PE Week Wire: Wed., June 6, 2007

The sun is shining, yet another round of premature presidential debates are over and the ACG Boston Growth Conference is underway just a few blocks away from my spacious cubicle (if you advertise, I will shill). In other words, it’s time for some Wednesday Warblings.

A real grab bag today, as we haven’t done this for a while. First up are a couple of emails on the Amp’d Mobile situation. Praveen: “I can’t believe that you continue to believe that this investment was worthy of the respect that you seem to bestow on it. I guess that even smart people have difficulty distinguishing investments that back fundamental innovations rather than momentum plays (such as investing in anything that addresses the youth market). Or, maybe people just get swayed by large sums of investments by big names. I’m sorry to differ, but the story would NOT make for a good subject for a book.”

Colleen: “Amp’d sounds like a poster child for why VCs should think twice before allowing strategic investors to become larger shareholders than the VCs themselves. The interest just too often are not aligned, with VCs wanting what’s best for the company as a whole (or at least for its value), while the strategic investors sometimes want what’s best for the corporation they represent (which sometimes has little to do with a company’s independent success).”

*** Morgan: “Now that you have a ton of emails about other listed private equity funds-of-funds, could you post the whole lot on peHUB?” Good idea. Give me an hour or two, and I’ll get it up.

*** PR pro Karen, on why I don’t always cover your/her clients: “Thanks for putting this in writing so my clients can see it. It makes it difficult for everyone when we find out about involvement in a deal five days after it has closed.”

*** A few emails related to last Wednesday’s column, on why buyout pros don’t really believe the caution they’re preaching. Andy: “Thank you for seeing past the BS that the Journal apparently accepted without thinking. If mega-firms are being cautious, then Pedro Cerano was a selective hitter at the beginning of Major League.” Thomas: “I agree 100% that the boom will be ended by banks instead of by private equity firms. But you should emphasize that the banks won’t do it voluntarily either. You hint at it, but aren’t explicit enough. There will have to be a major macro-economic event that changes the entire lending market by force.”

But Oliver dissents: “Not quite sure I agree with your rebuttal to the Journal… The level of activity does not necessarily equate with aggressiveness. Some of the investments of late are in more defensive sectors.And against a market that has grown significantly, TPG is more cautious than others.”

*** Seth on fair-value accounting: “One thing not too many people are talking about is the effect on carry.Many funds have a clause that allows them to start paying out carry once they reach a value ~ 120% of cost.There’s a clawback provision so if the full fund isn’t returned or the total carry ends up being less than what was distributed, GP’s must return the money (assuming they have it), but FVA has the potential to significantly accelerate the point at which funds reach this threshold. My personal view is that funds shouldn’t pay out carry until they’ve actually returned the entire fund value (including management fees) to their LPs, but I think that view is in the minority.”

*** Finally, Lauren asks: “How do I send you an anonymous tip?” Just click the “Top Secret” button ad at the bottom of the righthand column, or just go here. Getting good tips are the best part of my day…

Top Three

Amgen (Nasdaq: AMGN) has agreed to acquire Alantos Pharmaceuticals, a diabetes and inflammatory drug-maker with offices in Cambridge, Mass. and Heidelberg, Germany. The deal is valued at $300 million in cash, and is expected to close next quarter. Alantos has raised nearly $56 million in VC funding since 2000, from firms like Heidelberg Innovation, Earlybird Venture Capital, Oxford Bioscience Partners, SV Life Sciences, Forbion Capital Partners and Ventech.

Colony Capital has agreed to acquire a 65% stake in European oil refining company Tamoil from the Libyan government, for €2.6 billion. Libya will retain a 35% position. When Tamoil first went on the block last year, it attracted interest from such suitors as The Carlyle group, ERG SpA and Respol.

