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Four days have passed since Forstmann Little & Co. and the State of
I’ve been discussing this “who won” issue with a bunch of folks here in
How so? There has been a lot of talk about politics in this case, particularly when it comes to a Democratic AG and treasurer going after a big Republican fundraiser (Ted Forstmann), while not even bothering to call his former partner (Erskine Bowles, a current Democratic Party candidate for U.S. Senate) to testify. But I think this misses the point. The primary political motivation here was electoral rather than partisan. AG Blumenthal and Treasurer Nappier wanted to be able to campaign on the idea that someone ripped off their state, and that they weren’t going to take it lying down. They accomplished this goal not only by getting a jury to find that Forstmann Little had violated its contract, but also by getting the $15 million settlement. I recognize that $15 million isn’t anything close to the $100 million-plus that
It also is worth noting that
As for Forstmann Little, its primary motivation was to avoid the awarding of three-figure damages, which it accomplished. It also wanted to avoid liability on securities law violations, which the judge threw out just prior to opening arguments. That said, Forstmann has suffered an extraordinary blow to its once-sterling reputation. It is one thing for folks to believe that you made a few lousy telecom investments, but it’s quite another for them to believe that you breached your contract with a limited partner. Most every attorney and buyout professional I’ve spoken with this week about the case has severely chastised Forstmann Little for its breach, with the buyout pros quickly adding that they would have never followed the same course of action.
Market rumor has it that Forstmann Little wasn’t looking to raise another fund, at least not one with Ted Forstmann at the helm. Therefore, reputation might not be all that important, save from a prideful point of view. Folks did say, however, that some of the other Forstmann Little pros there might want to carry on the brand name for a “successor” firm/funds, but there is probably too much tarnish for that plan to ever take hold.
Connecticut also may have hurt itself a bit in its efforts to become a limited partner of choice (a buyout firm CFO said last night that he probably wouldn’t accept Connecticut as an LP, were his firm fundraising), but buyout fund investing is only a small part of what makes the state money. Fundraising for Forstmann Little, on the other hand, would be the firm’s only lifeblood.
DLJ Merchant Banking Partners has pulled back from its planned $400 million recap of Trump Hotels & Casino Resorts Inc. A deal proposed in August would have had the troubled company file for bankruptcy protection, and then reemerge after DLJ and Donald Trump teamed up to co-invest $400 million. The problem, however, is that the transaction also involved a lot of securities swapping on the part of bondholders. For example one group of Trump Hotels bondholders would have had to exchange $1.3 billion in debt for approximately $228.2 million in cash, $852 million in new debt and $107 million in Trump Hotels stock. Once it became clear that a significant number of bondholders were balking, DLJ left the table. www.trump.com
Sopherion Therapeutics Inc., a New Haven, Conn.-based drug company focused on anti-cancer therapies, has raised $47 million in Series B funding. TL Ventures led the deal, and was joined by Sprout Group, ProQuest, Canaan Partners, HealthCap, NewSpring Ventures, Commerce Health Ventures and Seaflower Ventures. The company had raised a $26 million Series A round in late 2002 at a post-money valuation of approximately $34.3 million. In connection with the Series B financing, Sopherion also entered into an exclusive licensing agreement with Geneus Pharma Ltd. For the future commercialization of Myocet in
Sony Corp. of
Remon Medical Technologies Inc., a Waltham, Mass.-based medical device company, has raised $16 million in Series C funding. Lilly Ventures and KBL Healthcare Ventures co-led the deal, and were joined by fellow new investor Ofer Hi-Tech Group. Return backers Polaris Venture Partners and Concord Ventures also participated. The company now has raised around $36 million in total VC funding since its 1997 inception. www.remonmedical.com
