PE Week Wire: Fri., July 13, 2007

I used to enjoy covering the E3 gaming expo and the Consumer Electronics Show. Then there was Comdex, too, in the perfect party setting of Las Vegas. But Comdex is no more and now even E3 has scaled back. This year, the gaming expo became an invitation-only affair, meaning that instead of about 60,000 conference attendees, they were only expecting several thousand to show up to see the latest developments and hear what Microsoft and Sony have to say about gaming. I’m sure there was still plenty of shwag, too.

Organizers of E3 said that they wanted a more intimate atmosphere where business would be the emphasis. In regards to private equity, I saw one funding deal get announced last week; that was for Trion, a developer of online games based on TV episodes. About a month ago, a similarly focused game developer named Telltale raised venture funding.

Their funding announcements come as venture firms pulled back on gaming investments in 2006 despite lucrative exits early in the year. Investment dollars dropped nearly 38% in 2006 to $137 million, down from the $219 million invested during 2005, according to Thomson Financial (publisher of PE Week Wire). I expect to see another drop off at the end of 2007, based on some anecdotal evidence.

It seems odd there would be a dip in 2006. Especially after VCs scored with the sale of Massive and XFire. XFire, as you’ll recall, raised $12.5 million before Viacom purchased it for $102 million. Massive raised nearly $18 million before Microsoft paid somewhere between $250 million and $400 million to acquire it.

In the context of making money with video games, the franchising of TV shows makes sense, just as Electronic Arts has grown over the years thanks to its licenses of the sports titles (think John Madden Football). With Trion and Telltale now funded, you should expect to see more of your favorite shows come to a video screen near you. I should’ve seen this coming. I can play Star Wars Legos for hours. And I believe wholeheartedly what Trip Hawkins has to say about mobile gaming. But what remains to be seen is if gamers will have the same passion for playing a simulation of Lost.

*** Mark your calendars. Did you see the email yesterday from my publisher Jim Beecher? He was writing to remind you all that the North American Buyouts—Mezzanine Forum 2007 is coming in mid-October in Toronto, Canada.

I’d like to also remind you that the 4th annual Buyouts Symposium West conference is coming in mid-November in my backyard of San Francisco. These events are coming next quarter, so start planning. Hope to see you all there.

*** Next week, Dan Primack returns from a much-deserved vacation. Unfortunately, his Red Sox are still in first place while my Giants and A’s remind me that 49ers football exhibition is just over a month away.

Today’s blog is by Alastair Goldfisher, managing editor of Private Equity Week and Venture Capital Journal in San Francisco.

Thank you for having me, Amanda Palmer, as your guest editor on the PE Week Wire for the past two weeks I normally edit the European Venture Capital Journal and I’m a regular blogger on the PE Hub The much missed Mr. Primack is back on Monday.

Top Three

The London Stock Exchange will launch a dedicated new market for issuers of specialist funds. The Specialist Fund Market will meet demand from both issuers and institutional and other professional investors for a quotation on a regulated market in London that provides sufficient flexibility for specialist vehicles such as single strategy hedge funds and private equity vehicles. This will satisfy a market need which will exist between AIM and the Main Market once the FSA’s new Unitary Regime is introduced.

Huntsman rejected its $5.6 billion takeover arrangement with the Netherlands-based chemical company Basell International Holdings and will be acquired by Apollo Management for $6.51 billion.Under the terms of the deal, Huntsman shareholders will be paid $28 for each share, the same terms as the boosted offer Apollo made on Monday. Last week, the private equity firm offered $27.25 a share, topping Basell’s $25.25 bid. Including debt, the Apollo agreement is valued at $10.6 billion.

Argos Soditic, independent European private equity partnership with offices in Paris, Geneva and Milan, has acquired Financière Harlé Bickford group through an MBO. Financière Harlé Bickford is a family owned conglomerate operating a pyrotechnics business, wireless network equipment and managing a real estate portfolio. The complex deal required agreement of more than 200 shareholders and the creation of two holding companies by the buyer. Some of the 250 family shareholders chose to reinvest in the acquired companies and will be represented on the Supervisory Board. The SJ Berwin team in Paris led by partner Maxence Bloch assisted in the deal. Stephane Argyropoulos at Credit Su! isse advised on financial aspects for management. The financial details of the deal were not released but FHB’s revenues in 2006 were €102 million.

VC Deals

Signaling that the future for energy efficiency is now, Kleiner Perkins Caufield & Byers and six other investors have provided $8.33 million in financing to Verdiem Corporation, a Seattle-based developer of power management software for PC networks.

Jenken Biosciences, a North Carolina biotech company developing drugs for the treatment of liver, kidney and lung disease, has received a $142,716 low-interest loan from the North Carolina Biotechnology Center.

