PE Week Wire — Friday, August 5

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Let’s Be Obsessed Together…

While in San Francisco last week, I had dinner and drinks with a former colleague. After getting through all the chitchat, she got a puzzled look on her face and asked, “Why are you so obsessed with VSP Capital?” I don’t remember my exact response (which likely was defensive and blame-shifting), but it probably was something like: “Because it’s a saga that never seems to end, which is great for someone whose primary job responsibility is to fill space.” Then I ordered a cup of coffee, because summertime in the Bay Area is an icy insult to the season.

I bring this up because there is, once again, news from VSP. The full story will run in Monday’s print edition of PE Week, but here are the basics:

For the uninitiated, VSP Capital (f.k.a. Venture Strategy Partners) is the San Francisco-based venture capital firm that raised $185 million for its third fund early this year, and then was forced to disband it several months later after a “key man” provision was triggered by the resignation of general partner Matt Crisp. An interesting side note I learned this week is that Crisp’s resignation was preceded by VSP’s attempt to add venture partner Vince Vannelli to the key-man clause (which only required three keys to keep the fund active), so as to blunt the impact of Crisp’s likely departure. No vote was ever held, however, since Crisp took off before one was possible.

Anyway, there have been two lingering questions about VSP. The first is about the future of Fund II, but I have no useful information about that. The second is about the future of the three startup portfolio companies within the still-born Fund III, and there is information aplenty.

The three companies – Evil Twin Studios, Truveo Inc. and Umbria Inc. – were quietly put up for auction by VSP sometime last month, after LPs vetoed a proposal to roll them into Fund II. Vince Vannelli – the aforementioned former venture partner – expressed serious interest in bidding at a slight premium on both Evil Twin and Truveo, since he had led both deals. In an email, however, firm founder Joanna Rees-Gallanter suggested to Vannelli that he allow her to bid on the companies at around cost, and then sell him a minority stake afterwards. To me, this seems like a self-dealing insider transaction that ultimately would have lowered LP returns, although John Hamm, a general partner with VSP, calls such an interpretation “garbage.” He says that he is aware of the emails, but that they were nothing more than informal discussions, and that the final bidding process was fair and returned good money to investors (notes: Vannelli forwarded Rees-Gallanter’s email to his attorney! , and it also got into the hands of several VSP limited partners; Also, Vannelli declined comment for the PE Week story).

Anyway, Vannelli passed on the offer, and began a bidding war for the assets with John Hamm (who resigned from GP status with Fund III, in order to facilitate his bids). The bidding increments, however, were, in Hamm’s words, “dollar-by-dollar in a multi-million-dollar auction.” Rees-Gallanter and the LP advisory board decided to put an end to the informal comedy, by devising a “blind” bid procedure for Vannelli and Hamm, whereby they each would submit final bids for each company via simultaneous email. Highest bid would win the company, with a starting point of the highest bid received during the previous process. In the end, Vannelli would up with Evil Twin, and Hamm got Truveo. Both were sold at premiums, and LPs got paid. The third company, Umbia, is still being auctioned off.

That’s all I’ve got (thanks to Constance Loizos for help researching the VSP story). Have a good weekend…

    Top Three

 

Axel Springer AG has agreed to buy a controlling interest in German commercial television group ProSiebenSat.1 Media from P7Si Holding LP, an entity backed by Haim Saban (Saban Capital Group), Bain Capital, Hellman & Friedman, Providence Equity Partners, Quadrangle Group and Thomas H. Lee Partners. The deal will give Axel Springer 100% of ProSieben’s common stock and 25% of its preferred stock, or 62.5% of ProSieben’s total capital. It is valued at $3.1 billion, or 23.37 euros per common share and 14.10 euros per preferred share. The selling consortium acquired ProSieben two years ago, and received legal advice on the pending sale from Weil Gotshal & Manges. www.axelspringer.com

Baidu.com Inc., a Beijing, China-based Chinese language Internet search engine provider, priced 4.04 million American depository shares at $26 per ADS (above its already-raised $23-$25 range), for an IPO take of approximately $105 million. Goldman Sachs (Asia) and CSFB are serving as lead underwriters, while significant shareholders include Draper Fisher Jurvetson (28.1% pre-IPO stake), Integrity Partners (11%), Peninsula Capital (10.1%) and IDG Technology Ventures (4.9%) and Google Inc. (2.6%). www.baidu.com

Eric Hsia is transitioning out of his managing director role with Softbank Asia Infrastructure Fund, which he co-founded in 2001 to focus on Taiwanese and U.S. cross-border opportunities in China. He continues to maintain an office in SAIF’s Palo Alto, Calif. headquarters, and has not disclosed details about his future plans, except that they will involve private equity. SAIF recently closed its second fund with $643 million in committed capital. www.sbaif.com

    VC Deals

Rhythm Networks Inc. of Mountain View, Calif. has raised $7.85 million in Series A equity funding, plus another $1.16 million in convertible promissory notes, according to a regulatory filing. Backers include Morgenthaler Ventures, Lightspeed Venture Partners and Rembrandt Venture Partners. www.rhythmnetworks.com

    Buyout Deals

 

The Ontario Teachers’ Pension Plan and AIG Highstar Capital have completed their previously-announced acquisition of InterGen NV and ten of its power plants from Shell Generating (Holding) BV and Bechtel Enterprises Energy BV. The purchase price is Cdn$2.1 billion (approx. US$1.72 billion), with Ontario Teachers’ and the AIG companies as equal partners. www.otpp.com

HSBC Finance Corp. has agreed to acquire credit card issuer Metris Companies Inc. (NYSE: MXT) for approximately $1.6 billion in cash. Among the sellers is Thomas H. Lee Partners, which holds Metris’ preferred shares, and is expected to receive approximately $683 million. www.hsbc.com

RoundTable Healthcare Partners has acquired a majority stake in CorePharma LLC, a Middles*x, N.J-based developer and manufacturer of solid-dose generic pharmaceuticals. No financial terms were disclosed for the deal, which allows management to retain an “substantial” equity position. www.roundtablehp.com www.corepharma.com

Gillete Co. (NYSE: G) is putting its Oral-B Rembrandt teeth whitening division on the auction block, according to The Boston Globe. The unit was purchased last year for around $300 million, but is being sold to help smooth the regulatory way for Proctor & Gamble‘s $57 billion acquisition of Gillette.

