PE Week Wire — Friday, May 27

FRIDAY, MAY 27

Random Ramblings (Part Duex)

Some odds and ends to carry us into the weekend:

*** Survey Reminder: By now you should’ve received an email about completing our bi-annual ACG/Thomson DealMakers Survey. It only takes a few minutes to fill out, and all respondents will be entered in a drawing to win incentives including an iPod, a Buyouts subscription, a pass to Buyouts Symposium West (Nov. 1-2 in San Francisco) and a subscription to Pratt’s Guide. Make sure you enter your PE Week Wire email account to take the survey, which you can find at http://www.acg.org/membersurvey2004/enter-survey-thomson.asp.

*** As you read yesterday, Enel SpA has agreed to sell its stake in Italian Telecom company Wind SpA for approximately 12.14 billion euros to a consortium led by Egyptian businessman Naguib Sawiris. This is a deal that Blackstone Group had been bidding on, but apparently came in a bit low at 11.6 billion euros. What might be an interesting question going forward could be whether or not this deal will end up being viewed as the second-largest leveraged buyout of all time. It certainly meets the mark in terms of dollars, as it converts into $15.12 billion (easily topping the proposed SunGard deal, nowhere close to the KKR-Nabisco bell weather).

The only stumbling block, it seems, is that the deal not only wasn’t led by a private equity firm, it may not involve any at all. Sawiris is a telecom guy, not a private equity guy. Various news reports also say that both Wilbur Ross and Philippe Nguyen are involved, but as individuals, not via their private equity firms WL Ross & Co. and Investors in Private Equity, respectively. I’m not quite sure what I think here, since Blackstone could have structured the deal exactly the same, and it would clearly be the second-largest LBO ever (not to mention the largest-ever in Europe). What say you? LBO or no LBO?

*** Speaking of huge deals, the year’s largest VC deal just got a bit larger. Integro Ltd. announced earlier this month that it had raised $300 million to launch a New York-based insurance brokerage, with the help of firms like DLJ Merchant Banking and Weston Presidio. According to a regulatory filing, however, that figure is actually closer to $312 million.

*** Finally, a very happy birthday to my wife. You’re simply the best part of my life J, and I can’t imagine possibly being happier than I am with you.

Top Three

 

BC Partners has closed its eighth buyout fund with approximately 5.5 billion euros in limited partner commitments. www.bcpartners.com

Caris Ltd. has completed a $120 million recap of Pathology Partners, an Irving, Texas-based provider of GI diagnostic services to physicians treating patients in an ambulatory setting. Cash proceeds from the deal, net of transaction expenses, have been used to redeem equity securities held by early Pathway shareholders like Sprout Group, Salix Ventures and Alliance Technology Ventures. Company management will retain a minority interest in the company, with Caris becoming majority shareholder. www.carisltd.com www.pathologypartners.com

Cisco Systems Inc. (Nasdaq: CSCO) has agreed to acquire FineGround Networks Inc., a Campbell, Calif.-based provider of network appliances that accelerate, secure and monitor application delivery. The deal is valued at approximately $70 million in cash and options, and is expected to close by July 30. FineGround has raised approximately $25 million in VC funding since its 2000 inception from backers like New Enterprise Associates and Worldview Technology Partners. www.cisco.com www.fineground.com

VC Deals

Innovative Biosensors Inc., a College Park, Md.-based developer of tests to detect harmful pathogens, has raised $3.5 million in Series A funding. Harbert Venture Partners led the deal, and was joined by New Markets Growth Fund and the Maryland Venture Fund. www.innovativebiosensors.com

Dynamic Payment Ventures Inc., a Plano, Texas-based provider of payment processing services and loyalty programs to the restaurant industry, has raised $3 million in Series A funding from Catamount Ventures and CEOLO Inv*stments.

FleetCor Technologies Inc., a Norcross, Ga.-based provider of fleet card processing solutions for the business fleet industry, is in talks to receive $75 million in private equity funding from Bain Capital, according to VentureWire. The deal would be in exchange for a minority position, and would provide some liquidity for existing FleetCor shareholders like Summit Partners, GCC Inv*stments and Advantage Capital Partners. www.fleetcor.com

Buyout Deals

Tulcan Private Equity has acquired Pye & Hogan Machines Co., an Old Saybrook, Conn.-based aerospace industry supplier. No financial terms were disclosed on the deal, which featured Woodbridge Group as the exclusive M&A advisor to Pye & Hogan. www.pyeandhogan.com

Citigroup Venture Capital has agreed to acquire a 14.69% equity stake in Lakshmi Overseas Industries Ltd., an India-based rice milling company.

Labor Ready Inc. (NYSE: LRW) has agreed to acquire CLP Resources Inc., a Reno, Nev.-based skilled trades staffing company, from Baird Capital Partners and William Blair Capital Partners. The deal is expected to close today, and is valued at approximately $46.2 million. www.clp.com www.laborready.com

Texas Pacific Group and Apax Partners have received European Commission approival for their acquisition of Telecom Italia‘s 80.87% stake in TIM Hellas Telecommunications SA (Nasdaq: TIMHY), a Greece-based wireless telecom operator. The deal is valued at just over 1.11 billion euros, or approximately 16.43 euros per share, and is expected to close by July. D*bt financing will be provided by J.P. Morgan and Deutsche Bank.

PE-Backed IPOs

ProStrakan Group Ltd., a UK-based drug company formed after the merger of ProSkelia and Strakan, has cut its valuation in anticipation of floatation on the London Stock Exchange. The company originally said the IPO would value it at between Gbp270 million and Gbp290 million, but now has cut that estimated figure to between Gbp210 million and Gbp250 million. ProStraken shareholders include 3i Group, LMS, Innoven Partenaires and Quest for Growth. www.strakan.com

SSA Global Technologies Inc., a Chicago-based provider of enterprise application software, priced 9 million common shares at $11 per share, for a total IPO take of approximately $99 million. The company originally filed to raise $200 million, and had set terms at 14.3 million shares to be offered at between $13 and $15 per share. SSA Global is trading on the Nasdaq under ticker symbol SSAG, while JPMorgan and Citigroup served as co-lead underwriters on the IPO. It was formed in 2000 to acquire the assets of bankrupt company System Software Associates Inc., and since has acquired such companies as Infinium Software Inc., Ironside Technologies Inc., Elevon Inc. and EXE Technologies Inc. It currently is controlled by private equity firms General Atlantic Partners and Cerberus Capital Management. www.ssagt.com

EV3 Inc. of Plymouth, Minn., has set its proposed IPO terms to 11.765 million common shares being offered at between $16 and $18 per share. It plans to trade on the Nasdaq under ticker symbol EVVV, with Piper Jaffray and Banc of America Securities serving as co-lead underwriters. EV3 was formed in 2000 as an endovascular device acquisition platform by industry veteran Dale Spencer, private equity firm Warburg Pincus and medical device-focused VC firm The Vertical Group. Warburg Pincus currently holds more than a 90% stake in the company, but does not plan to sell shares during the IPO. www.ev3.com

PE-Backed M&A

Entelos Inc., a Foster City, Calif.-based developer of bio-simulation technologies for pharmaceutical R&D, has acquired Discovery Innovations Inc., a Naples, Fla.-based provider of data integration products and services to the life sciences industry. No financial terms were disclosed. Entelos has raised nearly $50 million in VC funding since its 1996 inception, from firms like Abingworth Management, Bear Stearns Health Innovations, Charles River Ventures, Brentwood Venture Capital and St. Paul Venture Capital. Discovery Innovations raised around $25 million in VC funding since its 1995 inception, from Alloy Ventures, Brentwood Venture Capital, Sanderling Ventures, Sofinnova Ventures and Integrity Partners. www.entelos.com www.biospace.com

Chromos Molecular Systems Inc. (TSX: CHR) has agreed to acquire Targeted Molecules Corp., a San Diego-based biotech company focused on the development of two antibody candidates for the treatment of multiple sclerosis and acute thrombosis, respectively. The deal will involve the issuance of 20.1 million shares of Chromos common stock, and is expected to close in July. Targeted Molecules has raised over $13 million in VC funding since its 2000 inception, from firms like GeneChem Financial Corp., Inglewood Ventures, NDI Capital and FAT Capital Management. www.chromos.com www.targetedmolecules.com

Firm & Fund News

Integral Capital Partners of Menlo Park, Calif. is looking to raise up to $300 million for its seventh fund, and already has approximately $125 million in commitments, according to a regulatory filing. Morgan Stanley is serving as placement agent. www.icp.com

The Sterling Group of Houston has closed its second private equity fund focused on acquiring mid-market manufacturing, industrial services and distribution companies based in North America. Limited partner commitments totaled $450 million, while the firm’s principals contributed an additional $20 million. LPs included AXA Private Equity, BNP Paribas, BOKF Private Equity, CSFB, Danske Private Equity, Hoegh Capital Partners, INVESCO Private Capital, The Meadows Foundation, Montreal Transit Workers, RCP Advisors, Standard Life Investments, Swiss Re Private Equity Partners and Texas Tech University. Lazard Freres acted as placement agent. www.sterling-group.com

Electra Partners‘ 21-person buyout team is planning to split off from its parent organization (which runs the electra Inv*stment Trust and two Electra Kingsway VC trusts), according to The Times of London. The buyout team will continue to be led by Nigel McConnell. www.electraeurope.com

Human Resources

Samantha Sacks has joined Pacific Corporate Group as controller. She previously served as controller and assistant director of vendor and product management, plus Sarbanes-Oxley oversight, for Cigna Corp. She replaces Dawn Duffy, who left just over one month ago. www.pcgfunds.com

***********
Correction: My Chi To’s name was misspelled in Wednesday’s Wire. She was named partner at the law firm oif Debevoise & Plimpton LLP.

THURSDAY, MAY 26

Random Ramblings

A few scattered notes as we Bay Staters continue our fruitless wait for the sun to return (so glad I opened my pool a few weeks back):

*** Remember when the term “stealth” was mostly used to describe early-stage companies? Me too, but today, more and more, it’s becoming an qualifier for nascent venture capital firms, like the upcoming efforts from veteran VCs Stewart Alsop and Jeff Drazen. (A quick aside: Alsop was recently referred to in the NY Times as a “tourist” VC, but I think it’s a mischaracterization, since he hasn’t left the market. He simply left New Enterprise Associates. Tourism isn’t about when you arrive, it’s about when you leave).

Anyway, the latest in this burgeoning class of emerging managers is something called Mainspring Capital Partners, which currently is pre-marketing its inaugural fund to prospective LPs. The Boston-based firm will operate as an independent affiliate of I-bank Lane Berry & Co., and plans to make growth equity investments in revenue-stage companies in the technology, communications, media and business services spaces. Ideally, Mainspring portfolio plays will not have received prior institutional funding. Its principals are Mike Balmuth (formerly of Summit Partners and the Summit Accelerator Fund), Pat Curran (formerly of Great Hill Partners) and Fred Lane (Lane Berry co-founder who was the eighth banker hired at DLJ).

Not surprisingly, its structure is kind of a cross between The Sprout Group of the 1970s and 1980s (in terms of its arm’s length DLJ affiliation) and the Summit Partners/TA Associates model (in terms of company stage and an intention to integrate cold-calling into its deal-flow strategy). Could be an interesting one to watch…

*** On paper, VSP Capital and AIG Capital Partners don’t seem to have much in common. The former is an early-stage VC firm in Silicon Valley, while the later is a multi-stage private equity firm focused on the emerging markets. Unfortunately, however, their fortunes are beginning to look fairly similar. We went over the most recent AIG CP happenings on Tuesday, and now word comes that the six-member limited partner advisory council of VSP Capital has unanimously agreed to recommend that all VSP LPs discontinue the firm’s third fund. The impetus in this case is the departure of three of the firm’s five general partners (including two in the past month), and some fairly pervasive rumors as to why it’s happened (like the Mercury News’ Matt Marshall wrote, the rumors are of such a personal nature that their publication is probably more destructive than constructive). As with AIG, the VSP situatio! n will involve a bunch of paperwork and arm-twisting before its conclusion.

