PE Week Wire — Friday, May 27


Random Ramblings (Part Duex)

Some odds and ends to carry us into the weekend:

*** Survey Reminder: By now you should’ve received an email about completing our bi-annual ACG/Thomson DealMakers Survey. It only takes a few minutes to fill out, and all respondents will be entered in a drawing to win incentives including an iPod, a Buyouts subscription, a pass to Buyouts Symposium West (Nov. 1-2 in San Francisco) and a subscription to Pratt’s Guide. Make sure you enter your PE Week Wire email account to take the survey, which you can find at

*** As you read yesterday, Enel SpA has agreed to sell its stake in Italian Telecom company Wind SpA for approximately 12.14 billion euros to a consortium led by Egyptian businessman Naguib Sawiris. This is a deal that Blackstone Group had been bidding on, but apparently came in a bit low at 11.6 billion euros. What might be an interesting question going forward could be whether or not this deal will end up being viewed as the second-largest leveraged buyout of all time. It certainly meets the mark in terms of dollars, as it converts into $15.12 billion (easily topping the proposed SunGard deal, nowhere close to the KKR-Nabisco bell weather).

The only stumbling block, it seems, is that the deal not only wasn’t led by a private equity firm, it may not involve any at all. Sawiris is a telecom guy, not a private equity guy. Various news reports also say that both Wilbur Ross and Philippe Nguyen are involved, but as individuals, not via their private equity firms WL Ross & Co. and Investors in Private Equity, respectively. I’m not quite sure what I think here, since Blackstone could have structured the deal exactly the same, and it would clearly be the second-largest LBO ever (not to mention the largest-ever in Europe). What say you? LBO or no LBO?

*** Speaking of huge deals, the year’s largest VC deal just got a bit larger. Integro Ltd. announced earlier this month that it had raised $300 million to launch a New York-based insurance brokerage, with the help of firms like DLJ Merchant Banking and Weston Presidio. According to a regulatory filing, however, that figure is actually closer to $312 million.

*** Finally, a very happy birthday to my wife. You’re simply the best part of my life J, and I can’t imagine possibly being happier than I am with you.

    Top Three


BC Partners has closed its eighth buyout fund with approximately 5.5 billion euros in limited partner commitments.

Caris Ltd. has completed a $120 million recap of Pathology Partners, an Irving, Texas-based provider of GI diagnostic services to physicians treating patients in an ambulatory setting. Cash proceeds from the deal, net of transaction expenses, have been used to redeem equity securities held by early Pathway shareholders like Sprout Group, Salix Ventures and Alliance Technology Ventures. Company management will retain a minority interest in the company, with Caris becoming majority shareholder.

Cisco Systems Inc. (Nasdaq: CSCO) has agreed to acquire FineGround Networks Inc., a Campbell, Calif.-based provider of network appliances that accelerate, secure and monitor application delivery. The deal is valued at approximately $70 million in cash and options, and is expected to close by July 30. FineGround has raised approximately $25 million in VC funding since its 2000 inception from backers like New Enterprise Associates and Worldview Technology Partners.

    VC Deals

Innovative Biosensors Inc., a College Park, Md.-based developer of tests to detect harmful pathogens, has raised $3.5 million in Series A funding. Harbert Venture Partners led the deal, and was joined by New Markets Growth Fund and the Maryland Venture Fund.

Dynamic Payment Ventures Inc., a Plano, Texas-based provider of payment processing services and loyalty programs to the restaurant industry, has raised $3 million in Series A funding from Catamount Ventures and CEOLO Inv*stments.

FleetCor Technologies Inc., a Norcross, Ga.-based provider of fleet card processing solutions for the business fleet industry, is in talks to receive $75 million in private equity funding from Bain Capital, according to VentureWire. The deal would be in exchange for a minority position, and would provide some liquidity for existing FleetCor shareholders like Summit Partners, GCC Inv*stments and Advantage Capital Partners.

