PE Week Wire — Friday, October 15

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Are You Sure It’s Friday?

Fridays are a typical abyss for industry news, which is one reason that the print edition of PE Week goes to press on Thursday nights. It’s kind of like a working vacation for PR flacks and their minions, with pizza parties and conversations about how to harass reporters the following week (not that we could do our job without it). This Friday, however, stands as a notable exception, which means that I haven’t yet read many of your emails. In turn, Friday Feedback will be transposed into Monday Mouth-Off. While we wait:

* As regular readers are aware, I’ve been talking for quite some time about the concept of limited partner overhang, particularly in terms of the venture capital market. This theory is based on a belief that VC funds are getting smaller, while the pool of available institutional capital is getting larger. The latter part of this equation is based on three main factors: (1) An influx of new institutional investors, particularly from overseas; (2) An overall increase in existing LP allocations to private equity; and that (3) Even static LP allocations are worth more today in hard dollars than a few years ago, thanks to overall portfolio gains. I still believe all this, but must acknowledge that Part 3 is losing some validity, as the public equity markets continue to tank. The average LP still has more capital under management today than in 2002, but perhaps not more than at the end of 2003. It may soon be time to make a theoretical adjustment.

* A number of you have written in to ask why I haven’t yet discussed the Iraq-Carlyle Group-James Baker situation and accusations. Both the short and long answer is that I haven’t yet looked into it, beyond reading the various news articles (plus a few conspiratorial blogs). Once I do find the time, however, you’ll be the first to know.

* Most interesting quote from last Sunday’s NY Times interview with Teddy Forstmann: “Would I have liked Forstmann Little to go on forever? Yes, yes I would have. But if I thought all I was good for was to invest money for pension funds, I think I would put a gun in my ear. I hope to Christ that’s not why I was put on this earth. Man, I hope I have other interesting and fun things to do.”

* Sports: No, I don’t want to talk about it.

* Politics: Final PE Week Wire presidential poll coming next Tuesday. Final note on the debates is that Wednesday’s edition had far too much substance – on both sides — to get mired in this chattering class idiocy about the appropriateness of citing Mary Cheney during an answer to a question about the “choice” of homosexuality. Kerry’s statement was not offensive, unless you find homosexuality itself to be offensive.

* Personal: My father is a longtime reader of this column, and tomorrow will move from his beloved Bay State to North Carolina. Good luck dad, and save me some barbeque.

MacroGenics Inc., a Rockville, Md.-based biotech company focused on treating cancer, autoimmune disorders and infectious diseases, has raised $30.5 million in Series B funding. Alta Partners and TPG Ventures co-led the deal, and were joined by fellow new investors Mithra Group, Red Abbey Venture Partners and Emerging Technology Partners. Return backers included InterWest Partners, MPM Capital, OrbiMed, Cogene BioTech Ventures, Vivo Ventures and Hunt Ventures. The company now has raised $61.7 million in total VC funding since its 2000 inception, including a tranched-out $31.2 million Series A round. www.macrogenics.com

Lehman Brothers has hired a team to invest in secondary interests of private equity funds. Brian Talbot will serve as a managing director and head of the Secondary Fund Investing Group, after having served as global head of secondary fund investing at Deutsche Bank. Also joining the group from Deutsche Bank are Ethan Falove and Tristram Perkins, who will serve as senior vice presidents. Talbot and his team will report to Tony Tutrone, managing director and head of Lehman’s private funds investment group, and to Mike Odrich, managing director of head of global private equity. www.lehman.com

Leonard Green & Partners once again looks like it may buy out Portland, Ore.-based Hollywood Entertainment Corp. (Nasdaq: HLWY). The Los Angeles-based firm originally had agreed to acquire the video rental chain for $14 per share (or $850.6 million plus $351 million in assumed debt and $117 million in cash on hand), but later suggested that the deal might not occur due to unfavorable market conditions. The deal is back on, however, thanks to a revised agreement that only sees Leonard Green paying $12 per share. www.hollywoodvideo.com

Gloucester Pharmaceuticals Inc., a Cambridge, Mass.-based drug company focused on cancer therapeutics, has raised $29 million in Series B funding. Prospect Venture Partners, Rho Ventures and ProQuest Investments co-led the deal, and were joined by fellow new investor CIBC Capital Partners. Founding investor Apple Tree Partners also participated. www.gloucesterpharma.com

