PE Week Wire — Friday, November 12

Get The Wire in your inbox each morning! Just send us an email.


    Friday 11/12


Friday Feedback

The air is cold, the Big Dig tunnel is full of leaks and the un-trusty Pontiac has begun making a sound reminiscent of fingernails on a chalkboard. In other words, it’s time for Friday Feedback.

Almost all of the non-internship input this week concerned Tuesday’s column on private equity disclosure. A bunch of you believe that the threat of disclosure might not be such a bad thing for the private equity markets, given the current reality of LP overhang. Others argue that the matter will cause private institutions to pass on funds that also accept public institutions as limited partners. In fact, some private folks wrote in to suggest that it already was beginning to happen.

Beyond those points, Tony writes: “I am real tied of these country club VCs who think they are above it all. For USVP to say they are excluding those directly tied to the possible disclosure of sensitive fund data is a joke. When they make a good investment and performance is good they want you to know, when it is a bad investment, it is none of your business. How convenient.”

Michael, however, disagrees: “While I was a bit leery of the dead-horse beating with disclosure, I think that today’s piece may have been your best ever on the subject. The USVP news is very important, and is another example that shows who holds the power in the relationship between LPs and the private equity firms. Apparently investments that provide high returns are a scarcer than LP dollars, which goes right along with efficient markets theory. The line ‘the state should have no trouble finding lucrative investments for its billions’ is absolute proof that some politicians really don’t understand markets, basic economic theory, or really how hard it is to generate a return on investment.”

Charles adds: “By treating transparency as an inherently valuable goal, the Statesman has elevated it to natural rights status. Thus, the public’s right to transparency must, inAbbott’s and The Statesman‘s views,take its place among the public’s rights to privacy, free speech, to bear arms. not to mention the pursuit of happiness. Please, don’t we have enough fundamental, natural rights, already? The 49th Amendment to California’s Constitution guarantees each resident the right to fish! I can see the day on the not-too-distant horizon in which we’ll legislate our right to wear Italian hand-made shoes and Armani suits. Not only haven’t the Statesman thought much about it, as Lowery admitted, they haven’t thought about it at all, unless, of course, theunderlying goal of raising this issue is to advance a political career and publisher’s agenda. Nice job – calling them was an great idea. And, I appreciate your persistence with Abbott.”

Finally, there was a most interesting party that agreed with Tuesday’s column: The San Jose Mercury News (or at least one of its reporters). That’s right, the paper that sued groups like CalPERS in order to promote greater transparency, has sided against the slippery slope promoted by AG Abbott and the Statesman editorial board. Check out this entry on the Merc’s new SiliconBeat blog for more.


Email Dan Primack

Blockbuster Inc. (NYSE: BBI) has expressed an interest in acquiring video rental chain Hollywood Entertainment Corp. (Nasdaq: HLYW) for $11.50 per share. The offer works out to approximately $700 million ion equity, plus the assumption of around $300 million in debt. The offer comes as competition to an existing bid from buyout firm Leonard Green & Partners and Hollywood Entertainment CEO Mark Wattles. The pair originally offered $14 per share in March, but later reduced it to $10.25 per share. It is worth noting, however, that dollars might not be the only factor in Hollywood Entertainment selecting a winner, since the Blockbuster offer could conceivably run into regulatory roadblocks.

BroadLogic Network Technologies Inc., a San Jose, Calif.-based supplier of semiconductor chipsets to the broadband industry, has raised $20 million in Series C funding. Time Warner Investments and Rho Ventures co-led the deal, and were joined by return backers August Capital, CDIB Venture Management, Levensohn Venture Partners, Presidio Venture Partners and Walden International.

Adelphia Communications Corp. might be sold in one enormous chunk, instead of piecemeal, according to The New York Times. The mega-LBO could fetch upwards of $18 billion, and KKR, Providence Equity Partners and Thomas H. Lee Partners reportedly are among the firms that have begun informal talks about participating.