CalPERS yesterday unveiled a $700 million investment program in the U.S. healthcare space. Some of this might go to biotech startups, but the real focus seems to be on improving the efficacy of the overall healthcare market, which CalPERS’ CIO Russell Readcalled “fragmented and inefficient.” Under terms of the deal, CalPERS will initially commit up to $500 million to a new initiative for direct investments and co-investments in healthcare companies. It also will earmark up ! to $200 million for healthcare-focused private equity funds and strategic joint ventures. The initiative will beadvised exclusivelyby Health Evolution Partners, a new private equity firm formed by Dr. David Brailer, former National Coordinator for Health Information Technology.

VC Deals

Artificial Muscle Inc., a Menlo Park, Calif.-based maker of actuator components based on electroactive polymer artificial muscle technology, has raised $20 million in Series B funding. AllianceBernstein led the deal, and was joined by Micron Technology Inc., Parker Hannifin Corp., CTTV Investments and return backers Arch Venture Partners, NGEN Partners and Vanguard Ventures. Artificial Muscle was spun out of SRI International in early 2004.

OpTier Inc., a New York-based provider of business transaction management technology, has raised $15 million in new VC funding. Gemini Israel Funds was joined by return backers Pitango Venture Capital, Carmel Ventures, and Lightspeed Venture Partners. OpTier has raised over $40 million in total VC funding since 2003.

Dreamerz Foods, a San Francisco-based natural foods company, has raised $10 million in Series B funding. New backers include Physic Ventures, Dean Foods Company and Fonterra Co-operative Group Ltd. Returnees include Burrill & Co., Great Spirit Ventures, Prolog Ventures and Unilever Ventures.

Storewiz Inc., a San Jose, Calif.-based provider of online storage compression solutions, has raised $9 million in Series B funding from Sequoia Capital.

Aileron Therapeutics, a Cambridge, Mass.-based developer of cell-permeable peptide technology to help treat cancer and other diseases, has raised $7 million in Series C funding. Backers include Apple Tree Partners and the Novartis Venture Fund.

AtTask Inc., an Orem, Utah–based provider of on-demand project and portfolio management software, has raised $7 million in first-round funding from OpenView Venture Partners.

NextBio, a Cupertino, Calif.-based developer of an online search engine for life sciences data, has raised $7 million in Series B funding led by Newbury Ventures., a San Francisco-based document-sharing website, has raised $3.7 million in Series A funding. Redpoint Ventures led the deal, and was joined by angel fund Kinsey Hills Group.

HipCricket Inc., a Bellevue, Wash.-based mobile marketing company, has raised $6 million in Series B funding led by Broadmark Capital.

Nanotech Semiconductor Ltd., a Bristol, England-based fabless IC company, has raised $2.5 million in additional Series A funding. The round total now stands at $8.5 million. Backers include Pond Venture Partners, Atlantic Bridge and company founder and CEO Gary Steele.

Austrianova Biomanufacturing AG, a Vienna, Austria-based developer of tumor treatments based on localized cell therapies, has closed the first tranche of a funding round expected to total €35 million. Ryan Group Holdings led the tranche, although no financial details were disclosed. Austrianova previously had raised more than €30 million.

Blue Lion (a.k.a. Qeep), a German mobile Internet startup, has raised an undisclosed amount of Series A funding from Bertelsmann Digital Media Investments.

Beijing Chemclin Biotech Co. Ltd., a Beijing-based medical diagnostics startup, has raised $5 million in VC funding. WI Harper Group and Siemens Venture Capital co-led the deal, and were joined by Softbank China Venture Capital.

Vocel Inc., a San Diego-based developer of wireless push marketing services, has raised an undisclosed amount of strategic funding from Motorola Ventures.

Buyout Deals

Apax Partners is interested in buying a controlling stake in Mumbai-based Patni Computer Systems for over $800 million, The Economic Times reported. The paper cited sources as saying that two mid-tier Indian IT companies and some private equity funds are also looking at acquiring stakes in the company. Patni Computers was founded by three brothers Ashok, Narendra and Gajendra Patni, who together own 44% in the company. Gajendra and Ashok together hold a 28% stake and are looking to exit the company, while Narendra Patni will continue to retain his 16% stake. Private equity firm General Atlantic is also looking to sell its 16% stake in the company, the paper said.

