PE Week Wire — Friday, September 16

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Just Linking Around

*** The private equity-tinged political scandal in Illinois deepens.

*** The back-story on Skype’s original VC backing, including how much Bill Draper put in (free sub req.). Speaking of Skype, Dave Cowan of Bessemer notes that the deal will return around 150x for Bessemer/DFJ ePlanet/Index/Mangrove, which put in a combined $18.8 million in 2004 (check comments section on Stavis/Skype post). Cowan also mentions thatr Bessemer and Catamount Ventures have backed a new startup named Flock.

*** I was searching for new SPACs the other day (three more this morning, including one led by former fed terrorism chief Richard Clarke), when I came across a bizarre filing for something called Apollo Publications. Paul Kedrosky posts it on his site (scroll down), and reports that the SEC is taking action.

*** Quiz Answer: On Monday’s brief discussion of SV Life Sciences, I asked you to name another VC firm with offices in Boston (or at least around Boston) and London that is in market with a new fund that will focus, at least in part, on life sciences? Good job to those of you who answered Atlas Venture.

*** Hopefully a good time had by all during yesterday’s “Meet the Press” event hosted by the NVCA. Best line came from Robert Weisman of The Boston Globe, who noted that one reason he likes visiting VC firms is that he can always find his car in the parking lot.

    Top Three


Fidelity National Information Services Inc., Jacksonville, Fla.-based information services subsidiary of title insurer Fidelity National Financial Inc. (NYSE: FNF), has agreed to merge with St. Petersburg, Fla.-based Certegy Inc. (NYSE: CEY). The combined company will be valued at $7.6 billion, with the merger providing a strong on-paper return for Thomas H. Lee Partners and Texas Pacific Group, which acquired a 25% stake in Fidelity National Information Services earlier this year for approximately $500 million (their ownership stake will be approx. 17.2% of the combined company).


Workflow Management Inc., a Washington, D.C.-based provider of printing and promotional products, has agreed to acquire Relizon Co., a Dayton, Ohio-based supplier of business process solutions for document outsourcing, billing and marketing. No financial terms were disclosed for the deal, which is expected to close next month. Financing will be provided by CSFB, National City Bank and Royal Bank of Canada Workflow Management is a portfolio company of Perseus and The Renaissance Group, while Relizon has been owned by The Carlyle Group since 2000.

Actions Semiconductor Co., a China-based chip design company, is planning to raise over $80 million in Series A funding, according to VentureWire. New Enterprise Associates, Intel Capital and Government of SingaporeInv*stment Corp. are co-leading the deal, which also includes HSBC, Rim Asia Capital and Shanghai Industrial Holdings. The round is designed to position the company for an IPO, with Actions already retaining CSFB Asia as its underwriter.

    VC Deals

Adaptive Planning Inc., a Mountain View, Calif.-based provider of on-demand budgeting, forecasting and reporting applications, has raised $5 million in Series B funding. Monitor Venture Partners led the round, and was joined by return backer Onset Ventures.

Versatel Networks, a Quebec, Canada-based provider of VoIP gateway and service delivery solutions for telecom service providers, has raised Cdn$10 million in third-round funding. Solidarity Fund QFL led the deal, and was joined by Multiple Capital.

BodyMedia Inc., a Pittsburgh-based developer of Internet-compatible health monitors, has raised $6.05 million in Series E funding, according to a regulatory filing. Backers included DFJ ePlanet Ventures, Draper Triangle Ventures, DQE Enterprises and Prescient Partners.

DioBex Inc., a San Francisco-based metabolic therapeutics company, has raised $7.075 million in Series A-2 funding, according to a regulatory filing. Return backers include Domain Associates, Pequot Capital and Sofinnova Venture Partners.

ECnext Inc., a Westerville, Ohio-based provider of technology and services for marketing business content via the Web, has raised $4 million in Series D funding. Reservoir Venture Partners was joined by return backer Athenian Venture Partners on the deal.

Aestherx Inc., a Woodland Hills, Calif.-based provider of medical product R&D, has raised just under $1 million in startup funding led by Versant Ventures, according to a regulatory filing. The company is led by former Amgen executive Keith Leonard.

X-Sten Corp., an Englewood, Colo.-based medical device startup, has raised $725,000 in Series A funding, according to a regulatory filing. Backers include Aweida Venture Partners and DFJ Mercury Venture Partners. LLC, an Elmhurst, Ill.-based developer of marketing resource management software, has raised an undisclosed amount of second-round funding from Midwest Inv*stment Partners.

