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PE Week Wire — Friday 3/21

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Rocket Network Inc., a San Francisco-based provider of online recording studios, has run out of cash and will shut its doors on March 31. The company had received just over $44 million of venture capital funding since being launched in early 1995. The most recent deal was a $10.3 million Series D financing in late 2001 at a post-money valuation of $42 million. Investors included Vulcan Ventures, JPMorgan Partners (through Chase Capital Entertainment Partners), Avid Technologies, Cisco Systems, Impress Group and Weston Presidio.

GTCR Golder Rauner has entered into a partnership with Thomas Wimsett and other executives to form Louisville, Ky.-based Iron Triangle Payment Systems. The new company will receive $200 million in equity capital from GTCR to support growth and acquisition opportunities in transaction processing and payment services. Wimsett is the former president and CEO of National Processing Inc., a leading provider of Visa and Mastercard processing services to merchants.

LifeHarbor Inc., a Cambridge, Mass.-based provider of wealth management software, has received $2 million in additional Series A funding from Blue Chip Venture Co. The news comes just weeks after Bessemer Venture Partners led a $5.8 million first close on the deal. Other investors in the initial tranche include WR Hambrecht & Co. and Hub Angel Investment Group.

Michael Jordan has been named chairman and CEO of Electronic Data Systems Corp. (NYSE:EDS). No, not that Michael Jordan, but rather the one who was former CEO of CBS Corp. and, before that, a partner with buyout firm Clayton, Dubilier & Rice.

Bresnan Communications has completed its acquisition of cable television systems serving 314,000 basic subscribers from Comcast Corp. The deal is worth $525 million in cash (plus some preferred and common equity in Bresnan), and was originally announced on Feb. 4. In addition to Comcast, Bresnan’s equity owners include lead investor Providence Equity Partners, Quadrangle Group, TD Capital Communications Partners and Bresnan management.

PR Week is reporting that Liz Hewitt has resigned her post as director of corporate affairs for global venture firm 3i for a non-PR gig in the British government. She will be replaced at 3i by Patrick Dunne, who has been promoted to group communications director from his previous title of worldwide marketing director.

Bottomline Technologies (Nasdaq:EPAY), a Portsmouth, N.H.-based provider of financial resource management software, has agreed to sell up to one million shares of common stock to General Atlantic Partners at around $5.18 per share.

Wind Point Partners has agreed to acquire tire-inflating machine maker AIR-Serv Holding in a deal valued at around $190 million ($67 million in equity). The Minneapolis-based company has annual revenue of $65 million, and is currently owned by Atlanta-based private equity firm from Atlanta-based private equity firm Prometheus Partners. PrivateEquityCentral.net is reporting that Helen Sinclair has been promoted to the position of managing director at UK-based Matrix Private Equity. She was previously a director in the group after having come over from 3i in 2000. She replaces Mark Burgess.
NEWS FROM THURSDAY 3/20
Targacept Inc., a Winston-Salem, N.C.-based drug discovery company focused on the central nervous system, has tacked another $14 million onto its Series B funding. The grand total is now $60 million, and features a post-money valuation of around $81 million. When the company raised $30 million in first round funding back in the summer of 2000, it was worth just over $57 million. Investors on the most recent tranche included Oxford Bioscience Partners, JAFCO, Cogene Biotech Ventures, Bison Capital and Rock Castle Ventures. Targacept had originally announced a first close of $46 million last December, with participation from investors like Nomura International, New Enterprise Associates, CDIB BioScience Ventures, Easton Hunt Capital Partners and the full syndicate of Targacept’s first round investors: EuclidSR Partners, Burrill & Co., Advent Venture Partners, Auriga Ventures, CDC-IXIS Innovation, Genavent Fund, SGAM Biotechnology Fund and Academy Venture Fund.

Sun Microsystems Inc. is being sued by a former employee for an alleged human resources policy of replacing older, U.S.-born workers with younger, India-born workers. The impetus for the suit (perhaps to become class action) seems to be an interview last month on 60 Minutes in which Sun co-founder (and current venture capitalist with Kleiner Perkins) Vinod Khosla extolled the virtues of IIT, the renowned Indian engineering university. Specifically, he discussed how U.S.-based companies often prefer to hire IIT alumnus. Sun has reportedly not seen the suit, although it did say that Khosla is no longer a Sun employee and has no impact on hiring.

Natural Gas Partners, an Irvine, Texas-based private equity fund focused on the energy industry, recently closed its seventh fund with $600 million. NGP typically provides $10 to $60 million of equity, particularly to oil and natural gas producing companies that grow through property acquisitions and subsequent exploitation activities. NGP has invested $935 million in 62 entities since its 1988 inception.