Zinc Matrix Power Inc., a Santa Barbara, Calif.-based developer of rechargeable alkaline battery technologies for commercial and military markets, has raised $9 million. OnPoint Technologies, a VC fund operated by the U.S. Army, led the deal, and was joined by Intel Capital and existing angel investors. www.zmp.com

Firefly Energy Inc., a Peoria, Ill.-based provider of lead acid battery technology, has raised $4 million in Series A funding. KB Partners led the deal, and was joined by United Defense LP (NYSE: UDI). The company was formed last year as a spinout from Caterpillar Inc. (NYSE: CAT), via a non-profit business incubator named Peoria NEXT. www.fireflyenergy.com

Symphoniq Corp., a Palo Alto, Calif.-based provider of software to help IT groups find and solve performance problems, has launched with an undisclosed amount of venture capital funding from Greylock and InterWest Partners. The company is being led by NetIQ (Nasdaq: NTIQ) founders Hon Wong, Ching-Fa Hwang and Her-daw Che. www.symphoniq.com

Aureus Pharma, a Paris, France-based life sciences knowledge management company, has raised Euro 3 million in new venture capital funding. New investors OTC Asset Management and AXA Private Equity were joined on the deal by return backersBIOAM and CDC Enterprises-FP Gestion. www.aureus-pharma.com

TxCell, a Nice, France-based developer of anti-inflammatory therapies, has raised Euro 10.5 million in first-round funding. New investors included – Auriga Partners, AXA Private Equity, BioAm, CDC and SPEF Venture, while seed backer Inserm-Transfert also participated.

Warburg Pincus announced last month that it would invest $350 million in equity to help support Jarden Corp.‘s (NYSE: JAH) $745.6 million acquisition of American Household Inc., the parent company of consumer products providers The Coleman Co. and Sunbeam Products Inc. The Warburg investment now has been reduced to $300 million, with Catterton Partners picking up the additional $50 million. www.jarden.com

The Blackstone Group has completed its acquired Cine-UK Ltd., a UK-based cinema chain operator, for approximately GBP 120 million. The seller was an investor consortium comprised on JPMorgan Partners, RIT Capital Partners PLC and Botts & Co., while Lehman Brothers served as M&A advisor and provided debt financing to Blackstone to finance the acquisition. www.cineworld.co.uk

Founders Equity Inc. has acquired Glass America, a Chicago-based operator of 14 automobile glass replacement and repair businesses throughout the United States, for $13.6 million. Co-investors included Main Street Resources and affiliates of JO Hambro Capital Management. www.fequity.com

Corel Corp., an Ottawa-based software company, has agreed to acquire Jasc Software Inc., an Eden Prairie, Minn.-based developer of the Paint Shop family of digital photography and image editing software. No financial terms were disclosed on the deal, which is expected to close later this month. Corel was acquired in August 2003 by Vector Capital Group of San Francisco. www.jasc.com www.corel.com

UTI Worldwide Inc. (Nasdaq: UTIW) has acquired Unigistix Inc., an Ontario, Canada-based provider of third-party logistics, for approximately Cdn$35 million. Unigistix had been bought out in March 2002 by Wynnchurch Capital Partners, Caisse de depot et placement du Quebec and Roynat Capital. www.unigistix.com

Amphire Solutions Inc., a Redwood Shores, Calif.-based provider of supply chain management solutions, has acquired Full Degree Inc., Palo Alto, Calif.-based provider of product information management and data synchronization solutions. No financial terms were disclosed. Full Degree has raised around $11 million in VC funding from Convergence Partners and individual investors. www.fulldegree.com

PlanetOut Inc., a San Francisco-based online media company serving the gay, lesbian and transgender communities, has begun trading on the Nasdaq under ticker symbol LGBT. The company priced 4.65 million common shares at $9 per share (below its $12-$14 range), for a total IPO take of approximately $41.85 million. The company has raised over $36.5 million in VC funding, with significant shareholders including JPMorgan Partners, Flatiron Partners, AOL, JH Partners and Mayfield. www.planetout.com

GuruNet Corp., a Jerusalem-based provider of integrated online reference answers, has begun trading on the AMEX under ticker symbol GRU. The company priced 2.35 million common shares at $5 per share, for a total IPO take of approximately $11.75 million. GuruNet originally filed for its IPO back in May, when it hoped to raise $76.7 million and list on the Nasdaq SmallCap market. It has raised over $30 million in VC funding since its 1999 inception at Atomica Corp., with significant shareholders including Highland Capital Partners, Flatiron Partners, Israel Seed Partners and the Dawntreader Fund. www.gurunet.com

