PE Week Wire: Fri., Aug. 17, 2007

You wouldn’t think that I could – or would even want to – write more about Citrix’s $500 million acquisition of XenSource, but it turns out I neglected two interesting nuggets yesterday. So here they are:

*** As we discussed, XenSource was originally seeded by Sevin Rosen Funds, Kleiner Perkins and Kleiner Perkins partner Kevin Compton (via his Radar Partners vehicle). Guess what other company Sevin Rosen and Kleiner seeded? Yup, Citrix.

That was back in 1989, with Sevin Rosen’s Steve Dow and Kleiner’s Compton taking board seats. Citrix went public in 1996, but Dow remains on the board. A regulatory filing says that Dow “not attend the meeting at which the Citrix Board approved the transaction, and recused himself from the vote to approve the transaction.” The filing added that Dow is expected to personally receive $1.9 million from the sale, via his allocated GP carry. It makes no mention of Compton, whose Kleiner bio still lists him as a Citrix board member. A Citrix spokesman could not recall how long ago Compton stepped down, but did confirm that he’s no longer on the board.

*** There was also another firm in that first round for Citrix: Mayfield.

Mayfield did not subsequently invest in XenSource, but it had the opportunity to do so. It passed up the Series A, despite some lobbying by Peter Levine, who was with Mayfield at the time. Levine later left Mayfield and began raising a $200 million VC fund with the late Todd Brooks. The fund received good LP feedback, and was nearly closed by early 2006. Then Levine stunned the market – not to mention Brooks – by pulling out to become CEO of… XenSource.

At the time, Levine said that he wrestled with the decision, but that XenSource represented the “opportunity of a lifetime.” I’d heard that line too often to pay it much heed, but apparently he knew of what he spoke. Levine will stick with Citrix, in charge of a new virtualization and management division that will include XenSource.

*** I was on CNBC this morning, to discuss the trend of PE firms buying up hung bridge debt. Watch it here. I was supposed to be on twice, but the second spot was killed after the Fed surprisingly cut the “discount window rate” by 50 basis points. We would have discussed how the disappearance of cheap debt structures means that strategics are back in the M&A driver’s seat. Writing the Wire’s news section from a studio green room is not ideal…

*** A big VC trend has been to invest in companies that help insert advertising in video games. Makes lots of sense, although I only buy one video game per year (actually, J buys it as an annual gift). That would be Madden, and advertising in the ’08 version is extremely distracting. If it’s as bad in other games, then this might be a strategy reaching its in-game saturation point…

*** A bunch of blogging at peHUB yesterday. Here’s a table of contents:

• Is Blackstone Group shooting its own messenger?

• Will Thomas H. Lee Partners — err THL — win by losing?

• Small Silicon Valley scoop: Oracle is buying VC-backed Bridgestream.

• SEIU president Andy Stern has made it personal.

Top Three

Arcapita has agreed to acquire HT Troplast from Advent International and The Carlyle Group. No financial terms were disclosed. HT Troplast is a German maker of PVC window and door profiles, with 2006 sales of €850 million. Goldman Sachs and Lazard managed the sale process.

Concentric Medical Inc., a Mountain View Calif.-based developer of medical devices for restoring blood flow in people who have suffered ischemic strokes, has filed for a $69 million IPO. It plans to trade on the Nasdaq under ticker symbol CLOT, with Merrill Lynch and Lehman Brothers serving as co-lead underwriters. The company has raised around $53 million in VC funding since 1999, from firms like New Enterprise Associates (20.3% pre-IPO stake) H&Q Capital Management (16.2%), SV Life Sciences (9.5%), Oxford Bioscience Partners (9.5%) and ProQuest Investments (13.9%).

Sequoia Capital India has closed its third fund with around $300 million in capital commitments.

VC Deals

nTAG Interactive Corp., a Boston-based provider of real-time event data management solutions, has raised $8.3 million in Series B funding. Return backers include Sevin Rosen Funds and Pilot House Ventures. The company has now raised over $21 million in total VC funding.

Plumchoice, a Billerica, Mass.-based provider of remote technology support services to the home and small business markets, has raised $4.8 million from Edison Venture Fund.

Beneq, a Vantaa, Finland-based nanotech equipment supplier, has raised €3 million in VC funding from Via Venture Partners (Denmark) and Finnish Inventure.

Kemeta LLC, a Phoenix-based developer of palm-sized breath sensors, has received an undisclosed amount of strategic funding from Dow Chemical.

Quartics Inc., an Irvine, Calif.–based provider of video processing solutions, has raised $7.5 million in venture debt from Hercules Technology Growth Capital. Quartics previously raised around $43.5 million in VC funding since 2000, from firms like VantagePoint Venture Partners, Sorrento Ventures, Focus Ventures, Foundation Capital and Enterprise Partners Venture Capital.

Cast Iron Systems Inc., a Mountain View, Calif.-based maker of application integration hardware devices, announced that it has raised $16 million in Series F funding. PE Week Wire first reported the round details last month, with Lehman Brothers Venture Capital being joined by return backers Sequoia Capital, Norwest Venture Partners, Artis Capital Management and Invesco Venture Capital. Cast Iron has raised over $61 million in total VC funding since 2001.

