PE Week Wire — 12/5-12/9

Random Ramblings

Greetings from cold, snowy and Renteria-less Boston. Some notes as we head into the weekend:

*** Monday’s Buyouts Magazine will include a piece I recently wrote about the future of private equity fund placement agents, particularly vis-à-vis growing buyout fund sizes. My general premise was as follows: More and more firms are raising funds in excess of $750 million (40% increase from 2002-2003 to 2004-2005), which consequently means that more and more firms are hiring in-house fund-raising and/or investor relations pros. These jobs are typically separate, although there are more than a few jacks-of-all-trades. Some firms even have entire teams devoted to the cause (e.g., Carlyle Group). So if the industry trend is toward internal fund-raisers, where does that leave external fund-raisers?

The most common answer seems to be that the outsiders are left with partial mandates, whereby a firm going from a $1 billion Fund III to a $1.75 billion Fund IV will hire an outside agent to secure the extra $750 million. Or perhaps to secure a couple of Japanese LPs, because the firm wants some geographic expertise/credibility. This is a decent model while PE fund sizes grow, but absolute disaster if they plateau. I know that many of you believe buyout fund size growth to be perpetual, but remember the VC fund size experience.

In fact, the VC example may prove a map for where the buyout fund placement agent market is headed. Most of the good work won’t come from established/reputable firms, but rather from young or new teams that spin out of established/reputable firms. For example Diamond Castle Holdings (ex-DLJ Merchant Banking/CSFB PE folks like Larry Schloss) is using Lazard Freres to raise its $2.5 billion inaugural fund. Anyway, more on this topic Monday for Buyouts magazine subscribers.

*** Speaking of placement agents, can you name the placement agent who is leaving his in-house job with a Boston-based firm, in order to launch a new independent placement agency? Hint: Formal announcement expected in early January.

*** The month’s most intriguing firm has to be Providence Equity Partners. No, not because it got sued, but because it’s seemingly involved in every mega-LBO deal on the market: TDC, Dunkin’ Donuts, Kabel Deutscheland, Knight Ridder, etc. If each bid comes through, Providence could be back in the fund-raising market within two years, despite having closed on $4.25 billion just a few months back. No judgment (yet), but it certainly bears watching.

*** Quiz Time: What corporate VC group is telling portfolio companies that it must liquidate its current fund ASAP? Hint: Think global.

*** Constance Loizos of PE Week has some dish on the Train Wreck at Grand Central.

*** Finally, yesterday I wrote that I didn’t plan to attend the “PwC shindig.” Turns out it was the PwC-Globespan Capital Partners-Goodwin Procter shindig, as more than a few Globespan and Goodwin Procter readers wrote in to share (used to be the PwC-Atlas Venture-Testa Hurwitz shindig). Anyway, I felt so bad about my mistake (read: free booze and sushi) that I changed my mind about attending. I met a lot of readers, and engaged in conversations that ranged from the prevalence of black bears in Southern New Jersey to why SunGard is such a troubling deal. Oh, and I think that I also compared VC deals for pharma and gaming companies in the same breath, since they are so hits-reliant. Anyway, one week – four parties. Hopefully next week will be slower, but methinks not.

 

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Phone: 312-759-2314 

    Top Three






Lululemon Athletica, a Vancouver, Canada-based specialty retailer of athletics and yoga apparel, has raised US$93 million in private equity funding. Advent International led the deal, and was joined by Highland Capital Partners. The deal is in exchange for a 47.7% equity stake, with company founder Chip Wilson retaining the majority position. www.lululemon.com www.adventinternational.com www.hcp.com

Wellspring Capital Management has agreed to acquire restaurant/entertainment complex operator Dave & Buster’s Inc. (NYSE: DAB) for $18.05 per share. The total transaction is valued at approximately $375 million (including the assumption of debt) and is expected to close in Q2 2006. Piper Jaffray is serving as exclusive financial advisor to Dave & Buster’s, while J.P. Morgan Securities is both advising Wellspring and serving as sole lead arranger for the acquisition financing. www.wellspringcapital.com www.daveandbusters.com

Nasdaq Stock Market has completed its $1.88 billion buyout of Instinet Group Inc. (Nasdaq: INGP), which was majority-owned by Reuters PLC. Simultaneously, Silver Lake Partners completed its acquisition of Instinet’s institutional brokerage business. www.instinet.com