China Finance Online Co. Ltd., a Beijing-based provider of financial and listed company data and information, will begin trading on the Nasdaq under ticker symbol JRJC. The company priced 6.2 million American Depository Shares (ADS) at $13 per ADS (above its $10-$12 range), for a total IPO take of approximately $80.6 million. The company lists IDG Technology Ventures and Vertex Technology Fund among its significant shareholders. www.cf99.com

Bill Barrett Corp., a Denver-based oil and gas exploration company, has set its IPO terms to 12 million common shares being offered at $20-$23 per share. The company lists Warburg Pincus, Goldman Sachs and JPMorgan Partners as significant shareholders. www.billbarrettcorp.com

BioNumerik Pharmaceuticals Inc., a San Antonio, Texas-based drug company focused on the prevention of side effects of existing cancer therapies, has set its IPO terms to 5 million common shares being offered at $14-$16 per share. The company has raised over $100 million in private equity funding since its 1995, including a $52 million strategic investment announced earlier this month from Takeda Pharmaceutical Co. Ltd. www.bionumerik.com

CoTherix Inc., a Belmont, Calif.-based drug development company, has again reduced its IPO offering price. The company now plans to sell 5 million shares at $6 per share, after having originally filed for $12-$14 per share, and later reducing it to $8-$10 per share. CoTherix has raised over $65 million in VC funding since its 2000 inception as Exhale Therapeutics Inc. Significant shareholders include MPM Capital, Alta Partners, Sofinnova Ventures, Sofinnova Capital, Spray Venture Partners and Frazier Healthcare. www.cotherix.com

S.R. One, a healthcare-focused venture capital firm affiliated with GlaxoSmithKline, has promoted Mark Strobeck to the position of principal. www.srone.com

Sarah Mattson-Fishman has joined San Francisco-based VC firm Partech International as a venture partner located in Israel. She previously served as a senior research assistant at RBC Capital Markets. www.partechvc.com

Paul Helmick has been named acting executive director of the West Virginia Venture Connection, which was formed four months ago. Helmick currently serves as CEO of Premier Strategies LLC, and is a serial entrepreneur. www.wvvc.org

Pharmion Corp. (Nasdaq: PHRM) announced that Jay Moorin, co-founder of VC firm ProQuest, has resigned from the company’s board of directors. He will be replaced by Edward McKinley, a senior advisor to Warburg Pincus. www.pharmion.com

Garrett Gruener and Edward Penhoet, both directors with Alta Partners, have been elected co-chairs of the Chabot Space & Science Center, an Oakland-based organization that provides Bay Area schools with astronomy and science education programs. www.chabotspace.org

Kohlberg & Co., a New York-based buyout firm focused on the middle-markets, has closed its fifth fund with $800 million in limited partner commitments. Lazard LLC served as placement agent. The firm had raised $576 million for its predecessor fund in 2000. www.kohlberg.com

Siguler Guff & Co. has held a first close of over $200 million on a new private equity fund targeted at companies operating in the Russian Federation and/or within other countries of the former Soviet Union. Limited partners include the European Bank for Reconstruction and the International Finance Corp. The fund is targeted at $350 million, and is a follow-up vehicle to the $155 million Russia Partners fund organized in 1994. www.sigulerguff.com

DW Healthcare Partners of Salt Lake City has closed its inaugural private equity fund with $88.3 million in limited partner commitments (including $12.6 million from the firm’s four managing directors). www.dwhp.com

Bridgepoint has sponsored a management buyout of John Brown Publishing from founder John Brown. The company is a UK-based contract publisher with annual revenue in excess of GBP 50 million. No financial terms of the acquisition were disclosed.

Accrete Partners has announced its formation as a New York-based firm to help companies increase market value and unlock liquidity options. www.accretepartners.com

Tri-Artisan Capital Partners LLC, a New York-based M&A advisory, has received an undisclosed amount of private equity investment from both Sumitomo Corp. of America and Sumitomo Corp. www.tri-artisan.com

Tiro Industries LLC, a Fridley, Minn.-based provider of personal care goods for professional salons, has voluntarily filed for Chapter 11 bankruptcy protection. In conjunction with the filing, Tiro has named Jay “Chip” AuWerter of turnaround management firm Glass & Associates as its interim CEO. Tiro Industries was bought out in 2003 by an investor group that included Convergent Capital Partners, Dailey Capital Management and Ironwood Capital Advisors. www.tiroinc.com

