PE Week Wire

Monday Mouthoff

The sun is shining, Brokeback got robbed and the Buyouts Symposium East is just two days away. In other words, it’s time for some Monday Mouth-Off.

Most email was in response to Friday’s column about the Silicon Valley VC being arrested for domestic abuse, and my (possibly hypocritical) reasons for not disclosing his name or firm. Mark begins: “I suggest that if you truly believe it’s none of anyone’s business at this point… then there is no reason to publish the story and first paragraph at all. The first paragraph is essentially a tabloid tidbit that will certainly draw more attention to the individual involved, and increase the odds of his/her name, and the firm’s name, being disclosed in the press.” Celia adds: “If you feel that you shouldn’t reveal the name of the partner who was arrested, then you shouldn’t write about it at all. You come across as coy and wanting to show off how much information you have without actually sharing. One is reminded of grade school kids bragging about their secrets.”

Finally, there is Brian: “This column is a pox on your otherwise stainless record for focusing on relevant PE matters (or at least connecting your own interests in a creative way to PE matters). Don’t become one of those journalists that tries to have it both ways. Your journalistic mouth is working double time using each side with vigor. Side 1 describes facts about the situation, while Side 2 claims it is none of our business. If Side 2 is right, then Side 1 should be silent. Try chewing gum with it, if it needs exercise.”

On the other hand, we’ve got Wayne: “I absolutely agree with your rationale for not disclosing the person’s name or firm and if it’s trumped up it’s a shame. If it’s not… Well, since we VCs always tell entrepreneurs, business school classes and you guys in the media that the investor-entrepreneur relationship is a lot like a marriage, what entrepreneur wants to take money from someone known for fits of physical (maybe fiscal) rage? It may not be the LPs he has to worry about. If it was our firm and this was true, he wouldn’t be around for the next fund.”

LP Brian summed up the emails of many LPs: “This is important and absolutely vital information for me to know. I don’t need to know the name of the guy, but I damn well need to know the name of the firm. My investments in this area are what feed my four children and pay for their education. This is not a hobby or a side-pocket game of fun for me.”

Jack adds: “There is no need to ‘out’ the miscreant venture capitalist since he’s already in the hands of the justice system, but there is every need to ‘out’ every single LP who honestly insist that they do not find domestic abuse inconsistent with being a good venture capitalist. Are they familiar with the word ethics? Further, every attorney who would advise an LP to overlook or otherwise excuse a VC engaging in domestic abuse should be disbarred.”

*** Jim and others write in to ask: “Are you going to run another March Madness pool?” But of course Jim (and others). Details to come once the brackets are set.

Providence Equity Partners and Goldman Sachs Capital Partners have agreed to acquire Education Management Corp. (Nasdaq: EDMC), a Pittsburgh, Pa.–based provider of private post-secondary education. The total transaction is valued at approximately $3.4 billion, with EDMC common shareholders receiving $43 per share. Leverage will be provided by Credit Suisse, Goldman Sachs, Merrill Lynch and Bank of America, while Education Management was advised by Merrill Lynch. www.provequity.com www.gs.com www.edmc.com

Alan Patricof, co-founder of Apax Partners, has launched a $50 million venture capital fund focused on digital media opportunities. www.greycroftpartners.com

BlueNote Networks Inc., a Tewksbury, Mass.-based provider of IP telephony software, has raised $15 million in Series B funding. Commonwealth Capital led the deal, and was joined by return backers Fidelity Ventures and North Bridge Venture Partners. www.bluenotenetworks.com

    VC Deals

Criston Software, a France-based provider of secure desktop management solutions, has raised €4.75 million in new VC funding. SPEF Venture and Viveris Management were joined on the deal by return backers Odyssée Venture and Finadvance. www.criston.com

Evolutionary Technologies International Inc., an Austin, Texas–based provider of data integration solutions, has raised $6.5 million in Series A-1 funding. Appian Ventures led the deal, and was joined by Access Venture Partners and Osprey Ventures. www.eti.com

OpTier Inc., a New York-based provider of transaction workload management solutions, has raised $7 million in fourth-round funding. Return backers include Carmel Ventures, Lightspeed Venture Partners and Pitango Venture Capital. www.optier.com

Beceem Communications Inc., a Santa Clara, Calif.-based provider of chipsets for mobile WiMAX technology, has received an undisclosed amount of VC funding from Intel Capital. www.beceem.com

Covalys Biosciences AG, a Switzerland-based provider of products for biotech researchers, has raised an undisclosed amount of Series C funding. Backers include BVgroup Private Equity, Novartis and Venture Incubator. www.covalys.com

 

Buyouts Symposium East
March 8-9 in New Yorkat the PierreHotel

 

This is an exceptional opportunity to meet your peers and network at the highest level. Make sure to be there THIS WEDNESDAY AND THURSDAY.

