PE Week Wire — Friday, March 4

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21,000 and Counting…

Every time the PE Week Wire adds another thousand subscribers (we hit 21,000 yesterday), I like to remind you that this free service is just a tasty sampling of the 8-course feast that is Private Equity Week. To get access to all the trimmings, however, you need to become a paid subscriber. So take out that corporate card and sign up today. Paid subscribers get a weekly print publication and unlimited access to our website’s protected sections, within which you’ll find in-depth deal news, fund news, market analysis and proprietary data. So just click the “Subscribe” button at the right-hand side of this email, or email Rob Mills.

This also is a good time to add that those interested in advertising on the PE Week Wire should contact Naz Bayazit at 917-408-5260.

Bain Capital & The NHL
A bunch of industry folks seem to be wondering why Bain Capital would be interested in buying the currently-crippled National Hockey League. Or, as Dave Perkins of the Toronto Star wrote yesterday: “There is no suggestion that the Boston-based firm of Bain Capital Partners LLC intends those last three letters to stand for ‘Let’s Lose Cash.’ But, geez, didn’t these guys read the Arthur Leavitt Report?”

Good question Dave, but I think Bain might be on to something here. This isn’t an attempt to buy the NHL, and then to keep running it as currently constituted. Instead, it is an attempt to buy, and then to restructure, an organization whose great product has been nearly destroyed by inept management. Fix the management, and what you’re left with is the great product.

Bain and the NHL first had informal discussions about some sort of financial deal around five months ago, when most folks still believed that there would be an abbreviated 2004-2005 season. This week’s presentation before NHL owners was obviously more specific – including the much-reported $3.5 billion offering price – but really was viewed by Bain as a conceptual framework rather than a hard-and-fast bid. Mark Ganis, president of Chicago-based SportsCorp, says that $3.5 billion should best be viewed as “an opener that’s high enough to get people’s attention, but not large enough to get approval.”

Ganis adds, however, that this deal’s biggest hurdle will be politics, not price. Bain would basically need approval from all 30 owners, and particularly from owners of Original 6 teams like New York, Detroit and Boston. This seems unlikely today, but it is not an insurmountable problem – particularly if next season begins with replacement players and low attendance. Buyout firms often take years to complete a single transaction, and this one may be no different, with Bain trying to wait out the NHL while periodically sweetening the pot. Moreover, teaming up with GamePlan was a smart move, as few know as much about the business of professional sports as does Bob Caporale.

Speaking of understanding the business of sports, there is the issue of Steve Pagliuca, Bain’s managing partner who also is a co-owner of The Boston Celtics (not a silent partner – but not nearly as involved day-to-day as is former venture capitalist Wyc Grousbeck). Those who follow Boston sports know that the Celtics have been dropping not-so-subtle hints that they are dissatisfied with their current rent-free Fleet Center lease, which is held by Boston Bruins owner Jeremy Jacobs. Specifically, the Celtics want a better cut of concession and luxury box revenue). Since Pagliuca will need Jacobs on board for the NHL buy, however, one must wonder if the Celtics will withdraw their demands. If nothing else, it’s just another wrinkle in what could be the year’s most interesting private equity deal.

CVC Capital Partners is raising its fourth buyout fund with a target capitalization of 5 billion euros, according to a regulatory filing. The London-based firm’s current fund – CVC European Equity Partners III — closed out at 4.65 billion euros in 2001.

VStar Inc., a Sherman Oaks, Calif.-based producer of an on-demand mobile television network, has raised $15 million in a venture funding round co-led by Bessemer Venture Partners and Charles River Ventures.

Aspreva Pharmaceuticals Corp., a British Columbia, Canada-based drug company focused on new applications for on-the-market medications, priced 7.2 million common shares at $11 per share (below $13-$15 offering range), for a total IPO take of approximately $79.2 million. It will trade on the Nasdaq under ticker symbol ASPV, and on the TSX under ticker symbol ASV. Aspreva had raised venture capital funding from firms like Sprout Group, InterWest Partners and HBM BioVentures.

Pollex Mobile Holdings, a Beijing-based provider of software and application for mobile handsets, has received venture funding from Jafco Asia and Intel Capital, according to a Chinese press report.

Aepona Ltd., a Belfast, Ireland-based telecom software developer, has raised $20 million in new venture funding, according to The Irish Times. Polaris Venture Partners reportedly led the deal, and was joined by return backers Trinity Venture Capital and Amadeus Capital Partners.

CapMan Capital Management has agreed to acquire mechanical power transmission equipment maker Metso Drives from Finland-based Metso Corp. The deal is valued at approximately 98 million euros.

Lehman Brothers Merchant Banking Group has acquired The Anschutz Corp.‘s 36.6% interest in Pacific Energy Partners LP, a Long Beach, Calif.-based limited partnership engaged in the business of gathering, transporting, storing and distributing crude oil and other related products in California and the Rocky Mountain region.

United Enterprise Fund, a New York-based private equity fund specializing in the restaurant market, has acquired the bankrupt Le Petit Bistro restaurant chain and related assets. The deal was valued at approximately $7.13 million.

InterContinentalExchange, an Atlanta-based operator of the London-based Internet-based global OTC marketplaces for commodities trading, said that it plans to file for an IPO within the next several weeks. The company, which owns London’s International Petroelum Exchange, sold a minority ownership position last year to TA Associates.

Mykrolis Corp. (NYSE: MYK) has acquired Extraction Systems Inc., a Franklin, Mass.-based producer of molecular contamination measurement and control products for ultra-clean environments, for $25 million in cash. Extraction Systems has raised private funding from such firms as Howland Capital Management and the Venture Capital Fund of New England.

RecruitMax Software, a Ponte Vedra Beach, Fla.-based, has acquired InfoTechWorks Inc., a New Hope, Pa.-based provider of compensation management software and consulting services. No deal terms were disclosed. RecruitMax has received VC funding from Montagu Newhall Associates, QuestMark Partners and Tudor Ventures.

Envox Group, a Sweden and Westborough, Mass.-based provider of voice solutions, has acquired Intel Corp.‘s NetMerge call processing software and NetMerge CT application development environment products. No financial terms were disclosed. Envox is backed by Equivitec Partners, Northzone Ventures, Intel Capital and Servisen Investment Management.