    VC Deals

Optosecurity Inc., a Quebec City, Canada-based provider of security products for the detection of weapons or explosive devices in cargo of luggage, has raised additional first-round funding from Fondaction CSN. The company has now raised Cdn$5.1 million in VC funding this year, with first tranche backers including Business Development Bank of Canada and Innovatech Quebec. www.optosecurity.com

Webshastra Pvt. Ltd., a Bangalore, India-based provider of online advertising solutions, reportedly has raised $10 million in first-round funding from Warburg Pincus. www.webshastra.com

Altair Semiconductor Ltd., an Israel-based developer of broadband wireless communications semiconductors, has raised $8 million in first-round funding, according to Globes Online. BRM Capital led the deal, and was joined by Giza Venture Capital and JVP. www.altair-semi.com

    Buyout Deals

 

VNUNV, a Dutch media company, may receive buyout bids from a pair of private equity consortia, according to The Wall Street Journal. Bids likely would be well in excess of $8 billion, with one group made up of Apax Partners, Blackstone Group, Carlyle Group; KKR, Permira, Thomas H. Lee Partners and AlpInvest. The other group – reported to be in a more preliminary stage – includes Bain Capital, Texas Pacific Group and Warburg Pincus.

TA Associates has sold portfolio company HVL Inc. (a.k.a. Douglas Laboratories)to Canada-based Atrium Biotechnologies Inc. (TSX: ATB.sv) for approximately $92 million. HVL is a Pittsburgh-based provider of nutritional products, and first received private equity backing from TA Associates in 1997. www.ta.com www.douglaslabs.com

AIG-Brunswick Millennium Fund has sold its stake in IBS Group Holding Ltd., a Russia-based provider of IT services and products. The deal is valued at $84 million, with the buyers only referred to as “a number of institutional investors.” www.ibs-company.com

Pernod Ricard SA reportedly has received three bids for its restaurant business, which includes brands like Dunkin’ Donuts, Baskin Robbins and Togo. The groups include: KKR/Trimaran Capital Partners, Providence Equity Partners/JPMorgan Partners and Bain Capital/TH Lee/Carlyle Group. The deal is expected to be worth upwards of $2 billion.

Kosmos Energy LLC of Dallas has acquired a 35% working interest in the Kombe-N’sepe Block onshore the Republic of Cameroon. Kosmos’ partners on the block are Perenco, operator of the project with a 40% working interest, and Societe Nationale des Hydrocarbures (SNH), the national oil company of Cameroon, with a 25% working interest. No financial terms were disclosed. Kosmos Energy received $300 million in private equity commitments in 2003 from Warburg Pincus and The Blackstone Group. www.kosmosenergy.com

Apollo Management, KKR and Texas Pacific Group yesterday submitted a $23.25 per share bid for supermarket company Alberton’s Inc. (NYSE: ABS), according to The Financial Times. Additional bids were possible from Kroger’s and Cerberus/Kimco Realty/Supervalu, with the Alberton’s board expected to evaluate all offers this weekend.

    PE-Backed IPOs

Basic Energy Services Inc., a Midland, Texas-based provider of well site services to oil and gas drilling and production companies, priced 12.5 million common shares at $20 per share (top of $18-$20 range), for an IPO take of approximately $250 million. It will trade on the NYSE under ticker symbol BAS, while Goldman Sachs and Credit Suisse First Boston served as lead underwriters. DLJ Merchant Banking was listed as Basic Energy’s majority shareholder, based on a December 2000 recapitalization. First Reserve, Fortress Capital and Southwest Partners also hold equity positions. www.basicnrg.com

WiderThan Company Ltd., a Seoul, South Korea-based provider of mobile entertainment solutions for wireless carriers, priced six million million American depository shares at $12 per ADS (below its $14-$16 range), for an IPO take of approximately $72 million. It will trade on the Nasdaq under ticker symbol WTHN, while Merrill Lynch and JP Morgan servied as lead underwriters. Shareholders include Nokia Venture Partners, i-Hatch Ventures, SAIF Capital, Apax Partners, General Atlantic and The Washington Dinner Club. www.widerthan.com

Cynosure Inc., a Westford, Mass.-based developer of non-invasive aesthetic treatment systems to do such things as remove hair or treat vascular lesions, priced five million common shares at $15 per share (above $12-$14 range), for an IPO take of approximately $75 million. It will trade on the Nasdaq under ticker symbol CYNO, while Citigroup served as lead underwriter. Cynosure received under $1 million in VC funding in 1998 from the Boston University Community Technology Fund and Venham Ventures. www.cynosurelaser.com

