PE Week Wire: Mon., Aug. 6, 2007

Conventional wisdom is that equity sponsors are desperate to see their “hung” buyouts close, in the face of crunched credit and the corresponding possibility that certain banks might jump the bridge. And I don’t doubt it – as no one wants to put several months of work into a deal that falls apart due to macro-market factors.

But here’s a thought: It might be better for certain firms if these deals do, indeed, fall apart. The majority of them are overpriced, particularly in light of falling stock prices. Moreover, the favorable leverage terms are disappearing (see Alliance Boots), which largely negates why those price premiums were offered in the first place. Finally, let’s assume that all of the deals do close. If so, a handful of brand-name funds would face dry powder shortages. In other words, closing bad deals today can make it more difficult to do good deals in the future.

This might not be the case were we still in January, but the 2007 fundraising rush has left many limited partners with a dearth of available allocation. This is particularly problematic for mega-funds in search of large commitments. Just today, Buyouts ran a story about how Bain Capital beating the bushes a bit harder to get its new $15 billion fund raised.

Not a crisis by any means – and European and Middle Eastern LPs might be the saving spigot – but certainly a flip side worth considering.

*** MoneyTree data is coming tomorrow. Yeah, I know it’s late.

*** Amanda has lunch with Henry Jackson, the former Deutsche banker who now runs Merchant Equity Partners.

*** A bunch of new job listings on the peHUB Careers page. Shouldn’t your firm and/or portfolio companies be posting there? Just $99 for a two-week spot, and you can do it all online.

*** Tech writer Scott Kirsner has returned to Boston, and has entered the world of blogging. One of the most plugged-in guys out there, and a thought leader on why Boston lags so far behind Silicon Valley. Read him here.

*** I woke up extra-early today for a CBNC spot. For some reason they edited out video of “Chuck Prince” dancing. Happy watching, particularly when I pointlessly repeat myself three times at the beginning. Again, it was early…

*** Speaking of Silicon Valley, a bunch of you probably read yesterday’s NY Times piece on Bay Area millionaires who don’t feel rich. How deep inside the Valley cocoon must you be to feel such a thing? And, even if you do feel that way, how much deeper must you be to express such views in print?

*** Some feedback on Friday’s column about VC fund returns. More on this subject later today at peHUB…

Top Three

F5 Networks Inc. (Nasdaq: FFIV) has agreed to acquire Acopia Networks Inc., a Lowell, Mass.–based provider of intelligent file virtualization solutions. The deal is valued at $210 million in cash, and is expected to close on September 14. Acopia has raised around $85 million in VC funding since 2002, from firms like Accel Partners, Charles River Ventures, Goldman Sachs, Meritech Capital Partners, Star Ventures and Vesbridge Partners.

Istithmar has increased its buyout offer for department store chain Barneys New York from $825 million to $950 million. If current Barney’s owner Jones Apparel Group (NYSE: JNY) does not complete the deal, Istithmar would be entitled to a $22.7 million breakup fee.

David Welsh has joined McAfee Inc. (NYSE: MFE) as executive vice president of corporate strategy and business development. He previously spent seven years as a partner with venture capital firm Partech International.

VC Deals

Clear Water Compliance Services Inc., a Lynnwood, Wash.-based provider of water treatment services at constructions sites, industrial sites and ports, has raised $25 million in Series A funding from Plainfield Asset Management. The round included both preferred equity and debt. Cascadia Capital advised Clear Water on the deal.

DBS Communications Inc., a Schaumburg, Ill.-based mobile virtual network operator (MVNO), has raised $17.24 million in Series D funding, according to a regulatory filing. Return backers include NeoCarta Ventures, Montagu Newhall Associates, Sierra Ventures, MK Capital and SVB Capital. DBS has raised around $54 million in total VC funding since 2002.

Kinemed Inc., an Emeryville, Calif.-based drug company whose lead compound is designed to help treat ALS, has raised $15 million in convertible note funding. Stanford Financial Group led the deal, while Ledgemont Capital served as placement agent.

LiteScape Technologies Inc., a Redwood Shores, Calif.-based developer of unified communications applications, has raised $14 million in Series B funding. Vedanta Capital led the deal, and was joined by T-Venture and return backers SoftBank Capital, TeleSoft Partners and Blumberg Capital.

BioProcessors Corp., a Woburn, Mass.-based developer of micro-engineered solutions for biopharmaceutical process development applications, has raised $10.01 million in Series C funding at a post-money valuation of approximately $68 million. Life Sciences Partners was joined by return backers Healthcare Ventures, HLM Venture Partners, New Science Ventures and Oxford Bioscience Partners. This is the company’s second Series C tranche, and it has now raised $54.5 million in total VC funding since 2001.

AmieStreet, a New York-based digital music startup that prices songs based on artist popularity, has raised an undisclosed amount of first-round funding led by

SureFire LLC, a Fountain Valley, Calif.-based maker of flashlights and high-end tactical equipment, has raised an undisclosed amount of growth equity funding from Broadsword Partners, Brooklyn NY Holdings and Goldman Sachs.

Buyout Deals

Centerbridge Partners has completed its acquisition of a majority stake in The GSI Group Inc., an Assumption, Ill.–based manufacturer and distributor of agricultural equipment for the protein production markets. Seller Charlesbank Capital Partners retained a minority interest. No financial terms were disclosed.

