PE Week Wire, Dec. 15, 2006

Just a few quick hits to head us into the weekend…

*** Yesterday, I linked you to a post that disputed BusinessWeek’s assertion that Blackstone/KKR/Providence/Hicks Holdings had “walked away from a bidding war” over Clear Channel Communications. The BusinessWeek claim originated from an interview with Tom Hicks, so I concluded by writing the following:

I do not know why Hicks said what he said about walking away from the table, but yesterday put in a call to his PR rep to ask. No word back yet. One possibility is that Hicks Holdings left the consortium prior to Clear Channel’s final decision, but I am certain that Blackstone, KKR and Providence were involved until the moment Bain and TH Lee learned that they had won.

I have now heard back from Hicks who, through his spokesman, says the following: “The group of which [Hicks Holdings] was a part did not ‘walk away,’ but was simply outbid. As to why it was outbid, it could have been because the [losing] group had a higher return hurdle rate than the winning bidders, or perhaps a different vision for the company… But, at the end of the day, nobody ‘walked away.’” The BusinessWeek story remains untouched on both its main website and in a blog post.

*** Texas Teacher Retirement System trustees met yesterday to discuss the proposed $600 million allocation to direct venture capital investments, but took no action. They did, however, apparently blame: (1) The TRS staff for not preparing all of the requested information in a timely manner, and (2) The media and teachers/education association for misrepresenting the program. No idea of the first charge’s validity, but the second one apparently is based on the a trustee perception that opposition to the program is based on the false premise that the TRS program would be required to automatically provide follow-on capital to existing Texas Emerging Technology Fund investments.

I spoke briefly this morning with Linda Bridges, president of the Texas Federation of Teachers, and was told that her group’s opposition is based on a distrust of Gov. Perry’s motives. Maybe this is just all politics (Dem-leaning teachers’ groups vs. GOP governor), but groups like TFT are the TS constituency, so should be listened to and, arguably, heeded unless there is a compelling reason not to do so. One newspaper reports claims that TRST received over 7,000 emails and letters from retired teachers and educators, in opposition to the plan.

As I wrote on Monday, this idea has merit, but the actual capital should come from state coffers rather than from TRS (following legislative approval). The former is responsible for economic development, while the latter is not.

In a related note, some Texas VC types have been writing to say the situation is not nearly as dire as some (read: me) have made it out to be. They correctly say that the state receives the third-most VC disbursements nationally, and that there are some brand-name, local early-stage firms like Austin Ventures and Sevin Rosen Funds. True and true… But: While Texas is number three, but is far closer in total dollars to numbers four through ten than to numbers one (California) or two (Massachusetts). Moreover, if AV and SRF say “No thanks,” there aren’t many other local places for a young company to turn. For more on the issue, check out the following papers authored by Stephen Straus and former UTIMCO chief Bob Boldt (with current UTIMCO pro Trey Thompson).

*** Finally, I want to wish a fond farewell to Eric Kooymans, who has been this publication’s email guru for the past three years. He is moving on from Mansell Group (with which we will continue to work), for a new gig in the search optimization space. He has been the rare service provider who not only seems to be on active call 24 hours per day, but who has never belied any exasperation with my constant pestering. He either has great discipline, or endless patience. He will be missed…

New at

5 Questions with Larry Schloss, of Diamond Castle Holdings

Alex Haislip on gaming deals

Alexis Lakes on Strategic Investing, Phil Gordon Style

New job listings in our Career Section

And, as always, news and analysis updated throughout the day…

Top Three

KKR and Permira agreed to acquire German Media Partners’ majority stake in German television broadcaster ProSieben-Sat.1 Media AG for Euro 5.9 billion.

GTCR has agreed to sell HSM Electronic Protection Services Inc. to The Stanley Works (NYSE: SWK) for $545 million. GTCR formed HSM in June 2004 to acquire the security alarm monitoring business of Honeywell International. Lehman Brothers advised GTCR and HSM on the transaction.

Forest Laboratories Inc. (NYSE: FRX) has agreed to acquire Cerexa Inc., an Alameda, Calif.-based developer of injectable antibiotics, for total consideration of $480 million. Cerexa raised a $50 million VC round in August 2005 from firms like CDIB BioScience Ventures, Canaan Partners, Domain Associates, EGS Healthcare Capital Partners, Frazier Healthcare Ventures, Montreaux Equity Parnters, New Leaf Venture Partners, OrbiMed Advisors and Pappas Ventures.

