PE Week Wire — Friday 3/14

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UK retailer WH Smith has teamed up with private equity firm Cinven for a possible bid on the book publishing division of AOL Time Warner. No specifics were available, but the eventual sale could net AOL upwards of $400 million (although probably a bit less). If successful, WH Smith would merge the newly acquired assets with its UK-based Hodder Headline publishing division to create a transnational operation.

Asset Management Advisors, an Atlanta-based wealth management firm and affiliate of SunTrust Banks Inc., has expanded its private equity capabilities with the formation of a new private equity group. This strategic move enables AMA to actively manage private equity portfolios of existing clients, other family groups with private-equity investments, and institutional investors, as well as seek out new opportunities. As part of the expansion, Jeff Dyment has joined AMA as the new group’s chief executive officer. Most recently, Dymant served as director of investments for a wealthy family with a large portfolio of private equity holdings.

Nobex Corp., a Durham, N.C.-based pharmaceutical company, recently laid off one-third of its staff (16 employees). The company has raised nearly $90 million in venture capital since its 1993 founding from such investors as A.M. Pappas & Associates, Aurora Funds, Crescendo Venture Management and American Express.

Colorado MedTech Inc. (Nasdaq: CMED), a Boulder-based medical device maker, has agreed to be bought out and taken public by KRG Capital Partners. The deal is valued at $62.5 million, and is expected to close at the end of Q2, pending regulatory approval.

fSONA Communications, a British Columbia-based designer and manufacturer of optical wireless transmission equipment, today announced that it had raised Cdn$9.5 million in Series C financing led by GrowthWorks Capital.

VenGrowth Capital Partners has named Graham McBride as a general partners responsible for mezzanine debt financing activity. He was most recently a managing director at RBC Dominion Securities.

Soros Private Equity has invested another $2 million into online retailer Bluefly Inc. (Nasdaq: BFLY). The deal helped pay down $3 million in Bluefly debt, and included a commitment for another $1 million in new capital. Soros now owns 89.7% of Bluefly, whose stock closed trading yesterdat at $0.77 per share.
NEWS FROM THURSDAY 3/13

Only €19.4billon was raised and €27.2 billion invested by European venture and private equity firms last year, according to a new report released today in Geneva by the European Venture Capital Association, Thomson Venture Economics and PricewaterhouseCoopers. Preliminary European private equity and venture capital returns for the year ending 2002 remain solid with an annualized pooled internal rate of return (IRR) of 11.5% for all private equity. This long term IRR is measured for the 23 years since fund inception of 12/31/79. This compares with short-term returns, (measured using one and three-year horizon IRRs) of -8.2% and +4.1% respectively.

Solstice Software Inc., a Wilmington, Del.-based application testing company, has raised $3.8 million in Series B funding led by Core Capital Partners. Anthem Capital Management also participated on the deal.

Argonaut Group Inc. (Nasdaq:AGII) announced today that it had signed a definitive agreement with HCC Insurance Holdings Inc. (NYSE:HCC) to lead a private placement of $58 million in new equity capital in the form of convertible preferred stock.

In-Q-Tel, a venture capital group funded by the CIA, has reached a development and investment agreement with Convera (Nasdaq:CNVR), a Vienna, Va.-based provider of search and retrieval software. In-Q-Tel will pay Convera just over $1.53 million to help promote enhancements to products that help address the critical IT challenges facing the intelligence community. In conjunction with this transaction, In-Q-Tel will receive two-year warrants to purchase 137,711 shares of Convera common stock.

DealTime Ltd., a New York-based online shopping search engine, has signed a definitive agreement to acquire Epinions, a Brisbane, Calif.-based facilitator of online customer ratings and reviews. Terms were not disclosed on the deal, which is expected to close in around six weeks. Epinions had received $44 million in venture capital since its May 1999 founding, from such firms as ABN AMRO, AOL Time Warner, August Capital, BV Capital, Benchmark Capital, Bowman Capital, Dell Ventures and Goldman Sachs. DealTime has raised over $70 million in venture capital from such firms as AOL, Bain Capital, Israel Infinity Fund, Odeon Capital Partners and UBS Warburg.

The New Mexico Senate and House has endorsed a plan to raise the limit of investments in New Mexico-based private equity funds from 3% up to 8 percent of the market value of the Severance Tax Permanent Fund. That fund now stands at around $3.2 billion.