HydroPoint Data Systems Inc., a Petaluma, Calif.-based provider of irrigation management solutions, has raised $11.9 million in first-round funding. Investors included The Toro Co., Monitor Venture Partners, Firelake Strategic Technology Fund, Scneic Ventures and Shea Ventures.

XOS Technologies Inc., a Sanford, Fla.-based , has raised $5.5 million in second-round funding. Beechtree Capital led the deal, and was joined by Dorchester Capital, principals of Sanders, Morris and Harris, Ledgewood Properties Inc., LBJ Holdings, Sherwood Family LLC; Carolyn Wall (former publisher of Newsweek and New York magazines and vice president/general manager of the NYC Fox Network television stations) and Frank Vuono (co-founder/partner of 16W Marketing and former president of marketing of SFX Sports Group). In addition, the McCotter Family Trust converted approximately $2 million in outstanding indebtedness into common shares.

Reata Discovery Inc., a Dallas, Texas-based drug company targeting cancer and neurodegenerative disease, has raised $12 million in Series C funding. Investors included Cardinal Investment Co., Ojai Goliad, StarTech Ventures, RedBird Life Sciences Inc. and the University of Texas.

Select Medical Corp. (NYSE: SEM), a Mechanicsburg, Pa.-based operator of long-term acute hospitals, agreed last month to be acquired for approximately $2.3 billion by an investment group led by buyout firm Welsh, Carson, Anderson & Stowe, and also including current shareholder Thoma Cressey Equity Partners. Now, however, a group of existing shareholders have filed a class-action lawsuit in Delaware to prevent the public-to-private deal from being consummated, arguing that the $18 per share price is not adequate.

Forbo International SA, a publicly-traded Swiss flooring company, rejected a CHF 450 million (approx. $380 million) buyout offer from CVC Capital Partners. News of the offer, however, sent Forbo stock up over 30% per share, and Forbo said that it would hire CSFB to prepare a value analysis of the company, after which it could perhaps reconsider the bid.

Key Principal Partners has acquired Honsador Lumber Corp., a wholesaler of building products in Hawaii. The deal also includes Honsador affiliates Honolulu Wood Treating and Ariel Truss. RDV Corp. and the Hawaiian Land Development Corp. both joined Key Principal Partners as equity partners in the resulting holding company, while First Hawaiian Bank provided senior debt financing. No pricing information was disclosed.

Koor Industries Ltd. has acquired a 32.5% ownership stake in Tadiran Communications Ltd. for approximately $141 million. Selling shareholders were Trefoil Israel Partners II LP (part of Shamrock Holdings) and the FIMI Israel Mezzanine Fund. Tadiran is a Holon, Israel-based provider of military communications solutions.

Dimensional Music Publishing LLC, a private equity investment unit of JDS Capital Management, has acquired the assets of DreamWorks Music Publishing from Universal Music. The acquired catalog includes works by such artists as The Byrds, Stevie Ray Vaughn, John Denver, Ricki Lee Jones, Jimmy Eat World and Papa Roach. Music created for DreamWorks motion pictures and television programs was not included in the sale. No financial terms were disclosed, although The New York Post reports a $50 million price tag.

Bencis Capital Partners, a Dutch private equity firm, has closed its second buyout fund with Euro 250 million in limited partner commitments.

Mark Stevens, a general partner with Sequoia Capital, and his wife Mary have donated $22 million to the University of Southern California’s Viterbi School of Engineering. The gift is designed to create an institute both to commercialize faculty technology innovations and to teach students about the commercialization process. Stevens is a USC trustee and alumnus.

Mark J. Harty has joined LCS & Partners in Taipei, where hisresponsibilities will include private equity and private financing.He previously was Asian Counsel with Shearman & Sterling

Rainer Magold and Christina Ungeheuer, current partners in the Frankfurt office of Baker & McKenzie, have agreed to join the Munich office of Milbank, Tweed, Hadley & McCoy LLP as partners.


