PE Week Wire — Friday, March 18

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Not too much going on this morning, so just a few quick notes to kick off the weekend (I couldn’t even come up with a column title):

** You may have noticed that some press reports are still valuing the Toys “R” Us buyout at $5.75 billion, instead of at $6.6 billion. The confusion comes from the fact that the company is selling all 215 million outstanding common shares at $26.75 per share, which comes out to just over $5.75 billion. What that figure doesn’t include, however, are options, equity security units and other goodies that bring the total cash purchase price to $6.6 billion. Sorry for not explaining this yesterday.

**I expanded yesterday’s column on biotech IPOs into a print piece for next Monday’s PE Week, which means that I did a bit more math. Among my findings: 46 VC-backed life sciences IPOs went public on U.S. exchanges in 2004, with 24 trading above their offering price as of market close this past Wednesday (while another was trading even). When all 46 are taken into account, the non-weighted average aftermarket performance is +6.33%. As of today, there are 19 such companies sitting in registration. Anyway, a response to that column (and some additional analysis) can be found on BusinessWeek‘s Deal Flow blog.

**Speaking of blogs, how come all the VC-authored ones seem to be from tech-focused inv*stors? Is there a biotech-focused VC blog? If so, please provide directions.

**I somehow forgot to mention this: PE Week reported a few weeks ago that Walden International has decided to inv*st exclusively in semiconductor deal. More on this also can be found in an extensive Q&A with Walden chief Lip-Bu Tan in the current issue of Venture Capital Journal.

**Finally, the first day of NCAA Tourney play is over, which means that we have our first leader. Congratulations (for now) to Hunter McCrossin of the Duke Management Co., who correctly picked 15 of the 16 games. Which one did he miss? Utah over UTEP.

Clayton, Dubilier & Rice, Eurazeo and Merrill Lynch Global Private Equity have completed their 3.7 billion euros acquisition of a 98.5% stake in Rexel SA, a France-based wholesale distributor of electric products. The buyers say that the deal is the largest public-to-private transaction ever completed in Europe.

JPMorgan Partners has sold Grupo Comercial e Industrial Marzam SA de CV to a group of private Mexican buyers led by Joseph Sitt. No financial terms were disclosed. Grupo Marzam is a Mexico City-based wholesale distributor of pharmaceutical products in Mexico, and was acquired by JPMorgan Partners in early 2002.

SpinalMotion Inc., a Mountain View, Calif.-based developer of artificial spinal disks, has raised $20.11 million in Series B funding, according to a regulatory filing. Participants included Three Arch Partners and Thomas Weisel Healthcare Venture Partners.

OuterBay Technologies Inc., a Cupertino, Calif.-based provider of information lifecycle management solutions for applications and databases, announced that it has raised $12 million in Series C funding (deal actually closed last December). Focus Ventures led the round with a $4.2 million infusion, and was joined by return backers BA Venture Partners, LeapFrog Ventures, Mayfield and Redpoint Ventures. The company has raised $40 million in total VC funding since its 1999 inception, including an $8 million Series B deal in 2003 at a post-money valuation of approximately $50 million., a Chinese WAP portal operator, has received an undisclosed amount of venture funding from IDG Ventures, according to Chinese news reports.

Transparency Software Inc., a Menlo Park, Calif.-based provider of database monitoring solutions, has raised $6 million in first-round funding from Pitango Venture Capital and Lightspeed Venture Partners. The company maintains an R&D facility in Israel.

Thoma Cressey Equity Partners and Trident Capital are sponsoring a management buyout of Datatel Inc., a Fairfax, Va.-based provider of enterprise information management solutions for higher education institutions. No financial terms were disclosed.

Whitney & Co. and Clearview Capital have agreed to sell Compression Polymers Holdings LLC to AEA Inv*stors Inc. No financial terms were disclosed. Compression Polymers is a Moosic, Pa.-based maker of engineered extruded plastic sheet products, used primarily as replacements for wood and metal.

PAI Partners has agreed to sell French pasta and sauce maker Panzani to Spanish food company Ebro Puleva for nearly 650 million euros.

The Carlyle Group is part of a consortium that may be bidding on a 40% stake in Taiwan-based Chang Hwa Commercial Bank Ltd., according to The Wall Street Journal. The group also is reported to include Lone Star Funds and ING Group, while a competing offer could come from either Shinsei Bank Ltd. or Cerbeus Capital Management. Chang Hwa has a market capitalization of approximately $3.3 billion, and would be the first Taiwanese bank controlled by foreigners.

Hicks, Muse, Tate & Furst has recouped 80% of its inv*stment in Greeley, Colo.-based meat processor Swift Foods, via a $136 million dividend, according to PrivateEquityOnline. A second dividend worth $8 million in expected to follow.

FreightCar America Inc., a Chicago-based maker of railroad freight cars, has set its proposed IPO terms to six million common shares being offered at between $16 and $18 per share, according to Reuters. The company traces its roots back to 1901, and was owned by Bethlehem Steep Corp. from 1923 to 1991. It then was purchased by Johnstown America Industries (now known as TTII), and resold in June 1999 to an investor group that included company management, Trimaran Capital Partners and John Hancock Life Insurance Co.

Alphyra Group, an Ireland-based, has acquired UK electronic payment processor PostTS for 85 million euros. Alphyra is controlled by Benchmark Capital Europe.

Internet Commerce Corp. (Nasdaq: ICCA) has acquired the managed EC business of Inovis USA Inc., an Alpharetta, Ga.-based B2B services provider controlled by Golden Gate Capital and Cerberus Capital Management. No deal terms were disclosed.

Ewing Bemiss & Co., a Richmond, Va.-based I-bank focused on the middle-markets, has promoted both Keith Mumford and James McGrath to the position of vice president. Mumford specializes in private placement and M&A services, while McGrath specializes in private placement and M&A services to companies in the business and technology services

The California Public Employees’ Retirement System (CalPERS) elected Charles Valdes as chair of its inv*stment committee, and Geoge Diehr as vice chair. Valdes has been a CalPERS board member since 1984, and is an attorney with the California Department of Transportation. Diher joined the board in 2003, and is a professor of management sciences at Cal State San Marcos.

Celsius Capital is raising its inaugural fund with a $150 million target, according to this past Monday’s edition of PE Week. The Palo Alto, Calif.-based firm recently was founded by Bill Burnham (formerly a managing director with Mobius Venture Capital) and Carlos Bhola (former president of broadband phone company Vonage). It hopes to close the fund by late July.