    PE-Backed M&A

 

Par3 Communications Inc., a Seattle–based provider of enterprise customer communications solutions, has acquired EnvoyWorldWide Inc., a Bedford, Mass.–based provider of notification services for business continuity and emergency communications. No financial terms were disclosed. Par3 has raised around $33 million in total VC funding since its 1999 inception, from firms like Draper fisher Jurvetson, Bluerun Ventures, Timberline Venture Partners, InterWest Partners and Staenberg Venture Partners. EnvoyWorldWide has raised around $38 million in VC funding since its 1998 inception, from firms like Battery Ventures, Longworth Venture Partners and Sofinnova Partners. www.par3.com www.envoyww.com

    Firm & Fund News

 

Lime Rock has closed its Lime Rock Resources fund with $450 million in capital commitments. The vehicle will acquire lower-risk oil and fas properties in the United States. Monument Group assisted in the fund-raising, while limited partners include the Pennsylvania State Employees’ Retirement System ($25m) and the University of Michigan ($25m). www.limerockresource.com

Bingham McCutchen LLP has agreed to merge with 140-attorney law firm Swidler Berlin LLP of Washington, D.C. The combined firm would retain the Bingham McCutchen name, and would feature nearly 1,000 attorneys. www.bingham.com

The CaliforniaPublic Employees Pension System (CalPERS) has made the following fund commitments: $400 million to Blackstone Capital Partners V; $150 million to Avenue Special Situations Fund IV; $175 million to Welsh Carson Anderson & Stowe X; 150 million euros to Candover 2005; and $52.5 million to Rosewood Capital V. www.calpers.com

The Pennsylvania State Employees’ Retirement System has made the following fund commitments: $25 million to Care Capital Investments III, $25 million to Lightspeed Venture Partners VII, 50 million euros to Alpha Private Equity Fund 5; $100 million to JPMorgan Venture Capital Institutional Investors III; $20 million to TL Ventures VII; and $50 million to Blackstone Real Estate Partners V. www.sers.state.pa.us

    Human Resources

 

Matt Horton has joined @Ventures, the VC affiliate of CMGI Inc. (Nasdaq: CMGI), as a principal. He previously was with Garage Technology Ventures. www.cmgi.com

Charles Bennett, onetime director of the NASD’s corporate financing department, has joined Kaulkin Information Systems as senior advisor for regulation and compliance. www.kaulkin.com

Random Ramblings

*** Some of you have written in to ask if my primary interest in the Herald Media Inc. sale is provincial, since most reporters would instead be focused on the pending sale of the much-larger Knight Ridder Inc. (first-round bids due tomorrow). The answer is mostly affirmative, since I believe strongly that Boston’s best interests are served by having two vibrant and competing daily newspapers. That said, however, it’s also because Herald Media offers the community weekly vs. big-city daily dichotomy of which I’ve written extensively, with the former now far more attractive than the latter. Anyway, a few notes on the deal:

First, it has been reconfirmed that the sale is for the entire company, which includes The Boston Herald, over 100 community papers in Eastern Massachusetts and a sweet piece of Boston real estate. Second, Wachovia received over 10 first-round bids last Thursday from both strategic and private equity players, of which a handful will be invited back into Round 2. Third, Heritage Partners is looking more like a seller than a buyer. If it is ultimately involved in this deal, expect it to package its Enterprise NewsMedia LLC platform along with Herald Media for a buyer looking for significant regional expansion. Finally, the whole thing should be wrapped up by the end of Q1 2006.

*** Blackstone Group held a second close on its fifth general buyouts fund on November 30, as expected (LPs were just informed this week). The record-breaking tally now stands at just under $12 billion, with a final close on around $13 billion still expected to occur early next year. Blackstone declined to comment on the fund-raising effort.

*** Speaking of major fund-raising, someone from an I-banking fund placement group told me that the group just received a mandate for a fund that “could be as large as Blackstone’s.” My problem is that I can’t think of any firm that might be raising even $12 billion, let alone $13 billion. KKR is a possibility, but it raised 4.5 billion euros for its European fund just a few months ago, and isn’t expected to be targeting more than $8 billion for its next North American fund. Texas Pacific Group was a thought, but a press report puts its target at just $8 billion. The only other firm I can think of is the spun-out JPMorgan Partners buyout group, but $10 billion-plus just seems way too high for them. Any ideas from you, dear readers? Remember, the Top Secret button is a great way to leave anonymous tips.

