PE Week Wire: Tues., June 26, 2007

Let’s take a day off from the carried interest debate, and return to the traditional bevy of personnel and fund scoop:

David Walrod has left Oak Investment Partners, where he was a Palo Alto-based general partner who focused on chips, wireless/wireline communications and Internet services and infrastructure.

Oak managing partner Annie Lamont said that Walrod is “moving on to pursue other interests,” and that I’d have to talk to Walrod for additional info. So I called Walrod at his Palo Alto home. The brief conversation confirmed that he is “making a change,” but beyond that said the Oak statement would “speak for itself.”

Walrod joined Oak in April 1999 as a principal, and was promoted to general partner when the firm closed its tenth fund in 2001. His current (about to be ex-) board seats include CoVi Technologies, Cyren Call, Integrated Solutions, LumaSense, NextG Networks, NR2B, Orange Broadband, SmartDrive, UltraDots and Wavestream.

Oak has no current plans to replace Walrod’s position in Palo Alto, where he was one of two GPs. The firm has four GPs remaining, to go with four managing partners, nine venture partners and ten other investment professionals. It is currently investing out of its eleventh fund, which closed last year with $2.56 billion.

*** Battery Ventures is still on target to close its new fund with $850 million by next Monday. As part of the close, Battery is expected to promote three partners to general partner. They are: Michael Brown, Sunil Dhaliwal and Neeraj Agrawal.

*** The Gores Group last Friday closed its second fund with $1.3 billion in capital commitments. Expect a press release within a week or two.

The Los Angeles-based firm began fundraising with a $750 million cover price and a $1 billion expectation, but accepted oversubscription because the size of its deal opportunities has grown substantially over the past year. Senior managing director Scott Honour says that Gores has no plans to staff up due to the major capital jolt, although it is continuing efforts to fill a pair of operational positions. Gores raised $400 million for its previous fund in 2003.

*** Vector Capital also is about to bust its target, with plans to close on just over $1 billion within the next few weeks. A regulatory filing showed that the San Francisco-based firm had secured $691.5 million through June 7.

The firm closed its prior fund on around $350 million, and decided to bulk up after more and more of its deals required large co-investments from limited partners. For example, Vector provided a $60 million equity check when taking Corel Corp. private in August 2003 – but only $20 million came from Vector’s actual fund. In other words, it decided to raise additional fund capital so all of its LPs could gain substantially from positive returns, rather than just those with co-investment programs.

Top Three

Saga, a UK travel and insurance company for people over 50, has agreed to merge with UK motoring group the Automobile Association (AA), in a £6.2 billion deal. Existing shareholders in the two companies will remain as investors in the combined enterprise. These include private equity houses Permira and CVC, which bought the AA from energy group Centrica in 2004, and Charterhouse Capital Partners, which owns Saga. Permira and CVC would hold a combined 42.5%, Charterhouse would hold 37.5% and company management would hold the remaining 20 percent.

Stion, a Menlo Park, Calif.-based photovoltaics company developing thin-film modules, has raised $15 million in Series B funding. Lightspeed Venture Partners led the deal, and was joined by General Catalyst Partners and return backers Khosla Ventures, Braemar Energy Ventures and Moser Baer Photovoltaic.

Insight Venture Partners has closed its sixth fund with $1.25 billion in capital commitments. The New York-based firm focuses on both control and minority investments in the software and Internet services market, and closed its prior fund with $675 million in 2005. In related news, the firm has promoted five professionals to managing director. They are: Ben Levin and George McCulloch on the transaction team; Hilary Gosher and Nikitas Koutoupes on the “value-creation” team and Blair Flicker, the firm’s chief compliance officer.

VC Deals

Kiadis Pharma BV, a Dutch oncology drug company, has raised €15 million in new VC funding. Alta Partners led the deal, and was joined by Quest for Growth, MedSciences Capital and return backers Life Sciences Partners, Esprit Capital Partners LLP and N.V. NOM.

Exanet Inc., a Ra’anana, Israel-based provider of network attached storage software for data centers, has raised $18 million in third-round funding. Coral Capital Management led the deal, and was joined by hedge fund QVT Fund and return backers Evergreen Venture Partners, Intel Capital, Microdent, Kodak, CSK Fund (Hitachi) and Dr. Giora Yaron.

JasperSoft Corp., a San Francisco-based provider of commercial open-source reporting solutions, has secured $11 million of a $12.27 million Series D round, according to a regulatory filing. Scale Venture Partners led the deal, and was joined by return backers Partech International, DCM and Morgenthaler. It has now raised over $34 million in total VC funding, including an $8 million Series C round in 2005 at a $23.2 million post-money valuation.