HarvardUniversity reportedly has retained executive search firm PrinceGoldsmith LLC to find a new head of its $22.6 billion endowment. Current chief Jack Meyer plans to leave Harvard Management Co. at the end of June, to form his own firm.

First Reserve Corp. has promoted Alex Krueger to the position of managing director. He joined First Reserve in 1999 from DLJ’s energy group, and has worked on such deals as Pine Mountain Oil & Gas, Foundation Coal and Alpha Natural Resources.

ABN Amro yesterday held a media briefing in Amsterdam to deny market rumors that the bank could be looking to divest some of its private equity investment efforts.


Barbells, BDCs and Bain

Lots of stuff to write about this morning, including Bain Capital’s reported bid to acquire the moribund National Hockey League (would the deal be considered a turnaround?). First up, however, is the long-delayed barbell strategy discussion:

For those who don’t remember last Thursday’s column, barbell strategy is when limited partners primarily make commitments to buyout firms on the micro/small and large/mega ends of the market, while mostly eschewing the vast array of middle-market opportunities. It was advocated by Barry Gonder of Grove Street Advisors during the Wharton Private Equity conference last month, and seems to be gaining traction with a growing number of institutional acolytes. My question to you, therefore, was whether or not the strategy makes sense.

The first thing that many of you asked was how “middle-market” is being defined. In general, such terms are based on current fund size, since it generally corresponds to deal-size focus. I couldn’t get Gonder on the phone, but did speak with Eric Hirsch, chief investment officer for Hamilton Lane Advisors, which used to advise Gonder while he was still at CalPERS, and which also has actively pursued the barbell strategy for over six years. His categories seemed appropriate, and they were: Small market funds are < $250m; middle-market are $400m-$1.5b; large-market are $1.5b-$4b; and mega-market are />$4b.

Hirsch says that barbell strategy obviously doesn’t work perfectly for everyone, since CalPERS is too large to commit equal amounts of capital to the small and large/mega-markets, while some smaller systems probably can’t even scrounge up the minimum requirement for Carlyle Group’s new $6.5 billion (or higher) fund-raising drive. However, he says that the best returns are at those ends of the market, so the best performance will be at the market edges. Many of you also wrote in to agree, and to add that middle-market performance could continue to decline, due to a current glut of middle-market funds.

What is so interesting about this performance theory, of course, is that it goes completely against the conventional wisdom that middle-market funds have better long-term performance than do large-market of mega-market funds (small-market funds are generally accepted to be the best, albeit trickiest, bet). This is specifically believed to be true when one looks at long-term benchmarks of 15 or 20 years. The question, however, is whether market fluidity is cause for reconsideration. For example, KKR raised $316 million for a 1982 fund, $1 billion for a 1984 fund, $750 million for a 1985 fund and $672 million for a 1986 fund. Each of those KKR funds was certainly playing the large- or mega-markets for their time (deals and enterprise values were smaller in the 1980s), but would be considered middle-market by today’s standards. As such, the argument is that some of today’s 15 or 20-year middle-market benchmarks could include those high-performing KKR fund, and thus theoretically could be artificially skewed upward.

This point was made by many of you, and it’s well taken, although it’s also worth noting that other readers believe that folks like Gonder – and probably Hirsch – have an ulterior motive for adopting barbell strategy. In short, they feel that it helps justify massive commitments to massive funds, and less time spent sorting through the middle-markets. Others also stress that LPs should focus exclusively on fund managers, regardless of fund size. We’ll get to all points of view tomorrow.

**  Ask a stupid question get over 150 emails. Yesterday, I suggested that the only way for individuals to participate in private equity was to either be filthy rich and/or know some folks already in the market (preferably fund managers). Then I asked if I was missing something. The answer, of course, is a resounding yes. First off, I forgot all about business development companies (BDCs) like Allied Capital, American Capital, Apollo, etc. This is particularly galling since the PE Week Wire was obsessed with BDCs for much of last spring. There also are the venture capital trusts (VCTs) in London, and the occasional opportunities for corporate employees to participate in their company’s venture or private equity programs. Third-highest response to a Wire column so far, behind the ones about lawn care and the Iraq War.

**  No time to discuss Bain and the NHL. sorry, but it’s getting late.

**  Finally, a sad note from the venture capital community, as Don Feddersen passed away last Thursday at the age of 70. Don spent the 1970s running such companies as Entrex Inc. and Applicon Inc., after which he became a general partner with Charles River Ventures. He “semi-retired” in 1997, and then took on a venture partner role with Bessemer Venture Partners. He is survived by wife Catherine, daughter Kimberly, sons John, Brett and Daniel, sister Rith Sievers, twin sister Dorothy Liveley and brother David. He also had nine grandchildren.

Visiting hours will be held at the J.S. Waterman Funeral Home in Wellesley, Mass. this Friday from 1:30-3:30pm, and from 6:30-8:30pm. A service will be held Saturday at Wellesley College’s Houghton Memorial Chapel at 11am. In lieu of flowers, donations may be made to Bone Marrow Transplant Research, c/o Dr. Robert Soiffer, Dana Farber Cancer Institute, 44 Binney Street, Boston, MA 02115. Directions to both the funeral home and Wellesley College can be found at \

Mary Ann Gray, former executive director of the Mid-Atlantic Venture Capital Association (MAVA), has been sentenced to two years in prison, after being convicted of embezzling approximately $400,000 from the group. Her attorneys had been looking for 12 months of home confinement.

Xtent Inc., a Menlo Park, Calif.-based developer of stent systems, has raised $25 million in Series C funding. Morgenthaler Ventures led the deal, and was joined by fellow return backers Advanced Technology Ventures, Latterell Venture Partners and Split Rock Partners (co-manager of St. Paul Venture Capital). The company has raised over $40 million in total VC funding, including a $15.2 million Series B round in 2003 at a post-money valuation of approximately $35 million.

Evergreen Pacific Partners of Seattle has closed its inaugural buyout fund with $275 million in limited partner commitments. Limited partners include West AM, the Public School Employee Retirement System of Pennsylvania, Duke University and Mass Mutual. The firm plans to participate in traditional buyouts, management buyouts and growth equity deals for middle-market companies in the Western U.S. and Canada.