    PE-Backed IPOs

Dresser-Rand Group Inc., an Olean, N.Y.-based provider of energy conversion technologies, priced 22.5 million common shares at $21 per share (top of $19-$21 range), for an IPO take of approximately $472.5 million. It will trade on the NYSE under ticker symbol DRC, while Morgan Stanley and Citigroup served as lead underwriters. Dresser-Rand was acquired last year by First Reserve Corp. from Ingersoll-Rand Company Ltd. (NYSE: IR) for $1.2 billion. www.dresser-rand.com

Eschelon Telecom Inc., a Minneapolis-based provider of voice and data services and business telephone systems, priced around 5.36 million common shares at $14 per share, for an IPO take of approximately $75 million. The company originally had planned to price 4.68 million shares at between $15 and $17, but later changed the terms to 5.36 million shares at between $13 and $15. Lehman Brothers and Jefferies & Co. served as lead underwriters. Shareholders include Bain Capital (40.57% pre-IPO position), Wind Point Partners (20.46%) and Stolberg Partners (9.69%). www.eschelon.com

Baidu.com Inc., a Beijing, China-based Chinese language Internet search engine provider, priced 4.04 million American depository shares at $26 per ADS (above its already-raised $23-$25 range), for an IPO take of approximately $105 million. Goldman Sachs (Asia) and CSFB are serving as lead underwriters, while significant shareholders include Draper Fisher Jurvetson (28.1% pre-IPO stake), Integrity Partners (11%), Peninsula Capital (10.1%) and IDG Technology Ventures (4.9%) and Google Inc. (2.6%). www.baidu.com

Advanced Life Sciences Holdings Inc., a Woodridge, Ill.-based pharmaceutical company, priced seven million common shares at $5 per share, for an IPO take of approximately $35 million. The company originally filed to sell 4.5 million shares at between $11 and $13, but later changed the terms to five million shares at between $8 and $9. C.E. Unterberg Towbin and ThinkEquity Partners served as lead underwriters. ALS was recapped last December, with Flavin Ventures taking a majority ownership position. Flavin Ventures is a business accelerator run by ALS founder and CEO Michael Flavin, but it also has other portfolio companies. Abbott Labs also was listed as a significant shareholder. www.advancedlifesciences.com

Atricure Inc., a West Chester, Ohio-based developer of surgical devices to create precise lesions in soft tissues, priced 4 million common shares at $12 per share (bottom of $12-$14 range), for an IPO take of approximately $48 million. UBS and Piper Jaffray served as lead managers for the offering. The company had raised around $26.2 million in VC funding since its 1999 inception, from firms like Camden Partners, Charter Ventures, Foundation Medical Ventures and U.S. Venture Partners. www.atricure.com

Stentor Inc. has withdrawn registration for its proposed $69 million IPO, due to its pending $280 million acquisition by Royal Philips Electronics (NYSE: PHG). Stentor is a Brisbane, Calif.-based provider of picture archiving and communications systems used for storing, managing and distributing digital radiology images in hospitals and health care facilities. It had raised more than $25 million in VC funding from firms like Sanderling Ventures, Lancet Capital, University of Pittsburgh and EMC Investment Corp. www.stentor.com

Teta SA, a Poland-based provider of enterprise management software, has filed to raise approximately $1.5 million via an IPO in Warsaw. The company has received VC funding from Enterprise Inv*stors. www.teta.com.pl

Hindustan Media, an India-based newspaper publisher that counts Henderson Asia Pacific as a minority shareholder, priced an IPO in India that ultimately could raise Rs4.03 billion ($92.7 million).

    PE-Backed M&A

AmericaOnline Inc. has acquired Xdrive Inc., a Santa Monica, Calif.-based provider of online storage and backup services. No deal terms were disclosed. Xdrive had raised $122 million in VC funding between 1999 and 2000 – with its valuation reaching up to $275 million – but filed for Chapter 11 bankruptcy protection in 2002, after which its assets were sold for just $1.2 million. Among its washed-out VC backers were Goldman Sachs, MC Capital, Soundview Technology Group, Pacific Capital, Dawntreader Ventures, J&W Seligman & Co. and Wit Capital Corp. www.aol.com www.xdrive.com

Fox Interactive Media, a unit of News Corp. (NYSE: NWS), has agreed to acquire Scout Media Inc., a Seattle-based online sports network operator. No financial terms were disclosed. Scout Media raised $5 million in first-round funding earlier this year from NLM Capital Partners and former NFL quarterback Bernie Kosar. www.newscorp.com www.scout.com

    Misc. Deals

The Speedel Group, a Switzerland-based drug company focused on cardiovascular and metabolic diseases, has raised CHF 70 million (approx. $55.4 million) via a convertible loan. Earlier this year, the company raised CHF 47.8 million in VC funding from firms like Novartis and DSM Venturing. www.speedel.com

EZ2Companies.com (OTC BB: EXTO), a Miami, Fla.-based operator of various Internet portals, has received a $10 million funding commitment from Cornel Capital Partners. www.excompanies.com

    Firm & Fund News

Oak Hill Capital Partners of Ft. Worth, Texas has raised $2.19 billion for its second buyout fund, according to a regulatory filing. The fund has a max cap of $2.5 billion (including a parallel fund that had $70 million of commitments as of February), and is being marketed by Credit Suisse First Boston.