Register or get more info at: www.Buyouts-Symposium.com

 

 

    Buyout Deals

 

The Blackstone Group has agreed to acquire office property company CarrAmerica Realty Corp. (NYSE: CRE). The deal is valued at around $5.6 billion, with CarrAmerica common shareholders receiving $44.75 per share. Leverage is being provided by Deutsche Bank, Bank of America and Citigroup. www.blackstone.com

Longview Fibre Co. (NYSE: LFB) has rejected a $26 per share buyout offer from The Campbell Group and Portland, Ore.-based private equity firm Obsidian Finance Group. www.obsidianfinance.com

Apax Partners has acquired a minority stake in The Learning Annex, a New York-based provider of adult self-improvement education. No financial terms were disclosed. www.learningannex.com

EdgeStone Capital Partners has acquired New Foods Classic, a Canadian custom maker of protein products like frozen hamburgers, custom-cut steaks and cooked appetizers. Company management also acquired a minority interest, while Goldsmith Agio Helms represented New Foods. Sellers included Investment Saskatchewan. www.edgestone.com

ThyssenKrupp AG of Germany is considering a sale of its automotive division, according to The Wall Street Journal. A sale could bring in upwards of $3.6 billion, with ThyssenKrupp then having extra cash on hand to help it acquire Canadian steelmaker Dofasco. www.thyssenkrupp.com

Linde AG, a Germany-based gas company, has agreed to buy UK rival BOC Group PLC for approximately Gbp8 billion. In order to help finance the deal, Linde is expected to auction off some non-core assets like its material handling division and Edwards semiconductor division.

American Capital Strategies has paid $79 million to acquire an 88% stake in The Meadows of Wickenburg LP, a Wickenburg, Ariz.–based multi-disorder inpatient facility specializing in addiction treatment. Company management also participatd in the equity tranche. www.americancapital.com www.themeadows.org

American Capital Strategies has paid $98 million to acquire a 79% stake in Financial Asset Management Systems Inc., a Norcross, Ga.–based debt collection agency. Company management also participated in the equity tranche. www.americancapital.com www.fams.net

    PE-Backed IPOs

Entelos Inc., a Foster City, Calif.-based developer of bio-simulation technologies for pharmaceutical R&D, is planning to raise up to Gbp20 million via a flotation on AIM. The company has raised nearly $50 million in VC funding since its 1996 inception, from firms like Abingworth Management, Bear Stearns Health Innovations, Hewlett-Packard, Charles River Ventures, Brentwood Venture Capital and St. Paul Venture Capital. www.entelos.com

    PE-Related M&A

Catalyst Investors has sold TCP Communications LLC to Global Tower Partners. No financial terms were disclosed. TCP is a Beverly, Mass.–based wireless communications tower operator. www.tcpcommunications.com

Lincolnshire Management has sold Transcraft Corp. to Wabash National Corp. for $71 million in cash and up to an additional $4.5 million in earn-outs. Transcraft is an Anna, Ill.–based maker of flatbed and drop-deck trailers. www.transcraft.com

CSG Systems (Nasdaq: CSGS) has acquired Telution Inc., a Chicago-based provider of operations support system software for communications companies. No financial terms were disclosed. Telution has raised VC funding from Draper Fisher Jurvetson and MC Venture Partners. www.telution.com

Temasek has agreed to acquire a 10% stake in Indian telecom company Tatas Teleservices, according to The Times of India. The deal is valued at around $212 million.

    Firm & Fund News

The Chinese Assets Supervision and Administration Commission (SASAC) is forming a venture capital fund for state-run companies.

Dresdner Kleinwort Wasserstein has sold its Gbp60 million limited partner position in Kleinwort Capital Partners IV to Partners Group (75%) and F&C Equity Trust PLC (25%). The fund was closed in 2001. www.kleinwortcapital.com

Open Solutions Inc. (Nasdaq: OPEN) has acquired the Information Services unit of The Bisys Group Inc. (NYSE: BSG).