Windward Capital has sold its majority interest in the PSI Group, a Commerce, Calif.-based designer and manufacturer of components for military and commercial space-based applications, to Alliant Techsystems Inc. (NYSE: ATK). The deal is valued at $165 million. Windward originally invested in PSI Group in April 1997. www.psi-pci.com
The Blackstone Group has closed its previously-announced acquisition of a majority interest in Vanguard Health Systems Inc., a Nashville, Tenn.-based hospital operator, for approximately $1.75 billion in cash. Vanguard was formed in 1997 by company management and Morgan Stanley Capital Partners. As part of the Blackstone buyout, both company management and Morgan Stanley Capital Partners reinvested in Vanguard, and now hold a combined 34% position. The deal also included a $475 million term loan and $791 million of senior subordinated notes. www.vanguardhealth.com
Apax Partners and Cinven are considered the current leaders in an auction to acquire the yellow pages business of Dutch media company VNU NV, according to Reuters. The firms jointly bid just over ?2 billion for the assets, with other bidders including BC Partners, Blackstone Group, Carlyle Group and a pairing of CVC Capital Partners and Permira. www.vnu.com
Bustos Media Corp., a Sacramento, Calif.-based owner and operator of Spanish-language radio stations, has secured $103 million in private equity funding, according to The Sacramento Bee. Mostof the capital is coming from Alta Communications and Providence Equity Partners, with smaller plays coming from Opportunity Capital Partners and company management. www.bustosmedia.com
Admiral, a UK-based automobile insurer, priced its IPO on the London Stock Exchange at 275 pence per share (upper end of its 245-300 pence per share offering range). The deal prices Admiral at GBP 711 million.The company was formed in 1993, and acquired by management in 2000. The management buyout was sponsored by Barclays Private Equity, Munich Re and XL Capital. www.admiral.com
Dennis Shaughnessy has been named full-time chairman of the board with FTI Consulting Inc., where he previously had served as a director. Shaughnessy previously served as a general partner with Grotech Capital Group. www.fticonsulting.com
Elevation Partners is looking to raise $2 billion for its inaugural fund, according to The Los Angeles Times (which cites a recently-filed SEC document). The firm originally was thought to be looking for $1 billion, but now is looking for $2 billion. Elevation Partners is to be run by Roger MacNamee, founder of Silver Lake Capital and Integral Capital Partners, John Riccitiello, former president of Electronic Arts Inc., Bret Pearlman, former senior managing director with Blackstone Group, and Bono, lead singer for rock band U2.
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Thursday, Sept. 23 |
Cleaning up The Record
No column this morning, as I’ve got to prepare for a talk here in
Kabel Deutschland GmbH, a German cable giant owned by Goldman Sachs Capital Partners, Apax Partners and
Nura Inc., a Seattle-based biotech company focused on intractable neurodegenerative diseases, has raised $9.5 million in Series A funding. ARCH Venture Partners and Aravis co-led the deal, with Vulcan Capital, Linkagene LP and the Novartis Venture Fund also participating. www.nurainc.com
Beacon Roofing Supply Inc., a Peabody, Mass.-based distributor of roofing materials, will begin trading on the Nasdaq under ticker symbol BECN. The company priced 13.5 million shares at $13 per share (middle of its $12-$14 offering range), for a total IPO take of approximately $175.5 million. Prior to its IPO, the company was majority owned by Chicago-based buyout chop Code, Hennessy & Simmons, which led a management buyout in August 1997. Following the acquisition, Beacon acquired seven regional roofing materials distributors, and opened 20 new branches. www.beaconroofingsupply.net
Propagate Networks Inc., an Acton, Mass.-based provider of WLAN equipment, has raised $8 million in Series C funding. Investors included Motorola Ventures, Thomas Weisel Venture Partners and come unnamed corporate investors. The company now has raised around $14 million in total VC funding since its 2002 inception. www.propagatenet.com
Fox Paine & Co. has agreed to acquire a majority position in VCST Industrial Products NV, a Belgium-based provider of automotive components. Current shareholder Vavas Investments BV, and company management, will retain minority interests once the deal closes in the next few weeks. No financial terms were disclosed. www.vcst.be