Village Ventures is marketing its second fund with a $125 million target, according to this past Monday’s edition of PE Week.

Thursday, March 17

What’s So Bad About Biotech IPOs?

Another series of quick notes, before settling in for an afternoon of watching NCAA tourney games work:

TargaCept Inc. pulled its proposed IPO yesterday, citing “difficult market conditions that exist in the life science industry.” For those of you who generally don’t read such documents, the decision to be more descriptive than just “market conditions” is fairly unusual, although regular readers of this space know that there has been a bubbling debate about the life sciences IPO space (Is a sub-$75 million IPO worthwhile given Sarbanes-Oxley costs of $1 million to $2 million per year? Are public-market life sciences valuations still preferable to private-market life sciences valuations? Etc.), with BusinessWeek‘s Sarah Lacy pursuing the topic with particular vigor and pessimism.

In order to get a bit more insight, I spoke this morning with Alan Musso, vice president and chief financial officer of TargaCept. It might just be me, but he seemed kind of pleased to take a press call (quiet periods can be tough for folks who like to promote their company). Anyway, I asked if he could pinpoint the “difficult market conditions that exist in the life science industry.” He responded by saying that most recent biotech IPOs priced below their offering range and, more importantly from an institutional buyer’s perspective, they have not performed well in the aftermarket. For what it’s worth, here’s the VC-backed batch from 2005, along with their offering price, yesterday’s closing price and the percentage difference:

·          Viacell; $7; $8.43; 20.42%

·          Favrille; $7; $6; -14.29%

·          Icagen; $8; $7.15; -10.62%

·          Threshhold Pharmaceuticals; $7; $6.06; -13.43%

·          Aspreva Pharmaceuticals; $11; $12.05; 9.55%

The average aftermarket performance for VC-backed life sciences IPOs in 2005, therefore, is -1.67 percent. This obviously isn’t good, but actually is better than is the overall Nasdaq performance in 2005 (-7.34%), and just nominally worse than is the average Dow performance in 2005 (-1.39%). In other words, if institutional buyers are being scared off by aftermarket performance, then they are using crystal balls, because the historical evidence indicates that such companies have been outperforming the index upon which most of them trade. No conclusion here, just an observation. As a quick addendum, Musso says that his company had $50 million in the bank as of year-end 2004, and was not yet planning to raise another round of venture capital funding.

** It seems that all the existing March Madness groups are full, so I’ve created one more for procrastinators: Group ID: 110333 Password: capital. Check Monday’s Wire for entry info, and make sure to send me your team name.

** Testa, Hurwitz & Thibeault has issued its legal response to the eight former partners who filed an involuntary bankruptcy petition against their former firm. Not all that interesting a read, except for the fact that THT has paid off all obligations to its landlord (a.k.a. its biggest creditor). A judge is expected to hear the petition on Monday morning (or at least I hope it’s in the morning, because I do not want to wait around all day).

** Finally, a sad note as former Bay Area venture capitalist David Hurley passed away Saturday from cancer at the age of 69. He is survived by wife Debra, four sons, one daughter and three grandchildren. A memorial service is planned for today at 10:30am at St. Hilary’s Church in Tiburon, Calif.

TorreyPines Therapeutics Inc. (f.k.a. Neurogenetics Inc.), a La Jolla, Calif.-based small molecule drug company focused on central nervous system disorders like migraine headaches and Alzheimer’s disease, has raised $34.8 million in Series C funding. Johnson & Johnson Development Corp. and return backer Alta Partners co-led the round, and were joined by fellow NIF Ventures, Sorrento Ventures, GIMV, Advent International, Novartis Venture Fund and S.R. One. The company has raised over $65 million in total VC funding since its 2000 inception.

Toys ‘R’ Us reportedly has accepted a $5.7 billion buyout offer from consortium that includes Kohlberg Kravis Roberts & Co., Bain Capital and Vornado Realty Trust. A losing bid had been submitted by Cerberus, Goldman Sachs and Kimco Realty Trust

PanAmSat Holding Corp., a Wilton, Conn.-based provider of satellite communications services, priced 50 million common shares at $18 per share (below its $19-$21 offering range), for a lower-than-expected IPO take of $900 million. The company has been controlled since last year by Kohlberg Kravis Roberts & Co. (24.69% post-IPO position, with over-allotment) The Carlyle Group (15.23%) and Providence Equity Partners (15.23%).

Xeround Systems, a Tel Aviv, Israel-based provider of scalable signaling solutions to VoIP carriers, has raised $6.5 million in startup funding from Benchmark Capital and Giza Venture Capital.

Telcontar Inc., a San Jose, Calif.-based provider of location-based solutions for in-vehicle, Internet and wireless platforms, has raised $10.68 million in Series B-1 funding. Norwest Venture Partners was joined on the deal by return backers Mobius Venture Capital, Ford Motor Co. and Cardinal Venture Capital.

IntraLens Vision Inc. (f.k.a. Anamed), a Lake Forest, Calif.-based provider of implantable products to correct and maintain vision, has raised $12 million in Series C funding co-led by Canaan Partners and InterWest Partners co-led the deal.

Genetic Solutions Pty Ltd., a Brisbane, Australia-based genetic information technology company, reportedly has received Au$2.5 million in funding from Sidney-based Nanyang Ventures. AG, a Berling, Germany-based provider of multi-channel commerce solutions has raised its first round of venture capital funding from an unspecified group of Asian inv*stors. No financial terms were disclosed, although The Deal reports that it was worth 15 million euros.

Vanson HaloSource Inc., a Redmond, Wash.-based provider of anti-microbial solutions for patient care and consumer hygiene, has raised $5 million in second-round funding. Return backers include Alexander Hutton Venture Partners and Buerk Dale Victor LLC, while Mars Inc. and WRF Capital also participated.

NewspaperDirect, a Vancouver, Canada-based provider of digital newspaper distribution solutions, has raised Cdn$8.5 million in venture capital funding. Soses Inv*stments led the deal.

OpenLogic Software Inc., a Broomfield, Colo.-based provider of enterprise software and services to enable open source development and deployment environments, has raised $4 million in Series A funding. Participants include Appian Ventures, Red Rock Ventures, Highway 12 Ventures and Village Ventures.

