PE Week Wire — 1/20/06-2/3/06

Random Ramblings

*** Buyouts Magazine is asking private equity pros to participate in its second annual Survey on Sell-Side Advisors. Specifically, it monitors how private equity firms use sell-side advisors/I-banks, and their overall feelings about the working relationship. Results will be published in the next issue of Buyouts Magazine, with selected results published here. So please spare just a couple of minutes, and take the survey.

*** The latest bi-annual Global Private Equity Barometer has been released by Coller Capital. Among the results: (1) Around 44% of LPs plan to increase their allocation to private equity, compared to just 30% last summer. This is particularly true of European and Asia-Pacific LPs. (2) ROI satisfaction rising for North American venture, North American buyouts and Asian venture, while European venture and buyouts remained flat (although European buyout satisfaction is so high that it has no upward opportunity). Only Asian buyouts suffered a satisfaction loss. Nonetheless, Asian buyout funds ranked third in a “best area of investment for GPs over the next 12 months” question. European buyouts ranked first, European venture ranked last. (3) LP 3-5 year return expectations are up, but LPs are getting far more stingy when it comes to reinvesting with the same GPs. (4) India is followed by Eastern/Central Europe as the most attractive emerging markets. China/Hong Kong/Taiwan places third. Get more info at www.collercapital.com

*** Apax Partners honcho Martin Halusa caused stirrings at the World Economic Forum in Davos yesterday, when he said that $100 billion private equity funds could be formed within the next decade. Let me be the first to say: Not a chance. Take the case of Blackstone, which is about to close on $13 billion for the world’s largest PE fund. Its inaugural fund closed in 1987 with $810 million. Ten years later, it raised $3.75 billion, for an increase of around 4.66x. Nine years later (i.e., today), it is planning to close on a $13 billion fund, for a 3.46x increase. To get to $100 billion, however, it should have to severely accelerate its trajectory and manage a 7.7x increase. Again, not a chance.

*** The Ohio Bureau of Workers’ Compensation is apparently planning to amend its initial complaint, but only to include a few extra defendants (i.e., firms that filed disclosure objections after the initial complaint was filed). This of course begs the question: how could firms not have previously filed objections, and how could some firms still not have filed objections? Their portfolio companies must be very proud.

*** Internship Rodeo
A few more listings. The original posting and instructions can be found here.

Job: Family wealth management office, focused on VC
Location:
Mission Viejo, CA
Email: pewireinterns53@yahoo.com

Job: Emerging markets-focused placement and advisory
Location:
Boston
Email: pewireinterns50@yahoo.com

Job: Early-stage VC/merchant bank, focused on China
Location:
Honolulu
Note: Must be fluent in Mandarin
Email: pewireinterns52@yahoo.com

Job: M&A boutique
Location:
Minneapolis
Email: pewireinterns60@yahoo.com

Job: Hedge FoF & Private Equity
Location:
Philadelphia
Email: pewireinterns61@yahoo.com

Job: Middle-market I-bank
Location:
Chicago
Email: mailto:pewireinterns62@2yahoo.com

     Top Three

 

The Blackstone Group has completed its $11.25 per share buyout of La Quinta Properties Inc. (NYSE: LQI). The entire deal is valued at $3.4 billion, with leverage being provided by Bank of America, Bear Stearns and Merrill Lynch. www.blackstone.com www.lq.com

RadioFrame Networks Inc., a Bellevue, Wash.-based provider of converged platform solutions for wireless operators in the pico-cell and micro-cell spaces, has secured around $40.8 million of a $44.8 million Series E funding round, according to a regulatory filing. Backers include Innovacom Venture Capital, Ericsson Venture Partners, Ignition Partners, VantagePoint Venture Partners and Nextel. www.radioframe.com

Altus Pharmaceuticals Inc., a Cambridge, Mass.-based developer of protein therapeutics for chronic gastrointestinal and metabolic disorders, priced seven million common shares at $15 per share (middle of $14-$16 range), for an IPO take of approximately $105 million. It will trade on the Nasdaq under ticker symbol ALTU, and used Merrill Lynch and Morgan Stanley as lead underwriters. The company raised around $103 million in total VC funding, from firms like Warburg Pincus, U.S. Venture Partners, Vertex Pharmaceuticals, Nomura, BankInvest, CMEA Ventures and China Development Industrial Bank. www.altus.com

 

 

