PE Week Wire: Friday, June 20, 2008

The Canadian Supreme Court has said that it will hand down its BCE buyout ruling today at 4:30pm. My initial reaction was selfish pique about how I can’t start my weekend early. That was soon replaced by intrigue.

There is conventional wisdom that the Canadian Supremes will overturn a lower-court ruling, which found that BCE has the same obligations to its bondholders as it does to its shareholders (yes, I’m oversimplifying it). In fact, traders have basically been baking that assumption into a share price – while leaving lots of cushion for what could still be a bruising battle between the buyout sponsors and lenders. But, if that cookie is baked, why wait to announce the ruling until the trading week is over? And if the answer is so obvious, why didn’t the judges simply issue a ruling immediately following oral arguments Tuesday?

It just makes me a bit uncomfortable. Kind of like when you take a multiple choice test, and each of the first five answers are “C.” Doesn’t make the answers wrong, but does make you begin to doubt yourself…

It’s also worth noting that if BCE bondholders lose today, they may still try to block the buyout via a different legal tact.

The Financial Post writes: “Sources say [bondholders] are set to launch a second court challenge over the structure of the deal which gives [Ontario] Teachers control even though pension rules cap their voting control at 30%. The Canadian Radio-television and Telecommunications Commission left the deal open to the legal challenge when it granted federal approval to the deal in March.”

If such a challenge were to succeed, it could cripple the buyout activities of Canadian pension systems, which would probably lead to an emergency rewrite of national pension law.

*** Yesterday there was a panel discussion about the impact of noncompete agreements in Massachusetts, where they are taken particularly seriously. It was supposed to be a pro/con conversation, rather than a bunch of VCs bitching about how hard it is to pull talent out of EMC, Boston Scientific, etc. Unfortunately, the pro side bailed out at the last minute.

That rep was Melanie Haratunian, vice president and general counsel for Akamai. According to Scott Kirsner, she pulled out because Akamai is in the process of enforcing a noncompete with an ex-employee, and was worried that the individual’s attorney might attend and take notes. If true, it’s pathetic. If you believe in the legal and/or moral validity of your argument, then who cares who hears it? Looks like conviction without courage.

*** You are simply the best readers a guy could have. When I need lawn-care tips, you’re there. When I need to score football tickets in New York, you’re there. And now when I ask for help planning an upcoming trip to Peru, you respond by the dozens. Just fantastic. Huge thanks to those who offered advice. We’re going to go in May – yeah, a long way off — so that we can plan properly and get passes for the Inca Trail. Your suggestions are really informing our choices. Much thanks, and have a great weekend…

Top Three

Kosmos Energy, an oil exploration and production company focused on West Africa, has secured a $500 million equity line co-led by Warburg Pincus and The Blackstone Group. Kosmos had previously raised $300 million from the firms and company management.

UBS is suing German motorway service operator Tank & Rast, which is owned by Terra Firma Capital Partners and Deutsche Bank. UBS had helped finance Tank & Rast’s leveraged buyout last fall, but claims that it was prevented from later selling that debt to other institutions.

Matt Cohler has agreed to join Benchmark Capital as a general partner this fall. He has spent the past three years with Facebook, most recently as vice president of product management.

VC Deals

Optaros Inc., a Boston-based provider of enterprise consulting and systems integration services, has raised $12 million in Series C funding, according to a regulatory filing. 406 Ventures was joined by return backers Globespan Capital Partners, Charles River Ventures and General Catalyst Partners. The company had previously raised $19.5 million.

Hangar Networks Inc., a New York-based provider of advertising solutions via dry cleaners and patented “EcoHangers,” has raised $10 million in Series B funding. ABS Ventures led the round, and was joined by return backers Sigma Partners and Kodiak Venture Partners.

Bazaarvoice, an Austin, Texas-based provider of hosted social commerce applications, has raised $7.1 million in Series C funding. Return backers include Austin Ventures, Battery Ventures, and First Round Capital.

TextDigger, a Morgan Hill, Calif.-based semantic search startup, has raised $3.8 million in first-round funding. True Ventures led the round, and was joined by seed backers Exis Trust and CNET. VentureBeat first reported the news.

Sciformix Corp., a Westborough, Mass.-based provider of knowledge process outsourcing services for the life sciences market, has raised $3.3 million in Series A funding. Flybridge Capital Partners led the round, with partner Chip Hazard taking a board seat. R, a New York-based provider of health-related online search services, has raised around $2.3 million in Series A funding led by ETF Venture Fund, according to a regulatory filing.