*** Credit rating agency Standard & Poor’s is apparently planning to launch a private equity fund index. Let the anti-transparency arguments fly…

*** A quick correction to my piece last week on Howard Anderson. It seems that he is no longer launching a consultancy for non-profits, and instead is spending his time as a “consigliare” for CEOs who desire some independent (i.e., not board of directors) advice. Also, worth noting that I recently conducted a Q&A with Howard about his controversial MIT Tech Review piece, which will appear in the July issue of Venture Capital Journal.

*** Finally, a sad note out of Thailand. Caroline Chan, an investment professional with venture capital firm KLM Capital, has officially been pronounced dead, after having gone missing in the December 26 tsunami. Our deepest condolences to her family and colleagues.

 

Cylene Pharmaceuticals Inc., a San Diego-based drug discovery and development company focused on oncology, has raised $26.3 million in Series B funding. Coastview Capital led the deal, and was joined by BioVentures Inv*sdtors, Mitsui & Co. Venture Partners, Morningside Venture Investments, TDL Investors, William Harris Investors, Lakeview Capital and the Viterbi Group. Return backers included Sanderling Ventures, Novartis BioVentures, Research Corporation Technologies and IngleWood Ventures. www.cylenepharma.com

The Blackstone Group has lost out in its efforts to acquire Enel SpA’s stake in Italian telecom company Wind SpA. Enel announced today that it has accepted a bid from Weather Inv*stments SARL, which is controlled by Egyptian businessman Naguib Sawiris. The total transaction is valued at approximately 12.14 billion euros, with Enel retaining a minority position. www.enel.it

Bay Partners is looking to raise up to $325 million for its eleventh venture capital fund, according to a regulatory filing. The Cupertino, Calif.-based firm already has closed on $174.5 million in commitments from limited partners like Paul Capital, the BP Pension and Horsley Bridge Partners. www.baypartners.com

VC Deals

SpikeSource Inc., a Redwood City, Calif.-based open source IT infrastructure company, has closed its Series A funding round with $12.85 million in preferred stock and $1.35 million in convertible securities, according to a regulatory filing. Participants included Fidelity Ventures and Kleiner Perkins Caufield & Byers. The company has been incubated by KPCB since its 2003 inception. www.spikesource.com

Aran Technologies Ltd., a Dublin, Ireland-based provider of end-to-end mobile customer experience management software for operators, has raised $10 million in second-round funding. Participants included Trident Capital, Cross-Atlantic Capital Partners, Oyster Inv*stment Funds and Enterprise Ireland. www.arantech.com

The NAU Group, a Ramsey, Minn.-based provider of crop insurance, has received an undisclosed amount of private funding from The Lightyear Fund. www.lycap.com www.naucountry.com

Tectura Inc., a Redwood City, Calif.-based provider of Microsoft-integrated business solutions to mid-market companies and large enterprise divisions, has raised $10 million in private equity funding from Ritchie Capital Management. www.tectura.com

OptiMedica Corp., a Santa Monica, Calif.-based medical device startup, has raised Series A funding from Kleiner Perkins Caufield & Byers, according to a regulatory filing. Brook Byers of KPCB will serve on the company’s board of directors. www.optimedica.com

Buyout Deals

 

Kelso & Co. has completed its acquisition of Insurance Auto Auctions Inc. (Nasdaq: IAAI), a Westchester, Ill.-based provider of auto salvage services to insurance companies. The deal was valued at approximately $400 million, with IAAI shareholders receiving $28.25 per share in cash. www.iaai.com

Allied Domecq PLC, a publicly-traded UK liquor company, has given a prospective buyout consortium a June 29 deadline to either make a bid, or go away. In April, the company agreed to a 7.4 billion euros takeover offer from France-based Pernod Picard SA, but subsequently was approached by a group that includes Constellation Brands, Brown-Foreman Corp., Blackstone Group and Lion Capital (f.k.a. Hicks Muse Europe). The Constellation-led group, however, has not yet made a formal offer. www.allieddomecq.com

DLJ Merchant Banking is looking to sell Mueller Group Inc. for up to $1 billion, according to The Deal. Mueller is a Decatur, Ill.-based valve and hydrant maker that DLJ acquired in 2000. www.muellercompany.com

Sentinel Capital Partners has acquired Metro Dentalcare, a Minnesota-based dental clinic operator and provider of group dental care to more than 125,000 patients in the Minneapolis and St. Paul metropolitan area. No financial terms were disclosed. www.metro-dentalcare.com

Newbridge Capital and affiliate TPG-Axon Capital have agreed to pay approximately $188 million for a 26% stake in Singapore-based private healthcare company Parkway Holdings Ltd. from founding family shareholders. The deal is expected to close next month.

Repsol YPF, a Spain-based oil and gas company, is planning to bid for Royal Dutch/Shell Group’s liquefied petroleum gas distribution and marketing business. The deal could be worth more than $2 billion, and Repsol already is in negotiations with several potential funding partners, including CVC.

Whitbred PLC, a publicly-traded UK hospitality company, reportedly has received buyout interest from firms that include Apax Partners and CVC. According to The London Evening Standard, prospective buyers want to acquire Whitbred, and then sell off most divisions except for its Premier Travel Inn hotels chain. www.whitbred.co.uk

CAM Fabrication Inc., a distributor of concrete forms and accessories in the Southeastern U.S., has completed a $24.5 million recapitalization. JMH Capital led the deal, and was assisted by mezzanine firm Praesidian Capital Inv*stors.

PE-Backed M&A

UTStarcom Inc. (Nasdaq: UTSIE) has acquired Pedestal Networks Inc., a Fremont, Calif.-based broadband access provider, as first reported yesterday by Light Reading. No financial terms were disclosed. Pedestal had raised approximately $30 million in VC funding from firms like Benchmark Capital, DMC-Doll Capital Management, Skymoon Ventures and Duff Ackerman & Goodrich LLC. www.utstarcom.com www.pedestalnetworks.com

Firm & Fund News

NGEN Partners, a Santa Barbara, Calif.-based VC firm focused on mid-to-late-stage companies in the materials science space, has held a first closing on its second fund, which is targeted at $150 million. Participating limited partners include CalPERS, CalSTRS, The Camille and Henry Dreyfus Foundation, Cycad Group, the Glenn Foundation, Siemens Venture Capital, Asahi Glass Co., Air Products, BASF, Bayer MaterialScience, DuPont, DSM and Henkel. www.ngenpartners.com

Human Resources

Shawn Marcell has joined Science Center Ventures as a senior vice president, after having most recently served as chief operating officer of biotech company Linguagen Corp. Science Center Ventures is a new early-stage venture capital effort from The Science Center, a commercialization engine for science and tech companies in the Greater Philadelphia area. www.sciencecenter.org

Michael Murphy has joined FTI Consulting Inc. (NYSE: FCN) as a senior managing director in the corporate finance/restructuring practice. He most recently served as president and CEO of Am-Beo Ltd., an Ireland-based software and services company focused on the telecom and content industries. www.fticonsulting.com

Josh Kopelman, founder of Half.com, and Richard Forman, founder of Register.com (Nasdaq: RCOM), have joined the board of New York Angels Inc. www.newyorkangels.com

GE Commercial Finance has named four executives to its Global Media & Communications origination team: Mark Huang was appointed senior vice president of technology lending; Eitan Milstein has been named senior vice president of the special situations team; Kevin Khanna has been named vice president focused on the entertainment sector; and Robert Malone has been named vice president focused on the media sector. www.gegmc.com

Geoffrey Berger has joined Atlantic-Pacific Capital as a principal in charge of direct placements. He had spent the past seven years as a partner with Equinox Capital, and previously worked with both Bank of Boston and Bessemer Securities Corp. www.apcap.com

Roy Merritt has joined Amadeus Capital Partners as a special partner. He most recently served as founder of Orcapital, having previously worked with Providence Equity Partners, DB Capital Ventures, Espirit Telecom Group and Apax Partners. www.amadeuscapital.com

WEDNESDAY, MAY 25

23,000 and Counting.

Every time the PE Week wire adds another thousand subscribers, I like to remind you that these daily rantings are just a sampling of the scrumptious feast that is Private Equity Week. To gain access to the buffet table, however, you must become a paid subscriber. So just whip out that well-worn corporate credit card and sign up. You’ll get the weekly print publication, and unlimited access to our website’s protected sections, within which you’ll find in-depth deal news, fund news, market analysis and proprietary data. Plus, it even has bylined stories of mine, minus all of those Wire-like typos. Just tap the “Subscribe” button at the right-hand side of this email, or email Rob Mills. He also can help you get a subscription to the bi-weekly Buyouts Magazine, or the monthly glossy Venture Capital Journal. Also, anyone interested in getting their message out to 23,000 subscribers should contact our ad guru Naz Bayazit.

 

InPhase Technologies Inc., a Longmont, Colo.-based provider of holographic disk storage drive and media development, has raised $32.1 million in Series C funding. Bayer MaterialScience AG participated on the deal as a financial and strategic backer, and was joined by Nanotech Partners Ltd. (sponsored by Mitsubishi Corp.), New Venture Partners and existing shareholders Hitachi Maxell Ltd., ALPS Information Technology Fund, Yasuda Enterprise Development Co. and Japan Asia Investment Co. The company has raised approximately $54 million in total VC funding since its 2000 inception. www.inphase-technologies.com

RazorGator Interactive Group Inc., a Beverly Hills, Calif.-based online ticket agent for sold-out sporting and entertainment events worldwide, has raised $26 million in Series A funding. Kleiner Perkins Caufield & Byers and Oak Inv*stment Partners co-led the deal, with Hercules Technology Growth Capital also participating. www.razorgator.com

MTU Aero Engines Holding AG, a Germany-based maker of aircraft engines, has set its proposed IPO terms to 19 euros to 22 euros per share, with up to 35.65 million shares to be issued. MTU plans to price on the Frankfurt Stock Exchange, and is controlled by Kohlberg, Kravis Roberts & Co. (KKR). The IPO would value MTU at between 1.05 billion euros and 1.2 billion euros, which is lower than the 1.5 billion euros KKR paid for MTU when buying it from DaimlerChrysler last year. www.mtu.de

VC Deals

Tropic Networks Inc., an Ottawa-based supplier of regional and metro-area optical networking equipment, has raised US$33 million in additional VC funding. JPMorgan Partners led the deal, and was joined by Narra Venture Capital, Dynamic Venture Opportunities Fund, CrossBridge Partners Fund, VentureLink Fund and The Bank of Nova Scotia. Return backers included Altamira, Anschutz Inv*stment Co., Crescendo Ventures, Celtic House Venture Partners, Goldman Sachs, Kodiak Venture Partners, Ontario Teachers’ Pension Plan and Raza Venture Fund. In other Tropic Networks news, the company secured a $15 million operating capital facility from Silicon Valley Bank. www.tropicnetworks.com

Proxilliant Systems Corp. (f.k.a. SpaceNet Communications AB) has raised 2 million euros in VC funding from Creandum and Northzone Ventures. Proxilliant is a cable networks technology company with offices in both Stockholm, Sweden and Bala Cynwyd, Penn. www.proxilliant.com

Qumas, a Cork, Ireland-based provider of enterprise risk and compliance management solutions, has raised $10 million in VC funding from Fidelity Ventures and General Catalyst Partners. www.qumas.com

Quickoffice Inc., a Mountain View, Calif.-based provider of office document software for mobile professionals, has raised $7 million in a VC funding round led by Mayfield. The deal was structured as Series C convertible preferred stock, but is Quickoffice’s first institutional round of funding. www.quickoffice.com

Isilon Systems Inc., a Seattle-based provider of clustered storage solutions, has raised $20 million in fourth-round funding. Focus Ventures led the deal, and was joined by return backers Lehman Brothers Venture Partners, Sequoia Capital, Atlas Venture and Madrona Venture Group. The company has now raised nearly $60 million in total VC funding since its 2001 inception. www.isilon.com

Energy 51 Inc., a Calgary, Alberta-based oil and gas exploration company, has received up to Cdn$17.8 million in private equity commitments from Greenhill Capital Partners and COSCO Capital Management. www.energy51.ca

Southern Bay Energy LLC, a Houston, Texas-based oil and gas exploration and production company, has received $10 million in private equity funding from Wachovia Capital Partners.