Update: VhaYu Technologies Corp., a Los Gatos, Calif.-based provider of real-time analysis software for the financial industry, has raised $10.25 million in Series C funding from Silicon Valley Bank, Menlo Ventures and DB Capital Partners. Tuesday’s Wire put the deal at just $9 million, and didn’t include SVB.

Duke Street Capital and Englefield Capital have agreed to acquire publicly-traded Cox Insurance Holdings PLC for GBP 296 million. Cox shareholders Warburg Pincus (23.3%) and Palamon European Equity (10.3%) both accepted the bid.

The Carlyle Group has received Hawaii Public Utilities Commission approval for its $1.65 billion acquisition of Verizon Hawaii from Verizon Communications (NYSE: VZ), although the Commission insisted that Carlyle provide additional equity so as to improve the equity-to-debt ratio. The deal includes Verizon’s Hawaii-based local telephone operations, plus its print directory, long distance and Internet service provider assets, which reported combined 2003 sales of $610 million. Once complete, Verizon Hawaii will be renamed Hawaiian Telecom.

MidOcean Partners has acquired a majority position in Vitaquest International, a New Jersey-based provider of specialty nutritional products. No financial terms were disclosed

BC Partners and Cinven Group have received European Union Commission approval for their 4.34 billion euros buyout of Amadeus Global Travel Distribution SA, a Spain-based travel reservations company currently is owned by airlines Air France, Iberia Lineas Aereas de Espana SA and Deutsche Lufthansa SA.

PAI Partners is nearing an agreement to purchase Italian clothing retailer Gruppo Coin SpA for $463 million, according to The Deal.

Bridgepoint, Benchmark Capital and Allco Finance Group have teamed up to acquire clinical decision support software providers CAS Services Ltd. and MDS International Inc. No financial terms were disclosed.

FastClick Inc., a Santa Barbara, Calif.-based provider of online advertising solutions, has set its proposed IPO terms to 6.5 million common shares being offered at between $12 and $14 per share. It still plans to trade on the Nasdaq under ticker symbol FSTC. FastClick raised $75 million in Series A funding last September at a post-money valuation of $96.54 million. Round participants included Highland Capital Partners, Oak Inv*stment Partners and Disney corporate venture arm Steamboat Ventures.

TargaCept Inc., a Winston Salem, N.C.-based drug company focused on the central nervous system, has withdrawn its proposed $86.25 million IPO, citing “difficult market conditions that currently exist for initial public offerings in the life sciences industry.” TargaCept has raised over $120 million in VC funding from firms like Nomura Phase4 Ventures, New Enterprise Associates, EuclidSR Partners, Oxford Bioscience Partners, R.J. Reynolds Tobacco Holdings, Burrill & Co. and Advent International.

Seacor Holdings Inc. (NYSE: CKH) and Seabulk International Inc. (Nasdaq: SBLK) have signed a definitive merger agreement, to create a combined provider of marine fleet and other offshore services to the oil, gas and chemical industries. The total transaction is valued at $532 million, plus approximately $471 million in net d*bt obligations that will be assumed by Seacor. The deal is being supported by DLJ Merchant Banking Partners and Carlyle/Riverstone Global Energy & Power Fund, which collectively own approximately 75% of Seabulk’s common shares.

Akamai Technologies Inc. (Nasdaq: AKAM) has agreed to acquire Speedera Networks Inc., a Santa Clara, Calif.-based provider of distributed application hosting and content delivery services. The stock-for-stock transaction is valued at approximately $130 million, with Akamai issuing approximately 12 million shares of common stock. It is expected to close sometime next quarter. Speedera has raised over $47 million in total venture capital funding since its 1999 inception, from firms like ABS Ventures, Trinity Ventures, Comdisco Ventures, Continuum Group, Banc of America, Industry Ventures, DB Inv*stor, Oracle, Hewlett-Packard, Palo Alto Inv*stors and Stanford University.

MAP ROI Systems Inc., a Sterling, Va.-based maker of a system that helps business qualify for, and manage, government contracts, has acquired the assets of Privia Inc., a San Mateo, Calif.-based provider of enterprise software that automates the qualification, development and delivery of commercial bids on large government contracts. No financial terms were disclosed. MAP ROI has raised over $4 million in VC funding since its 2003 inception from The Aurora Funds and Novak Biddle Venture Partners, while Privia has raised over $8 million in venture funding since its 1999 inception, from Benchmark Capital, CAP Ventures and VSP Capital (f.k.a. Venture Strategy Partners).

Clarity Visual Systems Inc., a Wilsonville, Ore.-based , has acquired the CoolSign software and services division of Adspace Networks Inc., a New York-based provider of digital advertising solutions for malls and movie theaters. No deal terms were disclosed. CoolSign provides high-definition digital content for networked digital display systems, and the acquisition includes CoolSign-related assets that include enterprise sales, engineering, and creative and client services teams located in Burlingame, Calif. Clarity Visual has raised $6.5 million in venture capital funding from Needham Capital Partners. Adspace has raised approximately $20 million from AIG Capital Partners, DCM-Doll Capital Management, TWB Inv*stment Partners, Angel Inv*stors LP and Allen & Co.

Epimmune Inc. (Nasdaq: EPMN) has agreed to merge with IDM SA in an all-stock transaction that will result in a San Diego-based company with manufacturing facilities in Irvine, Calif. and Paris, France. IDM develops immunotherapies for cancer, and has received VC funding from Sofinnova Partners, Atlas Venture, Apax Partners, Clal Biotechnology Industries, China Development Corp., Banexi Ventures, XAnge Capital, Alta Partners and JPMorgan Partners.

Allianz AG Holdings says that it plans to continue increasing its private equity exposure over the next three to five years.

Wednesday, March 16

Random Ramblings

Lots of news today, including another social networking deal and the narrowing of buyout bidders for Toys ‘R’ Us (which I never went to as a kid, because we had Spag’s and something called Child World). So just time for a few quick notes:

** We have over 250 players for our March Madness contest, which means that there are just a limited number of spots remaining. If you still want to participate, the most open group ID numbers are 50961 and 50970, both of which use the “capital” password (but without the quotes). Remember, picks must be made before the first game tips off tomorrow at 12:20pm EST.