Digital Forensics Professionals Inc., a Tulsa, Okla.-based provider of computer investigative services, has raised $1 million from Mimosa Tree Capital Partners.

SolFocus Inc., a Palo Alto, Calif.-based developer of solar concentrator photovoltaic systems, is raising between $60 million and $80 million in Series C funding, according to VentureWire. The company has already raised around $90 million in total VC funding, including for its European subsidiary.

Buyout Deals

3i has acquired a 49% stake in Italian leather accessories maker Antichi Pellettieri SpA, for €118 million. Antichi Pellettieri is a division of the Mariella Burani Fashion Group.

Bain Capital plans to launch a $445 million tender offer for D&M Holdings Inc., the Japanese maker of Denon audio equipment, from Ripplewood Holdings and its publicly-traded affiliate.

BlackHawk Capital Management has agreed to buy Teton Gravity Research, a Jackson Hole, Wyo.-based producer of adrenaline sports” feature films and television programming. No financial terms were disclosed.

Blue Sage Capital has sponsored a recapitalization of MultiCam Inc., a Dallas-based manufacturer of CNC cutting machines. Blue Sage invested $8.725 million alongside the company’s founder and senior management, while Fifth Third Bank provided an undisclosed amount of senior note financing.

CHC Helicopter Corp. (NYSE: FLI) said that it does not expect its C$3.7 billion buyout by First Reserve Corp. to close by the proposed June 30 date. The company, which provides helicopter services to the global offshore oil and gas industry, said yesterday that it is still awaiting certain regulatory approvals in both Canada and Europe. No revised date had been disclosed.

Orica Ltd. (AX: ORI) has suspended the auction for chemical trading subsidiary Chemnet, after bids came in lower than expected. Goldman Sachs was running the process, with CVC Capital Partners and KKR believed to be among the interested suitors.

PE-Backed M&A

Boundless Networks Inc., an Austin, Texas-based promotional merchandising company, has acquired Phoenix-based Theresa Roberts Inc. No financial terms were disclosed. Boundless has raised around $8.5 million in VC funding from firms like Austin Ventures and Silverton.

Cardinal Gas Storage Partners LLC has acquired two natural gas storage development projects from a natural gas pipeline subsidiary of CenterPoint Energy Inc. The projects are located in Northern Louisiana, and include a salt dome storage development project and a depleted reservoir storage development project. No financial terms were disclosed. Cardinal Gas Storage was formed last month as a 50/50 joint venture by Energy Capital Partners and Martin Resource Management Corp.

Firms & Funds

Kohlberg Kravis Roberts & Co. has made a number of internal changes, including the creation of a chief administrative officer position. It will be filled by existing KKR pro Todd Fisher. The firm also has absorbed its entire KFL credit business, shifting from a 65% owned entity to a wholly owned entity.

DFJ InCube Ventures is targeting $125 million for its debut fund, according to a regulatory filing. The Menlo Park, Calif.-based firm focuses on early-stage medical technology opportunities, and is led by managing director Mir Imran. It already has received a $10 million LP commitment from Medtronic.

Great Hill Equity Partners is raising up to $1.25 billion for its fourth fund, according to a regulatory filing. The Boston-based firm already has secured around $830 million in commitments. Its third fund closed in 2006 with $750 million. www.greathillpartners.

New Enterprise Associates is pre-marketing its thirteenth fund, according to VentureWire. The Baltimore-based venture firm is expected to begin official fundraising in the second half of this year, with a target of between $2.5 billion and $3 billion. It raised $2.5 billion for its twelfth fund in 2006.

Human Resources

Kim Fennebresque is stepping down as non-executive chairman and board member of the Cowen Group Inc. (Nasdaq: COWN), effective July 15. He will be succeeded as non-executive chairman by John Toffolon.

Jonathan Russell, a managing partner with 3i, has been elected chairman of the European Private Equity and Venture Capital Association (EVCA). He succeeds Helmut Schüsler, chairman of TVM Capital.

Mark Collar has joined Triathlon Medical Ventures as a venture partner. He had retired last year as president of Procter & Gamble’s global pharma and personal health division.

Michael Kelly has joined the board of advisors at Veronis Suhler Stevenson. He most recently served as president of AOL Media Networks.

Olivier Leclerc has been named CEO of SGAM Asset Management, a subsidiary of Societe Generale Asset Management. He originally joined SGAM in January 2006 as head of finance and operations, later becoming chairman and CEO of SGAM Banque.

David Hellier has joined Bertram Capital as head of national business development. He previously was president and CEO of The Gemisis Corp., a developer of diamond growth technology. He also has held senior management positions at and Iomega.