Agensys, a Santa Monica, California-based biotech company, has raised $41.3 million through a Series D financing co-led by Duquesne Capital Management and JAFCO. Also participating in this round were new investors Innovis Investments and Nextech Venture, as well as existing investors Bear Stearns Health Innoventures, Alta Partners, HBM BioVentures, Lombard Odier Darier Hentsch & Cie, H&Q Life Sciences Investments, and Orbimed Associates.

VitreoRetinal Technologies, an Irvine, California-based ophthalmic-drug company, has raised $9 million in a Series A funding from De Novo Ventures, reports VentureWire (vw).

Obopay, a service provider for payments over mobile phones located in Redwood City, California, has closed a Series C round, raising $29 million. Richmond Global Cellular, an affiliate fund of Richmond Management, led the round and all current investors, including Qualcomm and Redpoint Ventures, participated. New investors included AllianceBernstein, Citi, Societe Generale, and others.

ActoGeniX, a Dutch biopharmaceutical developer and spin-off from VIB and Ghent University, has secured a €3.1 million ($4.2 million) grant from the Flanders government. The money follows a Series A round where it raised €20 million from Biotech Flanders, GIMV, Life Sciences Partners, Aescap Venture, Baekeland Fonds and Ventech, reports vw.

IGA Worldwide, an independent in-game advertising network, has raised $25 million in Series B funding. GE/NBC Universal’s Peacock Equity and KTB Ventures led the round along with existing investors, Easton Capital, Morgenthaler Ventures, Intel Capital and DN Capital. The company is headquartered in New York, with offices in London and Berlin.

Skyhook Wireless, a Boston, Massachusetts based provider of metro-area positioning system based on Wi-Fi systems, has raised $8.5 million. The round was led by new investor RRE Ventures along with existing investors Bain Capital, Intel Capital and CommonAngels.

Vapps, a provider of VoIP conferencing, has collected $2.5 million by way of a Series A round led by Azure Capital, a new backer, vw reports. The company is based in Hoboken, New Jersey.

TvTrip, a London-based website that enables hotel searches using online videos, has raised €3.5 million ($4.8 million) from investors Balderton Capital (formerly Benchmark Capital Europe) and Partech International.

OptiVia Medical, a North Carolina based medical devices business, has secured $500,000 as part of a $1.5 million Series B round, vw reports. Investment has come from individuals.

Buyout Deals

UK insurance group Admiral has rejected a bid by an unnamed private equity consortium for its website, an online provider of insurance, financial services, power and broadband. In a statement, Admiral said: “The board has concluded that this weakening in its flexibility to determine the strategy of Confused would restrict the ability to maximise Confused’s potential as part of the Admiral Group in the medium to long term,” the company said in a statement.”

Terra Firma, Guy Hands’ private equity group, has again extended the proposal period for its recommended £4bn (US$8.1bn) bid for UK music business EMI. The bid period had already been extended twice, most recently until 12 July, but will now run until 19 July. To date, Terra Firma has received acceptances representing approximately 3.82% of shares. Maltby Limited, Terra Firma’s takeover vehicle for the offer, had received 3.65% of acceptances by the end of the previous offer period.

Investcorp, a global alternative asset management firm that listed on the London Stock Exchange in December has agreed to acquire a majority ownership interest in Berlin Packaging, a supplier of rigid packaging in the United States. The acquisition caps is Investcorp’s fifth in a year.

Darby Overseas Investments, the private equity arm of Franklin Templeton Investments and a provider of mezzanine capital in emerging markets, through the BBVA Latin America Private Equity Fund made a $15 million equity investment in Grupo Bajo Cero, the largest manufacturer and distributor of ice in Mexico. This investment is the Fund’s sixth portfolio company and the third in Mexico.

API Heat Transfer is welcoming its third private equity owner in as many years. Audax Group agreed to sell the Buffalo, New York-based API Heat Transfer to Industrial Growth Partners, just over two years after buying the company from Madison Capital Partners. The deal included $26.6 million of subordinated debt and $4 million of equity from Golub Capital. Financial details were not disclosed.

Dubai International Capital, the international investment arm of Dubai Holdings, has made a substantial investment in ICICI Bank, an Indian financial services firm. The investment allows DIC to take a 2.8% shareholding in the Bank.

Elevation Partners has received antitrust clearance to buy a 25% stake in handheld game maker, Palm for $325 million. The Federal Trade Commission granted early termination of the waiting period required under the Hart-Scott-Rodino antitrust law.

