PE Week Wire — Friday 3/7

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Masergy Communications Inc., a Dallas-based network service provider focused on the business market, has raised $31 million in Series B venture capital financing from existing backers Meritage Private Equity Funds and Centennial Ventures. The company had previously raised $67.6 million in a multi-tranched Series A deal that also included Lightspeed Venture Partners and Kleiner Perkins Caufield & Byers. The Series A deal’s post-money valuation was around $82 million, and Massergy VP of Finance David MacGrandle says that the more recent transaction represented a “flat round.”

PA Early Stage Partners has held a $68 million first close on a new fund targeted at $100 million. This is the Wayne, Pa.-based firm’s third investment vehicle, the first two of which were sized at $50 million and $101.5 million, respectively.

Intel Corp. yesterday released its first quarter earnings projections, which included a lowered estimate on investment losses (including losses from Intel Capital). The company had previously said that Q1 investment losses would come in at around $125 million.

WLAN AG, a Germany-based wireless local area network provider, has been acquired by Swisscom Eurospot, a new subsidiary of telecom operator Swisscom. The move comes just five months after WLAN received €9 million in venture funding from Target Partners, Viventures and Wellington Partners. Terms of the sale were not disclosed.

Cedar Point Communications Inc., a Derry, N.H.-based provider of voice and multimedia switching solutions for the cable industry, has secured $25 million in second round financing. STAR Ventures led the deal, and was joined by return backers Charles River Ventures, Battery Ventures, Comcast Interactive Capital and Ascent Ventures.

Microlanguage, an Amherst, N.Y.-based provider of intelligent language processing solutions, today announced it has raised $1 million in Series A financing led by Spaulding Ventures.

Michael Klein has been named CEO of Citigroup‘s global corporate and investment banking efforts in Europe, the Middle East and Africa (EMEA). Klein was formerly CEO of the GCIB in Europe and global co-head of the Investment Bank. He originally joined Salomon Brothers Mergers & Acquisitions group in 1985 and founded the firm’s practice advising leveraged buyout and private equity firms in 1988, and will continue to focus on private equity in his new role.

Gevity HR (Nasdaq: GVHR) has received a $30 million private placement from Chicago-based private equity firm Frontenac Co.

Encompass Services Corp., a Houston, Texas-based company, has completed part of its restructuring by filing its Joint Plan of Reorganization and Disclosure Statement with the United States Bankruptcy Court for the Southern District of Texas. The plan contemplates that the Residential Services Group of Encompass will be reorganized as a new entity. The new company will be headquartered in Dayton, Ohio, with operations in nine states. The plan of reorganization is supported by an investment from Wellspring Capital Management, and will result in Wellspring and the Residential Services Group management team owning all outstanding shares of the new entity established to carry forward the business.

Kramer Levin Naftalis & Frankel LLP have added Richard Gilden and Ernest Wechsler as partners in the firm’s corporate practice, focusing on business and technology. Both men were New York-based partners in defunct Silicon Valley law firm Brobeck, Phleger & Harrison LLP, where Mr. Wechsler was also a partner. John Bessonette and Michelle Lung, two Brobeck corporate associates who worked closely with Gilden and Wechsler, also have joined Kramer Levin.

In related news, Wilson Sonsini Goodrich & Rosati has expanded its intellectual property practice with the addition of a new IP litigation partner and former Brobeck attorney Craig Tyler. Tyler, who is joined by three new associates, will be based in the firm’s Austin, Texas office.

SentitO Networks, a Rockville, Md.-based optical switching company, has raised $14 million in Series B funding. New investors TELUS Ventures and Core Capital Partners joined the round, which also included previous investors Kodiak Venture Partners, Mid-Atlantic Venture Funds, Technology Venture Partners and Inflection Point Ventures. The company had previously raised an $11 million first round deal in February 2001.

