This is perhaps the single hottest VC-backed company in New England, with contracts to power the upcoming Chevy Volt and some of Daimler’s hybrid buses. It also has a storage grid deal with AES, and for the past two years has supplied batteries to power Black & Decker’s cordless power tools.

2007 revenue was approximately $41.4 million, while it generated around $10.3 million in Q1 2008. It reported $31 million in losses last year, and $13.9 million in Q1 2008.

Backers include North Bridge Venture Partners (13.7% pre-IPO stake), General Electric (12.7%), Motorola (8.5%), Qualcomm (8.8%), Sequoia Capital, CMEA Ventures, FA Technology Ventures, Procter & Gamble, Alliance Capital, OnPoint, Carruth Management, the Massachusetts Institute of Technology and board chairman Desh Deshpande.

Morgan Stanley and Goldman Sachs are co-managing the offering, which could be one of the first real VC-backed homeruns to come out of the cleantech sector.

Scott Kirsner has more…

But venture capitalists aren’t the only one with IPO stress. Only two buyout-backed companies went public on U.S. exchanges in Q2, which matches the paltry number from last quarter. For context, 16 buyout-backed companies went public in the first half of 2007, while 34 went public in the first half of 2006. In fact, it’s been five years since the buyout-backed IPO market was this sluggish.

There isn’t even much good news in the pair of IPOs we did get: RHI Entertainment and Verso Paper Corp. Each priced lower than expected, and have since traded even lower in the after-market.

No wonder certain PE firms are having fundraising troubles. Who wants to invest in funds that can’t exit their investments…

Not voting, however, will be the holders of Graham Packaging’s $2.5 billion of debt, some of it leftover from Blackstone’s LBO of the company in 1998. And judging by the reaction of one of those bondholders on today’s conference call, that’s good news for Tom Hicks. His SVP Christina Vest had to issue a “no comment” during the Q&A session, when an apparent bondholder accused the group of trying to “screw” them.

The disgruntled bondholder (I didn’t catch his name) took issue with the fact that there’s no change of control in the company’s bonds and Graham Packaging’s backers don’t seem too eager to pay any of it down. The only concrete debt repayment is $150 million to Graham Packaging’s Term Loan B. Hicks paid lip service to possible deleveraging but also stressed that Graham Packaging’s public peers have been highly levered in the past, too. Before and after the transaction Graham Packaging will be operating with 5X leverage, which Vest called a comfortable level.

Since the playback isn’t yet available, I’ll have to paraphrase the interaction between Vest and the bondholder.

Bondholder: Why is there no change of control for debt holders?
Vest: The credit agreement has a provision for what is considered to be an IPO organization, which this is.
Bondholder: Is there a legal reason for not changing control?
Vest: This isn’t the venue to get into that much detail.
Bondholder: Yes it is. This is a key interest for major bondholders. “You’re trying to screw the bondholders!”
Vest: “We’ve given our response.”

Interestingly, Vest mentioned that Citigroup and Deutsche Bank advised on the deal, and that both of those banks served as debt providers in Blackstone’s initial buyout of Graham Packaging, proving that not everyone wants to get out of their commitments to the company. “Graham has an attractive capital structure that would be difficult to replicate in this market,” she said in response to a separate question on the topic.

As for the rest of the call, here are some highlights of the transaction:

• The deal is valued at $3.2 billion.
• Blackstone will retain 34% of the shares of Graham Packaging for at least two years.
• Hicks will control 66% of the business.
• Last year Graham Packaging had $2.5 billion in sales. It lost $206 million thanks in part to one-time costs. This year it is expecting $2.4 billion and an EBITDA of $450 million.
• Growth strategies include entering adjacent product categories like bottles for ready-to-drink tea and enhanced water. Likewise, the company is looking to emerging countries as they convert from glass packaging to plastic.
• The company negotiates to pass changes in resin prices to its customers in every contract.
• The merger agreement will be signed within a day or two.
• The company will trade at a 7.7X evaluation to EBITDA multiple.
• Blackstone had no exits plans for the business, according to Chinh Chu, Senior Managing Director at The Blackstone Group.
• Hicks approached Blackstone directly around 60 days ago.
• Hicks looked at more than 100 potential targets.

