PE Week Wire: Mon., June 4,

On Friday, a bottle of Memphis-style BBQ sauce was delivered to my office. The sender was a venture capitalist who told me that it would go well on crow. Later that afternoon, Amp’d Mobile filed for Chapter 11 bankruptcy protection (see the filing here).

Pardon me while I stoke up the grill.

In a formal statement, Amp’d said that the move was made because its “back-end infrastructure was unable to keep up with customer demand.” That explanation seems to wash with folks I’ve spoken with – and with Rafat Ali of MocoNews, which broke the story – but is nonetheless a stinging indictment of both the company’s management and its investors. The primary reason Amp’d raised so much venture capital funding – around $360 million to date – was in order to handle the scale of a nationwide mobile platform. If the scaling didn’t work, it wasn’t for lack of funds. It was for lack of operational execution and (apparently) hands-on oversight.

It also was for lack of a cohesive vision. I reported a few weeks back that the company effectively had 20 board members (including observers), and there were some deep splits over whether Amp’d should become more of a content producer than a mobile virtual network operator (its original charter). There also was an interesting dynamic whereas the initial venture investors no longer held terribly significant stakes in Amp’d. According to the Chapter 11 filing, Columbia Capital, Highland Capital Partners and Redpoint Ventures each hold less than 10% stakes. This compares unfavorably to a strategic investor like Vivendi, which holds over 12 percent. I can’t say that some battle lines were drawn that neatly, but strategic investors often have different priorities than venture investors.

Please note that Amp’d is not going away (at least not yet) – this is a Chapter 11 filing, not a Chapter 7 filing, and Amp’d said that it will continue “normal business operations” and that it is in the process of obtaining financing from an existing investor. I had heard earlier that the biz plan required another $100 million or so, although I don’t know if the debtor-in-possession round will be that high.

There also have been reports that two investors have left the Amp’d board of directors, although specifics are hard to come by. One likely departee is Jon Auerbach of Highland Capital Partners, given that Highland has removed Amp’d from Auberbach’s website bio. In fact, Highland also has removed Amp’d from its online list of portfolio companies. A Highland spokesman did not return requests for comment, while I got “no comments” from folks at both Columbia Capital and Redpoint.

Other Amp’d shareholders include MTV Networks, Intel Capital, Rho Ventures, Tudor Investment Corp., Qualcomm and Quilvest. More on this story at peHUB later today…

*** Speaking of mea culpas, I also erred in claiming that Lehman Brothers planned to list the first-ever private equity fund-of-funds on the public markets. I asked you to correct me, and boy did you ever. More than 100 emails, which cited such vehicles as Shape Capital, Castle Private Equity,Princess Private Equity Holding Ltd. and Pantheon International Participations. And there were more, plus planned offering from both Bank of America and Bear Stearns.

*** And even more: When ChosenSecurity raised its $8.5 million Series A round last week, I neglected to mention that .406 Ventures served as the lead…. For those of you who regularly email to say I don’t know what I’m talking about, consider this your day of rejoicing…

*** But so as not to be all about how I messed up, here is one piece of VC scoopiness: Digital music company Slacker Inc. has raised $40 million in second-round funding. The VCs luckily got the deal done before CBS deemed worthy of a $280 million valuation, particularly given that Slacker has a far more ambitious strategy than do any of its rivals (not just software, but also satellite-linked hardware). Read the full story here.

Top Three

Brash Entertainment LLC, a Los Angeles-based publisher of videogames based on movies and other entertainment properties, has raised $400 million in startup funding. Abry Partners led the deal, and was joined by New York Life Capital Partners and PPM America.

Elevation Partners has agreed to acquire a 25% stake in Palm Inc. (Nasdaq: PALM), in exchange for a $325 million equity investment. Elevation partners Fred Anderson and Roger McNamee will join the Palm board of directors. The deal is part of Palm’s larger recapitalization, which also includes $400 million in debt. Both the equity and debt will be used to help finance a $9 per share cash distribution for Palm shareholders.

Silver Lake Partners and TPG reportedly are near an agreement to acquire telecom equipment maker Avaya, (NYSE: AV) for $17 per share, or more than $8 billion. The only hiccup could be a last-minute offer from Nortel Networks, whose initial bid apparently fell short.

VC Deals

BioRelix Inc., a Southport, Conn.-based antibiotics developer, has raised $25.75 million in second-round funding, according to VentureWire. New Leaf Venture Partners and Aisling Capital joined seed backers CHL Medical Partners, Novartis Venture Fund, Elm Street Ventures and Alexandria Real Estate Equities.

Verari Systems Inc., a San Diego-based blade computing company, has raised nearly $25 million in Series C funding, according to a regulatory filing. Return backers include Carlyle Venture Partners, Sierra Ventures, Voyager Capital and Celerity Partners.

Stretch Inc., a Sunnyvale, Calif.-based maker of software-configurable processors, has raised $12 million in Series B funding. Participants include Worldview Technology Partners, Oak Investment Partners and Menlo Ventures.

Tumri Inc., a Santa Clara, Calif.-based provider of contextual online advertising solutions, has raised $10 million in Series B funding. Lehman Brothers Venture Partners led the deal, and was joined by return backers Accel Partners and Shasta Ventures.

Innovative Metabolics Inc., a Cambridge, Mass.-based developer of a neuron-modulation platform technology to treat a variety of acute and chronic diseases, has raised $6 million in first-round funding, according to a regulatory filing. Backers include Morganthaler Ventures and Foundation Medical Partners.

Accu-Break Pharmaceuticals Inc., a Plantation, Fla.-based drug company focused on increased efficacy of oral dosages, has raised $5.65 million in its first institutional funding round (fourth overall round). Participants included S.A.C. Capital Associates and Pequot Capital Management.