Clearlake Capital Group paid $20 million to acquire a 9% stake in online retailer, according to a regulatory filing. The deal was announced last month, but without any financial information.

Duke Street Capital and Europa Capital Partners have completed their acquisition of CI Traders Ltd., a retail and leisure conglomerate that owns around 200 properties on the U.K. Channel Islands. The deal was valued at around £260 million.

Fox Paine has agreed to acquire Icicle Seafoods Inc., a Seattle-based seafood harvesting and processing company with processing facilities throughout Alaska. No financial terms were disclosed.

Hammond Kennedy Whitney & Co. has acquired a majority stake in Nesco LLC, according to LBO Wire. No financial terms were disclosed. Nesco is a Bluffton, Ind.-based renter of contractor vehicles, including bucket trucks, forklifts and cranes.

Lion Capital has agreed to buy Russian juice producer Nidan Soki. No financial terms were disclosed, except that Nidan Soki generated around $270 million in 2006 sales. Lion was advised by Goldman Sachs, while Nidan Soki was advised by Troika Dialog.

Marlin Equity Partners has agreed to acquire Ronco Corp., a bankrupt maker of rotisserie ovens, knives and food dehydrators. The deal is valued at around $6.5 million, which does not cover the $8.1 million Ronco owes creditor Laurus Master Fund.

Rutland Partners has agreed to buy the Pulse leisure division of Alba PLC for £51.5 million. The business provides branded goods to the UK home electrical market, including kitchen appliances, electrical hair care products and power and garden tools.

Sopris Partners has acquired WIT Postal Logistics, a New Lenox, Ill.-based mail distribution outsourcing company. No financial terms were disclosed. WIT was advised by RSM EquiCo Capital Markets.

Stephens Capital Partners has acquired Royston LLC, a Jasper, Ga.-based maker of checkout and convenience store merchandising equipment, from Cinnabar Solutions. No financial terms were disclosed. Edgeview advised Royston on the sale.

Sun Capital Partners has closed its acquisition of a 75% stake in retail chain Limited Stores from Limited Brands Inc. (NYSE: LTD).

Tricor Pacific Capital has acquired Golden Boy Foods Inc., a Burnaby, British Columbia-based maker of more than 400 private-label and branded food products. No financial terms were disclosed. BMO Capital Markets advised Golden Boy on the deal.

PE-Backed IPOs

ICx Technologies Inc., a Washington, D.C.-based provider of sensor solutions for the homeland security market, has filed for a $184 million IPO. It plans to trade on the Nasdaq under ticker symbol ICXT, with Lehman Brothers serving as lead underwriter. Wexford Capital holds a 85.9% pre-IPO position.

BG Medicine Inc., a Waltham, Mass.-based developer of molecular diagnostics based on biomarkers, has filed for an $80 million IPO. It plans to trade on the Euronext Amsterdam under ticker symbol BGMDX, with Cowen International and Fortis serving as co-lead underwriters. BG Medicine has raised around $37 million in VC funding since 2000, from firms like Flagship Ventures (48.8% pre-IPO stake), Gilde Investment Management (14.6%) and Koniklijke Philips Electronics (6.5%).

PE Exits

Allen-Vanguard Corp. (TSX: VRS) has agreed to acquire Med-Eng Systems Inc. for Cnd$600 million, plus another Cnd$50 million in excess working capital. The sellers are two undisclosed venture capital firms. Med-Eng is an Ottawa-based maker of explosive ordnance disposal equipment.

Orbotech Ltd. (Nasdaq: ORBK) has agreed to acquire 3D-Danish Diagnostic Development AS, a Danish development of nuclear medicine gamma cameras. The deal is valued at approximately $39 million in cash, plus up to $6.5 million in performance-based earn-outs. Danish private equity fund Axcel II has owned a majority stake in DDD since 2004.

PE-Backed M&A

Total Safety U.S. Inc., a Houston, Texas-based portfolio company of DLJ Merchant Banking Partners, has completed its acquisition of Inter-Mountain Safety Inc., an Evanston, Wyo.–based provider of safety services to the oil and gas industry in the Rocky Mountain region. No financial terms were disclosed.

Firms & Funds

Rutland Partners has closed its second fund with £322 million in capital commitments. The UK-based firm focuses on troubled mid-market companies.

Draper Fisher Jurvetson has acquired a stake in European tech venture firm Esprit Capital Partners, which will be re-branded DFJ Esprit with existing DFJ partners joining the Esprit investment committee. Esprit currently manages $560 million in two funds: Esprit Capital I, which it acquired via a management buyout from Cazenove in 2006, and the evergreen, LSE-listed, Prelude Trust PLC.

Human Resources

Francis Leung has joined CVC Capital Partners Asia Pacific as a senior advisor focused on opportunities in Greater China. He resigned as Asia chairman for Citigroup Global Markets in February.

Sasha Mirchandani has joined BlueRun Ventures as a senior investment director in the firm’s Mumbai office. He previously was with Mirc Electronics as head of corporate affairs and new business.

In Sik Rhee has joined Accel Partners as a venture partner in the firm’s Palo Alto office. Rhee previously was co-founder and chief tactician at Opsware, which recently agreed to be acquired by HP for $1.6 billion. Before that, he co-founded Kiva Software Corp., which was acquired by Netscape.

Saloni Joshi has joined law firm Morgan Lewis as a London-based partner in the firm’s private investment fund practice. She previously was with Debevoise & Plimpton.