PE Week Wire: 9.8.06

Seven weeks ago, I devoted a column to the New York City pension system’s appalling lack of qualified private equity managers. Specifically, the system – a collective of five separate systems – had just two dedicated managers overseeing $3.09 billion in commitments. One was Timothy Kelly, while the other apparently just had an X on his/her birth certificate.

At the time, I wrote that NYC would not allow me to speak with Kelly, and then sarcastically suggested that it was because he was “too damn busy.” But now I have a new theory: He was preparing to leave.

Let me clearly state that I cannot prove he was planning to leave, only that he has indeed done so. As first reported by Private Equity Insider, Kelly has bolted for the greener pastures of a fund-of-funds team at Zurich Capital Markets. I have been unable to confirm this yet with NYC (they’re getting back to me), although I did leave a voicemail at Zurich for someone named “Timothy Kelly.” Since I’ve never spoken with him before, it’s impossible to confirm it was his voice.

Anyway, this news comes just one day after deputy comptroller for pensions Horatio Sparkes resigned, and is the latest in a n NYC defection bonanza that would even make Katherine Harris blush. PE Insider reports that CIO Rita Sallis has taken temporary ownership of private equity, but her background is in municipal finance. I heard that some NYC bigs weren’t pleased with my dismal assessment of their competence back in July, but nothing yet has happened to change my mind.

Yes, I know that they continue to interview potential replacements for Kelly and additional private equity staffers (after inexplicably not advertising the vacant positions for several months), but how did they let the situation get so dire? Of equal import, how will NYC explain away its inability to retain talent? I would direct these questions to NYC, but there really isn’t anyone there right now to answer them.

*** I reported yesterday that Berkshire Partners of Boston has closed on over $2 billion in capital commitments for its seventh fund. A final close is slated for the end of this month, with expectations that the final total will be somewhere between $2.5 billion and $3 billion.

*** Oris Capital Partners has launched as a New York-based firm focused on the transition from analog media to digital media. Its website describes the opportunity as follows: “This ongoing shift from analog to digital, narrowband to broadband, fixed connections to mobile connectivity and the development of multiple interactive platforms has created technology disruption and new growth markets on a global scale.”

Oris is targeting $250 million for its inaugural fund, and I hear that it already has soft circles from several LPs. It also has an impressive group of principals: Michael Carus (formerly of JVP), Clarke Keough (Allen & Co.), Los Angeles-based Hassan Miah (Intel Capital) and Joel Katz (Greenberg Traurig). Katz may be the best known of the bunch, as he runs Greenberg Traurig’s global entertainment practice, and also is chairman of the American Bar Association’s Entertainment and Sports Law Forum and general counsel to the National Academy of Recording Arts & Sciences. He declined to comment (SEC restrictions), but a source says that he’ll split his time between Oris and Greenberg Traurig.

*** So now it turns out that Patricia Dunn had investigators obtain the phone records of journalists covering Hewlett-Packard, in addition to the records of HP board members. The only thing more shameful than this illegal action is her continuing refusal to resign.

*** I asked for an invite to The Carlyle Group’s annual meeting, which is being held next week in NYC. Rumor is that their next $15 billion fund-raising effort could be unveiled. They understandably said no. So now I actively solicit spies. Don’t worry, Pat Dunn doesn’t have any sway there.

*** Sweden is having a locust moment. It too shall pass.

*** I’ll be conducting a keynote interview with Barry Gonder of Grove Street Advisors, on Thuresday, Sept. 28 in New York. It’s part of a New York Capital Roundtable Master Class on fundraising for PE and VC firms. More info here.

*** Finally, a very happy anniversary to J. I still can’t believe it’s been five years… the best five years of my life so far.

Top Three

Saints Capital has bought 10 mid-market buyout investments from 3i Group. No financial terms were disclosed for the deal, except that Saints received backing from Lexington Partners and Drawbridge Special Opportunities Fund.

Ashmore Inv*stment Management has acquired global power plant and pipeline company Prisma Energy International for $2.9 billion. The seller was bankrupt Enron Corp., which now has just a few small assets remaining to be sold.