**An interesting little tidbit from the blogosphere, where SAP Ventures’ Jeff Nolan yesterday noted the irony of Technology Crossover Ventures recently adding anti-spyware company Webroot Inc. to its portfolio, while also maintaining an ownership position in spyware producer Claria Inc. (a.k.a. Gator). For those who don’t remember, Claria withdrew its proposed IPO offering last year, which delighted folks who don’t feel companies should be rewarded for bad behavior. Anyway, Nolan made his quickie blog comment, and TCV took the unusual step of sending out their PR emissaries from Blanc & Otis to respond. Probably makes Jeff feel all warm, fuzzy and self-important but, hey, I guess he deserves it. Quite unusual for a company/firm to formally answer a blog, and perhaps could be opening a whole can of worms that will keep PR firm coffers overflowing for years.

A few quick points on the substance: Matt Marshall of the Mercury News referred to this as a “non-scandal,” and he’s absolutely right. He also got in touch with TCV, which I sincerely appreciate because I was five minutes away from making the same call at the expense of other work. The most interesting part of Marshall’s piece is that Webroot was extremely concerned about letting TCV lead its $108 million Series A deal, because the Claria connection could generate an air of impropriety.

In order to jump the hurdle, TCV offered to remove Claria from the TCV website, which is why you can’t find it there today (fellow Claria backer U.S. Venture Partners has not made a similar move, but it also hasn’t inv*sted in an anti-spyware company). Nolan suggests that this is erasing the past, but I disagree. There is plenty of evidence that TCV is involved with Claria (Venture Expert database, old press releases via Lexis-Nexis, SEC filings), and if website removal is what got the Webroot deal done, so be it. Moreover, I’d almost be more impressed with TCV if they actually had intentionally backed both a spyware and anti-spyware company. Sure it’s cynical, but it’s also creating demand for your portfolio company’s product (kind of like on 24 when the defense contractor tried starting the war by detonating a nuclear bomb in LA, except not nearly so heartless or fictional).

**I had promised myself that I wouldn’t do any more traveling for a few months, but I’ve agreed to serve as a judge (one of twelve) at a prominent southern b-school’s upcoming business plan competition. More info on this as it gets hammered out, but this should be quite enjoyable. Any advice from those who have done this before?

**Morgenthaler will announce tomorrow that it has opened a Boston office, to complement existing offices in Menlo Park, Princeton, N.J., Cleveland and Boulder, Colo. This one will be staffed by general partners Jim Broderick (VC healthcare focus) and Daniel Farrar (mid-market management buyout focused). Both men actually have been working from Boston for several months, but the formal announcement was delayed until Morgenthaler decided on physical office space (which took a while). Rather than going the Waltham route, they ended up at 545 Boylston Street, on the 9th floor.

**The AP just reported that Deputy Defense Secretary Paul Wolfowitz will be nominated by President Bush to take over as head of the World Bank. I’ve heard the rumors for a while, but actual confirmation remains a bit stunning. It’s not that I think Wolfie is a lair (as do many of my friends). In fact, I consider him to be a true believer. The problem is that I consider many of his more well-known beliefs to be absurd, and his foresight to be akin to that of Grady Little. Very disappointing nomination. Hey World Bank readers, what’s your take?

**Finally, a few of you have asked about last Friday’s California court decision that there are reporters should be found liable for publishing a company’s trade secrets. The case specifically dealt with Apple Computer, but could have far-reaching consequences. After all, any time this space prints a previously-undisclosed company valuation or VC firm partner defection, couldn’t it arguably could be considered trade secret (seems that California’s shield rule only applies to political and sports reporters)? In fact, isn’t uncovering trade secrets a large part of what business journalists are paid to do? Troubling ruling, but here’s hoping for a successful appeal.

Providence Equity Partners and Warburg Pincus have completed their $1.35 billion buyout of Telcordia Technologies Inc., a Piscataway, N.J.-based telecom software company originally formed by AT&T, and then sold in 1999 for $700 million to Science Applications International Corp. (SAIC). The deal was partially financed by a sale-leaseback transaction, in which W.P. Carey & Co. acquired Telcordia’s Piscataway office campus for $114 million

KaloBios Pharmaceuticals Inc., a Palo Alto, Calif.-based developer of therapeutic antibodies, has raised $20 million in Series B funding at a post-money valuation of approximately $27 million. MPM Capital and GBS Venture Partners co-led the deal, and were joined by Lotus BioScience Ventures and return backers Sofinnova Ventures, Alloy Ventures, 5AM Ventures and Singapore BioInnovations Pte. Ltd.

Weston Presidio has received $819.92 million in limited partner commitments for its fifth fund, according to a regulatory filing. The San Francisco-based private equity firm is looking for upwards of $1 billion.

MySpace Inc., a Santa Monica, Calif.-based social networking company, has raised $37.79 million in Series A funding at a post-money valuation of approximately $44.23 million, according to a regulatory filing. Redpoint Ventures and Intermix Media Inc. participated on the deal.

Masergy Communications Inc., a Palno, Texas-based provider of application performance solutions for converged enterprise networks, has raised $30 million in Series C funding. WestAM led the deal, and was joined by return backers Centennial Ventures and Meritage Private Equity Funds. Masergy also announced that it has received a $15 million line of credit from Comerica Bank.

BuySafe Inc., an Arlington, Va.-based e-commerce and auction bonding services, has raised $13.25 million in Series B funding. Grotech Capital Group and Core Capital Partners co-led the deal, and were joined by return backers Hartford Ventures and Thomas Rutherfoord Inc.

Masergy Communications Inc., a Plano, Texas-based provider of application performance solutions for converged enterprise networks, has raised $30 million in Series C funding. WestAM led the deal, while return backers included Centennial Ventures and Meritage Private Equity. In other Masergy news, the company has received a $15 million line of cr*dit from Comerica Bank.

Soleil Securities Group Inc., a New York-based aggregator of independent equities research and brokerage services, has raised $11 million in Series 2-R convertible preferred stock. Bain Capital Ventures led the deal, and was joined by return backers like Bessemer Venture Partners and Bessec Ventures.

RLX Technologies Inc., a The Woodlands, Texas-based provider of heterogeneous server management solutions, has raised $9.1 million in Series 1 recap funding. Ignition LLC led the deal, and was joined by Austin Ventures, GM Capital Partners, Sternhill Partners, Soros Private Equity Investors LP, and Cockrell Investment Partners. RLX has raised over $90 million in total VC funding since its 2001 inception. It also announced that it has signed an OEM agreement with Nexcom.

