PE Week Wire — Friday, July 30


MMC Capital Inc., a subsidiary of Marsh & McLennan, held a final close on its Trident III fund, finishing with $1.1 billion. The fund will target investments in global insurance, employee benefits and financial services, while the size of those investments will generally be from $25 million to $150 million.

 

Sorrent Inc., a San Mateo, Calif.-based maker of wireless video games, has raised $20 million of Series C financing. Led by BA Venture Partners, the deal also included return backers New Enterprise Associates, Globespan Capital Partners and Siennea Ventures. As part of the deal, Sharon Wienbar, a director with BA, will join Sorrent’s board.  www.sorrent.com

 

MetroPCS Communications Inc. postponed its IPO yesterday, citing accounting issues. The Dallas-based telecom company, which expects to raise more than $500 million, has struggled with accounting issues in the past. MetroPCS is backed by investors including Accel Partners, MC Venture Partners, First Plaza Group Trust and Technology Ventures Associates.

 

Alveolus, a Charlotte, N.C.-based medical device company that makes nonvascular stents, has raised $10 million of Series B financing. Led by MDS Capital, the deal also included FCA Venture Partners III, SBIC, MB Venture Partners, Healthcare Capital Partners and Matignon Technologies FCPR. As part of the deal, Dr. Anthony Natale, of MDS Capital, will join the board. Other new board members are Stuart McWhorter of Clayton Associates and David Carne, formerly CEO of Medcath Inc. www.alveolus.com

 

SurfKitchen, a Reading, UK-based mobile device software company, has raised $17.5 million in its third round of financing. Led by Accel Partners and Scottish Equity Partners, the deal also included Argo Global Capital and return backer Add Partners. www.surfkitchen.com

 

ABN Amro Capital has acquired TEXA, a French insurance company, in a management buyout for 50 million euros. Societe Generale provided senior debt for the transaction. This is the fourth French buyout for ABN Amro’s France team since 2003.

 

Jacobson Partners is doing a recapitalization of Taco Bueno, a Carrollton, Texas-based restaurant chain. As part of the deal, Golub Associates is providing $13 million of second lien debt. www.tacobueno.com

 

Phoenix Equity Partners has acquired Palletways, a UK-based freight service company with operations across Europe, from 3i Group, according to several media reports. Phoenix has brought on James Wilson as the new chief executive. 3i said it made a 72% return on the investment. www.palletways.com

 

Chequers Capital has agreed to buy a 51% stake in steel product company International Metal Service SA for 46 million euros ($55.5 million), Dow Jones reported. The Neuilly-sur-Seine, France-based company is owned by Arcelor SA, which will retain a stake in the company, and Merrill Lynch. Another backer, European Renaissance Fund, will hold onto is 6.2% stake. Due to French securities laws, Chequers is obligated to launch a takeover bid for the remaining 49% of the company, which trades on the Euronext Paris Stock Exchange. However, Chequers does not expect its five euro-per-share offer to be accepted.

 

Dolphin Fund Management won approval from Argentina’s government to buy a 50% stake in Transener SA, an electric power company there, Dow Jones is reporting. Transener is now owned equally by Dolphin and Petrobras Energia, however Petrobras has been shopping its 50% stake. Dolphin purchased its stake in two parts, starting in December 2003, from UK company National Grid.

 

Veritas Capital has acquired McNeil Technologies Inc., a security services company based in Springfield, Va., for an undisclosed amount. Aronson Capital Partners advised McNeil and initiated the deal on its behalf. www.mcneiltech.com

 

IBM will acquire venture-backed Cyanea, a management software company, for an undisclosed amount. IBM said Cyanea president and chief executive James Chong will consolidate IBM’s various application management tools. Big Blue has been reselling Cyanea software since 2002 and was an early investor in the company. Other venture backers are Draper Fisher Jurvetson, Infinity Capital and Mobius Venture Capital.