    Human Resources

Craig Driscoll has joined Highland Capital Partners as chief recruiting officer. He previously served as a client partner in Korn/Ferry’s Boston office, with a particular focus on venture capital and technology. www.hcp.com

Henry-Louis Merieux has joined Mezzanine Management as a Paris-based director. He previously was a director in Deloitte’s advisory group. www.mezzanine-management.co.uk

Stephen Frey has joined Westham Capital Partners as a managing director. He previously was a managing director in the private equity group of Winston Partners Group. www.westhamcapital.com

L Capital Partners has promoted Sarit Soccary,Ben Yochanan and Andrew Hyman to principal. www.lcapitalpartners.com

FRIDAY, MARCH 3

An Arresting Development

The head of a brand-name Silicon Valley VC firm last month was arrested at his office, handcuffed and marched out past his colleagues. He then was arraigned on three misdemeanor charges of domestic assault against his (soon to be ex-) wife, pled not guilty to each count, posted $35,000 bail, received a restraining order and was told to be back in court next week. The firm’s LP advisory board was informed of the situation, although at least one non-advisory board LP contacted yesterday had not heard the news.

Your likely question now would be: Who is it? My answer: I’m not telling… yet (or maybe at all). If you therefore find what follows to be a giant waste of space, my apologies. I occasionally use this column to work through my own thought processes, and this is one of those times.

My rationale for withholding such info from you, dear readers, is not related to presumptions of innocence or allegations of guilt (although the allegations alone would be a permanent stain on his reputation). Instead, it’s because I do not see any evidence that this arrest — or even possible convictions — will affect the VC firm, its portfolio companies or its limited partners. As such, at this point, it is not our collective business.

Had the San Francisco DA opted to charge the VC with possible felonies (instead of misdemeanors), I might feel differently. After all, felonies sometimes can sometimes trigger certain “bad act” clauses in GP and LP agreements, although any actual GP or LP action still would be discretionary. Ditto for director or executive positions with portfolio companies. Were he to be convicted and imprisoned for any length of time, that could trigger key-man provisions due to his inability to provide services, but the likelihood of a lengthy jail sentence seems quite remote (again, related to the misdemeanor charges). LPs possibly could argue that the entire matter is causing him so much emotional/intellectual stress that he can no longer function as a fiduciary, but that is even more remote, particularly given how many big-name VCs have gone through very messy divorces over the past few years (not to mention some VCs who have been convicted for drunk driving).

Finally, it is important to note that the firm is not currently fund-raising. In other words, a resolution will hopefully be reached before the firm returns to market. At that point, LPs will be able to make an informed decision about their future involvement with this man, as will his fellow GPs. If found innocent, this becomes a non-issue. If found guilty, certain LPs probably will step away, although the vast majority will still base their decisions on investment returns instead of jury verdicts. As one attorney told me yesterday: “The hard truth is that many LPs will not find domestic abuse inconsistent with being a good venture capitalist.”

I promise to continue following this story as it progresses, as will my colleague Larry Aragon (who spent much of yesterday at SF police HQ, confirming info). If we learn something new, or are otherwise persuaded that identification is, indeed, in our readers’ interest, you’ll be the first to know.

 

Buyouts Symposium East
March 8-9 in New Yorkat the PierreHotel


Don’t miss your chance to attend this premier networking event.

Keynote speakers include

 Steve Pagliuca of Bain Capital, former U.S. Secretary of Defense William Cohen and NFL great Phil Simms.

Register or get more info at: www.Buyouts-Symposium.com

 

    Top Three

 

BT Group could soon receive a Gbp20 billion buyout bid from unidentified private equity firms, according to The Times of London. BT shares rose on the news, even though the company said that it has yet to receive any such approach. www.btplc.com

Allied Capital Corp. (NYSE: ALD) has agreed to sell a majority equity interest in Advantage Sales & Marketing Inc. to J.W. Childs Associates and Merrill Lynch Global Private Equity. The deal gives Advantage an enterprise value of around $1.05 billion, and is expected to close at the end of the month. Advantage is a Tampa, Fla.-based provider of sales and marketing services to manufacturers, suppliers and producers of consumer packaged goods. It was acquired by Allied in 2001. www.asmnet.com

ARCA Discovery Inc., a Denver, Colo.-based developer of genetically-targeted therapies for heart failure, has raised $15 million in second-round funding. Atlas Venture led the deal, and was joined by Pequot Capital Management and seed backer Boulder Ventures.

