PE Week Wire: Wed., July 25, 2007

Running late in Redwood City this morning, so just a few quick links to kick off the day:

*** VCs keep pumping tons of money into gaming companies – albeit not yet into 38 Studios – but Paul Heydon of Avista Partners says that the Holy Grail of gaming continues to be elusive.

*** Lots of buzz around this interview with Peter Thiel, in which he says Facebook would not go public until 2009, at the earlier. Well, duh. It’s one thing for a strategic to consider shelling out billions for a blockbuster platform with less than $100 million in revenue, but quite another for public investors to do the same. So unless Comcast, Disney or Viacom are willing to face their shareholders’ short-term wrath, expect Facebook to stay private and independent for some time to come…

*** Mark Cecil finds some big buyout returns in Africa.

*** Pimco chief Bill Gross says that the buyout boom is coming to an end, because the era of cheap debt is over. Maybe so for the big deals, but it hasn’t yet trickled down to the large-market and mid-market deals, which have seen very little changes in leveraged financing terms…

*** Why pay 2 & 20 hedge fund fees, when you can just get a piece of software to mimic the best managers. Don’t worry, it wouldn’t work for private equity…

Top Three

Genstar Capital has agreed to acquire clinical research organization PRA International (Nasdaq: PRAI) for approximately $790 million. PRA stockholders would receive $30.50 per share in cash, which is a 13% premium to yesterday’s closing price. Credit Suisse is advising PRA, while UBS is advising Genstar.

AOL has agreed to acquire Tacoda Inc., a New York-based provider of behaviorally-targeted online advertising solutions. The deal is reported to be worth nearly $300 million. Tacoda had raised around $31 million in VC funding since 2001, from firms like Union Square Ventures, Masthead Venture Partners and Rho Ventures.

Validus Holdings Ltd., a Bermuda-based reinsurance company, raised $334.4 million via its IPO. The company priced 15.2 million common shares at $22 per share, which was below both its expected share amount (15.7 million) and price range ($24-$26). It has an initial market cap of approximately $1.58 billion. Validus will trade on the NYSE under ticker symbol VR, while Goldman Sachs and Merrill Lynch served as co-lead underwriters. It was formed in October 2005, with funding from Aquiline Capital Partners, Goldman Sachs Capital Partners, Vestar Capital Partners, New Mountain Capital and Merrill Lynch Global Private Equity.

VC Deals

Cyntellect, a developer of laser-based live-cell manipulation technology, has raised $15.1 million in Series D funding. Under terms of the deal, investors could choose to commit up to $8.3 million in additional capital. Third Security LLC led the deal through its New River Management V fund. Cyntellect is based in San Diego.

VaST Systems Technology Corp., a Sunnyvale, Calif.-based producer of embedded systems development technology, has raised $12 million in Series D funding. ZenShin Capital led the deal, and was joined by return backers Allen Buckeridge, Foundation Capital and Mohr Davidow Ventures. VaST has raised nearly $42 million in total VC funding since its 1997 formation.

Adzilla Inc., a Vancouver-based online advertising startup, has raised US $10 million in Series A funding, according to a regulatory filing. Backers include Alloy Ventures and Norwest Venture Partners.

Skyetek Inc., a Westminster, Colo.-based provider of embedded RFID reader technology, has raised $10 million in Series C funding. Grotech Capital Group led the deal, and was joined by TD Fund and return backers Appian Ventures, Sequel Venture Partners and Palomar Ventures. Skyetek has raised around $21 million in total VC funding since 2004.

Achive3000, a Lakewood, N.J.-based provider of online reading, vocabulary and writing instruction, has raised $9 million in funding from Insight Venture Partners.

Stratavia, a Denver, Colo.-based provider of IT run book automation software and services, has raised $6.25 million in Series B funding. Asset Management Co. led the deal, and was joined by fellow returnees Adams Street Partners and Vista Ventures.

Q4bis Inc., an Irvine, Calif.-based provider of decision support software, has raised $6 million in Series A funding. TVC Capital of San Diego led the round, with TVC partners Steve Hamerslag and Jeb Spencer joining the Q4bis board of directors.

Cloud9 Analytics, a San Mateo, Calif.-based provider of on-demand analytic applications for customers, has raised $5 million in Series A funding. InterWest Partners led the deal, and was joined by Leapfrog Ventures., a Boston-based social network for 20-somethings looking for activities in their cities, has raised $5 million in second-round funding. Return backers include Highland Capital Partners and General Catalyst Partners.

Zeligsoft, a Gatineau, Quebec-based provider of software development tools to the embedded computing industry, has raised Cdn$5 million in Series D funding. BDC Venture Capital led the deal, and was joined by Export Development Canada, Echo Capital and return backer Fonds régional de solidarité FTQ Outaouais.