    Thursday 11/11

Assorted Ramblings

Lots of interesting news, rumor and innuendo floating around the cavernous cubicle this morning, so let’s get to them in that order.

News: Accel Partners has closed its ninth fund with $400.35 million in limited partner commitments. No press release or official Accel comment yet (London partners have been in a meeting all morning, and it’s still too early to grab anyone in Palo Alto), but the firm did recently file relevant papers with the Securities and Exchange Commission. Nothing too shocking here, as conventional wisdom was that Accel would have no problem hitting its $400 million target. I’m also hearing that Accel was able to maintain its proposed 30% carry, with LPs apparently believing the premium to be an acceptable alignment of interests, if not of profits. It’s worth noting, however, that this fund could include one significant change at Accel, but I’m less sure of that today than I was yesterday. We’ll just keep such things between us until I know for sure.

Rumor: A few days ago, a reporter called to ask my opinion of how Bush’s re-election would impact the VC industry. I gave the standard answers about how Bush and Kerry had differed on tax policy, medical research policy and other such chestnuts, and then added a quick mention about the Small Business Administration and its Small Business Investment Company (SBIC) program. I knew Kerry was in favor of maintaining the SBIC program with some alternations, whereas Bush was not nearly as enthusiastic. Nonetheless, I said, Bush had signed a stop-gap measure to deal with the program’s budget shortfall (caused, in part, by lingering effects of the Internet bubble collapse), so that it seemed like he would try to find a way to make it work to at least some extent.

Oops. According to The Deal, Bush is hoping to kill off the program in its entirety. No idea if this is why SBIC administrator Jeff Pierson just quit, but it certainly is disturbing news to small VC firms and startups alike. Bush’s main objection seems to be one of the federal government having no legitimate role as a provider of capital to private enterprise, although things like farm subsidies and airline industry bailouts due lead one to wonder about his consistency on such matters. Anyway, an SBA spokesman told The Deal that the program is here to stay – in some form – and Senator Olympia Snowe (R-ME) won’t let it die without a fight. Worth keeping an eye on, as it could prove to be the single most important policy decision Bush makes in regards to the VC and entrepreneurial classes.

Innuendo: I’ve written a lot about how veteran VC and LBO firms are having little trouble raising new funds (see Accel above). But it seems that, in some cases, lousy returns can come back to bite you. Hey Boston VCs: Do you know which one of your peers I’m talking about? You might have seen them on Storrrow Drive with signs that read: “Will work for LP commitments.” 

Finally, a few additions and clarifications to yesterday’s internship list: The job listed as should have been listed as “private equity.” It is based in LA. Also, two additional opportunities:

Job: Private equity (invests direct and in funds)
Location: Washington DC

Job: Middle Market Senior/Junior Capital Provider
Location: New York


Email Dan Primack

Nalco Holding Co., a Naperville, Ill.-based wastewater treatment and process-chemicals company, will begin trading on the NYSE under ticker symbol NLC. It priced over 44.44 million common shares at $15 per share (below its $17-$19 range), for a total IPO take of approximately $666.67 million. The company was formed last year, after Suez SA sold the company – then known as Ondeo Nalco – in a $4.3 billion leveraged buyout to The Blackstone Group, Apollo Management and GS Capital Partners. The three firms maintain a combined majority interest following the IPO.

Amgen Inc. (Nasdaq: AMGN) has formed a $100 million corporate venture capital fund named Amgen Ventures. The new effort will be based in San Diego, and will invest in early-stage biotech companies focused on human therapeutics.

PowerGenix Corp., a San Diego-based provider of rechargeable nickel-zinc batteries, has raised $10 million in Series B funding. OnPoint Technologies, a U.S. Army-supported VC firm, led the deal, and was joined by fellow new investor Braemar Energy Ventures. Existing backers Advent International, Granite Ventures and Technology Partners also participated.

