PE Week Wire: Thurs., Aug. 9, 2007

The Blackstone Group has completed the largest – and one of the longest – fundraising drives in private equity history, by closing its fifth fund with $21.7 billion in capital commitments. Thank goodness, because my regular queries to Blackstone reps had become a variation of the tiresome “Are we there yet.”

Blackstone began raising this fund way back in 2004 with a $10 billion target. Seems modest now, but at the time would have been the largest fund ever raised. Not long after, a fundraising arms race began. The Carlyle Group in March 2005 secured a combined $10.05 billion for its North American and European funds, and I joked that Schwarzman would probably ask LPs for an extra $600k. But I underestimated Blackstone, which soon gathered $12 billion. What Blackstone didn’t do, however, was hold a final close.

Instead, the firm decided to push off the end-date to Q3 2006 – as deal opportunities continued to get larger. It had $15.6 billion by last fall, and asked its LPs for feedback on additional fundraising. Reports at the time suggested that Blackstone was looking to settle on an even $20 billion, but sources said that such speculation was premature.

The next info nugget came this past March, when Blackstone’s IPO filing indicated that the fund had grown to $19.6 billion. Soon after, Buyouts Magazine reported that everything would be wrapped up by the end of July on around $22 billion.

Which brings us to today, and the $21.7 billion final close. It is the largest single fund ever raised – topping a $20 billion Goldman Sachs vehicle that was partially raised from firm employees. It might also be a short-lived respite for Blackstone’s fundraisers, as the fund is already 2/3 committed to closed and pending deals. Among them are Biomet, Center Parcs, Michaels Stores, Freescale Semiconductor, Alliance Data Systems and Hilton Hotels.

That leaves Blackstone with around $7.2 billion in dry powder, and some are already saying that it could be hard to put that much to work in today’s environment. And they would be right, if the environment stays exactly like it is today (included shock-induced banker paralysis — but that’s highly unlikely and Blackstone has several years of investment runway remaining.

Also, don’t discount the power of creativity. For example, some sponsor banks have been circulating pitch-books that propose swap facilities whereby large LBO firms would put excess fund capital to work in leveraged vehicles that would help fix hung bridges. But that’s a different column for a different day…

Top Three

The Home Depot Inc. (NYSE: HD) said that it may change the terms and financing of its agreement for the sale of its HD Supply unit, which could result in a drop in the $10.33 billion sale price. The company is in talks with Bain Capital, Carlyle Group and Clayton, Dubilier & Rice about the possible changes, which are being prompted by the changed economic environment.

GreatCall Inc., a Del Mar, Calif.-based provider of “simple” mobile phones and services for baby boomers and seniors, has raised $36.66 million in Series B funding. Backers include Charles River Ventures, NautaCapital and Steelpoint Capital Partners. Get the full story here.

Providence Equity Partners has invested $100 million into a joint venture between NBC Universal and News Corp., which would bring both companies’ television shows and movies onto the Internet. The deal was first reported by The New York Times, and values the total project at $1 billion.

VC Deals

Xtera Communications, an Allen, Texas-based optical networking and services company, has raised $52 million in seventh-round funding. The Wellcome Trust led the deal with an investment of approximately $26 million, and was joined by return backers New Enterprise Associates and Arch Venture Partners. Xtera has now raised over $218 million in total VC funding since 1998.

Nereus Pharmaceuticals Inc., a San Diego-based cancer drug company that uses marine microbial sources, has raised $45 million in Series D-2 funding. BankInvest Biomedical Venture of Copenhagen led the deal, and was joined by fellow new backers Roche Venture Fund, Astellas Venture Management, Boston Life Science Venture Corporation, Taiwan Global Biofund and Eminent Venture Capital Corp. Returning shareholders included HBM BioVentures, Alta Partners, Forward Ventures, Advent International, GIMV, InterWest Partners and Pacific Venture Group. Nereus previously raised a $42.6 million Series D-1 round, and has now raised over $127 million in total VC funding since 1998.

Intune Networks, a Dublin-based provider of network equipment for telecommunications and enterprise networks has raised $17.75 million in second-round funding. Backers include Amadeus Capital Partners, Balderton Capital and Spark Capital. The company was formed in 1999, and previously raised nearly $4 million from firms like 3i Group, ICC Venture Capital and Enterprise Ireland. Those firms remain Intune shareholders, but did not participate on the new round.

Adnexus Therapeutics Inc., a Waltham, Mass.-based developer of therapeutic proteins, has raised $15.5 million in Series C funding. HBM BioVentures led the deal, and was joined by return backers Atlas Venture, Flagship Ventures, Polaris Venture Partners and Venrock. AdNexus has raised $70 million in total VC funding since 2003. Its first candidate focuses on oncology, and is in Phase I clinical trials.

Parade Technologies Ltd., a Sunnyvale, Calif.-based provider of digital video interface technology, has raised $14.5 million in Series B funding. AsiaVest Partners led the deal, and was joined by Intel Capital and return backer Legend Capital. Parade has now raisesd $21.5 million in total VC funding.