Akira Technologies Inc., a San Francisco-based developer of publishing applications for wireless networks and devices, has raised $2 million in a first close on its Series A funding round. Labrador Ventures led the deal, and was joined by Parker Price Venture Capital.

IXI Mobile Inc., a Redwood City, Calif.-based provider of phone operating system software and mass-market messaging devices, has received an undisclosed amount of funding from Concord Ventures. The company previously had raised over $60 million in venture capital from such groups as Gemini Capital Fund Management, T1 Ventures, Intel Capital, Draper Fisher Jurvetson and China Development Industrial Bank.

KKR and Cerberus are the two remaining bidders for Wayne, N.J.-based Toys ‘R’ Us (NYSE: TOY), according to multiple press reports. Both firms are interested in buying the entire company with bids reported to be over $5.5 billion (over $5.7 billion, according to Reuters). Toys ‘R’ Us originally planned to retain its Babies ‘R’ Us division, but instead will accept one of the two offers. Cerberus has teamed up on its deal with Goldman Sachs and Kimco Realty Trust, while it is not clear who, if anyone, KKR has teamed with.

Neiman Marcus Group has put itself on the block for upwards of $5 billion, according to The New York Post. The upscale retailer reportedly has approached several strategic buyers, plus private equity firms like Apollo Management and Leonard Green & Partners. Goldman Sachs will be running the sale.

Corporacion Financiera Alba SA, Omega Capital and Mercapital reportedly have withdrawn their buyout offer for Spain-based airport retailer Aldeasa SA. A competing bid from Advent International is believed to still be on the table.maker British Vita, which had previously declined to open its books.

Aviza Technology Inc., a Scotts Valley, Calif.-based supplier of thermal process and atomic layer deposition systems, has agreed to merge with Trikon Technologies (Nasdaq: TRKN), a UK-based provider of plasma etching and deposition systems for the global semiconductor industry. The two companies had combined 2004 revenue of approximately $160 million, and employed 700 people. Under terms of the merger agreement, the combined company will be known as Aviza Technology Inc., and will trade on the Nasdaq. VantagePoint Venture Partners, the largest current Aviza shareholder, will own a 50% stake in the combined company.

Irdeto Holdings BV, a subsidiary of Naspers (Nasdaq: NPSN), has acquired LockStream Inc., a Seattle-based provider of mobile digital rights management software. No deal terms were disclosed. LockStream has raised over $15 million in VC funding from such firms as Audax Group, AOL Time Warner, Artisan Digital Media, ING Barings Private Equity and Encore Venture Partners.

Chromos Molecular Systems Inc. (TSX: CHR) has agreed to acquire Anosys Inc., a Menlo Park, Calif.-based drug company focused on cancer, in a cash and stock transaction. Anosys has received private equity funding from BankInv*st.

The User-Friendly Phone Book LLC, a The Woodlands, Texas-based directories publisher controlled by VS&A Communications Partners, has agreed to acquire Carrollton, Ohio-based Shaw Publications. No financial terms were disclosed.

Powermill Service Group AB, a portfolio company of Swedish private equity firm Segulah, has acquired Philesko Oy, a Finland-based repair and services company for consumer electronics. The sellers were Philesko CEO Esko Jokinen and his family.

Vector Capital of San Francisco-based has closed its third venture capital fund with $337 million in limited partner commitments, according to a regulatory filing. The firm originally had been seeking $250 million, and held a $176.5 million first close last May from groups like First Plaza Group Trust (with JPMorgan Chase Bank as trustee), Stichting Pensionenfunds AB and ZAM Holdings LP. It was launched in 1997 as an independent entity, although its formation included the absorption of Ziff Brothers Investments.

VSP Capital (f.k.a. Venture Strategy Partners) has closed its third early-stage venture capital fund with $185 million in institutional commitments. Limited partners include Horsley Bridge Partners, Cal Regents, Adams Street Partners, Duke Endowment and Wellcome Trust. The firm also expects to add additional capital from tech industry executives, but says that the final fund size will not exceed $200 million.

The California Public Employees’ Pension Systems (CalPERS) has approved a 75 million euro commitment to Advent International’s fifth European fund.

Flexpoint Partners has launched as a Chicago-based private equity firm focused on the healthcare and financial services market. Each of its three founders – Donald Edwards, Ethan Budin and Charles Glew – once served as principals with buyout firm GTCR Golder-Rauner.

Sharad Mansukani has joined Texas Pacific Group as a consultant and senior advisor. He most recently was with the Department of Health and Human Services, where he was a senior advisor and medical officer at the Centers for Medicare and Medicaid Services (CMS). He also serves on the faculty of both the University of Pennsylvania and Temple University Schools of Medicine.

Thomas Bentley, a managing director of SVB Alliant, has joined the board of Rambus Inc. (Nasdaq: RMBS), a Los Altos, Calif.-based technology licensing company specializing in high-speed chip interfaces.

James Wolfe, managing partner of private equity firm Apex Structures LLC, has been elected president and CEO of NanoSignal Corp. (OTC BB: NNOS), a Las Vegas-based developer of MRI data processing solutions. 

The European Venture Capital Association, in conjunction with Thomson Venture Economics (publisher of the PE Week Wire) and PricewaterhouseCoopers, has released preliminary 2004 disbursement, fund-raising and performance data for the European private equity and venture capital markets. It all can be found at

Tuesday, March 15

Tuesday TalkBack

The sky is shining, the Celtics are winning and the Waldorf-Astoria ballroom was successfully converted from the Buyouts Symposium to the Rock & Roll Hall of Fame Induction ceremony. In other words, it’s time for some Tuesday TalkBack. Most of the topics discussed recently in this space – barbell strategy, Josh Lerner’s “Smart Institutions” paper and the seeming reluctance of funds-of-funds to commit to small-market buyout funds – overlap, so here are some selected emails in no particular order (I promise that I’m working on an RSS-enabled blog so that all comments can be published – anyone interested in building it?).

Chris writes: “You mentioned that LPs on one [Buyouts Symposium] panel extolled the virtues of mega-funds. I would be curious to know the basis for their praise, and rationale for believing these funds will continue to perform well into the future. They certainly have benefited tremendously over the last 2.5 years from an absence of strategic buyers, a large number of distressed corporate sellers/corporate orphans and, more recently, incredibly receptive debt markets. But it’s not clear to me that this ‘perfect storm’ will continue, nor that funds eclipsing $5 or $6 billion will be able to outperform the industry.”