Polatis Ltd., a UK-based developer of ultra-low loss optical switches, has raised $9.4 million in third-round funding. Return backers included 3i Group, Alta Berkeley Venture Partners, EonTech Ventures and Prelude Trust PLC. The company now has raised approximately $20 million in total VC funding since its 2000 inception.

BoardVantage Inc., a Menlo Park, Calif.-based provider of corporate governance software, has raised $5.5 million in venture capital funding. Bay Partners led the deal, and was joined by return backers Foundation Capital.

Paciolan, an Irvine, Calif.-based provider of automated ticketing software, has raised an undisclosed amount of strategic funding from Comcast-Spectacor. The transaction also includes an agreement whereby Paciolan will provide the technology platform for Comcast-Spectacor’s ticket management business.

The Blackstone Group has agreed to acquire Gerresheimer Glas AG, a Germany-based packaging company owned by Investcorp and JPMorgan Partners. No financial terms were disclosed. The selling parties acquired Gerresheimer Glas in 2000 from Viag AG.

Fenway Partners said that portfolio company AAC Group Holding Corp., the parent company of class ring and yearbook provider American Achievement Corp., has completed a recapitalization. The transaction includes $89.2 million in gross proceeds from 10.25% senior discount notes due 2012, with Fenway and its fellow investors retaining full company ownership.

Patriarch Partners has completed its acquisition of Galey & Lord Inc., an Atlanta-based supplier of denim, khaki and corduroy fabrics for the fashion apparel and uniform markets. Following the deal, all Galey & Lord operations have emerged from Chapter 11 bankruptcy protection. No financial terms were disclosed.

The European Union Commission has okayed CVC Capital Partners‘ pending sale of Spanish vehicle inspection outfit Corporativa de Servicios Grupo Itevelesa to Apax Partners and Banco Santander Central Hispano.

Warburg Pincus and Providence Equity Partners are in advanced talks to buy Telcordia Technologies Inc. for approximately $1.3 billion, according to The Wall Street Journal. Telcordia is a Piscataway, N.J.-based telecom software company originally formed by AT&T, and sold for $700 million to Science Applications International Corp. (SAIC) in 1999.

LLR Partners, a Philadelphia-based private equity firm, is planning to close its second fund with $300 million in the first quarter of 2005. So far, it has closed on approximately $250 million.

Voyager Capital, a Seattle-based venture capital firm, has joined the Open Source Development Labs, an Oregon-based non-profit consortium dedicated to accelerating the adoption of Linux. The group has more than 60 members, but Voyager is its first venture capital firm.

Hans Kempers, former president of Ahold Real Estate, has joined the board of publicly-traded venture capital firm Hansen Gray & Co.


    Wednesday 11/10

Time to Make A Match

We have over 30 firms that asked to participate in our summer intern matching program. Some are looking for one intern, some are looking for multiple interns. Some of the positions are paid, some are not. Each of the positions is only open to current MBA candidates looking for summer employment. Apologies to everyone else, including recent MBA grads. For those who qualify:

1.      Scan the list of available internship opportunities below. If one interests you, please send a resume and cover letter to the appropriate email address. The poster is not required to respond or acknowledge receipt. If interested, they will contact you.

2.      In order to help prospective employers wade through the hundreds of applicants, please include the following in the email subject header: “Full Name – Name of Person With Whom You’d Most Like to Have Dinner.” The person can be living or dead, and feel free to explain yourself in the cover letter.

3.      Do not copy me on your emails. My inbox is full enough. Also, it is possible that these Yahoo accounts will fill up quickly. If your email bounces back, just wait a few hours, and hopefully the firm will clear out space.