Trema, a Sweden-based provider of strategic software solutions to the financial industry, has raised 8 million euros in venture funding. Investcorp led the deal, which bought out company founders, and was joined by return backers Carlyle Group, ABS Ventures and Norsk Vekst.

Vizional Technologies Inc., an El Segundo, Calif.-based provider of RFID supply chain solutions, has raised $3.5 million in Series A funding. Draper Fisher Jurvetson and Zone Venture Fund co-led the deal.

Phasebridge Inc., a Palo Alto, Calif.-based photonics company, has raised an undisclosed amount of second-round funding, led by Clearstone Venture Partners.

Medsonix Inc., a Las Vegas-based medical device company focused on non-invasive pain relief, has received an undisclosed amount of venture funding from the DaVinci-Franklin Fund I.

Cittio Inc. (f.k.a. JJ Labs), a San Francisco-based provider of network monitoring and operations software, has raised $3.5 million in venture funding from Hummer Winblad Venture Partners.

GMT Communications Partners has acquired Multicom Security AB, a Sweden-based provider of fixed and mobile communications services. The deal was valued at 60 million euros, with selling parties including Industri Kapital and TeliaSonera.

Gryphon Investors has acquired Consolidated Fire Protection LLC from Caltius Private Equity Partners, Westar Capital and other shareholders. The deal was done in partnership with company management, and also included Jerry Rose, former vice-chairman of Jones Lang LaSalle, and Jim Didion, former chairman and CEO of CB Richard Ellis. No financial terms were disclosed. Consolidated Fire Protection is an Irvine, Calif.-based provider fire and life safety.

InterContinentalExchange, an Atlanta-based operator of the London-based Internet-based global OTC marketplaces for commodities trading, said that it plans to file for an IPO within the next several weeks. The company, which owns London’s International Petroelum Exchange, sold a minority ownership position last year to TA Associates.

NeoPhotonics Corp., a San Jose, Calif.-based maker of PLC-based integrated optical modules and subsystems, has acquired all state-owned shares of Photon Technology Co. Ltd., a Shenzhen, China-based manufacturer of optical components for broadband access and backbone optical networks. The deal gives NeoPhotonics approximately one-third of all outstanding Photon Technology shares, in exchange for an undisclosed amount of cash and stock. NeoPhotonics has raised nearly $100 million in venture capital funding since its 1996 inception, from firms like Venrock Associates, Institutional Venture Partners, Bay Partners, Draper Fisher Jurvetson, Nth Power, Oak Investment Partners, SBV Ventures and Rockport Capital Partners.

Mellon Financial Corp. (NYSE: MEL) has acquired Derivatives Portfolio Management LLC, a Somerset, N.J.-based provider of fund administration and back-office outsourcing to the alternative asset management market. No financial terms were disclosed. DPM had raised $4 million in venture funding nearly three years ago from Edison Venture Fund and Milestone Venture Partners.

GPC Biotech AG (Nasdaq: GPCB) has acquired the material assets of Axxima Pharmaceuticals AG, a Munich-based drug discovery company that filed for insolvency last December. The deal is valued at 13.7 million euros in stock. Axxima had raised more than 50 million euros in VC funding from such firms as TVM-Techno Venture Management, AlpInvest Partners, Life Science Ventures, Heidelberg Innovation, SV Life Science Advisors and Novartis.

Allos Therapeutics Inc. (Nasdaq: ALTH), a Westminster, Colo.-based drug company focused on cancer therapies, has agreed to sell $50 million of exchangeable preferred stock to Warburg Pincus, at a price of $22.10 per share (7.5% discount from 20-day trailing average). The deal is expected to close tomorrow.

Refocus Group Inc. (OTC BB: RFCG), a Dallas-based medical device company focused on eye disorders, has held a first close on half of a $14 million Series A-1 funding commitment from Medcare Investment Fund III. A second close is expected to occur within the next year.

The Aurora Funds has promoted both Chris Kroeger and Grant Jackson to the role of principal. Kroeger joined Aurora Funds in 2003 as an associate, while Jackson joined in May 2004 as a senior associate.

ATP Private Equity Partners, a Copenhagen-based fund-of-funds manager, has promoted Susanne Forsingdal and Klaus Ruhne to the position of partner. Forsingdal joined ATP in 2003, after having served as senior vice president of inv*stor relations at Danske Bank. Ruhne also joined in 2003, after having served as a director of corporate finance with Danske.

Gary Neuser has joined Credit Suisse First Boston as head of private client services. He previously served as senior vice president of UBS Wealth Management, and before that in various executive roles with Merrill Lynch.

Hana Bank, Cambridge Capital Partners and IMM Investment Corp. have held a $50 million first close for a jointly-managed private equity fund that will participate in middle-market buyouts, growth financings and recaps in both the U.S. and Korea. It hopes to close on an additional $50 million to $100 million by year-end.

El Dorado Ventures has closed its seventh fund with $200 million in limited partner commitments. It also has promoted Scott Irwin to the position of general partner. Gary Kalbach, who co-founded EDV in 1986, will remain as a founding partner, but will not play an active role in the new fund.

Gold Hill Venture Lending Partners has closed on a new venture debt fund with $215 million in limited partner commitments. The firm was formed in 2002 by four senior lending officers from Silicon Valley Bank, which is a limited partner in the fund.

August Capital of Menlo Park, Calif. has received $283 million in limited partner commitments for its fourth fund, according to a regulatory filing. The only inv*stor listed was Horsley Bridge Partners.

Global Vision AG Private Equity Partners, a Germany-based fund-of-funds manager, said that its sixth vehicle (which still has not yet held a final close) has made LP commitments to Institutional Venture Partners XI, Carlyle Partners IV and Sofinnova Capital V.

Don Feddersen passed away last Thursday at the age of 70, after a battle with leukemia. He spent the 1970s running such companies as Entrex Inc. and Applicon Inc., after which he became a general partner with Charles River Ventures. He “semi-retired” in 1997, at which point he took on a venture partner role with Bessemer Venture Partners. He is survived by: wife Catherine, daughter Kimberly, sons John, Brett and Daniel, sister Rith Sievers, twin sister Dorothy Liveley and brother David. He also had nine grandchildren.