Multi-Factor Authentication Inc., an Irvine, Calif.-based provider of online user authentication solutions, has raised $4.5 million from undisclosed backers.

Zipit Wireless Inc., a Greenville, S.C.-based maker of a low-cost portable IM device, has raised $4.5 million in Series A funding. Backers include Windspeed Ventures, SunBridge Partners, Meritus Partners and seed backer SC Launch.

Aquapharm Biodiscovery Ltd., a UK-based marine biotech company, has raised £4 million in second-round funding. Aescap Venture led the deal with a £1.5 million infusion, and was joined by Tate & Lyle Ventures and return backers Scottish Enterprise, NESTA Investments and HIE Argyll and the Islands.

MediTract Inc., a Saddle Brook, N.J.–based provider of contract management services to the healthcare industry, has completed a recap co-sponsored by Tudor Ventures and GE Healthcare Financial Services. No financial terms were disclosed. MediTract was advised by Shattuck Hammond Partners.

MotionDSP, a San Mateo, Calif.-based provider of digital video enhancement solutions, has raised an undisclosed amount of funding from In-Q-Tel.

TechTribe, an Indian career networking portal, has raised an undisclosed amount of first-round funding led by Canaan Partners. Other participants include The Entrepreneur’s Fund and Minven Venture Partners.

Buyout Deals

Clayton Dubilier & Rice has completed its acquisition of The ServiceMaster Co. for approximately $5.5 billion (including the assumption of debt). Under terms of the deal, ServiceMaster shareholders received $15.625 per share, which was around a 16% premium overthe stock’sclosing price prior to the original announcement. Banc of America Capital Investments, Citigroup Private Equity and JPMorgan Chase providedequity financing, while leverage came from Banc of America Securities, Citigroup Global Markets and JPMorgan. Morgan Stanley and Goldman Sachs served as financial advisors to ServiceMaster, which provides residential and commercial customers with such services as lawn care and landscape maintenance, termite and pest control, home warranties, disaster response and reconstruction, cleaning and disaster restoration, house cleaning, furniture repair and home inspection.

Platinum Equity has agreed to acquire Ryerson Inc. (NYSE: RYI), a Chicago-based metals processor. The total deal is valued at approximately $2 billion, with Ryerson stockholders to receive $34.50 per share. UBS is advising Ryerson on the deal.

KKR has agreed to sweeten the terms on loans it is using to finance its £11.1 billion buyout of Alliance Boots, according to Bloomberg. The firm reportedly will increase the junior loans (originally 1 billion at 1.25 percentage points), and cut back on the senior loans (originally £5 billion at £3 percentage points).

MetalMark Capital has agreed to acquire Hunter Defense Technologies Inc. from Behrman Capital. The deal is valued at $350 million, according to Moody’s Investors Service. Hunter manufactures tactical shelters, power and temperature control equipment, and chemical, biological, radiological, and nuclear (CBRN) filters and systems for military and homeland security applications.

Wireless Facilities Inc. (Nasdaq: WFII) has sold its Wireless Deployment business to Platinum Equity for $24 million. The deal includes $18 million in cash, and $6 million payable via a three-year earnout.

General Atlantic has acquired a minority stake in IBS Software Services for $60 million. IBS is an India-based provider of software to the travel, transportation and logistics industries. Edelweiss Capital advised IBS on the deal.

Gordon Brothers Group has acquired the non-operating machinery and equipment of bankrupt Joan Fabrics Corp. Valdese Weavers acquired the company’s Circa 1801 and Guild 360 product lines, while Mexico-based Texel was bought by Joan Fabrics chairman Elkin McCallum. Fred Godley acquired Joan Fabrics’ non operating plants and warehouses in North Carolina. The sales were announced by Carl Marks Advisory Group, which had been managing Joan Fabrics through bankruptcy.

Siemens AG has agreed to sell its VDO auto parts division to Continental AG of Germany for €11.4 billion. There had been rumors earlier this year that Bain Capital, KKR and Permira were looking at the unit.

PE-Backed IPOs

BladeLogic Inc., a Lexington, Mass.-based provider of data center automation software, raised $85 million via its IPO. It priced five million common shares at $17 per share, after revising its range upward from $12-$14 per share to $16-$17 per share. Its initial market cap is approximately $440 million. BladeLogic will trade on the Nasdaq under ticker symbol BLOG, while Morgan Stanley and Merrill Lynch served as co-lead underwriters. The company has raised around $35 million in total VC funding since its 2001 inception, from firms like Battery Ventures (21.3% pre-IPO stake), Bessemer Venture Partners (21.7%), Globespan Capital Partners (17.2%) and MK Capital (7.2%).