LaSalle Capital Group of Chicago has closed its inaugural buyout fund with over $115 million in capital commitments. The vehicle will focus on lower middle-market companies in a variety of industries, with a particular focus on family-owned companies or divisions/subsidiaries of larger companies. www.lasallecapitalgroup.com

Partnership Equity has launched as a New York-based private equity firm that will take control positions in lower middle-market companies that face challenges in attaining liquidity. The firm’s two principals are Adam Blumenthal, previously first deputy comptroller and CFO for the New York City Comptroller’s Office, and Josh Wolf-Powers, who previously served as managing director for private markets for the New York City Comptroller’s Office. www.partnershipequity.com

The Carlyle Group is looking to raise around $240 million for its Carlyle Europe Technology Partnership fund, according to a regulatory filing. Limited partners already signed up include Barclays Funds Inv*stment, Sieben European Growth, GreenCap Consultants and PicTet Private Equity Inv*stors. www.carlyle.com

    Human Resources

Donald L. Lucas, has resigned from the board of PDF Solutions Inc. (Nasdaq: PDFS), where had had served since May 1999. Lucas is a longtime Silicon Valley venture capitalist, who backed PDF Solutions on behalf of RWI Group, where he currently serves as an advisor. www.pdf.com

Wilmer Cutler Pickering Hale and Dorr LLP has added three attorneys to its Palo Alto, Calif. office, which opened this past June. All three previously worked with Weil, Gotshal & Manges LLP. They are: Ron Howard, a corporate practice partner focused on M&A; Peter Buckland, counsel in the corporate department; and Jon Wyatt, also counsel in the corporate department. www.wilmerhale.com

Allan Barkat will leave Apax Partners early next year, according to Israel’s Business Arena. He has been with the firm for ten years, and is head of its Israeli office. No word yet on a successor. www.apax.com
—————–
Correction: Advanced Analogic Technologies Inc. raised $106 million via its IPO, not $160 million.

THURSDAY, AUGUST 4

Random (Public) Ramblings

Busy news day, particularly on the PE-backed IPO front (four pricings, two filings and richer terms for Baidu.com). Keeping with the “public” theme, here are a few quick notes from the wild and wacky world of state pension funds:

*** Just one month after John Gennon, a trustee with the Illinois Teachers’ Retirement System, was charged with fraud, a former TRS trustee also has been indicted on a separate fraud case that involves a onetime private equity professional. Think Illinois educators are cutting back on their summer vacation spending?

The PE pro in question is Joseph Cari, a prominent Democratic fund-raiser and corporate attorney (Ungretti & Harris) who once served as a managing director with Healthpoint Capital. He allegedly teamed up with the former trustee Stuart Levine — big-time GOP fund-raiser, because most good scandals are bipartisan – and another attorney to extort hundreds of thousands of dollars from a Virginia investment firm wanting to do business with TRS. It also is worth noting that U.S. Attorney Patrick Fitzgerald (yes, the same one) reportedly has requested information about Healthpoint, a New York-based private equity firm focused on the orthopedic device market. Not only did Cari used to be on the Healthpoint payroll, but TRS is a Healthpoint limited partner (although no allegation has been made that TRS improperly committed to the fund).

Cari and the other attorney – Steven Loren – are cooperating with Fitzgerald in his efforts to convict Levine, and will plead guilty, according to Cari’s attorney.

*** Strong returns for the Massachusetts Pension Reserves Investment Management Board (MassPRIM), which returned 13.4% over the past fiscal year. Included in that is a whopping 26.3% for alternative investments, including venture capital and leveraged buyout funds. This bests recent alternative returns for both CalPERS and CalSTRS, which came in at a not-too-shabby 22.8% and 25%, respectively.

*** A few of you wrote in to ask how I could suggest that Parthenon Capital could ultimately post positive returns out of its $750 million second fund, despite completely writing off the approximately $160 million it spent on Atkins Nutritionals. I “must have failed math” as one reader put it. Leaving a side the fact that I did, almost, fail economic statistics my senior year as good ole’ Haverford College, my statement stands.

For some evidence, one need only take a look at publicly-available data from the University of Texas Investment Management Co. (UTIMCO). As of February 28, UTIMCO reports that the fund had an IRR of 21.38 percent. Now this obviously doesn’t take into account the entire Atkins write-off that occurred near the end of March, but should include the 50% carrying value haircut imposed at the end of December. We can get a clearer picture once UTIMCO releases updated info – figures through the end of May should come out in around two weeks, but expect Parthenon II to be a strong performer despite its dietary disaster. That doesn’t necessarily mean that it can raise $1 billion, but LPs have been known to forgive and forget without too much grousing.

    Top Three

 

Tengion Inc., a King of Prussia, Pa.-based regenerative medicine company founded by Scheer & Co., has raised $39 million in Series A funding. Participants included Oak Inv*stment Partners, Johnson & Johnson Development Corp., HealthCap and L Capital Partners. www.tengion.com

First Reserve Corp. has agreed to acquire Chart Industries Inc. (OTC BB: CIDI), a Garfield Heights, Ohio-based supplier of engineered products and systems serving a variety of low-temperature and cryogenic applications. The deal is valued at approximately $460 million, or $65.74 per share, minus Chart’s transaction expenses. It is expected to close by the end of October. www.firstreserve.com www.chart-ind.com

Peter Boni has agreed to join Safeguard Scientifics Inc. (NYSE: SFE) as president and CEO, effective September 1. He currently serves as an operating partner with Advent International, and as non-executive chairman of Intralinks Inc. (Nasdaq: INLX). Before that, he served as CEO of both Prime Response Inc. and Cayenne Software. As previously announced, current Safeguard president and CEO Anthony Craig will transition into a consulting role. www.safeguard.com

    VC Deals

SemEquip Inc., a North Billerica, Mass.-based developer of ion implantation systems and advanced materials for semiconductor manufacturing, has raised $26 million in Series F funding. LightSpeed Venture Partners led the deal, and was joined by Sierra Ventures and unnamed existing backers. www.semequip.com