    Buyout Deals

Tulcan Private Equity has acquired Pye & Hogan Machines Co., an Old Saybrook, Conn.-based aerospace industry supplier. No financial terms were disclosed on the deal, which featured Woodbridge Group as the exclusive M&A advisor to Pye & Hogan.

Citigroup Venture Capital has agreed to acquire a 14.69% equity stake in Lakshmi Overseas Industries Ltd., an India-based rice milling company.

Labor Ready Inc. (NYSE: LRW) has agreed to acquire CLP Resources Inc., a Reno, Nev.-based skilled trades staffing company, from Baird Capital Partners and William Blair Capital Partners. The deal is expected to close today, and is valued at approximately $46.2 million.

Texas Pacific Group and Apax Partners have received European Commission approival for their acquisition of Telecom Italia‘s 80.87% stake in TIM Hellas Telecommunications SA (Nasdaq: TIMHY), a Greece-based wireless telecom operator. The deal is valued at just over 1.11 billion euros, or approximately 16.43 euros per share, and is expected to close by July. D*bt financing will be provided by J.P. Morgan and Deutsche Bank.

    PE-Backed IPOs

ProStrakan Group Ltd., a UK-based drug company formed after the merger of ProSkelia and Strakan, has cut its valuation in anticipation of floatation on the London Stock Exchange. The company originally said the IPO would value it at between Gbp270 million and Gbp290 million, but now has cut that estimated figure to between Gbp210 million and Gbp250 million. ProStraken shareholders include 3i Group, LMS, Innoven Partenaires and Quest for Growth.

SSA Global Technologies Inc., a Chicago-based provider of enterprise application software, priced 9 million common shares at $11 per share, for a total IPO take of approximately $99 million. The company originally filed to raise $200 million, and had set terms at 14.3 million shares to be offered at between $13 and $15 per share. SSA Global is trading on the Nasdaq under ticker symbol SSAG, while JPMorgan and Citigroup served as co-lead underwriters on the IPO. It was formed in 2000 to acquire the assets of bankrupt company System Software Associates Inc., and since has acquired such companies as Infinium Software Inc., Ironside Technologies Inc., Elevon Inc. and EXE Technologies Inc. It currently is controlled by private equity firms General Atlantic Partners and Cerberus Capital Management.

EV3 Inc. of Plymouth, Minn., has set its proposed IPO terms to 11.765 million common shares being offered at between $16 and $18 per share. It plans to trade on the Nasdaq under ticker symbol EVVV, with Piper Jaffray and Banc of America Securities serving as co-lead underwriters. EV3 was formed in 2000 as an endovascular device acquisition platform by industry veteran Dale Spencer, private equity firm Warburg Pincus and medical device-focused VC firm The Vertical Group. Warburg Pincus currently holds more than a 90% stake in the company, but does not plan to sell shares during the IPO.

    PE-Backed M&A

Entelos Inc., a Foster City, Calif.-based developer of bio-simulation technologies for pharmaceutical R&D, has acquired Discovery Innovations Inc., a Naples, Fla.-based provider of data integration products and services to the life sciences industry. No financial terms were disclosed. Entelos has raised nearly $50 million in VC funding since its 1996 inception, from firms like Abingworth Management, Bear Stearns Health Innovations, Charles River Ventures, Brentwood Venture Capital and St. Paul Venture Capital. Discovery Innovations raised around $25 million in VC funding since its 1995 inception, from Alloy Ventures, Brentwood Venture Capital, Sanderling Ventures, Sofinnova Ventures and Integrity Partners.

Chromos Molecular Systems Inc. (TSX: CHR) has agreed to acquire Targeted Molecules Corp., a San Diego-based biotech company focused on the development of two antibody candidates for the treatment of multiple sclerosis and acute thrombosis, respectively. The deal will involve the issuance of 20.1 million shares of Chromos common stock, and is expected to close in July. Targeted Molecules has raised over $13 million in VC funding since its 2000 inception, from firms like GeneChem Financial Corp., Inglewood Ventures, NDI Capital and FAT Capital Management.