 

Victhom Human Bionics Inc. has acquired Vancouver-based Neurostream Technologies Inc., a venture-backed medical device company, for C$10 million. Two of Neurostream’s venture backers–BDC Venture Capital and GrowthWorks Capital,  are now Victhom shareholders. Neurostream produces nerve cuff electrodes for implanted prosthetic devices to restore the use of paralyzed muscles. www.neurocuffs.com 

 

The Toronto Globe & Mail reported last week that Ernst & Young Corporate Finance and Orenda Corporate Finance Ltd. are merging to target mid-market mergers and acquisitions in Canada. Denis Lemieux will head the new company, to be called Ernst & Young Orenda Corporate Finance Inc. The story said collectively the two groups average 40 deals a year in Canada with a total combined deal volume of C$7.3 billion over the last three years. Orenda’s David Ward is the only Orenda investment banker who decided not to join the new investment bank.

 

PA Early Stage Partners has promoted four of its people to partner: Stephen Barnes, the firm’s chief financial officer; Dean Miller, who joined the firm five years ago after serving as chief financial officer of Adaptiv Learning Systems; Scott Nissenbaum, the former president of Quaker State Mortgage Co.; and Guy Winters, who has serves as the firm’s general counsel since 2000. Wayne, Pa.-based PA Early Stage Partners manages a $235 million family of funds that invests in IT and life sciences companies.

 

Thomas Kemp has joined Veronis Suhler Stevenson as a managing director. Kemp was previously chairman and CEO of Penton Media Inc. and before that worked for Miller Freeman. Kemp will focus on business-to-business media investments at the merchant bank.

 

 Thursday, July 29

 

Blackstone Group-backed Graham Packaging Co., the plastic container giant, has agreed to buy the plastics container business of Toledo, Ohio-based Owens-Illinois Inc. for $1.2 billion. Donald Graham, founder of Graham Packaging, will maintain a 15% ownership stake in the combined company once the transaction is completed. Graham will keep its headquarters in York, Pa.

 

Israel‘s Pitango Venture Capital closed its fourth fund with $300 million after less than a year of fund-raising.Pitango’s latest fund will invest in early-stage Israeli companies, focusing on communications, information technology and health care companies – all traditional sectors for the Herzilya-based firm. It also plans to scout new opportunities in nanotechnology and in technologies surrounding homeland security issues.

 

Trump Hotels & Casino Resorts Inc. yesterday said discussions with DLJ Merchant Banking Partners about a $400 million recapitalization of the company were making progress. Under the restructuring plan, which needs to be approved by bondholders, the private equity fund would take control of the company. The discussions come at a time when several buyout shops are looking at the casino industry in light of MGM Mirage and Harrah’s having to shed assets because of antitrust concerns.

  

Diffusion Pharmaceuticals, a Charlottesville, Va.-based pharmaceutical company, has raised $2.1 million of venture financing. Proceeds will be used to develop small-molecule therapeutics to treat hypoxia, and Diffusion plans to raise another round for at least $1 million in 2005. www.diffusionpharma.com

 

Houston-based Energy Solutions, a software company that serves oil and gas pipelines, has raised $2 million from Inverness Capital Partners. Inverness and Alvin V. Shoemaker Investments plan to invest another $2.5 million to $3 million in the company. As part of the deal, Inverness Operating Partner Bob Pollan has joined the advisory board as chairman. www.energy-solutions.com

 

Allied Capital will buy Financial Pacific Leasing, a Federal Way, Wash.-based leasing company, for $94 million, Knight Ridder is reporting. FinPac has withdrawn its IPO filing, through which it had hoped to raise $35 million.

 

ArcLight Capital Partners has acquired 10 power generation facilities from Redwood LLC, a John Hancock Life Insurance subsidiary, for an undisclosed amount. The facilities were among 25 domestic power plants that El Paso Energy had agreed to sell to Northern Star Generation.

 

Harvest Partners-backed Home Care Supply, a medical equipment company based in Beaumont, Texas, has been acquired by Praxair Inc. for $245 million, Knight Ridder is reporting.  Praxair is an industrial gas giant based in Danbury, Conn. Other private equity backers of Home Care include Prudential Capital Group, Davis Tuttle Venture Partners and Rice Partners.