Job: M&A, private capital raising
Location: San Francisco

Job: Private equity investing in the Caribbean
Location: Jamaica

Job: PIPE, soon to launch LBO and ABL funds
Location: New York

Job: Merchant banking
Location: Cleveland

Job: Late-stage investing in business services space
Location: Chicago

Job: LBO
Location: New York

Job: VC (some buyout)
Location: Philadelphia

Job: LBO
Location: Washington DC

Job: Software-focused private equity/M&A
Location: San Francisco

Job: VC
Location: Ft. Lauderdale, FL

Job: Corporate VC, focus on semiconductors
Location: San Jose, CA

Job: VC
Location: Los Angeles

Job: Mezzanine
Location: White Plains, NY

Job: Mid-market M&A
Location: Houston, TX

Job: Mid-market LBO
Location: Greenwich, CT

Job: Early-stage VC
Location: Raleigh, NC

Job: Late-stage/buyouts/turnarounds
Location: Hong Kong & Amsterdam

Job: Mid-market buyout
Location: Seoul, South Korea

Job: Lower middle-markets private equity
Location: Conshohocken, PA

Job: Small-market buyout
Location: Portland, OR

Job: Non-control private equity
Location: Philadelphia

Job: M&A
Location: New York

Job: Special situations
Location: New York

Job: Buyout/mezzanine
Location: Columbus, Ohio

Job: IT-focused VC
Location: Boston

Job: Networking startup (non-investment)
Location: New York

Job: Mid-market buyout
Location: Boulder, CO

Job: Secondary acquisitions
Location: San Francisco

Job: Investment management
Location: Los Angeles


Email Dan Primack

Verizon Communications Inc. (NYSE: VZ) has completed the sale of its Canadian directories business to Bain Capital for $1.54 billion. Known as SuperPages, the business comprises GTE’s former Dominion Directory Services and the Canadian directories purchased from TELUS in 2001. It is the second-largest directories publisher in Canada.

NGP Capital Resources Co., a business development company (BDC) formed by private equity firm Natural Gas Partners, will begin trading on the NYSE under ticker symbol NGC. The company priced 16 million common shares at $15 per share, for a total IPO take of approximately $240 million. NGP had filed to price 17 million shares at $15 per share. It is the fourth BDC from a private equity firm to price this year, following earlier offerings from Apollo Management, Ares Management and Prospect Street Capital. Other proposed offerings from firms like KKR, Blackstone Group and Thomas H. Lee Partners have either been canceled, or have not yet materialized.

TradeBeam Holdings Inc., a San Mateo, Calif.-based provider of global trade management solutions, has raised $18.25 million in new VC. The Carlyle Group led the deal, and was joined by return backers Sigma Partners, Enterprise Partners Venture Capital, Sprout Group and Silicon Valley Bancventures. The company now has raised approximately $45 million in total VC funding since its 2000 inception.

PocketThis Inc., an Oakland-based provider of mobile data services software, has raised $12 million in Series C funding. New investors American River Ventures and Crosslink Capital were joined on the deal by return backers Mobius Venture Capital, SeaPoint and Innovacom. The company now has raised approximately $32 million in total VC funding since its 1999 inception.

Extricom Ltd., a Herzlia, Israel-based WLAN company, has held a $5.6 million first close on its second round of VC funding. Vertex Venture Capital led the deal, and was joined by seed backer Magnum Communications Fund. Extricom plans to close out the round with a total of $8 million within the next two months, and already has signed commitments for the remaining $2.4 million.

ViOptix Inc., a Fremont, Calif.-based developer of non-invasive local tissue oxygen measurement devices, has raised $9.2 million in Series C funding. MDS Capital led the deal, and was joined by return backers Morningside Group, Vivo Ventures (f.k.a. BioAsia) and Trident Investments.

Sigaba Corp., a San Mateo, Calif.-based provider of secure messaging solutions, has received an $8 million private equity investment from Symantec Corp. and Liberty Partners.

Senior Health Holdings, a Birmingham, Ala.-based holding company for a Boston-based subsidiary that provides senior healthcare benefits and support services, has raised $7.5 million in venture capital funding. Investors included Noro-Moseley Partners, Council Ventures, SSM Ventures and New Capital Partners.