YellowJacket, a New York-based provider of energy trading solutions for the financial and energy marketplaces, has raised $1.25 million in VC funding from Greenhill SAVP.

Neuromed Pharmaceuticals Ltd. and Merck & Co. Ltd. (NYSE: MRK) said yesterday that they are discontinuing a research collaboration and license agreement focused on novel compounds for the treatment of pain and other neurological disorders. The deal had included an immediate cash payment of $25 million, plus up to $450 million in progressive milestone payments. In a statement, the companies said that the lead candidate “does not demonstrate the ideal pharmaceutical characteristics considered necessary to advance the compound further in development.” In other Neuromed news, VentureWire reports that the company has raised $36 million in Series E funding to finance Phase III clinical trials of a new product recently licensed from J&J. This brings the Vancouver-based company’s total VC funding to around $126 million, from firms like GrowthWorks, RBC Capital Partners, MPM Capital, Kinetic Capital Partners, MDS Health Ventures, NDI Capit! al, Cogene Ventures and BDC Venture Capital.

Buyout Deals

Eurazeo has agreed to acquire French workwear rental company Elis GIE from PAI Partners for €2.28 billion. The deal is expected to close later this year.

Actis has sponsored a $75 million management buyout of Mivan Far East (MFE) from Mivan, a European construction company. MFE designs aluminum formwork systems for the construction industry.

Alliance Data Systems Corp. (NYSE: ADS) shareholders have approved an $81.75 per share buyout offer from The Blackstone Group. The total deal is valued at $7.8 billion, including assumed debt, and is expected to close in the fourth quarter. Alliance Data provides marketing, loyalty and transaction services.

Citicorp Venture Capital has acquired Big Red Ltd., a Waco, Texas-based maker of carbonated soft drinks. No financial terms were disclosed. CVC said that it would install Gary Smith, former co-CEO of Red Bull, as Big Red’s new CEO.

DC Capital Partners has acquired a controlling interest in The Spectrum Group, an Alexandria, Va.-based consulting group. No financial terms were disclosed. Most of Spectrum’s 80 associates are former flag and general officers, with the remainder comprised of ambassadors, political appointees, legislative experts and corporate executives.

Generation Equity Investors has acquired a minority stake in Scandinavian Child LLC, a Raleigh, N.C.–based marketer and distributor of children’s products. No financial terms were disclosed.

Sun Capital Partners has increased its ownership stake in residential furniture maker Furniture Brands International Inc. (NYSE:FBN) from 5 to 6 percent, according to a regulatory filing. Sun acquired its original shares back in March, which led to speculation that it would make an offer for the entire company.

SV Investment Partners has acquired FocusVision Worldwide Inc., a Stamford, Conn.-based provider of video transmission and digital recording technologies for the qualitative market research industry.No financial terms were disclosed for the deal, which was done in partnership with FocusVision management.

Brinker International Inc. (NYSE: EAT) said that it is exploring a sale of its Romano’s Macaroni Grill restaurant chain, which includes 217 units. Earlier this year, Brinker sold 95 Chili’s Grill & Bar restaurants to Olympus Partners for $155 million.

Campbell Soup Co. (NYSE: CPB) has retained Centerview Partners to explore strategic alternatives, including possible divestiture, for its Godiva Chocolatier business. Godiva has annual sales of approximately $500 million.

General Motors CFO Fritz Henderson said yesterday that the company’s next divestiture could be its medium-duty tuck unit. Earlier this week, GM completed the $5.575 billion sale of its Allison Transmission unit to The Carlyle Group and Onex Partners.

PE-Backed IPOs

DemandTec Inc., a San Carlos, Calif.-based provider of consumer-centric merchandising software, raised $66 million through an IPO. The company priced 6 million common shares at $11 per share ($10-$12 range), for an initial market cap of approximately $288 million. It will trade on the Nasdaq under ticker symbol DMAC, while Credit Suisse and Morgan Stanley served as co-lead underwriters. DemandTec had raised around $50 million in total VC funding since 1999, from firms like Crosspoint Venture Partners (34.8% pre-IPO stake), Cargill Ventures (15.9%), Altos Ventures (8.3%) and Athena Technology Ventures. Late last year it acquired TradePoint Solutions Inc., a Pleasanton, Calif.-based provider of online deal management software.

Masimo Corp., an Irvine, Calif.-based provider of non-invasive patient monitoring products, raised approxim! ately $202.65 million through its IPO. The company priced 11.92 million common shares at $17 per share $16-$18 range), for an initial market cap of nearly $898 million. Piper Jaffray and Deutsche Bank Securities served as co-lead underwriters. Masimo began trading yesterday on the Nasdaq under ticker symbol MASI, and closed up at $20.90 per share. It had raised around $88 million in total VC funding since 1992, including a 2005 infusion at a $190 million post-money valuation. Backers include Invesco Private Capital (8.6% pre-IPO stake), Steelpoint Capital Partners (5.6%), DSV Partners (5.4%) and Franklin Templeton Group (5.3%).