Buyout Deals

Bear Stearns Merchant Banking has completed its acquisition of Universal Hospital Services Inc. from JW Childs Associates, The Halifax Group and UHS management. The deal was valued at approximately $712 million. UHS is an Edina, Minn.–based provider of medical equipment lifecycle services.

The Blackstone Group has agreed to acquire insurance brokerage Alliant Insurance Services Inc., in partnership with Alliant management and employees. No financial terms were disclosed. JPMorgan is advising Alliant on the deal, and also will provide Blackstone with leveraged financing for the transaction.

Cadence Design Systems (Nasdaq: CDNS) has held talks with at least two prospective buyers, according to The New York Times. The report says that Cadence discussed a possible buyout with both Blackstone Group and KKR, although cautions that other private equity firms have already passed on the company. Cadence currently has a market cap of around $6.4 billion.

The Carlyle Group has agreed to acquire a majority stake in RMI, an Atlanta–based provider of rail information services to the transportation industry. No financial terms were disclosed.

Fenway Partners has agreed to acquire 1-800 Contacts Inc. (Nasdaq: CTAC), a Draper, Utah-based provider of replacement contact lenses. The total deal is valued at around $340 million, with CTAC stockholders to receive $24.25 per share (21% premium to last Friday’s closing price). Sonenshine Partners and Goldman Sachs advised CTAC on the deal, while Fenway has secured financing commitments from JPMorgan.

EQT has acquired a majority stake in Danish industrial engineering business Cimbria. No financial terms were disclosed for the deal, which results in Cimbria’s founding family retaining a “significant” stake and maintaining key management positions.

Laureate Education Inc. (Nasdaq: LAUR), a Baltimore-based provider of on-campus and online higher education, has accepted an increased buyout offer that values the company at $3.82 billion. The new deal will provide Laureate stockholders with $62 per share, compared to an original $60.50 per share price. The buying consortium includes Laureate chairman and CHO Douglas Becker, Kohlberg Kravis Roberts & Co., Citigroup Private Equity; S.A.C. Capital Management, SPG Partners, Bregal Investments, Caisse de dépôt et placement du Québec, Sterling Capital, Makena Capital, Torreal SA and Southern Cross Capital.

Leeds Equity Partners has agreed to acquire eInstruction Corp. from Chicago Growth Partners. No financial terms were disclosed. eInstruction is a Denton, Texas-based provider of interactive instructional and assessment systems and content-based assessment software to K-12, high education, corporate and military classrooms.

Lehman Brothers Private Equity has acquired a “significant equity stake” in SkyPower Corp., a Toronto-based renewable energy company with a portfolio of wind and solar projects across Canada. The investment includes an up-front acquisition payment, commitments to future project financing as well as other investment opportunities in the renewable energy sector. A portion of the up-front payment will be used by the Adler Renewable Energy Foundation, a group formed to help provide select schools and needy communities in Canada with the ability to benefit from clean renewable power by having solar or wind power to augment or replace their current power needs.

Lone Star Funds has agreed to acquire residential mortgage company Accredited Home Lenders Holding Co. (Nasdaq: LEND). The deal is worth approximately $400 million, with Accredited stockholders to receive $15.10 per share (10% premium over Friday’s closing price).

Industrial Growth Partners has sponsored a recapitalization of Seaboard International, a Houston, Texas-based provider of engineering, manufacturing serving and repair for oil and gas wellhead equipment. No financial terms were disclosed. Seaboard was advised on the deal by GulfStar Group.

American Express (NYSE: AXP) is near a deal to sell its private banking business, according to Reuters. No buyers were identified.

PE Exits

Google confirmed that it acquired Feedburner, a Chicago-based provider of online feed distribution and management tools. No financial terms were disclosed, although TechCrunch had previously reported a $100 million price. Feedburner had raised $10.2 million over three rounds since 2004, from firms like Mobius Venture Capital, Portage Venture Partners, Sutter Hill Ventures and Union Square Ventures., a Los Angeles-based online marketing company, has agreed to acquire SnapNames Inc., a Portland, Ore.-based operator of expired and deleting domain names. No financial terms were disclosed for the deal, which is expected to close within the next few weeks. SnapNames had raised nearly $9 million in VC funding since its 2000 inception, from firms like Empire Ventures and InvestAmerica Venture Group.

Firms & Funds

Adveq, a Swiss private equity fund-of-funds manager, has opened a U.S. office in New York. Several of Adveq’s Switzerland-based staffers will relocate, and be joined by new hires Lee Gardella and Steven Yang. Gardella will serve as executive director, and previously was a managing director of private markets at CTC Consulting. Yang will serve as a vice president, and previously was a portfolio manager for family office Beagle Ltd.

IAC/InterActive, the New York-based media and ecommerce conglomerate headed by Barry Diller, is launching a venture capital unit called Primal Ventures, according to The San Jose Mercury News. The effort will be led by former CEO Jim Safka, who is relocating from Dallas to San Francisco.

Shackleton Ventures has acquired a portfolio of nine venture capital investments from 3i Group, including Creditcall Communications. No financial terms were disclosed for the deal, which is Shackleton’s second portfolio acquisition from 3i in the past three months.

VMG Equity Partners has closed its debut fund with $325 million in capital commitments, according to LBO Wire. Park hill Group served as placement agent. San Francisco-based VMG focuses on middle-market consumer companies, and was founded in 2005 by three former members of TSG Consumer Partners and David Baram, president and COO of talent management agency The Firm.

Human Resources

Sven Weber has joined Cipio Partners as a principal in the firm’s Silicon Valley office. He previously was a managing partner with Innovature Capital Partners. Cipio is a direct secondaries firm, with other offices in London and Munich.