The Strait Times is reporting that Newbridge Capital has scaled down its Singapore-based operations by moving most of that office’s professionals to Hong Kong. The firm originally had 15 people in Singapore, but the article says that the number will soon shrink to just two or three administrative staffers.

The Deal is reporting that Bain Capital has won an auction for Elizabeth, N.J.-based Hayward Pool Products. The winning bid is reportedly $570 million (40% equity), which apparently beat out a competing offer from Warburg Pincus.

NEWS FROM WEDNESDAY 3/12
Peptimmune Inc., a Cambridge, Mass.-based biopharmaceutical company recently spun out of Genzyme, has secured $41.2 million in Series A funding. New Enterprise Associates and MPM Capital co-led the deal, alongside fellow participants Prism Venture Partners, Vanguard Ventures, Hunt Ventures and Boston Medical Investors. As part of the deal, Genzyme’s stake in the company is now reduced to around 10 percent.

Mike Moritz, a general partner with Sequoia Capital, has resigned from the board of Yahoo Inc. He will be replaced by Robert Kotick, who is chairman and CEO of Activision Inc.

Clean Air Partners, a San Diego-based provider high-tech solutions to reduce emissions from mobile and stationary engines, announced today that it has raised $8.6 million in second round funding. CIBC Capital Partners, Emerson Electric Co., EnerTech Capital, Exelon Capital Partners, Nth Power and RBC Capital Partners invested in Clean Air Partners to finance ongoing product and market expansion for low emission vehicle, electric distributed generation, and oil and gas application products. The company’s $26 million Series A deal closed in 2001 at a post-money valuation of $46 million.

Optiant, a Boston-based provider of supply chain design solutions, has secured $10.5 million in its second round of funding. Castile Ventures, a new investor, and Battery Ventures, which also backed Optiant’s first round, participated in the Series B round.

Lancope Inc., an Atlanta-based enterprise security company, has raised $5 million in a Series B funding round at a post-money valuation of $10 million. Participants included new investor Council Ventures and return backers H.I.G. Ventures and GMG Capital Partners. As part of the deal, Dennis Bottorff has joined the Lancope board of directors.

Sylvan Learning Systems Inc. is selling its grade and high school tutoring business to Apollo Management for between $275 million to $300 million in cash and stock. The group will be renamed Educate Inc., and will not be publicly traded.

OncoGenome Sciences, a Belgium-based developer of clinical diagnostic testing services, has raised €14 million in an initial first round funding led by Bank Brussels Lambert SA. Other investors included PolyTechnos Venture-Partners, Life Sciences Partners, Technowal SA, Meusinvest and S.I.B.L.

TransDimension, an Irvine, Calif.-based provider of USB connectivity solutions for embedded applications, has raised up to $10 million in Series C financing (initial close of $6 million). GKM Ventures led the round, which included fellow new investor another new investor iSherpa Capital, along with repeat backers Shelter Capital Partners and Rolling Oaks Capital.

Bullrun Financial Inc., a Princeton, N.J.-based financial software developer, has raised $3 million in Series B funding. Mission Ventures was involved on the deal.

Halliburton Co. has sold its Wellstream pipeline business to as private equity group led by Candover Partners for $136 million.

Prenova Inc., an Atlanta-based management services provider, has raised $15.5 million led by existing investor Frontenac. Austin Ventures and River Cities Capital Fund also participated. The company used to be known as Service Resources Inc.

Vista Ventures, a Colorado-based firm, announced today that it has been granted a Small Business Investment Co. (SBIC) license by the U.S. Small Business Administration. With the license, Vista Ventures will have more than $60 million in fresh capital to invest in Colorado technology companies.
The Globe & Mail is reporting that Onex Corp. is looking to launch a $1.5 billion private equity fund.
NEWS FROM TUESDAY 3/11
The University of Texas Investment Management Co. (UTIMCO) seems to have changed its tune regarding the disclosure of private equity fund performance data. Last October, the group caused shockwaves when it responded to a Freedom of Information Act (FOIA) request by releasing cash-in/cash-out and internal rate of return (IRR) data on all 124 active partnerships in its private equity portfolio. Only around two-thirds of those funds had released UTIMCO from confidentiality agreements, but the remaining performance data was released based on a ruling from then-Attorney General John Conryn, who was running for senator at the time. Now, however, Dow Jones is reporting that UTIMCO has decided that new Attorney General Greg Abbott must make a similar ruling specific to the latest quarterly numbers, or else UTIMCO will not release info from firms that declined to sign wavers – such as Austin Ventures and The Carlyle Group.