When Apax bought the apparel maker in 2006 for over $1 billion, Tommy Hilfiger’s cachet as “high end” had completely eroded in the U.S. Apax pulled the brand from most U.S. stores, and for the past two years, has had incredible success taking Tommy Hilfiger global. This week the business reported a year over year increase in annual EBITDA by more than 20% for 2007.

I’m impressed, because how many firms buy a business with the intention of “expanding internationally” and then actually do it with success? But the real challenge is still to come for Apax—Tommy Hilfiger is planning a new launch at Macy’s stores in the U.S. and may expand to more high-end locations. If the brand is accepted by upscale (or even middle-of-the-road) U.S. consumers, this may be one of the largest brand revitalizations I’ve seen. Possibly inspiration for Jordache denim, another once-popular U.S.-born brand kept alive by overseas popularity. Jordache Enterprises is privately owned, to my knowledge.

What are some other successful PE-backed brand revitalizations in apparel, or consumer products? Certainly not FILA, previously owned by Cerberus Capital Management. The brand seems to have disappeared from most markets to focus on South Korea. (In fact, its current owner has publicly blamed Cerberus for its waning success in the West). Cerberus sold it in an MBO last year to its Korean counterpart for $100 million more than it paid. Here’s an in-depth look at that situation the latest edition of Forbes.

Certainly I’ll be closely watching Sun Capital’s investment in Kellwood Company, a company with a few stale brands in need of revitalization, disposal or phasing out.

Not a single venture-backed company has gone public on U.S. exchanges since March, and none are scheduled to do so before Q2 ends next Monday. Not even a piddling one like that $5.68 million embarrassment from BioHeart in February. It is the first quarterly shutout in more than 30 years, which well predates the modern venture capital era.

The situation is so dire that the National Venture Capital Association sent an email last week to all its members, asking for feedback. It read: “Thus far in the second quarter of this year, there have been NO venture-backed IPOs. There has never been a quarter where this situation has occurred (since NVCA has been tracking such data). So that we can report on this situation accurately in the next week, we are asking our members to answer 4 short questions. It should take you less than a minute to complete - but your opinion will be critical to our messaging.”

I’m not providing a link to the multiple-choice questions, but they are as follows:

1. When do you see the IPO window re-opening?
2. How do you perceive the current attitude of venture-backed companies towards going public?
3. How [critical] do you view the current IPO drought relative to the future health of the venture capital and entrepreneurial communities?
4. What are the three largest factors you attribute to the current IPO drought? (Choose up to 3)

• Sarbanes-Oxley
• Credit crunch/mortgage crisis
• Reduction in investment banks
• Poor IPO candidates
• Lack of analyst coverage
• Skittish investors
• Lack of companies interested in going public

It should be interesting to see what NVCA comes up with, particularly on the issue of issuer supply vs. market demand. I’ve heard some VCs suggest that IPOs are no longer their endgame, as M&A exits can prove equally lucrative and far more efficient. On the other hand, I recently heard NVCA president Mark Heesen argue that almost all VC home-runs have come via IPO.

We should have some thoughts coming next Tuesday, once the bad news becomes official.

-US private equity shops will continue to take investments from foreign entities in an increased capacity.

-Changes in carried interest law could lead to an influx of deals in the fourth quarter of this year.

-Further, FAS 121(R) and FAS 160 will motivate firms to close deals before December and take on more minority stakes by the end of the year, respectively.

Industry specific conclusions:
-Consumer Products companies will shed non-core and underperforming assets.

-Energy companies in the equipment and services sector will experience a wave of consolidation to last another year at least. Master Limited Partnerships (MLPs) are just beginning to consolidate thanks to struggles with competition and deal pricing.

-Within technology, Internet companies are the most attractive and small and medium-sized ad-driven businesses will see consolidation, driven by interest from European and Asian suitors.

-PwC predicts sales in the auto industry will be hurt this year, falling to its lowest number in 13 years.

-The firm believes opportunities to infuse capital into financial services businesses is an attractive one.

Only five VC-backed companies went public on U.S. exchanges last quarter, raising $282.73 million. That’s the lowest offering and raise figures since Q2 2003, and way off from the 31 VC-backed IPOs that raised over $3.04 billion in Q4 2007.