    Firm & Fund News

Integral Capital Partners of Menlo Park, Calif. is looking to raise up to $300 million for its seventh fund, and already has approximately $125 million in commitments, according to a regulatory filing. Morgan Stanley is serving as placement agent.

The Sterling Group of Houston has closed its second private equity fund focused on acquiring mid-market manufacturing, industrial services and distribution companies based in North America. Limited partner commitments totaled $450 million, while the firm’s principals contributed an additional $20 million. LPs included AXA Private Equity, BNP Paribas, BOKF Private Equity, CSFB, Danske Private Equity, Hoegh Capital Partners, INVESCO Private Capital, The Meadows Foundation, Montreal Transit Workers, RCP Advisors, Standard Life Investments, Swiss Re Private Equity Partners and Texas Tech University. Lazard Freres acted as placement agent.

Electra Partners‘ 21-person buyout team is planning to split off from its parent organization (which runs the electra Inv*stment Trust and two Electra Kingsway VC trusts), according to The Times of London. The buyout team will continue to be led by Nigel McConnell.

    Human Resources

Samantha Sacks has joined Pacific Corporate Group as controller. She previously served as controller and assistant director of vendor and product management, plus Sarbanes-Oxley oversight, for Cigna Corp. She replaces Dawn Duffy, who left just over one month ago.

Correction: My Chi To’s name was misspelled in Wednesday’s Wire. She was named partner at the law firm oif Debevoise & Plimpton LLP.


Random Ramblings

A few scattered notes as we Bay Staters continue our fruitless wait for the sun to return (so glad I opened my pool a few weeks back):

*** Remember when the term “stealth” was mostly used to describe early-stage companies? Me too, but today, more and more, it’s becoming an qualifier for nascent venture capital firms, like the upcoming efforts from veteran VCs Stewart Alsop and Jeff Drazen. (A quick aside: Alsop was recently referred to in the NY Times as a “tourist” VC, but I think it’s a mischaracterization, since he hasn’t left the market. He simply left New Enterprise Associates. Tourism isn’t about when you arrive, it’s about when you leave).

Anyway, the latest in this burgeoning class of emerging managers is something called Mainspring Capital Partners, which currently is pre-marketing its inaugural fund to prospective LPs. The Boston-based firm will operate as an independent affiliate of I-bank Lane Berry & Co., and plans to make growth equity investments in revenue-stage companies in the technology, communications, media and business services spaces. Ideally, Mainspring portfolio plays will not have received prior institutional funding. Its principals are Mike Balmuth (formerly of Summit Partners and the Summit Accelerator Fund), Pat Curran (formerly of Great Hill Partners) and Fred Lane (Lane Berry co-founder who was the eighth banker hired at DLJ).

Not surprisingly, its structure is kind of a cross between The Sprout Group of the 1970s and 1980s (in terms of its arm’s length DLJ affiliation) and the Summit Partners/TA Associates model (in terms of company stage and an intention to integrate cold-calling into its deal-flow strategy). Could be an interesting one to watch…

*** On paper, VSP Capital and AIG Capital Partners don’t seem to have much in common. The former is an early-stage VC firm in Silicon Valley, while the later is a multi-stage private equity firm focused on the emerging markets. Unfortunately, however, their fortunes are beginning to look fairly similar. We went over the most recent AIG CP happenings on Tuesday, and now word comes that the six-member limited partner advisory council of VSP Capital has unanimously agreed to recommend that all VSP LPs discontinue the firm’s third fund. The impetus in this case is the departure of three of the firm’s five general partners (including two in the past month), and some fairly pervasive rumors as to why it’s happened (like the Mercury News’ Matt Marshall wrote, the rumors are of such a personal nature that their publication is probably more destructive than constructive). As with AIG, the VSP situatio! n will involve a bunch of paperwork and arm-twisting before its conclusion.

