PE Week Wire: 9.12.06

Cortina Systems yesterday announced that it had raised $132 million in fourth-round venture funding, in order to help finance its $115 million acquisition of Intel Corp.’s optical network components business. Since this is the third-largest VC deal of the year — following ClearWire and Cilion — a few notes are in order:

I initially assumed that a VC deal of this size would be led by a billion dollar-plus firm like Oak, NEA or VantagePoint. Or perhaps by a generalist like Warburg Pincus. But you know what they say about those who assume… Instead, the deal was co-led by three VC shops – new Cortina backer Institutional Venture Partners and existing shareholders Canaan Partners and Morgenthaler Ventures. IVP committed $20 million to the deal, which comes out of its $300 million eleventh fund.

Had Cortina lost the Intel auction to other bidders – which included both strategics and private equity firms – it would not have raised the new venture capital round. “Cortina’s interest in the Intel thing came from synergies with customers and products,” explains Dave Furneaux, a Cortina board member and managing general partner of Kodiak Venture Partners. “There was greater than a 90% overlap between Cortina’s existing customers and those that the Intel business had.”

Cortina previously had raised around $85 million in VC funding. This included a $13 million Series A round at a $22 million post-money valuation, a $42 million Series B round at a $91 million post-money valuation and a $30 million Series C round last year at a post-money valuation of around $115 million. The company has no immediate plans to raise additional capital, but may need to do so in order to fund future acquisitions. It also is expected to begin considering an IPO.

*** Speaking of giant deals, some additional details have been released for the massive $200 million startup round for ethanol producer Cilion (broken into $40m and $160m tranches). The company originally announced its formation as a partnership between Western Milling and Khosla Ventures, and now says that additional backers include Virgin Fuels (newly-formed part of Virgin Group), Yucaipa Cos. and Advanced Equities.

***, a portfolio company of General Atlantic, is the subject of a class action lawsuit.

*** The LA Times has more on the ITU Ventures saga, with a new report suggesting that LPs may have pulled commitments because ITU principals had “solicited political contributions from the fledgling firms they financed, and several obliged.” PE Week previously reported that the decision had been prompted by LP concerns over several staff departures.

Top Three

Cortina Systems Inc., a Sunnyvale, Calif.-based provider of analog and digital ICs, has raised $132 million in fourth-round funding. The deal will be used to help finance Cortina’s $115 million acquisition of Intel Corp.’s optical network components business. Institutional Venture Partners co-led the financing, alongside return backers Canaan Partners and Morgenthaler Ventures. Other new buyers included Alloy Ventures, Bridgescale Partners, Doll Capital Management and Sofinnova Ventures. Other returnees included Kodiak Venture Partners, El Dorado Ventures, Invesco Private Capital, Jafco Ventures and Redpoint Ventures.

Francisco Partners has agreed to lead an $18.50 per share buyout of Metrologic Instruments Inc. (Nasdaq: MTLG), a Blackwood, N.J.–based provider of data capture and collection hardware, optical solutions and image processing software. Other equity participants include hedge fund Elliot Associates and Metrologic founder and CEO C. Harry Knowles. Needham & Co. advised Metrologic on the deal.

Doughty Hanson plans to publicly float a new buyout fund in London later this week, according to Financial News Online. Goldman Sachs and Citigroup are co-leading the IPO, which is designed to raise at least €1 billion.

VC Deals

ProtoStar Ltd., a Bermuda-based satellite company focused on the Asia-Pacific region, has received $40 million in Series B funding commitments. VantagePoint Venture Partners led the deal, and was joined by return backers New Enterprise Associates and RedShift Ventures.

Elephant Pharmacy Inc., a Berkley, Calif.-based complementary pharmacy and wellness store, chain has raised $26 million in Series C funding. Tudor Investment Corp. led the deal, and was joined by return backer the Bay Area Equity Fund (managed by JPMorgan).

QuickPlay Media, Toronto-based provider of mobile video and rich-media services, has raised US$12 million in Series B funding. General Catalyst Partners led the deal, and was joined by return backer JL Albright Ventures., a Silver Springs, Md.-based provider of do-it-yourself website publishing solutions, has raised $11 million in Series A funding co-led by Columbia Capital and Novak Biddle Venture Partners.

