PE Week Wire — Friday 4/11

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ARCH Venture Partners recently held an initial close on its sixth seed-stage fund, with $75 million in dry commitments from four returning investors. The Seattle-based firm’s overall marketing plan is to close on between $250 million and $350 million by year-end. PE Week subscribers can read more of this story later today in the protected section of www.PrivateEquityWeek.com , or in Monday’s print edition.

Cadence Design Systems Inc. (NYSE: CDN) has agreed to acquire San Jose, Calif.-based Get2Chip for an undisclosed amount. The maker of nanometer-scale synthesis technology had raised over $30 million in venture funding since its 1999 founding, including an $11.5 million second round in late 2001 at a post-money valuation of $44.5 million. Investors included Benchmark Capital, Blue Chip Venture Co., Intel Capital and VenGlobe Capital.

In February, a team of nine private equity pros left Merrill Lynch to form a new fund placement group at Lazard Freres & Co. Now, according to PrivateEquityCentral.net, Merrill is suing both the defectors and Lazard, citing collusion and misappropriation of confidential information.

Avamar Technologies Inc., an Irvine, Calif.-based provider of data protection solutions, has raised $13 million in fourth round funding. New investor Goldman Sachs led the round alongside return backers Benchmark Capital, CMGI @Ventures and Lightspeed Venture Partners. The company has now raised over $35 million since its 1999 founding, including a $12 million Series C deal last year.

Afmedica Inc., a Kalamazoo, Mich.-based company focused on post-surgical hyperplasia, has raised $1.3 million in new venture funding. Investors include ApJohn Ventures and Tgap Ventures.

Vyant Technologies, a Fairfax, Va.-based developer of data recovery software, has raised $3 million in new funding from existing investor Capitol Ventures.

Charles Ayers has joined Lehman Brothers as head of global merchant banking, where he will report to private equity chief Mike Odrich. Ayers was most recently a founding partner with MidOcean Partners, and before that was head of North American merchant banking at Deutsche Bank Capital Partners.

Senator Olympia Snowe (R-Maine) yesterday introduced a bill that would allow tax-exempt entities like pension and university endowment funds to invest directly in small business investment companies (SBICs) without incurring unrelated business taxable income (UBTI). The National Association for SBICs suggests that the bill could boost available capital to SBICs by up to $200 million in its first year alone.

The State of Wisconsin Investment Board has agreed to provide $30 million to Milwaukee-based Baird Venture Partners and another $60 million to Seattle-based Frazier Technology Ventures. There are no specific requirements yet put on the money, although both firms will be expected to make significant investments in Wisconsin. In addition, Frazier is expected to open a satellite office in the state.

The European Union Commission has approved Carlyle Management Group‘s plan to purchase Lakeland, Fla.-based car partners manufacturer Breed Technologies Inc. No terms have been released, although various press reports have said that the deal involves around $230 million of equity and the assumption of $85 million in debt.

In a correction to a Wire item from Wednesday, Cytokinetics Inc. has raised $17.07 million (not $18.5 million) in an ongoing Series E funding round. According to an SEC filing, the South San Francisco-based company is looking to secure a total of $50 million.
NEWS FROM THURSDAY 4/10

Ciena Corp. (Nasdaq:CIEN) has agreed to pay $158 million in stock to acquire WaveSmith Networks Inc., an Acton, Mass.-based maker of optical networking equipment. Since being founded in March of 2000, Ewavesmith has raised $72.5 million in private equity and an additional $12 million in debt. It’s most recent capital infusion came this past October, when it secured $30 million at a post-money valuation of $82.9 million. Investors included Atlas Venture, Bessemer Venture Partners, Commonwealth Capital Ventures, Fidelity Ventures, VIMAC and Ciena.

Behrman Capital has acquired Woodcraft Industries Inc., a manufacturer of hardwood and engineered wood doors for the kitchen cabinet industry. The total deal was worth $145 million, including senior debt financing provided by Antares Capital.

Draper Fisher Jurvetson has promoted both Raj Atluru and Andreas Stavropoulos to the position of managing director. Atluru currently serves on the board of companies like Agentis Software, Blue Titan Software, Konarka Technologies, PAR3 Communications and Vizional Technologies. Stavropoulos serves on the boards of Appstream, Centerpost, Everdream, Pronto Networks and Silverpop.