Visiting hours will be held at the J.S. Waterman Funeral Home in Wellesley, Mass. this Friday from 1:30-3:30pm, and from 6:30-8:30pm. A service will be held Saturday at Wellesley College’s Houghton Memorial Chapel at 11am. In lieu of flowers, donations may be made to Bone Marrow Transplant Research, c/o Dr. Robert Soiffer, Dana Farber Cancer Institute, 44 Binney Street, Boston, MA 02115. Directions to both the funeral home and Wellesley College can be found at


Random Ramblings

Lots of news this morning, including another planned corporate PE group spinout (MMC Capital), and a pair of new private equity fund-of-funds from bank-affiliated groups (Goldman Sachs Asset Management and Morgan Stanley Alternative Investment Partners). As such, our barbell discussion gets postponed for yet another day, in favor of a few very quick notes:

* Yesterday I spoke with a newspaper reporter who wanted to know how readers could participate in the private equity market, were they so inclined. My basic answer was that they should: (A) Become filthy rich, and (B) Make friends with private equity fund managers. I added that there are obviously some exceptions – such as small-time angel consortiums or corporate employees being able to participate in their company’s private equity program – but that the private equity market is not really accessible for your average newspaper reader (or PE market columnist, for that matter). This answer didn’t seem to satisfy the reporter, which is understandable since it would make for a lousy story (“Let me tell you about a great financial opportunity that you can’t take part in.”).

So I ask you: Am I missing something obvious, or even less than obvious? Is there a private equity avenue for folks without millions — or even hundreds of thousands — of dollars in their bank accounts? Just wondering.

* Remember when VCs promised to stop acting like sheep to the next big thing? If not, don’t worry, because it didn’t last long. Brad Feld of Mobius Venture Capital writes that the VC saturation point has arrived for the RSS/blogging space, while Matt Marshall of the Merc takes a look at the next saturation point for niche consumer technologies.

* I’m so glad that Antoine is getting Mark Blount’s minutes, instead of Al Jefferson’s. No idea how I’ll concentrate on poker tonight with the Celts-Lakers game on.

* Yes, that rap-related shooting Monday night was just outside the lobby of our NYC office. No, none of our folks were hurt (we share a building with Hot 97).

*  Finally, some of you write in to complain that you only receive the PE Week Wire sporadically. This is most likely due to sp*m blocking issues. If you fall into this category, please send me an email with the subject heading “Wire Problem”, and I’ll send you info on how to prevent such blockages from happening in the future.

Goldman Sachs Asset Management has closed private equity fund-of-funds GS Private Equity Partners 2004 with $1.2 billion in LP commitments. The firm also announced previous closes of its third dedicated secondaries fund with $1.5 billion (closed 12/04) and its second distressed fund-of-funds with $386 million (closed 5/04).

Arginox Pharmaceuticals Inc., a Menlo Park, Calif.-based, has raised $25 million in Series C funding. Topspin Partners led the deal, and was joined by fellow return backer Perseus-Soros Biopharmaceutical Fund. The company has raised over $42 million in total funding, including three small business innovation research awards from the NIH.

PanAmSat Holding Corp., a Wilton, Conn.-based provider of satellite communications services, has set its proposed IPO terms to 50 million common shares being offered at between $19 and $21 per share. The company has been controlled since last year by Kohlberg Kravis Roberts & Co., The Carlyle Group and Providence Equity Partners.

G2 Switchworks Corp., a Chicago-based provider of travel commerce services, has raised $5 million in a Series A funding round co-led by Norwest Venture Partners and TPG Ventures. The company recently asked a court to declare that members of its management team – including founder and CEO Alex Zoghlin – did not violate contractual obligations to their former employer, Orbitz. Zoghlin was Orbitz’s first employee, and served as its chief technology officer from 2000 to 2003.

SkyBitz, a Dulles, Va.-based provider of satellite-based asset tracking and information management services to the transportation industry, has raised $4 million in additional Series C funding from existing shareholders, bringing the round total to $20 million. The company had announced a $16 million close on the deal in January 2004, from firms like Inverness Capital Partners, Motorola Ventures, AIG Highstar Capital and Cordova Ventures.

Axial Biotech, a Salt Lake City-based maker of devices for the diagnosis and treatment of human spine disease and deformity, has raised $4.1 million in Series A funding. VSpring Capital led the deal, and was joined by both Medtronic Sofamor Danek and Ohio Biotech Group.

Desert Power Inc., a Farmington, N.M.-based provider of equipment overhaul and repair services to the natural gas compression industry in the Rocky Mountain region, has raised $1.14 million in first-round funding. Mesa Venture led the deal, and was joined by Altira Group.

Arroyo Video Solutions Inc., a Pleasanton, Calif.-based provider of video application delivery solutions, has raised $12 million in Series B funding. Matrix Partners led the deal, and was joined by return backers DCM-Doll Capital Management, Foundation Capital, Time Warner Investments and Comcast Interactive Capital.

Farelogix Inc., a Toronto-based provider of faring and distribution technology to the global travel industry, has raised US$6 million in Series C funding from Sandler Capital Management. The company also announced that it plans to relocate its corporate headquarters to Miami, Fla.

Datanomic Ltd., a UK-based provider of data quality solutions, has raised GBP 2.5 million in Series B funding from 3i Group. IT also received an undisclosed amount of capital from existing shareholder DN Capital and company management.

Thomas H. Lee Partners has completed the sale of its 56% stake in San Antonio-based vision care retailer Eye Care Centers of America Inc. (ECCA) to Golden Gate Capital, Moulin International Holdings Ltd. and company management. The deal was valued at $450 million, including a $340 million financing package arranged by J.P. Morgan Securities.

Summit Partners has agreed to acquire a majority position in Actix Ltd., a London-based provider of wireless performance engineering solutions. The deal is valued at GBP 40.6 million (approx. $76.1 million), with company management retaining a “sizable” minority stake. The deal is expected to close within the next few weeks.