 

Gardner Denver Inc., a maker of blowers, compressors and petroleum pumps, will acquire Audax Group portfolio company Nash Elmo Holdings LLC, an industrial vacuum pump company, for $223.5 million. The deal is expected to close sometime this quarter. Nash Elmo was created in 2002 when Audax bought Connecticut-based Nash Engineering Co. and Germany-based Elmo Vacuum Technology and combined them.

 

Symbol Technologies Inc., which makes bar code scanners, will acquire Matrics Inc., a venture-backed company that uses radio frequency identification technology to track items, for $230 million. Matrics, based in Rockville, Md., was formed in 1999 and secured investments from venture firms including Novak Biddle Venture Partners, Carlyle Group, VentureHouse Group, ECentury Capital Partners and Polaris Venture Partners. Symbol, based in Holtsville, N.Y., expects to close the acquisition this quarter.

 

Malaysia’s M$240 billion ($57 billion) Employees Provident Fund has set aside M$1 billion ($263 million) to make investments in private equity, FinanceAsia.com is reporting. The fund expects to invest no more than 10% of that amount by the end of 2004. The move into private equity is intended to boost EPF returns, which last year returned only 4.25 percent.

 

Actress Nancy Stafford Myers recently won $274,000 in an arbitration case against Janney Montgomery Scott LLC for investing her money in stocks, bonds and loans to an Israeli startup that went belly-up, Dow Jones is reporting. According to her complaint, a broker who has since been fired from the firm convinced Myers and her husband to borrow $150,000 from her life insurance to invest in PlatiNet Communications, a private Israeli company. The broker told the Myers that they could expect a return of at least 9 percent, and that their investment would convert into stock and then trade higher after an IPO. JMS also told her the firm had raised almost $5 million of venture capital for the company. Myers claims all of that was untrue. For its part, PlatiNet shut its doors when all the capital dried up. The $247,000 settlement, ordered by a National Association of Securities Dealers arbitration panel, was about half the $500,000 Myers had requested. JMS must also pay $27,000 in expert witness fees to Myers.

 

Donatella Versace has entered a drug rehabilitation program at a time when her family’s company, Gianni Versace SpA, is trying to court private equity investors, The Wall Street Journal Europe is reporting. Ms. Versace owns 20% of the company, while her daughter, Allegra Versace Beck, owns 50 percent, and Santo Versace-Donatella’s brother-owns a 30% stake. Versace is looking to sell a 30% stake with the help of advisers Lazard and CSFB. Dow Jones said while some international private equity firms are interested, they won’t do the deal unless they have some control over hiring and creative decisions.

 

Webster Financial Corp. is forming a mezzanine finance company, Webster Growth Capital, that will serve small and mid-sized companies, the Waterbury Republican-American reported. Hartford, Conn.-based Webster Growth will target companies that need less than $10 million to fund growth, recaps and acquisitions. Randall Kutch, most recently a managing director for mezzanine investments and growth equity for Citizens Capital, will become Webster Growth’s president and first employee.

 

 Wednesday, July 28

 

Despite a lack of market enthusiasm toward BDC filings, Prospect Energy Corp. yesterday raised $105 million in an IPO of the business development company. However, the deal was smaller than anticipated, selling seven million shares vs. an expected total of 12 million. Prospect plans to invest in energy companies with revenues of less than $250 million. The deal was underwritten by Ferris, Baker Watts Inc., D.A. Davidson & Co., Sterne, Agee & Leach Inc., Sands Brothers & Co. Ltd. and Wunderlich Securities Inc.

 

Ottawa-based Tropic Networks Inc., which supplies regional and metro-area optical networking equipment, has raised $33 million of Series D financing. Led by Alcatel, the deal also included return backers Celtic House Venture Partners, Crescendo Ventures, Goldman Sachs, Teachers’ Private Capital and Kodiak Venture Partners. The company was founded in 2000. www.tropicnetworks.com

 

British biotech company Cyclacel has delayed its planned 110 million pound IPO on the London Stock Exchange, citing market conditions, The Times reported. The venture-backed company, which develops drugs to fight oral cancer, counts Merlin Biosciences among its backers.

