PE Week Wire: 9.13.06

Today’s column just fell apart, which led to yelling (at no one in particular) that startled a dog walker outside of the home office in Framingham. So I’ll let others pick up the slack until tomorrow…

*** CalPERS is using a two-year-old private equity disclosure law to withhold information about political contributions from venture capital firms to members of the CalPERS board, according to The Los Angeles Times. The article specifically relates to allegations that ITU Ventures solicited political contributions from its portfolio company, which then were directed to the failed gubernatorial race of California Controller Steve Westly. It also could have been expanded to include similar past allegations related to Westly and Healthpoint Capital Partners. Both ITU Ventures and Healthpoint received fund commitments from CalPERS.

The law was a compromise bill whereby private equity fund performance (e.g. top-line data) would be publicly-disclosed, while bottom-line data (e.g. portfolio company valuations) would remain confidential. I supported it then, and support it now. Too bad CalPERS apparently has decided to pervert the law’s meaning to cover its own behind.

*** Sage advice for entrepreneurs from Ed Sim and Mike Hirshland.

*** Going Private wades into the Ben Stein vs. MBOs debate.

*** Quiztime: Can you name the former corporate bigshot-turned-VC who is planning to launch a niche fund under his firm’s banner? Hint: Think retail.

*** TV Update: I’ll be on CBNC tomorrow morning at around 6:40am, to discuss various LBO targets.

*** Finally, a regular reader question is: “How can colleagues sign up for the PE Week Wire?” Just send them to our automated Subscribe Page. Do be sure to pass it around…

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Top Three

Competitive Power Ventures Holdings, a Silver Springs, Md.–based North American power industry development and asset management company, has received up to $200 million in private equity commitments from existing shareholder Warburg Pincus. The new capital will be used to launch a portfolio of new fossil fuel power generation projects – primarily natural gas-fired projects — that could grow to 6,000 megawatts in the United States and

AT&T Inc. (NYSE: T) has agreed to acquire USinternetworking Inc., an Annapolis, Md.–based independent application service provider. The deal is valued at approximately $300 million in cash and assumed debt, and is expected to close next quarter. USi shareholders include Bain Capital, El Dorado Ventures and Grotech Capital Group.

Credit Suisse announced several new initiatives to expand its alternative inv*stment activities. They include: A partnership with the Abu Dhabi Future Energy Co. to support projects and funds focused on alternative energy investments; a partnership with China Renaissance Capital to form a China-focused venture capital effort; and a new private equity program focused on Latin America.

VC Deals

Handango, a Hurst, Texas-based provider of mobile phone content, has raised $60.5 million in Series B funding. Institutional Venture Partners and Advanced Technology Ventures co-led the deal, and were joined by CenterPoint, NeoCarta Ventures, Pharos Capital Group and SSM Partners. The company raised VC funding in 1999 and 2000 from firms like HM Capital Partners, and Q Ventures, but only the latter remains a shareholder.

NuPathe Inc., a Conshohocken, Pa.-based drug company focused on treating migraine and other CNS disorders, has raised $15 million in Series A funding. Birchmere Ventures and BioAdvance Ventures (managed by Quaker BioVentures), co-led the deal, and were joined by firms like Safeguard Scientifics.

Oxxius, a Lannion, France-based manufacturer of ultra-compact lasers has raised $10 million in second- round funding. Return backer Sofinnova Partners led the deal, and was joined by AXA Private Equity and Sofinnova Ventures.

Signiant Inc., a Burlington, Mass.-based provider of distributed data management solutions, has raised $10 million in third-round funding. North Bridge Venture Partners led the deal, and was joined by return backers Boston Capital Ventures and Vimac Ventures.

TC³ Health Inc., a Costa Mesa, Calif.-based provider of a healthcare claims management solutions, has raised $10 million in Series C funding. JMI Equity led the deal, and was joined by return backer Ticonderoga Capital.

Red 5 Studios Inc., an Aliso Viejo, Calif.-based developer of online multiplayer games, has secured $8.87 million of an $18.47 million Series A round, according to a regulatory filing. Benchmark Capital led the deal, with Benchmark’s Bill Gurley taking a board seat.

Landslide Technologies Inc. (f.k.a. SalesGene), a Pittsburgh-based developer of sales workstyle management software, has raised around $3 million in Series A funding from Osage Ventures and Draper Triangle Ventures.

SiliconSystems Inc., an Aliso Viejo, Calif.-based provider of storage technology, has raised $2 million in strategic Series C funding from Samsung Ventures. Other company shareholders include Miramar Venture Partners, Rustic Canyon Partners, Sandisk Corp. and Shepherd Ventures.

CMWare Inc., a Princeton, N.J.-based provider of PC place-shifting solutions for mobile carriers, has raised an undisclosed amount of Series A funding from Updata Partners.