Onset Technology Inc., a Santa Cruz, Calif.-based provider of enterprise access software for wireless handheld devices, has raised $2 million in new Series C funding from Jerusalem Global Ventures. The Series C round now totals $3.75 million, following an earlier investment from Catalyst Fund, Polar Communications and the Challenge Fund.

Bridgepoint Capital has agreed to sell UK-based insurance broker to Willis Group Holdings Ltd. (NYSE: WSH) for an undisclosed amount. Opus was originally acquired by Bridgepoint in September 1998, and has annual general insurance and group benefit revenue of approximately $24 million.

Spiegel Inc. (OTC BB: SPIEGEL) has taken its bankrupt Eddie Bauer unit off the auction block, according to The Deal. The unit reportedly had received bids from Bain Capital, Apollo Management, KKR, CSFB Private Equity and Cerberus Capital Management. The problem, it seems, is that the bids were in the range of 4600 million to $700 million, while Spiegel was looking for upwards of $1 billion.

China Netcom Corp., a Beijing-based fixed-line telecom provider in China and data communications operator throughout Asia, yesterday priced a $1.13 billion IPO. It will begin trading next Tuesday on the NYSE under ticker symbol CN, and on Wednesday in Hong Kong under ticker code 0906. In February 2001, Goldman Sachs and News Corp. (NYSE: NWSA) invested $325 million into China Netcom for a 12% ownership position.

ZipRealty Inc., an Emeryville, Calif.-based provider of residential services over the Internet, will begin trading on the Nasdaq under ticker symbol ZIPR. The company priced 4.55 million common shares at $13 per share (above its $10-$12 offering range), for a total IPO take of approximately $59.15 million. The company has raised over $57 million in VC funding, from significant shareholders like Benchmark Capital, Pyramid Technology Ventures, Vanguard Ventures, Venture Strategy Partners, Iverson Financial Corp. and Barrington Partners.

Inion Ltd., a Finnish developer of polymer-based surgical implants, plans to raise approximately GBP 30 million by floating on the London Stock Exchange. The company has received VC backing from CapMan Capital Management Oy, Odlander, Fredrikson & Co., POD Holding and Bio Fund Management Oy.

W.P. Carey & Co. LLC, a New York investment firm focused on long-term corporate financing, has opened an office in Dallas, Texas. Anne Coolidge Taylor, a managing director with W.P. Carey, will head up the new office.

Kirkland & Ellis International LLP plans to open an office in Munich, Germany, which will focus on private equity and M&A work. The law firm’s German practice will continue to be run by Thomas Verhoeven, who will move from London to Munich early next year. The new office will be co-managed by Volker Kullmann, who previously served as a partner with Clifford Chance.

Bain Capital Ventures announced that it has hired Benjamin Nye as a venture partner, and Michael Fleisher as an executive-in-residence. Nye most recently served as a senior vice president with Veritas Software Corp. (Nasdaq: VRTS), while Fleisher served as chairman and CEO of Gartner Inc. Both men will work on Bain Capital Ventures’ $250 million fund, which formally was announced this morning.

The Carlyle Group has added four members to its European leveraged finance team: Colin Atkins joins as a director, after having served as a director of the leveraged finance business at Prudential M&G; Nilesh Desai joins as an associate director, after having served as a vice president responsible for monitoring credits for Citigroup’s European leveraged finance portfolio; Caroline Goldsmith came aboard in September as an associate director, after having served in a similar role at Prudential M&G; and Stuart Mackenzie has joined as a senior associate, after having worked with Alcentra.

Armond Hairapetian has joined Miramar Venture Partners as an entrepreneur-in-residence. He most recently served as general manager of the optical products division of Broadcom Corp. (Nasdaq: BRCM).


    Tuesday 11/9

Reasons? We Don’t Need No Stinking Reasons!