WL Ross & Co. is leading a stalking horse bid for WestPoint Stevens Inc., a West Point, Ga.-based maker of bed and bath fashion products, which currently is in Chapter 11 reorganization. The inv*stor group also includes holders of a majority of WestPoint Stevens’ senior credit facility, including Contrarian Capital Management and CP Capital Investments.

Goldman Sachs reportedly said that South Korean distillery Jinro Ltd. is worth $3.6 billion, in preparation of a Merrill Lynch-led auction that is expected to include Newbridge Capital, CVC Capital Partners and Affinity Partners. The news is a serious valuation increase for Jinro, which had previously been valued by creditor Goldman Sachs at approximately $2.5 billion.

Fletcher Building Ltd. has acquired Australia-based Amatek Holdings Ltd. for Au$530 million (approx. US$414 million) from CVC Capital Partners and DLJ Merchant Banking Partners. Amatek is a holding company comprising four Australian building products businesses: Rocla Pipeline Products (a national supplier of steel reinforced concrete pipes and pre-cast products), Rocla Quarry Products (a regional operator of sand quarries), Stramit (a leading supplier of roll formed steel roofing and structural products) and Insulation Solutions (a manufacturer of glass-wool and foil insulation).

Horizon Lines Inc., a Charlotte, N.C. container shipping company, has filed to raise $287.5 million via an IPO of common stock on the NYSE under proposed ticker symbol HRZ. Castle Harlan acquired the company last July from The Carlyle Group, in a transaction valued at $663.3 million. Carlyle had taken control from CSX Corp., as part of a February 2003 recapitalization.

Cardtronics Group Inc., a Houston, Texas-based operator and distributor of automated teller machines, has withdrawn registration papers for a $115 million IPO. The company is majority-owned by CapStreet Group LLC. 

Multi-Channel Holdings, the parent entity of Golden Gate Capital portfolio company Ecometry Corp., has agreed to acquire Blue Martini Software Inc. (Nasdaq: BLUE). The deal is valued at approximately $54 million, or $4 per share (a 63% premium over Blue Martini’s 2/28 closing price). The deal is expected to close next quarter.

Bridgepoint Education Inc., a Poway, Calif.-based higher education company, has agreed to acquire The Franciscan University of the Prairies of Clinton, Iowa. No financial terms were disclosed for the deal, which is expected to close later this month. Once complete, The Franciscan University’s name will be changed to Ashford University. Bridgepoint Education is a portfolio company of Warburg Pincus.

Alcatel (NYSE: ALA) has agreed to acquire Native Networks Ltd., a UK-based provider of Ethernet transport solutions, for approximately $55 million in cash. Native Networks has raised over $33 million in total VC funding since its 1999 inception, from firms like Apax Partners, Alta Berkely Venture Partners, Anschutz Investment Co., JVP, Skypoint Capital, Soros Fund Management, Delta Capital Management and Tamir Fishman Ventures.

Eurasia Group, a New York-based research and consulting firm focused on global political risk analysis, has acquired the assets of Intellibridge Corp., a Washington, D.C.-based provider of intelligence and analysis to business and government decision-makers on a range of geo-political, economic, homeland security, and technological developments. No financial terms were disclosed. Intellibridge had raised over $12 million in VC funding since its 1999 inception, from firms like 1-to-1 Ventures, Hudson Venture Partners, LibertyView Equity Partners and Young Associates Ltd.

Discovery Partners International Inc. (Nasdaq: DPII) has agreed to acquire the natural products drug discovery subsidiary of Germany-based Biofrontera AG. No financial terms were disclosed. Biofrontera is a portfolio company of 3i Group.

Remy International Inc., an Anderson, Ind.-based portfolio company of Citigroup Venture Capital, has agreed to acquire the assets of Unit Parts Co., an Oklahoma City-based automotive aftermarket provider of new and remanufactured starters and alternators. No financial terms were disclosed for the deal, which is expected to close this month. Dechert LLP represented Remy on the deal, while Unit Parts was represented by McAfee & Taft.

Joseph Zubretsky has joined disability income protection insurance provider UnumProvident Corp. as senior executive vice president of finance, investments and corporate development. He previously served as president and CEO of insurance company GAB Robins Group, and also as a partner with private equity firm Brera Capital Partners.

Christian Gruenwald has joined the London office of TA Associates as a vice president. He previously was a Duesseldorf-based senior associate with General Atlantic.

Ventures West, a Vancouver, Canada-based venture capital firm, has promoted both Robin Axon and Pardeep Sangha to the position of vice president. Axon joined the firm’s Toronto office in 2001 and focuses on IT and communications deals, while Sangha joined in 1999 and focused on the telecom, photonics, wireless, IT and semiconductor spaces.

Marsh & McLennan Cos. (NYSE: MMC) is planning to spin off its private equity arm MMC Capital, in order to remove “any appearances of a conflict of interest.” MMC Capital currently is inv*sting out of the $1.1 billion Trident III fund raised last July.

Roark Capital Group of Atlanta has closed its first institutional private equity fund with $413 million. Limited partners include Princeton University, Harvard University, Hamilton Lane, Goldman Sachs, ATP, RCP Holdings, Tangent LLC, AJG Family LP, Parish Capital and Commonfund Capital. Lazard Freres served as placement agent. The Atlanta-based firm had previously raised capital on an “as-needed” basis for specific deals, and will continue to focus on family-owned businesses.

Leo Hindery, former CEO of AT&T Broadband, The YES Network and TeleCommunications Inc. (TCI), has teamed with former partner Peter Kern to form InterMedia Advisors, a private equity firm focused on the media market. The firm executive advisory board will be chaired by former Senator Tom Daschale

Morgan Stanley Alternative Investment Partners has closed its second Private Markets Fund with $500 million in limited partner commitments. The vehicle will disburse its capital to primary funds, co-investments and direct secondaries throughout the U.S. buyout, European buyout, global venture capital and special situations markets.

C.E. Unterberg Towbin has opened an office in Hong Kong, which will be led by Alex Ning Jing, who previously worked with Standard & Poor’s.


