PE Week Wire: 8.30.06

Random Ramblings

Venture capitalists have been unfairly maligned by those who oppose federal funding for embryonic stem cell research. Such criticism was particularly harsh in California, where many notable VCs helped lead passage of a $3 billion bond bill that will provide around $300 million per year for in-state stem cell research. The basic whine goes like this: “If VCs see so much promise in embryonic stem cell research, why don’t they just fund it themselves?”

The smart response is that VCs must exit an investment within 10 years, and embryonic stem cell technology remains too embryonic (pardon the pun) to make such a timeline plausible. Someone else needs to do the blueprint R&D – just as many VC-backed pharma companies are rooted in existing institutional research from either academia or big pharma.

But there is one embryonic stem cell company just screaming out for buyout firm investment, if not venture capital: Advanced Cell Technology, which last week said that it had found a way to form new embryonic stem cells without destroying the original embryo (via a biopsy process). Yes, I know ACT is publicly-traded on the OCT Bulletin Board, and that it already has lost the price surge generated by its breakthrough news (thanks, in part, to a blasé White House reaction). I also know that it continues to raise generous PIPE funding from investors like Anthem Venture Partners. So why the screaming out?

ACT is not primarily focused on creating a cure for Parkinson’s disease, which would well exceed the aforementioned 10-year timeline. Instead, it wants to commercialize new embryonic stem cell lines that would be sold to both small and large drug development companies. The current holdup, of course, is the federal ban on all but a handful of existing lines, but successful reproduction of ACT’s results could – and likely would — produce new legislation that allows for funding of new lines that don’t destroy the original embryo.

So back to private equity: This is a buyout opportunity with huge potential upside and relatively little capital risk (ACT’s market cap is below $23 million). It also has knowledgeable private equity folks already on board, including director Alan Walton, a general partner with Oxford Bioscience Partners.

Private equity investors have precious few chances to put their money where their mouth is on embryonic stem cell research. ACT is one of them.

*** Speaking of stem cells, OncoMed Pharmaceuticals Inc. has raised $33.12 million in Series B funding, according to a regulatory filing. Adams Street Partners was joined by return backers like Latterell Venture Partners, Morgenthaler Ventures, U.S. Venture Partners and The Vertical Group. OncoMed focuses on something called “cancer stem cells,” which aren’t really stem cells, but are called that because of their ability to replicate within solid tumors. The company isn’t talking about this deal yet, but here’s a piece I wrote on OncoMed last year. Still one of the most exciting companies I’ve ever covered.

*** Lots of West Coast blog buzz last week, about Mark Pincus’ decision to retake control of social networking company Tribe Networks. The relevant news here is that Tribe investors Mayfield Fund, Knight-Ridder and The Washington Post are in the process of being washed out, and no longer have board representation. Pincus and existing company lenders are now in search of recap funding.

*** We see lots of public pension fund managers go private, due to both increased salaries and support staff. But the reverse trip is much rarer, which is why the following move deserves note: Steve Reynard has left Nationwide Mutual Insurance Co., in order to join the State Teachers Retirement System of Ohio.

*** Both Venture Capital Journal and Buyouts Magazine are looking for some new reporters. If you’re interested, please email me some info.

*** Finally, some of you have asked for a heads-up when I’m going to be on television. Ok, I’ll be on CNBC today at 1:20pm ET. The topic is whether or not there is a private equity bubble. My answer will not surprise you…

Top Three

TPG Newbridge has agreed to acquire a 24.99% stake in BankThai for approximately $186 million.

Rosedale Medical Inc., a Cupertino, Calif.-based developer of glucose monitoring system for diabetics, has raised $20 million in Series C funding, according to a regulatory filing. U.S. Venture Partners and Investor Growth Capital were joined by return backers Pequot Ventures, Thomas McNerney & Partners and Versant Ventures. Sarnoff Corp. – which spun out Rosedale Medical in 2003 – also is a shareholder.

Vertafore Inc., a Bothell, Wash.-based provider of software solutions for the insurance industry, has agreed to acquire BenefitPoint, a San Francisco-based provider of benefits software solutions. No financial terms were disclosed. Hellman & Friedman acquired Vertafore in 2004 for approximately $400 million, with JMI Equity also participating. BenefitPoint has raised over $95 million in total VC funding, including a $13.8 million recap round in 2004 led by Trident Capital. Other BenefitPoint shareholders include HarbourVest Partners, HLM Venture Partners, Institutional Venture Partners and Sequoia Capital.

VC Deals

Little Sheep, a Baotou, Inner Mongolia-based restaurant chain, has raised $25 million in VC funding from 3i Group and Prax Capital.

SiGe Semiconductor Inc., an Ottawa-based supplier of RF front-end solutions for wireless systems, has raised US$19.5 million in Series D funding. Backers include TD Capital, Prism Venture Partners, VenGrowth Private Equity Partners, 3i Technology Partners, Hunt Ventures, RWI Group, GrowthWorks and Vista Ventures.

Tymphany Corp., a Cupertino, Calif.-based developer of technology to improve stereo sound quality, has raised approximately $16 million in Series C funding, according to a regulatory filing. American Capital Strategies led the deal, with return backer VantagePoint Venture Partners also participating.

Metabolex Inc., a Hayward, Calif.-based drug company focused on diabetes and related metabolic diseases, has raised $10 million in Series C-1 funding, according to a regulatory filing. The company has now raised around $164 million in total VC since its 1998 inception. Shareholders include Alta Partners, Versant Ventures, Biotech Turnaround Fund (Netherlands), VantagePoint Venture Partners and Bay City Capital.