  

Fathom Online, a San Francisco provider of search engine marketing services, has raised $6 million of Series A financing from Constellation Ventures and other private investors. As part of the deal, Constellation managing directors Virginia Turezyn and Dennis Miller will join Fathom’s board. Founded in 2002, Fathom helps clients measure the impact of advertising on search engines. www.fathomonline.com

 

The Haley Enterprise Inc., a Sewickley, Pa.-based rules and process management software company, has raised $5.5 million of Series A financing. Led by Pequot Ventures, the deal also included Draper Triangle Ventures and PA Early Stage. Mark Juliano has been named the new president and CEO, while founder Paul Haley will become chief technology officer and executive vice president. Haley Enterprise was founded in 1989. www.haley.com  

 

Friend Skoler & Co. has acquired Hopkins Manufacturing Corp., an Emporia, Kan.-based towing products company, for an undisclosed amount. To support the deal, American Capital Strategies invested $35 million in the form of senior and junior subordinated debt and redeemable preferred equity, while Antares Capital led the senior debt portion. Harris Williams & Co. advised Hopkins on the transaction. www.hopkinsmfg.com

 

Charterhouse Group-backed healthcare company MP TotalCare Inc. has acquired Gericare Providers Inc., an Englewood, Colo.-based company that supplies direct-to-consumer wound care products. As part of the deal, Gericare President Mitch Knutson will join MP TotalCare as an executive vice president.

 

Another Charterhouse company, East Hartford, Conn.-based OAKLEAFWaste Management, has merged with Phoenix-based Greenleaf Compaction, which provides waste management equipment rentals. Greenleaf Founder Michael Macera will continue to be Greenleaf’s president and has joined Oakleaf’s board. www.oakleafwastemgmt.com

 

American Capital Strategies has acquired Future Food, a Carrolton, Texas-based maker of dips, spreads and seafood salads, in a $43 million transaction. ACAS, which now owns 99% of the company on a fully diluted basis, bought the company from Transition Capital Partners and Private Equity Partners. The company’s investment took the form of a senior term loan, senior and junior sub debt with warrants and common partnership interests. Texas Capital Bank provided a revolving credit facility and senior term loan. Management will invest in the common stock

 

Stamford, Conn.-based MxEnergy Inc., a natural gas provider, has raised $31 million in a growth financing from Charterhouse Group ($26 million) and Greenhill Capital Partners ($5 million). www.mxenergy.com

 

SBI Group, a venture-backed consulting firm in Salt Lake City, has agreed to sell its advertising agency, SBI. Razorfish, for $160 million to Seattle-based aQuantive. The deal is scheduled to close by the end of this month. Backed by Park City, Utah-based Hunter Capital, GE Capital and Cerberus Capital Management, SBI Group has been around since 1997.

 

About five months after raising a $10.2 million round of venture capital, medical imaging company Synarc Inc. has acquired Paris-based IoDP Medical Imaging Research. In February, San Francisco-based Synarc raised a VC round from Schroder Ventures Life Sciences and U.S. Venture Partners, with the intent to grow via acquisition. www.synarc.com

 

Malaysia‘s Human Resources Ministry wants to make venture capital more accessible and wages more competitive in order to keep Malaysian scientists, technologists and other professionals at home instead of abroad, the BBC reported. To that end, Minister Datuk Dr. Fong Chang Onn told reporters after a conference that the ministry was willing to negotiate with banks to provide venture capital for ideas that come from Malaysia’s professionals.

 

Dr. Lowry Caudill has been named to Southern Capitol Ventures’ advisory board. Caudill, most recently the worldwide president of pharmaceutical development for Cardinal Health, has been involved with the early stage venture firm since last year.

 

Irwin Gross has joined Worldview Technology Partners as a general partner focusing on software and semiconductors. Gross comes to Worldview from Wilson, Sonsini, Goodrich & Rosati, where he ran the law firm’s venture fund (WS Investments) and co-founded its intellectual property group.

 

 Tuesday, July 27

 

 

Madison Dearborn has agreed to pay $3.2 billion-including $500 million of equity-for the paper and timber operations of Boise Cascade Corp., the Wall Street Journal is reporting. The acquisition does not include OfficeMax, which will stay with Boise, but strengthens Madison Dearborn’s already-huge presence in the paper industry. The Chicago buyout shop already owns Jefferson Smurfit Group PLC and Packaging Corp. of America. The new company will continue to be based in Boise, Idaho, and few layoffs are expected. The deal is slated to close in November, at which time Boise Cascade will change its name to OfficeMax Inc.