VC Deals

Seven Networks Inc., a Redwood City, Calif.- based mobile email company, has raised $42 million in new venture capital funding. It is unclear if this includes a $29.5 million Series D infusion that PE Week Wire reported on earlier this year, based on a regulatory filing. Backers include Ignition Partners, Greylock, Softbank Asia and Elm Ridge Capital Partners. In other Seven news, the company named former CEO Russ Bott as its new CEO., an Indian travel portal, has raised $13 million in second-round funding, according to The Economic Times. Helion Ventures and Sierra Ventures were joined by return backer Softbank Asia Infrastructure Fund.

SIRS-Lab GmbH, a Jena, Germany-based developer of molecular diagnostics for life threatening infections, has raised Euro 10 million in venture funding. Affentranger Associates led the deal, and was joined by bm-t Beteiligungsmanagement Thüringen and undisclosed Swiss institutions.

SpectraLinear Inc., a Santa Clara, Calif.–based provider of timing solutions for the consumer, computer and communications markets, has raised $6.4 million in additional Series B funding, according to a regulatory filing. The company announced earlier this year that it had raised $14 million from ComVentures, Norwest Venture Partners and Interwest Partners. The only new shareholder listed on the filing is Cypress Semiconductor Corp.

Jaxtr, a Palo Alto, Calif.–based VoIP startup, has raised around $1 million in seed funding from The Founders Fund, Mayfield, Reid Hoffman and Draper Richards.

VisionShare Inc., a Minneapolis-based provider of data communications services for the healthcare industry, has raised $1 million in private equity funding led by the Chippewa Valley Angel Investment Network.

Buyout Deal

The Blackstone Group has acquired UK-based restaurant chain operator Tragus Ltd. from Legal & General Ventures for approximately Gbp267 million. Tragus management also participated alongside Blackstone. Tragus operates over 160 restaurants, under core brands Café Rouge and Bella Italia.

Aleris International Inc. (NYSE: ARS) shareholders voted to approve a $52.50 per share buyout offer from Texas Pacific Group. Aleris is a Beachwood, Ohio-based maker of aluminum-rolled products and extrusions, aluminum recycling and specification alloy production.

European Capital has completed a Euro 106 million “one-stop” buyout of Metall Technologie Holding, a Menden, Germany-based manufacturer of heat treatment industrial furnaces.

One Equity Partners has acquired the private label unit of listed Dutch food group Wessanen NV, for Euro 104 million.

3i Group has sold UK media monitoring agency Precise Media Group to Phoenix Equity Partners and company management for Gbp42 million. 3i’s proceeds are Gbp24 million, which represents a 3.2x multiple from its original investment, which came in March 2005.

Morgenthaler Partners is in advanced discussions to buy Ryan Herco Products Corp., a Burbank, Calif.–based distributor of plastic fluid handling products. The Federal Trade Commission earlier this week gave Morgenthaler approval to move forward with the proposed transaction.

Brynwood Partners has acquired a majority ownership in S. Walter Packaging, a Philadelphia-based distributor of premium packaging to the retail industry. No financial terms were disclosed.

PE-Backed IPOs

Affymax Inc., a Palo Alto, Calif.-based drug development company, priced 3.7 million common shares at $25 per share, for an IPO take if approximately $92.5 million. The original forecast had been for 3.5 million shares to be sold at between $22 and $24 per share. It will trade on the Nasdaq under ticker symbol AFFY, while Morgan Stanley served as lead underwriter. Affymax had raised around $160 million in VC funding since its 2001 inception, from firms like Apax Partners, MPM Capital, Sprout Group, Jafco, Bear Stearns Health Innoventures and Bessemer Venture Partners.

Altra Holdings Inc., a Quincy, Mass.-based provider of mechanical power transmission and motion control products, priced 10 million common shares at $13.50 per share ($14-$16 range), for an IPO take of approximately $135 million. It will trade on the Nasdaq under ticker symbol AIMC, while Merrill Lynch served as lead underwriter. Genstar Capital was listed as Altra’s majority shareholder, with Caisse de dépôt et placement du Québec also holding a significant stake.

Double-Take Software Inc., a Southborough, Mass.-based provider of software for reducing downtime of business-critical systems, priced 7.5 million common shares at $11 per share ($9-$11 forecast), for an IPO take of approximately $82.5 million. It will trade on the Nasdaq under ticker symbol DBTK, while Cowen & Co. and Thomas Weisel Partners served as co-lead underwriters. Shareholders include ABS Capital Partners, J&W Seligman & Co. and Lake Street Capital.