AudioAudit, a Paramus, N.J.-based provider of broadcast verification technology services, has raised $15 million in Series A funding. Investors included General Catalyst Partners, Polaris Venture Partners, and Ridgewood Capital.

AIG Highstar Capital and private equity affiliates of Credit Suisse First Boston (such as DLJ Merchant Banking) have reached a definitive agreement with Duke Energy North America to acquire its 50% interest in Duke/UAE Ref-Fuel. Duke/UAE Ref-Fuel owns American Ref-Fuel Co., a holding company for six waste-to-energy facilities in the Northeastern United States. The agreement calls for a newly formed entity owned by Highstar Renewable Fuels LLC and CSFB Private Equity to pay Duke Energy approximately $306 million and is expected to close, subject to customary closing conditions including FERC and certain other regulatory approvals, by mid-year. Credit Suisse First Boston acted as financial advisor to AIG Highstar and CSFB Private Equity in this transaction.

George Bayly, a principal with venture firm Whitehall Investors, has been named Presiding Independent Director on the board of General Binding Corp. (Nasdaq:GBND).

DeVry Inc. (NYSE:DV) has signed a definitive agreement to acquire Ross University, the operator of Ross University School of Medicine and Ross University School of Veterinary Medicine. In 2001, Ross was acquired by private equity firms Leeds, Weld & Co. and J.W. Childs Associates via a $125 million buyout.

Consideration for the acquisition will be approximately $310 million in cash. At current operating levels, this acquisition will be immediately accretive to earnings per share and have a positive impact on operating margins and cash flow. Subject to completion of customary regulatory approvals, the acquisition is expected to close during DeVry’s fiscal fourth quarter ending June 30, 2003.

Champion Ventures, a fund-of-funds group co-founded by such Bay Area football legends as Joe Montana and Ronnie Lott and Harris Barton, is expanding into real estate. The trio already has $225 million under management for venture capital investment, and is now looking to add another $250 million for a multi-manager real estate fund, according to Real Estate Alert.

NeoCore Inc., a Colorado Springs, Colo.-based enterprise software company, has reportedly gone out of business after an expected funding round fell apart. The company had raised over $14 million since being founded in early 1997. Baker Capital was the company’s lead investor.

Nevada Ventures has opted to temporarily postpone fund-raising efforts on its second investment vehicle. The group originally raised a $10 million fund in 1999.

NEWS FROM WEDNESDAY 3/18
Brockway Moran & Partners has acquired Pennant Foods Corp., one of the nation’s largest franchisees of Wendy’s burger shops. Terms were not disclosed. Harris Williams & Co. acted as exclusive financial advisor for Pennant with respect to the transaction. Financing for the acquisition was provided by Bank of America, GE Capital and Merrill Lynch Capital. T

 

he bidding for UK restaurant chain PizzaExpress has gotten more interesting, according to a story in today’s Times of London. Original bidder Luke Johnson has been making his £263 pitch through a dedicated investment vehicle named Venice Bidder. In a bit of snarkiness, a rival vehicle from private equity firms Capricorn Ventures and TDR Capital has been christened GondollaExpress.

 

Silicon Optix Inc., a San Jose, Calif.-based fabless semiconductor company, has closed out its Series B funding round with a total of $27 million. The first $17 million was raised last July, with the final $10 million coming in earlier this year. Both tranches were co-led by Canaan Partners and Polaris Venture Partners. Series A backers Origin Partners and RBC Partners also participated.

Brickstream Corp., a Fairfax, Va.-based developer of customer intelligence software, has raised $6.2 million in Series A financing. Columbia Capital and Mohr Davidow Ventures co-led the deal.

StemCo Biomedical Inc., a Research Triangle Park-based developer of medical device products for stem cell transplantation, has raised $9.8 million in Series B funding. The deal was co-led by Intersouth Partners and The Aurora Funds, along with additional participation from Becton Dickinson Ventures, The Trelys Funds and Tall Oaks Capital. The company was spun out of Duke University research back in 1999, and later raised a $4 million Series A round at a post-money valuation of $7 million.

Network Security Technology Inc. (a.k.a. NETSEC), a Herndon, Va.-based provider of managed security services, has raised $10 million in Series C funding from inside investors Mobius Venture Capital and ArrowPath Venture Capital. The company has now raised $32.5 million since being founded in early 1998. In related news, NETSEC has named Glenn Hazard as its new chairman and CEO. Hazard was most recently a senior partner at high-tech consultancy Zero-G Inc., and will continue as a managing director of that firm’s venture capital fund.

Oculan Corp., a Raleigh, N.C.-based developer of IT infrastructure and security management platforms, recently secured $5 million from affiliates of Soros Private Equity Partners.