Norwest Equity Partners and M2P Capital have teamed up to acquire Deep Rock Water Co., a Denver-based provider of bottled water. No financial terms were disclosed. www.deeprockwater.com
Backyard Broadcasting Holdings LLC, a Baltimore-based operator and acquirer of radio stations, has agreed to purchase five Sioux Falls, S.D.-based radio stations from Midcontinent Media Inc. No financial terms were disclosed .Backyard Broadcasting is a portfolio company of Boston Ventures Management and PCG Corporate Partners Fund. Both firms provided equity for the acquisition. www.bybradio.com
LivHome Inc., a Los Angeles-based provider of at-home assisted living services, has acquired AdvoLife Inc., a Campbell, Calif.-based provider of long-term elder care in the home. No financial terms were disclosed. LivHome has raised over $17 million in VC funding since its 1999 inception, from investors like BA Venture Partners, Tullis-Dickerson & Co. and Kline Hawkes & Co. AdvoLife had raised over $8 million in VC funding since its 1998 inception from investors like Crosspoint Venture Partners and Acacia Venture Partners. www.livhome.com www.advolife.com
Cisco Systems Inc. (Nasdaq: CSCO) is planning to acquire Finjan Software Inc., according to multiple press reports. Finjan is a San Jose, Calif.-based data security company that has raised around 445 million in VC fnding from investors like Benchmark Capital, Bessemer Venture Partners, Israel Seed Partners, Apex Venture Partners, RRE Ventures and STAR Ventures. Cisco also is an existing investor. www.finjan.com
Warner Music Group is considering a $5 billion IPO, according to The Financial Times. The company did not comment on the report. Earlier this year, Time Warner Inc. (NYSE: TWX) sold Warner Music Group for $2.6 billion in cash to an investor consortium of Thomas H. Lee Partners, Bain Capital, Providence Equity Partners and Edgar Bronfman’s Music Capital Partners. www.wmg.com
Conor Medsystems Inc., a Menlo Park, Calif.-based developer of vascular drug delivery technologies, has filed to raise $70 million via an IPO of common stock on the Nasdaq, under proposed ticker symbol CONR. The company has raised over $40 million in total VC funding since its 1999 inception, with significant shareholders including Highland Capital Partners, Hunt Capital Partners, Maverick Fund and Hambrecht & Quist London Ventures. www.conormed.com
Educate Inc., a Baltimore-based provider of K-12 educational services, will begin trading on the Nasdaq under ticker symbol EEEE. The company priced 15 million common shares at $11 per share (below its $12-$14 offering range), for a total IPO take of approximately $165 million. The company was formed in March 2003, after Apollo Management acquired Sylvain Learning Systems Inc. www.educateinc.com
Cisco Systems Inc. (Nasdaq: CSCO) said that it plans to open a venture capital operation in
BioAdvance Ventures, a Philadelphia-based venture capital firm focused on early-stage life sciences companies based in Southeastern Pennsylvania, has held a $25.5 million close on a new fund targeted at $40 million. www.bioadvance.com
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Wednesday, Sept. 22 |
NVCA on PEIGG: “A” Basis or “The” Basis?
Greetings from
This last part is a bit strange, because it’s not really what the NVCA said back in March. It’s also not what they said this morning, during a telephone interview. Instead, the NVCA maintains that member firms should use indeed review the PEIGG guidelines, but then only should use them as “a basis” for portfolio valuation, rather than as “the basis.” This is a major distinction. The NVCA tells its firms to use GAP standards, but that anything after that is, essentially, a private matter between GP and LP. Take a look at the PEIGG standards, but by no means feel obligated to use them.
Such caution is nothing new for the NVCA, which has refused to fully endorse the PEIGG guidelines since they were first made public late last year. Why? Because a number of VC firms remain opposed to any sort of fair market valuation within the private equity industry, which basically is what the PEIGG is proposing. As I’ve said before, however, it would be better for the VCs (and their lead trade group) to hop aboard the fair market train voluntarily, before a regulatory body like the SEC runs them over with it.