Rev D Networks Inc., an Ottawa-based telecom software company, has raised Cdn$22 million ($15 million) in Series A venture funding. Newbury Ventures and VenGrowth Capital Partners co-led the deal, and were joined by BDC Venture Capital and BEST Discoveries Fund. Rev D also announced that it has acquired ownership rights to important technology and associated patents from Bell Canada.

Bertelsmann has thinned out the ranks of potential bidders for its professional publishing division, according to a report in today’s Financial Times. Left in the running for BertelsmannSpring are said to include Apax Partners (with UK publisher Taylor & Francis), Blackstone Group (with CVC Capital Partners), Soros Private Equity, BC Partners, Charterhouse and a teaming of Cinven and Candover. The deal is expected to net €1 billion.

Greenpark Capital has closed its debut secondaries fund with $200 million, according to PrivateEquityCentral.net. The UK-based firm was launched in 2000 by a trio of former managers from Coller Capital
NEWS FROM THURSDAY 3/6

Optical Micro-Machines Inc., a San Diego-based supplier of MEMS-based optical switch array modules, will cease operations tomorrow and lay off all of its 85 employees. The company was unable to secure new funding, although it had already raised around $160 million in venture capital since being founded in the summer of 1997. Its last VC infusion was a $22.3 million Series E deal in late 2001 at a post-money valuation of $132.3 million (it had received a $954.8 million mark following a $34 million round earlier that year). OMM investors included Sevin Rosen Funds, Atlas Venture, Bessemer Venture Partners, Rho Capital Partners, Weston Presidio, Nortel Networks, Siemens, Alcatel, Sycamore Networks, Solectron, Fairchild Semiconductor and Corvis Corp.

iWatt Inc., a Los Gatos, Calif.-based producer of digital controllers for power suppliers, has raised $14.5 million in Series B financing, led by new investor VantagePoint Venture Partners. Existing investors Horizon Ventures, PTI Alliance of Taiwan and Sigma Partners, as well as several private investors, also participated in the round.

Entrepia Ventures has closed Entrepia Fund II LP and Le Fonds Entrepia Nord SEC with an aggregate of $50 million. The funds will invest in expansion-stage IT, communications ore electronics companies. Potential investments must have the potential of generating revenue in Japan.

Codeon Corp. and Quantum Photonics, a pair of venture-backed optical components companies, have decided to merge. The new combined company – named Covega Corp. – has raised $17 million as part of a Series A funding from existing investors New Enterprise Associates, Optical Capital Group, Boulder Ventures, Core Capital Partners, EDB Ventures, Intersouth Partners, Kinetic Ventures and Siemens Venture Capital. Codeon had received over $60 million of venture funding, with its most recent post-money valuation tagged at $270 million. Quantum Photonics had raised around $35 million since being founded in 1998, included a $23 million Series B deal in August 2001 at a post-money valuation of just under $25 million.

NewSouth Communications, a Greenville, S.C.-based competitive local exchange carrier (CLEC), has raised $62.5 million in new private equity funding. Return investors included Kohlberg Kravis Roberts (which is NewSouth’s majority shareholder following a July 2000 buyout), Wachovia Capital Partners and Vaxa Capital Partners. Also participating are new investors M/C Venture Partners and Quadrangle Group. NewSouth has raised over $300 million in private financing since opening shop in early 1997.

Groove Networks Inc., a Beverly, Mass.-based provider of decentralized desktop collaboration software, has raised $38 million in fifth round funding from existing investors like Microsft Corp. and Accel Partners. The company has now secured more than $155 million in venture capital, but nonetheless announced yesterday that it would lay off 20% of its workforce.

Entertainment Cruises International Inc. has entered into an agreement with LightHorse Ventures for a minimum $5 million equity funding for its planned Day Cruise Gaming operations. Entertainment Cruises’ initial operations will begin in Panama City, where a port has been leased and a license to do business has been obtained. Preparations for the launch of other port locations are in process.

Kathryn Gould, a general partner with Foundation Capital, is resigning from the board of Chordiant Software Inc. (Nasdaq:CHRD) after a seven-year stay.