*** Credit rating agency Standard & Poor’s is apparently planning to launch a private equity fund index. Let the anti-transparency arguments fly…

*** A quick correction to my piece last week on Howard Anderson. It seems that he is no longer launching a consultancy for non-profits, and instead is spending his time as a “consigliare” for CEOs who desire some independent (i.e., not board of directors) advice. Also, worth noting that I recently conducted a Q&A with Howard about his controversial MIT Tech Review piece, which will appear in the July issue of Venture Capital Journal.

*** Finally, a sad note out of Thailand. Caroline Chan, an investment professional with venture capital firm KLM Capital, has officially been pronounced dead, after having gone missing in the December 26 tsunami. Our deepest condolences to her family and colleagues.

    Top Three


Cylene Pharmaceuticals Inc., a San Diego-based drug discovery and development company focused on oncology, has raised $26.3 million in Series B funding. Coastview Capital led the deal, and was joined by BioVentures Inv*sdtors, Mitsui & Co. Venture Partners, Morningside Venture Investments, TDL Investors, William Harris Investors, Lakeview Capital and the Viterbi Group. Return backers included Sanderling Ventures, Novartis BioVentures, Research Corporation Technologies and IngleWood Ventures.

The Blackstone Group has lost out in its efforts to acquire Enel SpA’s stake in Italian telecom company Wind SpA. Enel announced today that it has accepted a bid from Weather Inv*stments SARL, which is controlled by Egyptian businessman Naguib Sawiris. The total transaction is valued at approximately 12.14 billion euros, with Enel retaining a minority position.

Bay Partners is looking to raise up to $325 million for its eleventh venture capital fund, according to a regulatory filing. The Cupertino, Calif.-based firm already has closed on $174.5 million in commitments from limited partners like Paul Capital, the BP Pension and Horsley Bridge Partners.

    VC Deals

SpikeSource Inc., a Redwood City, Calif.-based open source IT infrastructure company, has closed its Series A funding round with $12.85 million in preferred stock and $1.35 million in convertible securities, according to a regulatory filing. Participants included Fidelity Ventures and Kleiner Perkins Caufield & Byers. The company has been incubated by KPCB since its 2003 inception.

Aran Technologies Ltd., a Dublin, Ireland-based provider of end-to-end mobile customer experience management software for operators, has raised $10 million in second-round funding. Participants included Trident Capital, Cross-Atlantic Capital Partners, Oyster Inv*stment Funds and Enterprise Ireland.

The NAU Group, a Ramsey, Minn.-based provider of crop insurance, has received an undisclosed amount of private funding from The Lightyear Fund.

Tectura Inc., a Redwood City, Calif.-based provider of Microsoft-integrated business solutions to mid-market companies and large enterprise divisions, has raised $10 million in private equity funding from Ritchie Capital Management.

OptiMedica Corp., a Santa Monica, Calif.-based medical device startup, has raised Series A funding from Kleiner Perkins Caufield & Byers, according to a regulatory filing. Brook Byers of KPCB will serve on the company’s board of directors.

    Buyout Deals


Kelso & Co. has completed its acquisition of Insurance Auto Auctions Inc. (Nasdaq: IAAI), a Westchester, Ill.-based provider of auto salvage services to insurance companies. The deal was valued at approximately $400 million, with IAAI shareholders receiving $28.25 per share in cash.

Allied Domecq PLC, a publicly-traded UK liquor company, has given a prospective buyout consortium a June 29 deadline to either make a bid, or go away. In April, the company agreed to a 7.4 billion euros takeover offer from France-based Pernod Picard SA, but subsequently was approached by a group that includes Constellation Brands, Brown-Foreman Corp., Blackstone Group and Lion Capital (f.k.a. Hicks Muse Europe). The Constellation-led group, however, has not yet made a formal offer.

DLJ Merchant Banking is looking to sell Mueller Group Inc. for up to $1 billion, according to The Deal. Mueller is a Decatur, Ill.-based valve and hydrant maker that DLJ acquired in 2000.