*** A quick correction to something I wrote a few weeks ago: Atlas Venture now expects to close its seventh fund in early 2006, instead of at year-end. It also formally reduced its target from $600 million to $400 million.

*** Dow Jones is reporting that a settlement has been reached in the case of 51 ex-Epinions Inc. employees and eBay, Benchmark Capital, August Capital and BV Capital Management. No settlement terms were disclosed, nor was there any comment from the VC firms.

*** This has been a week of VC-related parties, so quick commendations are in order to: Clarus Ventures for serving great red wine (fund closing party in Cambridge) and Castile Ventures for serving great hour dourves (holiday party in Waltham). I’m not going to the PwC shindig tonight, but someone please write in to share such important details…

 

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ATTENTION

Seeking Yield Oriented Investment Products

Lowery Asset Consulting, LLC seeking yield. Interested in learning about conventional and unconventional strategies with a minimum 3% yield component. Core real estate and conventional fixed income managers need not apply. Contact Bill Lowery, Phil Kosmala, or Joe Taiber at:

Lowery Asset Consulting, LLC
20 North Wacker Drive, Suite 1836
Chicago, IL 60606

Phone: 312-759-2314 

    Top Three







Bridgepoint has completed its acquisition of Environmental Resources Management PLC, a UK–based provider of environmental consulting services. The deal was valued at $535 million, and includes the 52% stake owned by 3i Group and part of the 48% stake held by ERM’s 400 employee shareholders. In total, Bridgepoint holds a 58% position, while ERM management and employees hold the remaining 42 percent. The deal is Bridgepoint’s first transaction out of the 2.5 billion euros third fund it raised earlier this year. www.bridgepoint-capital.com www.erm.com

NGP Energy Capital Management has closed three funds with an aggregate of $1.7 billion in committed capital. They are: Natural Gas Partners VII with $1.3 billion, companion fund NGP Income Co-Investment Opportunities Fund II with $250 million and NGP Energy Technology Partners with $148 million. Each final close occurred in November. www.ngptrs.com

Cardio-Optics Inc., a Wilmington, Mass.-based medical device company, has secured $20.5 million of a $24 million Series B round, according to a regulatory filing. Backers include Novo AS, Cardinal Partners, WSI Inv*stments, Primus Venture Partners and Sequel Venture Partners. www.cardiooptics.com

    VC Deals

Cellon Inc., a Shenzhen, China-based provider of design and systems integration services for the wireless handset industry, has raised a Series D funding round led by TVG Capital Partners. No terms were disclosed for the deal, but Asian Venture Capital Journal places the total at $50 million www.cellon.com

Pentaho Corp., an Orlando, Fla.-based provider of open-source business intelligence software, has raised $5 million in Series A funding. New Enterprise Associates led the deal, and was joined by Index Ventures. www.pentaho.org

Third Brigade Inc., an Ottawa, Canada-based provider of intrusion prevention systems, has raised Cdn13 million in Series B funding. Return backers include BCE Capital, Celtic House Venture Partners and BDC Venture Capital. The company’s first-round deal raised Cdn6 million this past April. www.thirdbrigade.com

Adchemy Inc., a Palo Alto, Calif.-based Internet marketing startup, has raised around $6.35 million in Series B funding, according to a regulatory filing. Backers include August Capital. www.adchemy.com

Trovix Inc., a Mountain View, Calif.-based provider of search technology, has raised $5.25 million in Series A funding from U.S. Venture Partners, 3i Group and Stanford University. The company also launched an intelligent applicant tracking system product focused on the recruitment market. www.trovix.com

Alba Communications Ltd., a London-based provider of programming for the television, video and DVD markets, has raised Gbp250,000 in VC funding from The Capital Fund. www.albacommunciationsltd.com www.thecapitalfund.co.uk

DFine Inc., a Cupertino, Calif.-based developer of an electrosurgical system for treating tissue, has secured $6.5 million of a $7 million Series B round, according to a regulatory filing. Backers include Prospect Venture Partners.

Pinstripe Inc., a Milwaukee-based provider of recruitment process outsourcing services, has raised $3 million in a Series A funding round led by Baird Venture Partners. The State of Wisconsin Investment board and company management also participated.