Buyout Deals

 

Freeman Spogli & Co. has completed its acquisition of a majority position in Santa Ana, Calif.-based Bright Now Dental Inc. from Gryphon Inv*stors, which will remain a minority shareholder. www.brightnow.com

Francisco Partners has completed its acquisition of RedPrairie Corp., a Waukesha, Wis.-based provider of supply chain technology solutions that enable business process transformation. No financial terms were disclosed. RedPrairie received a significant minority inv*stment in 1998 from Advent International, Vestar Capital Partners and GE Capital. www.redprairie.com

The Riverside Co. has acquired Embracing HospiceCare, a provider of hospice services with three locations in Georgia. No financial terms were disclosed. Riverside plans to combine EH with American Hospice Management, a platform company it acquired in January 2004. www.americanhospice.com

PE-Backed IPOs

Allion Healthcare Inc., a Melville, N.Y.-based provider of specialty pharmacy and disease management service for HIV/AIDS patients, has set its proposed IPO terms to four million common shares being offered at between $12 and $14 per share. The company plans to trade on the Nasdaq under ticker symbol ALLI, with Thomas Weisel Partners serving as lead underwriter. The company lists The Edgewater Funds as a significant shareholder, with an 8.2% pre-IPO stake. www.allionhealthcare.com

Premium Standard Farms Inc., a Kansas City-based provider of pork products within the United States, has set its proposed IPO terms to 12.5 million common shares being offered at between $15 and $17 per share. The company plans to trade on the Nasdaq under ticker symbol PORK, with Morgan Stanley serving as lead underwriter. The company is majority-owned by ContiGroup Companies Inc., while other shareholders include MetalMark Capital and Oaktree Capital Management. www.psfarms.com

Opoczno SA, a Poland-based ceramics company, today delayed setting price terms for its proposed IPO, without giving either an explanation or a revised disclosure date. The company is controlled by Enterprise Investors. www.opocznosa.com.pl

PE-Backed M&A

North American Science Associates Inc., a Northwood, Ohio-based contract research organization, has agreed to acquire CeeTox Inc., a Kalamazoo, Mich.-based scientific and medical services company. CeeTox was founded in 2003 by former Pfizer scientists, and received funding from Southwest Michigan First, Western Michigan University’s Bioscience Research Commercialization Center, the Michigan Economic Development Corp. and local angels. www.ceetox.com

Bionomics Ltd. (ASX: BNO) of Australia has agreed to acquire Melbourne-based drug discovery company Iliad Chemicals Pty Ltd. for Au$9 million worth of Bionomics stock, plus the possibility of an additional Au$3 million worth of milestone payments. Iliad Chemicals has received VC funding from Start-Up Australia Pty Ltd. www.iliad.com.au

Firm & Fund News

North Bridge Venture Partners is looking to raise up to $515 million for its sixth fund, according to a regulatory filing. www.nbvp.com

The Minnesota  StateBoard of Inv*stment, Adams Street Partners, St. Paul Fire & Marine Insurance Co. and 3M Inv*stment Corp. are among the limited partners in Split Rock Partners‘ inaugural fund, according to a regulatory filing. www.splitrock.com

Human Resources

ECentury Capital Partners, a McLean, Va.-based venture capital firm focused on technology companies, has promoted: Jim Broder from principal to managing director, and Chris Fritz from associate to principal. www.ecenturycapital.com

 

TUESDAY, MAY 24

 

AIG Capital Partners (Again)

I promised an update on the AIG Capital Partners situation and, for a change, I’m delivering. For the uninitiated, read this and this before continuing.

Last Thursday, the limited partner advisory board of the $900 million, AIG-sponsored Global Emerging Managers II fund (GEM II) unanimously agreed to seek an amendment to the existing limited partnership agreement, whereby committed investors would have the opportunity to withdraw from the fund. The decision was communicated to all GEM II LPs via a conference call last Friday morning, and the actual amendment is expected to be drawn up and delivered as early as next week. At that point, LPs will have around three weeks to decide whether to continue in GEM II, or pull out without consequence (the fund has only had one capital call).

According to an AIG spokesman, the Thursday meeting included both AIG Global Investment Group CEO Win Neuger, plus David Yeung, who took over the GEM II effort after fund chief Peter Yu and managing director Bill Jarosz were fired late last month. Both men basically made the case that AIG is still committed to GEM II’s mandate to buy into companies in Latin America, emerging Europe and Asia, and that the original GEM I fund has produced strong returns (plus a handful of recent exits like GOL Linhas Aereas Inteligentes SA and Orange Romania. LPs, however, are clever enough to remember that Yu and Jarosz were instrumental in those aforementioned returns, and that AIG Capital Partners has retained precious few senior executives from the time of GEM I’s founding, let alone the fund-raising ef! fort for GEM II.

I would be surprised if AIG is able to get enough LPs to stick around, particularly since most of the advisory board members are goners. It could go back out to market with its new management team, but it would have to offer extremely attractive terms.

As I wrote after the firings in late April, none of this had to happen. First, Yu and Jarosz’s plan to spin AIG Capital Partners out into an independent entity made sense (which is why Hank Greenberg had OK’d it). LPs generally don’t like sponsored funds, for the very reason that they don’t have ultimate control over who is managing their money. Second, if the terminations had to happen, AIG should have given Yu and Jarosz a boatload of severance cash, in exchange for a wink-wink orderly transition and promise to soothe LP concerns. Maybe not the most ethical thing to do, but hardly unprecedented among private equity firms. Instead, of course, AIG fired both men and marched them out the front doors, in plain sight of lots of folks who then contacted people like me. AIG complained when I originally called this HR strategy short-sighted, but I’d guess that, privately, they’re wondering how they could have made such a major mistake.

*** A quick update on another fund falling apart: VSP Capital III. Constance Loizos of PE Week reports that LPs yesterday received a letter from the firm, informing them not only that Matt Crisp and Vince Vannelli had resigned, but that a vote to suspend the fund and a vote to terminate the fund will take place within the next week. More on this tomorrow.

*** Finally, lots of you write in to ask how to break into the VC market. Seth Levine of Mobius Venture Capital has some answers

Top Three

 

Phenomix Corp., a San Diego-based drug company focused on immune disease and metabolic syndrome, has raised $40 million in Series B funding. JPMorgan Partners and Delphi Ventures co-led the deal, and were joined by fellow new backer Baker Brothers. Existing shareholders Alta Partners, Sofinnova Ventures, Bay City Capital, CMEA Ventures, GBS Venture Partners and Novartis BioVenture Fund also participated. Phenomix has raised $65.5 million in total VC funding since its 2001 inception. www.phenomix.com

Telenor ASA (Nasdaq: TELN) has agreed to acquire broadband companies BredbandsbolagetAB and Cybercity for SEK 6 billion ($824 million) and DKK 1.4 billion ($237 million), respectively. Bredbandsbolaget of Sweden has received VC funding from The Carlyle Group, Access Industries, Investor AB and Continuum Group. Cybercity of Denmark is controlled by Advent International, with other shareholders including Merrill Lynch Capital Partners, Lehman Brothers, Four Seasons Venture Capital and Nordic Venture Partners. www.telenor.com www.bredband.com www.cybercity.dk

Wilber Ross Jr. and Masters Capital Management have formed a Chicago-based partnership that will provide private equity to early, mid and late-stage companies working on nanotechnology-enabled products and solutions. Michael Collett of Masters Capital and Mel Melsheimer, former president of Harris & Harris Group Inc., will serve as managing members and managing directors of the effort, while Ross and Masters Capital founder Michael Masters will serve on the investment committee. No financial terms have been disclosed for the partnership, which also plans to have offices in both Virginia and on the West Coast.

 

VC Deals

Elbion AG, a Germany-based drug company focused on CNS and inflammatory diseases, has raised 10 million euros in additional Series A funding, bringing the round total to 35 million euros. New backers include Techno Venture Management, Temasek Holdings and Mitsubishi Corp., while participants in the initial tranche included 3i Group, Burrill & Co., DVC Deutsche Venture Capital, AGF Private Equity, Quintiles PharmaBio Development, BayTech Venture Capital and the Marubeni Corp. www.elbion.de

Attenex Corp., a Seattle-based developer of document analysis and visualization tools for electronic discovery, has raised $5 million in Series B funding led by Voyager Capital. www.attenex.com

422 Inc., a Palm Beach, Fla.-based developer of directory assistance services for wireless phone users, has raised approximately $3 million in Series C funding. Motorola Ventures was joined on the deal by return backers Draper fisher Jurvetson and Draper Fisher Gotham. www.422.info

Infineon Technologies has spun out its Circuit Verification Environment (CVE) division into a new company called OneSpin Solutions GmbH. As part of the move, OneSpin has received 14 million euros in venture capital funding from Apax Partners. www.infineon.com

Brix Networks, a Chelmsford, Mass.-based provider of VoIP performance management solutions, has raised $1.5 million in funding from TELUS Ventures. Last month, the company announced that it had raised $5 million in fifth-round funding from Castile Ventures (lead), Charles River Ventures, ComVentures, Fidelity Ventures, Partech International and Star Ventures. The company has raised around $60 million in total VC funding since its1999 inception. www.brixnet.com

Buyout Deals

 

Odyssey Investment Partners has agreed to acquire Norcross Safety Products from an ownership group that includes Trimaran Capital Partners, John Hancock Life Insurance Co. and CIVC Partners. The deal is valued at $495 million, including the assumption of Norcross’ outstanding debt and cash. Norcross is an Oak Brook, Ill.-based manufacturer and marketer of protective equipment for the industrial, utility/high voltage and fire service markets. It had 2004 revenue of approximately $440 million. www.nspusa.com

Golden Gate Capital has sponsored a recapitalization of Plant Equipment Inc., a Temecula, Calif.-based provider of mission-critical communications systems for 911 and other emergency call centers. The deal was done in partnership with Plat Equipment president and CEO Timothy Fuller, who will continue to lead the company. No financial terms were disclosed. www.peinc.com

The Blackstone Group has acquired Merlin Entertainments Group from Hermes Private Equity for Gbp102.5 million. Merlin is a UK-based operator of European visitor attractions like the London Dungeons and the Sea Life Centers. UBS served as sole financial advisor on the transaction. www.merlinentertainments.biz

Apax Partners, CVC and Cinven reportedly have pulled their consortium for Spanish telecom company Grupo Auna SA, which is expected to be sold for approximately 12 billion euros. Two remaining groups include: Providence Equity Partners (lead), Carlyle Group, Blackstone Group and Permira; and KKR, Goldman Sachs and BC Partners.