 

Pantheon has closed its second global secondaries fund at $900 million, raising money from 60 investors and turning others away from the oversubscribed vehicle. The entire process for Pantheon Global Secondary Fund II took under nine months, Pantheon said.

 

CinemaNow Inc., a Los Angeles-based online movie download service, has raised $11 million of Series D financing. Led by Menlo Ventures, the deal also included participation from Cisco Systems and Lions Gate Entertainment. www.cinemanow.com

  

NanoDynamics Inc., a Buffalo, N.Y.-based nanotech company, has raised $12 million of venture financing. Since its founding in 2002, the company has raised more than $16 million from institutional investors, the company’s founders and its management team. The company manufactures nanomaterials, including electronic-grade copper nanopowders. www.nanodynamics.com

Authoria Inc., a Waltham, Mass.-based human capital management software company, has raised $10.5 million of financing. Led by new investor CIBC Capital Partners, the deal also included participation from unnamed return backers. Included on the list of existing investors are Menlo Ventures, Capital Z Financial Services Partners and Fidelity Ventures. www.authoria.com  

Vintela,which provides integration services for Unix and Windows, has raised $3 million of venture financing after acquiring Australian IT security company Wedgetail Communications. The deal included Australia-based Allen & Buckeridge and Canopy Group, according to the Australian Financial Review. www.vintela.com

Atlanta-based BroadSource Inc., which provides telecom expense management software, has raised $5.7 million of financing. Led by Noro-Moseley Partners and Harbert Venture Partners, the deal also featured individual investments by the following Atlanta-based entrepreneurs: Tripp Rackley, who currently serves as BroadSource chairman and made his initial investment last October; Michael McChesney, formerly of S1 and WebTone Technologies; Bill Scott of ITC Holding Co.; and Said Mohammadioun, former CEO of Synchrologic Inc. As part of the deal, Noro-Moseley’s Alan Taetle and Harbert’s Wayne Hunter joined the BroadSource board. www.broadsource.com

OpsTechnology Inc., a San Francisco-based Web-based supplier network for real estate companies, has raised $4 million of Series D financing. The round included SAP Ventures, Internet Realty Partners, Vortex Partners and Crest Opportunity Fund IX. Founded in 1999, the company has raised a total of $16 million.

 

Ruxton Pharmaceuticals Inc., a Baltimore-based drug development company that focuses on tackling neurogenerative diseases, has raised $5.2 million of Series A financing. Led by New Enterprise Associates, which invested $1.7 million in the deal, the deal will help Ruxton reformulate FDA-approved drugs for new indications, including “Lou Gehrig’s Disease.” For more info, email [email protected]

 

GTCR Golder Rauner LLC has acquired Cellnet, which provides wireless automated meter reading services to the utility industry, for an undisclosed amount. The buyout shop teamed up with Cellnet President and CEO Mike Zito and other members of management to purchase the company from Atos Origin, an IT services firm. Kirkland & Ellis was the legal advisor to GTCR on the deal. www.cellnet.com

 

Caxton-Iseman Capital-backed Ply Gem Industries will pay $320 million to acquire MW Manufacturers, a Rocky Mount, Va.-based maker of window and patio door products, from Investcorp. Caxton-Iseman, which bought Ply Gem this past February, will make an additional cash investment in that company to support the deal, expected to close in August. www.mwwindows.com

Primus Venture Partners has acquired Universal Tax Systems Inc., a tax software company, for $65 million. The Rome, Ga.-based company’s senior management team and founding shareholders will retain ownership interest in the company, and CEO Bill Anderson will continue in his current role. Antares Capital and AmSouth Capital provided senior debt for the transaction, while Allied Capital invested $18.5 million of subordinated debt. Brentwood Capital Advisors was the financial advisor to UTS on the deal. www.taxwise.com

Citigroup Venture Capital Equity Partners has won the approval of Hynix Semiconductor shareholders to acquire the South Korean company for 954.3 billion won ($817.7 million), according to various media reports.

