PE Week Wire: Fri., April 4, 2008

I’ve been running MBA Internship Drives for the past five years, and yesterday was by far the weakest response to a call for available positions. My point isn’t to chastise you, dear reader, but rather to suggest the weakness is a micro reflection of macro market trends.

Now it might be self-evident that private equity firms would be cutting back on all levels of hiring, given that there isn’t too much new business coming in the door. But it’s a conclusion that has been repeatedly rejected. For example, Steve Pagliuca said at Buyouts Madness last month that his firm, Bain Capital, was not altering plans to add more new staffers in 2008 than it had in 2007. I’ve heard similar things in background discussions, including with some industry headhunters who say business is surprisingly strong.

So how do I draw a conclusion from what might just be reader lethargy? Because more and more people have been emailing me of late to say job offers have been rescinded. And not just from those who had been heading to Bear Stearns. For example, I’ve learned that American Capital has taken back most, if not all, of its recent offers to pre-MBA and post-MBA candidates. The firm declined to specifically confirm or deny the action, except to say: “In light of the 21% decline in overall middle market M&A volume in the first quarter of 2008 over the first quarter of 2007, we have changed our plans for new hires in 2008.”

This is one of those trends to watch, and I’ll begin putting together some sort of comprehensive chart if possible. To do so, let me know about any hiring freezes and other assorted pullbacks you’re aware of. Or prove me wrong, by flooding my inbox with Internship Drive opportunities (details here). I’ll be happy either way…

*** Speaking of market trends, the PE-backed bankruptcy parade shows no signs of slowing. One of the latest examples is MatlinPatterson portfolio company ATA Airlines, which has filed for Chapter 11 and canceled all current and future flights. If that read like déjà vu, it’s probably because a similar thing happened just one week ago with Yucapia Cos. portfolio company Aloha Airlines. I’ve got more details here.

*** This space has been neglecting startups as of late, so here’s a stealthy scoop for you: Polaris Venture Partners has led a $5.25 million Series A round for something called Modelinia. It’s unclear exactly what this company plans to do, but it looks like an online content play focused on the world of modeling.

Its website is just a one-pager, which defines Modelinia as a noun meaning “The obsession over and infatuation with the world’s most beautiful women, celebrating the genetic jackpot of the supermodel industry, coveting their lifestyles and openly admitting to not hating them because they are beautiful.”

That was tough to transcribe without giggling. The company is coming from the executive team behind Full Picture LLC, a New York-based PR firm and talent agency that has ventured out into multimedia endeavors like producing Project Runway. Both Full Picture and Modelinia are run by uber-flack Desiree Gruber, who has repped such brands as Miramax and Victoria’s Secret and celebs like Heidi Klum and Arnold Schwarzenegger.

I emailed Jon Flint of Polaris about Modelinia, but he declined to comment.

*** Jeff Walker has stepped down as chairman of CCMP Capital, 24 years after co-founding the firm as a captive unit of Chemical Bank. He’s moving fulltime into non-profit work, and says that he hopes to apply some private equity lessons into these new pursuits. Read the full story.

*** If you’re not sick of Clear Channel yet, there were some new developments yesterday.

*** My imminent colleagues at Reuters report that China has signed a deal with J.C. Flowers, to form a $4 billion private equity fund focused on U.S. financial assets. This is the ultimate contrarian play. Not only in terms of the target sector, but also the partner. Flowers hasn’t been able to get a deal done for months, including failures on Sallie Mae, Northern Rock and (perhaps in process) Friends Provident. Maybe China feels it got burned buying into Blackstone when all looked rosy, so it’s moving in the opposite direction.

*** peHUB First Read, including Senatorial confusion and why Valley VCs might want to begin contemplating retirement.

*** Have a great weekend. For those playing our March Madness Extravaganza, I will post updated standings at peHUB on Sunday morning. Good luck.

Top Three

Odyssey Investment Partners has agreed to sell Norcross Safety Products LLC to Honeywell International for approximately $1.2 billion. Norcross is an Oak Brook, Ill.-based maker of personal protective equipment, and was acquired by Odyssey in July 2005 for approximately $495 million. Credit Suisse is advising Norcross on the sale to Honeywell.