JPMorgan Partners To Spin Out

This morning’s column was supposed to discuss barbell strategy, and I even worked up a lead while shoveling out my driveway. Then I came back inside – after a Dunkin’ Donuts visit — to learn that such work had been for naught (the lead, not the driveway), because J.P. Morgan Chase & Co. has agreed to let its JPMorgan Partners (JPMP) unit spin out as an independent entity. Big, big news.

The basics are that JPMP will spin out as an independent entity in late 2006, or whenever it is almost done committing the capital of its current $6.5 billion global fund (it has about $2 billion of dry powder remaining). The new firm will have a name not affiliated with the bank, and will be run by current JPMP chief Jeffrey Walker. It also will raise a fund targeted at around $4 billion, of which J.P. Morgan Chase will commit upwards of $1 billion (the figure will drop if the fund is unable to raise $4 billion, as J.P. Morgan Chase wants to hold less than a 25% interest).

As for affiliated efforts, the new entity also will manage an Asian Opportunity Fund II, which currently is being raised with a $1.2 billion target. It will not, however, manage One Equity Partners. Instead, that group (acquired as part of the Bank One merger) will remain captive to J.P. Morgan Chase, even though it had been in the midst of its own spinout discussions.

In general, none of this is surprising. Lots of banks have spun out their private equity units, often because of conflicts that occur when I-banking clients and captive private equity groups begin competing for the same deal. The driving factor also can be a general discomfort with the private equity asset class’ high-risk nature. Examples over the past few years include Fleet spinning out Nautic Capital, Deutsche Bank spinning out MidOcean Partners and Morgan Stanley spinout out MetalMark Capital. Then there is the whole CSFB-DLJ Merchant Banking debacle, which certainly is a “what not to do” road map for Jeffrey Walker and crew. The main captive banking units remaining belong to Citigroup and Goldman Sachs, with the latter apparently targeting around $8.5 billion for its new fund.

I generally applaud all of these spinouts (or attempted spinouts, in the CSFB case), because conflicts of interest can never be good for either side of the business. The JPMP move, however, gets special recognition, because it also will rectify one of JPMP’s most longstanding stumbling blocks: An unwillingness/inability to separate out its venture capital and buyouts activities. This stubbornness goes back to the bubble years, when JPMP (or Chase Capital Partners, at the time) morphed from a buyout shop into a major early-stage VC force. When the bubble burst, JPMP tried to become all things to all people, which contributed to its fund-raising difficulties in 2001 and 2002. Specifically, JPMP launched its first third-party vehicle effort in late 2000 with a $13 billion target (including a $6.25 billion commitment from the bank), but ultimately could secure just $1.7 billion in outside limited partner commitments (bank also reduced commitment twice, leading to the current ! $6.5 billion fund size).

As part of the spinout, however, the $4 billion fund will be exclusively dedicated to late-stage and buyout deals. The current JPMP venture capital team – which focuses on both IT and life sciences — will spin out into its own firm, although it probably will include some involvement from Jeffrey Walker and other senior managers. It is a case of better late than never, and should facilitate fundraising for all involved.

JPMorgan Partners (JPMP) will spin out of parent bank J.P. Morgan Chase & Co. (NYSE: JPM) in late 2006, becoming an independent entity. The spinout will focus primarily on buyouts, and will try to raise a $4 billion global fund that has received up to $1 billion in a limited partner commitment from J.P. Morgan Chase. The JPMP venture capital team will form its own independent group, while One Equity Partners will remain as the captive private equity arm of J.P. Morgan Chase. JPMP also is continuing to raise its second Asian Opportunity fund with a $1.2 billion target. That vehicle will be associated with the spinout. JPMP still has approximately $2 billion in uncommitted capital for its current fund.

Perlegen Sciences Inc., a Mountain View, Calif.-based company that studies genetics-related efficacy and adverse effect profiles of pharmaceutical clinical trial participants, has raised $74 million in Series D funding. CSK Venture Capital led the deal, and was joined by Brookside Capital (a Bain Capital affiliate), Mizuho Securities, Glynn Capital Management and Cape Securities. Return backers included Maverick Capital, Lombard Odier Darier Hentsch & Cie, Zesiger Capital, Sano Ventures, BSI SA, MPM BioEquities, SB Life Sciences, Unilever Ventures, Biofrontier Partners, Private Life Biomed, CMEA Ventures and former parent company Affymetrix Inc. (Nasdaq: AFFX). The company was spun out of Affymetrix in 2000, after which it raised a $100 million Series B round at a post-money valuation of approximately $266 million in early 2001,and a $30 million Series C round in 2002.</! p>

Saratoga Partners has completed its sale of specialty printing inks company Sericol to Fuji Photo Film Co. Ltd. (NasdaqSC: FUJIY) for approximately $230 million. Saratoga acquired Sericol in February 2003 from British Petroleum subsidiary Burmah Castrol PLC.

SpectraSensors Inc., a San Dimas, Calif.-based supplier of optical sensors for industrial and environmental gas sensing applications, has raised $6 million in Series B funding. American River Ventures led the deal, and was joined by Nth Power and return backer Blueprint Ventures.

Nautilus Biotech, a Paris, France-based protein pharma company, has raised 7.25 million euros in new venture capital funding. Auriga Partners led the deal, and was joined by return backers Matignon Technologies, Edmond Rothschild Investment Partners, FCJE (CDC PME, Caisse de Depots), Pre-IPO Inv*st, 123 Venture and Creabilis Biotech.

DirectPointe Inc., a Lindon, Utah-based provider of managed computer services with a current focus on the healthcare market, has raised $4.5 million in Series A funding led by the Canopy Group. The company previously had raised $1.1 million in seed funding from angels and Canopy Group.

Sciona Inc., a Boulder, Colo.-based biotech company focused on genetic personalization, has raised $8.2 million in third-round funding. Burrill & Co. led the deal, and was joined by Prelude Trust, BASF Venture Capital and Bioventures Inc.

Walton Garden Buildings, a UK-based maker of timber sheds and play houses, has received GBP $15 million from Close Brothers Private Equity. The deal – plus an facility from HSBC — facilitates the retirement of Barry Walton, one of the family’s two co-owners.

VPIsystems Inc., a Holmdale, N.J.-based provider of software for modeling and optimizing communications network capacity, has raised $9.26 million in Series F funding. Core Capital Partners led the deal, and was joined by return backers Techno Venture Management, Siemens Venture Capital and Cipio Partners.