Dimerix Bioscience Pty Ltd., an Australia-based drug company, has raised nearly Au1 million in Series A funding led by Foundation Capital.

    Buyout Deals


Gresham has sponsored a management buyout of Olaer, a UK-based provider of pressure regulators and coolers for the industrial hydraulic market, from Expamet International Ltd. No financial terms were disclosed, except that Bank of Ireland provided financing. Gresham says that Olaer has annual sales of Gbp70 million.

Parthenon Capital has agreed to acquire a majority stake in American Wholesale Insurance Group, a Charlotte, N.C.-based independent insurance wholesaler. No financial terms were disclosed for the deal, which would result in company management retaining a “substantial” ownership position.

MDSI Mobile Data Solutions Inc. (TSX: MMD; Nasdaq: MDSI) shareholders have approved a proposed acquisition of the company by Vista Equity Partners. The total transaction is valued at approximately US$70 million, or $8 per share, with MSDI to subsequently delist from both the TSX and Nasdaq. MDSI is a British Columbia, Canada-based provider of mobile workforce management software.

    PE-Backed IPOs

Turbolinux Inc., a Japan-based provider of Linux-based solutions, has raised approximately $9.02 million via an IPO on the Osaka Stock Exchange. Nikko Citygroup Ltd. served as lead underwriter, while the company will trade under identification number 3777. The company had raised around $95 million in VC funding during 1999 and 2000, from firms like August Capital, Dell Ventures, Intel Capital, IBM, Broadview Associates, JPMorgan Partners, Mobius Venture Capital and Novell.

Israel Growth Partners Acquisition Corp., an Israel-based blank check acquisition company, has filed to raise $51.71 million via an IPO. It plans to trade on the OTC BB, with HCFP/Brenner Securities serving as lead underwriter. The group’s management includes: chairman Marty Karp, co-founder of Concord Ventures; CEO Carmel Vernia, former CEO of Tower Semiconductor; and executive VP and director David Silberg, a managing director of Mercator Research (unit of Mercator capital).

Global Services Partners Acquisition Corp., a Fairfax, Va.-based blank check acquisition company, has filed to raise $30.46 million via an IPO. It plans to trade on the OTC BB, with HCFP/Brenner Securities serving as lead underwriter. The group’s management includes: chairman and CEO Rahul Prakash, CEO of Everest Telecom, and president Abhishek Jain, CEO of WTP Capital.

    PE-Backed M&A

ScanSoft Inc. (Nasdaq: SSFT) has completed its merger with Nuance Communications Inc. (Nasdaq: NUAN), with Nuance shareholders receiving 0.77 shares of ScanSoft common stock and $2.20 of cash for each share of Nuance common stock that they own. The deal financed through Warburg Pincus’ $75 million PIPE infusion into ScanSoft.

Esprit Pharma Inc. of Princeton, N.J. has acquired Pompano Beach, Fla.-based Metagen Pharmaceuticals Inc. and its operating subsidiaries Star Pharmaceuticals and Stellar Pharmacal. The deal is valued at approximately $58.28 million. Esprit has raised VC funding from Domain Associates, Apax Partners and New Enterprise Associates.

    Firm News

Capstone Partners and Palomar Capital Advisors have merged, to form a combined partnership that will provide global private equity fund placement and advisory serves. It will include a team of 12 dedicated distribution principals and a total staff of 20, working from offices in Dallas, New York, Zurich, Geneva and Amsterdam. It will be called Capstone Palomar Partners.

ARC Inv*stment Partners LLC has launched as a Beverley Hills, Calif.-based inv*stor into, and executor of, reverse merger transactions. Firm founder and CEO Adam Roseman previously was a partner with Tompkins Capital Group.

BISYS (NYSE: BSG) has agreed to sell its Information Services group, which includes its Banking Solutions, Document Solutions and Corporate Financial Solutions businesses, to Open Solutions Inc. (Nasdaq: OPEN) for approximately $470 million in cash.

    Human Resources

Jeffrey Feinberg has joined GE Commercial Finance Global Media & Communications as senior vice president of origination. He most recently was a director in the telecom group of CIBC World Markets’ I-banking division.

Vinod Khosla of Kleiner Perkins Caufield & Byers has resigned from the board of Qwest Communications International Inc. (NYSE: Q), after having served for nearly seven years. Quest also announced two new board members: James Unruh, principal of Alerion Capital Group and former CEO of Unisys Corp., and Wayne Murdy, chairman and CEO of Newmont Mining.