Thomas adds: “Absolutely, there should be some percentage of the [fund-of-funds] pie allocated to smaller funds, just as there is some percentage of the overall [institutional] pie allocated to alternative investments. Why not just ignore PE because it’s only 5% of the total and can’t move the needle? It’s the same darn idea.” (Note: a small handful of fund-of-funds managers did write in to say that they either have existing programs dedicated to sub-$300M funds, or that they were planning to raise one).

Wayne asks: “Assuming Lerner is correct in his findings that geographic concentration is fa factor in poorer performing LP choices, then doesn’t that also indict the strategy so many LPs have embraced over the last few years of concentrating their inv*stments into Bay Area or Northeastern funds?” Yes Wayne, I would say it probably does. It’s also worth noting, however (and I’m just being presumptive here), that this finding may have been significantly influenced by the large spate of local public pensions (such as firefighters unions or county employees) that don’t have enough bandwidth or contacts to conduct due diligence outside a local geographic radius.

Ted writes about Lerner’s study: “Dan, you wrote: ‘In my opinion, the buyouts asset class also should have been broken out, as there are more similarities between General Catalyst and Oak Inv*stment Partners than between a $50 million LBO firm and KKR.’ As Jon Lovitz used to say – ‘that’s the ticket!’ Small buyout returns are the foundation formost buyout histories as you have noted before on the barbell. Successful (actually, super successful) early returns from small deals fed the demand from previously wary institutional investors into KKR II, Forstmann Little II and so on. If the professor and his team could have grabbed some data on sub $300M or better yet sub $200m buyout firms, I think it wouldbe telling.

W adds: Having just migrated from fund raising at an Ivy League university to fund raising at a placement agency, I found one of Prof. Lerner’s conclusions interesting. Specifically that alumni loyalty and generosity were directly correlated to a university endowment’s performance (pg 38), and hence a factor in the overall greater returns of the endowments. His survey was based on the most selective universities and the degree of giving by their alumni (US News & World Report). The correlation I believe is more indirect and perhaps more telling. I believe that graduates, undergraduates as well as MBAs, of these highly selective schools tend to gravitate in higher numbers to higher paying fields of employment (i.e., the broad finance sector), than do their counterparts at less selective universities. This pool of alumni provides both the advisory pool, to which he referred, as well a concentrated network of individuals from which GPs & LPs are created.

A cursory review of the Directories of PE & VC funds reveals that the partners and associates of these firms all come from a relatively small clutch of schools. The opportunity to make money rather than give it is the paramount desire among this group. The degree of generosity by these alumni is a direct result of their success in the financial sector. I don’t think that Loyalty to one’s alma mater is the driving factor of the alumni in this instance so much as the desire and ability to take advantage of access to a network of key decision makers. The largest funds I raised were from those alumni in Hedge funds, PE or VC partnerships or as a managing director at a Wall Street type firm.I was constantly asked by these alumni if I could make introductions to the CIO of my university’s endowment.”

Finally, a reader clarification on a recent reference to the SBIC/SBA funding issue: You write that there is no funding for the program as an absolute.You are failing to differentiate between the Participating Securities program and the Debenture program.The Participating Securities program has been eliminated and NASBIC is trying to develop a new proposal to present to Congress.However, the Debenture program is alive and well. The government does not expect its losses to exceed its loss reserves, and there is more than enough debenture leverge available for debenture SBICs. I do not know the amount. In addition, you should be aware, that last year, the SBA issued commitments for almost $4 billion of Participating Securities, which commitments will be available for takedown of Participating Securities leverage until Sept. 30, 2008.Therefore, the bottom line is that there are no new Participating Securities licenses being issued and no new Participating Securities leverage being issued.

Oh, and one more thing: We’ve got about 200 March Madness players as of this morning, so there is still room for more of you who want to play. Just check yesterday’s Wire for instructions.

Rayovac Corp. (NYSE: ROV) has agreed to acquire Tetra Holding GmbH for approximately 415 million euros from Triton, AXA Private Equity and Tetra management. The deal is expected to close prior to June 30. Tetra is a Melle, Germany-based provider of foods, equipment and care products for fish and reptiles, plus accessories for home acquariums and ponds. Citigroup advised Rayovac on the deal, while the sellers were advised by J.P. Morgan Securities.

Vontu Inc., a San Francisco-based provider of data and IP loss prevention solutions, has raised $10 million in Series C funding. Return backers include Benchmark Capital, U.S. Venture Partners and Venrock Associates. The company now has raised over $25 million in total VC funding since its 2001 inception, including a $10 million Series B deal in 2003 at a post-money valuation of approximately $40 million.

PharmAthene Inc., an Annapolis, Md.-based biotech company focused on biological warfare threats, has raised $11.2 million in Series C funding. Teachers’ Private Capital and Canadian Medical Discoveries Fund Inc. co-led the deal, and were joined by the MDS Life Sciences Technology Fund US, and return backers MPM Capital, Bear Stearns Innoventures and Healthcare Ventures. Proceeds from the funding were used to help PharmAthene complete its previously-announced $18 million acquisition of all operations and assets related to Protexia (recombinant human butyrylcholinesterase) from Nexia Biotechnologies Inc.

G2 Microsystems Inc., an Oakland, Calif.-based fables semiconductor company developing integrated circuits for the active asset tracking and telemetry markets, has raised $6 million in Series A funding. Starfish Ventures was joined on the deal by return backer DB Capital Partners.

Kazeon Systems Inc., a Mountain View, Calif.-based provider of unstructured information management solutions for the enterprise, has raised $17 million in venture capital funding from Redpoint Ventures, Clearstone Venture Partners and Goldman Sachs.

VhaYu Technologies Corp., a Los Gatos, Calif.-based provider of real-time analysis software for the financial industry, has raised $9 million in Series C funding. Return backers include Menlo Ventures and DB Capital Partners.

CEH Holdings Inc., an Austin, Texas-based e-commerce company focused on classified listings for the travel market, has raised $32.27 million in Series A funding, with participation by both Austin Ventures and Redpoint Ventures.

SecureMedia Inc., a Natick, Mass.-based provider of software-based conditional access and digital rights management systems, has raised $4 million in a new venture funding round led by M/C Venture Partners.