Buyout Deals

Midwest Airlines (AMEX: MEH) has once again picked TPG Capital over AirTran Holdings (NYSE: AAI), by agreeing to a sweetened $450 million offer. TPG had originally offered to buy Midwest for $16 per share, with equity backing from Northwest Airlines. That topped AirTran’s “best and final offer” of $15.75 per share, but AirTran backtracked with a $16.25 per share offer. Now, Midwest has accepted a revised $17 per share offer from TPG.

CanWest Global Communications Corp. and GS Capital Partners have completed their acquisition of Alliance Atlantis Communications Inc., a Toronto-based entertainment broadcaster. Alliance stockholders received Cdn$53 per share, for an aggregate purchase price of approximately Cdn$2.3 billion.

Insight Equity has received bankruptcy court approval to but Elkhart, Ind.-based Attwood Mobile Products from Dura Automotive Systems Inc. for $160.2 million. An auction had been scheduled, but was canceled when Insight was the only bidder to come forward.

The Riverside Company has acquired Keycast, a Nordic producer of cast steel components for leading original equipment manufacturers in the mobile equipment, energy and process industries. Company management reinvested as part of the deal, with Finland-based OKO Bank providing leveraged financing. No financial terms were disclosed.

U.S. Equity Partners has completed its sale of ALM Media to Incisive Media, a UK business information publisher owned by Apax Partners. The deal is valued at $630 million in cash. ALM owns and publishes 33 national and regional magazines and newspapers focused on the legal and real estate communities, including The American Lawyer, The New York Law Journal, Corporate Counsel, The National Law Journal and Real Estate Forum.

Vertrue Inc. has gone private, after completing its $50 per share buyout by One Equity Partners, Rho Ventures and Brencourt Advisors. The total deal was valued at $855 million, including assumed debt. Jefferies Broadview advised Vertrue on the deal, while debt financing was provided by Lehman Brothers and JPMorgan. Oak Investment Partners was originally part of the equity consortium, but dropped out once the bid rose from $48.50 per share to $50 per share. It was replaced by existing Vertrue shareholder Brencourt.

PE Exits

Cadence Design Systems Inc. (Nasdaq: CDNS) has acquired Clear Shape Technologies Inc., a Santa Clara, Calif.–based provider of design-side solutions to minimize yield loss for advanced semiconductor ICs. No financial terms were disclosed. Clear Shape had raised a $5 million Series B round in 2005 at a post-money valuation of approximately $30 million. Backers include U.S. Venture Partners, Intel Capital, KT Venture Group, AsiaTech Management and Telos Venture Partners.

PE-Backed M&A

LN Acquisition Corp., a lubrication products platform sponsored by Harbour Group, has acquired Reefcraft Industries Inc., a Columbia City, Ind.-based manufacturer of spring-driven hose, cord and cable reels.

Firms & Funds

Thomas H. Lee Partners has filed suit against Grant Thornton LLP, in connection with Grant Thornton’s role as Refco’s independent auditor. In a press release, the firm says that the suit “details how Grant Thornton, through material and knowing omissions in its representations to the THL Funds, kept hidden the related party transactions and round-trip loans that were the basis of the fraudulent scheme that led to Refco’s collapse.” The suit seeks to recover damages of at least $245 million.

Craton Equity Partners is nearing the halfway mark for fundraising on its inaugural fund, according to VentureWire. The Los Angeles-based firm is targeting $250 million, and has secured over $40 million since holding an $82 million first close last year. It will focus on venture capital and private equity opportunities in the clean-tech space.

Hancock Mezzanine Investments, the mezz arm of John Hancock Life Insurance, is planning to raise $500 million for its fourth fund, according to LBO Wire. Benedetto Gartland & Co. is serving as placement agent. Hancock’s third mezz fund was capped at $396 million in 2004.

Veronis Suhler Stevenson is planning to raise $300 million for its second mezzanine fund, according to LBO Wire. Its debut mezz fund closed on $123 million in 2004.

VRH Partners LLC, an Atlanta-based I-bank that provides M&A services to middle-market companies and private equity firms, has modified its name to VRA Partners LLC. The change was made in conjunction with a settlement agreement between VRH Partners and SunTrust Banks.

Human Resources

John Dupuy has joined Arsenal Capital Partners as an operating director, with a focus on the transportation and logistics markets. He has spent the past six years in various executive capacities with SIRVA.

Tim Foster has joined Edison Venture Fund as business development manager. He previously was with 1Sync as manager of industry development.

Michael Donnelly, CEO of Growcorp, has been elected chairman of the Irish Venture Capital Association. He succeeds Niall Carroll, whose term was up.

DC Capital Partners has formed a board of advisors. It includes: Richard Armitage, former Deputy Secretary of State; Ambassador Henry Crumpton, former Coordinator for Counterterrorism at the Department of State; General Michael Hagee, former Commandant of the Marine Corps; Vice Admiral Stephen Loftus, former Deputy Chief of Naval Operations for Logistics and former Director of the Office of the Budget for the Navy; General Eric Shinseki, former Chief of Staff of the Army; and Jeffrey Smith, Senior Partner, Arnold and Porter and former General Counsel at the CIA.


Key Bridge Partners, not Key Principal Partners, has acquired Duvinage Corp., and its wholly-owned subsidiary Mitchell Machine Shop.