One pitfall of writing a daily column is the inevitable beating of dead horses. Today, however, the deceased really do deserve a few more whacks.

So again we tackle the issue of private equity disclosure by public limited partners, which is back in the news thanks to the notable lack of such LPs in a new fund from U.S. Venture Partners. In particular, we will discuss Texas, since it is there that a local AG is unleashing his fire hose on the slippery slope. For a quick summary of all things disclosure, pick up today’s Wall St. Journal and read Ann Grimes’ story on C-1 (or go here). For those who have been following this space faithfully, simply continue.

One of the key tenets of Texas AG Greg Abbott’s disclosure position – which would include the release of underlying asset information like portfolio company valuations and revenue – is that it would not result in public investment groups like UTIMCO and TRST being denied access into any significant number of private equity and/or venture capital funds. I’ve personally tried to ask Abbott about the basis for this belief, but repeated requests for comment or clarification have gone unanswered. I also hear that certain public pension execs in Texas have received a similar silence from the AG’s office on such matters, but I’ll graciously chalk that up to an antiquated voice mail system.

In truth, perhaps Abbott simply feels that discussing the matter would muddy the media waters. Already, the Austin-American Statesman has bought his line (along with the hook and sinker), according to an October 22 editorial. It reads, in part: “[UT Regent Woody] Hunt argues that the venture capitalists salivating over UT’s $16 billion endowment will look elsewhere if Texas requires transparency. But as Texas Attorney General Greg Abbott said recently, the state should have no trouble finding lucrative investments for its billions.”

Upon first read, my immediate question was why the Statesman was taking Abbott’s word over that of Woody Hunt. So I called up David Lowery, an editorial writer with the newspaper. Specifically, I asked if he knew of any private equity or venture capital firms that have said they would take Texas money if Abbott’s disclosure plan is accepted by the courts. Lowery said he did not, and indicated that he hadn’t really looked for any. When asked why he trusted Abbott’s assertion, he answered that Abbott had some investment experience in a past career, and that what the AG said “seems to make sense.” When pressed, Lowery said my questions were too “technical,” and that the over-arching issue was one of increasing transparency. He did acknowledge that there could be information that should, indeed, remain private, but admitted that neither he nor his editorial board colleagues had given any substantial thought to what that information may be.

As an aside, the Statesman editorial also spent a lot of time parroting an earlier Wall Street Journal editorial that basically accused CalPERS of cronyism. That WSJ effort has been derided in this space for using selective examples of immature fund returns, but Lowery felt that the WSJ had met its burden. –

The reason I’m revisiting all of this today is because U.S. Venture Partners closed its ninth fund last week with $600 million in limited partner commitments. Among those NOT invited to participate were past USVP investors like CalPERS, the Washington State Investment Board and the Virginia Retirement System. Steve Krausz, a general partner with USVP, says that the exclusions were directly tied to the possible disclosure of sensitive fund data. Specifically, he said that USVP only considered admitting public LPs who either: (A) Operated in a state that had legislated against private equity disclosure (e.g. Michigan); or (B) Had established some sort of internal firewall that shielded the group from FOIA exposure. The rest, he said, were simply too risky for USVP to take a chance on in what currently is a cash-heavy fundraising market.

So USVP joins a growing list that also includes firms like Sequoia Capital and Charles River Ventures. Even Austin Ventures seems to be getting into the act, despite once saying that they couldn’t imagine not taking money from their neighbors at UT. Seems that Abbott has helped change their minds.

So the question now for Abbott and the Statesman editorial board is why they are so convinced that underlying asset disclosure will not dissuade private equity and VC firms from taking Texas’ money. There is not yet underlying asset disclosure in California, Washington or Virginia, but the very threat of it caused USVP to break off longstanding investment relationships. I know that two of those are blue states, Greg, but the money is still green. Either a reasoned answer or court intervention must come soon, or else groups like UTIMCO and TRST could be forced to stop investing in a particularly lucrative asset class.