Camilion Solutions Inc., a Toronto-based software solutions provider for the insurance and banking industries, has raised Cdn$8 million (US$5.43 million) in Series B funding from existing investor Celtic House Venture Partners and new investor Raymond Chang, chairman of CI Fund Management.

Ntelos Inc., a Waynesboro, Va.-based telecom company, has filed for Chapter 11 bankruptcy. The company has $785 million in debt, including $95 million owed to Welsh, Carson, Anderson & Stowe. The buyout firm had invested over $200 million in Ntelos, which says it will continue operations.
NEWS FROM WEDNESDAY 3/5

Worldspan, an Atlanta-based airline ticket processing company jointly owned by three major airlines (Delta, Northwest and American), will soon be acquired by Travel Transaction Processing, a new company formed by Citigroup Venture Capital Equity Partners and Teachers’ Merchant Bank. Terms of the deal were not disclosed, but it is scheduled to close in mid-2003, pending certain financing and regulatory issues.

Cognio Inc., a Natick, Mass.-based provider of cognitive radio solutions, today announced that it has completed a $12.5 million funding from existing investors North Bridge Venture Partners and ABS Ventures.

Kaidara Software, a Los Altos, Calif.-based supplier of advanced service and support solutions, today announced that it has secured an additional $4.3 million to finalize its $8.6 million Series B round of funding. Digital Networks joined existing investors CDC Innovation Partners, ACE Management, Financiere de Brienne, Galileo Partners and LCF Rothschild Venture Partners on the deal. Kaidara also announced that Nenad Marovac, managing partner at Digital Networks, will join the company’s board of directors.

ItemField Inc., a New York-based provider of real-time, bi-directional, XML-based data transformation software, announced today it has closed a $4 million financing round. Investors included Accel Partners, Gemini Israel Funds and Evergreen Partners.

M-Stream Inc., an Israeli company focused on cellular technologies, has received a $1.5 million Series A investment from Broadcom Corp. and Applied Materials Ventures.

JP Morgan Partners (JPMP), Veronis Suhler Stevenson and Ascend Media today announced the acquisition of Atwood Publishing and GEM Communications. Atwood is a publisher for trade industry associations, while GEM Communications is a publisher of magazines, conferences and exhibitions for the gaming industry. Terms of the deal were not disclosed.

Pasadena Capital Partners LLC today announced that Charles Woo has joined the firm as a vice president. Woo was most recently with Morgan Stanley, where he was an I-banker in the firm’s Los Angeles-based M&A group. Woo had previously worked from 1997 to 1999 as a financial analyst at Thomas H. Lee Partners.

SLI Inc. has entered into definitive agreements providing for the sale of its Miniature Lighting Division to an affiliate of M Capital LLC, a New York based private equity fund. The deal is expected to be worth around $100 million, pending regulatory approvals.

Frank Quattrone has resigned his post as head of the global technology group for Credit Suisse First Boston. He had been on paid leave for the past month, as part of a regulatory investigation into whether or not he improperly influenced stock research and IPO allocations. He is also the subject of an obstruction-of-justice case in New York State, related to the alleged destruction of documents.

Country Road Communications LLC and Community Service Communications Inc. today jointly announced the signing of a definitive agreement pursuant to which Country Road will purchase substantially all of the assets and operations of Community Service Telephone Co. from Community. Country Road has funded its acquisitions with equity from ABRY Partners, Prudential Insurance Co. of America and management. Bank borrowings have come from CoBank, a leading lender to telecommunications companies.

NEWS FROM TUESDAY 3/4

United Platform Technologies Inc., a Beijing, China-based telecom equipment and solutions provider, has received $50 million in Series A funding. Walden International led the deal, after having incubated the company. Other investors included Doll Capital, Intel Capital, Jerusalem Venture Partners, Morgenthaler Ventures, New Enterprise Associates, Shanghai Alliance Investment Ltd., Sycamore Ventures and Sumitomo Electric Industries Ltd.