Capella Photonics Inc., a San Jose, Calif.-based developer of reconfigurable optical subsystems, has raised $7 million in Series B funding. Investors include Bay Partners, Vanguard Ventures and BCE Capital. This brings the company’s total venture capitalization up to $22 million, which includes a $15 million first round in mid-2001 at a post-money valuation of $29 million.

TransChip Inc., a Ramat Gan, Israel-based developer of single-chip camera solutions for mobile phones, has raised $5.5 million in Series C funding. Mission Ventures led the deal, and was joined by Cadence Inc. and return backers Ray Stata, co-founder and chairman of Analog Devices, and Andrew Viterbi, co-founder of Qualcomm.

Michael Mueller has joined MDS Capital Corp. as president and CEO. He was most recently vice-chairman of global investment banking at TD Bank Financial Group.

Arlington Capital Partners has acquired ITS Services Inc., a Springfield, Va.-based provider of IT solutions and network operations to federal government agencies. ITS Services is the first acquisition as part of Arlington’s $75 million equity commitment to consolidate several federal IT services companies. In addition to Arlington’s investment, debt financing was arranged with Wachovia Bank, Allfirst Bank, Citizens Bank and Allied Capital.

TechTeam Global Inc. (Nasdaq:TEAM), a Southfield, Mich.-based provider of business process outsourcing, has raised $5 million in private equity funding from ChrysCapital.

Kent Adams, former managing director of I-banking at Piper Jaffray, has been named president of the new financial services group and director of I-banking at Manchester Cos.

Stargate, a Pittsburgh-based ISP, has filed for Chapter 11 bankruptcy protection. The company, which is burdened by around $20 million in debt, is not expecting layoffs or service interruptions. It has received equity funding from firms like Alta Communications and RRZ Capital Markets.

Cinven has agreed to acquire UK gym chain Fitness First PLC. The deal includes £204 million of equity from Cinven and a £332 million debt package provided by Bank of Scotland and Royal Bank of Scotland.
NEWS FROM WEDNESDAY 4/9

Florida Digital Network, an Orlando-based telecom services provider, has raised $20.2 million from Centennial Ventures, Columbia Capital and MC Venture Partners. The new capital will be used to purchase the Florida and Georgia assets of fellow telecom services provider MPower Communications. This includes network assets and customer lists representing around 77,000 business and Internet access lines in such markets as Miami, Tampa and Atlanta. Florida Digital, which recently changed its name to FDN Communications, has now raised over $120 million in five rounds of venture funding since its 1998 launch. No valuation information is available on its two most recent deals, but it was pegged at $210 million following a $13.5 million Series B deal in May of 2000, and at around $106 million after a $50 million third round deal in mid-2001.

Net6 Inc., a software and infrastructure company focused on the wireless web, has raised $8.5 million in second round funding led by BA Venture Partners. Series A investors Sierra Venture Partners and OVP Venture Partners also participated. The first round deal occurred in early 2001, and involved an $8.7 million investment at a post-money valuation of $23.6 million.

NetContinuum Inc., a Santa Clara, Calif.-based provider of web and application security solutions, has raised $20 million in third-round venture funding. New investor Palomar Ventures led the round, joining return backers Menlo Ventures, NIF Ventures/Daiwa Securities, Adams Street Partners, Invus Group and MKS Ventures. NetContinuum last raised venture capital in May 2001, when it closed a $26 million Series B deal at a post-money valuation of $85 million. It has now raised more than $54 million since being founded in late 1999.

Cytokinetics Inc., a South San Francisco-based biopharmaceutical company, has raised $18.5 million in fifth round funding. Investors included CSFB Private Equity, Alta Partners and HBM BioVentures.

Comverge Inc., an Florham Park, N.J.-based provider of software solutions to the energy industry, has closed on a $13 million venture capital deal. The financing round was led by Nth Power, and includes E.ON Venture Partners, EnerTech Capital, Shell Internet Ventures and Easton Hunt Capital Partners. Data Systems & Software Inc. (NASDAQ: DSSI) also participated in the round and remains Comverge’s largest shareholder.

Mavent Inc., an Irvine, Calif.-based developer of an automated system for complying with residential mortgage regulations, has received a $6 million second round commitment from Financial Technology Ventures. As part of the agreement, FT Ventures has the option to invest an additional $4 million.