     VC Deals

I4 Commerce Inc., a Timonium, Md.-based provider of merchant payment solutions for multi-channel retailers, has raised $27.56 million in Series 3 funding, according to a regulatory filing. Shareholders include Azure Capital Partners, GRP Partners and Crosspoint Venture Partners. www.i4commerce.com

PreferredTime Inc., a Boston-based provider of sales representative scheduling software for physicians’ offices, has raised $3 million in second-round funding from IDP Group and The Venture Capital Fund of New England. www.preferredtime.com

Cluster Seven Ltd., a UK-based provider of spreadsheet management solutions, has raised Gbp2.4 million in first-round funding from Quester. www.clusterseven.com

EdgewareAB, a Stockholm, Sweden-based provider of server products for video streaming over IP, has raised an undisclosed amount of Series A funding from Creandum. www.edgeware.tv

     Buyout Deals

 

Bridgepoint Capital and Mercapital Servicios Financieros have agreed to sell their 93.1% stake in Spanish wind farm operator Corporacion Eolica SL (CESA) to Acciona SA. The deal is valued at around $1.37 billion euros. www.corporacioneolicacesa.com

ECI Partners has sold UK-based marketing database company ClarityBlue to Experian, a subsidiary of GUS PLC, for Gbp85 million. ECI originally sponsored a Gbp10 million management buyout of ClarityBlue in 2003.

Inflexion Private Equity reportedly has sponsored a Gbp22 million management buyout of Viking Moorings, a UK-based provider of mooring systems and related products to the North Sea offshore oil and gas industry. Royal Bank of Scotland provided debt financing.

Silver Lake Partners and Texas Pacific Group have sold around 26.74 million common shares of Seagate Technology (NYSE: SEAGATE).

     PE-Backed IPOs

Ntelos Holding Corp., a Waynesboro, Va.-based provider of wireless and wireline communication services in Virginia and West Virginia, has set its proposed IPO terms to around 14.38 million common shares being offered at between $15 and $17 per share. It plans to trade on the Nasdaq under ticker symbol NTLS, with Lehman Brothers and Bear Sterns serving as lead underwriters. The company wqas acquired earlier this year for around $750 million by Citigroup Venture Capital and Quadrangle Capital Partners. www.ntelos.com

     Human Resources

 

Richard Schell has joined Onset Ventures as a venture partner. He was an early employee at Intel, Netscape’s first vice president of engineering and an early investor in NetFlix. Most recently, he was chief technology and senior vice president for product planning, strategy and process with NetIQ Corp. (Nasdaq: NTIQ). www.onset.com

Alvarez & Marsal has promoted Jeff Feinberg, Robert Campagna and Tom Baldasare to the position of managing director in the firm’s U.S. turnaround and restructuring practice. It also promoted Marc Liebman to managing director in its corporate finance group. www.alvarezandmarsal.com

SJF Ventures has promoted David Griest to managing director. He joined the firm two years ago after receiving his MBA from Yale. www.sjfund.com
———–

Correction: Splunk Inc. is a San Francisco-based developer

Roster Moves

Prism Venture Partners is a bit like the Boston Celtics – it keeps tinkering with its lineup in order to generate better performance. Most of these alterations are on the periphery, but sometimes they involve a key player. For Prism, that key player is firm co-founder Bob Fleming. For the Celtics it’s Ricky Davis. Before continuing, it is important to emphasize that there is no one at Prism as inept as the perpetually-befuddled Doc Rivers. Now back to our analogy…

Prism, like the Celtics, has been a silver-lined cloud for the past several years. It has some good young talent like Woody Benson and Gordie Nye, plus more established veterans like firm co-founders Fleming and John Brooks. It also has had several wins, but the recent track record has been middling at best. Performance for its past two funds has been below-benchmark (per CalPERS data through Q2 2005), and the firm was unable to hit its $350 million target for Fund V last year (closed with $250m). That fund was the first marketed without Duane Mason (age-related retirement), and was revised after the contentious departure of former general partner David Baum.

In the midst of fund-raising, Prism began to reevaluate its operational structure. Most of the firm’s top dogs were ex-CEOs, so a decision was made that the general partnership should be horizontal. In other words, five general partners without hierarchy. Bob Fleming initially consented to the decision — even though it would mean giving up his managing partner post – and the firm switched its model. When it came time to make the change official (i.e., sign the papers), however, Fleming opted out. As Prism general partner Woody Benson explains: “Bob agreed with it at the time, but when it came time to put down the actual documentation, he had that hard look in the mirror sort of moment when he realized that it was too hard for him to do. It’s understandable.”