Alvine Pharmaceuticals Inc., a Palo Alto, Calif.-based drug company focused on Celiac disease, announced that its $21.33 million Series A round was led by Sofinnova Ventures, with other backers including Prospect Venture Partners, InterWest Partners, Cargill Ventures and Flagship Ventures. PE Week Wire last week reported that the company had called down $8 million of the deal, citing a regulatory filing.

Buyout Deals

The Riverside Company has acquired J.E.R. Overhaul Inc., an Arcola, Ill.–based repairer and rebuilder of railroad maintenance-of-way equipment. No financial terms were disclosed. Riverside will roll J.E.R. into existing portfolio platform company Nordco Inc., a designer and provider of railroad maintenance-of-way equipment, rebuilding services and repair parts.

Entrepreneur Partners has formed Terramar Media, a platform for acquisitions of direct marketing companies selling continuity products and services. Its first acquisition is Taramac, Fla.-based Magazine Services of America. The deal was financed via equity from Entrepreneur Partners principals Salem Shuchman and Bruce Newman, while leverage was provided by CapitalSource. No specific terms were disclosed.

NIBC Principal Investments has sponsored a management buyout of BWise Holding BV, a provider of compliance and enterprise risk management software. No financial terms were disclosed. BWise is based in The Netherlands, with a U.S. office in New York.

Castle Harlan and Australian affiliate Champ Private Equity have formed United Malt Holdings, which will become one of the world’s largest producers of malt for use in the brewing and distilling industries. The deal includes the acquisitions of Great Western Malting, Canada Malting Co., Barrett Burston Malting and a 60% interest in Bairds Malt. The businesses were acquired from Conagra Foods and South Africa-based Tiger Brands.

Time Inc., the magazine division of Time Warner Inc. (NYSE: TWX), said that it will sell 18 titles. The portfolio includes Popular Science, Parenting, Field & Stream and Outdoor Life.

The New York Times Co. (NYSE: NYT) has retained Goldman Sachs to advise it on a sale of its broadcast media group, which includes nine television stations. It is expected to report 2006 revenue of around $150 million.

Aspect Software Inc., a Westford, Mass.–based provider of contact center software solutions, has completed a recapitalization. The deal includes a $20 million second-lien term loan from American Capital Strategies and a revolving credit facility and senior term loans from a JPMorgan-led syndicate. Golden Gate Capital and Oak Investment Partners are majority owners of Aspect Software.

Coles Myer Ltd. soon could receive a second private equity approach, according to the Sydney Morning Herald. The report suggests that a five-firm consortium led by Catalyst may try topping a rejected Au$14.50 offer by a KKR-led group.

PE-Backed IPOs

Obagi Medical Products Inc., a Long Beach, Calif.-based drug company focused on the aesthetic and therapeutic skin health markets, has filed to raise $86.25 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol OMPI, with JPMorgan serving as lead underwriter. Stonington Partners holds a 60.7% pre-IPO stake.

Eagle Rock Energy Partners LP, a Houston-based natural gas gatherer, processor and transporter, has set its proposed IPO terms to 12.5 million common shares being offered at between $19 and $21 per unit. It plans to trade on the NYSE under ticker symbol ERE, with UBS, Lehman Brothers and Goldman Sachs serving as co-lead underwriters. Natural Gas Partners is listed as a significant shareholder.

ICF International Inc., a Fairfax, Va.-based provider of management, technology and policy consulting serving to the U.S. federal government, has set its proposed IPO terms to 4.67 million common shares being offered at between $14 and $16 per share. It plans to trade on the Nasdaq under ticker symbol ICFI, with UBS and Stifel Nicolaus serving as co-lead underwriters. CM Equity Partners holds an 88.64% pre-IPO position.

PE Exits

Lucent Technologies (NYSE: LU) has agreed to acquire Mobilitec Inc., a San Mateo, Calif.-based provider of content management software for wireless service providers.No pricing terms of the all-cash transaction were disclosed. Mobiltec has raised over $28 million in VC funding since its 2000 inception, from firms like AIG Capital Partners, Mohr, Davidow Ventures, Novak Biddle Venture Partners, Canaan Partners, Duchossois Technology Partners and Lucent Venture Partners.

Argus Capital Partners has sold Czech commercial printer Svoboda Press to EuroDruck Service AG for an undisclosed amount.

Other Deals

NexTone Communications Inc., a Gaithersburg, Md.-based provider of session management solutions for VoIP, has raised $25 million in private debt funding from Columbia Partners Private Capital. It previously raised $67.5 million in VC funding from firms like One Equity Partners, BCE Capital, Core Capital, Mid-Atlantic Venture Funds and Safeguard Scientifics. The company has raised $67.5 million in total VC funding since its 1998 inception.

PE-Backed M&A

International Automotive Components Group Japan has acquired Mitsuboshi Belting Kaseihin Co. Ltd. from Mitsuboshi Belting Ltd. (Tokyo: 5192) and BST Safety Textiles GmbH from PPM Capital. The combined deals are valued at $305 million. IACG Japan is a unit of International Automotive Components Group, a joint venture between W.L. Ross & Co. and Franklin Mutual Advisers. It also owns 56.5% of Brazilian automotive plastics company Plascar, the former Collins and Aikman Europe and the forthcoming acquisition of Lear Corp.’s European Interior Systems Division (early October close).