SecureMethods, a Bethesda, Md.-based developer of secure network applications, has raised $3 million in Series B funding. Adena Ventures led the deal, alongside participation from West Virginia Jobs Investment Trust and previous investors Walker Ventures and principals from the company.

Silver Lake Partners last week purchased $175 million of WorldCom bonds. The New York-based buyout shop is said to be working on a turnaround plan with senior Worldcom executives and company creditors.
Quantum Energy Partners has agreed to invest $15 million into a new oil and gas exploration platform named Linn Energy LLC.

John Smith Jr., chairman and former CEO of General Motors Corp., has been appointed chairman of the joint advisory board of AlixPartners LLC, a turnaround firm, and Questor Partners Funds, the affiliated private equity firm that invests in underperforming and turnaround companies. The move will be effective as of May 1, which is when Smith officially retires from GM.

Leonidas Tsimpouri has been named general director of the National Bank of Greece‘s venture capital unit. He has been an investment director in the group since 2001.

3i Group has cited a slower-than-expected investment market in its decision to close its Dublin office, according to the Business and Finance Daily News Service. The same reason was used in February, when 3i opted to shutter its Tokyo office.

The Boston Herald is reporting that Heritage Partners has taken a “meaningful ownership position” in local newspapers The Patriot Ledger and The Brockton Enterprise, both owned by Enterprise NewsMedia LLC. Terms were not disclosed.
NEWS FROM TUESDAY 4/8

eCredit, a Dedham, Mass.-based provider of credit and collections automation software, has raised $9 million in new venture funding. Apex Venture Partners and Sterling Venture Partners co-led the deal, and were joined by return backer Internet Capital Group (ICG). This is eCredit’s first round of announced funding since May of 2000, when it sold a 30% ownership stake to ICG in exchange for 4.66 million shares of ICG common stock. At the time, the ICG stock package was worth around $170 million, but that number has since dropped to less than $2 million.

Cohesive Technologies Inc., a Franklin, Mass.-based developer of novel liquid chromatography systems and chemistries, has held an $8 million first close on its Series B funding round. Psilos Group Partners led the deal, and was joined by strategic buyer Mitsubishi Corp. and return backer Oxford Bioscience Partners. This is actually the company’s fifth round of funding, but the company characterizes its first three deals (total of $11.7 million) as angel investments. Cohesive’s first “official” round of funding was a $13.6 million deal in Sept. 2000 at a post-money valuation of $27 million.

Navini Networks Inc., a Richardson, Texas-based provider or wireless broadband technology, has raised $25 million in Series C funding. The deal was an inside round provided by return backers Austin Ventures, Granite Ventures, Sequoia Capital and Sternhill Partners. The company has now raised $85.5 million since its Jan. 2000 founding, including a $45 million second round deal in the summer of 2001 at a post-money valuation of $85 million.

Cranium Inc., a Seattle-based board game maker, has closed its first round of funding with $21 million. Maveron and TPG Ventures led the deal.

Galazar Networks Inc., an Ontario, Canada-based fabless semiconductor company, has raised Cdn$22.7 million (US$15.35M) in Series B financing. Investors included Skypoint Capital Corp., VenGrowth Capital Partners, Katsura Investments, Desjardins Venture Capital Group, RBC Capital Partners and Goldman Sachs. The company had closed its $7.1 million Series A deal in late 2001.

Jack DiMaio has been named CEO of Alternative Investments at Credit Suisse Asset Management. He is currently head of both CSFB’s Global Credit Products and Fixed Income divisions. DiMaio will continue to serve on CSFB’s Executive Board.

Rand McNally & Co. has completed its financial restructuring and recapitalization, and has emerged from Chapter 11. Leonard Green & Partners, a Los Angeles-based private equity firm, now owns a majority interest of the cartography company.

Emagia Corp., a Santa Clara, Calif.-based provider of enterprise cash-flow management solutions, has raised $7.5 million in second round funding from Sigma Partners and WestBridge Capital Partners.

Adapt Media, a New York-based provider of wireless outdoor advertising, has raised $8.5 million in Series C funding. Dolphin Equity Partners led the round alongside FA Technology Ventures and some existing investors.