Anyway, what this means is that Fleming will now be considered a “founder” at Prism. He will not make new investments, but will maintain his existing board seats with MarketSoft, Motia, Polatis, SiGe Semiconductor and ThinkEngine Networks. I can’t think of any way to work the Celtics analogy back around at this point, so let’s move on without it.

It would be easy to say that Fleming’s change in status should have been determined before the firm closed its fund last year, even though the move does not activate any key-man clauses. In fact, I said it to Benson during our conversation yesterday. But it wasn’t, which left Fleming and Prism with two options: Continue on a path that wasn’t working, or change course. They chose the latter, just as any good venture capitalists should. This is not a business that usually rewards inflexibility.

So better late than never I say. Prism now has a more fluid operational structure (oh, here we go: Kind of like Wally able to better space out the court for Pierce), a relatively young fund and a number of promising portfolio companies. Like my beloved Celtics, there’s still a good chance for Prism to do something special.

*** I will be in London Monday-Wednesday, but will continue publishing the PE Week Wire. Also, we’re now over 29,200 subscribers. I want 30,000 by my birthday in late February. So please tell your friends, colleagues and assorted acquaintances to sign up.

 

 

     Top Three

 

AMC Entertainment Inc. has completed its merger with fellow movie theater operator Loews Cineplex Entertainment Corp. The combined company — named AMC — will be based in Kansas City, with approximately 415 theaters with 5.672 screens in 12 countries. Approximately 60% of the new company’s stock will be held by AMC shareholders like JPMorgan Partners (21%) and Apollo Management (21%), while the remaining 40% will be held by former Loews shareholders like Bain Capital (15%), The Carlyle Group (15%) and Spectrum Equity Investors (10%). www.amctheaters.com

Movaz Networks Inc., a Norcross, Ga.-based provider of optical networking solutions, has raised $20 million in Series E funding. Return backers include Anschutz Investment, Comcast Interactive Capital, Menlo Ventures, Oak Investment Partners, Meritech Capital Partners and Worldview Technology Partners. The company now has raised nearly $190 million in total VC funding since its 2000 inception. In related news, Movaz also announced that it has secured a $12 million line of credit. www.movaz.com

Waud Capital Partners has teamed with veteran hospital executive Rod Laughlin to form Acadia Healthcare, an Atlanta–based owner and operator of psychiatric and substance abuse hospitals, residential programs and schools. Acadia began operations in November 2005, and expects to acquire and developer new facilities within the next two months. Laughlin will serve as president and CEO. www.cadiahealthcare.com www.waudcapital.com

     VC Deals

Arcadian Networks Inc., a Woodside, Calif.-based networking startup, is looking to raise $85 million in first-round funding, according to BusinessWeek.

Pay By Touch, a San Francisco-based provider of biometric authentication solutions, has raised more than $60 million in Series C funding (including the conversion of convertible promissory notes). The company continued its practice of eschewing traditional VC sources, instead taking equity from hedge funds Plainfield Asset Management and Scout Capital, plus Quince Associates and Global Trust Partners. www.paybytouch.com

     Buyout Deals

 

Barclays Private Equity has acquired Robinia Care Group, a UK-based provider of intensive support services for adults and young people with learning disabilities, from Bridgepoint. The deal is valued at Gbp80 million. LDC also is expected to co-invest alongside Barclays. www.robinia.co.uk

Hudson Capital Advisors and Kline Hawkes & Co. have agreed to acquire Omniglow Corp., a chemical light product (i.e., glow-stick) manufacturer with operations in West Springfield, Mass. and Aix en Provence, France. The company will be renamed Cyalume Technologies Inc. No financial terms were disclosed. www.omniglow.com

MCC Sofipa SpA and BS Private Equity have received European Commission approval for their proposed buyout of IP Cleaning SpA, an Italy-based manufacturer of high-pressure cleaning machines.

