Corn has never been so controversial. Ethanol, a supposedly eco-friendly gas additive produced primarily from the fermentation of maize or sugar cane, has been blamed for skyrocketing food prices worldwide as corn growers in the US farm belt and sugar producers in the tropics divert more of their resources towards ethanol and less towards for-market products.
However, the fuel is still championed by many as an eco-friendly solution to rising petrol costs, and several US private equity firms including Centerbridge Partners and Braemer Energy Ventures have made major ethanol-related acquisitions in recent months.
Energy specialist First Reserve, which traditionally invests in companies related to the oil and natural gas industries, has joined the ethanol investment fray – but with a twist it believes may remedy some of biofuel's major drawbacks.
“Without being unduly pejorative, we are not invested in that industry for very good reason,” says First Reserve director Glen Payne. But there is an exception: First Reserve sees barley-based ethanol as another matter altogether.
Last month, the firm made a $300 million (€195 million) equity investment in Osage Bio Energy to construct the US' first barley-based ethanol production facilities. “The technology is very well understood,”Payne says.“It's not like we're taking any technology risk here.”
Barley ethanol, currently produced in several countries including Canada and Spain, competes for less land and food production than corn. Moreover, barley prices have not been affected by ethanol production as much as corn has, albeit much less barley is used for ethanol than corn.
“We have a cost advantage over every other form of ethanol produced in the US,” Payne says.
Osage Bio Energy's facilities will use regionally grown barley, reducing transportation costs incurred from relying on Midwestern producers.
Renewable energy from the combustion of the barley waste products, husks and hulls, will also be generated. The facilities will aspire to be self-sustainable and approximately 20 megawatts of excess energy from each facility will go back into the power grid.
First Reserve's $7.8 billion fund has the capacity to invest around 10 percent in renewable energies and the firm is considering increasing that allocation either in the present fund or in later efforts. In April, the firm purchased Gamesa Solar, a Spanish solar energy company, for €261 million. It also acquired Ener3, an Italian solar power plant construction company with the intention of merging the two. N
SUMERU INKS $185M INVESTIGATION TECH DEAL
Silver Lake Partners' mid-market arm Suberu (see also p. 27) has agreed to pay $185 million (€118 million) for i2, a unit of decisionmaking technology and information company ChoicePoint. The company provides technology solutions for investigations to law enforcement, intelligence and government agencies. Its products aim to automate investigative analysis in order to increase case capacity and effectiveness. ChoicePoint discontinued the operations of i2 in the fourth quarter of 2007 as a strategic move to divest itself of business lines outside the company's core focus of managing economic risk. The i2 deal is the third Sumeru has agreed from its debut fund, which closed in May last year on $1.1 billion.
BESSEMER TO EXIT THREE FIRMS FOR $1.25BN
Bessemer Venture Capital will sell three portfolio companies for a total of $1.25 billion (€788 million), according to a blog post from Bessemer partner David Cowan. Pharmaceutical and healthcare company GlaxoSmithKline has agreed to acquire Bessemer-funded start-up Sirtris Pharmaceuticals for approximately $720 million. Meanwhile, Sony has agreed to acquire Bessemerand Sequoia Capital-funded digital technology company Gracenote for approximately $260 million. The Emeryville, California-based business will continue operating separately with its existing management team in place while developing new technologies. Fabless microprocessor company PA Semi, back by Bessemer,Venrock, Highland Capital and Focus Ventures, has reportedly agreed to be acquired by Apple. The deal is valued at approximately $278 million in cash.
TPG, PHAROS ACQUIRE ASSET MANAGER FOR $480M
TPG Capital and Pharos Capital Group have signed a $480 million (€302 million) deal with American Airlines to acquire the struggling company's wholly-owned asset manager, American Beacon Advisers. American Beacon, which manages some $65 million in assets, will be acquired by Lighthouse Holdings, a joint holding company formed by TPG and Pharos. American Beacon provides several services for American Airlines, including investment management for the company's pensions, 401k and health and welfare plans. However, in recent years it has expanded its operations to become an asset manager for several institutional and retail investors beyond its parent company. It also manages a series of low-cost, no-load mutual funds. A statement from American Airlines' parent company AMR called the deal “primarily a cash transaction”. Texas-based Pharos was co-founded by Kneeland Youngblood, Bob Crants and Michael Devlin.
KLEINER PERKINS BACKS ELECTRIC CARS
Cleantech-focussed venture firms RockPort Capital Partners and Kleiner Perkins Caufield & Byers have formed a joint venture with Norwegian electric vehicle company Think Global to launch TH!NK North America. TH!NK North America intends to initiate sales of the fifth-generation electric vehicle TH!NK city in the North American market by 2009. Think's next-generation electric vehicle, the TH!NK Ox was announced earlier this year and will begin production in 2010 and 2011. Think has sold approximately 1,200 cars in Norway since late last year and is currently expanding its production capabilities to 10,000 cars per year. The car is a zero-emission, 95 percent recyclable vehicle that reaches a top speed of 65 miles (100 km) per hour and can drive up to 110 miles on a single charge.
APAX IN $1.4BN TAKE-PRIVATE
Apax Partners has agreed to a $1.4 billion (€885 million) take-private for healthcare software company TriZetto. The London-based private equity firm will pay $22.00 per share in cash, representing a 29 percent premium over TriZetto's 30-day average. BlueCross BlueShield of Tennessee and The Regence Group, a conglomerate of BlueCross firms in the Pacific Northwest, have agreed to provided a portion of the funding for the transaction and will be equity investors in the new private company. Apax, which manages roughly $35 billion in funds, has been particularly proactive in the international healthcare sector, investing over $2.8 billion in the industry worldwide from 1989 to 2007. Newport Beachbased TriZetto specialises in offering core administrative software to healthcare providers and insurers.
GOLDMAN KILLS $1BN MYERS DEAL
GS Capital Partners (GSCP) and Myers Industries have agreed to terminate their $1 billion (€635 million) deal to take private the Ohio-based polymer manufacturer. The deal, struck in April 2007, consisted of $788 million in cash, or $22.50 per share, and debt assumption of approximately $276 million. In December, GSCP requested an extension of the deal's closing date to further evaluate Myers' exposure to certain industries. In return, GSCP agreed to make a non-refundable payment to Myers of the previously agreed $35 million termination fee. Myers' head of investor relations, Max Barton, said GSCP is not required to pay any additional fees for terminating the deal.
DUBAI FIRM BUYS STAKE IN CREDIT SPECIALIST
Dubai Government-backed investment firm Istithmar World has agreed to acquire a majority stake in US asset manager Gulf Stream Asset Management in an effort to capitalise on credit market turmoil. Under the agreement, Gulf Stream founder and chief executive Mark Mahoney and his team will continue to own the remainder of the company. No financial details were disclosed. The investment was made via Istithmar World's private equity and alternative investment arm Istithmar World Capital. Charlotte, North Carolina-based Gulf Stream currently manages approximately $3.8 billion (€2.4 billion) of corporate credit portfolios for global institutional investors. Istithmar World, formerly known as Istithmar, rebranded itself earlier this year as the group sought to diversify. The firm opened its first international office in Shanghai, China in November last year.