Isilon Systems Inc., a Seattle-based provider of clustered storage solutions, priced 8.35 million common shares at $13 per share, ($8.50-$9.50 forecast), for an IPO take of apperoximately $108.6 million. It will trade on the Nasdaq under ticker symbol ISLN, while Morgan Stanley and Merrill Lynch served as co-lead underwriters. The company had 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.

US BioEnergy Corp., an Inner Grove Heights, Minn.-based ethanol production company, priced 10 million common shares at $14 per share, for an IPO take of approximately $140 million. It originally had planned to offer 9.4 million shares at between $15 and $17 per share. It will trade on the Nasdaq under ticker symbol USBE, while UBS and Piper Jaffray served as co-lead underwriters. Shareholders include Capitaline Advisors.

PE-Backed M&A

CLP Healthcare Services Inc., an acquisition platform backed by Thoma Cressey Equity Partners, has acquired Community Hospices of America Inc., a Birmingham, Ala.-based hospice provider with 25 locations in nine states. No financial terms were disclosed.

Intechra Holding Corp., a Jackson, Miss.-based has agreed to acquire three IT asset disposition companies from Chasm Corp.: EPC of Los Angeles; Market2Market of Columbus, Ohio and; SpaceFutters of Hartford, Conn. No financial terms were disclosed. Intechra is backed by Chrysalis Ventures, Clayton Associates, Richland Ventures and WestWind Partners.

IP Unity Corp., a Milpitas, Calif.-based provider of carrier-grade media servers, has agreed to acquire Glenayre Messaging from Glenayre Technologies Inc. (Nasdaq: GEMS) for $25 million. IP Unity said that its investors are supporting the transaction, which is expected to close within 30 days. It has raised over $85 million in VC funding from firms like Battery Ventures, Coral Capital, Kleiner Perkins, New Enterprise Associates, Partech International, Siemens Venture Capital, Sumitomo Corp. and Telus Ventures.

PE Exits

BASF has agreed to acquire Pemas GmbH, a Frankfurt, Germany-based supplier of fuel cell components. No financial terms were disclosed. Pemeas was founded in April 2004 as a spin-off of the former Hoechst Group’s fuel cell activities, and is backed by such firms as BankInvest, CDP Capital-Technology Ventures and Conduit Ventures.

Firms & Funds

EQT of Sweden has closed its second Greater China fund with $545 million in capital commitments. It will focus on mid-market buyout and control opportunities in, or connected to, China, Hong Kong and Taiwan.

HarbourVest Partners of Boston has closed its fifth international fund-of-funds with Euro 2.4 billion, and a parallel emerging markets fund with Euro 500 million.

The California Public Employees’ Retirement System (CalPERS) has approved five new fund commitments: $500 million to First Reserve Fund XI, Cdn$150 million to Richardson Capital Private Equity 2; Cdn$110 million to Tricor Pacific Capital Partners IV; 19 billion yen to Carlyle Japan Partners II and $50 million to Acon-Bastion Partners II.

Venrock Associates is planning to raise more than $500 million for its fifth fund, according to PE Insider.

Norwest Equity Partners plans to close its Los Angeles office at year’s end, according to LBO Wire. The report says that three of the office’s four professionals will move to Norwest’s Minneapolis based, with partner Steven Burge opting to leave.

Human Resources

Michael Brous, a co-founder of Jerusalem Global Ventures, has joined Yahoo as a senior business developer manager.

Chris Reilly has resigned as head of alternative investments for the Colorado Public Employees’ Retirement Association, according to PE Insider. He will take a job with family office Kemnay Advisory Services. Colorado PERA already is searching for a replacement, with CIO Jennifer Paquette handling Reilly’s responsibilities in the interim.

Christopher Davis has resigned from Safeguard Scientifics, where he had been executive vice president, chief administrative officer and chief financial officer. He is leaving “in order to pursue other interests.” Safeguard has retained Heidrick & Struggles to identify a replacement, and hired Stephen Zarrilli, co-founder of the Penn Valley Group, as acting CFO.

The Carlyle Group reportedly has hired three staffers from collapsed hedge fund manager Amaranth Advisors. They are: Scott Davidson, a structured product portfolio manager, John Bailey, a long/short energy equities manager and Jaime Gualy. They each will join Carlyle Blue Wave, a hedge fund unit that Carlyle recently began building.

Daniel Dickinson, a managing partner of Thayer Capital Partners, has joined the board of Caterpillar Inc. (NYSE: CAT).