Erlang Technology Inc., a St. Louis-based fables semiconductor company, has raised $11.7 million in Series C funding led by DragonVenture. Other investors included Authosis, JAFCO Asia, Ignite Group, Pacesetter Capital and NEC Electronics Corp.

PrivateEquityCentral.net is reporting that Gabriel Venture Partners has hired Steve Simonian as CFO and director of operations. He previously served as CFO with Meritech Capital Partners, and he is still listed on that firm’s website.

NEWS FROM TUESDAY 3/17
Gary Little, a founding partner and CFO of Chicago-based private equity firm Madison Dearborn Partners, died of lung cancer last Wednesday at the age of 52. Prior to co-founding Madison Dearborn in 1993, Little served for 15 years in the venture capital division of First Chicago Bank. He held an undergraduate degree from the University of Illinois and an MBA from the Illinois Institute of Technology. He leaves behind his wife Diane, sons Alfred and Michael, daughter Tracy and brothers Terrance and Barry. Services have already been held.

SCP Global Technologies, a Boise, Idaho-based supplier of surface preparation equipment for the semiconductor industry, has raised $50 million from 3i and VantagePoint Venture Partners. The company was founded in 1975, but this is its first round of venture capital funding. In related news, SCP has acquired the wet processing division of Mattson Technology Inc. (Nasdaq: MTSN).

iScience Surgical Inc., a San Francisco-based maker of imaging systems and microsurgical instruments for the minimally-invasive treatment of glaucoma, has raised $7 million in Series B venture funding. Prism Venture Partners led the round with De Novo Ventures, Asset Management Co. and Pacific Horizon Ventures also participating.

Thomas Davis, a former vice chairman for private equity and research at Merrill Lynch, is among four former bank executives accused yesterday by the SEC of helping Enron Corp. artificially inflate profits through fraudulent transactions. He and the other three were charged in a civil suit filed by the SEC yesterday in Houston. Last year, Davis had invoked his Fifth Amendment rights against self-incrimination when asked to testify in front of the SEC, soon after which he was fired from Merrill Lynch.

Arbortext Inc., an Ann Arbor, Mich.-based provider of XML-based publishing software, has raised $8.75 million in a round led by GIC Special Investments, a member of the Government of Singapore Investment Corp. Return backers include Norwest Venture Partners, INVESCO Private Capital and North Coast Technology Investors. The company has now raised around $50 million in venture capital since 1996.

NATCO Group Inc. (NYSE: NTG) has reached an agreement to received $15 million in convertible preferred stock financing from Lime Rock Partners. The deal is expected to close by the end of this month. NATCO Group is a Houston-based provider of wellhead process equipment, systems and services used in the production of oil and gas.

Consera Software, a Bellevue, Wash.-based server management solutions provider, has emerged from stealth mode with $8.5 million in Series A funding. Investors on the deal were Ignition Partners, Intel Capital and Matrix Partners.

Parthenon Capital has led a $19 million recapitalization of Med-Tel International Corp. of McLean, Va. and London. Med-Tel is a nine-year-old owner and operator of diagnostic imaging centers using proprietary telemedicine technology.

Chris Neenan has been named vice president and chairman of mergers and acquisitions at The Boston Consulting Group. He previously served as managing director and COO of private equity firm SG Capital Partners.

Paul Blackney, president and CEO of ticketing technology provider Worldspan, said yesterday that he’ll step down when the proposed acquisition of Worldspan is completed. He will assume a special advisory role and serve on the company’s board of directors. Earlier this month, Worldspan’s three major airline owners agreed to sell the company to Travel Transaction Processing Corp., which was formed by Citigroup Venture Capital Equity Partners and Teachers’ Merchant Bank. The buyout is thought to be valued at around $1 billion.

JPMorgan Partners has completed its acquisition of M&H Plastics Corp., in association with M&H management. Bank of Scotland Structured Finance provided the debt financing for the transaction. JPMorgan Partners was advised by Lansdowne Capital, while Deloitte & Touche provided accounting and due diligence services.

Cellzome GmbH, a German biotechnology company, has raised €30 million from such new investors as INVESCO, Biofrontier Partners, SG Asset Management and Yamanouchi Venture Capital. Return backers include Atlas Venture, Advent International and Schroder Ventures Life Sciences.

HSBC has sold an 80.1% interest in its private equity unit to existing group management. The group once known as HSBC Private Equity Ltd. Has changed its name to Montagu Private Equity Ltd.