General Bandwidth Inc., an Austin, Texas-based provider of VoIP infrastructure solutions, reportedly will announce today that it had raised $18 million in a new funding round led by existing shareholder Oak Investment Partners. The company previously had raised around $150 million in total VC funding since its 1999 inception.

Movaris Inc., a Cupertino, Calif.-based provider of financial control management software and services, has raised $10 million in third-round funding. Adobe Ventures and Granite Ventures co-led the round, and were joined by return backers Mohr Davidow Ventures and Redpoint Ventures.

Arsenal Capital Partners has acquired Sermatech International from Teleflex Inc. (NYSE: TFX). No deal terms were disclosed. Sermatech is a Limerick, Pa.-based provider of engineered coatings and repair services.

Black Diamond Capital Management has acquired the assets of Coachella, Calif.-based produce company Sun World International Inc. for $127.75 million. Sun World filed for Chapter 11 bankruptcy protection in January 2003, after which Black Diamond supplied approximately $40 million of de*tor-in-possession financing. An auction for the company’s assets occurred on January 13, 2005, with Black diamond emerging as the winning bidder.

Citigroup Private Equity has acquired a 7% stake in publicly-traded Indian textiles and apparel company Abhishek Industries Ltd., according to Reuters. The deal would be worth approximately $10.3 million, and Abhishek stock rose approximately 8.9% on the news.

American Capital Strategies Ltd. has sponsored a buyout of FutureLogic Inc., a Glendale, Calif.-based maker of customized small-format embedded thermal printing solutions. AmCap had been a minority shareholder in the company since December 2002, and has inv*ested $108 million as part of the buyout (including senior term loans, senior and subordinated notes and common equity). AmCap also is rolling over its existing common equity and warrants (as is company management), and will provide a revolving credit facility. It now owns approximately 64% of FutureLogic.

SSA Global Technologies Inc., a Chicago-based provider of enterprise application software, has set its proposed IPO terms to 14.3 million common shares being offered at between $13 and $15 per share. The company was formed in 2000 to acquire the assets of bankrupt company System Software Associates Inc., and since has acquired such companies as Infinium Software Inc., Ironside Technologies Inc., Elevon Inc. and EXE Technologies Inc. It currently is controlled by private equity firms General Atlantic Partners and Cerberus Capital Management.

Thomas Kuhr has resigned as chairman of T-Venture, the venture capital arm of Deutsche Telekom AG. He also resigned as chairman of the management board of the German Private Equity and Venture Capital Association. According to a German press report, the moves come just one week after Kuhr revealed in a magazine interview that he obtained his “by mail” doctorate improperly, by submitting written work that he had previously published.

Paul Grangaard has agreed to join Minneapolis-based private equity firm Goldner Hawn Johnson & Morrison, effective next month. He currently runs Piper Jaffray‘s private client group, and will be replaced by Robert Peterson, who most recently ran the firm’s investment research group.

MSD Capital, which manages the capital of Michael Dell and his family, has hired Eric Rosen to run its private equity group. Rosen previously served as a managing director with Onex Corp.

Almeida Capital, a London-based private equity placement and consulting firm, has promoted both Delaney Brown and Stephen Hunt to the position of associate director. Both men have been with Almeida for four years.

Yaacov Gross has joined Morrison & Foerster LLP as a partner in the law firm’s capital markets practice. He previously was with Wilkie, Farr and Gallagher LLP, where he co-founded that firm’s real estate securities practice.

Index Ventures of Switzerland has closed its fourth fund with 300 million euros. Limited partners include Adams Street Partners, AlpInvest Partners, BP Pension Fund, Horsley Bridge, HarbourVest Partners, LGT Capital Partners, Partners Group and Schroders.


Buyouts Deals of the Year

As you probably know by now, The Buyouts Symposium is next Wednesday through Friday at the Waldorf Astoria in New York. The event’s highlight is always the Deals of the Year awards luncheon, during which normally-composed dealmakers awkwardly accept trophies while vacillating between a substantive speech and a laundry list of thank yous. It’s kind of like the Oscars, minus the celebrities, commercials and formal ware. It’s also minus the sealed envelopes, as most winners were published in the last issue of Buyouts Magazine,and the rest of them were published in today’s issue (on the other hand, we have what could be the final joint appearance by James Carville and Tucker Carlson – plus lots of good panels, sponsorship schwag and a Thursday night bash at the Four Seasons).

Each award winner received an extensive write-up/award explanation in Buyouts Magazine. Winners disclosed in the February 14 issue included:

  • European Deal of the Year: Celanese (Blackstone Group)
  • Emerging Markets Deal of the Year: Gecis Global (GA Partners & Oak Hill Capital Partners)
  • Turnaround of the Year: Shinsei Bank (Ripplwwood)
  • Exit of the Year: New York & Co. (Bear Stearns Merchant Banking)
  • I-Bank of the Year: Harris Williams & Co.
  • Small Market Lender of the Year: CapitalSource
  • Large Lender of the Year: Wachovia
  • Small Market Deal of the Year: Loehmann’s Holdings (Crescent Capital)
  • Mid-Market Deal of the Year: LazyDays RV (Bruckmann Rosser)
  • Large Market Deal of the Year: Vetco (Candover, JPMP, 3i Group)
  • Mega Deal of the Year/Public-to-Private: PanAmSat (KKR, Providence, Carlyle)

Winners unveiled this morning included:

  • Pros of the Year: Marc Rowan & Joshua Harris of Apollo
  • Firm of the Year: Blackstone Group

Deal of the Year: Texas Genco (TPG, KKR, Hellman & Friedman, Blackstone)

Apax Partners has agreed to acquire a 63% ownership position in Travelex PLC, a UK-based foreign currency exchange company. The deal values Travelex at just over GBP 1 billion (approx. $1.92 billion), including an undisclosed amount of assumed debt. Travelex chairman and CEO Lloyd Dorfman‘s ownership stake will drop from 63% to 30%, while 3i Group‘s position will drop from 33% to seven percent. It is expected to close this July. Other bidders were reported to include Permira, CVC and KKR.