VC-backed exits via M&A was even worse, by comparison to other quarters. Only 56 VC-backed companies were acquired in Q1, which is slower than any other quarter since Q1 1999. The largest M&A exit was Dell’s $1.4 billion acquisition of EqualLogic.

Such was the scenario faced last month by Archemix, a Cambridge, Mass.-based biopharma shop that had finally given up the IPO ghost. The company was far from broke, reporting around $55 million in cash thanks to prior VC investment and a revenue stream based on out-licensing its aptamer drug development platform. But it also had one drug development too many for its current financial situation, and had realized that a bunch of ongoing clinical trials were of little interest to the public markets.

So time for a new strategy: Do one thing, and do it well. Finish it. Let someone else do the rest – particularly the more expensive projects — via mutually-beneficial partnerships.

For Archemix, that means focusing most of its in-house resources on developing aptamer therapeutics for rare hematological diseases. For example, yesterday it announced that it’s entering Phase 2 trials for an anti-platelet agent for patients suffering from thrombotic thrombocytopenic purpura (TTP), a blood disorder whose mortality rate is believed to be as high as 20 percent. Such a study will require less than 30 patients, whereas a similar study for an acute cardio drug would require hundreds of patients (i.e., much more money).

Archemix has done significant acute cardio and cancer discovery work, but has now out-licensed much of it. It also has at least one additional candidate currently in search of a partner.

“Our financial position is strong enough to take us through 2009, under this new strategy,” explains Archemix CEO Errol De Souza. “Then we can see what the public markets look like, or perhaps bring in some non-dilutive funding.”

Archemix has raised around $135 million in VC funding since 2001, from firms like Atlas Venture (13.9% stake), Prospect Venture Partners (13.9%), Highland Capital Parnters (13.2%), SV Life Sciences (11.6%), KGaA (11.3%), Rho Ventures (9.6%) and Care Capital (5.3%). 

Bioheart Goes Public With a Modest Offering

That’s like saying that the Knicks are having a modest season. Or that Lindsay Lohan is modest.

Bioheart is a Sunrise, Fla.-based company that uses stem cell therapies to regenerate damaged heart muscles. It filed one year ago for a $35 million IPO, and later upped the target to $57.6 million. Soon after, however, the company switched underwriters and began cutting the asking price.

By the time Bioheart actually went public this week, the offering raised just under $5.8 million. No, I’m not making a decimal mistake — that’s the number you get when you multiple 1.1 million shares times 5.25 per share. And it hasn’t even been able to maintain that meager price, losing value both yesterday and today. At last check, Bioheart was trading at around $4.88 per share.

A company spokesman told the WSJ that Bioheart’s public status will make it easier to raise additional funding (which he admitted it needs). Maybe that sounded like a good plan when the company still hoped to secure double-digits. But today it just looks silly. And sad.

So instead of ridicule, we give ArcSight a rose. Prior to the offering, it had raised around $15 million in VC funding, from firms like Kleiner Perkins Caufield & Byers (23.5% pre-IPO stake), Institutional Venture Partners (11.8%), Integral Capital Partners (6.3%) and New Enterprise Associates (5.4%).

The only other VC-backed company to price this year was IPC Inc., while six others have withdrawn: Akela Pharma, Archemix, BG Medicine, Biolex, Imperium Reneables and Light Sciences Oncology. Then there are a pair that have postponed offerings indefinately: Transoma Medical and BCD Semiconductor (which withdrew its offering, but then withdrew the withdrawal… IPO whiplash).

So, what’s left? Forty-two offerings, minus a handful awaiting acquisition (like Danger). Here’s the list, courtesy of Daddy Thomson: VCIPOs.xls

Update: Figures that another VC-backed IPO would price, just hours after I write this post. That would be MAKO Surgical, which priced at the bottom of an already-reduced range. But, still, MAKO is deserving of praise (following the ArcSight theory). We also had another VC-backed company cancel its IPO (Concentric Medical), which leaves us with the following 2008 toteboard:

Priced: 3
Withdrawn: 7
Postponed: 2
In registration (not postponed): 41