NanoDynamics Inc., a Buffalo, N.Y.-based developer of solid-oxide fuel cells, water filters and other advanced materials, has postponed its IPO due to “current market condition.” The company had planned to offer 6.6 million common shares at between $12 and $14 per share, and to trade on the Nasadaq. Jefferies & Co. is serving as lead underwriter. NanoDynamics has raised around $15.25 million in total private funding, with backers including the Convergent Private Equity Fund.

PE Exits

Dell (Nasdaq: DELL) has agreed to acquire Zing Systems Inc., a Mountain View, Calif.-based developer of a mobile entertainment platform. No financial terms were disclosed. Zing has raised over $13 million in VC funding from Redpoint Ventures and IDG Ventures Boston.

MetLife Inc. has agreed to acquire SafeGuard Health Enterprises Inc. from CAI Private Equity. No financial terms were disclosed. SafeGuard is an Aliso Viejo, Calif.-based provider of dental and vision benefits.

Wipro Ltd. has acquired Unza Holdings Ltd. from Actis and Standard Chartered Private Equity for $246 million. Unza manufactures and markets skin and hair care products for the Southeast Asia market, with manufacturing plants in Malaysia, Vietnam, China and Indonesia. Actis and SCPE co-led a $100 million management buyout of Unza in 2004.

YouGov PLC has acquired Polimetrix Inc., a Palo Alto, Calif.-based provider of technology solutions for polling, for £11.7 million in cash and stock. YouGov had originally acquired a 32% stake in Polimetrix last December. Polimetrix had raised $8.13 million in Series A funding led by Alloy Ventures.

PE-Backed M&A

Aegera Therapeutics Inc., a Montreal-based drug developer, has acquired LymphoSign Inc., and its clinical oncology program that includes a tyrosine kinase inhibitor for acute myelogenous leukemia and other myelopproliferative disorders. No financial terms were disclosed. Aegera also raised a small amount of additional Series C equity funding – following a Cdn$14 million first close last year. Backers include VenGrowth, GrowthWorks, Business Development Bank of Canada, Desjardins Venture Capital, Multiple Capital and Solidarity Fund.

FDC Vitamins LLC, a Miami, Fla.-based portfolio company of MBF Healthcare Partners, has acquired Nutri-Force Nutrition Inc., a provider of vitamin contract manufacturing. No financial terms were disclosed.

InfuScience Inc., a Gurnee, Ill.–based provider of infusion therapy services and specialized clinical programs, has acquired Palmetto Infusion Services LLC, a Charleston, S.C.-based provider of in-home and ambulatory infusion center services. The seller was Winyah Healthcare Group. No financial terms were disclosed. InfuScience was formed in January 2006 by company management and Thoma Cressey Bravo.

Mycroft Talisen Inc., a St. Louis-based provider of identity and access management solutions, has raised $10 million from Petra Capital Partners and Ticonderoga Capital. The funds were used to for working capital, and to support the recent merger of Talisen Technologies and Mycroft Inc.

Veyance Technologies Inc., the former Engineered Products division of Goodyear Tire & Rubber, has expanded its conveyor belt operations by acquiring the assets of the former Industrial Specialty Fabrics of Hogansville, Georgia. No financial terms were disclosed. Veyance was acquired last week by The Carlyle Group for $1.475 billion.

Firms & Funds

Sheridan Production Partners has closed its debut fund with $1.3 billion, to invest in mature oil and gas assets located across the United States. Sheridan was formed by Warburg Pincus and Lisa Stewart, former president of El Paso Exploration & Production Company.

ViewPoint Capital Partners has held an €81 million first close on its second fund, which expects to hold a final close on up to €140 million by year-end. The Swiss firm focuses on Continental European companies in the software and IT spaces – including both venture capital, replacement capital and buyout opportunities.

GrandBanks Capital is targeting $150 million for its second fund, as first reported by PE Week Wire back in April.

Unified Growth Partners has raised nearly $21 million for its debut fund, according to LBO Wire. The Greenwich, Conn.-based firm will focus on mid-market growth equity opportunities, and was formed by former United Rentals executives John Milne and George Cinquegrana.

Accenture has provided a $1.5 million grant to the Enablis Entrepreneurial Network, which helps entrepreneurs in Africa build and scale strong, sustainable businesses. Enablis began in South Africa, and is now extending its program to countries in sub-Saharan Africa.

Human Resources

Paul Clark has joined Genstar Capital as an operating partner, with a focus on the life sciences market. He previously served as chairman and CEO of biotech company ICOS Corp., which was acquired earlier this year by Eli Lilly.

Jeff Sutherland has joined OpenView Venture Partners as a senior advisor. He is the inventor of the Scrum Agile Development Process, which is used to manage software development teams.

Grant Garbers and Brian Mulvaney, founding partners of ISI Capital Partners, have joined merchant bank Headwaters MB as managing directors in charge of a new officer in Costa Mesa, California.