Vcommerce Corp., a Scottsdale, Ariz.-based provider of supply chain execution solutions, has closed over $8 million in fifth round financing. StarVest Partners led the deal, and was joined by Archery Capital, Benchmark Capital and CMGI @Ventures. Proceeds will be used for working capital and the cancellation of debt. The seven-year-old company has now raised over $66 million, including a $21 million deal in December of 2000 at a post-money valuation of $221 million.

Paul O’Neill, who recently was asked to resign as Treasury Secretary, has found a new gig as special advisor to the Blackstone Group. His primary role will be to advise the firm’s private equity funds’ portfolio companies on operational and related issues, and to assist the firm in analyzing potential private equity investment opportunities. In addition O’Neill will join Blackstone’s advisory board.

BayPackets Inc., a Fremont, Calif.-based provider of enhanced voice and data solutions, has secured $21.7 million in new funding, bringing the total venture investment in the company to $43.7 million. Investcorp and TL Ventures co-led the round, which also included funding by new investor Intel Capital, and previous investors Blueprint Ventures, Diamondhead Ventures, INC3 Ventures, Lucent Venture Partners and TeleSoft Partners. Investcorp partner Alex Guira and TL Ventures managing director Massoud Entekhabi will join BayPackets’ board of directors.

Crescendo Ventures has hired Ian Jenks as a new general partner. Jenks is the former president of Uniphase Inc.’s lasers and fiber optics group, and also served as chairman of Oplink Communications Inc. He also served as a venture partner with Crescendo.

Virtela Communications Inc., a Greenwood Village, Colo.-based IP network service provider, has received $11 million in fourth round funding led by Norwest Venture Partners. Other investors included New Enterprise Associates, Palomar Ventures, North Coast Technology Investors and New Enterprise Associates. The company has raised $86 million since being founded in April of 2000.

General Catalyst Partners has added Terry Jones as a special venture partner. Most recently the founder and CEO of Travelocity.com, Jones will focus on identifying new investment opportunities within the travel and leisure, transportation and e-commerce sectors.

Putnam Lovell Equity Partners has signed a definitive agreement to purchase substantially all the assets of Berkeley Capital Management (BCM) from London Pacific Group Ltd. San Francisco-based BCM manages approximately $1.1 billion in value equity, growth equity, and balanced accounts distributed through various brokerage firms. The new firm will maintain the BCM name will retain the entire team of 17 portfolio management, sales, and operations professionals. BCM Chief Executive Jim Landau and President John Hart, joined by other employees, will become significant shareholders in the newly private company. The transaction is expected to close by May 15.

Lehman Brothers has named James Greenwood as managing director and co-head of European leveraged finance. He was previously with Merrill Lynch.

InfiniSwitch Corp., a Westborough, Mass.-based provider of data center switching solutions, has merged with Lane15 Software Inc., an Austin, Texas-based provider of management software for fabric computing. Both companies are venture-backed and the merger includes a new $3.85 million debt and equity investment from some certain existing investors (according to an SEC filing). Past backers of InfiniSwitch and Lane15 include Austin Ventures, Bessemer Ventures, Columbia Capital, Convergent Ventures, Flagship Ventures, Index Ventures, Lightspeed Venture Partners, Moore Capital Management, TL Ventures, Dell, HP-Compaq, Intel and Quanta Computer. Rob Adams of Austin Ventures and Bernard Dalle of Index Ventures were elected new members to the board of directors.
Christopher Jenny, a senior partner with The Parthenon Group, has been appointed by President Bush to the President’s Export Council. The group – which includes such people as Michael Dell and J.W. Marriott – advises the President on trade performance, export expansion and other international trade issues.

Fountain View Inc., a Foothill Ranch, Calif.-based operator of long-term and post-acute care facilities, has filed its plan of reorganization with the U.S. Bankruptcy Court. As part of the deal, the company has received commitments for $150 million in exit financing from CapitalSource Finance LLC and Highbridge/Zwirn Special Opportunities Fund LP, as well as another unnamed financial institution.