Charlie Troup has decided to leave his London-based partnership position with Permira at year-end, according to PrivateEquityOnline.

Cecilia Claudio has joined Mercury Interactive Corp. (Nasdaq: MERQE) as chief information officer. She most recently served as VP of engineering and CIO with Align Technology Inc. (Nasdaq: ALGN), before which she was an executive-in-residence with Clearstone Venture Partners, where she still maintains an advisory role.


Running Early

Early PE Week Wire this morning, as I’ve dumbly scheduled a 10:15am meeting in Cambridge (and then will be sitting on the NVCA’s Meet the Press panel at 12:30). But because I’d hate to leave you with nothing.

Ford Motor Co. earlier this week agreed to sell rental car giant Hertz Corp. for $15 billion to private equity firms Clayton, Dubilier & Rice (CD&R), Carlyle Group and Merrill Lynch Global Private Equity. There’s obviously been a lot written about the deal, including that it would be the second-largest leveraged buyout in history (behind Nabisco, topping SunGard), how Ford originally favored an IPO to a sale, etc. Those are, of course, the most important angles, but here are a couple of tidbits you may not know (if you do know, just politely smile, nod your head and move on):

*** This deal should guarantee that CD&R not only hits its $3.5 billion fund-raising target, but actually hits its $4 billion maximum cap. The buyout firm and placement agent CSFB began marketing the fund in late 2004 and held a first close on approximately $1.5 billion by January, but the process seemed to get a bit bogged down after that (we are in September, after all). Hertz, however, has jump-started the effort, in large part because: (A) CD&R has proved that it can lead a mega-deal and form a top-tier consortium; and (B) Because Hertz will be a portfolio company of Fund VII.

CD&R isn’t commenting on fund-raising, but a source familiar with the situation says that the firm already has $3.5 billion in verbal commitments, and should easily hit $4 billion before a final close occurs later this year. “If Hertz had happened six months ago,” the source says. “The fund probably would have been raised by now.”

*** CD&R originally approached Ford about selling Hertz back in 2002, but was summarily rebuffed (not that they weren’t persistent). There were a bunch of complicated financing roadblocks, but the main problem was that Ford couldn’t envision how the private equity markets could reasonably handle such a large transaction. In the past three years, however, big-time private equity has undergone massive changes. Not only are certain firms raising enormous amounts of capital (e.g., $12b for Blackstone, $10b for Apollo, etc.), but those firms have shown an increased willingness to syndicate, thus enabling deals that would have been impossible just a few years ago (e.g., $11.3b for SunGard).

CD&R certainly was responsible for getting Ford to even consider selling Hertz, but it was larger market forces that ultimately greased the wheels.

Unrelated 1: A rep for KKR has taken some offense to the snide remark I made yesterday about the firm’s decision to tap non-locals to open offices in Hong Kong and Tokyo. Specifically, I cited how other LBO firms were, indeed, having locals run their Asian offices, and how many VC firms were surprised to learn that Silicon Valley culture (let alone laws) didn’t necessarily translate in London or Paris. Why the offense? Because KKR has a very successful European business that was originally formed after a pair of Bay Area folks were dispatched to open a London office. In other words, it has worked for KKR in the past, making its decision quite sensible. I plan to discuss this whole matter in greater depth next week, but felt a note was probably appropriate today.

Unrelated 2: I’ll be sitting in on a “Meet the Press” panel hosted by the National Venture Capital Association, today at 12:30 at the Charles Hotel in Cambridge, Mass. It’s invite-only for VC/PE marketing pros…

    Top Three


GlobeImmune Inc., a Denver-based developer of immunotherapy products for the treatment of cancer and chronic infectious diseases, has raised $34.3 million in Series B funding. Lilly Ventures led the round, and was joined by Medica Holdings, Adams Street Partners, Biogen Idec Inc., Genentech Inc., Partners Healthcare and GC&H Inv*stments. Return backers included HealthCare Ventures, LLC, Morgenthaler Ventures and Sequel Venture Partners. The company now has raised over $42 million in total funding, including a $4 million Series A round and $4 million in grant financing.


The Blackstone Group is leading a private equity consortium that has agreed to acquire health and life insurer UICI (NYSE: UCI) for $37 per share (19% premium to yesterdays closing price of $31.08). The equity group also includes Goldman Sachs Capital Partners and DLJ Merchant Banking Partners, and it will commit over $1 billion to the transaction. The deal also includes more than $125 million in equity from company management and employees.