AXA Private Equity has acquired a majority position in Welcome Real-time, an Aix-en-Provence, France–based provider of payment software for financial institutions and payment networks. No financial terms were disclosed. The remaining shares were purchased by Welcome’s management team.

BCE Inc. said that it has begun talks with a new private equity group about a possible take-private buyout. The group includes Providence Equity Partners and Teachers’ Private Capital. Last month, BCE said it was in talks to sell the company to Cerberus Capital Management and a group of Canadian investors.

GTCR Golder Rauner has sponsored a recapitalization of APS Healthcare, a Silver Spring, Md.–based provider of outsourced healthcare solutions to government entities, health plans and employers. No financial terms were disclosed. GTCR partnered with APS senior managers on the deal, while previously majority investor H.I.G. Capital sold its position. Kirkland & Ellis provided legal council to GTCR, while Merrill Lynch Capital provided leveraged financing.

Hub International Ltd. (NYSE: HBG; TSX: HBG) shareholders have approved a $41.50 per share buyout offer from Apax Partners and Morgan Stanley Principal Investments. The total deal is valued at approximately $1.8 billion, including around $145 million of assumed debt. Hub is a Chicago-based insurance broker.

OSI Restaurant Partners Inc. (NYSE: OSI) shareholders have approved a $41.15 per share buyout offer from Bain Capital Partners and Catterton Partners. The deal is valued at around $3.2 billion, and is expected to close later this month. OSI is a restaurant operator whose brands include Outback Steakhouse, Cheeseburger in Paradise, Roy’s and Carrabba’s Italian Grill.

TA Associates has led a $113 million investment in FreeWave Technologies, a Boulder, Colo.-based provider of spread spectrum and licensed radio products and services.

TAL International Group Inc. (NYSE: TAL) has retained Citigroup Global Markets to assist in a review of strategic alternatives to enhance shareholder value, including a possible sale, acquisition, merger, recapitalization and adjustment to dividend policy. TAL is a lessor of intermodal freight containers and chassis. Its current market cap is around $934 million.

Vector Capital has withdrawn its proposed to acquire Inter-Tel Inc. (Nasdaq: INTL) for $26.50 per share. The move comes after Inter-Tel founder and former CEO Steven Mihaylo proposed a recapitalization option that Vector refers to as “superior” to its own offer.

Pe-Backed IPOs

Starent Networks Corp., a Tewksbury, Mass.-based provider of mobile multimedia infrastructure solutions, raised $126.4 million in its IPO. The company priced 10.5 million common shares at $12 per share ($9-$11 range), with a subsequent market cap of $749 million. It will trade on the Nasdaq under ticker symbol STAR, while Goldman Sachs and Lehman Brothers served as co-lead underwriters. It had raised around $95 million in total VC funding since its 2000 inception, from firms like Matrix Partners (20.1% pre-IPO stake), North Bridge Venture Partners (20.1%), Highland Capital Partners (18.4%), Focus Ventures (6%) and the T-Mobile Venture Fund.

CVR Energy Inc., a Sugar Land, Texas-based producer of ammonia and urea-ammonia nitrate, has raised its IPO target from $300 million to $375 million. It also said that it plans to offer 15.5 million shares, but did not specify a price range. Shareholders include Goldman Sachs and Kelso & Co., while Goldman and Deutsche Bank are serving as co-lead underwriters.

PE-Backed M&A

Activant Solutions Inc., a Livermore, Calif.-based business process management company, has acquired Silk Systems Inc., a British Columbia–based provider of computer software solutions providers for the Canadian home improvement, wholesale distribution and building materials industries. No financial terms were disclosed. Activant was bought last year by Hellman & Friedman and Thoma Cressey Bravo for $750 million, from HM Capital.

Novations Group Inc., a Boston-based training and consulting organization, has acquired ProGroup Inc., a Minneapolis-based provider of corporate diversity training. No financial terms were disclosed. Novations was acquired last year by private equity firm MCG Global.

Nu Visions Manufacturing Inc., a portfolio company of Golden Gate Capital, has acquired Veritek Manufacturing Services Inc., a San Marcos, Calif.-based provider of electronic manufacturing services to medical, defense, gaming and industrial customers. No financial terms were disclosed.

