InterNAP Buys VC-Backed Company

InternNAP Network Services Corp. (Nasdaq: INAP) has acquired a venture-backed company and has agreed to acquire another.

The Atlanta-based company completed a deal to buy NetVMG Inc., a Fremont, Calif.-based provider of Internet traffic management solutions. InterNAP issued to NetVMG shareholders approximately 345,000 unregistered shares of its Series A convertible preferred stock.

As part of the acquisition agreement, NetVMG shareholders infused approximately $3.9 million of new capital into NetVMG to eliminate selected liabilities prior to the acquisition.

Additionally, 1.5 million common stock warrants (priced at the date of the close) were issued to NetVMG shareholders. The warrants are exercisable only if the NetVMG shareholders invest an amount no less than $4.4 million in any future private placement. NetVMG had raised approximately $75 million in venture capital funding from investors like Accel Partners, BA Venture Partners, Cisco Systems, Comdisco Ventures, Duff Ackerman & Goodrich and Itochu Technology.

Meanwhile, InterNAP, which provides Internet connectivity to private networks, made a pending deal to buy Waltham, Mass.-based Sockeye Networks. The Internet route control company has raised approximately $40 million in venture capital, but is being sold for just $1.75 million in stock. That deal is expected to close later this month.

Sockeye investors included Baker Capital, Battery Ventures, CSFB Private Equity and Polaris Venture Partners.