Mark Gallogly, a senior managing director and head of private equity for The Blackstone Group, will leave at the end of this month to form a new firm with Jeffrey Aronson, head of distressed securities and leveraged loan activities at Angelo, Gordon & Co. Blackstone is in the midst of raising up to $12 billion for a new private equity fund, but Gallogy’s departure is not expected to hamper the effort.

    VC Deals

Earnix Inc., an Israel-based provider of price and revenue optimization software to the financial services industry, has raised $7 million in Series B funding. Jerusalem Venture Partners led the deal, and was joined by return backer Formula Ventures.

    Buyout Deals


Gibraltar Industries Inc. (Nasdaq: ROCK) has agreed to acquire Alabama Metal Industries Corp. from CGW Southeast Partners and other shareholders for approximately $240 million. Alabama Metal is a Birmingham, Ala.-based manufacturer of products for the industrial and building products markets, and was advised on the transaction by Houlihan Lokey Howard & Zukin. The deal is expected to close early in the fourth quarter.

Advent International has acquired a majority interest in German nursing home company Casa Reha Betriebs und Beteiligungsgesellschaft. The selling parties were JPMorgan Partners, Covenant Care International and German Equity Partners, with company management rolling over its ownership stake. No financial terms were disclosed.

Albertson’s Inc. (NYSE: ABS) is beginning to generate buyout interest from three distinct groups, according to The Deal. KKR, Apollo Advisors and Texas Pacific Group are working together, as are Thomas H. Lee Partners, Bain Capital and Yucaipa Cos. Cerberus Capital Management and Kimco Realty also are reported to be involved, with Merrill Lynch Global Private Equity possibly joining the KKR group and Warburg Pincus possibly joining the TH Lee group. The deal could be worth up to $16 billion, including $6.7 billion in assumed debt.

Cigars International Inc., a catalog and Internet marketer of premium cigars, has been recapitalized. Fifth Third Bank Chicago led the financing, which included a $16 million Term Loan A, an $8.75 million Term Loan B and a $3.25 million revolving line of credit. Cigars International is a portfolio company of private equity firm Svoboda Collins LLC.

W.P. Carey & Co. has acquired and leased back a Norwich, Conn.-based warehouse distribution facility from Bob’s Discount Furniture Inc., a Manchester, N.H.-based portfolio company of Apax Partners (original deal for Saunders, Karp & Megrue, which since has merged with Apax). The total transaction is valued at $22.6 million, including $12.3 million to fund expansion of the facility.

Sara Lee Corp. (NYSE: SLE) is in talks to sell its European packaged meats division, as part of its larger divestiture strategy. According to the Times of London, parties interested in buying the Gbp1 billion-plus unit include Lion Capital, Blackstone Group, Carlyle Group, BC Partners, CVC Capital Partners and PAI Partners. The same article adds that Novartis AG (NYSE: NVS) has retained CSFB to sell its Nutrition et Sante unit for around 250 million euros.

Motorola Inc. (NYSE: MOT) has retained J.P. Morgan Chase & Co. to explore the possible sale of its automotive products unit, according to The Wall Street Journal. The deal could be valued at between $1 billion and $2 billion.

    PE-Backed IPOs

Regency Energy Partners LP of Dallas, Texas has filed to raise $289.8 million via an IPO of 12 million common units. Lehman Brothers and UBS are serving as lead underwriters. Regency is a Delaware limited partnership recently formed by Hicks, Muse, Tate & Furst to capitalize on opportunities in the midstream sector of the natural gas industry.

Vimicro, a China-based chipmaker, soon will file to raise $100 million via an IPO in the U.S., according to The Standard of Hong Kong. Morgan Stanley is arranging the offering, which would allow Vimicro to trade on the Nasdaq. The company was seeded in 1999 by China‘s Ministry of Information, raised early-stage capital from Infotech and then got $20 million from General Atlantic last year.

    PE-Backed M&A

Seagate Technology LLC (NYSE: STX) has acquired Mirra Inc., a Sunnyvale, Calif.-based provider of networked digital content protection products for the home and small business markets. No financial terms were disclosed. Mirra has raised $9.5 million in VC funding since its 2002 inception, from Sunrise Capital Partners, VSP Capital and Sequoia Capital.

ZentivaNV, a Czech drug company controlled by Warburg Pincus, has agreed to acquire a 51% stake in Romanian drug company Sicomed SA for $102 million. Zentiva also will make a voluntary offer for the remaining 49% position.