BeTrusted Holdings Inc. of
J.P. Morgan Chase announced that CFO Dina Dublon is resigning after 23 years with the company. She will be replaced by Michael Cavanagh, who currently runs middle-market banking activities (he will relocate from
Diamond Castle Holdings, a new private equity firm launched by former DLJ Merchant Banking pros, is looking to raise over $1 billion for its inaugural fund, according to yesterday’s Wall Street Journal. In related news, the article also mentions that CSFB Private Equity is in the midst of raising between $3.5 billion and $4 billion for a new fund of its own.
Cloudmark Inc., a San Francisco-based provider of email security solutions, has raised $11 million in Series C funding. New investors included FTVentures and Presidio Venture Partners, while return backer Ignition Partners also participated. www.cloudmark.com
Velocimed LLC, a Maple Grove, Minn.-based medical device company focused on cardiovascular and neurovascular diseases, has raised $16.5 million in Series B funding. Investors included Warburg Pincus, The Vertical Group, RiverVest Venture Partners and Arnerich Massena & Associates. www.velocimed.com
Silecs Inc., a San Jose, Calif.-based provider of dielectric solutions for the semiconductor industry, has raised $6 million in venture capital funding led by InnovationsKapital. The company did not specify whether or not existing investors like Kleiner Perkins or Viventures also participated. www.silecs.com
Azimuth Systems Inc., an Acton, Mass.-based provider of wireless network test platforms, has raised $10.5 million in third-round funding. Return backers North Bridge Venture Partners and Kodiak Venture Partners co-led the deal. The company now has raised over $23 million in total VC funding since its 2002 inception, including a $7.1 million Series B infusion last year at a post-money valuation of approximately $20.16 million. www.azimuth.net
Avamar Technologies Inc., an Irvine, Calif.-based provider of data backup and recovery solutions, has raised $15 million in new venture capital funding. Morgan Stanley Venture Partners led the deal, and was joined by return backers Lightspeed Venture Partners, Goldman Sachs, Benchmark Capital and CMGI @Ventures. The company now has raised around $40 million in total VC funding since its inception. www.avamar.com
Capvis, a Switzerland-based private equity firm, has agreed to acquire Germany-based chemical company SF-Chem AG, in concert with company management. The deal is valued at approximately $64 million, with selling shareholders including Syngenta AG and Clariant. Once completed, Capvis will hold an 85% ownership position in SF-Chem, with company management holding the remaining 15 percent. www.capvis.ch
Albertson’s Inc. (NYSE: ABS) has acquired Bristol Farms Inc., an El Segundo, Calif.-based specialty food retailer. No financial terms were disclosed. Bristol Farms had been majority-owned by private equity firm Oaktree Capital Management. www.bristolfarms.com
Tekelec (Nasdaq: TKLC) has acquired VocalData Inc., a Richardson, Texas-based provider of hosted IP telephony applications. The deal is valued at approximately $27.5 million, including $14.5 million in cash and 780,000 shares of Tekelec common stock. VocalData has raised around $60 million in total VC funding since its 1996 inception, including a $32 million Series B round in 2000 at a post-money valuation of approximately $93 million. Investors included Austin Ventures, Capital Southwest Corp., Core Capital Partners, JPMorgan Partners, SAIC Venture Capital Corp., Hickory Venture Capital Corp., Silicon Valley Bancshares, Seed Capital Partners and Trinity Ventures. www.vocaldata.com
Directed Electronics Inc., a
Broadcom Corp. (Nasdaq: BRCM) has acquired Alphamosaic Ltd., a
China Finance Online Co. Ltd., a Beijing-based provider of financial and listed company data and information, has filed to raise over $79.14 million via an IPO of American Depository Shares (ADS) on the Nasdaq under proposed ticker symbol JRJC. The company lists ADG Technology Ventures and Vertex Technology Fund among its significant shareholders.
