PE Week Wire: 9.5.06

Random Ramblings

Just some notes as I combat jetjag, following a weekend wedding in Los Angeles…

*** Draper Atlantic Ventures seems to have lost its Draper. The firm just began marketing for its $200 million-targeted third fund, under the name New Atlantic Ventures. It also has launched a new website that contains no mention of its original affiliation. Neither the firm nor Tim Draper responded to inquiries as to whether the de-affiliation is legit or just cosmetic. Either way, it’s not terribly surprising. Lots of startup firms leverage third-party affiliations for funds one and two, and then drop off once they get more established. In related news, partner Jim Lynch is not involved on the third fund, nor is he listed on the website.

*** Greg Case and Paul Vais are planning to leave Apax Partners at year-end, as the firm’s U.S. operation continues to move away from early-stage investing. Case leads the firm’s U.S. financial and business services group, and serves on the boards of such companies as The Learning Annex, Paladin Holdings, Planview and Princeton Softech. Vais is a Menlo Park-based co-head of Apax’s U.S. technology and telecom group. His current board seats include InnovaLight, Silicon Optix and TvHead. No word yet on their future plans, or if others with early-stage inclinations could follow suit.

In related news, Apax continues to raise its U.S. fund, which is a follow-up to $1.1 billion Excelsior VI fund closed in 2000. According to CalSTRS, Excelsior VI had a 10.88% IRR as of Sept. 30, 2005, with around 83% of capital already called. The new fund has secured over $1 billion in commitments, with a final close slated to occur near year-end.

*** A pair of Bay State energy investors have changed addresses. Dan Goldman, former CFO of New Energy Capital, has taken a job heading up finance for GreatPoint Energy. Great guy taking a great job. Dan is one of the area’s best-networked clean-tech gurus, and GreatPoint is one of the precious few VC-backed companies in the clean coal market.

Also, Michael Gee has joined the energy group of American Capital in Dallas, after having been a VP in the Needham, Mass. office of Energy Investors Funds (EIF Group). He was responsible for fund-raising with EIF, and also helped lead the firm’s recent acquisition of a 74% stake in Tenaska Washington Partners and a 100% interest in Burney Forest Products.

*** Ernst & Young and VentureOne reported that €962.4 million was disbursed to 213 European companies in Q2 2006. This is 13% capital bump over Q2 2005, although deal volume was down by 30 percent.

*** One week after The New Yorker argued for the impropriety of management buyouts of public companies, Ben Stein goes one step further in a NY Times piece. He suggests that they could be illegal.

Top Three

Flextronics International Ltd. (Nasdaq: FLEX) has completed the sale of its software development and solutions business to KKR (76%) and Sequoia Capital (9%). The deal values the unit at $900 million, with Flextronics retaining a 15% stake.

NYFIX Inc. (Pink Sheets: NYFX), a New York-based provider of technology solutions to the financial market, has agreed to sell $75 million in convertible preferred stock to Warburg Pincus. As part of the deal, Warburg Pincus entrepreneur-in-residence P. Howard Edelstein will become NYFIX’s new CEO.

Ashmore Investment Management has raised $1.3 billion for its third fund focused on special situation opportunities in the emerging markets.

VC Deals

Cilion, a Menlo Park, Calif.-based ethanol producer, has raised $170 million in second-round funding, according to VentureBeat. It raised $40 million in startup funding earlier this year from Khosla Ventures and Western Milling. No word yet on the new investors’ identities.

Neuronetics Inc., a Malvern, Pa.-based medical device company focused on chronic psychiatric disorders, has raised $35 million in Series C funding, according to a regulatory filing. Quaker BioVentures led the deal, and was joined by return backers InterWest Partners, KBL Healthcare, Onset Ventures, Inv*stor AB and Three Arch Partners.

Arcadian Networks Inc., a New York-based wireless broadband network carrier, has raised $20 million in new Series A funding from Clal Industries and Investments. This follows a $42 million first tranche that came from Goldman Sachs and Gilo Ventures earlier this year. VentureWire reports that it plans to close a third, and final, tranche of between $15 million and $20 million within the next two months.

Angstrom Power Inc., a Vancouver-based developer of high energy density micro-structured fuel cells, has raised US$18 million in new VC funding. VantagePoint Venture Partners led the deal, and was joined by return backers Ventures West, GrowthWorks Capital, Chrysalix Energy, OPG Ventures and Micro-Generation Technology Fund.

Crystal IS Inc., a Green Hills, N.Y.-based commercializer of single-crystal aluminum nitride substrates for the production of production of high power, high temperature and optoelectronic devices, has raised $10.6 million in second-round funding. Lux Capital led the deal, and was joined by Arch Venture Partners, 3i, Credit Suisse, Taiwanese Linkmore Ltd. and Harris & Harris Group.