Bivio Networks Inc., a Pleasanton, Calif.-based provider of network appliance platforms, has raised $8.5 million in its second round of VC funding since a 2005 recap. Silver Creek Ventures led the deal, and was joined by return backers Goldman Sachs, InterWest Partners, Storm Ventures and Venrock Associates.

Enure Networks Inc., an Israel-based provider of broadband home network environment automation, has raised $8 million in Series A funding. Elron Electronic Industries Ltd. led the deal, and was joined by Carmel Ventures.

ParinGenix Inc., a Charlotte, N.C.-based developer of multiple drugs based on a modified form of heparin, has secured $5.92 million of a $20.4 million Series B round, according to a regulatory filing. Shareholders include Academy Venture Funds, Research Corporation Technologies Inc. and A.P. Kennedy Family Securities.

Xenon Pharmaceuticals Inc., a Vancouver-based developer of small-molecule therapies for select neurological, cardiovascular and metabolic diseases, has raised US$5 million in strategic funding from the venture arm of Takeda Pharmaceutical Co. In addition, Xenon and TRI have entered into an agreement whereby Takeda Pharmaceutical receives a right of first negotiation to select atherosclerosis discoveries made by Xenon.

FitLinxx, a Stamford, Conn.-based provider of fitness data tracking technology, has raised $4.1 million in Series B funding. Ironwood Capital led the deal, and was joined by company management and return backer North Atlantic Capital.

Expresso Fitness, a Sunnyvale, Calif.-based supplier of interactive software for Internet-enabled cardio fitness systems, has raised $4 million from existing shareholder Enterprise Partners Venture Capital. It had secured $4.5 million from EPVC in July 2005.

Infinity Channel Networks Inc., a Dallas-based provider of processing solutions for Internet video content, has secured $3.56 million of a $7.06 million Series A round, according to a regulatory filing. Backers include Hunt Ventures, ATA Ventures, Vesbridge Partners and El Dorado Ventures.

AdRoll Inc., a San Francisco-based provider of online video advertising services, has secured $605,000 of a $1 million Series A round from True Ventures and Colin Wiel Inv*stments, according to a regulatory filing. The company is run by Tod Sacerdoti, a former executive with Plaxo and Spoke Software.

StreamerNet Corp., a Leesburg, Va.-based provider of online video streaming technologies, has raised a total of $1.5 million in angel funding. It also is in the midst of raising a $5 million Series A round of institutional funding.

Seeking Alpha, a New York-based online publisher of stock market opinion and analysis, has raised an undisclosed amount of venture funding from Benchmark

Infobionics Inc., a Minneapolis-based developer of a cellular database solution to address the data management and analysis requirements, has received an undisclosed amount of strategic funding from In-Q-Tel. The deal also includes an option whereby In-Q-Tel can participate in a forthcoming Infobionics venture capital round.

Buyout Deals

Univision Communications Inc. (NYSE: UVN) may not be entirely off the auction block, according to today’s New York Times. The Spanish-language broadcaster’s shareholders are expected to vote later this month on a $36.25 per share offer from Haim Saban, Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group and Thomas H. Lee Partners. But today’s report suggests that the losing consortium – which includes Grupo Televisa, Bain Capital and Cascade Inv*stments – is considering a rival $38 per share bid.

The Carlyle Group is among the finalists to win the auction for Dubai Ports World’s U.S. port assets, according to The Financial Times. Other short-listed firms include Morgan Stanley and SSA Marine.

Cinven is considering a buyout offer for Gondola Holdings, operator of UK pizza chain Pizza Express. Press reports say that Conven has won the support of TDR Capital and Capricorn Ventures, which hold a combined 48% stake in Gondola.

Lindsay Goldberg & Bessemer has acquired Brock Holdings Inc., a Beaumont, Texas-based provider of industrial maintenance services. No financial terms were disclosed. Harris Williams & Co. advised Brock on the sale.

The Halifax Group has sponsored a majority recapitalization of The Taylor Cos., a Winnsboro, Texas–based provider of transportation and logistics services for crude oil, condensate and natural gas liquids. Tyler CEO James Ballengee has retained a significant minority stake, while other financial terms were not disclosed.