Venetica, a Charlotte, N.C.-based provider of content integration software, today announced that it has secured $7 million in Series A funding from Charles River Ventures and General Catalyst Partners.

Transitive Technologies Ltd., a Los Gatos, Calif.-based provider of software that enables transportability of software applications across multiple processor architectures, today announced that it secured $10 million in Series B financing led by Crescendo Ventures. Series A backer Pond Ventures, also participated.

George Milne has joined New York-based Radius Ventures as a venture partner. Dr. Milne recently retired as executive vice president of global research and development at Pfizer, where he spent the past 32 years.

Zia Laser Inc., an Albuquerque-based developer of quantum dot semiconductor laser technology, today announced that it has raised $5.4 million in Series B funding from Prism Venture Partners and RWI Group. Zia, which was spun out of the University of New Mexico, has now raised $11.5 million overall. The Series B deal closed in the fourth quarter of 2002.

BoostWorks Inc., a San Francisco-based provider of end-to-end enterprise application acceleration solutions, today announced that it has successfully secured approximately $9 million in Series C funding. Investors included 3i US, BNP-Europe Telecom & Media Fund 2, Innovacom, SPEF Ventures, MC Capital Europe and Mitsubishi Corp.

Hookup.com, a Joplin, Mo.-based online truck auction operator, has gone out of business. The company raised a $4 million Series A round in 2000 at a post-money valuation of $35.6 million from Capital for Business Inc., InvestAmerica Venture Group and Kansas Venture Capital.

Hang Michael Xu has been named chief financial officer of venture-backed mobile phone technology developer Bitfone Corp. He was most recently CFO of LlinkAir and, before that, a vice president with The Carlyle Group.

Lightwave Microsystems Corp., a San Jose, Calif.-based integrated circuit maker that has raised nearly $160 million in venture capital   but effectively shut down last fall, has been acquired by NeoPhotonics Corp., a Fremont, Calif.-based company that has raised around $51 million. No terms of the deal were disclosed. Lightwave was most recently valued at $922 million following a $75 million fifth round funding in November of 2000 from Comdisco Ventures, Draper Fisher Jurvetson, First Analysis Corp., Information Technology Ventures, JPMorgan Partners, Lightspeed Venture Partners, Meritech Capital Partners, Morgenthaler Ventures, Oak Investment Partners Putnam Management, RS Investments, Stanford University and Worldview Technology Partners. NeoPhotnics backers include Bay Partners, Institutional Venture Partners, Nth Power Technologies and Venrock Associates.

Kevin Brown, a partner at Reed Elsevier Ventures, has joined the board of directors at portfolio company Inxight Software Inc.

Austin McGregor, an executive search firm whose clients include Accel Partners and Lightspeed Ventures, has doubled the size of its Silicon Valley office by adding Nadine North and Stephen O’Deegen as partners. North was previously head of global recruiting for Siebel Systems, while O’Deegen served as founder and chief executive of boutique search firm Celerity Inc.

Northrop Grumman Corp. has completed the $4.7 billion sale of TRW Automotive to affiliates of The Blackstone Group. The consideration included approximately $3.9 billion in the form of cash and debt retained by TRW Automotive, a $600 million payment-in-kind note, and a 19.6% equity investment in the new enterprise.

Falconhead Capital (formerly known as Sports Capital Partners) has promoted Brian Crosby to the positions of vice president and principal. Prior to joining Falconhead in early 2002, Crosby was most recently a founder and partner of Wright Venture Partners.

ExcelleRx, a Philadelphia-based medication management company, has received a $37 million investment from Wachovia Capital Partners and Prims Venture Partners.

Soros Private Equity has agreed to purchase PolymerLatex from joint owners Degussa and Bayer for €235 million ($256 million). The deal will close pending regulatory approval.