Monotype Imaging Holdings Inc., a Woburn, Mass.-based provider of text imaging software, raised $132 million via its IPO. The company priced 11 million common shares at $12 per share ($13-$15 range), which gives it an initial market cap of approximately $403 million. Monotype plans to trade on the Nasdaq under ticker symbol TYPE, while Banc of America Securities served as lead underwriter. TA Associates held an 81.2% pre-IPO ownership position, with D.B. Zwirn held a 3.9% stake.

Archemix Corp., a Cambridge, Mass.-based biopharma company focused on developing aptamer therapeutics, has filed for a $69 million IPO. It plans to trade on the Nasdaq under ticker symbol ARCH, with Banc of America Securities and Bear Stearns serving as co-lead underwriters. Archemix has raised around $132 million in VC funding since 2001, from firms like Atlas Venture (14% pre-IPO stake), Prospect Venture Partners (14%), Highland Capital Parnters (13.3%), SV Life Sciences (11.7%), KGaA (11.4%), Rho Ventures (9.7%) and Care Capital (5.3%).

Trans1 Inc., a Wilmington, N.C.-based developer of a surgical device for treating a degenerative disc disease affecting the lower lumbar region of the spine, has filed for an $80.5 million IPO. It plans to trade on the Nasdaq under ticker symbol TSON, with Lehman Brothers and Piper Jaffray serving as co-lead underwriters. Trans1 has raised around $40 million in VC funding since 2000, from firms like Advanced Technology Ventures (19.5% pre-IPO stake), Delphi Ventures (16.3%), Cutlass Capital (15%), Sapient Capital (12%) and Thomas Weisel Healthcare Venture Partners (7.2%).

Lululemon Corp., a Vancouver-based athletic apparel designer and retailer, has increased its IPO price range from $10-$12 per share to $15-$17 per share. It still plans to sell 18.2 million shares, and now would be valued at $1.17 billion, if it were to price at the high end of its revised range. Lululemon plans to trade on both the Nasdaq and TSX, with Goldman Sachs and Merrill Lynch serving as co-lead underwriters. Shareholders include Advent International, Highland Capital Partners and Brooke Private Equity Advisors.

PE Exits

Hearst Corp. has agreed to acquire UGO Networks Inc., a New York-based provider of online entertainment – including games and movies — targeting men. No financial terms were disclosed, although reports have put the price tag at around $100 million. UGO has raised around $90 million in VC funding since 1997, with current shareholders including GRP Partners.

PE-Backed M&A

CVI Laser LLC, an Albuquerque, N.M.-based optical components manufacturer, has acquired Melles Griot, a UK–based maker of lasers, photonics-related components and subsystems, from Barloworld Scientific. No financial terms were disclosed. CVI Lasers was acquired by Norwest Equity Partners four years ago.

TricorBraun, a St. Louis-based packaging company backed by Code Hennessy & Simmons, has agreed to acquire Ryco Packaging Corp., an Omaha, Neb.-based rigid packaging distributor. No financial terms were disclosed for the deal, which was first reported by LBO Wire. Code Hennessey bought TricorBraun from AEA Investors last year.

Firms & Funds

Apollo Management is planning to raise up to $1.1 billion via a private placement on a new private stock market being developed by Goldman Sachs, according to The Financial Times. News of the offering has been around for a while, but FT is the first to report that Apollo would sell around a 12.5% stake, which would value the firm at up too $8.8 billion. This means Apollo plans to offer itself up at 10x expected 2008 earnings, as opposed to the 20x mark Blackstone Group used when going public.

Google has joined the Delhi, India-based Band of Angels as an institutional member, according to Business Standard. Other institutional members include Lightspeed Venture Partners, SIDBI Ventures and Punjab Venture Capital.

LRG Capital Group, manager of the BayStar Capital Investment Funds, has made an investment in, and forged a strategic partnership with, the Arque Orion Group, a Tokyo-based wealth management and securities brokerage. No financial terms were disclosed.

Human Resources

Marty Felsenthal has joined Boston-based HLM Venture Partners as a general partner, and head of a new San Francisco office. He previously was a general partner with Salix Ventures.

Steven Ratoff, a venture partner with ProQuest Investments, has been named interim president and CEO of NovaDel Pharma Inc. (AMEX: NVD), following the resignation of Jan Egberts. Ratoff has been on the NovaDel board since 2004, and chairman since 2006. The company said that it plans to initiate a search for a permanent replacement.

Michael Ross has joined Babson Capital Management as a managing director in the firm’s mezzanine and private equity group. He will be based in a new Los Angeles office that is scheduled to open in the fall. He previously was with UnionBanCal Equities, where he worked in such area’s as leveraged equity sponsor finance.