Aveso Inc., a Fridley, Minn.-based developer of printed electronic displays, has raised $6.25 million in Series B funding, according to a regulatory filing. Backers include Dow Chemical Co., Arch Venture Partners and Frazier Technology Partners.

Efficient Frontier Inc., a Mountain View, Calif.-based provider of paid search engine marketing solutions, has raised $6 million in Series C funding, according to a regulatory filing. Mitsui & Co. was joined by return backers Redpoint Ventures and Cambrian Ventures.

Microchip Biotechnologies Inc., a Dublin, Calif.-based provider of nanofluidic sample preparation and analysis instrumentation, has raised $4.5 million in Series A funding. In-Q-Tel and RONA Syndicates LLC co-led the deal.

HyPerformix Inc., an Austin, Texas-based provider of enterprise performance management and capacity planning software, has secured $3 million of a $14.11 million Series C round (including $7.01m of warrants), according to a regulatory filing. Existing backers include The Lambda Funds, Morgan Stanley Venture Partners and M/C Venture Partners.

Helmi Technologies Inc., a Mountain View, Calif.-based provider of user interface software solutions for enterprise Web developers, has raised $2.5 million in new VC funding from Conor Venture Partners.

Wikigenia Inc., a West Hollywood, Calif.-based genology website, has secured $1.5 million of a $2.5 million Series A round, according to a regulatory filing. The Founders Fund was the sole participant, while company management includes David Sacks (former PayPal COO) and Alan Braverman (Xoom Corp. co-founder).

Orb Energy, a Singapore-based solar energy startup, has raised an undisclosed amount of venture capital funding from Cleantech Europe (managed by Zouk Ventures), Renewable Capital and the Singh family.

YeePay, a Beijing-based provider of e-payment solutions, has raised an undisclosed amount of VC funding. Draper Fisher Jurvetson and DFJ Dragon co-led the deal, and were joined by firms like Intel Capital China and WR Hambrecht.

Buyout Deals

Vista Equity Partners has agreed to buy Who’s Calling Inc. for around $55 million, according to The Seattle Post-Intelligencer. Who’s Calling is a Kirkland, Wash.-based provider of marketing call measurement and monitoring technology.

Lehman Brothers Co-Investment Partners has acquired a 36% stake in aerospace manufacturer Firth Rixson from The Carlyle Group, according to Financial News Online. Carlyle will retain a majority stake, and had been advised on its initial acquisition of Firth Rixson by Lehman Brothers.

Ovation, a cable television network focused on the arts, has been acquired for $55 million by a group that includes Hubbard Media Group, Weinstein Co., Perry Capital, Arcadia Investment Partners and a Lehman Brothers affiliate. The company will be run by The Tennis Channel CEO Ken Solomon (who will focus most of his time on The Tennis Channel).

BCE Inc. is planning a $1 billion IPO for its Telesat Canada commercial satellite unit, according to The Globe & Mail. BCE had been trying to sell the unit to a private equity consortium that included Ontario Teachers’ Pension Plan, but talks reportedly broke down over both price and future Telesat Canada management.

PE-Backed IPOs

DivX Inc., a San Diego-based provider of video compression technology, has set its proposed IPO terms to 9.1 million common shares being offered at between $12 and $14 per share. It plans to trade on the Nasdaq under ticker symbol DIVX, with JPMorgan serving as lead underwriter. DivX has raised around $47 million in VC funding from firms like Zone Ventures, WI Harper Group, Insight Venture Partners, Draper Atlantic, Wasatch Venture Fund, Springboard-Harper, Cardinal Venture Capital, Ali Corp. and Cyberlink International Technology Corp.

PE-Backed M&A

Phoenix Exploration Company LP of Houston has agreed to acquire all of the Gulf of Mexico and south Louisiana assets currently owned by Cabot Oil and Gas Corp. for $340 million. The deal is expected to close late next month. Phoenix was formed by Carlyle/Riverstone this past April with a $250 million capital commitment. Last month, Phoenix received an additional $100 million private equity commitment from Soros Strategic Partners and HNBridge LP, while J.P. Morgan Securities arranged and led a $300 million credit facility.

PE Exits

H&Q Asia Pacific has sold its stake in MTV Japan to MTV Networks, a subsidiary of Viacom Inc. (NYSE: VIA). No financial terms were disclosed. MTV Networks now owns 100% of MTV Japan.

Emulex Corp. (NYSE: ELX) has agreed to acquire Sierra Logic Inc., a Roseville, Calif.–based provider of embedded ASIC components and firmware solutions for enterprise storage systems. The deal is valued at up to $180 million, including assumed debt and Sierra Logic stock options. It is expected to close by the end of September. Sierra Logic had raised around $32 million in VC funding since its 2001 inception, from firms like JPMorgan Partners, QTV Capital, TPG Ventures and InterWest Partners.

Firm & Fund News

Benson Elliot Capital Management of London has held a €335 million final close on its inaugural fund, which will focus on lower-middle-market European real estate. Probitas Partners served as placement agent.

Thelen Reid & Priest LLP has opened an office in Shanghai.

Human Resources

John Barber has agreed to join European private equity firm Bridgepoint as a partner and head of investor relations, effective in early 2007. He succeeds Graham Dewhirst, who is retiring. Barber currently serves as a managing director of Helix Associates.

Ian Kay has joined MFC Capital Funding as an analyst. He recently received his undergraduate degree from University of Cincinnati’s College of Business Administration.