Magnolia Broadband Inc., a Bedminster, N.J.-based fables semiconductor company focused on antenna solutions for wireless handsets, has raised $10 million in Series E funding, according to VentureWire. Grosvenor Funds and Western Technology Inv*stment co-led the deal, and were joined by return backers SCP Private Equity Partners, DFJ Gotham, Intel Capital, ECentury Capital Partners, Selway Partners and Silverstar Holdings.

OrderMotion Inc., a Boston-based provider of retail management software, has raised $8.5 million in Series B funding, according to a regulatory filing. Updata Partners led the deal with a $6.5 million infusion, and was joined by Capital Resource Partners. OderMotion was spun out of CommercialWare Inc. earlier this year.

Bluestreak Network Inc., a Montreal-based provider of mobile TV and digital television technology, has raised Cnd$8 million in Series C funding. Return backers included Solidarity Fund QFL, BDC Venture Capital and First Capital Group.

SemiSouth Laboratories, a Starkville, Miss.-based developer of silicon carbide electronic components and materials, has raised $5 million in Series A-1 funding. Southern Farm Bureau Life Insurance Co. led the deal, and was joined by return backers Delta Capital Management and Southern Appalachian Fund.

Buyout Deals

Hellman & Friedman and Texas Pacific Group have agreed to acquire Intergraph Corp. (Nasdaq: INGR), a Huntsville, Ala.–based provider of spatial information management (SIM) software. The deal is valued at $1.3 billion, with Intergraph shareholders receiving $44 per share (22% premium over average closing price for last 20 trading days). Goldman Sachs is advising Intergraph, while Morgan Stanley is advising H&F and TPG.

The Blackstone Group plans to compete with Premier Foods in the £1.7 billion auction for United Biscuits, according to The Financial Times.

Norwest Equity Partners has sponsored a management buyout of Duni Corp Inc. and Duni Supply Inc. from Duni AB of Sweden The two Atlanta-based companies are manufacturers of disposable plastic containers and converters of paper products for the foodservice and retail markets. No financial terms were disclosed.

Graphite Capital has agreed to acquire NES Group from Bridgepoint and company co-founders Geoff Lloyd and Bryan Sullivan, for £86 million. Royal Bank of Scotland arranged the leverage package. NES is a UK-based technical recruitment company, which was acquired by Bridgepoint in a £32 million buyout in May 1999.

Norvestor has agreed to buy fitness club chain Elixia Nordic ASA from Exlixia GbmH. No financial terms were disclosed.

Monster Worldwide (Nasdaq: MNST) has agreed to sell its TMP Worldwide Advertising & Communications business to VSS Mezzanine Partners and senior TMP management. The deal is valued at $45 million. TMP is a New York-based independent recruitment advertising agency. Evercore Partners advised Monster on the sale.

Brook Street Investments has sponsored a buyout of Phoenix Integration, a Blacksburg, Va.-based provider of process integration and design optimization software for the aerospace and defense industry. No financial terms were disclosed. Brook Street partnered with company co-founder Scott Woyak, who will succeed Brett Malone as company president and CEO. In related news, Phoenix Integration will relocate its corporate headquarters to King of Prussia, Pennsylvania.

PE-Backed IPOs

Heely’s Inc., a Carrollton, Texas-based maker of youth footwear with a removable wheel in the heel, has filed to raise $115 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol HLYS, with Bear Stearns and Wachovia serving as co-lead underwriters. Shareholders include Capital Southwest Venture Corp.

Isilon Systems Inc., a Seattle-based provider of clustered storage solutions, has filed to raise $86.25 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol ISLN, with Morgan Stanley, Merrill Lynch and RBC Capital Markets serving as co-lead underwriters. The company has raised nearly $70 million in total VC funding since its 2001 inception, from firms like Atlas Venture, Madrona Venture Group, Sequoia Capital and Lehman Brothers.

Warner Chilcott Ltd., a Rockaway, N.J.-based drug company focused on women’s healthcare and dermatology, has set its proposed IPO terms to 70.6 million common shares being offered at between $17 and $19 per share. It plans to trade on the Nasdaq under ticker symbol WCRX, with Goldman Sachs serving as lead underwriter. The company was taken private in early 2005 for $3.1 billion by a private equity consortium that included Bain Capital, DLJ Merchant Banking Partners, JPMorgan Partners and Thomas H. Lee Partners.

Riverbed Technology Inc., a San Francisco-based provider of wide area network performance software, has set its proposed IPO terms to around 8.39 million common shares being offered at between $7 and $8.50 per share. It plans to trade on the Nasdaq under ticker symbol RVBD, with Goldman Sachs serving as lead underwriter. The company has raised $56.6 million in VC funding since its 2002 inception, from firms like Accel Partners, Lightspeed Venture Partners, UT Partners, Meritech Capital Partners and Goldman Sachs.

PE Exits

Asahi Tec Corp. of Japan has agreed to acquire Metaldyne Corp. from Heartland Industrial Partners and CSFB Private Equity. The deal is valued at approximately $1.2 billion (including assumed debt), and is expected to close in Q4. Metaldyne is a Plymouth, Mich.–based supplier of powertrain and chassis systems and components.