Virgin Media, a UK cable group, is pursuing US and international trade buyers following concerns that volatility in the debt market could undermine a bid from private equity. Virgin Media, rebranded from NTL Telewest after a merger last year, has hired UBS to look for “strategic buyers”, despite having already appointed Goldman Sachs to review “strategic alternatives” following a US$23m offer proposal from US buyout firm The Carlyle Group. Richard Branson, who retains a 10.1% stake in Virgin Media, held a board meeting in New York yesterday to discuss the company’s options. Companies believed to have! been contacted include Liberty Global, Comcast and Time Warner Cable, reports the FT.

Lincolnshire Management is selling tennis racket company Prince Sports and Nautic Partners, the $2.3 billion, Rhode Island based mid-market private equity house is thought to be interested.

Dallas Utility TXU set its shareholder meeting for 7 September to vote on the pending $45 billion buyout by KKR and TPG Capital.

Close Ventures, a UK Venture Capital Trust Manager, has invested £1.5 million into Process Systems Enterprise. Close Ventures has now made 16 investments in 2007 with a total value of £40m ($81 million). PSE provides modeling software to the process manufacturing industries.

LBO Wire reports, Paris Re, formerly the reinsurance arm of French insurance giant Axa, said Thursday it priced its initial public offering at EUR19.35 ($26.66) a share, at the bottom end of an earlier announced price range of EUR19.35 to EUR22. A group led by Stone Point Capital bought the company last year and provided about $1.6 billion of capital. The value of that transaction wasn’t disclosed but Axa recorded a gain of about $155 million on the deal. Other investors included Hellman & Friedman, Vestar Capital Partners and Crestview Capital Partners. Axa retained a 3.4% stake in the company after the transaction. The reinsurer will have a market capitalization of EUR1.66 billion ($2.29 billion) when it starts trading on Euronext Friday.

Bard Capital Group has paid more than $320 million for industrial crane provider AmQuip.

PE-Backed M&A

The VRH Partners portfolio company, MD-X Solutions, was acquired by MedAssets. VRH Partners acted as the exclusive financial advisor to MD-X Solutions. The transaction, which closed on 2 July 2007, was led by Brock Matthias and Chris Surdo. PE Week Wire was told this is MedAssets largest of seven acquisitions completed in the last three years but terms of the transaction were not disclosed.

Pearlman Industries, a cutting tool company backed by Harbour Group, completed an add-on deal for Stone Tool Supply. Terms of the deal were not disclosed.

Industrial pipe supplier McJunkin, which is controlled by GS Capital Partners, agreed to merge with rival Red Man Pipe & Supply. Financial details weren’t disclosed.

PE Exits

BioHeart, a Sunrise, Florida-based developer of heart muscle regeneration therapies, has filed for a $45 million IPO, an increase from the original $35 million it intended to raise in its initial filing in February. It plans to trade on the Nasdaq under ticker symbol BHRT, with BMO Capital Markets and Janney Montgomery Scott serving as co-lead underwriters. BioHeart has raised around $40 million in VC funding since 2000, from firms like Ascent Medical Ventures, Guidant, Tyco Capital and Advent-Moro Equity Partners.

Intellon Corporation, an Ocala, Florida-based designer and seller of integrated circuits (ICs) for powerline communications, has filed for a $100 million IPO. The company is backed by AMP, BCE Capital, Boston Capital Ventures, Comcast Interactive Capital, Crescendo Venture Management, Duchossois Technology Partners, EnerTech Capital, Fidelity Investments, Goldman, Sachs & Co., Hewlett Packard, Hydro-Quebec CapiTech, Intel Capital, Kinetic Ventures, Liberty Associated Partners, Motorola Ventures, Philips Venture Capital Fund, Samsung Venture Investment Corporation, TL Ventures, UMC Capital.

Lithographic company Invarium has been acquired by Cadence Design Systems, a NASDAQ listed semi-conductor company, for an undisclosed value. Invarium is a San Jose based company, founded in 2003, which has received a total of $12.5 million from ACT88, an angel fund, Goldman Sachs & Co. and Onset Ventures.

Firms & Funds

Clearwater Capital Partners’ third Asia-focused distressed fund closed at $900 million on June 26. The New York-based distressed-debt buyout firm increased its $850 million hard cap on Clearwater Capital Partners Fund III just prior to the close. The fund was started with a target of $400 million.

The New York-based, Citigroup spin out Court Square closed Court Square Capital II at $3.13 billion. That surpasses a $2.5 billion target making it one of the largest funds ever raised by an investment bank spin out.

The New Mexico Educational Retirement Board allocated $15 million to the GF Capital Private Equity Fund, the debut fund of New York-based GF Capital Management.

Human Resources

Robb Chase was named chief executive of Canadian weight-loss group Herbal Magic, which is backed by TorQuest Partners. He was formerly president of the international unit of Papa John’s International, a pizza chain. (Surely his expertise isn’t in weight loss? Ed.)

Arsenal Capital Partners has promoted Joelle Marquis to principal.