PE-Backed IPOs

Mindray International Medical Ltd., a China-based medical device maker, has set its proposed IPO terms to 20 million American depository shares being offered at between $10 and $12 per ADS. It plans to trade on the NYSE under ticker symbol MD, with Goldman Sachs (Asia) and UBS serving as co-lead underwriters. GS Capital Partners holds a 9.64% pre-IPO stake.

PE-backed IPOs scheduled to price later this month include Hawkeye Holdings Inc., Warner Chilcott Holdings, Home diagnostics Inc., Commvault Systems and DivX Inc.

PE Exits

BSA Sales LLC, a subsidiary of Synnex Corp. (NYSE: SNX), has acquired Concentrix Corp., a Rochester, N.Y.-based provider of call center, database analysis and print-on-demand services to customers in the transportation, publishing, banking, healthcare and high tech industries. No financial terms were disclosed, except that Concentrix had 2005 revenue of approximately $15 million. Concentrix had raised just over $15 million in total VC funding from firms like North Atlantic Capital, Boston Millennia Partners, FA Technology Ventures, Onodaga Venture Capital and Rand Capital Corp.

Swisscom Fixnet Ltd. has acquired Betty Holding AG, a Switzerland-based provider of interactive television solutions. No financial terms were disclosed. Betty had been backed by Target Partners and CornerstoneCapital.

Airgas Inc. (NYSE: ARG) has acquired Aeriform Corp., a Houston, Texas-based industrial gas and welding supply distributor. Aeriform had been backed by American Capital Strategies. No financial terms were disclosed, although Airgas said that Aeriform had $65 million in annual sales. Matrix Capital Markets Group advised Aeriform on the deal.

PE-Backed M&A

MLM Information Services LLC, an IT acquisition platform backed by Warburg Pincus has acquired Tax Compliance Inc., a San Diego-based provider of corporate property tax compliance software. No financial terms were disclosed. MLM is managed by and Mason Slaine, former CEO of both Thomson Financial and Information Holdings Inc. (sold to Thomson Corp. in 2004).

OneAccess, a France-based provider of enterprise access routers and professional multi-play IP devices, has acquired the Telindus Access Products (TAP) division of the Belgacom Group. No financial terms were disclosed. OneAccess shareholders include Innovacom, T-com Venture, CDC Entreprises Innovation, Tempo Capital Partners, AGF Private Equity and CIC Finance.

Firm & Fund News

H.I.G. Capital has closed its fourth buyout fund with $750 million in capital commitments.

Human Resources

Akio Ishida has joined TPG Newbridge as vice chairman of Japan operations. He previously was vice chairman of I-banking for Merrill Lynch Japan. In other TPG-Newbridge news, Steven Schneider has been named chairman of Japan operations. He will maintain his existing role as head of Asian operations. Before joining TPG Newbridge in 2005, Schneider had been CEO of GE-Asia Pacific.

James Kelly has joined Nixon Peabody LLC as a New York-based partner with the firm’s private equity team. He previously was with O’Melveny & Myers.

Shasta Ventures has promoted Jason Pressman from principal to partner. The firm also hired former WebMD Health account manager Brent Tworetzky as an associate.

Paul Wilson has left Champ Private Equity, according to PrivateEquityOnline. He had been with the firm since 2000, including a one-year stint with Champ’s New York-based affiliate Castle Harlan.

Tim Weld has joined Parish Capital as a London-based investment manager. He is a former associate with BancBoston Capital, and more recently received his MBA from the Tuck School of Business at Dartmouth and his Master of Law & Diplomacy from The Fletcher School at Tufts University.

Steve Cosler has joined Water Street Healthcare Partners as an operating partner. He had served as president and CEO of Priority Healthcare Corp. until its acquisition by Express Scripts in 2005.

Scott Hasley has joined Piper Jaffray & Co. as a Chicago-based principal and M&A banker in the firm’s Industrial Growth I-Banking Group. He previously was with Brown Gibbons Lang.

Eric Oganesoff has joined Focus Enterprises Inc. as a partner. Focus is a Washington, D.C.-based middle-market boutique I-bank.

Bernard Darre, co-founding partner of Bow River Capital Partners, has joined the board of United Western Bancorp Inc. (Nasdaq: UWBK) as an outside director.

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