  Thursday, October 14

Softball Schieffer; Hedge Funds Move Into Mezz

Since I’m filling in for Dan just one day, I wasn’t planning to be too ambitious with today’s commentary. However, I can’t resist taking a quick jab at last night’s debate moderator Bob Schieffer, whose day job is hosting CBS’s “Face the Nation.” He had some good questions, and he kept things flowing, but he also uttered one of the more useless questions posed to the candidates during the debates when he asked “will you set a priority on trying to bring the nation back together?” the way it was in the aftermath of Sept. 11. Wow, that’s a tough one, Bob. It’s kind of like asking a general partner whether he or she will try to bring back positive returns for their limited partners. Perhaps the second-most useless question came next, when Schieffer asked the candidates what they had learned from their wives. Sure, it’s a touchy-feely question and served as a light moment in the debate, but it was ill-timed. You don’t end the very last televised debate of a presidential election with yet another softball question. I’m probably being overly critical, but I guess I expected more from a newsman who’s been at CBS since 1969. (I’ll tell you this much: If Dan was playing moderator he wouldn’t have let them off so easy.)

On a more market-relevant note, Wall Street Journal online subscribers should check out yesterday’s story on hedge funds getting into the mezzanine game. This was a logical next step considering hedge funds have already encroached upon private equity territory. It’s an opportunistic trend, similar to PE firms launching BDCs, but with hedge funds so flush with cash, this trend could have more legs than the brief BDC craze. We’ll be devoting an entire panel to the role of hedge funds in private equity at the upcoming Buyouts Symposium West conference next week in San Francisco . For more information on this panel and the full conference agenda, go to www.buyouts-symposium.com

Thanks,

Adam Reinebach

Piper Jaffray is spinning out its corporate VC arm to a team of four investment professionals. Headed by Buzz Benson, a Piper Jaffray Ventures managing director, the new group will be called Sightline Partners. The firm will maintain Piper Jaffray’s health care focus and also include PJV managing directors Maureen Harder, Ken Higgins and Heath Lukatch. Sightline will manage over $225 million of capital devoted to medical technology, biotech and healthcare services companies.

Research Triangle Park, N.C.-based Metabolon Inc ., a pharma company focused on metabolomics, has raised $9 million of Series A financing, including $5 million from Sevin Rosen Funds. The recent $5 million infusion came a couple months after an initial $4 million investment from The Aurora Funds, Trelys Funds, Alexandria Real Estate Equities and other investors. As part of the recent funding, Sevin Rosen General Partner John Oxaal will join Metabolon’s board. Metabolomics is a scientific approach to discovering and developing drugs and detecting diseases early. www.metabolon.com

Singapore-based Petra Foods Ltd ., a private equity-backed maker of cocoa products, plans to raise as much as $174.3 million in a public offering, Business Times Singapore is reporting. Petra is part owned by a private equity fund of Singapore-based CSLA Private Equity.

Washington-based Liquidity Services Inc ., an asset recovery company that runs custom online business-to-business auction marketplaces, has raised $20 million of private equity financing from ABS Capital Partners . Phil Clough, a general partner at ABS Capital, will join LSI’s board of directors as part of the deal. www.liquidityservicesinc.com .

GetActive Software , a Berkeley, Calif.-based member relationship management software company, has raised $7 million of Series C financing, Ascribe is reporting. The deal was co-led by Pacific Partners and El Dorado Ventures and also included return backers. The company has now raised $9 million of venture financing. www.getactive.com

Horsham, Pa.-based Nucleonics Inc ., a biotech company focused on RNA therapeutics, has raised $2.7 million of equipment financing from Oxford Finance Corp. Outside of the financing facility, Nucleonics has raised $50.8 million of venture financing. www.nucleonicsinc.com

Greenhill Capital Partners and Lime Rock Partners have invested $35 million in LMP Exploration Operating LLC, an oil and gas exploration company in Corpus Christi , Texas . The new company’s management includes president Michael Pedrotti as well as Duncan Chisholm, James Greshman, Michael Lucente, Jeff Uecker and Gregory Robins.

Ares Management will purchase Tinnerman Palnut Engineered Products, a Kohlberg & Co.-backed fastener and component manufacturer, with the help of $150 million in debt. BNP Paribas will provide a $150 million of financing, including an $85 million first lien amortizing term loan, a $40 million second lien term loan and a $25 million revolver.

ING is raising an NZ$129 million fund of funds to invest in Australian and New Zealand private equity funds, Dominion Post is reporting.