John Doerr, a partner with Kleiner Perkins Caufield & Byers, will not stand for reelection to the Sun Microsystems Inc. (Nasdaq: SUNW) board when his term expires on November 2. He had been on the Sun board since the company’s 1982 founding.

VC Deals

UbiquiSys Ltd., a UK-based developer of mass-market wireless access points for the residential market, has raised $12 million in first-round funding. Backers include Accel Partners, Advent Venture Partners and Atlas Venture.

Promptu Inc., a Menlo Park, Calif.-based provider of voice-powered search and navigation services for mobile operators, has raised $11.6 million in new venture capital. Steelpoint Capital Partners led the deal, and was joined by return backers like Lauder Partners.

Venafi Inc., a Draper, Utah-based provider of enterprise encryption management, has secured $7 million of a $10.5 million Series C round (including convertible notes/warrants) led by Foundation Capital, according to a regulatory filing.

KryptIQ Corp., a Hillsboro, Ore.-based provider of middleware platforms for automating healthcare workflows, has raised $6.57 million in Series C funding, according to a regulatory filing. Return backers include Shelter Capital Partners, SmartForest Ventures and Voyager Capital.

Monitor110 Inc., a New York-based developer of real-time financial intelligence solutions, has raised $5 million in Series B funding. Backers include Draper Fisher Jurvetson, DFJ Gotham Ventures and Acadia Woods Partners.

Xaware Inc., a Colorado Springs, Colo.-based provider of lifecycle management solutions for Service-Oriented Architecture (SOA), has raised $3 million in Series B-1 funding, according to a regulatory filing. Return backers include Gefinor Ventures, ITU Ventures, Sequel Venture Partners and vSpring Capital. The company had raised a $10 million Series B round in late 2004 at a $23.8 million post-money valuation.

Values of n Inc., a Portland, Ore.-based startup from O’Reilly Media CTO Rael Dornfest, has raised $510,000 in Series A funding, according to a regulatory filing. Sherpalo Ventures and Magnus Ventures participated.

AdMob Inc., a Menlo Park, Calif.-based operator of a global online mobile ad network, has raised an undisclosed amount of Series A funding from Sequoia Capital. It also announced two new board members: Jim Goetz of Sequoia Capital and Maynard Webb, former COO of eBay.

AerovectRx Corp., an Atlanta-based developer of inhaled drug delivery technologies, has raised an undisclosed amount of first round funding from Georgia Venture Partners, Emergent Growth Fund and the Advanced Technology Development Center Seed Fund.

Buyout Deals

HealthpointCapital Partners has agreed to acquire BioLok International Inc. (OTC BB: BLLI) for $2.15 per share, or approximately $35 million total. BioLek is a Deerfield Beach, Fla.-based manufacturer and distributor of dental implant technology. Capitalink LC advised BioLek on the sale.

DCA Group, an Australian nursing home and radiology clinic operator, has received takeover offers from undisclosed suitors. The company’s stock rose 17% on the news, giving it a market cap of around Au$1.4 billion.

Axa Private Equity has agreed to buy France-based specialty chemicals company Eliokem from Littlejohn & Co. for 130 million euros. Littlejohn acquired Eliokem in 2001 in a corporate carve-out from the Goodyear Tire & Rubber Co.

Kohlberg & Co. has completed its $16 per share buyout of Niagara Corp. (OTC BB: NGCN), a New York-based maker of specialty and commodity steel bars.

Permira has acquired UK-based Principal Hotels from Royal Bank of Scotland for an undisclosed amount. Principal is a four-star hotel chain with six properties, including The Russell in London and The George in Edinburgh.

The Sterling Group has acquired a majority interest in Roofing Supply Group, a Dallas, Texas-based wholesale distributor of roofing supplies and related materials in the United States. No financial terms were disclosed.

PE-Backed IPOs

Light Sciences Oncology Inc., a Snoqualmie, Wash.-based developer of light-activated treatments for solid tumors, has set its proposed IPO terms to 5.25 million common shares being offered at between $14 and $16 per share. It plans to trade on the Nasdaq under ticker symbol LSON, with Wachovia Securities and Cowen & Co. serving as lead underwriters. The company raised $67 million in Series A funding late last year from firms like Essex Woodlands Health Ventures, Scandinavian Life Science Venture, Novo AS, New Science Ventures, China Industrial Development Bank and Johnson & Johnson Development Corp.