Aureon Laboratories (f.k.a. Aureon Biosciences), a Yonkers, N.Y.-based provider of personalized predictive pathology, has raised $20 million in Series B funding. Pfizer was joined on the deal by return backers Atlas Venture and Sprout Group. A group of unnamed European firms with medical diagnostics expertise also participated. www.aureon.com

WideRay Corp., a San Francisco-based provider of solutions for wireless distribution of digital content and promotional content to mobile devices, has raised $10 million in Series C funding. Enterprise Partners Venture Capital led the deal, and was joined by return backer Sequoia Capital. www.wideray.com

IBalance Medical Inc., a Longmont, Colo.-based developer of axial knee realignment systems, has raised nearly $5 million in Series A funding from Sutter Hill Venture Partners and Skyline Ventures. www.ibalancemedical.com

Serus Corp., a Mountain View, Calif.-based provider of enterprise software to manage outsourced manufacturing operations, has raised $5.3 million in Series B funding. Diamondhead Ventures led the deal, and was joined by Kelly Porter (managing partner of ZAP Ventures). www.serus.com

    Buyout Deals

Golden Gate Capital has agreed to sell Itronix Corp. to General Dynamics Corp. (NYSE: GD) for an undisclosed amount. The deal is expected to close later this quarter. Itronix is a Spokane, Wash.-based provider of wireless, rugged mobile computing systems, and was acquired by Golden Gate in 2003 from bankrupt Acterna Corp. www.itronix.com

Clarion Capital Partners has bought a majority stake in Strategic Outsourcing Inc. from Regions Financial Corp. (NYSE: RF) for approximately $70 million. Guggenheim Corporate Funding led the senior note funding, while Wachovia Bank served as revolving agent. Strategic Outsourcing is a Charlotte, N.C.-based provider of HR outsourcing to small and mid-sized businesses. www.clarion-capital.com www.soi.net

The New York Mercantile Exchange confirmed that it has received takeover offers from private equity firms, and that its board expects to make a formal recommendation by the end of August. It adds that an IPO is still on the table. The offers are believed to include a $240 million bid for a 20% stake from General Atlantic, and a $200 million bid for a 20% stake from The Blackstone Group and Battery Ventures. www.nymex.com

General Motors Acceptance Corp. (GMAC), financial services unit of General Motors Corp., has agreed to sell a 60% stake of its commercial mortgage subsidiary to a private equity consortium that includes Kohlberg Kravis Roberts & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners. No financial terms were disclosed for the deal, which is expected to close sometime next quarter. www.gmac.com

Apax Partners has agreed to acquire a majority stake in Spanish baked goods company Panrico SA from the Costafreda Family, La Caixa and other minority shareholders. No financial terms were disclosed, but earlier press reports placed Apax’s bid at around 900 million euros. Leverage was provided by a syndicate of Goldman Sachs, ING, Caja Madrid, Royal Bank of Scotland and La Caixa. www.apax.com www.panrico.com

Sara Lee Corp. (NYSE: SLE) has narrowed the possible buyers for its direct-selling unit to Tupperware Corp. and an unnamed private equity firm, according to The Times of London. The deal is expected to set Sara Lee approximately $700 million, and is part of a larger divestiture strategy. www.saralee.com

    PE-Backed IPOs

Advanced Analogic Technologies Inc., a Sunnyvale, Calif.-based provider of power management semiconductors for mobile consumer electronic devices, priced 10.6 million common shares at $10 per share (above $8.50-$10 range), for an IPO take of approximately $160 million. It will trade on the Nasdaq under proposed ticker symbol AATI, while Morgan Stanley and Merrill Lynch served as lead underwriters for the offering. Advanced Analogic had raised VC funding from such firms as Battery Ventures, Sunsino Ventures, Maton Fund and Vision 2000 Venture Ltd. www.analogictech.com

Unica Corp., Waltham, Mass.-based provider of enterprise marketing management software, priced 4.8 million common shares at $10 per share (middle of revised $9-$11 range), for a total IPO take of approximately $48 million. It will trade on the Nasdaq under ticker symbol UNCA, while Deutsche Bank Securities served as lead underwriter. Unica had raised VC funding from firms like Summit Partners and JMI Equity. www.unicacorp.com

MWI Veterinary Supply Inc., a Meridian, Idaho-based distributor of animal health products, priced approximately 4.33 million common shares at $17 per share (above $14-$16 range), for a total IPO take of around $73.67 million. It will trade on the Nasdaq under ticker symbol MWIV, while Banc of America Securities served as the offering’s lead underwriter. MWI Veterinary was formed in June 2002, after private equity firm Bruckmann, Rosser, Sherrill & Co. bought out MWI Veterinary Supply Co. from Agri Beef Co. www.mwivet.com

Republic Companies Group Inc., a Wilmington, Del.-based personal and commercial property and casualty insurance provider, priced six million common shares at $14 per share (below $15-$17 range), for a total IPO take of approximately $84 million. It will trade on the Nasdaq under ticker symbol RUTX, while JPMorgan and Banc of America Securities served as lead underwriters for the offering. Private equity backers include Greenhill Capital Partners (46.7% pre-IPO stake), Brazos Private Equity (17.5%), Banc of America Capital Inv*stors (8.9%), 21st Century Group (7.6%), Norwest Equity Partners (5.8%) and Wand Partners. www.republink.com

Eschelon Telecom Inc., a Minneapolis-based provider of voice and data services and business telephone systems, has changed its proposed IPO terms. It originally planned to offer 4.68 million common shares at between $15 and $17 per share, but now plans to offer around 5.36 million common shares at between $13 and $15 per share. Eschelon hopes to trade on the Nasdaq under ticker symbol ESCH, with Lehman Brothers and Jefferies & Co. serving as lead underwriters. Shareholders include Bain Capital (40.72% pre-IPO position), Wind Point Partners (32.54%) and Stolberg Partners (15.30%). www.eschelon.com

