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PE Week Wire — Friday 11/22

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The private equity disclosure battle took an unexpected turn earlier this week when the California Public Employees’ Retirement System (CalPERS) revealed that it once published partial valuation information on approximately 850 California-based private companies in which it had invested. The information appeared in both a printed brochure and on the pension system’s Web site, according to court papers filed with the San Francisco Superior Court as part of an ongoing open records suit against CalPERS by the San Jose Mercury News. PE Week subscribers can read more on this story in the protected Fund News section.

Louis Gerstner Jr. will become chairman of The Carlyle Group effective Jan. 7, 2003. In this capacity, Gerstner will commit about 20 percent of his time, providing strategic guidance on Carlyle’s global business activities, giving management input to Carlyle portfolio companies, and serving on the committees that review and approve Carlyle’s global investments. Frank C. Carlucci, who joined Carlyle in 1989 as vice chairman and became chairman in 1993, will become chairman emeritus. Gerstner has been chairman of IBM since 1993, and served as chief executive officer of IBM from 1993 until March 2002. He retires as chairman of IBM at the end of 2002.

Nanosphere Inc., a Northbrook, Ill.-based nanotechnology-based life sciences company, today announced it has received more than $10 million in third round financing. Proceeds will fund the commercialization of the company’s biomolecular detection system, which will be released in the second half of 2003. Previous investor, Lurie Investments of Chicago, and new investor Takara Bio Inc. of Japan led the round.

Songbird Hearing Inc., the maker of the world’s first disposable hearing aid, on Wednesday closed on $25 million in new funding from existing investors Prism Venture Partners, Investor AB, BA Venture Partners, University of Texas Investment Management Co. and TI Ventures This round — which will remain open for a few more months — included the conversion of a $5 million bridge financing the company completed earlier this year. PE Week subscribers can read more on this story in the protected Deal News section.

Inlet Medical Inc., an Eden Prairie, Minn.-based medical device company, has closed on $1.5 million of Series E Participating Preferred stock. The round was lead by Quatris Fund.

The Shansby Group (TSG), a San Francisco-based private equity investment firm specializing in acquiring consumer branded products and companies, announced today the appointment of Robert Schult as chairman and CEO of the TSG Food Group. Schult, who is the former chairman and CEO of Nestle USA, succeeds Charles Lynch, former chairman and CEO of Saga Corp., who remains an advisor to the firm.

FastMobile, a Schaumburg, Ill.-based provider of innovative mobile instant communication services, announced today that it has raised $4 million in Series A funding. The financing was led by Leo Capital Holdings, with participation from BlueStar Ventures and Red Barn Investments.

TA Associates Group has distributed the entire remaining balance of its holdings in Eden Prairie, Minn.-based Fargo Electronics Inc. (Nasdaq:FRGO), approximately 950,000 shares of common stock, to its limited partners, Fargo announced today. “This distribution by TA Associates, which was our only remaining original 1998 venture capital investor, broadens our shareholder base. It is not dilutive,” said Gary R. Holland, Fargo’s president and CEO.

Deutsche Bank is said to be considering a buyout offer of its private equity group by the unit’s own managers. An estimated price tag has been set at around $3 billion. A handful of other players – like Kohlberg Kravis Roberts & Co. (KKR) – also have expressed interest in the group.

Synaptic Pharmaceutical Corp. (Nasdaq: SNAP) has signed a definitive merger agreement with H. Lundbeck A/S, a Denmark-based international pharmaceutical company, by which Lundbeck will acquire Synaptic for $6.50 per common share in cash, or approximately $121 million. Warburg Pincus Private Equity VIII LP, Synaptic’s largest stockholder, has signed a Voting Agreement with Lundbeck to vote its shares in favor of the transaction. Warburg Pincus owns approximately 35% of Synaptic.
Altea Therapeutics (formerly Altea Development Corp.) announced today that it has closed its Series B equity financing of $17 million. The round was co-led by new investors Domain Associates and Venrock Associates, with vSpring Capital also participating. The Atlanta-based company plans to use these funds to develop its lead products, a basal insulin patch and an opiate-based analgesic patch, through Phase II clinical trials. Altea Therapeutics will also continue to assess the use of its skin microporation technology for the controlled delivery of other therapeutic agents, including proteins, small molecules, and vaccines.