Digit Wireless, a Lexington, Mass.-based provider of mobile device interface solutions, has raised $6 million in Series C funding. Venrock Associates led the deal, and was joined by return backers Qualcomm Inc. and Telus Ventures.

NeoScale Systems Inc., a Milpitas, Calif.-based provider of enterprise storage security solutions, has raised $12 million in fourth-round funding. Advanced Technology Ventures participated on the deal, and was joined by return backers Bay Partners, Lightspeed Venture Partners and Sevin Rosen Funds.

Codefast Inc., a San Jose, Calif.-based provider of software development automation solutions, today announced that it raised $6.5 million in Series A funding. The deal closed last December, and was co-led by Foundation Capital and Trinity Ventures.

Wellinx, a St. Louis provider of evidence-based electronic drug prescribing systems, has raised $11 million and merged with Canadian electronic medical record (EMR) company Purkinje (the combined company has taken the Purkinje name, but will be based in st. Louis). John Doerr of Kleiner Perkins Caufield & Byers led the deal as an individual inv*stor, but no additional buyer information was disclosed.

Brown Shoe Company Inc. (NYSE: BWS) has agreed to acquire Bennett Footwear Group Inc., a Newton, Mass.-based designer and wholesaler of woman’s and children’s shoes that is majority-owned by Heritage Partners. The deal is valued at $205 million (less ind*btedness), will the sellers eligible to receive up to $42.5 million in earn-out considerations upon the achievement of certain financial milestones.

Orion Telecommunications Corp., a Bayside, N.Y.-based provider of professional services and manufacturing for the prepaid calling industry, has emerged from Chapter 11 bankruptcy protection with $12 million in new capital. The infusion comes from Core Value Telecommunications LLC, which includes private equity firm The Core Value Group, Richard Roscitt (former president and COO of MCI and former CEO of AT&T Solutions) and Robert Book (managing director of Double R Capital Enterprises and Liberty Alliances LLC).

OneAccess Networks, a Paris, France-based maker of access routers for telecom carriers and corporate networks, said that T-Com Venture Fund and Innovacom have taken over 21% of OneAccess’ share capital. No deal terms were disclosed.

Texas Pacific Group reportedly has succeeded in its efforts to access financial information related to UK foam rubber maker British Vita, which had previously declined to open its books.

Cambridge Silicon Radio PLC (LSX: CRS.L) has acquired Clarity Technologies Inc., a Troy, Mich.-based provider of software and services for improving the audio quality of voice-based communications systems. The deal is valued at $17.1 million in cash. Clarity had previously raised around $24 million in VC funding since its 1998 inception, from groups like Duchossois Technology Partners, Sloan Ventures, iSherpa Capital, Reservoir Capital Group and Motorola Ventures.

Ambrion LLC of Chicago and TrustWave Corp. of Annapolis, Md. have merged, forming a combined company focused on data security and compliance services. It will continue to use the Ambrion name in the payment industry, and the TrustWave name in other vertical sectors lile financial services, healthcare and government. TrustWave had received venture capital funding from Financial Technology Ventures.

Getronics North America has agreed to acquire the assets of RedSiren Technologies Inc., a Pittsburgh-based provider of managed security services and consulting. RedSiren has raised over $32 million in VC funding since its 1999 inception, from firms like The Redleaf Group, Aspen Ventures, Mellon Ventures and Safeguard Scientifics.

SOA Software Inc. (f.k.a. Digital Evolution), a Santa Monica-based provider of SOA and Web services management, security and governance solutions, has acquired ThoughtDigital, a New York-based provider of event-based reliable messaging technology. No financial terms were disclosed. SOA Software has received VC funding from Redpoint Ventures, Mellon Ventures, Paladin Capital Group and Palisades Ventures.

Bytemobile Inc., a Mountain View, Calif.-based provider of mobile data optimization solutions, has acquired ProQuent Systems Corp., a Marlborough, Mass.-based developer of mobile multi-services switching platforms. No pricing terms of the all-stock acquisition were disclosed. ByteMobile has raised over $55 million in VC funding since its 2000 inception, from firms like Benchmark Capital, Trident Capital, CrossBridge Venture Partners, Angel Inv*stors LP, Skymoon Ventures, Orange Ventures, Dot Edu Ventures and Ericsson Venture Partners. ProQuest has raised over $53 million since its 2000 inception, from firms like St. Paul Venture Capital, BlueRun Ventures, Clarity Capital, Wasserstein Ventures and YankeeTek Ventures.

KPS Special Situations Funds has promoted Jay Bernstein to the position of senior vice president. It also has hired Ilya Koffman as an associate. Koffman previously worked with turnaround firm Alvarez & Marshall.

Ted Dintersmith, a partner with Charles River Ventures, has joined the board of Southeast TechInventures Inc., a Durham, N.C.-based technology accelerator for the conversion of university scientific research into commercial endeavors.

Monday, March 14


The brackets are set, $20 bills are being pooled in offices across America and my N.C. transplant father can’t stop talking ’bout them Tarheels. That’s right dear readers, it’s time for the PE Week Wire’s Third Annual March Madness contest.

This contest is open to all PE Week readers, with the top finisher receiving a year-long subscription to Venture Capital Journal (including website access). He or she also will be given ownership of this space for a morning, which can involve anything from a column to a company advertisement to a plea for work. You also could spend 500 words criticizing me, my politics or my Celtics/Red Sox/Patriots. No restrictions, save for certain naughty words like inv*stments.

To Play:

·          You will need a Yahoo account, which you can get here if you don’t already have one. Once you’ve done so and logged in, go to:

·          Select “Create or Join Group.”

·          I have created six groups for PE Week Wire readers, with each group capable of holding 50 people. If one is full, try another. If they all fill up, I’ll likely add more (only one entry per reader).

·          You will need the Group ID and Password to join the group. The password to each group is: capital. The group IDs are as follows: 50945; 50961; 50970; 51062; 51077; 51089

·          Finally, I ask that participants send me an email with the following subject heading: “NCAA – [Yahoo team name].” For example: “NCAA – Duke Fan.” This is so that I can contact the winner, and let PE Week Wire readers know who is in the lead as the tourney progresses. Good luck to all.

The Blackstone Group is looking to raise $10 billion for its next fund, rather than the $8 billion to $9 billion that had been previously reported.