 

Oak Hill Capital Partners won approval from Duane Reade Inc. stockholders to acquire the company in a deal that is scheduled to close July 30.
 
London private equity firm Stellican Limited has acquired the trademarks and intellectual property of Indian Motorcycle, the Springfield, Mass.-based bike manufacturer that went through liquidation in September 2003. Indian was previously owned by Audax Group.

 

TolerRx Inc., a venture-backed biopharmaceutical company, has withdrawn its registration statement for an IPO, due to market conditions. Securing its most recent round in 2002, for $35 million, the company has raised $58 million of venture capital to date. Among its investors are the Sprout Group, Skyline Ventures and Rho Ventures. www.tolerrx.com

Financial Times is reporting that the Swiss Technology Venture Capital Fund, a government-sponsored investor, is raising a $50 million fund focused on India. This is the Swiss fund’s second vehicle focused on India.   

 

W.P. Carey has acquired the chief technology facility and a corporate office of TietoEnator Plc through a $95 million sale-leaseback transaction. TietoEnator is a Finland and Sweden-based IT services company.

 

Mary Anne Citrino has joined Blackstone Group as a senior managing director in the firm’s corporate advisory group. Citrino has spent 20 years in the investment banking world, most recently as global head of the consumer products investment banking group at Morgan Stanley.

 

Peter Kerman has been appointed the new global chair of Latham & Watkins’ corporate department. His most previous job was as managing partner of the Silicon Valley office, where Kerman had experience in venture capital, M&A and other transactions.

 

Thomas Weisel Partners has added six senior investment bankers: Blake Kim, who joins as a partner in San Francisco focusing on communications equipment; Patrick O’Shaughnessy, who joins as a partner in New York focusing on industrial growth; Brad Raymond, who joins as a partner in New York focusing on software; Mark Roberts, who joins as a partner in San Francisco focusing on enterprise systems & storage; Kevin Swanson, who joins as a partner in New York focusing on media, Internet and communications; and Mark Finckle, who joins as a principal in New York focusing on media, Internet and communications.
 

Tuyen Do, vice president with private equity firm Royal Palm Capital Partners, has joined the board of Cenuco Inc., a wireless video and data technology company.

 

 Monday, July 26

 

 

Google Gets Specific

 

Greetings from the edge of South Boston, which is approximately two miles away from DNC delegates, media hordes and caged protesters. Fairly quiet on this side of town, and only one police cruiser stationed on the Mass. Pike (I don’t know if he was looking for terrorists or speeders). As I’ve said before, holding this convention at the Fleet Center is a bad idea from both an event planning and political strategy perspective, but it hardly will be the end of days that everyone here has been predicting (except, perhaps, for problems related to the aforementioned cage).

 

Anyway, this morning’s big news is that Google Inc. has set its IPO offering price range to $108-$135 per common share, and its number of offered shares to approximately 24.63 million. It also disclosed that its Nasdaq ticker symbol will be GOOG. My initial reaction to the filing (which I’ve only had time to skim) is that the price could be a high barrier to entry for many of the retail investors that Google hopes to attact via a Dutch Auction-like process. Maybe it’s just my own flagging bank account, but this IPO does not seem to be aimed at little old ladies trading on eBay – unless those little old ladies have a view of Central Park West from their bedrooms. More specifically, will retail investors bid on five shares of Google when they could get 25 shares of a $20 stock for the same price? This is a particularly salient question when one considers that Google is warning prospective investors against expecting a substantial trading price increase following the IPO. It refers to this phenomenon as the “winner’s curse,” and goes so far as to suggest that the immediate aftermarket performance actually may represent a net decrease.

I ran such theories by our resident IPO expert Steve, who believes that I doth protest too much. His read is that retail investors will pay up for a small handful of shares, if for no other reason than that Google is a hot brand. This seems to be the same type of logic that caused my grandparents to buy me some Boston Celtics stock when I was a kid, even though it became impossible to unload until the team was bought (thanks Wyc & Steve for erasing a tax complication, although I still resent you trading away Antoine, Williams, Delk, etc.).

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