    Buyout Deals

 

Mid Europa Partners has agreed to acquire Aster City Cable for 412 million euros from Hicks, Muse, Tate & Furst EuropeFund (advised by Lion Capital). Aster City is a Poland-based provider of media and communications services in Poland. The deal represents a 4.8x multiple on invested capital for HMTF Europe Fund. www.astercity.com.pl

The Riverside Co. has sold the automotive sensor business of Elkhart, Ind.-based portfolio company American Electronic Components Inc. to Siemens VDO Automotive Corp. No pricing terms were disclosed. AEC is one of four companies that Riverside acquired on the same day in November 2002, as part of a carve-out from Dana Corp. (NYSE: DCN). It already has exited the other three via sales to TriMas Corp., a portfolio company of Heartland Industrial Partners. www.riversidecompany.com www.aecsensors.com

The CPP Investment Board has acquired an 80% two large shopping centers in Quebec: the Galeries de la Capitale in Quebec City and Carrefour de L’Estrie in Sherbrooke. Westerkirk Capital taking the remaining 20%, with the properties being managed by Redcliff Realty Management Inc., a wholly owned subsidiary of Osmington. No financial terms were disclosed. www.cppib.ca

Apax Partners is considered the frontrunner for BSN Medical GmbH, the medical products group being sold by Beiersdorf AG and Smith & Nephew PLC, according to the Frankfurter Allgemeine Zeitung. Morgan Stanley is running the auction, with other bidders reported to include Advent International, CVC and Montagu Private Equity. www.apax.com

North Castle Partners has sold Grand Expeditions Inc. to UK leisure company First Choice Holidays PLC for Gbp54 million, including Gbp11.8 million in long-term debt. Grand Expeditions is a high-end travel group catering to 45-65 year-olds, and was acquired by North Castle in 1999. www.northcastlepartners.com www.grandex.com

Industri Kapital has received European Commission approval for its proposed buyout of GUS Holland Holding from GUS PLC.

    PE-Backed IPOs

Patni Computer Systems Ltd., a Mumbai, India-based provider of IT services, priced 6.875 million American depository shares at $20.34 per ADS, for an IPO take of approximately $140 million. The company plans to begin trading today on the NYSE under ticker symbol PTI, and already has been listed on both the Bombay Stock Exchange and National Stock Exchange of India. Goldman Sachs (Asia), Merrill Lynch, ABN Amro and Rothschild served as lead underwriters for the offering. Significant shareholders include General Atlantic, GE Capital and HSBC. www.patni.com

    PE-Backed M&A

 

Par3 Communications Inc., a Seattle–based provider of enterprise customer communications solutions, has acquired EnvoyWorldWide Inc., a Bedford, Mass.–based provider of notification services for business continuity and emergency communications. No financial terms were disclosed. Par3 has raised around $33 million in total VC funding since its 1999 inception, from firms like Draper fisher Jurvetson, Bluerun Ventures, Timberline Venture Partners, InterWest Partners and Staenberg Venture Partners. EnvoyWorldWide has raised around $38 million in VC funding since its 1998 inception, from firms like Battery Ventures, Longworth Venture Partners and Sofinnova Partners. www.par3.com www.envoyww.com

    Firm & Fund News

 

Vintage Venture Partners of Israel has held a $45 million first close on its second fund-of-funds focused on early-stage, Israel-related technology VC funds. The fund target is $75 million, with a final close expected to occur in February or March. www.vintageventures.com

SVB Financial Group, the parent company of Silicon Valley Bank, has opened a Shanghai-based subsidiary named SVB Business Partners (Shanghai) Co. Ltd. www.svb.com

    Human Resources

 

Raj Parekh has joined the life sciences team of Advent Venture Partners as a general partner. He is a co-founder of Oxford Glycosciences, and most recently served as an entrepreneur-in-residence with Abingworth Ventures. Advent Venture Partners also is promoting Shahzad Malik from partner to general partner in the life sciences team, and Frédéric Court from principal to partner in the information and communications team. www.adventventures.com

Michael Marks has agreed to join Kohlberg Kravis Roberts & Co. as a member on January 1, following his retirement as CEO of Flextronics International Ltd. (Nasdaq: FLEX). www.kkr.com

Ray Schuder has joined El Dorado Ventures as a senior associate. He previously served as a vice president with Pequot Ventures and, before that, was a director with Silicon Valley BancVentures. www.eldorado.com

CapitalSource Finance LLC has promoted Cheryl Carner to managing director of the retail finance group. www.capitalsource.com

28,000 and Counting…

Every time the PE Week Wire adds another thousand subscribers, I like to remind you that these morning missives are just a scrumptious