PE Week Wire: 9.11.06

Corporate employees are rarely fired. They get laid off, become redundant or accept voluntary (wink, wink) buyouts. For Intel Capital, the operative euphemism is “efficiency.” Want me to use it in a sentence? Ok, the “efficiency program” at Intel Capital likely will result in between 15% and 20% of its investment directors being fired.

This move is part of a larger restructuring at parent company Intel Corp., whose leading market share has been slowly eroded by pesky rival AMD. As CEO Paul Otellini said at the time: “No stone will remain unturned. We will restructure, resize and repurpose Intel for the future.”

This space and others questioned whether or not Intel Capital would be among those upturned stones. The best argument against layoffs was that the group already had shrunk – via attrition – from 300 employees in 2001 to just 200 employees today. Conversely, the best argument for layoffs was that new Intel Capital CEO Arvind Sodhani had erased a job title distinction between “strategic investors” (i.e. deal sourcing/due diligence) and “treasurers” (i.e. term sheets, financial matters). This move meant that many Intel Capital employees had to be adept at both jobs, and there were clearly some who weren’t. When I asked Sodhani back in May about the Intel Corp. reorganization, he only would say that Intel Capital would be neither spun off nor shut down.

Intel Capital spokesman Kent Cook confirmed the “efficiency program,” and said that the group hierarchy currently is developing a skills assessment that will be used to evaluate current employees. “The skills assessment involves what capabilities we want the investment directors to possess, and if the people we have properly fit the bill,” Cook said. “For certain people, it may just mean additional training.”

Expect Intel Capital to be more efficient by year-end (credit to Paul Kedrosky for original scoop).

*** A couple of quick New York City pension system updates. Two sources tell me that Horatio Sparkes – who recently resigned as deputy comptroller for pensions – will be taking an investor relations gig with Yucaipa Cos. He will be succeeded by Joseph Haslip, who had been his number two. Still no word on who will be taking over the private equity investment activities from Tim Kelly.

In barely-related news, Josh Wolf-Powers and Adam Blumenthal – two former NYC pension pros focused on private equity – have received the first institutional commitment for their new direct investment firm called Blue Wolf Capital Management (f.k.a. Partnership Equity). The $33.5 million to $43.5 million commitment comes from South Africa-based Johnnic Holdings, which is an affiliate of Hosken Consolidated Investments.

Blue Wolf will use its cash to make structured control plays of between $5 million and $30 million (overall transaction sizes of $10 million-$150 million). Target companies either have significant government involvement, have hourly workers represented by labor unions or are facing serious financial/operational distress. Expect formal fund-raising to follow.

*** Last but certainly not least: Please take a moment today to remember the thousands of innocents murdered on this day five years ago. In particular, the private equity community lost David Retik of Alta Communications, Chris Mello of Alta Communications and Brian Dale of Blue Capital Management. May they not be forgotten…

Top Three

Freescale Semiconductor Inc. (NYSE: FSL) is on the block for more than $16 billion, according to The New York Times. The report says that an initial bid came from a consortium that includes The Blackstone Group, Permira, Texas Pacific Group, Carlyle Group and Bain Capital. Then a second, higher, bid came from KKR and Silver Lake Partners, which could try merging Freescale with Philips Electronics’ semiconductor unit.

Linux NetworX Inc., a Bluffdale, Utah-based supercomputing company, has raised $37 million in third-round funding. Lehman Brothers and Canaccord Adams were joined by return backers Oak Investment Partners and Tudor Ventures.

FTI Consulting Inc. (NYSE: FCN) has agreed to acquire FD International Ltd. (a.k.a. Financial Dynamics), a UK-based business communications firm controlled by Advent International. The deal is valued at approximately $260 million, including $215 million in cash, $20 million in notes and deferred purchase obligations and $25 million of restricted FTI stock. To finance the acquisition of FD, FTI plans to offer $215 million of senior unsecured notes.

VC Deals

SpikeSource Inc., a Redwood City, Calif.-based open source IT infrastructure company, has raised $21 million in Series B funding, according to a regulatory filing. PE Week Wire reported a $15 million first close earlier this year. Duff Ackerman & Goodrich was joined by return backers Fidelity Ventures and Kleiner Perkins Caufield & Byers.

Bubble Motion Pte Ltd., an India-based provider of short-voice messaging services, has raised $10 million in venture funding from Sequoia Capital and Sequoia Capital India.

Hi-G-Tek Inc., a Rockville, Md.-based provider of RFID products for monitoring and controlling high-value physical assets and sensitive materials, has raised $10 million in its first round of pure venture capital funding. L Capital Partners led the deal, and was joined by Battelle Ventures and Battelle affiliate Innovation Valley Partners.