HighRoads Inc., a Woburn, Mass.-based provider of HR management software, has raised $9 million in Series C funding. ABS Ventures led the deal, and was joined by Kodiak Venture Partners, Egan-Managed Capital and AH Ventures. HighRoads has raised nearly $28 million in total VC funding since 2001.

Advanced BioNutrition Corp., a Columbia, Md.-based developer of technology to improve animal health and functional nutrition in the aquaculture area, has raised $7.75 million in Series C funding. Sea Change Investment Fund led the deal, and was joined by return backers Sherbooke Capital, Emerald Technology Ventures, BASF Venture Capital and Arancia Industrial SA de CV.

SDCmaterials Inc., a German provider of nano-enhanced products and nano materials, has raised $6.3 million in Series A funding. Emerald Technology Ventures led the deal, and was joined by BASF Venture Capital and individual angels.

Digitalsmiths Corp., a Durham, N.C.–based provider of contextual advertising solutions within digital video, has raised $6 million in Series A funding from The Aurora Funds and Chrysalis Ventures.

EG Technology Inc., an Atlanta-based provider of video processing equipment for switched digital video, has raised $5 million in additional Series C funding. Return backers include H.I.G. Ventures, Gray Ventures, Noro-Moseley Partners and Sevin Rosen Funds. This brings the round total to $20.5 million.

uXcomm Inc., a Beaverton, Ore.-based provider of software that virtualization platform software, has raised $4 million in third-round funding from return backers Foundation Capital and OVP Venture Partners. The company also changed its name to Virtugo Software.

CircleUp Inc., a Newport Beach, Calif.-based provider of a social communication service for simplifying email and IM replies, has raised $3 million in Series A funding led by S.R. Bass Associates.

Lijit Networks Inc., a Louisville, Colo.-based provider of search tools and statistics for blog publishers, has raised $3.3 million in Series B funding. Boulder Ventures led the deal, and was joined by return backers High Country Venture and Brad Feld.

Bionica Corp., a Providence, R.I.-based developer of a personal communication system for the hearing-impaired, has raised $250,000 in seed funding from Slater Technology Fund.

Cequint Inc., a Seattle-based developer of caller ID technology for mobile phones, has raised Series B funding. No financial terms were disclosed, but a regulatory filing shows that the total round was $5 million, with Cequint having called down $2.9 million as of June 12. iSherpa Capital led the deal, and was joined by return backer Benaroya Capital.

Medical Carbon Research Institute LLC, an Austin, Texas–based carbon technology and cardiovascular surgery products company, has completed a recapitalization and changed its name to On-X Life Technologies Inc. The financing eliminates most of the company’s debt, and provides growth capital. Under terms of the agreement, existing shareholders like Paul Capital Healthcare and PTV Sciences provided $32 million through a combination of debt, revenue interest and royalty conversion, as well as a new equity capital

Buyout Deals

American Capital Strategies has acquired an 83% stake in SMG, a Philadelphia–based provider of entertainment and conference venue management services. The total deal is valued at $631 million, with American Capital providing all of the equity and debt.

Candover has agreed to acquire Stork, a Dutch maker of food processing equipment, for at approximately €1.5 billion. ABN Amro is advising Stork on the deal, while Candover is bring advised by Goldman Sachs.

Carlyle/Riverstone has completed its sale of a 63% limited partnership interest in pipeline operator Buckeye GP Holdings LP (NYSE: BGH) to ArcLight Capital Partners, Kelso & Co. and Lehman Brothers.

Centerbridge Partners has agreed to acquire 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 will retain a minority interest. No financial terms were disclosed.

Centre Partners has acquired Orion International Consulting Group Inc., a Raleigh, N.C.–based recruiting and permanent placement organization specializing in individuals leaving the military.No financial terms were disclosed for the deal, which was done in partnership with Jeffrey Evans, a staffing industry veteran, who will serve as the company’s executive chairman.

Thoma Cressey Bravo has completed its take-private buyout of Embarcadero Technologies Inc., a San Francisco-based provider of data management solutions. The total deal was valued at approximately $200 million, with Embarcadero stockholders receiving $7.20 per share. Morgan Stanley advised Embarcadero on the deal, while Wells Fargo Foothill has committed to provide leveraged financing. Thoma Cressey had previously agreed to acquire Embarcadero at $8.38 per share, but the deal was canceled late last year, after Embarcadero disclosed evidence of stock option backdating and a restatement of historical financials.