     PE-Related M&A

Informatica Corp. (Nasdaq: INFA) has acquired Similarity Systems Inc., a Dublin, Ireland-based provider of business-focused data quality solutions. The deal is valued at around $55 million in cash. Similarity Systems has raised over $9 million in VC funding since its 2000 inception, from firms like Delta Partners, AIB Equity, HotOrgin, ION Equity and Trinity Venture Capital. www.informatica.com www.similaritysystems.com

Network Solutions Inc., a Drums, Pa.–based web hosting provider and domain name registrar, has acquired MonsterCommerce, a Belleville, Ill.–based provider of ecommerce solutions. No financial terms were disclosed. Nertwork Solutions is controlled by Pivotal Private Equity. www.networksolutions.com www.monstercommerce.com

Digital River Inc. (Nasdaq: DRIV) has acquired Direct Response Technologies Inc. a Pittsburgh-based provider of affiliate technology and e-marketing solutions. The deal was valued at approximately $15 million in cash. Direct Response raised a small amount of venture capital from Internet.com Venture Funds in 1999, and also a minority equity funding from the North Dakota Department of Commerce in 2003. www.digitalriver.com www.directresponse.com

Reichert Inc., a Buffalo, N.Y.-based manufacturer of diagnostic instruments to the ophthalmology and eye care marketplace, has acquired certain tonometry assets from Medtronic Inc. (NYSE: MDT). The deal was backed by $4.4 million in equity from existing Reichert shareholder Summer Street Capital Partners, and an undisclosed amount of leverage from M&T Bank. www.reichert.com

Concur Technologies Inc. (Nasdaq: CNQR) has agreed to acquire Outtask Inc., an Alexandria, Va.–based provider of corporate travel booking solutions. The deal is valued at between $67 million and $88 million in cash and stock. Outtask has raised over $6 million in VC funding from firms like WaldenVC. www.outtask.com

SuperGen Inc. (Nasdaq: SUPG) has agreed to acquire Montigen Pharmaceuticals Inc., a Salt Lake City-based drug company focused on oncology. The deal is valued at $18 million in cash and stock, plus the possibility of an earn-out valued at approximately $22 million in stock. Montigen raised $5.2 million in Series A funding in 2003 from undisclosed backers. www.montigen.com

American Capital Strategies announced that it had formed Mirion Technologies Inc., via the merger of portfolio companies Global Dosimetry Solutions Inc., Imaging and Sensing Technology Corp. and France-based SynOdys Group SA.

     Firm & Fund News

 

FRR Capital Partners has launched as a lower-middle market buyout shop focused on already-profitable companies in the Northeast and Midwest. The New York-based firm is targeting $70 million for its inaugural fund with a $100 million hard cap, and is run by Thomas Ferguson (former partner with Bradford Equities Fund) and Robert Rosenberg (formerly a principal with IndiGo Ventures). www.ffrcapital.com

The State of Utah has selected Cincinnati-based Fort Washington Investment Advisors as its advisor for the planned $100 million Utah Fund-of-Funds. The new vehicle will provide capital to Utah-based entrepreneurs at all stages of business development. http://goed.utah.gov/fund_of_funds/index.html

     Human Resources

 

Patrick Dunleavy has joined the private equity fund placement group of Lehman Brothers as a managing director. He previously was with Lazard. www.lehman.com

Gyuri Karady has stepped down as managing partner of central Europe for Baring Coriluis Private Equity, following that firm’s sale to Société Générale Asset Management. He will, however, continue to serve on the firm’s investment committee. www.baringcapital.com

Morgan Stanley has tapped Gavin MacDonald to run its European M&A business, following the surprise resignation of Paolo Pereira. MacDonald has been with the company since 1983. www.morganstanley.com

Beth Seidenberg of Kleiner Perkins Caufield & Byers has been named a trustee at BarnardCollege.

Marshall Cogan has joined Ener1 Group as a senior strategic advisor focused on the firm’s private equity portfolio companies. He is a financial and automotive industry veteran, having founded Foamex International in 1984, acquired Sheller Globe in 1986 and founded United Auto Group in 1992 with the support of Apollo Management, JP Morgan and Harvard Private Equity. www.ener1group.com

Snacking In London

Greetings from London, where by eyes are droopy and my network connection is slow. I probably should write something Eurocentric, but instead will focus on Chicago. Apologies for the geographic incongruity.

Our topic is the ongoing litigation between Willis Stein & Partners and Brynwood Partners, in which the former accused the latter of cooking the books when selling a company called Lincoln Snacks (now part of the Ubiquity Brands platform). Specifically, Willis Stein alleged that Brynwood pumped up Lincoln Snacks’ pre-close balance sheet by stuffing the company’s “three largest and most important customers with surplus inventory.” Yup, this is remarkably similar to ABRY Partners’ chief complaint against Providence Equity Partners – just substitute Fiddle Faddle for niche publications.