Coremetrics Inc., a San Mateo, Calif.-based provider of digital marketing optimization solutions, has raised $60 million in Series E funding. 3i Group led the round, and was joined by return backers Accel Partners, FTVentures and Highland Capital Partners. It had previously raised $114 million since late 1999.

John Coyle has joined Permia as a partner and co-head of the firm’s New York office. He previously was global head of the financial sponsor group at JP Morgan Securities.

VC Deals

MarketTools Inc., a San Francisco-based provider of on-demand market research, has called down $18.3 million of a $25 million Series E round led by new investor Advanced Equities, according to a regulatory filing. The company had previously raised over $80 million. In other MarketTools news, the company has acquired CustomerSat, a provider of enterprise feedback management solutions. No financial terms were disclosed.

IlluminOss Medical Inc., an East Providence, R.I.-based developer of minimally-invasive devices for the treatment of bone fractures, has raised $11.02 million in Series B funding. New Leaf Ventures was joined by return backer Foundation Medical Partners.

SpikeSource Inc., a Redwood City, Calif.-based open source IT infrastructure company, has raised $10 million in third-round funding. Intel Capital was joined by return backers CMEA Ventures, DAG Ventures, Fidelity Venture Partners and Kleiner Perkins Caufield & Byers. The company had previously raised nearly $38 million.

Yardbarker, an Emeryville, Calif.-based online sports community and branded vertical ad network, has raised $6 million in Series B funding. Draper Fisher Jurvetson led the round, with Josh Stein taking a board seat. Return backers include Russ Siegelman, Ronnie Lott (via SC Investments Consulting), Jarl Mohn, Labrador Ventures and Baseline Ventures.

Flixster Inc., a film-centric social network, has called down $5 million of an $8 million Series B round, according to a regulatory filing. Pinnacle Ventures was joined by return backer Lightspeed Venture Partners. The San Francisco-based company had previously raised $2 million.

AuditSolutions Inc., a San Jose, Calif.-based provider of recovery audit solutions, has raised $5 million in Series A funding, according to a regulatory filing. Backers include ATA Ventures and Venrock.

Progeniq Pte Ltd., a Singapore-based provider of high-performance computing applications, has raised an undisclosed amount of “Pre-Series A” funding from BAF Spectrum Pte Ltd.

Buyout Deals

Abraaj Capital has offered to acquire listed Egyptian medical services company Al Borg Laboratory for approximately $186 million. The deal would value Al Borg shares at 225 Egyptian pounds each, and news of the offer sent shares up 5% to 134.40 pounds each.

Activa Capital has acquired a majority stake in French clothing designer Bruno Saint Hilaire from CDC Capital Investissement and Banque de Vizille. No financial terms were disclosed, except that BSH had 2007 sales of €42 million.

Apax Partners reportedly is nearing an agreement to acquire Greek pay television platform Nova from Multichoice Hellas SA. It had been competing for the deal with telecom company Forthnet SA. No financial terms were reported.

Bright Horizons Family Solutions Inc. (Nasdaq: BFAM) announced that it will hold a shareholder meeting on May 7, to vote on a $48.25 per share buyout offer from Bain Capital. The total deal would be valued at $1.3 billion.

Natexis Private Equity has sponsored a management buyout of French road haulage company Groupe Malherbe from Activa Capital. Crédit Agricole Ile de France led the leveraged financing. No financial terms were disclosed.

Norwest Equity Partners has acquired Shock Doctor Inc., a Plymouth, Minn.-based provider of sports protection products like mouth-guards. No financial terms were disclosed. Wachovia Securities advised Shock Doctor on the sale.

Stirling Square Capital Partners has acquired Italian security and surveillance business Sicurglobal in a secondary buyout from BS Private Equity. No financial terms were disclosed, although the deal is believed to be valued at between €150 million and €200 million.