ImaRx Therapeutics Inc., a Tucson, Ariz.-based drug company using nanotechnology therapies for stroke and cancer, has set its proposed IPO terms to five million common shares being offered at between $10 and $12 per share. It plans to trade on the Nasdaq under ticker symbol IMRX, with CIBC World Markets serving as lead underwriter. Edson Moore Healthcare Ventures holds a 7% pre-IPO stake.

PE Exits

UTC Fire & Security, a unit of United Technologies Corp., has agreed to acquire Red Hawk Industries from Florida Capital Partners. The deal is valued at just under $142 million, and is expected to close within 30 days. Red Hawk is a Denver-based integrated security solutions provider, and was advised on the sale by Harris Williams & Co.

PE-Backed M&A

IBX, a Sweden-based provider of e-purchasing solutions, has acquired Portum AG, a German provider of Web-based sourcing solutions. No financial terms were disclosed. IBX has raised VC funding from B-business Partners, Ericsson Business Innovation, Novo AS and SEB. Portum was a portfolio company of Siemens Venture Capital and Innotech Ltd.

Six Apart Ltd., a San Francisco-based provider of blogging software and services, has acquired Rojo Networks Inc., a San Francisco-based provider of newsreader services. No financial terms were disclosed. Six Apart has raised VC funding from August Capital, Focus Ventures and Intel Capital. Rojo was backed by TPG Ventures and BV Capital.


U.S. Shipping Partners LP (NYSE: USS) has closed on a $500 million joint venture financing led by The Blackstone Group, to construct new deepwater petroleum tankers for the domestic energy market. USSP provided junior equity, while Blackstone and other backers provided senior equity and debt. In a series of simultaneous and related transactions, USSP raised approximately $527.5 million to refinance existing debt and fund its capital program. Existing shareholder Sterling Investment Partners both advised and provided equity on the latter deal.

Firm & Fund News

KSL Capital Partners has closed its second fund with over $1 billion in capital commitments. It will focus on five sectors of the travel and leisure market: hospitality, recreation, clubs, real estate and travel services. Probitas Partners served as placement agent.

The Riverside Company has closed its inaugural micro-cap fund with $250 million in capital commitments. It will focus on companies with revenue between $5 million and $25 million, and OBITDA of $3 million or less. Limited partners include the State of Michigan Retirement Systems, AlpInvest Partners, Makena Capital Holdings, RCP Advisors, and Credit Suisse’s Ohio Public Employee Retirement System/Ohio-Midwest Fund.

Cross Creek Capital, a late-stage VC fund affiliated with Wasatch Advisors, has closed its inaugural fund with $111 million in capital commitments.

Human Resources

George Kase has joined Marlin Equity Partners as a principal primarily focused on consumer products, retail and service businesses. Prior to Marlin, he was a consultant at McKinsey & Co. and, before that, was an I-banker with CIBC

Michael DiMino has joined Knowledge Investment Partners as a Cleveland-based partner and managing director focused on private equity. Between 2001 and 2005, DeMino served as president and CEO of LESCO (Nasdaq: LSCO).

WR Hambrecht & Co. has named Gordon “Rusty” Johnson as head of I-banking, and named Brian Bristol as head of capital markets.

Private Equity Week

This is a free service of Private Equity Week, the only industry publication that tracks and researches private equity deals for the entire venture capital market. The weekly newsletter and daily website give you in-depth news on industry trends, companies seeking investors, deals at all stages, participating firms, deal conditions, proceeds and pricing. The experienced business reporters of Private Equity Week go beyond the press releases to find the stories behind the headlines. Private Equity Week offers: Informative reporting on deals at every stage Commentary on important trends in private equity Regional roundup of SEC filings Breakdowns of private equity funds Tables of venture-backed IPOs in registration and pricing Strategy and market insight on venture fund activity PEW Scoreboard: a comprehensive list of the past week’s venture deals Private Equity People: a list of the comings and goings of private equity professionals

Conference Calendar: a list of upcoming private equity events

Subscribe to Private Equity Week Now!