Predix Pharmaceuticals Holdings Inc., a Lexington, Mass.-based drug company, has filed to raise $70 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol PRDX, while UBS Inv*stment Bank and Deutsche Bank Securities are serving as lead underwriters. The company raised over $100 million in VC funding from such firms as OrbiMed Advisors (23.5% pre-IPO stake), Yozma Group (12.1%), PA International (8.1%), S.R. One Ltd. (11.8%), Forward Ventures (11%), Boston Millennia Partners (10%), CMEA Ventures (9%) and Yamanouchi Venture Capital (7%). www.predixpharm.com

Amerisafe Inc., a DeRidder, La.-based provider of workers’ compensation insurance for small-to-mid-sized employers engaged in hazardous industries, has filed to raise $92 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol AMSF, with Friedman, Billings Ramsay serving as lead underwriter. Shareholders include Welsh Carson Anderson & Stowe, Abbott Capital, Sprout Group, Teachers Annuity Association of America, Northwestern Mutual Life Insurance Co. and Jackson National Life Insurance Co. www.amerisafe.com

Baidu.com Inc., a Beijing, China-based Chinese language Internet search engine provider, has raised its proposed IPO terms. It originally filed to price 3.7 million American depository shares at between $19 and $21 per ADS, but now plans to offer 4.04 million ADS at between $23 and $25 per ADS. Goldman Sachs (Asia) and CSFB are serving as lead underwriters, while significant shareholders include Draper Fisher Jurvetson (28.1% pre-IPO stake), Integrity Partners (11%), Peninsula Capital (10.1%) and IDG Technology Ventures (4.9%) and Google Inc. (2.6%). www.baidu.com

MathStar Inc., a Minnetonka, Minn.-based maker of silicon CMOS platform semiconductor chips, has filed for an IPO of four million common shares to be offered at between $6 and $8 per share. It plans to trade on the Nasdaq under ticker symbol FPOA, with Feltl & Co. serving as the sole book manager. The company has raised over $50 million in private funding from firms like BrightStone Capital Partners, although no institutions are listed as significant shareholders in the S-1 filing. www.mathstar.com

    PE-Backed M&A

Corbis Corp., a Seattle-based company controlled by Bill Gates, has acquired eMotion Inc., a San Francisco-based provider of hosted solutions for managing and distributing digital media assets and marketing content. No financial terms were disclosed. EMotion has raised over $70 million in VC funding since its 1996 inception, from firms like Constellation Ventures, Crossbow Ventures, VantagePoint Ventures, Wasserstein Ventures and Chartwell Management Co. It was advised on the deal by Pharus Advisors. www.corbis.com www.emotion.com

SumTotal Systems Inc. (Nasdaq: SUMT) has agreed to acquire Pathlore Software Inc., a fellow enterprise software company focused on the learning and business performance management market. The deal is valued at approximately $47 million, including $29 million in cash and four million shares of SumTotal common stock. It is expected to close within the next 90 days. Pathlore raised $10 million in 2001 from Seaport Capital. www.sumtotalsystems.com www.pathlore.com

Mind CTI Ltd. (Nasdaq: MNDO) has agreed to acquire Sentori Inc., a Silver Spring, Md.–based provider of customer care and billing solutions to wireless carriers and mobile virtual network operators. The deal is valued at $5.1 million in cash. Sentori has raised approximately $10 million in VC funding from firms like Mid-Atlantic Venture Funds, STI Ventures, Edison Venture Fund and WWC Capital Group. www.mindcti.com www.sentori.com

    Firm & Fund News

Mustang Ventures has closed its inaugural fund with $40 million in capital commitments, including $10 million from Trident Capital as part of a strategic partnership. Mustang is a Palo Alto, Calif.-based firm focused on tech and tech-enabled services companies that can leverage China’s lower-cost structure and/or end-market.

—————–
Correction: Emergency Medical Services Corp. is based in  Greenwood Village, Colo.

WEDNESDAY, AUGUST 3

 

Just Linking Around

A few links while recovering from driving my wife to the airport at 4:30 this morning…

*** Today’s Wall Street Journal (subscription required) has some discussion of the 51% SBIR grant rule (here’s a refresher), and actually finds a venture capitalist who doesn’t believe that the misguided restriction should be revoked. Seems like a bit of a reporting coup, until you realize that the VC in question runs a firm dedicated to homeland defense-related technology companies, and that the Pentagon and its related research entities don’t actually follow the 51% rule. Give me a similar quote from a biotech VC — one whose companies request SBIR grants from the NIH or NSF — and then I’ll care.

*** I agree with Matt Marshall that Qwest seems like the obvious answer to “What corporation just gave more cash to Infinera,” but worry that there is some other Colorado player I’m simply not thinking of. (scroll down)

*** PE Week talks to Phil Zimmermann, the software encryption veteran who has turned his sights to VoIP.

*** Buyouts Magazine looks at The New Grave Dancers.

    Top Three

 

QuinetiQ PLC, a UK-based defense research company backed by The Carlyle Group, has acquired Apogen Technologies Inc., a McLean, Va.-based provider of information technology to the U.S. federal government, for approximately $300 million. The selling party is Arlington Capital Partners, which formed Apogen in 2003 as an acquisition platform that ultimately included both ITS Services and Science & Engineering Associates Inc. The actual name “Apogen” was not used until mid-2004. www.apogen.com

Targa Resources Inc., a Houston, Texas–based midstream energy company formed in 2003 by company management and Warburg Pincus, has agreed to acquire the midstream natural gas business of Dynegy Inc. (NYSE: DYN) for $2.35 billion. The deal is expected to close in Q4 2005. www.targaresources.com www.dynegy.com

Rob Herb has joined BA Venture Partners as a managing director, focused on the semiconductor and components space He has spent more than 20 years with Advanced Micro Devices Inc. (NYSE: AMD), including the last four as executive vice president and chief marketing officer. www.bavp.com