Sentinel Capital Partners has acquired Metro Dentalcare, a Minnesota-based dental clinic operator and provider of group dental care to more than 125,000 patients in the Minneapolis and St. Paul metropolitan area. No financial terms were disclosed.

Newbridge Capital and affiliate TPG-Axon Capital have agreed to pay approximately $188 million for a 26% stake in Singapore-based private healthcare company Parkway Holdings Ltd. from founding family shareholders. The deal is expected to close next month.

Repsol YPF, a Spain-based oil and gas company, is planning to bid for Royal Dutch/Shell Group’s liquefied petroleum gas distribution and marketing business. The deal could be worth more than $2 billion, and Repsol already is in negotiations with several potential funding partners, including CVC.

Whitbred PLC, a publicly-traded UK hospitality company, reportedly has received buyout interest from firms that include Apax Partners and CVC. According to The London Evening Standard, prospective buyers want to acquire Whitbred, and then sell off most divisions except for its Premier Travel Inn hotels chain.

CAM Fabrication Inc., a distributor of concrete forms and accessories in the Southeastern U.S., has completed a $24.5 million recapitalization. JMH Capital led the deal, and was assisted by mezzanine firm Praesidian Capital Inv*stors.

    PE-Backed M&A

UTStarcom Inc. (Nasdaq: UTSIE) has acquired Pedestal Networks Inc., a Fremont, Calif.-based broadband access provider, as first reported yesterday by Light Reading. No financial terms were disclosed. Pedestal had raised approximately $30 million in VC funding from firms like Benchmark Capital, DMC-Doll Capital Management, Skymoon Ventures and Duff Ackerman & Goodrich LLC.

    Firm & Fund News

NGEN Partners, a Santa Barbara, Calif.-based VC firm focused on mid-to-late-stage companies in the materials science space, has held a first closing on its second fund, which is targeted at $150 million. Participating limited partners include CalPERS, CalSTRS, The Camille and Henry Dreyfus Foundation, Cycad Group, the Glenn Foundation, Siemens Venture Capital, Asahi Glass Co., Air Products, BASF, Bayer MaterialScience, DuPont, DSM and Henkel.

    Human Resources

Shawn Marcell has joined Science Center Ventures as a senior vice president, after having most recently served as chief operating officer of biotech company Linguagen Corp. Science Center Ventures is a new early-stage venture capital effort from The Science Center, a commercialization engine for science and tech companies in the Greater Philadelphia area.

Michael Murphy has joined FTI Consulting Inc. (NYSE: FCN) as a senior managing director in the corporate finance/restructuring practice. He most recently served as president and CEO of Am-Beo Ltd., an Ireland-based software and services company focused on the telecom and content industries.

Josh Kopelman, founder of, and Richard Forman, founder of (Nasdaq: RCOM), have joined the board of New York Angels Inc.

GE Commercial Finance has named four executives to its Global Media & Communications origination team: Mark Huang was appointed senior vice president of technology lending; Eitan Milstein has been named senior vice president of the special situations team; Kevin Khanna has been named vice president focused on the entertainment sector; and Robert Malone has been named vice president focused on the media sector.

Geoffrey Berger has joined Atlantic-Pacific Capital as a principal in charge of direct placements. He had spent the past seven years as a partner with Equinox Capital, and previously worked with both Bank of Boston and Bessemer Securities Corp.

Roy Merritt has joined Amadeus Capital Partners as a special partner. He most recently served as founder of Orcapital, having previously worked with Providence Equity Partners, DB Capital Ventures, Espirit Telecom Group and Apax Partners.


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    Top Three


InPhase Technologies Inc., a Longmont, Colo.-based provider of holographic disk storage drive and media development, has raised $32.1 million in Series C funding. Bayer MaterialScience AG participated on the deal as a financial and strategic backer, and was joined by Nanotech Partners Ltd. (sponsored by Mitsubishi Corp.), New Venture Partners and existing shareholders Hitachi Maxell Ltd., ALPS Information Technology Fund, Yasuda Enterprise Development Co. and Japan Asia Investment Co. The company has raised approximately $54 million in total VC funding since its 2000 inception.