Warburg Pincus reportedly has sold 6% of Indian mobile communications company Bharti Tele-Ventures Ltd. for $561 million. This is Warburg’s third sale of Bharti stock since acquiring an 18.52% position just before the company went public on the Bombay Exchange in 2002. The sales have accounted for approximately 12% of the company, and have returned around $1.08 billion for Warburg.

DSW Inc., a Columbus, Ohio-based discount shoe retailer, has filed to raise $185 million via an IPO of common stock on the NYSE under proposed ticker symbol DSW. The company is backed by both Cerberus and Back Bay Capital Funding.

ProtoStar Ltd., a Bermuda-based satellite company focused on the Asia-Pacific region, has received an undisclosed amount of first-round funding from New Enterprise Associates and SpaceVest.

Zealand Pharma AS, a Danish developer of novel peptide-based drugs, has raised 13 million euros in additional Series C funding, bringing the round total to 26 million euros. Second-tranche backers included CDC Entreprises Innovation, AGF Private Equity and Life Sciences Partners. The first tranche closed on January 1, with support from BankInvest, LD Pensions, Dansk Erhvervsinvestering and Vaekstfonden.

The Riverside Co. has sold Clayton Group Services Inc. to U.S. Laboratories, a division of Bureau Veritas BV. No financial terms were disclosed. Clayton Group Services was acquired by riverside in October 2001, and is a Novi, Mich.-based provider of occupational health and safety services, environmental services and laboratory analysis.

International Paper Co. (NYSE: IP) has agreed to sell its Industrial Papers business to Kohlberg & Co. for approximately $180 million. The deal is expected to close next quarter.

Providence Equity Partners has agreed to become the largest single shareholder (25.5%) in Retos Cartera SA, an inv*stor consortium that has agreed to buy Spanish media group Recoletos for 941 million euros from Pearson PLC.

BorgWarner Inc. has sold its holdings in AG Kuehnle, Kopp & Kausch for 42 million euros to private equity group Turbo Group GmbH.

Churchill Equity Partners has sold the assets of Leeco Steel Products Inc. to O’Neal Steel Inc. No financial terms were disclosed for the transaction, which featured Brown Gibbons Lang & Co. as the sell-side advisor. Leeco is a Darien, Ill.-based niche steel service center focused on specialized types of steel plates, and was acquired by Churchill in 1997.

Iesy, a German cable company controlled by Apollo Management, has agreed to buy rival Ish for approximately 955 million euros, according to The Wall Street Journal.

Rutland, a UK-based private equity firm, has acquired BUPA Healthcare Professionals from BUPA, and has renamed the group Advantage Healthcare Group. Rutland will provide GBP 5.5 million in equity, with d*bt being provided by Lloyds TSB Commercial

Max Capital has sold portfolio company Continental Structural Plastics Inc. to Richard L. Scott Inv*stments LLC, with W.Y. Campbell & Co. serving as the sell-side advisor. No financial terms were disclosed, except that American Capital Strategies provided $14 million in senior subordinated notes and redeemable preferred and common equity. Antares Capital Corp. and Bank One Corp. provided a revolving credit facility and senior term loans. CSP is a provider of compression-molded plastic components to the automotive and truck markets.

Valera Pharmaceuticals Inc., a Cranbury, N.J.-based drug company focused on urological and endocrine conditions, has filed to raise $74.75 million via an IPO of common stock on the Nasdaq under proposed ticker symbol VLRX. The company has raised over $30 million in venture capital funding from firms like Sanders Morris Harris, Psilos Group Managers, the New Jersey Technology Council and Wheatley Partners.

Submarino SA, a Brazil-based online retailer, is planning to raise up to $187 million via an IPO later this month on the Sao Paulo Stock Exchange’s New Market. The company is backed by such private equity firms as TH Lee Putnam Ventures, Goldman Sachs and Warburg Pincus.

PSF Group Holdings Inc., a Kansas City-based provider of pork products, has filed to raise $100 million via an IPO of common stock. It has not yet selected either an exchange or trading symbol. The company is majority-owned by ContiGroup Companies Inc., while other shareholders include MetalMark Capital and Oaktree Capital Management.

V.I. Technologies Inc. (Nasdaq: VITX) has completed its merger with privately-held Panacos Pharmaceuticals Inc. A related $20 million PIPE financing led by Great Point Partners also has been completed. Panacos has raised over $25 million in VC funding from A.M. Pappas & Associates, Ampersand Ventures, Mitsui & Co., Novo AS, Maryland DBED, Boston biomedical and New England Partners.

Frederick Horton has joined GSC Partners as a partner and managing director. He most recently was responsible for the CDO business at Trust Company of the West. In other GSC news, the firm also has added Edward Steffelin as a vice president. He previously served as portfolio manager of the CDO funds at Trust Company of the West and, before that, was a principal with Allianz Risk Transfer.

Wouter Moerel has joined the Amsterdam office of AlpInvest Partners as a principal focused on secondary transactions. He most recently served as a principal with The Carlyle Group, specializing in European leveraged buyouts.

Andrew Nelson has joined Close Brothers Private Equity as an inv*stment manager. He most recently worked for the UK Secretary of State for Trade & Industry and, before that, with PriceWaterhouseCoopers.

Vasudev “Vas” Bhandarkar has joined BlueRun Ventures (f.k.a. Nokia Venture Partners) as a venture partner.

Frederic Sebbag has joined Astorg Partners as an associate. He previously worked with Calyon Corporate Finance as an associate director and, before that, as an associate in the private equity division of Banque Paribas.

ABRY Partners has closed its fifth buyout fund with $900 million.

Siemens Mobile Acceleration has changed its name to Siemens Acceleration in Communications, to better reflect a new inv*stment mandate that expands beyond early-stage wireless companies. The firm now will inv*st in all types of communications startups, and plans to commit $100 million over the next five years.

Mizuhu International PLC, the London-based arm of Japan-based Mizuhu Securities, is setting up a private equity division. It will be led by David Porter, who previously served as head of private equity with Nomura International PLC.

The California Clean Energy Fund, a $30 million venture capital fund created as part of PG&E’s bankruptcy settlement, has reached a partnership agreement with VC firms Nth Power, Draper Fisher Jurvetson and VantagePoint Venture Partners. The three firms will provide matching funds and access to key strategic partners.

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