Mass High Tech is reporting that Worcester Capital Partners and Long river Ventures have merged their operations, although they will remain as separate legal entities. The small regional firms ($16 million and $15 million, respectively) are both affiliates of Village Ventures.
NEWS FROM MONDAY 3/10
When Red Herring was declared dead last week, someone neglected to check its pulse. As first reported by PE Week, the magazine’s founders are trying to assemble an investor group to purchase its assets and eventually re-launch the publication. For more on this story, go to www.PrivateEquityWeek.com.

Longworth Venture Partners has closed its second fund with $115 million. The Waltham, Mass.-based firm also announced that it has added Peter Roberts as a general partner. Roberts was most recently a managing director with BancBoston Ventures.

Tredegar Corp. has reached definitive agreements to sell substantially all of its portfolio of private equity partnership interests (including the assumption of related capital commitments) to funds managed by Goldman Sachs Asset Management‘s private equity group. Tredegar Investments also has agreed to sell almost all of its direct investment portfolio to W Capital Partners, an independent private equity manager that has worked closely with Goldman Sachs. The divestiture requires a series of closings, the first of which occurred last Friday representing approximately $40 million in sales proceeds and recoverable income taxes. Additional closings are expected to occur by April 1, 2003. Assuming completion of all closings, Tredegar expects to receive a total of approximately $75 million in cash after taxes. This amount includes a tax refund of approximately $50 million expected in mid-2004 from the carry-back of 2003 capital losses against gains generated by the portfolio in 2000.

AuthenTec Inc., a Melbourne, Fla.-based developer of biometric fingerprint sensors, today announced it has completed a $12.1 million round of Series C funding, bringing the company’s total funding to nearly $50 million since its founding in October 1998. Sierra Ventures led the round, which also included previous investors Harris Venture First, Knickerbocker LLC, Advantage Capital Partners and Stonehenge Capital Corporation. SoundView Technology Group served as the Company’s sole placement agent in connection with the financing.

Corus Pharma, a Seattle-based biopharma company focused on respiratory and infectious diseases, has raised $40 million in a Series B preferred stock offering. Novo A/S, RBC Capital Partners and JPMorgan Partners led the financing. Other participants included new investors MDS Capital and Integra Ventures, plus return backers like Burrill & Co., OrbiMed Advisors, Cascade Investment, Washington Research Foundation and Anthem Venture Partners, also participated in the round. Corus had previously raised an $18.5 million Series A deal in June 2001 at a post-money valuation of $38.5 million.

Sopherion Therapeutics Inc., a New Haven, Conn.-based biotech company, has raised $26 million in Series A funding led by TL Ventures. Other investors included HealthCap KB, ProQuest Investments, Johnson & Johnson Development Corp., Intersouth Partners, Seaflower Ventures, Connecticut Innovations Incorporated and GE Life Science & Technology Finance. Sopherion was formed in 2001 by Scheer & Co., Children’s Hospital Boston and Dr. Samy Ashkar.

Gerry Benford, Marco Sodi and Scott Troeller have all been promoted to the position of partner with Veronis Suhler Stevenson. All three are active in the firm’s private equity subsidiary, named VS&A Communications Partners. Benford has been with Veronis Suhler since 1989, while Sodi joined in 1988 and Troeller came aboard in 1996.

Ustec Inc., a Victor, N.Y.-based manufacturer of structured wiring systems for home networks, has raised $5.5 million in new venture funding led by Summer Street Capital Partners. Existing investors Rand Capital Corp. and Onondaga Venture Capital Fund of also participated.

InfoClarus, a Waltham, Mass.-based provider of enterprise mobility solutions, has merged with iConverse, a Waltham-based provider of mobile applications, have merged. Prism Venture Partners, an early investor in iConverse, committed $8.5 million to support the merger.

Advent International has agreed to purchase Danish furniture retailer ILVA. According to Dow Jones, the deal is valued at close to €90 million.

The Wall Street Journal is reporting that Jonathan Knee has left his investment banking job at Morgan Stanley to join Evercore Partners as a senior managing director. Kneww focuses on the media sector, which will come in handy at Evercore. The New York-based firm just snapped up a stake in American Media Inc., publisher of the National Enquirer.

WestLB has led an acquisition of the UK-based Odeon cinema chain for