Aquarius Technologies Inc., a Port Washington, Wis.-based provider of “sludgeless” wastewater treatment solutions, has raised $7.5 million in first-round funding. L Capital Partners led the deal with a $6.5 million commitment.

Provade Inc., a San Mateo, Calif.-based provider of managed procurement solutions, has raised $5.2 million in Series C funding, according to a regulatory filing. Backers include Altos Vetures and ZAD Global Fund.

ZafGen Inc., a Cambridge, Mass.-based developer of an obesity therapy based on the vascular targeting of adipose tissue, has raised around $5.175 million in first-round funding, according to a regulatory filing. Backers include Atlas Venture and GreatPoint Ventures.

Buyout Deals

Freescale Semiconductor Inc. (NYSE: FSL) is on the block for more than $16 billion, according to The New York Times. The report says that an initial bid came from a consortium that includes The Blackstone Group, Permira, Texas Pacific Group, Carlyle Group and Bain Capital. Then a second, higher, bid came from KKR and Silver Lake Partners, which could try merging Freescale with Philips Electronics’ semiconductor unit.

Telecom Italia SpA is considering the sale of its Telecom Italia Mobile (T.I.M.) unit, which reportedly could be worth over $44 billion.

Ripplewood Holdings and VideoCon of India reportedly have won the auction to buy Korea’s Daewoo Electronics for between $650 million and $700 million.

Vestar Capital Partners has agreed to acquire MediMedia USA Inc. from The Carlyle Group, Apax Partners and Cinven. No financial terms were disclosed. MediMedia USA USA was the core of a broader package of healthcare and business publications activities acquired from Vivendi Universal Publishing in April 2002 Carlyle Group, Apax and Cinven.

Fenway Partners has sponsored a management buyout of RoadLink USA Inc., a Chicago–based inter-modal trucking service provider. No financial terms were disclosed.

Carlyle/Riverstone Renewable Energy Infrastructure Fund and Bunge North America have agreed to jointly build ethanol plants that will result in production capacity of several hundred million gallons-per-year by the end of 2008. The plants will be adjacent to U.S. grain facilities controlled by Bunge, while CRREIF will be majority owner of the facilities. No financial terms were disclosed.

PE-Backed IPOs

AdCare Health Systems Inc. is the only IPO scheduled to price this week. It has not received any private equity funding.

PE Exits

WebMethods Inc. (Nasdaq: WEBM) has agreed to acquire Infravio Inc., a Cupertino, Calif.–based provider of service-oriented architecture (SOA) registry and governance solutions. The deal is valued at approximately $38 million in cash, and is expected to close later this month. Infravio had raised around $18 million in VC funding since its 2000 inception, from firms like Walden International and Crystal Ventures.

Carl Zeiss SMT has agreed to acquire ALIS Technology Corp., a Peabody, Mass.-based developer of helium-ion microscopy technology. No pricing terms were disclosed for the all-cash deal, which is expected to close later this quarter. ALIS had raised over $5.6 million in VC funding from Arch Venture Partners and Kodiak Venture Partners.

PE-Backed M&A

DirecPath, a Dallas-based company formed earlier this year by Hicks Holdings and The DirecTV Group Inc., has agreed to acquire Apartment MediaWorks LLC, an Atlanta-based provider of pay television, broadband Internet and related services to multiple-dwelling unit and gated community residents in the southeastern United States. No financial terms were disclosed.

ALPS Advisers Inc., a subsidiary of Denver-based ALPS Holdings Inc., has agreed to acquire the Liberty All-Star Funds from Banc of America Inv*stment Advisors. No financial terms were disclosed. ALPS Holdings is a portfolio company of Lovell Minnick Partners, while the Liberty All-Star Funds are a family of two closed-end, NYSE-listed equity funds.

Firm & Fund News

Climate Change Capital, a UK-based I-banking group focused on clean energy and a low-carbon economy, has held an $830 million first close on a private equity fund focused on projects in developing countries that will help reduce the amount of carbon being emitted into the atmosphere. Limited partners include ABP and PGGM. The final fund target is $1 billion.

Human Resources

Joerg Riesmeier has joined Life Sciences Partners as a Cambridge, Mass.-based general partner. He previously was with Burrill & Co. and, before that, led R&D for Bayer CropScience.

Jeff Calcagno has joined BA Venture Partners as a principal and Kauffman Fellow. He previously served as chief biology officer and CFO for Vela Pharmaceuticals Inc., and also has been a McKinsey & Co. consultant.

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