PE-Backed IPOs

Aprimo Inc., an Indianapolis-based provider of marketing software and services, has withdrawn registration for its $50 million IPO. It had plannedto trade on the Nasdaq under ticker symbol MKTG, with Morgan Stanley and Thomas Weisel serving as co-lead underwriters. The company has raised around $47 million in VC funding since 1998, from firms like Sigma Partners (35.2% pre-IPO stake), First Analysis Corp. (17.3%), Frazier Technology Ventures (5.4%), Blue Chip Venture Co., JEGI Capital and PricewaterhouseCoopers Venture Partners.

PE Exits

Arclight Capital Partners has agreed to sell Magnum Coal Co. to Patriot Coal Corp. (NYSE: PCX) for nearly $709 million. The deal would create the second-largest coal producer in central Appalachia. Under terms of the agreement, ArcLight will hold a 16% stake in Patriot Coal, which spun off from Peabody Energy Corp. five months ago. Other Magnum shareholders will hold a 15% stake.

PE-Backed M&A

Logitrade, a French non-strategic industrial procurement company, has acquired smaller rival Achats Services Industries. No financial terms were disclosed. Logitrade is a portfolio company of Activa Capital.

SafeNet Inc., an information security company owned by Vector Capital, has completed its acquisition of Ingrian Networks Inc., a Redwood City, Calif.–based provider of enterprise data protection and privacy solutions. No financial terms were disclosed. Ingrian has raised over $57 million in VC funding since 2000, from firms like Prism VentureWorks, Globespan Capital Partners, Menlo Ventures, Jafco and HighBAR Ventures.

Seesmic Inc., San Francisco-based provider of online video chat solutions, has acquired Twhirl, which claims to be the top Twitter client with 100,000 downloads. No financial terms were disclosed. Seesmic recently raised $6 million in Series A funding from Atomico, Mike Arrington, Dave Winer, Martin Varsavsky, Ron Conway, Steve Garfield, Mark Pincus, Jeff Clavier, Jeff Pulver and Steve Case.

Bad News

Vicorp Restaurants Inc., which runs the Village Inn and Bakers Square chains, has filed for Chapter 11 bankruptcy protection. It said that its lenders have agreed to provide $60 million in debtor-in-possession financing that with would help it meet its obligations to employees, suppliers and partners. Vicorp is a portfolio company of Wind Point Partners.

Firms & Funds

Serent Capital has raised its inaugural fund with $250 million in capital commitments. The San Francisco-based firm was founded last year with a focus on services businesses. Its founders are David Kennedy, former president of ServiceSource, and Kevin Frick, former head of McKinsey & Co.’s West Coast private equity practice. Limited partners include Harvard Management Co., Horsley Bridge, Adams Street Partners and the private office of the Ziff family.

DLJ Merchant Banking Partners has opened an office in Troy, Michigan. It will be staffed by former Questor Management partners John Janitz and Dominick Schiano.

Luqman Arnold, former chairman of UBS, said in a letter that the Swiss bank should be broken up, including sales of its asset management unit and Brazilian and Australian subsidiaries. He also believes that UBS should separate its investment and private banking businesses. The bank has not yet specifically responded to the letter.

Human Resources

Jerry Bailey has joined Halcyon Asset Management as executive vice president of financial and operations. He previously was a senior advisory director with Bear Stearns Merchant Banking, and before that served as COO and CFO of NYMEX.

Chris Coles has joined Actis, a private equity firm focused on the emerging markets. He previously was with Barclays Capital as head of European leveraged finance.

Donald Herrema has joined Stone Point Capital as a senior advisor, with a focus on the asset management and private client services sector. He previously has served as CEO of Bessemer Trust, CEO of Loring Ward and CEO of Atlantic Trust.

Harvey Tepner has joined WL Ross & Co. as a principal. He previously was a partner with Compass Advisers, where he led the firm’s restructuring practice.

CMEA Ventures has promoted James Kim to senior partner in the firm’s energy and materials practice. He joined the firm last year, and has led such deals as A123 Systems. CMEA last week announced that it had raised $400 million for its seventh fund.

Gus Johnson has joined Hercules Growth Capital as a senior associate. He previously was an associate with Merrill Lynch Capital.