TPG and Affinity Equity Partners reportedly have offered to acquire listed Singapore-based chip testing company United Test & Assembly Center Ltd. for $1.5 billion. This would represent a premium of approximately 11% to UTAC’s stock price prior to news of the offer.

PE-Backed IPOs

Spreadtrum Communications Inc., a Shanghai-based fabless maker of wireless chipsets, said that the number of American depository shares being offered by selling shareholders in its IPO had increased from 767,000 to 998,000. The move means that Spreadtrum now will offer a total of 8.998 million ADS, while maintaining its $11-$13 price range. It plans to trade on the Nasdaq under ticker symbol SPRD, with Morgan Stanley and Lehman Brothers serving as co-led underwriters. Shareholders include New Enterprise Associates (24.24% pre-IPO stake), Fortune Venture Group (11.61%) and Pacific Venture Partners (7.7%).

PE Exits

Boston Scientific Corp. (NYSE: BSX) has agreed to acquire Remon Medical Technologies Inc., a Caesarea, Israel-based developer of communication technology for medical device applications. No financial terms were disclosed for the deal, which is expected to close later this summer. Remon entered into a co-development agreement with in 2004 with Guidant Corp., which was subsequently acquired by Boston Scientific. It also had raised around $46 million in total VC funding, from firms like Polaris Venture Partners, Concord Ventures, Lilly Ventures, KBL Healthcare Ventures, Medical Venture Partners, Triathalon Medical Ventures and the Ofer Hi-Tech Group.

PE-Backed M&A

Hub International Ltd., a Chicago-based insurance brokerage, has agreed to acquire the assets of Unity Group Insurance, which has three offices in Ontario, Canada. No financial terms were disclosed. Hub was taken private earlier this month for $1.8 billion, by Apax Partners and Morgan Stanley Principal Investments.

Firms & Funds

Kohlberg Kravis Roberts & Co. plans to obtain a securities broker-dealer license from the NASD, according to The Deal. The move is required for securities underwriting, although KKR is likely interested in forming an M&A advisory practice similar to that of Blackstone Group (which already has a broker-dealer license).

BlackRock Inc. has agreed to buy the fund-of-funds division of Quellos Group for up to $1.7 billion. The deal, set to close around Oct. 1, will create a fund-of-funds operation with more than $25.4 billion in managed assets.

Accent Equity Partners has closed a new fund with €380 million in capital commitments, according to LBO Wire. The Sweden-based firm focuses on lower-middle-market deals in the Nordic region.

GIMV and Dexia Bank Belgium have agreed to jointly launch a private equity fund focused on infrastructure and real estate construction projects, mainly in the Benelux. The fund’s target size is € 100 million, with GIMV and Dexia each providing up to 20 percent.

Yorkville Advisors has opened an Israel office in Tel Aviv. It will be staffed initially with a team of five executives under a joint venture with Israeli law firm Amos Bentzur and Company.

Human Resources

Justin Abelow has agreed to join Deutsche Bank Securities as a managing director in the firm’s financial sponsors group, focused on middle-market clients. He previously was with Houlihan Lokey Howard & Zukin, as a managing director hearing up the firm’s East Coast private equity efforts.

Fidelity Ventures has promoted Larry Cheng from principal to partner. He joined the firm in 205, after having been a senior associate with Battery Ventures.

Mary Denten has joined Scale Venture Partners as chief financial officer. She previously was CFO with Global Catalyst Partners.

Harvest Partners has promoted Michael Cardito, Richard Moreau, Andrew Schoenthal and Christopher Whalen from vice presidents to principals. The firm also said that CFO Debra Kravetz has added the title of senior vice president.

Marc Cali has joined Signal Hill, a boutique I-bank based in Baltimore, as vice president responsible for private placements and private investments in public equity. He previously was a vice president in the private finance and financial sponsors group of Stifel, Nicolaus & Company.

Pierre Suhrcke has joined London-based VC firm DN Capital as a managing partner. He previously was a partner with ABS Ventures, where he was responsible for European deals.

Glenn Pollner has joined Gibson, Dunn & Crutcher LLP as a partner in the firm’s corporate practice. He previously was with Dewey Ballantine, where he represented I-banks and companies on corporate finance transactions.

Arun Prakash has joined the Okalahoma City office of Virgo Capital as an associate. He recently received his MBA from MIT Sloan School, and has four years of project management experience at The Boeing Company.


Correction: Integral Capital Partners led the $4.8 million B-1 round for Tempo Payments Inc., and was joined by return backers Cardinal Venture Capital and Selby Venture Paertners.