 

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    VC Deals

Neutral Tandem Inc., a Chicago-based operator of telecom hubs and switching solutions, has raised $12 million in Series C funding, according to a regulatory filing. Return backers include New Enterprise Associates, DCM-Doll Capital Management, Mesirow Capital Partners and Montagu Newhall Associates. www.neutraltandem.com

Cytomics Systems, a France-based drug company focused on small molecules that control the degradation of proteins, has raised €10 million in second-round funding. Edmond de Rothschild and Truffle Venture co-led the deal, and was joined by return backer Société Générale Asset Management. www.cytomics.fr

MovimentoAB, a Gothenburg, Sweden-based automotive electronics and software company, has raised $4 million in VC funding from Eqvitec. www.movimento.se

Chorus Systems Inc., a Durham, N.C.-based provider of automated IT support software for large businesses and government agencies, has raised $6 million in Series B funding. Core Capital Partners led the deal, and was joined Inflection Point Ventures and Anthem Capital Management. www.chorussystems.com

Gridstone Research (f.k.a. Peruto Inc.), a Fremont, Calif.-based provider of tools and analytics for investment managers, has raised an undisclosed amount of startup funding co-led by Charles River Ventures and Maverick Capital. www.gridstoneresearch.com

    Buyout Deals

 

Main Street Capital Holdings has sponsored a management buyout of NABCO Inc., a Canonsburg, Pa.-based manufacturer and marketer of explosive containment solutions and other homeland defense products. No financial terms were disclosed. Raptor LLC served as exclusive financial advisor to NABCO, while leverage was provided by National City Bank of Pennsylvania and the David L. Babson unit of Mass Mutual. www.nabcoinc.com

3i Group may now have competition for its proposed Gbp111 million management buyout of Chorion PLC, a UK-based owner of classic literary-based brands and content. Chorion confirms that it has received an alternate bid from Apax Partners-backed Hit Entertainment. www.3i.com www.chorion.co.uk

Arcapita has completed a $90 million buyout of Bijoux Terner LLC, a Miami, Fla.-based retailer of accessories for the travel retail market. Senior financing was underwritten by SunTrust Robinson Humphrey, while senior subordinated financing was provided by SunTrust Equity Funding and Roynat Business Capital. Citigroup Global Markets advised Bijoux Terner on the deal. www.arcapita.com www.bijouxterner.com

Volkswagen AG is nearing an agreement to sell its Europcar rental unit to French private equity firm Eurazeo, according to Dow Jones.

    PE-Related M&A

The Boeing Co. (NYSE: BA) has agreed to acquire Carmen Systems AB, a Swedish provider of resource optimization solutions for the transportation industry. Sellers include InnovationsKapital, GE Equity, Gilde Investment Management and SEB Foretagsinvest. www.carmen.se

Bookham Inc. (Nasdaq: BKHM) has agreed to acquire Avalon Photonics Ltd., a Zurich-based supplier of chips, arrays and subassemblies for sensing and datacom applications. The deal is valued at approximately $5.5 million in Bookham stock (765,000 shares), plus the possibility of a 348,000 share earn-out. Avalon has raised over $24 million in VC funding from firms like Vision Capital Management, Viventures, Intel Capital and Avida Equity Partners. www.bookham.com www.avalonphotonics.com

Access Company Ltd. of Japan has agreed to acquire IP Infusion Inc., a San Jose, Calif.–based provider of networking software for enhanced IP services. No financial terms were disclosed. IP Infusion has raised over $27 million in VC funding from firms like Blumberg Capital Ventures, Intel Capital, Wilson Sonsini, Cardinal Venture Capital and Formative Ventures. www.access.co.jp www.ipinfusion.com

Interbulk Investments PLC has acquired United Transport Tankcontainers Holdings BV from 3i Group in a €67 million reverse takeover. UTT is a UK-based provider of global door-to-door transportation of hazardous chemical and food bulk liquids. 3i sponsored an MBO of the company in November 2002. www.3i.com

    Firm & Fund News

The Oregon Investment Council yesterday was set to vote on recommendations that it make new fund commitments to Texas Pacific Group, Focus Ventures and OVP Venture Partners. www.ost.state.or.us