GIMV has acquired an ownership position in Westerlund Corp. NV, a Belgium-based provider of handling and logistics for the European forest products industry. The immediate family of Westerlund managing director Jean-Jacques Westerlund retained its shares, but GIMV took over shares held by other family members. No financial terms were disclosed. www.gimv.com www.westerlundgroup.com

Zurich Financial Services Group has agreed to sell its 94% stake in ZC Sterling Corp. to Trident III (f.k.a. MMC Capital). No financial terms were disclosed for the deal, which is expected to close in Q3 2005. ZC Sterling is an Atlanta-based provider of business process outsourcing, insurance, consumer marketing and technology services to the mortgage, insurance and homebuilding industries. www.zurich.com

PE-Backed IPOs

BioXell SpA, an Italy-based biotech company focused on urology and inflammatory diseases, has moved closer to public market flotation, by signing a drug development agreement with Merck & Co. Inc. that could be worth up to $150 million. “This takes us a step forward towards an IPO,” BioXell CEO Francesco Sinigaglia told Reuters. BioXell shareholders include AlpInvest, Index Ventures, MPM Capital, Life Science Partners and NIF Ventures. www.bioxell.com

PE-Backed M&A

Alien Technology Inc., a Morgan Hill, Calif.-based RFID company, has acquired Quatrotec, a specialty integration services and project management company focused on commercial aviation and other transportation markets. No financial terms were disclosed. Alien has raised over $150 million in VC funding since its 1999 inception, from firms like CMEA Ventures, Lago Partners, New Enterprise Associates, First analysis Corp., Advanced Equities Capital Partners, Adams Street Partners, Equitek Capital, Rho Ventures and Sevin Rosen Funds. www.alientechnology.com www.quatrotec.com

Consul Risk Management Inc., a Herndon, Va.-based provider of enterprise security and compliance solutions, has acquired NetMon2, an early-stage provider of real-time event information correlation from network and security devices, including firewalls and switches. No financial terms were disclosed. Consul has raised VC funding from Kennet Venture Partners, Nesbic Group, Dresdner Kleinwort Wasserstein and Softbank Corp. www.consul.com www.netmon2.com

AEP Networks, an Somerset, N.J.-based provider of network and application access security, has agreed to acquire V-One Corp. (OTC PK: VNECQ), a bankrupt commercial vendor of application-layer SSL VPN technology. No financial terms were disclosed for the deal, which is expected to close within the next 30 days. AEP has raised VC funding form ACT Venture Capital, Atlantic Venture Partners, B-business Partners NV, Masthead Venture Partners and the New Jersey Technology Council. www.aepnetworks.com

Talk America (Nasdaq: TALK) has agreed to acquire LDMI Telecommunications Inc., a Southfield, Mich.-based provider of communications services to business and residential customers, primarily in Michigan and Ohio. No financial terms were disclosed. LDMI has raised over $50 million in VC funding from firms like Alpha Capital Partners, Wind Point Partners, CID Equity Partners, Blue Chip Venture Co., PNC Equity Management and Primus Venture Partners. www.talkamerica.com www.ldmi.com

Firm & Fund News

NGEN Partners, a Santa Barbara, Calif.-based VC firm focused on mid-to-late-stage companies in the materials science space, has held a first closing on its second fund, which is targeted at $150 million. Participating limited partners include CalPERS, CalSTRS, The Camille and Henry Dreyfus Foundation, Cycad Group, the Glenn Foundation, Siemens Venture Capital, Asahi Glass Co., Air Products, BASF, Bayer MaterialScience, DuPont, DSM and Henkel. www.ngenpartners.com

Human Resources

Mike Dolbec has joined The Ignite Group as a general partner, where he will focus on VC deals in the digital media, wire-free mobility, consumer electronics and data communications spaces. He previously was a general partner with Orange Ventures. www.ignitegroup.com

Meritage Private Equity Funds, a Denver-based private equity firm focused on the communications market, has promoted Derek Pilling to the position of vice president. He originally joined the firm in 2003, after receiving his MBA from the Kellogg School of Management at Northwestern University. www.meritagefunds.com

Raymond McGuire has resigned from his post as co-head of global M&A with Morgan Stanley, according to various press reports. The move is in anticipation of McGuire joining Citigroup as co-head of global I-banking. www.citigroup.com

Cliff Higgerson has transitioned from a general partner to a venture partner role with ComVentures, according to VentureWire. www.comventures.com

Jeff Miller, a venture partner with Redpoint Ventures and former CEO of Documentum, has joined the board of advisors of OuterBay Technologies, a Redpoint portfolio company focused on information lifecycle management solutions. www.outerbay.com\

MONDAY, MAY 23

Monday Mouth-Off

The sky is gray, the number of companies filing for IPOs keep outpacing the number that price them and I can look forward to another four months before my remote control is taken hostage on Sunday nights at 9pm EST. In other words, it’s time for some Monday Mouth-Off:

First up is Paul, who asked the following question about a line in last Monday’s column: “What did you mean when you suggest ‘VCs generally dare not tread in the Southeast. This is very different than saying ‘VCs do not tread in the southeast.’ I would certainly agree with the latter.” A bunch of people pointed this out Paul (you simply did it the most succinctly), and all are correct, for the most part. Using the word “dare” was really a slip of my fingers, although it is true that many VCs are uncomfortable investing in regions without a substantial, existing venture capital industry, because it makes follow-on financings for difficult. Moreover, VCs are often act like sheep in terms of niche industry focus (think social networking or metabolic disease), so it isn’t surprising that the same mentality keeps most of them in the Northeast of California). Nonetheless, I haven’t seen data suggesting that Southeastern deals, for example, either under-perform or outperform deals in other regions. In other words, point taken.

Moving on to Wednesday’s column, which discussed basic journalistic practice in the context of Newsweek’s original Koran story (it now has a follow-up posted). Not a single email about sourcing per se, but lots of talk about Newsweek itself, and the view that I was being too generous. The majority sided with regular respondent Frank, who writes: “Great thoughts today, but one comment: Uncovering a scandal of infidelity in the Oval Office nearly two terms ago is farfetched evidence of a reporter’s supposed friendliness toward the Administration.” Mark added: “Not to be picky, but when a mistake costs lives, I would characterize the practice of ensuring against a mistake as one that should be viewed more seriously than the ‘People died – oh well everyone makes mistakes.’

Finally, there is the issue of Howard Anderson’s column for the MIT Technology Review. A bunch of the emails I received were extraordinarily mean-spirited (toward Howard, not toward me), while others combined animosity with cynical humor. In short, the consensus was that Howard: (A) Is inappropriately bashing an industry on his way out, when such barbs can no longer hurt him; and (B) Hasn’t been a terribly successful VC for a while, and is simply bitter.

Again, I can’t speak to Howard’s motives for writing the piece, and I am certainly not one to throw darts at the house of occasional bitterness, even if justified. The issue remains, I believe, his belief that recent VC industry changes are structural, rather than cyclical. To that point, Ari says: “If Anderson is right, then VCs should be looking forward to greater future success, not future failure. The whole difficulty of VC investing is judging what the market will want/look like in four or five year’s time. If we already know, then we’ve won far more than half the battle.

Top Three

 

Oxagen Ltd., a UK-based drug discovery and development company focused on inflammation, has raised $59.8 million in Series B funding. MPM Capital led the deal, and was joined by Bessemer Venture Partners, IBT, Red Abbey Venture Partners. Return backers included SV Life Sciences, Advent Venture Partners, 3i Group, Abingworth Management and The Wellcome Trust. www.oxagen.co.uk

Auna, a Spain-based telecom company, reportedly has received buyout bids from at least three private equity consortia, which value the company at between 12 billion euros and 13.5 billion euros (including debt). Auna is owned by Banco Santander, Endesa and Union Fenosa. Bidding groups include: Providence Equity Partners (lead), Carlyle Group, Blackstone Group and Permira; KKR, Goldman Sachs and BC Partners; and Apax Partners CVC and Cinven.

Reliant Pharmaceuticals Inc., a Liberty Corner, N.J.-based cardiovascular drug company, has filed to raise $300 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol RRX, with Goldman Sachs serving as lead underwriter. The company has raised over $500 million in venture capital and strategic funding since its 1999 inception, from firms like Alkermes Inc., Bay City Capital, Invermed Associates, Morgan Stanley Private Equity, Goldman Sachs, Versant Ventures. www.reliantrx.com

VC Deals

Caspian Networks Inc., a San Jose, Calif.-based optical switching company, has raised $55 million in Series BBB funding. Last week, the PE Week Wire reported that Caspian had raised $31.4 million (according to an SEC filing). It turns out that the $31.4 million was the round’s second tranche, whereas the initial $22 million was raised in 2004. U.S. Venture Partners led the deal, and was joined by fellow return backers Oak Inv*stment Partners, Morgenthaler Ventures, New Enterprise Associates, Alloy Ventures and ABN Amro. The company has raised over $300 million in total VC funding since its 1999 inception, including a $120 million Series A recap in 2002 at a post-money valuation of approximately $195 million. www.caspiannetworks.com

Riskclick, a New York and London-based provider of business process management solutions for the insurance industry, has raised $8.2 million in third-round funding. Advent Venture Partners was joined on the deal by return backers BA Capital Partners Europe, Amadeus Capital Partners and Frank Bonsal Jr. www.riskclick.com

TrolltechAS, an Oslo, Norway-based provider of Linux and cross-platform software development technologies, has raised $6.7 million in Series B funding. Index Ventures led the deal, and was joined by existing shareholders Teknoinv*st and Northzone Ventures. www.trolltech.com

TriAactive Inc., an Austin, Texas-based provider of Web-hosted, integrated applications for enterprise desktop and server system management, has raised $7 million in Series F funding. Key Venture Partners led the deal, and was joined by return backers El Dorado Ventures and Sierra Ventures. TriActive has raised $35 million in total VC funding since its 1999 inception. www.triactive.com

Shenick Network Systems Ltd., a Dublin, Ireland-based provider of rollout test systems for communications equipment vendors, service providers, integrators and large enterprises, has raised $3.25 million in additional venture capital funding. Innovacom led the deal, and was joined by return backer Trinity Venture Capital. www.shenick.com

Endius Inc., a Plainville, Mass.–based developer of minimally-invasive spinal surgery technologies, has received $15 million in commitments for a Series B recap round. The deal involves three tranches, with participants including The Carlyle Group, EGS Healthcare, Hillman Medical Ventures and Morgan Stanley, Dauphin Capital Partners and Trellis Health Ventures. www.endius.com

Velox Semiconductor Corp. of Somerset, N.J. has raised $7.62 million in Series A funding. Backers include DCM-Doll Capital Management, DFJ New England and SAS Inv*stors.

Buyout Deals

 

JPMorgan Partners and Bancroft Private Equity have agreed to acquire Nowaco Central Europe from Nowaco Group AS (Copenhagen: NOWA) for approximately 90 million euros. Nowaco Central Europe is a Czech Republic-based distributor of chilled and frozen foods to the hotel, restaurant, catering and retail markets in Hungary, Slovakia and the Czech Republic. www.nowaco.com

Bain Capital and Game Plan LLC have upped their bid for the National Hockey League, according to Bloomberg. The revised offer stands at more than $4 billion, compared to an original bid of $3.5 billion.

Sun Capital Partners has agreed to acquire the Eljer Plumbingware business of Jacuzzi Brands Inc. (NYSE: JJZ). No financial terms were disclosed for the deal, which is expected to close by July 2. Eljer is part of Jacuzzi’s Bath division, and offers sanity ware like bathtubs, toilets, sinks and faucets. It had an operating loss of $30.7 million on $150.5 million in sales for the fiscal year ending October 2, 2004. www.jacuzzi.com www.suncappart.com

JPMorgan Partners has agreed to sell Crosstown Traders Inc. to Charming Shoppes Inc. (Nasdaq: CHRS). The deal is valued at approximately $218 million in cash, plus the assumption of Crosstown Traders’ debt. Crosstrown is a Tuscan, Ariz.-based direct marketer of women’s apparel, footwear and specialty gifts. www.jpmorganpartners.com

Accession Mezzanine Capital has sponsored a leveraged buyout of Solaris Bus & Coach, a Poland-based bus manufacturer. The deal is valued at 43 million euros, and Solaris is expecting to complete an IPO on the Warsaw Stock Exchange by year-end.

PE-Backed IPOs

K&F Industries Holdings Inc., a New York-based maker of aircraft parts, has filed to raise $100 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol KFI, with Goldman Sachs and Lehman Brothers serving as lead underwriters. The company is controlled by Aurora Capital Group, with GE Pension Trust and CalPERS also serving as significant shareholders.