    Firm News

Commonfund Capital is raising up to $750 million for its sixth private equity fund-of-funds, named Commonfund Capital Private Equity Partners VI. It already has secured over $250 million in commitments, with an earlier filing showing that the firm has closed its Commonfund Capital Venture Partners VII fund with just over $500 million.

    Human Resources

Ryan Moore has been promoted from principal to general partner of GrandBanks Capital. He was a co-founding member of the venture capital firm in 2000, and focuses on opportunities in the wireless and software sectors.

Suhail Shaikh has been named a managing director in the financial sponsors and I-banking group of Banc of America Securities. He previously was executive director in the leveraged finance/financial sponsors group of CIBC World Markets.

Christopher Jun has joined Warburg Pincus as vice president of marketing. He previously was a deputy managing director and financial communications practice leader for Asia with Edleman Public Relations.

Atlantic-Pacific Capital has made three new hires. John Chase joins as a vice president focused on sales distribution, after previously serving as a vice president with Lazard Asset Management. Kelsie Clark joins as an associate from Probitas Partners. Kavita Bagga also joins as an associate, and previously was an I-banking analyst for the global industries group of Merrill Lynch & Co.

Correction: Blue Lane Technologies Inc. raised $13.4 in Series B funding, not in Series D funding.


Random Ramblings

*** Jerry Levin, former CEO of Sunbeam and Revlon, has decided not to retire after all. The man who took over for Chainsaw Al has instead launched a private equity firm focused on turnaround opportunities of branded consumer companies. It actually may be more accurate to say ”private equity firm of sorts,” because Levin hasn’t yet decided whether or not his shop will raise an actual fund (although it has done some test marketing). For now, he is simply working in tandem with some undisclosed private equity firms in search of an appropriate deal (they’ve looked seriously at a few, but he deemed the prices too high). Once one is found, Levin and his partners – Steve Isko and Mike Topsen – will invest their own personal capital alongside their private equity partner, with Levin taking over as the company’s interim CEO for between six to nine months (average deal expected to be held between three-to-five years).

One interesting note is that Levin has received some partnership interest from hedge funds (those looking for longer-term plays), but is worried that such a deal could put off his LBO peers, since such groups continue to fear the full-scale movements of hedge funds into the private equity market. More on Levin’s efforts in Monday’s issue of Buyouts Magazine.

*** You’ll see below that Oak Hill Capital Management has closed its second private equity fund with $2.5 billion. Significance here is that it’s the first Oak Hill fund to be majority-backed by institutions. The firm was initially formed as the family office of hotelier Bob Bass, and its $1.6 billion initial fund was mostly supported by individuals like Bass, Nike honcho Phil Knight and Intel co-founder Gordon Moore. Those guys still have a lot of skin in the game (Bass and Knight committed a combined $450 million), but the bulk of capital comes from public pensions (CalPERS, Oregon, Ohio, Alaska, San Fran, etc.) and other institutions (American Airlines, Stanford, GIC, etc.).

*** KKR is all over the news today, given the pending departures of general partners – and former Stanford B-School roommates – Scott Stuart and Ed Gilhuly. Of equal interest, however, should be its long-awaited decision to open offices in Asia (Hong Kong and Tokyo). This follows similar announcements from LBO heavyweights like Bain and Tom Lee, but there is something a bit odd about the KKR move: The two people named to run the offices are not from Asia. I’m sure Asian natives will be added soon, but doesn’t KKR remember the regret of VC firms that tapped Bay Area folks to run  UK offices during the late 1990s?

*** Om wonders where SimpleFeed went. Me too.

    Top Three


Kohlberg Kravis Roberts & Co. has announced plans to open offices in Hong Kong and Tokyo, which would be the firm’s first offices in Asia. Joseph Bae, a KKR managing director, will lead the effort, and will move from New York to Hong Kong at the end of this year. He will be joined by Justin Reizes, a KKR principal who currently is based in London. In other KKR news, the firm is about to lose general partners Scott Stuart and Ed Gilhuly, who have decided to form their own firm focused on the public markets.

Jefferson Smurfit Group PLC of Ireland and Kappa Packaging Group BV of The Netherlands have agreed to merge, thus creating Europe’s largest packaging company. Under terms of the deal, existing Smurfit shareholders will own 58.3% of the combined company, while Kappa shareholders will own 41.7%. Kappa shareholders also will receive a total of 300 million euros in cash and a 75 million euros subordinated promissory note. Smurfit is controlled by Madison Dearborn Partners, with