    Human Resources

Michael Darby has joined Sterling Stamos Capital Management. He comes from Paul Capital Partners, which he had joined as a principal in May 2005. www.sterlingstamos.com

Ben Sloop is leaving his associate position with Parthenon Capital, in order to run business development at Parthenon portfolio company American Wholesale Insurance Group. www.amwins.com

THURSDAY, MARCH 2

Random Ramblings

Last month, Joe Montana didn’t show for a much-hyped Super Bowl event featuring past Super Bowl MVPs. He said it was about wanting to watch one of his kid’s sporting events, but some reporters suggested it was more about his rebuffed request for a $100,000 appearance fee. My gut feeling was that it was about the kid. After all, the man still collects big endorsement money and management fees from his involvement with private equity fund-of-funds HRJ Capital (f.k.a. Champion Ventures).

Well, at least he still has the endorsements.

Montana is no longer a managing member of HRJ, a firm founded in 1999 by fellow ex-49ers Ronnie Lott and Harris Barton. The move officially took effect at the end of 2005, and became obvious when Montana’s name didn’t appear on documents for a new LBO-focused fund-of-fund currently being raised (HRJ Growth Capital II). Then there also is the matter of HRJ’s website currently saying that its “Team” section is under construction.

An HRJ spokesman says that Montana remains an equity holder in the firm, but that various other commitments made it impossible for him to do the type of HRJ-related travel necessarily to remain a full-timer. Lott and Barton still remain, and the firm also has made several new hires like former LGT Capital pro Duran Curis. The spokesman promises more HRJ info when the fund-raising process concludes.

*** Speaking of personnel changes, a trio of biotech pros have spun out of TL Ventures to form a new firm called Devon Park Bioventures. It actually happened about a year ago, but I don’t recall reading about it anywhere (if someone else did write it up, please let me know so credit can be given).

Anyway, they are Chris Moller, Marc Ostro and Dev Kantesaria. The new fund is targeted at around $200 million, with a first close already in the bank. Moller says that the trio is continuing to manage the existing TL Ventures bio portfolio – TL is only focusing on tech for its new $250m-targeted fund – and that the firm is more concerned with a company’s product (or potential product) than its stage.

*** New websites up for JPMorgan spinout CCMP Capital and Vinod Khosla’s indi effort.

*** I keep getting lots of email about the Dubai ports controversy. Some have asked if it could have any impact on private equity, and the answer is a resounding yes. Here’s proof.

*** The Boston Globe’s Steve Bailey provides some update on the Herald Media sale. The most important note is Pat Purcell’s newfound willingness to split up the Herald and its community newspaper network, which lots of potential suitors were told could not/would not happen. An informed source confirms Purcell’s change of heart, but adds that Bailey’s bid figures are a bit on the low side. Of course, if the Globe really does begin printing the NY Post for the Boston market, the Herald might lose enough value to make Bailey’s estimates right on target (as an aside: Weren’t Rupert Murdoch and Pat Purcell supposed to be friends? Don’t these leaked negotiations strike you as a direct slap, given the stage of Herald sale negotiations?).

 

Buyouts Symposium East
March 8-9 in New Yorkat the PierreHotel


Don’t miss your chance to attend this premier networking event.

Keynote speakers include

 Steve Pagliuca of Bain Capital, former U.S. Secretary of Defense William Cohen and NFL great Phil Simms.

Register or get more info at: www.Buyouts-Symposium.com

 

    Top Three

 

The Cypress Group has agreed to sell The Meow Mix Co. to Del Monte Foods Co. (NYSE: DLM) for approximately $705 million. Meow Mix is a Secaucus, N.J.-based maker of Meow Mix and Alley Cat brand dry cat foods, and was acquired by Cypress for $425 million in 2003 from J.W. Childs.

Meximerica Media Inc., a Spanish-language publisher of such periodicals as the RUMBO newspapers, has raised VC funding from Rustic Canyon/Fontis Partners.

Hicks, Muse, Tate & Furst has changed its name to HM Capital Partners. It also has promoted Edward Herring, Eric Lindberg and JasonDownie to partner. Herring joined the firm in 1998 and focuses on the food/beverage and energy market. Lindberg also joined in 1998, and focuses on media. Downie came in 2000 and focuses on energy. www.hmcapital.com

 

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