Thomas Forschbach, Nathalie Alibert and Gaetan Gianass have joined the
CMEA Ventures of
Founders Equity Inc., a New York-based private equity firm, has held a final close on its Founders Equity SBIC Fund. Limited partners include Colorado PERA, Citibank, HSBC,
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Tuesday, Sept. 21 |
Greetings from last night, as a late-breaking story has disrupted my evening of pasta, packing and Playstation: Forstmann Little & Co. and the State of
Background (skip if you know this part): In the late 1990s, the State of
The two sides were unable to settle their dispute out of court, and opening arguments began on
What’s happening now : Yesterday, Forstmann Little agreed to pay
I received official statements from both sides, and hope to get them online later today (sorry, but air travel really does complicate things). In the meantime, I can tell you that the unsigned Forstmann statement reads, in part, “Forstmann Little had a complete victory in the contract litigation brought by the Treasurer of the State of
But the damage may already be done, especially given the fact that in the decision this past summer, a jury not only found Forstmann Little in various breaches, but also said that it had acted “with gross negligence, in bad faith or with willful misconduct.” It may not have been forced to shell out $100 million+, but its reputation suffered a major black eye that would have made it difficult to raise another fund (no plans for another fund, trusted sources say). - Dan Primack
Liability
It’s worth noting that Forstmann Little made a point of saying that the jury found no liability. When I originally researched this case, attorneys cautioned me to avoid using the terms “guilty” and “not guilty,” because they only would apply in criminal cases. Civil cases, they said, would involve findings of “liability.” So what to make of Forstmann Little’s claim, in light of the bizarre verdict?
I spoke by phone with Attorney General Blumenthal, who found the “no liability” claim to be strange. He said, “The jury found that [Forstmann Little] was in breach of contract and had violated laws of fiduciary duty. That’s pure liability.” An attorney pal of mine agreed. A family member suggested that Forstmann Little simply had dropped an adjective (i.e., financially liable, versus plain liable).
I then emailed Bill Bright, an attorney who represented Forstmann Little on the case. His firm probably vetted the initial statement, and strongly disagreed with Blumenthal, my attorney pal and my family member. He wrote, in part, “The jury found that FL was NOT liable. The jury found certain breaches of the contract but found no liability because the State knew what FL was doing and accepted the benefits of the transaction. The jury also found no liability because FL relied on the advice of its counsel, Fried Frank, that the transactions complied with the agreement. Because there was no finding of liability, the jury never even reached the question of damages. Had they reached the question of damages they would have at least written a zero on the verdict form. They in fact left all damages questions blank because there was no reason to answer them because there was no finding of liability. Thus a statement that the jury found FL liable but found no damages is just plain wrong.”
Some further research tends to support Bright’s take on the semantics, although I invite attorneys to send in their opinions. More on the bigger picture tomorrow (i.e., the real winner and loser) after I’ve had some more time to think and talk to folks. See some of you in
As noted in Dan’s preceding column, Forstmann Little and the State of
Updata Partners has held a $90 million first close on its third venture capital fund. It expects to hold a final close on the vehicle, which has a $150 million target, by year-end.