Musician.com Inc., a Chicago-based operator of an online community for musicians, has gone out of business. The company was founded in April of 2000, and has since raised over $4 million in venture capital funding from firms including Weston Presidio.
NEWS FROM MONDAY 3/17
LeftHand Networks Inc., a Boulder, Colo.-based provider of IP-SAN storage solutions, has raised $20 million in Series C funding. The Sprout Group led the deal with a $13 million infusion, with partner Wayne Nemeth receiving a board seat. Also participating on the deal were earlier investors Boulder Ventures, Garage Technology Ventures, Ironside Ventures, William Blair New World Ventures, Portage Venture Partners, Sequel Venture Partners, Vista Ventures and Wasatch Ventures. LeftHand Networks has now raised $38.5 million to date, including a $5.5 million Series B deal in November 2001 at a post-money valuation of $31 million.

Hypnion Inc., a Worcester, Mass.-based neuroscience drug discovery company focused on sleep/awake pharmaceuticals, today announced it raised $47.5 million in a Series B round of private equity financing led by Forward Ventures and MPM Capital. Other new investors included Advanced Technology Ventures, S.R. One Ltd., JAFCO and Coastview Capital, along with returning Series A backers Oxford Bioscience Partners, Flagship Ventures and GIMV.

Matrix Semiconductor, a Santa Barbara, Calif.-based developer of high-density 3-D integrated circuits, has raised $52 million in Series E funding. The round follows a $15 million investment from Nintendo that was announced last month. Other new investors on the deal included TeleSoft Partners, Benchmark Capital Europe, Integral Capital Partners and Seagate Technology. Series A backers Benchmark Capital, Skymoon Ventures and Western Technology Investment also participated. .

LiveVault Corp., a Malborough, Mass.-based provider of online backup and recovery solutions for business servers, today announced that it has secured $10 million in new equity financing led by Sevin Rosen Funds. Previous investors also participating included Partners, Atlas Venture, Adams Street Partners and Iron Mountain Inc.

LiveCapital Inc., a San Mateo, Calif.-based developer of enterprise credit management solutions, has raised $7.4 million in new funding led by Selby Ventures. Previous backers also participating included Cardinal Venture Capital, Irwin Ventures, Kingston Creek Ventures, Kleiner Perkins Caufield Byers, PacRim Venture Partners and Red Rock Ventures.

InTouch Health Inc., a Santa Barbara, Calif.-based developer of surgical robotics, has secured $2.4 million in Series A funding. Significant investors for the round include Dr. Virgil Elings, founder and past chairman and president for Digital Instruments Inc., and Twenty One East Victoria Investments.

Aristos Logic Corp., a Foothill Ranch, Calif.-based network storage company, has raised $20 million in fourth round funding led by Woodside Fund. Also participating in this round were new investor Macnica Inc. and previous backers JP Morgan Partners, TPG Ventures and QTV Capital As part of the transaction, Rick Shriner, a venture partner at Woodside Fund, will join the Aristos Logic board of directors.

SavaJe Technologies Inc., a Chelmsford, Mass.-based developer of an operating system based on a Java 2 platform, has raised $17.5 million in Series B funding. New investors RRE Ventures, Orange Ventures and Vodafone Ventures participated in equal amounts alongside existing investors New Venture Partners and Ridgewood Capital. The company has now raised $29.5 million since being founded in late 2001.

Tatara Systems, an Acton, Mass.-based developer of software and equipment for Wi-Fi service providers, has raised $9 million in financing from Highland Capital Partners and North Bridge Venture Partners. The company also announced that Steve Nicolle, former president and CEO of Sigma Systems Group, has been named president and CEO of Tatara.

Eitan Barzilay has joined Vertex Israel as a venture partner. He has previously served as co-founder of ArgoQuest, CEO of Cal Circuits Abco (UK), CEO of Packard Bell (Europe), CEO of Reveal Computers (Europe) and chairman and CEO of Western Systems Ltd.

Investcorp has acquired a majority stake in Willtek Communications GmbH, a German maker of test equipment for the wireless communications industry. Until April 2002, Willtekwas a subsidiary of U.S.-based ActernaCorp. In May 2002, the current Willtekmanagement team undertook a buyout of the company, financed by WilltechInc., a Korea-based wireless engineering firm. Investcorp`s acquisition concludes this staged-management buyout.

TDR Capital and Capricorn Ventures International have teamed up in an effort to acquire UK restaurant chain PizzaExpress. The private equity firms have yet to make a bid, but chances are that they’ll have to top an existing offer from former PizzaExpress chairman Luke Johnson.

The European Commission has approved a £1.25 billion buyout of UK-based bingo game operator Gala by private equity firms Candover and Cinven.

A bankruptcy judge last week okayed a $1.31 billion ($1.11 billion in cash) buyout of Conseco Finance Corp. to a private equity syndicate composed of Cerberus Capital Management, Fortress Investment Group and J.C. Flowers & Co.

Thomas Weisel Partners is laying off 100 of its remaining 600 employees.

 

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