Mark Hamister, chairman of National Health Care, has been chosen by the National Hockey League as the winning bidder for its Buffalo Sabres franchise. Hamister, who already owns the Arena Football League’s Buffalo Destroyers, is being backed on the Sabres deal by Todd Berman, president and founder of private equity firm Chartwell Investments.

Acorn Cardiovascular Inc., a St. Paul, Minn.-based developer of novel device therapies to treat heart failure, today announced the closing of a $20 million private placement of Series E preferred stock to a group of investors led by Johnson & Johnson Development Corp. Additional investors include New Enterprise Associates, CSFB, Piper Jaffray Ventures, Three Arch Partners, Bessemer Venture Partners and The Spray Venture Fund. Since its 1996 founding, Acorn Cardiovascular has raised approximately $69 million in venture funding.

Noro-Moseley Partners today announced that Kathy Harris has been hired as senior vice president of business development. She was most recently a partner at Technology Ventures and, before that, vice president and national marketing manager of Sirrcom Capital Corp.

Endovasc Ltd. Inc. and MIV Therapeutics Inc. announced today that they have formed Stentgenix Inc., a 50/50 joint venture company. Stentgenix, Inc. will be funded by MIV Therapeutics, which has agreed to invest $2.5 million over the next three years in the joint venture. Stentgenix will focus on developing Endovasc’s Angiogenix in a pharmaceutical coating block to block restenosis while stimulating angiogenesis for coronary and peripheral stents.

USA Interactive
(Nasdaq: USAI) announced today a definitive agreement to purchase Entertainment Publications Inc. from a group of investors led by The Carlyle Group. The consideration for Entertainment Publications is approximately $370 million and is to be paid in a combination of cash and USA common stock (up to 50%), with USA receiving a maximum discount of $10 million if it elects to pay all cash. Entertainment Publications’ current management team will remain in place and continue to manage the company. It is expected that the transaction will be completed no later than the first quarter of next year, subject to customary regulatory approvals.

Xchanging, a London-based business process outsourcing company, has received GBP 50 million ($79 million) in new private equity funding from General Atlantic Partners. This follows previous investment in Xchanging by General Atlantic totaling GBP 60 million ($95 million).

The Wall Street Journal is reporting today that oil tycoon Martin Davis has pulled together a group of private equity investors on a $15 billion bid to buy up Vivendi Universal SA‘s entertainment assets, which include Universal Studios, Universal Music and various cable networks and theme parks. The most immediate hindrance to such a deal seems to be Universal Entertainment Chairman Barry Diller, who is said to oppose the deal even though he would be kept aboard in his current position. Today’s WSJ is also reporting that buyout shop Welsh, Carson, Anderson & Stowe is in talks to buy U.S. Investigations Services, one of the nation’s biggest employee-screening companies, for approximately $1.1 billion.
Solena Group Inc., a Washington-based provider of renewable energy technology, has raised $10 million from an investment syndicate led by Montreal-based Hydro-Quebec CapiTech Inc. and Detroit-based Edison Development Corp., a division of DTE Energy. Also participating in the round were OPG Ventures Inc., a division of Ontario Power Generation, and CSL Properties Ltd., a diversified private equity fund with primary investors Canadian Steamship Lines and FedNav. Katalyst acted as investment banker to Solena in this transaction.

Encover Inc., a Mountain View, Calif.-based supplier of service lifecycle management software, today announced that it received $6 million in financing from Sigma Partners and existing seed backers like Imlay Investments. Pete Solvik and Mark Pine of Sigma Partners have joined the Encover board in conjunction with the funding.

Hanoun Medical Inc., a Toronto-based medical technology and employer services company, announced today that it has raised $3.4 million in Series A funding from Covington Capital Corp. and private investor Charles Ames, vice chairman of Clayton, Dubilier and Rice Inc.

Allan Will has joined St. Paul Venture Capital as a general partner in the firm’s Redwood City, Calif. office. Will currently serves as chairman of The Foundry, a medical devices incubator that he founded in 1998. He will continue in that role and will remain actively involved in identifying, selecting, creating and advising new businesses being developed within The Foundry. Previously, Will was president and chief executive officer of AneuRx Inc., a developer of stent grafts for aortic aneurysms that was acquired by Medtronic Inc. in 1996.