Wellness Foods, a portfolio company of Swiss private equity firm Lydian Capital, has acquired UK-based The Rowse Honey Co., according to The Telegraph of London. No financial terms were disclosed.

Firm & Fund News

ICV Capital Partners, a New York-based middle-market buyout firm, has closed its second fund with $313 million in capital commitments. Returning limited partners include the New York State Common Retirement Fund, CalPERS, Citibank, Fairview Capital Partners, Bank of America, and JP Morgan Chase. New backers include the City of Philadelphia, Illinois Teachers, CSFB Emerging Opportunities Fund, Lehman Brothers, New York Life, CalSTRS, the State of Connecticut and CSFB/NJDI Inv*stment Fund.

Argus Capital Partners has secured €213 million in capital commitments for its second fund, which is expected to hold a final close later this year. The London-based private equity firm focuses on deals in Central and Eastern Europe. Argus originally was formed as a subsidiary of The Prudential Insurance Co., but completed a management buyout in June 2002.

RiverVest Venture Partners of St. Louis is raising up to $150 million for its second fund, according to a regulatory filing. The filing indicates $39.65 million in commitments so far.

Transforma Acquisition Corp., a New York-based blank check acquisition company focused on the tech, media and telecom market, has filed to raise $150 million via an IPO. It plans to trade on the AMEX under ticker symbol TAQ-U, with Banc of America Securities and CRT Capital Group serving as co-lead underwriters. Transforma management includes president and CEO Larry Lenhart, an executive-in-residence with Mohr, Davidow Ventures who previously served as president and CEO of Requisite Technology, Contivo and CAT Technology. Directors include: Daniel Burstein and Samuel Schwerin, co-founders of Millennium Technology Value Partners; former Apple Computer chief John Sculley and Dale Kutnick, senior VP and director of research at Gartner.

Lehman Brothers and Hua An Fund Management Co. have teamed up to forma foreign currency-denominated fund that will allow domestic Chinese investors to access offshore investments.

PricewaterhouseCoopers LLP has launched a corporate advisory and restructuring group, which will provide financial, transactional and operational services to underperforming and distressed companies. The group’s senior management will include Tom Sperry, previously head of UIBS Warburg’s restructuring group, and existing PwC pro Peter Spratt.

Human Resources

Bal Johal and Ian Wallis both have left 3i Group to join Mezzanine Management as London-based directors, effective November 1.

IDG Ventures India has announced its management team, shortly after announcing the creation of its $150 million inaugural fund. The team includes: Sudhir Sethi, managing general partner, a former general partner with Walden International; Manick Arora, general partner, previously a senior associate with Battery Ventures, T.C. Meenakshisundaram, chief financial officer, CFO and president of payment processing company Venture Infotek; and Hemir Doshi, investment advisor, formerly in charge of boutique management consulting startup India Capital Advisors.

Carlos Oliveras has joined Aon Corp. (NYSE: AOC) as a managing director in its U.S. M&A group. He previously was president and CEO of CAO Advisors, a diligence and strategic consultant to companies and the private equity community.

Christoph Westphal, co-founder and CEO of Sirtris Pharmaceuticals, has joined IDG Ventures Boston as a senior advisor and chairman of the firm’s life sciences advisory board. Westphal has co-founded a total of five companies, including IDG Ventures portfolio play Magen Biosciences. He also is a former general partner with Polaris Venture Partners.

William Woodburn has been named a partner with Global Infrastructure Partners, a joint venture between Credit Suisse and GE Infrastructure. He has spent the past 22 years with General Electric, including membership on the GE Capital board. Most recently, he led a strategic assessment of GE’s industrial portfolio.

Greg Sullivan has joined Chrysalix Energy as a managing director. He began working with the firm last year as a “venture consultant,” and previously spent several years at the University of British Columbia’s Clean Energy Research Centre, with a focus on developing alternative fuels and combustion technologies for power and transportation.

Elizabeth de Saint-Aignan has joined Nautic Partners as a senior associate. She has spent the past year with Bain & Co., before which she got her MBA from Harvard and spent three years with Summit Partners.

Monomoy Capital Partners, a New York-based turnaround firm focused on the lower middle-markets, has promoted Loren Roseman from senior associate to vice president. It also has hired Mayank Singh (formerly of Sun Capital) as a senior associate and Earl Dos Santos (Citigroup) and Nathan Richey (Houlihan, Lokey, Howard & Zukin) as associates. The firm plans to close its $200 million-targeted inaugural fund later this year.

Dave Stepanek has joined Athena Capital Partners as a director. He previously worked in the Florida office of Advantage Capital Partners.

Bill Draper has donated $1 million to the Stanford Graduate School of Business, in order to support the Stanford Social Innovation Review magazine.


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