 

NEWS FROM MONDAY 3/3
Panscopic, a San Francisco-based provider of analytic reporting solutions, today announced that it has closed a $10 million second round of financing led by new investor Morgenthaler Ventures, with existing investors DCM – Doll Capital Management and Discovery Ventures also participating in the round. PE Week subscribers can read more on this story in this week’s print edition, or in the protected Deal News section of www.PrivateEquityWeek.com.

Tenor Networks Inc., an Acton, Mass.-based optical company founded in 1998, has shut down after raising $137 million over five rounds of venture capital. The company’s last significant funding came in August of 2000, when it secured $93 million at a post-money valuation of $693 million. Investors included: Amerindo Investment Advisors, BancBoston Capital, Essex Investment Management, Focus Ventures, Greylock, Haebler Ventures, Matrix Partners, Morgan Stanley Private Equity, Technology Crossover Ventures, Thomas Weisel Partners, Tyco, Williams Communications Group and Worldview Technology Partners. Tenor will keep a handful of engineers on staff as it searches for a buyer of its intellectual property.

SunTX Capital Partners LP, a Dallas-based middle market buyout shop, has held a $120 million first close on the SunTX Fulcrum Fund. The fund is expected to close with $130 million in commitments by mid-year, although an SEC filing listed its target capitalization at $400 million. PE Week subscribers can read more on this story in this week’s print edition, or in the protected Fund News section of www.PrivateEquityWeek.com. Wakesoft, a San Francisco-based supplier of service-oriented application architecture for building and managing enterprise applications and services, today announced that it has secured $7.65 million in equity financing. This second round of funding was led by BlueStream Ventures.

CXO Systems, a Boston-based provider of executive visibility systems and business dashboards, has raised $4.8 million in Series A financing. The company, which was formerly known as the Beacon Hill Group, is backed by GrandBanks Capital and Kodiak Venture Partners.

Morgenthaler Partners announced today the acquisition of MPI International, a Rochester Hills, Mich.-based provider of high-precision industrial components. The company had 2002 revenue of $135 million, and employs 950 people in the United States.The acquisition, finalized on Feb. 28, allows MPI’s management the opportunity to become a stand-alone company after a spin-off from Klockner Mercator Maschinenbau GmbH , a subsidiary of Klockner Werke AG in Germany. The terms of the deal were not disclosed.

Centerstone Software Inc., the leader in Workplace Resource Management, announced today that the company has secured an additional $3.2 million in venture capital funding, bringing cumulative funding to more than $10 million. Investors include Egan-Managed Capital, Trans-National Group Services, Corning Technology Venture Partners, and the Massachusetts Technology Development Corporation, all of Boston. The company also announced the appointments of CEO Matthew Durkin and Vice President of Sales Steven Walsh.

Flextronics (Nasdaq: FLEX), a Singapore-based provider of operational services for technology companies, has received a $200 million investment from Silver Lake Partners. The investment will be in the form of a junior subordinated convertible note due in March 2008.

Ocean Spray Cranberries Inc. has rejected an unsolicited $800 million buyout offer from Northland Cranberries. The deal was backed by private equity firm Sun Capital Partners.

Nina Ebert has been named chief financial officer of Labrador Ventures. She previously held a similar position with Saints Capital and, before that, worked with Goldman Sachs and Montgomery Securities.

The Seattle Post-Intelligencer is reporting that Bellevue, Wash.-based Entomo Inc. has laid off 10 employees after the collapse of a new venture capital funding agreement. The firm has already received $12 million from OVP Venture Partners, SeaPoint Ventures and Digital Partners, but has been marketing a Series C deal since last year. The Seattle Post-Intelligencer is also reporting today that Bellevue-based Consera Software has closed a $10.4 million funding round from Intel Capital, Matrix Partners and Ignition Partners.

The Carlyle Group has joined a syndicate led by oil tycoon Martin Davis to purchase the U.S. entertainment assets of Vivendi Universal SA for $13 billion, according to various news reports. Other firms involved on the bid are said to include Bain Capital and Texas Pacific Group.

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