Psychiatric Genomics Inc., a Gaithersburg, Md.-based biotech company, has raised $17 million in the initial round of its Series B financing, led by Catalytix LDC. Existing Series A investors who participated in the round included Oxford Bioscience Partners, GIMV NV, Emerging Technology Partners, CIBC, Maryland Department of Business and Economic Development and Alexandria Real Estate Equities LP. The Stanley Medical Research Institute, with which Psychiatric Genomics has an existing research collaboration, also participated. Psychiatric Genomics expects to raise additional funds as part of this Series B financing, which will remain open until the end of the year.

ENGlobal Corp. (AMEX:ENG) today announced that it has reached a definitive agreement to sell its manufacturing subsidiary, Thermal Corp., to Houston-based private equity shop Pivot Group LLC.

eClickMD Inc., an Austin, Texas-based provider of health-care information technology, today announced that it has consummated initial closings on $750,000 of gross proceeds out of a maximum of $2 million of its Series A Preferred Stock and Warrants private placement.

Evenflo Company Inc., a Vandalia, Ohio-based producer of infant and juvenile products, today announced it has reached agreement with its lenders, certain noteholders and its controlling shareholder (an affiliate of the investment firm of Kohlberg Kravis Roberts & Co.) for a recapitalization. As part of the recapitalization, the Company will offer the holders of its $110 million 11 3/4% Series B Senior Notes due 2006 the right to exchange their Senior Notes for equity in the recapitalized Company or $150 cash per $1,000 principal amount of Senior Notes. An additional approximately $15 million of bank indebtedness will be extinguished in the recapitalization. The Company also expects to receive from its controlling shareholder new cash equity of approximately $18 million, plus the amount needed to pay noteholders electing to receive cash in connection with the recapitalization, with this cash being applied to purchase new common equity in the Company. If successful, the recapitalization will reduce the Company’s leverage from $215 million to $72 million. The recapitalization will have no effect on trade creditors or customers.

Westport Resources Corp. (NYSE: WRC) today announced that it has completed a private equity offering of 3.125 million shares of its common stock at a net price to the Company of $16 per share for an aggregate purchase price of $50 million to certain qualified institutional buyers. The terms of the sale were negotiated on November 11, 2002 and the transaction closed on November 19, 2002. Westport intends to use the net proceeds of the offering to finance, in part, its recently announced acquisition of natural gas properties and midstream gathering and compression assets in Utah.

Loudeye Corp. (Nasdaq: LOUD) today announced the acquisition of Streampipe, a privately-held Webcasting company that has received venture capital backing from Blue Water Capital, Crest Communications and Hillhouse Advisors.

The Deal is reporting that Carlyle Group is leading a syndicate to purchase Dutch cable operator Casema NV, one day after Liberty Media Corp. bowed out of the bidding. The article names Providence Equity Partners and GMT Communications Ltd. as firms partnering with Carlyle on the potential deal.
It’s official. Northrop Grumman Corp. (NYSE: NOC) announced today that it has signed a definitive agreement to sell the automotive business of TRW Inc. (NYSE: TRW) to The Blackstone Group. Under the terms of the agreement, which is conditioned on the closing of the Northrop Grumman/TRW merger, Northrop will receive $4.725 billion, comprised of $3.757 billion in cash, $600 million in debt securities and an initial $368 million equity interest (approximately 42% of total equity of $868 million) in TRW Automotive. The parties intend to reduce their initial equity positions in TRW Automotive before closing. At the close of the transaction, anticipated to be in the first quarter of 2003, Northrop’s equity interest is expected to be approximately 20%, which would increase total cash consideration to between $3.9 billion and $4 billion. All financing necessary to complete the transaction has been provided by JP Morgan, Credit Suisse First Boston and Lehman Brothers.

JLL Partners, a New York-based private equity firm previously known as Joseph Littlejohn & Levy, today announced the successful closing of its $750 million JLL Partners Fund IV LP.

Exlservice Inc., a business process outsourcing service provider, announced today that management has joined with Oak Hill Capital Partners LP and Financial Technology Ventures to acquire 100% ownership of Exlservice Inc. from Conseco Inc. Terms of the transaction were not disclosed.