    VC Deals

Intercytex Ltd., a UK-based cell therapy company focused on the wound-care and aesthetic medicine markets, has raised Gbp12 million in fourth-round funding. Return backers included Avlar BioVentures, Merlin Biosciences, 3i, Cambridge Gateway Partnership, NIF Ventures and Scottish Equity Partners. The company has raised around Gbp31 million in total VC funding since its 2000 inception. www.intercytex.com

Infinera Inc., a Sunnyvale, Calif.-based provider of digital optical networking systems, has raised $10.3 million in Series F funding. No inv*stor information has been disclosed, except that $10 million of the deal came from a new corporate backer based in Colorado. Infinera has raised around $215 million in total VC funding since its inception, from such firms as Kleiner Perkins Caufield & Byers, Benchmark Capital, Applied Materials Ventures, Cypress Semiconductor, Mobius Venture Capital, Sprout Group, Venrock Associates, RWI Group, Worldview Technology Partners and Sutter Hill Ventures. www.infinera.com

Tippit Inc., a Palo Alto, Calif.-based Internet marketing startup, has raised over $3 million in Series A funding, according to a regulatory filing. Trinity Ventures led the deal.

ClassLink Technologies Inc., a Union City, N.J.-based provider of instructional platforms for K-12 classrooms, has raised $3 million in a Series A funding round led by Ascend Venture Group. www.classlink2000.com

Brilliant Shopper, a Fremont, Calif.-based online comparison shopping startup, has received an undisclosed amount of VC funding from SDL Ventures, according to the San Jose Mercury News.

    Buyout Deals

The Ares Corporate Opportunities Fund (Ares Management) and Teachers’ Private Capital (Ontario Teachers’ Pension Plan) has agreed to acquire National Bedding Co., the Itasca, Ill.–based maker of Serta mattresses. No financial terms were disclosed, except that company founders Burt Kaplan and Richard Yulman will retain equity positions and board seats. www.serta.com

Gryphon Inv*stors and Marcy Consulting Group have teamed up to acquire St. Louis-based physician recruiting firms Linde Healthcare and Kendall & Davis. No financial terms were disclosed for the acquisitions, which are designed to complement Gryphon/Marcy’s September 2004 acquisition of Nursefinders Inc., in partnership with Kaiser Permanente. www.gryphon-inv.com

Apax Partners has completed its Gbp1.05 billion acquisition of UK-based currency exchange company Travelex PLC. www.apax.com www.travelex.com

BA Capital Partners Europe has agreed to acquire a majority stake in Sweden-based Gas Control Equipment Group from Triton.

    PE-Backed IPOs

Emergency Medical Services Corp., a Greenwood, Colo.-based provider of ambulance and outsourced emergency department staffing services, has filed to raise $172.5 million via an IPO of common stock. The company plans to trade on the NYSE under ticker symbol EMS, with Banc of America Securities and JPMorgan serving as lead underwriters. The company is controlled by Onex Partners, the private equity arm of Onex Corp. www.emcare.com

Hoku Scientific Inc., a Honolulu, Hawaii-based developer of fuel cell technologies, has cut its proposed IPO offering price range from $11-$13 per share to $8-$9 per share. The company still plans to offer 4.2 million shares, with Piper Jaffray serving as lead underwriter. Significant shareholders include Lava Ventures and the Hawaiian Electric Co. www.hokuscientific.com

    PE-Backed M&A

IBM (NYSE: IBM) has agreed to acquire DWL Inc., an Atlanta-based provider of customer data integration middleware. DWL has raised over $60 million in VC funding since its 1996 inception, from firms like Insight Venture Partners, Stone Point Capital (f.k.a. MMC Capital) and VenGrowth. www.ibm.com www.dwl.com

Motricity Inc., a Durham, N.C.–based provider of mobile content and solutions, has acquired mobile infrastructure hosting company M7 Networks Inc. of La Jolla, California. No financial terms were disclosed. Motricity has raised nearly $60 million in VC funding from firms like the Wakefield Group, TriState Inv*stment Group, Noro-Moseley Partners, New Enterprise Associates, Intel Capital, Technology Crossover Ventures and Massey Burch Capital Corp. M7 has raised around $27 million from Enterprise Partners, Inv*stor AB, Qualcomm Ventures and Ideaedge Ventures. www.motricity.com www.m7networks.com

MCI Inc. (Nasdaq: MCIP) has agreed to acquire Totality Corp., a San Francisco-based provider of remote managed services for business-critical applications and infrastructure. No financial terms were disclosed for the deal, which is expected to close within the next 45 days. Totality has raised over $120 million in VC funding from such firms as Greylock, Lightspeed Venture Partners, Spectrum Equity Inv*stors, Rare Ventures, Azure Capital Partners, CSFB Private Equity, Boston Millennia Partners, BlueVector, Partech International, Putnam Management and Wheatley Partners. www.mci.com www.totality.com

4GL School Solutions Inc., a Towson, Md.-based provider of management solutions for special populations in K-12 education, has agreed to acquire Tranquility Solutions Inc., a Plymouth, Ind.-based provider of software-based process management tools for special education practitioners. No financial terms were disclosed for the deal, which is expected to close within the next 30 days. 4GL has raised around $20 million in VC funding from Warburg Pincus and Novak Biddle Venture Partners. www.4glschools.com www.tranquilitysolutions.com

    Firm & Fund News

CHAMP, an Australia-based joint venture of U.S.-based buyout firm Castle Harlan and Australia’s Mezzanine Investments Pty Ltd., has closed its second fund with Au$950 million of capital commitments. www.champmbo.com

    Human Resources

Steven Gillis, co-founder of Immunex Corp. and Corixa Corp., has joined ARCH Venture Partners as a Seattle-based venture partner focused on biotech companies. www.archventure.com

Josh Cleveland has joined Liquid Realty Partners as director of business development. He previously was a vice president with Switzerland-based Capital Dynamics, where he was responsible for new business development in North America, and positioning the firm amongst institutional inv*stors in the U.S. and Canadian private equity market. www.liquidrealty.com

Dana Mead, a partner with Kleiner Perkins Caufield & Byers, has been elected to the board of California Healthcare Institute, a nonprofit public policy research organization representing California academic institutions, biotech, medical device and pharmaceutical firms. www.chi.org

Dennis Langer has joined Philadelphia-based Phoenix IP Ventures as a managing director. He most recently served as president of North America for India-based drug company Dr. Reddy’s Laboratories. www.phoenixipv.com

Steve Aust has joined McLean, Va.-based Galen Capital Group as a managing director working out of the firm’s Newport Beach, Calif. office. www.galencapitalgroup.com

—————–
Correction: Matthew Cowan, who is forming a late-stage VC firm with former MDV partner Rob Chaplinsky, most recently worked at BayStar Capital. His stint with Bowman Capital came earlier.