Nixon Peabody LLP has named Charles P. Jacobs , as head of its private equity team. Jacobs, who will split time between New York , Boston and San Francisco , has been a member of the firm’s management committee and chair of its business department. The private equity team now has about 60 attorneys.

   Wednesday, October 13

Partners Group Opens Shop in Singapore

Just like how VC firms hold partner meetings on Mondays, the combined editorial team of PE Week and Venture Capital Journal holds story meetings on Mondays. It is a conference call affair, with participation from writers and editors in Boston (just me), New York and San Francisco. One of our San Francisco-based staffers is Jerry Borrell, but I can’t remember the last time that Jerry was in on one of these meetings. Why? Because he’s typically traipsing around Asia, looking for copy (and we feel it would be rude to wake him at 2am).

Jerry’s latest scoop is that Switzerland-based Partners Group has opened an office in Singapore, in order to manage a new private equity fund-of-funds focused on the Asia-Pacific market. The vehicle – named Partners Group Asia-Pacific LP – already has held a $50 million first close, with a total target of between $150 million and $200 million. The capital will be split between buyout funds (mostly in Japan, Australia and Korea) and VC funds (mostly in India, China and Singapore). Paid PE Week subscribers can read more in Monday’s print edition.

Unrelated: Someone else will be producing the Wire tomorrow (unexpected family thing), but it will still look like it’s coming from me. Not quite sure yet just who that someone will be.

Iron Mountain Inc. (NYSE: IRM) has agreed to acquire Connected Corp., a Framingham, Mass.-based provider of backup services for data and disaster recovery. The deal is valued at approximately $117 million in cash, and is expected to close sometime this quarter. Connected Corp. has raised over $65 million in total VC funding since its 1995 inception, including a $30 million Series F infusion in 2001 at a post-money valuation of approximately $93 million. Company investors include Applied Technology, Granite Ventures, Solstice Capital, Fidelity Ventures, Deutsche Banc. Alex Brown, New York Life Capital Partners, Mobius Venture Capital, Intel Capital, Ironside Ventures, JPMorgan Partners and StarVest Partners. www.connected.com

LinkedIn Ltd., a Mountain View, Calif.-based provider of professional networking tools, has raised $10 million in Series B funding. Greylock led the deal, and was joined by Series A investor Sequoia Capital. The company also announced the addition of 14 new angel investors, including: Marc Andreesen, co-founder of Netscape and chairman of Opsware; Joe Kraus, co-founder of Excite; Josh Kopelman, founder of Half.com; and Peter Thiel, co-founder of PayPal. www.linkedin.com

Stewart Alsop will leave his general partner post with New Enterprise Partners at the end of the year, after having spent eight years at the firm. He currently sits on seven portfolio company boards, and was responsible for NEA’s investment in TiVo Inc. (Nasdaq: TIVO). As first reported by the Los Angeles Times, Alsop sent a letter to NEA staffers that read: “I am going to see if I can design a working life for myself that is focused entirely on working with a few early-stage companies, whether that is in a smaller partnership or something more individualized.” www.nea.com

PharmAthene Inc., an Annapolis, Md.-based biotech company focused on countermeasures to bio-terrorism, has raised $50 million in Series B funding. MPM Capital and Bear Stearns Health Innoventures co-led the deal, and were joined by return backer HealthCare Ventures. The company now has raised $65 million in total VC funding, including a $15 million Series A round in 2003 at a post-money valuation of approximately $31.8 million. www.pharmathene.com

CoAxia Inc., a Maple Grove, Minn.-based developer of a catheter-based treatment for ischemic stroke, has raised $17.6 million in Series B funding. The company has called down $10.56 of the round so far, with additional call-downs reliant on the achievement of certain milestones. Prism Venture Partners and Canaan Venture Partners co-led the deal, alongside fellow new investor Baird Venture Partners. Return backers included Johnson & Johnson Development Corp. and Affinity Capital. www.coaxia.com

Not Your Average Joe’s Inc., a Dartmouth, Mass.-based owner and operator of Not Your Average Joe’s restaurants in Massachusetts, has raised $6.5 million in Series F convertible preferred stock. Grace Restaurant Partners of Orlando, Fla. led the deal, and was joined by unnamed individual investors. www.notyouraveragejoes.com

Biomax Informatics AG, a Martinsried, Germany-based provider of IT solutions to the bio-informatics market, has raised Euro 2.25 million in new venture capital funding. Investors included BayBG, ECOS and S-UBG Bayern.