PE-Backed M&A

Aeroflex Inc. (Nasdaq: ARXX) has agreed to acquire the testing and measurement division of UbiNetics, a UK–based supplier of software and silicon IP for digital wireless terminals, for Gbp46 million. 3i Group and PA Consulting Group are shareholders in Ubinetics. www.ubinetics.com

Firm & Fund News

Credit Suisse First Boston reportedly has teamed up with Mark Qiu, former finance director for Chinese government-owned oil company CNOOC Ltd., to invest in Chinese companies. The effort expects to disburse up to $1 billion over the next five years, with CSFB serving as the cornerstone limited partner. www.csfb.com

Vivo Ventures, a Palo Alto, Calif.-based venture firm focused on the life sciences sector, has raised approximately $97.4 million in limited partner commitments for its fifth fund, according to a regulatory filing. www.vivoventures.com

Human Resources

Vaughn Kailan has joined MPM Capital as a general partner. He currently serves as chairman of ViaCell Inc., Elixer Pharmaceuticals Inc. and Ikaria Inc., and served and president and CEO of COR Therapeutics Inc. from 1990 until 2002. www.mpmcapital.com

Doug Kimmelman reportedly has left Goldman Sachs, where he had been a co-founder of Orion Power Holdings. He now plans to raise a $1 billion private equity fund called Energy Capital, which will support physical energy assets in North America, like power plants and transmission lines. His partners are Scott Helm, co-founder of Orion, and Thomas Lane, a former managing director of M&A activity for Goldman Sachs.

Scott Schoen, co-president of Thomas H. Lee Partners, has stepped down from the board of AXIS Capital Holdings Ltd. (NYSE: AXS). The move follows the sale of all remaining AXIS Capital common stock held by Thomas H. Lee Partners, which occurred last week. www.axiscapital.com

Denning & Co., a San Francisco-based private equity advisory, has promoted Jill Kitazaki to chief operating officer, and Lisa Herrell to director. www.denningandcompany.com

******************
Correction: Boston Capital Ventures, not Boston Capital Advisors, is an investor in Khimetrics Inc.

FRIDAY, MAY 20

 

s This Goodbye?

When Howard Anderson speaks, people listen. Then they rip him apart.

Anderson is a living business legend here in BankBoston, Fleet, Hancock, Gillette, Citizen’s Bank country, thanks to his founding of the Yankee Group, and his co-founding of Battery Ventures. In 1999, Anderson launched YankeeTek Ventures, as an early-stage IT feeder firm for local later-stage firms that also would serve as its limited partners (e.g., Bain Capital, Boston Millennia Partners). He raised $60 million for YankeeTek’s inaugural fund in 2000, and then headed out into the heart of the bubble. Not surprisingly, the fund didn’t fare too well, including the recent $3.5 million sale of Altaworks Corp., which had raised around $45 million in VC. It also is involved with the giant question mark that is Egenera Inc.

Rather than packing it in, however, Anderson and YankeeTek last year began marketing a second fund with a $150 million cover price. He also had informal talks about adding additional investment pros. Then, Anderson surprised just about everyone by pulling the plug last December. In a subsequent conversation,  Anderson said that prospective LPs had largely soured on the early-stage space, and that he sort of had as well. The firm would wind down, he said, while he would move on to launch a consultancy for non-profit organizations.

There were a few more assorted news stories here and there about YankeeTek’s demise, but it had mostly faded into the background… until this past week, when the MIT Technology Review published an article by Anderson titled “Good-Bye To Venture Capital.

Rather than serving as a fond farewell to his former life – or as well wishes to his former peers — Anderson basically says he closed YankeeTek because the VC business model no longer works, at least for early-stage technology investors (he doesn’t touch on life sciences). His four basic points are: (1) There is an oversupply of new technology, and demand will be low for at least five more years; (2) One reason demand will be low is that corporations no longer like to increase spending; (3) The financial markets are no longer irrational, which portends poorly for homerun-requiring VCs; and (4) The aforementioned changes are structural, not cyclical. He concludes:

Ever wonder what we did for a living in early-stage venture funding? I bet you think we spent the day searching for the next insanely great company. But we spent most of our lives in endless meetings with people who were lying to us: scientists who swore that their patents were solid and entrepreneurs who insisted that they had no competition. We lied right back at them: said our money was different.

That was the old way, and it was tons of fun, and we all made too much money. I’ll miss it. But now the markets are too rational, and the returns are too small and uncertain. So, time to leave.

Not surprisingly, a number of VC bloggers (those who still invest for a living) have eviscerated Anderson for his views. Fred Wilson of Union Square Ventures, for example, writes on his blog: “This goodbye note from Howard is so off base that I can only think Howard feels the need to justify his retirement. He can’t feel good leaving the greatest job on planet earth unless he says the good times are over.” And it’s not constrained to Typepad folks, as a similar sentiment has been expressed to me a number of times in conversations since the piece was first posted.

So I guess it’s my turn to have at it. First, I think it’s important to note that there is a giant fallacy floating about: That Anderson is bitter because he couldn’t raise YankeeTek’s second fund. This is simply not true, from what numerous people have told me. The fund had a sizable number of commitments before Anderson called it quits. Maybe not $150 million, but close enough to make another go of it.

Second, much of what Anderson says is accurate, to a point. VC returns were lousy for 2000-2001 vintage funds, demand for innovation in certain IT sectors has slowed and corporate CFOs are paying far more attention to the bottom line than they have in past years. Where Anderson crosses the line, however, is in his assertion that such changes are structural, rather than cyclical. In fact, the one flaming piece of information gleamed from the bubble inflation and collapse was that cycles are an ingrained part of capitalistic economics (at least the American version). Don’t you remember all of those “There are no more economic cycles” conversations (I had one with my grandfather, who looked at me with a pity-laden glare that reminded me of Warren Buffet).

I obviously have not covered this market for as long as Anderson was involved in it, but every time I think I’ve uncovered some sort of structural shift, it shifts back (or to something new). How about LPs having power over GPs in terms of fund sizes/terms, or pharma companies being undervalued, then overvalued, then undervalued again? Or, “We were done investing in Internet companies, until Google came along.” Or “I’m glad the IPO market returned, because there are no strategic buyers,” to “Thank God the strategics are back, because the IPO window is slamming shut again.” In short, structural change lasts in the VC world only so long as there is a buck to be made from it. Anderson may be gone, but the VC market will continue to cycle/evolve/shift without him…

Top Three

 

Maytag Corp. (NYSE: NYSE), a Newton, Iowa-based home and commercial appliance maker, has agreed to be acquired for $14 per share, or approximately $2.1 billion (including $975 million in assumed debt). Private equity firm Ripplewood Holdings is leading the buyout, with other equity participants including RHJ International, GS Capital Partners and the J. Rothschild Group of Cos. Leverage will come from Citigroup, JP Morgan and Deutsche Bank. The Maytag board of directors has approved the agreement, and will recommend its adoption by company shareholders. Maytag common stock finished trading yesterday at $11.56 per share. www.maytag.com

Adrian Rawcliffe has been appointed managing partner and president of SR One Ltd., the venture capital arm of GlaxoSmithKline PLC (NYSE: GSK). The move becomes effective on June 1, with Rawcliffe succeeding Maxine Gowen, who was named senior vice president for a new GSK effort called the Centre of Excellence for External Drug Discovery. Rawcliffe has served in various positions with GSK, and has been in the company’s Transactions & Ventures group since 2003. www.srone.com

Blurb Inc., a San Rafael, Calif.-based provider of self-publishing software and services, has raised $2.05 million in Series A funding, according to a regulatory filing. Participants include Canaan Partners and Anthem Capital Management. Blurb is currently in stealth-mode, according to its website. www.blurb.com

VC Deals

Aspen Aerogels Inc., a Northborough, Mass.-based provider of thermal and acoustical insulation performance products, has raised $30 million in Series D funding, plus another $20 million in private debt financing. Equity backers included Rockport Capital Partners, Reservoir Capital Group, Lehman Brothers and LG Venture Inv*stment. The deal was first reported by the Boston Business Journal. www.aerogel.com

Nexxar Group Inc. (f.k.a. Tri-Axxa), a Paramus, N.J.-based money transmitter company, has raised $8.5 million in Series C funding, according to a regulatory filing. Participants included Key Venture Partners and FT Ventures. www.tri-axxa.com

Screen Pages Financial Solutions Ltd., a UK-based provider of employee benefit management software, has raised Gbp1 million in funding from Herald Ventures and an unnamed individual. www.staffcare.net

Dermacia Inc., a Newport Beach, Calif.-based cosmetics company, has raised $10 million in first-round funding. www.dermacia.com

Bee Ware, a Paris, France-based provider of IT security solutions, has raised 3 million euros in first-round funding from Sofinnova Partners. www.bee-ware.net

ISD Corp., a Holland, Mich.-based provider of payment management software for merchants, has raised an undisclosed amount of second-round funding. River Cities Capital led the deal, and was joined by Nationwide Mutual Capital and return backers Prism Opportunity Fund and Odin Capital Group. www.isdcorporation.com

Buyout Deals

Enterprise Partners Venture Capital has acquired Muze Inc., a New York-based digital content management company. No financial terms were disclosed. www.epvc.com www.muze.com

Barclays Private Equity France and Cobalt Capital have completed their acquisition of an 81.5% interest in Medi-Partenaires from Universal Health Services Inc. (NYSE: UHS) for approximately $100 million. Medi-Partenaires operates acute-care and behavioral health hospitals in Puerto Rico and France. www.uhsinc.com

PAI Partners has received European Commission approval for its 370 million euros acquisition of Germany-based FTE Automotive GmbH from HgCapital. www.fte.de

PE-Backed IPOs

EpiCept Corp., an Englewood Cliffs, N.J.-based drug company focused on pain management, has withdrawn registration for its proposed $75 million IPO, citing current market conditions and “strategic reasons.” It had planned to trade on the Nasdaq, with Wachovia Securities serving as lead underwriter. EpiCept has raised over $32 million in VC funding since its 1993 inception, with significant shareholders including TVM Techno Venture Management, Merlin Biosciences and GZ Paul Partners. www.epicept.com

Inmarsat, a UK-based satellite operator, has selected underwriters for a possible IPO on the LSE, which would be designed to raise between $700 million and $750 million, according to Reuters. They are JP Morgan Cazenove, Morgan Stanley, Lehman Brothers and Merrill Lynch. Inmarsat has been controlled since 2003 by Apax Partners and Permira. www.inmarsat.com

PE-Backed M&A

SAI Holdings Inc., a subsidiary of Penson Worldwide Inc., has agreed to acquire Computer Clearing Services, a Glendale, Calif.-based clearing firm focused on the active/online trading market. No financial terms were disclosed. Penson Worldwide is a Dallas-based provider of execution, clearing, custody and tech infrastructure products and services to the securities market. It has raised VC funding from Technology Crossover Ventures. www.penson.com

Novoste Corp. (Nasdaq: NOVT) and Wilmington, Mass.-based MRI systems maker ONI Medical Systems Inc. have agreed to merge. The deal is technically a reverse merger that brings ONI into the public markets, after a private life that has seen it raise around $15 million from firms like Galen Associates and Sage Hill Partners. www.onicorp.com

Khimetrics Inc., a Scottsdale, Ariz.-based provider of customer demand solutions, has acquired layout and execution software assets from Flow Systems, a division of Mediagrif Interactive Technologies Inc. (TSX: MDF). No financial terms were disclosed. Khimetrics has raised around $16 million in VC funding from firms like Boston Capital Advisors, RWI Group, Koch Ventures, Crown Advisors International, Telos Venture Partners and Oracle Venture Fund. www.khimetrics.com

Firm & Fund News

Escalate Capital has held a first close on its $200 million-targeted debut fund. The later-stage structured finance/venture debt firm was launched last year by: Ross Cockerell, a former partner with Austin Ventures; Tony Schell, former head of Comerica’s technology and life sciences lending office in Austin; and Jim Ellison, formerly of Silicon Valley Bank. Limited partners on the first close include GM Pension Plan, The Meadows Foundation, Portfolio Advisors, Teachers’ Private Capital, UTIMCO and Verizon. www.escalatecapital.com

Human Resources

Dana Mead has joined Kleiner Perkins Caufield & Byers as a partner focused on the life sciences sector. Mead most recently served as president of Guidant Vascular Intervention, and has served in various positions with Guidant since joining the company in 1992. www.kpcb.com