TXU Corp. (NYSE: TXU) today announced that its wholly owned subsidiary, TXU Energy Company LLC, has signed an agreement to issue $750 million of exchangeable subordinated notes due 2012 to DLJ Merchant Banking Partners III LP, a CSFB Private Equity fund and its affiliated funds (DLJ Merchant Banking Partners). The transaction is expected to close by the end of the week. The notes will carry an interest rate of 9%, and have a provision allowing for deferral of interest payments. The notes can be exchanged at any time for TXU common stock at an exercise price of $13.15 per share of common stock.

Sun Capital Partners Inc., a Boca Raton, Fla.-based LBO firm focused on special situations and turnaround investments, announced today the opening of the firm’s New York City office. The office will be led by Ralph Lynch, who recently joined the firm from Credit Suisse First Boston where he was a managing director focused on mergers and acquisitions.

The Scotsman is reporting that Acuid, an Edinburgh-based chip technology company, has raised $8 million in new venture capital funding from HgCapital.

Dow Jones is reporting that Advent International has funded a 100 million Euros buyout of Multinational Automated Clearing House SA (MACH) from MIC Systems BV, a unit of Millicom International Cellular SA and Kinnevik BV. MACH provides outsourced roaming clearing services and other billing-related services to mobile telephone operators.
Accruent, a Santa Monica, Calif.-based provider of contract management solutions, announced today that it closed a $10 million round of financing. The funding round was led by Sierra Ventures, and included other new investors Constellation Real Technologies, Peninsula Equity Partners and Stanford University. The round also involved continued support from existing backers Innocal Venture Capital, Red Rock Ventures and Pequot Venture Partners.

Pintail Technologies Inc., a Plano, Texas-based semiconductor software developer, today announced that it has secured $4 million in Series A financing from Austin Ventures.

Max-Viz Inc., a Portland, Ore.-based aviation safety company, said today that it has completed a second round financing totaling $7.8 million. The Series B financing was the first institutional round for the company, and was led by OVP Venture Partners. Other investors included Alexander Hutton Venture Partners, Buerk Craig Victor LLC (BCV) and FLIR Systems Inc.

Speedera Networks Inc., a Santa Clara, Calif.-based provider of content delivery services, today announced that it has raised $6.5 million in additional equity funding. Trinity Ventures led the round.

iPIN, a Belmont, Calif.-based provider of enterprise payment platform (EPP) technology, today announced that it secured $8 million in its most recent round of funding from Accel Partners, Cardinal Venture Capital, Invision AG, Nexus Group LLC, Sutter Hill Ventures and Verbena Communications. The company also announced that it has named company founder Alexandre Gonthier as chief executive officer. iPIN’s previous CEO, Bradley Rode, will continue as a director of the iPIN board.

Viewceler Corp., a Palo Alto, Calif.-based enterprise software developer, today announced it has raised $6.5 million in Series A financing from Lightspeed Venture Partners and Bay Partners.

Flashline, a Cleveland-based software asset reuse company, today announced that it has raised an additional $5 million from Adams Capital Management, Inc. (ACM), a national venture capital firm that invests in information technology and telecommunications companies. Flashline will use the proceeds to continue its aggressive growth strategy, increase research and development, expand its field sales and consulting organization and grow distribution capabilities.

EGeen International Corp. (EGeen), a Redwood City, Calif.-based population genetics and drug discovery company, announced today a completion of its first venture capital round of financing totaling $4.25 million. Draper Fisher Jurvetson ePlanet Ventures led the round with participation from Small Enterprise Assistance Funds (SEAF) and Biobank Technology Ventures.

Blueprint Ventures  today announced that George Hoyem has joined the firm as a partner. Hoyem is co-founder and former managing partner of The Redleaf Group and a former partner of El Dorado Ventures.

Venture Economics and the National Venture Capital Association today released third quarter M&A figures that showed 70 venture-backed companies were acquired for $1.8 billion. This represents a slight decrease from Q2, when 77 venture-backed companies netted $1.96 billion.

Reuters is reporting that Blackstone Group has agreed to buy the auto parts unit of TRW Inc., for approximately $4.73 billion. The agreement is expected to be announced today, and comes just two weeks after The Carlyle Group backed out of a partnership agreement with Blackstone, whereby each firm would have contributed an equal amount of equity financing. No word yet on who is providing the leverage.

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