TUESDAY, AUGUST 2

Saving Summitfrom Itself

I’m not sure who is in charge of the petty cash over at Summit Partners, but he might want to pony up for a gift basket. Address it to Parthenon Capital over on State Street, and fill it with high-carb goodies like muffins and regular Coke. Maybe also include a bullet, with an attached note reading: “Thanks for helping us dodge this.

By now, most of you probably have read about the Nutritional Nightmare (or Low-Carb Landmine, as reader Andy suggests), with Atkins Nutritionals Inc. filing for bankruptcy. The majority of stories detail how the company was bought for a mint in late 2003 by Parthenon Capital and Goldman Sachs Capital Partners, skyrocketed in paper value and then crashed due to the unholy trinity of competition, poor business focus and the realization of certain folks that sandwiches taste best with bread. All true. Some even have suggested that the buyout was valued at between $500 million and $800 million, while multiple LP sources tell me that Parthenon actually sank around 20% of its $750 million second fund into the deal (Parthenon declined to comment on the Atkins price, perhaps because it’s still in market with a $1 billion-targeted fund).

The part of this that that continues to interest me, however, isn’t simply that Parthenon over-committed to a company whose business model relied on a passing fad. It’s that Parthenon paid $20 million for the privilege of doing so (as first reported in this space last year):

Parthenon Capital was co-founded in 1998 by Ernest Jacquet, who previously had been a general partner with Summit Partners. The idea was to back small under-performing companies (Jacquet correctly predicted the bubble bust), which would not conflict with Summit’s focus on larger and more profitable businesses. Moreover, Jacquet still had legal ties to Summit from his original partnership agreement, which required him to inform Summit if Parthenon was looking to buy equity in any company already within Summit’s expansive leads database or related to a Summit portfolio company.

In early 2000, however, Parthenon seems to have violated its end of the bargain, by closing a $300 million public-to-private deal for onetime Summit portfolio company Wilmar Industries Inc. To make things right, Parthenon agreed to a one-way deal-sharing and co-investment arrangement whereby Summit could participate on Parthenon deals that met certain size requirements. But for the next several years, nothing happened. Some blame Summit and some blame Parthenon, but the net result was that no co-investments occurred.

Then came Atkins, which Summit was not invited to participate in, even though it far exceeded the aforementioned size requirements. Remember, this was once a very hot deal, and Summit was steamed that it wasn’t allowed in on the action. Following several contentious discussions between the two firms, Parthenon agreed to pay Summit $20 million in order to make the whole thing – including the deal-sharing arrangement – go away. Simply an amazing penalty to pay for a deal that ultimately would be written down to zero.

Some have suggested that Atkins has caused Parthenon fund-raising troubles, given that the firm originally expected to hold a first close by the end of 2004 (and still hasn’t done so). I’m told, however, that the firm’s second fund has benefited greatly from some recent exits, and might still post a positive return despite the nut wasted on Atkins. Expect renewed fund-raising vigor now that Atkins is disposed of…

*** Last Friday’s Wire mentioned that Rob Chaplinsky was leaving his general partner post with Mohr, Davidow Ventures. Rob remains mum on his future plans, but sources say that he has formed a new, late-stage venture capital firm called Bridgescale Partners, which is marketing its debut fund with a $150 million target capitalization. Rob’s fellow general partner is Matthew Cowan, formerly of Bowman Capital. More on this in Monday’s print edition of PE Week.

*** Speaking of personnel moves, Loring Knoblauch is not going to be a general partner on Bay Partners’ next fund, which currently is in market. He was not listed on the SEC filing, was just removed from the website and is planning to move to Chicago.

    Top Three

 

Innovative Spinal Technologies Inc., a med-tech company focused on minimally-invasive procedures for spinal disorders, has raised $39 million in Series B funding. Participants included OrbiMed Advisors, MPM Capital and JPMorgan Partners co-led the deal. In other IST news, the company is moving its headquarters from Plano, Texas to Boston. www.istspine.com

WebEx Communications Inc. (Nasdaq: WEBX) has agreed to acquire Intranets.com, a Burlington, Mass.-based provider of asynchronous collaboration applications for small and mid-sized businesses. The deal is valued at approximately $45 million in cash. Intranets.com has raised approximately $38 million in VC funding since its 1998 inception, from firms like MDT Advisors, Portage Venture Partners, FBR Venture Capital Managers, JPMorgan Partners, Lazard Freres and Idealab. www.webex.com www.intranets.com

Mission Ventures has closed its third fund with $210 million in capital commitments from groups like HarbourVest Partners. The San Diego-based firm plans to continue inv*sting in early-stage IT and tech-driven services companies in Southern California. www.missionventures.com

    VC Deals

Visiprise Inc., an Alpharetta, Ga.-based developer of manufacturing extraction systems, has raised $16 million in its second round of funding since a 2003 recap. Inv*stor Growth Capital led the deal, and was joined by RRE Ventures, Morgan Stanley Venture Partners, Canaan Partners and Wheatley Partners. www.visiprise.com

Evolvent Technologies Inc., a Falls Church, Va.-based provider of federal sector information assurance and technology services, has raised $4.5 million in a private funding round led by Evergreen Capital. www.evolvent.com