Michael Darby has joined Paul Capital Partners as a San Francisco-based principal. He had served as a general partner of Battery Ventures until late 2002. www.paulcapital.com

Gary Glazer and Andrew Rasdal have joined the advisory board of venture capital firm RWI Group. Glazer is a Stanford University School of Medicine professor and chairman of the department of radiology. Rasdal is president and CEO of DexCom Inc. (Nasdaq: DXCM). www.rwigroup.com

Stephen Bochner has joined executive recruiter Sextant Search Partners to launch a healthcare practice. He previously served as global practice leader at fellow search firms Highland Partners and TMP Worldwide Executive Search. Before that, he was a vice president in Robertson Stephens’ venture capital group. www.sextantsearch.com

Steven Napolitano has joined Chicago-based Winston & Strawn LLP as co-chair of the firm’s private equity practice. He previously was with Katten Muchin Zavis Rosenman. Also coming over with Napolitano are fellow partners Richard Ginsberg (private equity transactions) and Margaret Lomenzo (private equity and fund formation). www.winston.com

David Wilhelm, president of Woodland Venture Management, has resigned from the board of Bally Total Fitness Holding Corp. (NYSE: BFT). The decision was made after it was realized that a Woodland-related fund inv*sted in a company founded by another board member. He had joined the board just two days ago. www.ballyfitness.com

Kurt Berney has joined O’Melveny & Myers LLP as a partner in the firm’s Asia practice. He most recently was with Wilson Sonsini Goodrich & Rosati, where he represented technology companies in M&A, private, VC and public financings. www.omm.com

THURSDAY, MAY 19

 

No column today, as I need to run over to Boston’s Westin Copley Place for the Alternative Funding Sources for Life Science Companies forum. I hope to see you there…

Top Three

 

Boise Cascade Holdings LLC, a Boise, Idaho-based provider of paper and forest products, has canceled plans for an IPO that was originally designed to raise $575 million. The company filed to price 16 million shares at $24-$26 per share, before yesterday slashing the proposed price range to $17-$19. It subsequently decided to cancel the offering altogether, due to adverse market conditions. Boise Cascade has been controlled by Madison Dearborn Partners since last October. www.bc.com

 

Gemin X Biotechnologies Inc., a Montreal-based developer of treatments based on the regulation of apoptosis, has raised US$50 million in venture capital funding, plus another $15.2 million via a loan facility. H.I.G. Capital and Sanderling Ventures co-led the equity deal, which also included Merlin BioMed Group and Pinnacle Biotech Ventures Fund, Business Development Bank of Canada, Canadian Medical Discoveries Fund, Gestion BioCapital, ProQuest Inv*stments and SB Life Science Equity Management. www.geminx.com

Stewart Alsop, who left the general partnership of New Enterprise Associates late last year, has launched a new VC firm called Agenda Capital. Paid subscribers to PE Week can read more in this week’s print edition, or online in the protected Weekly Headlines section of www.pewnews.com

VC Deals

Caspian Networks Inc., a San Jose, Calif.-based optical switching company, has raised approximately $31.4 million in Series BBB funding, according to a regulatory filing. Return backers include Oak Inv*stment Partners, U.S. Venture Partners and Morgenthaler Partners. The company has raised nearly $300 million in total VC funding since its 1999 inception, including a $120 million Series A recap in 2002 at a post-money valuation of approximately $195 million. www.caspiannetworks.com

Sandvine Ltd., an Ontario, Canada-based provider of broadband management solutions for service providers, has raised Cdn$15 million in VC funding. Newbury Ventures led the deal, and was joined by return backers BDC Private Equity Partners, Celtic House Venture Partners, Tech Capital Partners and VenGrowth Capital Partners. www.sandvine.com

BioMimetic Pharmaceuticals Inc., a Franklin, Tenn.-based developer of products for the treatment of musculoskeletal disorders, has raised $11.8 million in additional Series C funding. The round total now stands at approximately $38 million, including a $25.7 million first close last November. Participants in the latest tranche include Noro-Moseley, PTV Sciences, Axiom Ventures and HSS Ventures. Earlier backers included InterWest Partners, CMEA Ventures, MC Life Science Ventures, Burrill & Co., Novo AS, Holden Capital, MB Venture Partners and Knowledge Ventures. www.biomimetics.com

Buyout Deals

Apollo Management has agreed to acquire Metals USA Inc. (Nasdaq: MUSA) for approximately $447 million, or $22 per share. No leverage details have yet been disclosed, and the $447 million price does not include assumed debt. News of the sale sent the price of Metals USA stock soaring yesterday, up 51.98% to $21.11 per share. www.metalsusa.com

Arlington Capital Partners has acquired Thermal Solutions Inc., a Hampton, N.H.-based provider of custom-engineered thermal management, electronic component and systems solutions for defense and aerospace customers. No financial terms were disclosed for the deal, which also included the participation of company management. www.arlingtoncap.com www.thermal-solutions-inc.com

NBGI Private Equity has sold UK-based executive recruiter Walker Hamill to company management, in a deal that values Walker Hamill at Gbp10 million. NBGI originally sponsored a Gbp1.9 million management buyout of Walker Hamill in March 2002. www.nbgiprivateequity.co.uk www.walkerhamill.com

PE-Backed M&A

Locatel Europe Group, a portfolio company of Platina Partnership, has agreed to acquire 2M Electronic AS, a Denmark-based provider of interactive hotel guest room technology in Europe. No financial terms were disclosed. www.locatel.com www.2m.dk

Hydro Star LLC, a subsidiary of AIG Highstar Capital, has agreed to acquire Utilities Inc. from a subsidiary of N.V. Nuon. Utilities Inc. is a Northbrook, Ill.-based water and wastewater utility holding company. No financial terms were disclosed for the deal, which is expected to close early next year. www.aig.com

Europroteome AG, a German drug company focused on epithelial cancers, has sold the rights to 16 of its drugs to Denmark-based GenmabAS for an undisclosed amount. Europroteome has raised VC funding from Earlybird Venture Capital, Heidelberg Innovation, Nextech Venture, Aventic Partners and Veritas Venture Partners. Europroteome is in the midst of insolvency proceedings.

Aveva Group PLC has acquired Realitywave Inc., a Cambridge, Mass.-based provider of industrial data collaboration product infrastructure solutions, for Gbp3.2 million. Realitywave has raised approximately $9 million in VC funding from firms like Brook Venture Fund and Echelon Ventures. www.aveva.com www.realitywave.com

Firm & Fund News

The CaliforniaPublic Employees’ Retirement System (CalPERS) has approved the following fund commitments: $70 million for Audax Private Equity Fund II; $125 million for Aurora Equity Partners III; $50 million for Lexington Middle Market Investors; $100 million for Quadrangle Capital Partners II; and $65 million for Weston Presidio V. www.calpers.com

Human Resources

Donald McDonough has joined Sentinel Capital Partners as a vice president. He most recently served in a similar role with Saratoga Partners. Sentinel recently closed its third fund with $319 million in limited partner commitments. www.sentinelcapital.com

Richard Snyder today will be elected chairman of Gateway Inc., as company founder Ted Waitt is expected to step down. Snyder is a former director and president of the company, and served as president of venture capital firm Avalon Inv*stments between 1997 and 2000. www.gateway.com

Karen Dempsey has joined law firm Heller Ehrman White & McAuliffe as a shareholder. She previously was with Wilson Sonsisi Goodrich & Rosati, and will continue to focus on VC deals, public offers and M&A. www.hewm.com

WEDNESDAY, MAY 18

 

The Source

I was on the phone with a VC yesterday, and he and I got into a cordial discussion of journalistic ethics. Our context was the recent Newsweek fiasco and PE Week’s latest article on VSP Capital, but his specific question to me was why I seem so comfortable using unnamed sources (both in this space, and in print). My immediate response was that I’d have to think about it for a bit, which is what I’ve done.

There is, of course, an inherent danger in reporters using unnamed sources: namely that we’re getting taken for a ride by someone whose anonymity will protect him/her from consequence. This is of particular concern when talking to a recently-fired partner, competitor, or someone else with an obvious motive to disparage. Likewise, you run the risk of an unnamed source speaking in glowing, albeit false, terms about something in which he/she has a vested interest.

The converse is that there are certain stories of import that simply cannot be told without unnamed sources. In the case of the ex-partner, for example, it’s possible that there is a confidentiality clause in place. Or perhaps it’s a lower-level worker (receptionist, for example) whose identification would cause job loss and virtual excommunication from the relevant workforce.

So, how do we balance? Every reporter and publication has a different policy, so all I can really do is provide some insight into our practices. First, it’s important to note that trade publications, traditionally, have a lower threshold than do more mainstream publications, especially in markets like this one, where not all information is made public. But even so, my general rule of thumb is to only use info from an unnamed source if it can be confirmed by another, independent, source.

In certain cases – such as the AIG Capital Partners or Testa Hurwitz sagas – I’ve made sure that there were three, four or more independent confirmations of certain information. Indeed, I’ve got several interesting stories in limbo right now because the sourcing simply is not yet good enough, and may never be. And, of course, I’ll never reveal a confidential source, per journalistic standards and self-preservation.

I also didn’t directly answer the VC about my take on Newsweek. In short, it was a case of poorly-sourced reporting, in which the magazine was too quick to pull the publish trigger. Overall, however, the simplistic sycophants chanting “Newsweek lied, people died” might want to remember three things: (A) Everyone makes mistakes, and there is no evidence here of intentional deceit. (B) The reporter in question has a history that could hardly be called anti-GOP/Bush partisan, since he’s the one who uncovered Monica Lewinsky and (C) Be careful what you wish for. My guess is that every major media outlet is about to revisit allegations of abuse at Gitmo, which were mostly yesterday’s news…

*** Tomorrow morning is the Alternative Funding Sources for Life Sciences Companies event, with a keynote from Tom Finneran. I hope to see you there.

Top Three

 

Zelos Therapeutics Inc., a drug discovery company focused on such diseases as osteoporosis and psoriasis, has raised $42.5 million in Series B funding. Alta Partners led the deal, and was joined by fellow new backers Prospect Venture Partners, Frazier Healthcare Ventures, S.R. One Ltd. and the Ontario Teachers’ Pension Plan. Existing shareholders VenGrowth Private Equity Partners, Genesys Capital Partners, Seaflower Ventures and the Business Development Bank of Canada also participated. Zelos has offices in both Ottawa Canada and Waltham Mass. www.zelostherapeutics.com

Jefferies Group Inc. (NYSE: JEF) acquired Helix Associates Ltd., a London-based private equity fund placement firm founded in 1993. No financial terms were disclosed for the deal, except that it involved both cash and stock. Helix has worked on fund placement for firms like Hicks, Muse, Tate & Furst, Bridgepoint, Exponent Private Equity and Graphite Capital. www.jefferies.com www.helix-associates.com

Terra Firma Capital Partners reportedly has agreed to acquire Viterra, the property arm of German utility company E.ON AG for approximately seven billion euros. The deal is being transacted through Terra Firma portfolio company Deutsche Annington Immobilien, which was acquired in 2000 by Nomura Principal Finance (a group run by current Terra Firma chief Guy Hands).

VC Deals

Netuitive Inc., a Reston, Va.-based provider of real-time analysis software for business service management, has raised $5 million in Series C funding. Thomas Weisel Venture Partners led the deal, and was joined by return backers Bessemer Venture Partners, Columbia Capital, Flagship Ventures and Noro-Moseley Partners. www.netuitive.com

AgileTV, a Menlo Park, Calif.-based provider of voice navigation services for the cable television industry, has raised $22 million in new private funding. Valence Capital Management led the deal, and was joined by Lauder Partners and Insight Communications. According to VentureWire, the deal is a Series B-1 recapitalization. www.agile.tv

CarboPur Technologies Inc., a Montreal-based manufacturer of activated carbon materials, has raised an undisclosed amount of Series A funding. Ventures West led the deal, and was joined by MSBi Capital. www.carbopur.ca

CR2 Group, a Dublin-based provider of channel-banking ATM and card payment solutions, has raised an undisclosed amount of VC funding from Trinity Venture Capital, company management and return backer ACT Venture Capital. www.cr2.com

Buyout Deals

Husih Detergents Inc., a Salt Lake City-based maker of private-label laundry detergents, has retained Deutsche Bank to advise it on a possible sale of the company, according to The Deal. The transaction could be valued at upwards of $1 billion, with possible suitors including KKR, Bain Capital, Blackstone Group, The Jordan Co. and Church & Dwight Co.