But why discuss this today, particularly since the lawsuit was filed over a year ago and is still in the midst of arbitration (or a verdict, if the arbitration fails)? In fact, this is the first question Avy Stein asked me when I called him last week. The answer is two-fold. First, the ABRY v. Providence case prompted lots of you to email questions about Willis Stein v. Brynwood, and also to chide me for writing so much about one and virtually nothing about the other. Second, there is a bit of news.

The news is that Tim Healy has left Ubiquity Brands as president and CEO, after a two-year stewardship that could best be described as troubled. Healy is a onetime managing director with J.W. Childs & Associates and chairman of NutraSweet, who also is credited with bringing the Lincoln Snacks deal to Willis Stein’s attention. He took an indefinite leave of absence in December, followed by a formal resignation in early January. The formal reason for the resignation was “to pursue other interests,” which is up there with “wanted to spend more time with his family” in the pantheon of bogus excuses. Calls to Healy’s cell phone have gone unanswered, and Avy Stein would only repeat the official line, adding that Tim is “a good person.” Sources familiar with the situation, however, say that the departure was not quite so voluntary.

Willis Stein retained Spencer Stuart to find a replacement, and later today is expected to announce that it has hired Jeff Dunn, former president and chief operating officer of Coca-Cola North America. Tomorrow, Ubiquity is expected to announce an acquisition that will add a private-label angle to the platform – a platform that expects to book between $250 million and $350 million in 2006 revenue.

None of this directly affects the lawsuit/arbitration, save for the fact that Healy was an integral part of both the initial transaction and the company’s post-deal performance. In other words, he likely would be called to testify were the case to arrive in front of a judge and jury (Willis Stein is asking for around $20 million). He might also have to appear in front of an arbiter. In either case, his testimony may be far more interesting today than it would have been at this point last year.

And a pair of not really-related notes: Willis Stein plans to begin raising its fourth fund later this year, while Brynwood is expected to close its acquisition of Stella D’oro from Kraft Foods today.

     Top Three

 

Morgan Stanley has agreed to sell its aircraft leasing business to private equity firm Terra Firma for $2.5 billion. The deal is expected to close in the second half of this year. www.morganstanley.com

JJWild Inc., a Canton, Mass.-based provider of med-tech consulting services, has raised $20 million in Series A funding from Advent International. The deal includes both growth equity and some liquidity for existing JJWild shareholders. Covington Associates served as advisor to JJWild on the deal. www.jjwild.com

EXCO Resources Inc., a Dallas, Texas-based oil and gas company, has set its proposed IPO terms to 50 million common shares being offered at between $11 and $13 per share. It plans to trade on the NYSE under ticker symbol XCO. Significant shareholders include Ares Management and Oaktree Capital Management. www.excoresources.com

     VC Deals

Xirrus Inc., a Westlake Village, Calif.-based developer of WLAN array architecture, has raised $16.25 million in Series B funding. Participants included U.S. Venture Partners and August Capital. www.xirrus.com

Mu Security Inc., a Sunnyvale, Calif.-based provider of security analysis for IP-based products and applications, has raised $4 million in Series A funding from Accel Partners and Benchmark Capital. www.musecurity.com

Updater Services (UDS), an India-based facilities management company, has received $10 million in venture capital from New Vernon Bharat, according to The Economic Times of India.

Axentis Inc., a Cleveland-based provider of governance, risk and compliance management solutions, has raised $6 million in new venture capital funding. Eastward Capital led the deal, and was joined by JPMorgan Partners, Key Venture Partners and Sierra Ventures. Axentis also secured $3 million in debt funding.

G2 Microsystems Inc., an Oakland, Calif.–based provider of ICs for the mobile resource management market, has received an undisclosed amount of strategic funding from Siemens Venture Capital. www.g2microsystems.com

nTAG Interactive Corp., a Boston–based provider of events data management solutions, has raised $6 million in new VC funding. Return backers include Sevin Rosen Funds, Pilot House Ventures and Rick Burnes. www.ntag.com

Heavy.com Inc., a New York-based broadband network operator, has raised $10 million in third-round funding led by Polaris Venture Partners. Allen & Co. advised Heavy.com on the deal.

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