Aethon Inc., a Pittsburgh-based robotics company, has raised $3 million. Half of the money came from Draper Triangle Ventures, while the rest was committed by local private investors.

The Carlyle Group has agreed to acquire the aerospace division of Fiat SpA for around $1.7 billion.

Tim Ng has joined SoundView Technology Group as a managing director and head of M&A. Ng most recently worked with the Palo Alto-based technology group at Credit Suisse First Boston. He previously helped launch the M&A group at Cowen & Co.

Meritage Private Equity Funds has launched a new program called FastStart, which will invest up to $1 million in seed capital to qualified, start-up and early-stage communications companies.

William Ford, a partner with General Atlantic Partners, has stepped down from his longtime board position with E*Trade Group Inc..

Electra Partners Europe has led a management buyout for UK-based Ashbourne Care Homes Group. The deal includes £15 million of equity, the assumption of £14 million of debt and a commitment for an additional £35 million of growth capital.

Benjamin Edmands will replace Damion Wicker on the board of DJ Orthopedics (NYSE:DJO). Both men are investors with JPMorgan Partners.

Mark Shafir, former director of investment banking at Thomas Weisel Partners, has been named head of M&A at Lehman Brothers.

PrivateEquityCentral.net is reporting that Kevin Newman has been named president and COO of Atlantic-Pacific Capital. He had led the in-house private equity placement group at Lehman Brothers since 1999.
NEWS FROM MONDAY 4/7
Accel Partners has decided to reduce both its eighth fund and strategic side fund by an additional 28.5 percent. This is on top of last May’s 32.1% cut, and would bring the funds’ capitalizations down to $679.25 million and $97.1 million, respectively. Once Accel receives LP approval, it will have handed back more committed capital than any other venture capital firm in history. For more on this exclusive story, go to www.PrivateEquityWeek.com.

BeamReach Networks, a Sunnyvale, Calif.-based developer of broadband wireless access systems, has raised $15 million in third round funding. Investors included The Goldman Sachs Group, Inc., Sofinnova Ventures, Inc., Walden International, Mitsui & Co. Venture Partners and London Pacific Life and Annuity Co. The company last raised venture capital in early 2001 when it closed a $40 million Series B deal at a post-money valuation of $120 million.

Network Associates has agreed to purchase Entercept Security Technologies Inc. for $120 million in cash. The San Jose, Calif.-based network security provider had raised over $60 million in venture capital since its 1992 founding. Investors included Alpine Technology Ventures, Dell Ventures, Diamondhead Ventures, Intel Capital, JK&B Capital, Sun Microsystems and UBS Capital.

The Yell Group has reportedly expressed interest in the telephone directories business of Telecom Italia. Yell, a UK-based directories publisher that is majority owned by buyout firms Hicks Muse and Apax Partners, could end up competing for the SeatPG SpA unit against two different private equity syndicates. The first is said to be comprised of CVC Capital Partners, Permira and BC Partners. The other is made up of Blackstone Group, Kohlberg, Kravis Roberts & Co. and the Texas Pacific Group. The Telecom Italia directories business has 2002 revenue of around $1.5 billion, and the Yell bid could come in at around $4.6 billion.

Broadmargin, a Fairfax, Va.-based provider of telecom cost management solutions, has received $21 million in new funding led by ABS Capital Partners. Existing backer Concert Capital Partners also participated on the deal.

Emulation and Verification Engineering, a Palaiseau, France-based electronic design automation firm, has raised $3.2 million in Series A Funding. 3i, Credit Lyonnais Private Equity and Siparex each provided one-third of the total investment.

The Rowe Cos. has sold the outstanding capital stock of its subsidiary, The Mitchell Gold Co., and certain related intangible assets to an entity formed by Wafra Partners LLC, a New York-based private equity firm, and Mitchell Gold management for approximately $46 million in cash, subject to adjustments for certain real property indebtedness and final working capital determination, which is expected to result in net proceeds of approximately $40 million. The sale was effective as of the close of business April 2nd.

Les Echos is reporting that San Francisco-based Global Asset Capital has been chosen by Vivendi Universal to take over Viventures Partners. The Global Asset Capital bid was supported by Hamilton Lane Advisors, and beat out a competing offer from a holding company created by Belgian businessman Albert Fre`re.

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