RazorGator Interactive Group Inc., a Beverly Hills, Calif.-based online ticket agent for sold-out sporting and entertainment events worldwide, has raised $26 million in Series A funding. Kleiner Perkins Caufield & Byers and Oak Inv*stment Partners co-led the deal, with Hercules Technology Growth Capital also participating.

MTU Aero Engines Holding AG, a Germany-based maker of aircraft engines, has set its proposed IPO terms to 19 euros to 22 euros per share, with up to 35.65 million shares to be issued. MTU plans to price on the Frankfurt Stock Exchange, and is controlled by Kohlberg, Kravis Roberts & Co. (KKR). The IPO would value MTU at between 1.05 billion euros and 1.2 billion euros, which is lower than the 1.5 billion euros KKR paid for MTU when buying it from DaimlerChrysler last year.

    VC Deals

Tropic Networks Inc., an Ottawa-based supplier of regional and metro-area optical networking equipment, has raised US$33 million in additional VC funding. JPMorgan Partners led the deal, and was joined by Narra Venture Capital, Dynamic Venture Opportunities Fund, CrossBridge Partners Fund, VentureLink Fund and The Bank of Nova Scotia. Return backers included Altamira, Anschutz Inv*stment Co., Crescendo Ventures, Celtic House Venture Partners, Goldman Sachs, Kodiak Venture Partners, Ontario Teachers’ Pension Plan and Raza Venture Fund. In other Tropic Networks news, the company secured a $15 million operating capital facility from Silicon Valley Bank.

Proxilliant Systems Corp. (f.k.a. SpaceNet Communications AB) has raised 2 million euros in VC funding from Creandum and Northzone Ventures. Proxilliant is a cable networks technology company with offices in both Stockholm, Sweden and Bala Cynwyd, Penn.

Qumas, a Cork, Ireland-based provider of enterprise risk and compliance management solutions, has raised $10 million in VC funding from Fidelity Ventures and General Catalyst Partners.

Quickoffice Inc., a Mountain View, Calif.-based provider of office document software for mobile professionals, has raised $7 million in a VC funding round led by Mayfield. The deal was structured as Series C convertible preferred stock, but is Quickoffice’s first institutional round of funding.

Isilon Systems Inc., a Seattle-based provider of clustered storage solutions, has raised $20 million in fourth-round funding. Focus Ventures led the deal, and was joined by return backers Lehman Brothers Venture Partners, Sequoia Capital, Atlas Venture and Madrona Venture Group. The company has now raised nearly $60 million in total VC funding since its 2001 inception.

Energy 51 Inc., a Calgary, Alberta-based oil and gas exploration company, has received up to Cdn$17.8 million in private equity commitments from Greenhill Capital Partners and COSCO Capital Management.

Southern Bay Energy LLC, a Houston, Texas-based oil and gas exploration and production company, has received $10 million in private equity funding from Wachovia Capital Partners.

    Buyout Deals


Freeman Spogli & Co. has completed its acquisition of a majority position in Santa Ana, Calif.-based Bright Now Dental Inc. from Gryphon Inv*stors, which will remain a minority shareholder.

Francisco Partners has completed its acquisition of RedPrairie Corp., a Waukesha, Wis.-based provider of supply chain technology solutions that enable business process transformation. No financial terms were disclosed. RedPrairie received a significant minority inv*stment in 1998 from Advent International, Vestar Capital Partners and GE Capital.

The Riverside Co. has acquired Embracing HospiceCare, a provider of hospice services with three locations in Georgia. No financial terms were disclosed. Riverside plans to combine EH with American Hospice Management, a platform company it acquired in January 2004.

    PE-Backed IPOs

Allion Healthcare Inc., a Melville, N.Y.-based provider of specialty pharmacy and disea