TrueDemand Software Inc., a Los Gatos, Calif.-based RFID startup, has raised $6 million in Series A funding from Mayfield and Bay Partners. www.truedemand.com

Silver Creek Systems Inc., a Louisville, Colo.-based provider of enterprise data integration, compatibility and usability solutions, has raised $6 million in second-round funding. KB Partners led the deal, and was joined by return backers Palomar Ventures, BV Group and Cornerstone Ventures. www.silvercreeksystems.com

    Buyout Deals

JPMorgan Partners has led a buyout of Hanley Wood Inc., a Washington, D.C.–based B2B media company serving the residential and commercial construction markets, from Veronis Suhler Stevenson. The buying group also includes Wasserstein & Co. and current and former Hanley Wood management. No financial terms were disclosed, although a press release called it the second-largest B2B media acquisition in U.S. history, trailing only the 2000 deal for Advanstar. www.hanley-wood.com

Oaktree Capital Management has agreed to acquire a 33% interest in Cannery Casino Resorts LLC, the Las Vegas–based owner and operator of the Cannery Casino & Hotel and the Rampart Casino at the Resort at Summerlin. Millennium Gaming Inc. will own the remaining 67 percent following the transaction, which is subject to Nevada Gaming Authority approval. Cannery also has engaged Banc of America Securities to raise up to $300 million in a new senior secured credit facility. www.cannerycasonos.com

Advent International has acquired a majority stake in Synventive Molding Solutions, a Peabody, Mass.–based designer and manufacturer of hot runner systems. No financial terms were disclosed. www.adventinternational.com www.synventive.com

Hampshire Equity Partners has acquired Fairchild Industrial Products Co., a Winston-Salem, N.C.-based maker of industrial control products. No equity terms were disclosed, while Patriot Capital Funding (Nasdaq: PCAP) provided a $20.2 million financing that consisted of a senior secured revolving credit facility, a senior secured term loan-A and term loan-B, and subordinated notes. www.hampep.com www.fairchildproducts.com

BC Partners has agreed to sell German cable company Tele Columbus GmbH to its rival Iesy for an undisclosed amount of Iesy stock, according to Financial Times Deutschland. www.telecolumbus.de

HIG Capital has agreed to sell Washington, N.C.-based Specialized Vehicles Corp. to Vision Technologies Systems Inc., an Alexandria, Va.-based subsidiary of Singapore Technologies, according to The Deal. The transaction is valued at $52.5 million. www.higcapital.com

Montagu Private Equity has dropped out of the auction for UK child car-seat maker Britax Childcare, according to Dow Jones. The deal is expected to be valued at between Gbp200 million and Gbp250 million, with ABN Amro Capital, 3i Group and PPM Capital all still involved. Royal Bank of Scotland is running the sale. www.britax.co.uk

    PE-Backed IPOs

Shine Media Acquisition Corp., a New York-based blank check company formed to acquire media and advertising businesses in China, has filed to raise $60 million via an IPO. The company plans to trade on the OTC Bulletin Board, with ThinkEquity Partners serving as sole book manager. Among the significant shareholders is director Richard Chang, managing director of SuttonBrook Capital Management who previously has held partnership roles with Primarius Capital, Spinnaker Crossover Fund and Bowman Capital Partners.

    PE-Backed M&A

Oracle Corp. (Nasdaq: ORCL) has agreed to acquire a 61% position in I-Flex Solutions Ltd., an India-based maker of banking software. The deal includes the purchase of Citigroup Venture Capital’s 40% stake, plus an additional 20% from public shareholders. www.oracle.com www.iflexsolutions.com

Vishay International Inc. (NYSE: VSH) has agreed to acquire the assets of CyOptics Israel Ltd., the Israeli subsidiary of Lehigh, Pa.–based CyOptics Inc. No pricing terms were disclosed. CyOptics has raised over $100 million in VC funding from firms like Sprout Group, JVP, TowersBrook Capital Partners, Vitesse Semiconductor Corp., Eurofund, Corning Innovation Ventures and Innovacom. www.vishay.com www.cyoptics.com

Bushnell Performance Optics Inc., an Overland Park, Kansas-based sports optics company, has agreed to acquire Michaels of Oregon Co., a maker of outdoor, hunting and shooting accessories. No financial terms were disclosed for the deal, which is expected to close later this month. Bushnell is backed by private equity firm Wind Point Partners. www.bushnellperformanceoptics.com www.michaelsoforegon.com

    Firm & Fund News

The Alaska Industrial Development and Export Authority is considering a $100 million commitment to a $200 million-targeted private equity fund being formed by the Industrial Bank of Taiwan and TECO Group, which would back industrial projects in Asian countries like China and India.

MBF Healthcare Partners of Coral Gables, Fla. has launched as a $200 million private equity firm focused on healthcare service companies throughout the United States. Veteran healthcare executive Mike Fernandez will run the firm, and be joined by: Marcio Cabrera, formerly of Deloitte & Touche; Jorge Rico, a recent MBA recipient; and Oliver Moses, previously with Merrill Lynch & Co., who will run the firm’s New York branch office.

    Human Resources

Carmen Chang has joined Wilson Sonsini Goodrich & Rosati to lead its China practice. This is her second stint with Wilson Sonsini, where she worked as a partner before leaving to joined the Menlo Park, Calif. office of Shearman & Sterling. In related news, Wilson Sonsini plans to immediately file for a license with China’s Ministry of Justice to open an office in Shanghai. www.wsgr.com

Joshua Vogelhut has joined Atlantic-Pacific Capital as an associate focused on direct placements and third-party fund-raising. He previously worked with Bain & Co. www.apcap.com

Hal Gerber has joined the merchant banking group of San Francisco-based Burrill & Co. as a managing director. He previously served as a managing director and head of pharmaceutical and biotech I-banking for Wells Fargo Securities. www.burrillandco.com

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