The Wall Street Journal is reporting that a consortium of unnamed
Montreal-based OZ , which focuses on mobile instant messaging, has raised $27.3 million from VantagePoint Venture Partners. Part of the financing, one of the largest this year for a Canadian company, will be used to expand into the European and Asian markets. www.oz.com
Atlantis Components Inc ., a dental implant company, has raised $12.5 million of Series C financing. The deal included new investor Danaher Corporation and return backers VIMAC Ventures and American Bailey Ventures. Danaher’s investment is part of a strategic relationship between Atlantis and Danaher-backed KaVo, a German maker of dental equipment. www.atlantiscomp.com
Los Altos, Calif.-based Provigent Inc ., a fables semiconductor company focused on broadband wireless chips, has raised $8 million in its third round of financing. Participating in the deal were new investor Sequoia Capital and return backers Pitango Venture Capital, Magnum Communications Fund, Ascend Technology Ventures, Delta Ventures and Dr. Andrew Viterbi, co-founder of QUALCOMM. www.provigent.com
Santa Clara, Calif.-based NeoPath Networks , a network file management company, has raised $12 million of Series B financing. Led by Gabriel Venture Partners, the deal also included return backers August Capital, DotEdu Ventures and DCM-Doll Capital. As part of the deal, Gabriel General Partner Navin Chaddha will join the board. The company was founded in April 2002. www.neopathnetworks.com
Intel Capital , through its $200 million Intel Digital Home Fund, has made five investments in companies developing technologies for the digital home: Cablematrix Inc., a broadband network services software company ( www.cablemx.com ) ; Mediabolic Inc., a developer of embedded software for consumer electronics devices ( www.mediabolic.com ) ; Pure Networks Inc., a provider of consumer software and services for the digital home ( www.purenetworks.com ) ; BridgeCo AG, a digital entertainment networking solutions provider ( www.bridgeco.net ) ; and Envivio Inc., a broadcast and streaming media tools and systems company ( www.envivio.com ). Financial terms were not disclosed.
San Mateo, Calif.-based Cemaphore Systems , a message services software company, has raised $10 million of Series B financing. Led by vSpring Capital, the round also included return backers Mayfield and Worldview Technology Partners. As part of the deal, vSpring Capital Managing Director Ed Ekstrom has joined the board. Founded in April 2002, the company has now raised $19.4 million. www.cemaphore.com
Fortress Investment Group will acquire Stelmar Shipping Ltd., an
The Royal Bank of Scotland ‘s private equity arm acquired Condor Ferries, a Channel Islands-based ferry operator, in a deal valued at £240 million ($425 million), according to Lloyd’s List . ABM Amro is the selling party.
The Compass Group has acquired SDC Technologies Inc., a manufacturer of coating systems for the premium eyewear, aerospace, automotive and industrial markets. Prior to the acquisition, SDC was a joint venture between Dow Corning Corp. and Pilkington plc.
Roynat Capital and VenGrowth Capital Partners have acquired Mississauga, Ontario-based Comtrad, a furniture importer and distributor. The deal involved a $10 million investment from VenGrowth, which provided a subordinated loan and will receive interest income on a monthly basis. VenGrowth now has a minority stake in the company.
Prism Medical Ltd ., a healthcare equipment company, has raised $7 million from Yellow Point Equity Partners. The deal, which took the form of seven-year 8% convertible debentures, will help fund the acquisitions of British healthcare companies Freeway Healthcare and Tricare Developments. Another $4 million was raised primarily from Prism executives. The financing comes three months after Vancouver-based Yellow Point closed its inaugural private equity fund. www.prismed.net
Matthew Fix has joined Intel Capital as an investment manager for the $200 million Digital Home Fund, which invests in companies developing hardware and software, as well as those driving convergence of PC and consumer electronics devices in the home. Prior to Intel, Fix was an associate with merchant bank Petkevich & Partners, and before that he worked at Robertson Stephens in the technology M&A investment banking group.
Ryan Pollock has joined Denver-based Meritage Private Equity Funds as an investment professional.
Goldman Sachs Asset Management and Societe Generale have agreed to purchase two private equity funds managed by SG Capital Europe and invest in a new Soc Gen fund for a total of 400 million euros. Specifically, the deal involves Goldman buying SG Capital Europe Fund I LP and SG Capital Europe Fund II LP for 220 million euros and Goldman and Soc Gen investing another 180 million euros in a new fund from SG Capital Europe.
Treasury manager Capital Advisors Group has launched a lending subsidiary that will target venture-backed companies, naming Rich Bowman as its president. The new group, Debt Advisor Group, will target pre-revenue companies with a focus on assisting CFOs. Capital Advisors has been around since 1991.
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