Sabre Holdings, an online travel reservations company taken private earlier this year by Silver Lake Partners and TPG, has acquired E-site Marketing, a Bethesda, Md.–based Internet marketing company focused on online business solutions exclusively for the hospitality industry. No financial terms were disclosed.

Cooper-Standard Automotive Inc. has agreed to acquire the Metzeler Automotive Profile Systems (MAPS) sealing systems operations in Germany, Italy, Poland and Belgium, from Automotive Sealing Systems SA. No financial terms were disclosed for the deal, which is expected to close next quarter. Cooper-Standard shareholders Goldman Sachs Capital Partners and The Cypress Group will invest new equity, in order to help finance the acquisition.

TriMark USA Inc., a South Attleboro, Ma.–based distributor of foodservice equipment and supplies, has acquired S.S. Kemp & Co., a Cleveland-based regional provider of food service equipment, supplies and design services. No financial terms were disclosed. TriMark was acquired last November by Audax Group.

PE Exits

Goldman Sachs said that it will not make a bid for UK clothing retailer New Look, after a press report suggested that either its private equity group or I-bank was considering buying the business. New Look’s private equity owners, Apax Partners and Permira, were hoping to auction the chain for around $3.96 billion. But they failed to flush out bidders willing to pay in that ball park figure by last Friday’s deadline. TPG Capital and Warburg Pincus are thought to have made a joint offer of around $3.7 billion.

Google Inc. has acquired PeakStream Inc., a Redwood City, Calif.-based provider of software application platforms to the high-performance computing market. No financial terms were disclosed. PeakSteam raised $23 million in total VC funding since its 2005 inception, including a $17 million Series B round last fall. Backers included Kleiner Perkins Caufield & Byers, Sequoia Capital and Foundation Capital.

Wexford Capital has sold Drew Shoe Corp., a Lancaster, Ohio–based maker of pedorthic, therapeutic and occupational footwear, to company management and an unidentified private investor group. No financial terms were disclosed. BB&T Capital Markets advised Drew Shoe on the deal.

Firms & Funds

Audax Group last Thursday closed its third fund with $1 billion in capital commitments. The Boston-based firm was founded by a pair of former Bain Capital pros in 1999, and focuses on middle-market opportunities across a range of industry sectors. It also runs a mezzanine lending business out of its New York office.

Genstar Capital has closed its fifth fund with $1.55 billion in capital commitments. Park Hill served as placement agent. Genstar is a San Francisco–based private equity firm focused on middle-market opportunities in such sectors as life sciences, healthcare services, industrial technology, business services and software. It closed its fourth fund closed in the fall of 2004 with $475 million.

Morgan Joseph & Co. announced the opening of a corporate finance office in Boston. It will be headed by Peter Olaynack, a managing director and co-head of the firm’s financial sponsors group.

BioVeda China, a Shanghai-based VC fund that invests in Chinese life sciences companies, has raised $10 million from Lilly Asia Ventures.

Human Resources

Douglas Kelly and Ryan Levitt have joined the co-investment group of Pomona Capital as a principal and senior analyst, respectively. Kelly previously was with Barclays Capital as a director in the U.S. strategic finance divisions, while Levitt was an investment analyst with GE Equity. Both will be working under Lorraine Hliboki, who joined Pomona earlier this year to head its co-investment business.

Chris Durbin has joined Vestar Capital Partners as a Boston-based principal in the firm’s resources group, which aids the firm’s portfolio companies. He previously was with Bank of America’s global wealth and investment management unit, as a managing director.

Susumu Sekihata has joined Vestar Capital Partners as a director of Vestar Japan Advisors, an affiliated office in Tokyo. He previously was a vice president and founding member of Red Diamond Capital, a U.S. middle-market buyout group affiliated with Mitsubishi.

Boris Ziser has joined Stroock & Stroock & Lavan LLP as a partner in the firm’s structured finance practice group. He previously was a partner with Brown Rudnick Berlack Israels LLP.