Solarflare Communications Inc., an Irvine, Calif.-based maker of semiconductor products for physical-layer connectivity, has raised $48 million in Series A-1 funding. Oak Investment Partners led the deal, alongside past backers Foundation Capital, Anthem Venture Partners, Intel Capital and Miramar Ventures. Solarflare has raised $78 million in total VC funding since its 2001 inception.

Pantheon Ventures is raising its fourth European fund with a maximum capitalization of $400 million, according to a regulatory filing. So far, the fund has at least $49 million in commitments from limited partners like the Newell Rubbermaid Master Trust and the Workers Benefit Plans of the Lutheran Church-Missouri Synod. Since March 2004, Pantheon has been wholly-owned by Russell Investment Group, a subsidiary of Northwestern Mutual Life Insurance Co.

Network Intelligence Corp., a Westwood, Mass.-based provider of security event management solutions, has raised $12 million in third-round funding. Bain Capital Ventures and Castile Ventures participated on the deal, and were joined by return backers Ascent Venture Partners, Egan-Managed Capital, JMI Equity Fund and Network Intelligence Chairman and Founder Lynn Mormann. The company has raised more than $25 million in total VC funding since its 1996 inception.

Frontier Silicon Ltd., a UK-based fabless semiconductor company focused on mobile digital television and DAB digital radio products, has raised $28 million in new venture funding. ACT Venture Capital led the deal, and was joined by Quilvest and return backers Apax Partners, Alta Berkeley and BlueRun Ventures.

T-Networks Inc., an Allentown, Pa.-based, has raised $5.75 million in Series C funding. TL Ventures led the deal, and was joined by fellow return backers Greylock Partners, U.S. Venture Partners and Sequoia Capital.

BlueLithium Inc., a San Jose, Calif.-based provider of Internet advertising solutions, has raised $11.5 million in Series A funding co-led by WaldenVC and 3i Group.

Active Reasoning Inc., a Palo Alto, Calif.-based developer of IT compliance solutions, has raised $11.5 million in Series B funding. InterWest Partners led the deal, and was joined by return backers ArrowPath Venture Capital, ComVentures and Onset Venture Partners.

NitroSecurity Inc., a Portsmouth, N.H.-based provider of intrusion prevention solutions for enterprise networks, has raised $6.5 million in Series B funding. First Analysis led the deal, and was joined by return backers like former Cabletron Systems executive Ken Levine. The company has raised $13.5 million in total VC funding.

Brightcove, a Cambridge, Mass.-based IP video startup, has received an undisclosed amount of venture capital funding from General Catalyst Partners and Accel Partners. The company was founded last year by Jeremy Allaire, co-founder of Allaire Corp. and, subsequently, an entrepreneur-in-residence with General Catalyst. Jim Breyer of Accel and David Orfao of General Catalyst are on the Brightcove board of directors.

Norwest Equity Partners has sponsored a recapitalization of portfolio company Imperial Supplies LLC, a Green Bay, Wis.-based distributor of maintenance products to fleet industries. No financial terms were disclosed, except that NEP and other company shareholders received a distribution as part of the deal.

Kleinwort Capital Ltd. has sold UK-based portfolio company Vivista Holdings Ltd. to SunGuard Data Systems Inc. (NYSE: SDS). The deal is initially worth GBP 104.5 million, with the possibility that additional considerations could net another GBP 5.5 million. Kleinwort sponsored a GBP 20.5 million management buyout of Vivista (f.k.a. Securicor Information Systems) in May 2003. Vivista provides IT systems and services to the UK public safety, criminal justice and local government sectors.

Laureate Education Inc. (Nasdaq: LAUR) has sold English language subsidiary Wall Street Institute to The Carlyle Group for approximately $40 million. Citigroup Private Equity also participated on the deal.

Citi Trends Inc., a Savannah, Ga.-based retailer of urban fashion apparel, has filed to raise $57.5 million via an IPO of common stock on the Nasdaq under proposed ticker symbol CTRN. The company was acquired in 1999 by Hampshire Equity Partners.

Targacept Inc., a Winston Salem, N.C.-based drug company focused on the central nervous system, has postponed its IPO, according to multiple press reports. The company had been looking to price 6.25 million common shares at between $11-$13 per share, and has raised over $120 million in VC funding from firms like Nomura Phase4 Ventures, New Enterprise Associates, EuclidSR Partners, Nomura, Oxford Bioscience Partners, R.J. Reynolds Tobacco Holdings, Burrill & Co. and Advent International.

Paladin, a Cedar Rapids, Iowa-based provider of construction equipment attachments, has acquired Sweepster LLC, a Dexter, Mich.-based maker and distributor of light construction equipment attachments. Paladin is a portfolio company of Norwest Equity Partners, and has made five acquisitions since NEP’s initial investment in October 2003.

Industry Kapital has promoted the following team members to the position of partner: Christopher Masek, who will be responsible for the firm’s French activities; Detlef Dinsel, responsible for German activities; Trygve Grindheim, responsible for Denmark/Norway; Kristiaan Nieuwenburg, responsible for Benelux region; and James Yates, who continues to be responsible for finance and administration. Both Masek and Dinsel also join the firm’s senior management group, which now has six members.

Alexei Andreev has agreed to joined business development company Harris & Harris Group as an executive vice president and managing director, effective in mid-March. He currently serves as an associate with Draper Fisher Jurvetson.

Austin Grose has joined Shasta Ventures as chief financial officer. He most recently served as CFO of Allegis Capital. As reported here last week, Shasta Ventures recently closed its inaugural fund with $210 million in limited partner commitments.

Samir Kothari has joined Battery Ventures as a senior associate in the firm’s San Mateo, Calif. office. He will focus on the software, consumer Internet and wireless market segments. Prior to joining Battery, Kothari led product marketing for BEA Systems‘ WebLogic Workshop.

David Marlow, former CEO of 3i Group, has resigned from the board of UK newspaper publisher Trinity Mirror PLC.

Crescent Capital Investments Inc. and parent company First Islamic Investment Bank are changing their names to Arcapita Inc., effective March 15. Crescent is an Atlanta-based private equity firm, while First Islamic is a Bahrain-based merchant bank.

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