Genesis Gas & Oil LLC, a newly-formed exploration company focused on coal-bed methane and other unconventional reserves, has received up to $70 million in funding commitments from Greenhill Capital Partners, Citigroup Private Equity and COSCO Capital Management. Genesis is based in Kansas City.

HgCapital has agreed to buy the cordless business unit of National Semiconductor Corp. (NYSE: NSM) for an undisclosed amount. www.hgcapital.net www.national.com

PE-Backed IPOs

Citi Trends Inc., a Savannah, Ga.-based retailer of urban fashion apparel, priced 3.85 million common shares at $14 per share (high end of $12-$14 range), for an IPO take of approximately $53.9 million. CIBC World Markets served as lead underwriter for Citi Trends, which had been acquired in 1999 by Hampshire Equity Partners. www.cititrends.com

Boise Cascade Holdings LLC, a Boise, Idaho-based provider of paper and forest products, has reduced its IPO pricing terms, from $24-$26 per share to just $17-$19 per share. It still plans to offer 16 million common shares, with Goldman Sachs serving as lead underwriter. Boise Cascade has been controlled by Madison Dearborn Partners since last October. www.bc.com

Golf Galaxy Inc., an Eden Prairie, Minn.-based retailer of golfing goods, has filed to raise $46 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol GGXY. Significant shareholders include William Blair Capital Partners, Primus Capital and FdG Capital Partners. www.golfgalaxy.com

Renovo Ltd., a UK-based biotech company, has postponed plans for an IPO on the LSE, citing poor market conditions. Goldman Sachs is serving as the offering’s lead underwriter. Shareholders include Atlas Venture, Care Capital, JPMorgan Partners, BioVeda Capital and Temasek Holdings. www.renovo.com

PE-Backed M&A

Cardtronics Inc., a Houston, Texas-based independent ATM operator, has acquired Bank Machine Ltd., a UK-based independent ATM operator that had been controlled by private equity firm Bridgepoint. Bridgepoint acquired a 76% stake in Euronet Services UK (subsequently renamed Bank Machine) in January 2003 for $32.5 million from Euronet Worldwide Inc. Cardtronics recently raised $75 million in private equity funding from TA Associates. www.cardtronics.com www.bankmachine.com

WageWorks Inc., a San Mateo, Calif.-based provider of tax-advantaged spending accounts, has acquired certain assets of HCap Strategies (f.k.a. FlexBen Corp. Wisconsin), a Mequon, Wis.-based employee benefit management and administration company. No financial terms were disclosed. WageWorks has raised over $30 million in VC funding from firms like Advent International and VatagePoint Venture Partners. www.wageworks.com www.hcapstrategies.com

NewsGator Technologies Inc., Denver-based RSS software platform provider, has acquired Bradbury Software LLC, a software developer whose main products are desktop aggregator FeedDemon and CSS/xHTML editor TopStyle. NewsGator is backed by Mobius Venture Capital and Masthead Venture Partners. www.newsgator.com

Micro Dynamics Corp. of Eden Prairie, Minn. and Logic Product Development Co. of Minneapolis have merged, thus forming a company that provides product development and manufacturing services from product conception to volume production and fulfillment. No financial terms were disclosed. Micro Dynamics is controlled by CHB Capital Partners and Wells Fargo. www.microdynamics.com

Inxight Software Inc., a Sunnyvale, Calif.-based provider of enterprise software solutions for information discovery, has acquired the federated search and alert technology product line of Cincinnati-based Intelliseek Inc. No financial terms were disclosed. Inxight has raised over $50 million in VC funding from Deutsche Bank-affiliated funds, Dresdner Kleinwort Wasserstein, VantagePoint Venture Partners and Atila Ventures. Intelliseek has raised over $20 million from BlueRun Ventures, Chrysalis Ventures, In-Q-Tel, Ford Motor Co. and River Cities Capital Funds. www.inxight.com www.intelliseek.com

Firm & Fund News

The Shansby Group, a San Francisco-based private equity firm, has changed its name to TSG Consumer Partners. It also named founding partners Gary Shansby and Chuck Esserman president and CEO, respectively. Both men remain managing directors. www.tsgconsumer.com

Atlantic Bridge Ventures has launched as a pan-European venture capital firm with offices in London and Dublin. It will focus on the technology sector, and already has held a first close of 50 million euros for its inaugural fund. www.abven.com

Insight Venture Partners of New York has raised approximately $518 million in limited partner commitments for its fifth fund, according to regulatory filings. The vehicle is technically comprised of three sub-funds, including $347.39 million for Insight Venture Partners V, $91 million for Insight (Cayman) V and $79.3 million for Insight Venture Partners V Co-Inv*stment Fund. www.insightpartners.com

Human Resources

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo

Brian Kinsman has joined Boston-based Bunker Hill Capital as a managing partner, and will open a West Coast office in the San Diego area. Kinsman most recently served as founder of San Diego-based Kinsman Capital since 1998, and before that was a senior managing director with Pacific Corporate Group. www.bunkerhillcapital.com

James Baker has joined Dallas-based turnaround firm Ewing Management Group as an investment partner, and will be particularly involved in advising EMG on its foray into China (EMG recently opened a Shanghai office). Baker is a former U.S. Secretary of State who recently left a senior advisory role with The Carlyle Group. EMG was founded last year by former Edward Ewing, as an independent spinout of Carlyle’s own turnaround effort.

Paul McNamara has joined El Dorado Ventures as an entrepreneur-in-residence, with a focus on high-performance computing, enterprise software, open source and digital media. He comes to El Dorado from Silicon Graphics Inc. (NYSE: SGI), where he most recently served as senior vice president and general manager of that company’s Visual Systems Group. www.eldorado.com

**********************
Correction: Justin Maccarone has joined Allied Capital as a managing director in charge of the firm’s New York-based investment business, not its I-banking busineess.

TUESDAY, MAY 17

AIG Capital Partners Update

Running late per usual, but I’d be remiss in not quickly sharing some of the most recent happenings at AIG Capital Partners. For those who don’t remember, AIG CP is the emerging markets-focused wing of AIG’s private equity unit. It closed on a $900 million direct investment fund earlier this year (GEM II), but AIG subsequently – and surprisingly — dismissed AIG CP CEO Peter Yu, and also managing director Bill Jarosz. Soon after, AIG CP vice president Charles Mixon resigned, as did senior advisor Tom Armstrong (co-founder of Advent International).

Anyway, the outstanding question to this upheaval was whether or not LPs would remain in the virtually uncommitted GEM II, or if whether they’ll pull the ripcord on certain key-man provision parachutes. After all, LPs claim to make commit to managers, not to brands (although we all know that it’s often a bit of both).

To my knowledge, there has not yet been a consensus response to the above question. In fact, its resolution likely hinges on what happens this Thursday, when AIG holds a meeting of the LP advisory board for GEM II. An AIG spokesman says that the meeting is designed to introduce LPs to David Yeung – Peter Yu’s replacement – and to “provide an update on deals in the pipeline and to review the status of the fund.

What is most interesting about this situation, of course, is that AIG CP – under the leadership of both Yu and Jarosz – has experienced a number of recent exit successes, including an IPO for Brazilian discount airline company GOL. Yeung’s task on Thursday will be to convince LPs that he can do just as well, if not better. Certainly a tough sell (particularly given that AIG CP has confirmed many worst fears about institution-sponsored funds), but I hear that Yeung is not to be underestimated. I’ll let you know what the flies on the wall tell me…

Top Three

 

Morgan Stanley Venture Partners has agreed to spin out as an independent entity from parent bank Morgan Stanley (NYSE: MWD). The new firm will be named Crossmark Capital, and will be run by William Harding and five other principals from MSVP. It represents the second private equity group spinout from Morgan Stanley, as its Capital Partners unit became Metalmark Capital last August. www.morganstanley.com

Yellow Book USA Inc., the US business of UK-based directories publisher Yell Group PLC, has agreed to acquire San Diego-based TransWestern Holdings LP for $1.575 billion in cash. The selling parties are Thomas H. Lee Partners, Providence Equity Partners and CIVC Partners. Each of those firms participated in a $900 million for TransWestern in 2001, which included a $300 million senior secured credit facility and $75 million in subordinated notes. www.yell.com www.worldpages.com

Cbeyond Communications Inc., an Atlanta-based provider of managed IP-based communications services to small businesses in large metropolitan areas, has filed to raise $172.5 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol CBEY, with JPMorgan and Deutsche Bank Securities serving as lead underwriters. Cbeyond has raised over $150 million in VC funding since its 1999 inception, with significant shareholders including VantagePoint Venture Partners, Battery Ventures, Cisco Systems, Madison Dearborn Partners, Metalmark Capital and Adams Street Partners. www.cbeyond.com 

VC Deals

Voltage Security Inc., a Palo Alto, Calif.-based provider of secure email and policy-based encryption, has raised $15 million in Series C funding. Jafco Ventures led the deal, and was joined by Siemens Venture Capital and return backers Hummer Winblad Venture Partners, Morgenthaler Ventures and Menlo Ventures. The company has raised around $30 million in total VC funding since its 2002 inception. www.voltage.com

LifeCycle Pharma AS, a Danish developer of a drug delivery platform for drugs with low water solubility, has raised 15 million euros in Series C funding. Alta Partners led the deal, and was joined by G Lux Multimanager I Sicav Lacuna Apo BioTech Subfund. Return backers included H. Lundbeck AS, Novo AS and Nordic Biotech. www.lcpharma.com

Androclus Therapeutics Inc., a San Diego-based biotech company focused on autoimmune and inflammatory diseases, has raised an undisclosed amount of first-institutional round funding from E. de Rothschild Inv*stment Partners and Matigon Technologies. www.androclus.com

IPextreme Inc., a Campbell, Calif.-based provider of on-chip subsystems, has raised $6 million in Series A funding from Alloy Ventures and SmartForest Ventures. www.ipextreme.com

Konarka Technologies Inc., a Lowell, Mass.-based provider of polymer photovoltaic products, has secured up to $7 million in venture debt funding from Lighthouse Capital Partners. www.konarka.com

Genomatix Corp., a Roanoke, Va.-based genomics tools company, has raised $500,000 in Series B funding from NewVa Capital Partners, which is named by Third Security LLC. www.genomatix.com

Buyout Deals

The Mustang Group, a Boston-based private equity firm, has agreed to sponsor a $6.50 per share going-private transaction for The Vermont Teddy Bear Co. (Nasdaq SC: BEAR).

Kohlberg Kravis Roberts & Co. (KKR) has formally offered to buy a 17.6% position in South Korea-based Samsung Life Insurance Co. for around 709.4 billion won (approx. $706.3 million).

Advent International has retained I-bank Rothschild to sell German drug company Viatris GmbH & Co., according to The Financial Times. Likely bidders are reported to include Altana AG, Almirall Almirall Prodesfarma SA, Chiesi Farmaceutici SpA and Cinven. Advent acquired Viatris from Degussa AG in 2002. www.adventinternational.com www.viatris.com

Cerberus Capital Management is reportedly considering a Cdn$1.3 billion (or Cdn$14 per share) bid for Canada-based Royal Group Technologies Ltd. The deal also would involve the assumption of more than $650 million in Royal Group d*bt, bringing the total transaction value just south of Cdn$2 billion.