MediGene AG of Germany has agreed to acquire Avidex Ltd., a UK-based drug company focused on cancer and autoimmune diseases. The deal is valued at approximately €50 million in MediGene stock (8.2 million shares). Avidex has raised VC funding from firms like Advent Venture Partners, Quester Capital Management and Seed Capital Ltd.

Process Software, a unit of Halo Technology Holdings (OTC BB: HALO), has acquired Tenebril Inc., a Boston–based provider of anti-spyware solutions. No financial terms were disclosed. Tenebril has raised around $10 million in VC funding from firms like Sierra Ventures.

Thomson Corp. (NYSE: TOC) has acquired ScholarOne, a Charlottesville, Va.–based provider of workflow management systems for scholarly publishers. No financial terms were disclosed. ScholarOne raised $3.1 million in Series A funding at a $12.2 million post-money valuation in 2001. Backers include Village Ventures, Tall Oaks Capital Partners and Philadelphia Ventures. (Thomson Corp. is the parent company of PE Week Wire publisher Thomson Financial).

PE-Backed M&A

Virgin Health, a UK-based health and fitness group, has acquired the Holmes Place’s UK business, which comprises 47 clubs with 190,000 combined members. No financial terms were disclosed. As part of the deal, Holmes Place controlling shareholders Bridgepoint and Permira will receive a minority stake in Virgin Health (now valued at £650 million). An IPO for Virgin Health is expected shortly.

NeoPhotonics Corp., a San Jose, Calif.-based producer of active and passive optical components, has acquired BeamExpress Inc., a Sunnyvale, Calif.-based provider of multi-mode transceivers for enterprise and storage applications.No financial terms were disclosed. NeoPhotonics has raised around $200 million in VC funding since 1998, from firms like ATA Ventures, Bay Partners, DFJ, Harris & Harris Group, IVP, Nth Power, Oak Inv*stment Partners, Rockport Capital Partners and SVB Ventures. BeamExpress had raised around $30 million from Oak, Index Ventures and Atila Ventures.

Active Interest Media has acquired multi-platform media company Yoga Journal for an undisclosed amount. AIM is an El Segundo, Calif.-based company formed in 2003 by Wind Point Partners.

TechSkills LLC, an Austin, Texas-based IT education company, has acquired the Boston University Corporate Education Center (BUCEC) from Boston University. BUCEC will continue to be based in Tyngsboro, Mass., and will operate autonomously under the BUCEC name. In related TechSkills news, the company has secured more than $10 million in private equity and debt funding. Silicon Valley Bank led the senior note facility, while Marquette Capital Partners led a mezzanine round that also included existing TechSkills backer Chrysalis Ventur! es. Marquette and Chrysalis joined O’Connor Investments on a Series D equity round.

Amerom Television, a Romanian subsidiary of SBS Broadcasting (Nasdaq: SBTV), has completed its acquisition of Romanian music television channel TV K Lumea. SBS is controlled by Permira and KKR.

Firm & Fund News

Electra Partners Europe has changed its name to Cognetas LLP. The mid-market European private equity firm also is opening a new office in Milan, Italy. It will be run by Maurizio Bianco, who previously was with Euromobiliare Private Equity.

SVB Financial Group has launched an Analytics business to provide analytical and administrative services to VC-backed companies and venture capital firms.

Pangaea Ventures of Vancouver has held a first close on its US$50 million-targeted second fund. Limited partners include BASF, Solvay and Ciba Specialty Chemicals. The firm focuses on early-stage opportunities in the advanced materials, energy, environmental technology and nanotech markets.

Babson Capital Management has closed a new commercial real estate fund – Babson Mezzanine Realty Investors LP – with $265 million in capital commitments. This includes a $100 million commitment from Babson parent MassMutual.

Human Resources

Brown Gibbons Lang & Co. announced that Scott Lang, senior managing director and CEO, will step down as CEO and sell his ownership back to the firm. He will remain active as a senior MD for a few more months, but will leave later this year to “pursue new professional opportunities.” Fellow firm co-founder and chairman Michael Gibbons will assume the CEO role.

Philippe Dauman has been named president and CEO of Viacom Inc. (NYSE: VIA), while Thomas Dooley has been named senior executive vice president and chief administrative officer. Both men are Viacom vets who already had been on the board of directors. They also have worked since 2000 as co-chairman and co-CEOs of DND Capital Partners, a private equity firm focused on media and telecom. Dauman succeeds Tom Freston.

Carl Atsushi Hirano has joined Market Platform Dynamics, where he will work with clients on mobile and Internet-based payment and content strategies. Hirano previously was managing director of DoCoMo Inc., a venture capital and consulting firm focused on mobile content.

Dennis Hall and Simon Coote have joined Baird Capital Partners Europe. Hall previously was with Harris Watson Holdings, while Coote was with Ernst & Young.

John Shaffer, head of credit sales for the Americas at Merrill Lynch & Co., has left the firm, according to Bloomberg.