PE-Backed IPOs

Xerium Technologies Inc., a Westborough, Mass.-based supplier of two categories of consumable products used in the production of paper, has priced over 13.39 million common shares at $12 per share (below $14-$16 offering range), for a total IPO take of approximately $160.8 million. Citigroup and Merrill Lynch served as co-lead underwriters, and the company finished its first day of trading on the NYSE at a flat $12 per share. The company remains majority-owned by an affiliate of Apax Partners. www.xerium.com

Accentia BioPharmaceuticals Inc., a Tampa, Fla.-based drug company focused on respiratory disease and oncology, has set its proposed IPO terms to 6.25 million common shares being offered at between $11 and $13 per share. The company plans to trade the Nasdaq under ticker symbol ABPI, with Jefferies & Co. serving as lead underwriter. Significant shareholders include The Hopkins Capital Group, McKesson Corp. and Pharmaceutical Product Development Inc. www.accentia.net

Micrus Corp., a Sunnyvale, Calif.-based medical device maker focused on cerebral vascular diseases, has set its proposed IPO terms to 3.25 million common shares being offered at between $12 and $14 per share. It plans to trade on the Nasdaq under ticker symbol COIL, with William Blair & Co. and A.G. Edwards serving as lead underwriters. Significant shareholders include UGS Capital, HBM BioVentures, International Life Science Partners, PolyTechnos Medical Devices Ltd. and Invision AG. www.micruscorp.com

PE-Backed M&A

QuatRx Pharmaceuticals Co., an Ann Arbor, Mich.-based drug company, has acquired Hormos Medical Corp., a Finland-based drug company focused on endocrine disorders related to aging. No financial terms were disclosed. QuatRx has raised over $50 million in VC funding since its 2000 inception, from firms like Frazier Healthcare Ventures, InterrWest Partners, TL Ventures, MPM Capital and Thomas Weisel Venture Partners and Twilight Ventures. Hormos has received funding from BankInv*st, Bio Fund Management Oy, Helmut Business Mentors Oy, GZ Group and Sitra. www.quatrx.com www.hormos-med.com

Air2Web Inc., an Atlanta-based provider of wireless applications and content gateway services, has acquired Consult Mobile, a UK-based provider of mobile solutions and infrastructure. No financial terms were disclosed. Air2Web has raised over $50 million in VC funding since its 1999 inception, from firms like CDP Capital, Credit Lyonnais Private Equity, Mitsubishi Corp., Nextel Ventures, UPS Strategic Enterprise Fund and VeriSign. www.air2web.com www.consultmobile.com

Magellan Biosciences of Chelmsford, Mass., has acquired TekCel, a Hopkinton, Mass.-based provider of sample management and assay automation systems to biomedical researchers. No financial terms were disclosed. TekCel has raised VC funding from Ampersand Ventures and The Hawthorne Group. www.magellanbio.com www.tekcel.com

FFG Industries Inc., a portfolio company of Nautic Partners, has launched a $1.55 per share tender offer to acquire Technology Flavors & Fragrances Inc. (AMEX: TFF), pursuant to an earlier agreement between the two companies.

Firm & Fund News

Credit Suisse First Boston has received around $2.4 billion in limited partner commitments for its third private equity secondaries fund family. The effort is named CSFB Strategic Partners III, and includes a $1.9 billion vehicle focused on LBOs, a $315 million real estate component and $210 million for venture capital. They begin their inv*stment period on July 1, with several transactions already is the works. www.csfb.com

Human Resources

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo has promoted 12 attorneys to partner status, including business and finance attorneys Ivan Blumenthal and Thomas Burton. www.mintz.com

**********************
Corrections: NewsGator Technologies Inc. raised $6 million, not $5 million, in third-round funding. Also, Entrisphere Inc. has raised over $170 million in total VC funding, including a tranched-out Series B round totaling over $82 million.

MONDAY, MAY 16

 

Random Ramblings

Tomorrow night, various Washington D.C. politicians and businessfolk will cut the figurative ribbon on a $50 million certified capital companies (Capco) program. Like Capco efforts in other regions, the program will provide $100,000 or more of government-funded venture capital to young, local companies, over a 10-year period. I don’t plan to be there, but if I were I’d probably be riding the giant elephant with the word “Huh?” painted on its side in big pink letters.

There was a time when I objected to the idea of publicly-funded VC on principal. Not the principal of “survival of the fittest” capitalism, but rather the principal of government-run VC programs under-performing private programs due to either: (a) having no dedicated staff or (b) having a greater chance of poorly-qualified staff due to massive compensation gaps between the public and private spheres. I even argued that case on a panel in New York alongside people who run such programs for a living (in geek terms, I was the Palpatine to their Yodas).

Anyway, I have since revised my position to believe that Capcos and other such initiatives make sense in certain places where private VCs generally dare not tread. Upstate New York, for example, or most of the Southeast. Washington D.C., however, is far from underserved by VCs, which is why I question the wisdom of pumping $50 million of public money into a local Capco program. The Mid-Atlantic clearly isn’t Silicon Valley or Boston, but there are plenty of brand-name firms around, including New Enterprise Associates, Columbia Capital, Grotech, Novak Biddle Venture Partners, etc. Overall, 132 Mid-Atlantic-based companies raised around $876 million in VC funding in 2004, including six D.C.-based companies collecting $62 million (or $12 million more than the Capco program will spend over 10 years)! . Again, huh?

*** Speaking of Mid-Atlantic-based venture firms, Steve Frederick has left the general partnership of Novak Biddle. The firm has not settled on a replacement, and has “a chair open for the right person,” according to Jack Biddle.

*** When Q1 VC disbursement data came in, lots of readers couldn’t reconcile the volume decline with anecdotal evidence of overworked VCs. One suggestion was that the added activity was actually involving overseas companies, since the MoneyTree Survey data only included U.S.-based companies. It still may be a bit tough to confirm a cause-and-effect relationship, but it’s worth noting that VC disbursements for European companies hit a three-year high in Q1 2005, according to figures released today by VentureOne and Ernst & Young.

*** Good line from Silver Lake Capital’s David Roux in The Mercury News: “We and the venture guys are sort of like doctors…I treat old people. They’re pediatricians. There’s just a lot more older people.” On the other hand, there may be just as many young people, but with a reversed mortality liklihood.

*** Finally, two blog items. First, Why Are Startups Like Peacocks. Also check out 25 Years of Post-It Notes.

Top Three

 

ECI Telecom Ltd. (Nasdaq: ECIL) has agreed to acquire Laurel Networks Inc. , a Pittsburgh-based provider of IP/MPLS multi-service edge routers. The deal is valued at $88 million in cash, and is expected to close within a few weeks. Laurel had raised $118 million in total VC funding since its 1999 inception, including a 2000-2001 Series B round at a post-money valuation of approximately $290 million, and a 2003 Series C round at a post-money valuation of approximately $63 million. Backers included New Enterprise Associates, Trinity Ventures, Ciena Corp. and Worldview Technology Partners. www.ecitele.com www.laurelnetworks.com

Sandra Horbach has agreed to join The Carlyle Group as a managing director, global partners and head of the consumer/retail sector group, effective this September. She previously served for 17 years as a general partner of Forstmann Little & Co. , where she remains as special limited partner. www.carlylegroup.com

The Blackstone Group has opened an office in Mumbai , India . It will be run by new senior managing director Akhil Gupta , who most recently served as CEO for corporate development for Relaince Industries and Reliance Infocomm in India . According to Reuters , Blackstone has allocated an initial $1 billion for India investments, and will raise a dedicated India fund. www.blackstone.com

 

VC Deals

Chipidea , a Lisbon , Portugal-based provider of analog and mixed-signal semiconductor solutions, has raised 12 million euros in Series B funding. Kennet Venture Partners led the deal, and was joined by Vision Capital and return backers BCP Capital and BPI/Fundo Caravela. www.chipidea.com

SkyPilot Networks Inc. , a Santa Clara, Calif.-based provider of carrier-class wireless broadband systems, has raised $15 million in third-round funding. Return backers include Mobius Venture Capital, Invesco Private Capital, Softbank Asia Infrastructure Fund, Selby Venture Partners, Nexit Ventures and Palo Alto Inv*stors. SkyPilot has raised $44.4 million in total private funding since its 2000 inception. In other company news, Bob Machlin has joined SkyPilot as president and CEO. He previously was president and CEO of AirFlow Networks Inc. www.skypilot.com

Fastmobile , a Rolling Meadows, Ill.-based provider of mobile instant communications solutions, has raised $12 million in Series B funding. DCM-Doll Capital Management and Walden International co-led the deal, and were joined by return backers BlueStar Ventures and Leo Capital Holdings. Fastmobile has raised over $21 million in total VC funding. www.fastmobile.com

Integrien Corp. , a Pasadena, Calif.-based, has raised $6.5 million in Series A funding. Clearstone Venture Partners led the deal, and was joined by Tech Coast Angels. www.integrien.com

The 41 st Parameter Inc. , a Scottsdale, Ariz.-based provider of anti-fraud and anti-phishing solutions, has raised $4.35 million in Series A funding led by Norwest Venture Partners . www.the41.com

Buyout Deals

3i Group and VSS Communications Partners have agreed to sell European directories publisher Yellow Brick Road to a consortium led by Australia-based MacQuarie Capital for 1.83 billion euros (approx. $2.3 billion). Other interested bidders are reported to have included CVC Capital Partners, Blackstone Group, BC Partners and various hedge funds. www.ybrgroup.com

GTCR Golder-Rauner has agreed to acquire Zenta , a Wayne, Pa.-based provider of global business process outsourcing for the financial services industry. Most of Zenta’s 2,600 employees are based in Mumbai , India . The deal is being transacted through GTCR affiliate H-Cube LLC , to which GTCR has committed $100 million in private equity capital. www.zentagroup.com www.h-cubeinc.com

Gryphon Investors has agreed to purchase a majority interest in Update Legal , a national provider of temporary legal professionals to law firms and corporate clients. Current company management will remain in place, and will retain minority ownership. No financial terms were disclosed. www.updatelegal.com

General Atlantic has completed its acquisition of a majority ownership position in online marketing company Webloyalty.com Inc. Selling shareholders included Canaan Partners and BCI Partners . No financial terms were disclosed. www.webloyalty.com

One Equity Partners has completed its purchase of oncology services company Oncology Therapeutics Network (OTN) from Bristol-Myers Squibb Co. (NYSE: BMY). N o financial terms were disclosed. www.oneequity.com

PE-Backed IPOs

XenoPort Inc. , a Santa Clara, Calif.-based biopharmaceutical company focused on drug absorption, has set its proposed IPO terms to five million common shares being offered at between $14 and $16 per share. The company has raised over $152 million in total VC funding since its 1999 inception, including a $25 million Series D round late last year at a post-money valuation of approximately $200 million. Significant shareholders include Venrock Associates, Skyline Ventures, ARCH Venture Partners and OrbiMed Advisors. www.xenoport.com

Safilo SpA, an Italy-based eyewear maker controlled by CSFB Private Equity , is considering an IPO that could value the company at upwards of 2 billion euros, according to The Financial Times. www.safilo.com

PE-Backed M&A

Multi-Channel Holdings , the parent entity of Golden Gate Capital portfolio company Ecometry Corp. , has completed its acquisition of Blue Martini Software Inc. (Nasdaq: BLUE). The deal is valued at approximately $54 million, or $4 per Blue Martini share. www.bluemartini.com

Firm & Fund News

GSC Partners of Florham, Park, N.J. is looking to raise upwards of $243 million for its second European mezzanine fund, according to a regulatory filing. It has secured $45.5 million to date, with Lazard Freres acting as placement agent. www.gscpartners.com

Human Resources

Barry Bycoff has agreed to joined Pequot Ventures as a venture partner, according to The Boston Globe . He had been serving as CEO of onetime Pequot portfolio company Netegrity Inc. , which was acquired by Computer Associates International Inc. (NYSE: CA) for $340 million last year. www.pequotventures.com

James Rieger has joined Tannenbaum Helpern Syracuse & Hirschtritt LLP as a partner in the law firm’s financial services, hedge fund and capital markets practice group. He most recently was of counsel for Dechert LLP . www.tannenbaumlaw.com

 

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Email Daniel.Primack@thomson.com