Unrelated: Any firms participating in our Intern Resume Drive will be contacted later today with information. A full list of openings will appear in tomorrow’s Wire.

Email Dan Primack

Sonim Technologies Inc., a San Mateo, Calif.-based provider of wireless communications solutions, has raised $16 million in new venture capital funding. Return backers include Accel Partners, Apax Partners, 3i Group and BV Capital. The company has raised nearly $70 million in total VC funding since its 1999 inception, including a $28 million Series C infusion earlier this year.

Onex Partners, the private equity arm of Onex Corp. (TSX: OCX.SV), has agreed to acquire a 90% ownership position in BMP/CEI Holdings Inc., the parent company of Holmdel, N.J.-based Cosmetic Essence Inc. The deal is valued at approximately Cdn$300 million, including Cdn$135 million in equity from Onex Partners, in exchange for a 90% ownership interest. Senior management and certain financial institutions will hold the remaining 10 percent. The selling party is private equity firm Brockway Moran & Partners.

Jeffrey Goldstein has joined San Francisco-based private equity firm Hellman & Friedman as a managing director. He previously served as managing director, chief financial officer and a member of the management committee of the World Bank.

Teknovus Inc., a Petaluma, Calif.-based provider of broadband-access semiconductor chipsets, has raised $9 million in Series B funding. Samsung America Ventures and Mitsubishi Corp. co-led the deal, and were joined by fellow new investor SUIT Growth Fund. Return backers included Partech International, U.S. Venture Partners and Portview Communications Ltd.

IntelliReach Corp., a Dedham, Mass.-based provider of security and compliance management solutions for corporate messaging environments, has raised $7 million in Series A funding from M/C Venture Partners.

VistaPrint, a Lexington, Mass.-based graphic design and printing services provider, announced that it has closed its Series B funding round with $52 million. Highland Capital Partners and HarbourVest Partners co-led the deal, which included a $30 million tranche in August 2003, and a $22 million tranche called down this past August. The company now has raised around $76 million in total VC funding since its 1995 inception.

Sling Media Inc., a San Mateo, Calif.-based provider of digital media solutions, has raised $10.5 million in Series A funding from DCM-Doll Capital Management, Mobius Venture Capital and undisclosed strategic investors.

Netli Inc., a Palo Alto, Calif.-based provider of application delivery network services, has raised $8 million in Series C funding. Reed Elsevier Ventures led the deal, and was joined by return backers Morgenthaler Ventures, Bessemer Venture Partners, Alta Partners, Nokia Venture Partners and Leapfrog Ventures. The company has raised approximately $32 million in total VC funding since its 2000 inception.

Courion Corp., a Framingham, Mass.-based provider of identity management solutions, has raised $5 million in Series E funding. Paladin Capital Group led the deal, and was joined by return backers JMI Equity and Questmark Partners. Courion now has raised approximately $32 million in total VC funding since its 1996 inception.

Akoya Inc., a Peoria, Ill.-based provider of business intelligence software focused on the direct materials purchasing industry, has raised $800,000 in venture capital funding. Investors included ARCH Development Partners, Caterpillar Inc. (NYSE: CAT) and the Tri-County Venture Capital Fund. The company’s core technology was developed by Caterpillar, and the company is being spun out in collaboration with Peoria NEXT.

MDdatacor Inc., an Alpharetta, Ga.-based healthcare information services provider, has received an undisclosed amount of strategic funding from Siemens Venture Capital. MDdatacor has raised approximately $13 million in total VC funding since its 2001 inception.

AccessMedical Provider Network, a Lafayette, Calif.-based PPO network, has raised $900,000 in venture capital funding from members of the Northern California Chapter of the Keiretsu Forum.

The Neiman Marcus Group Inc. (NYSE: NMGA) has sold its Chef’s Catalog direct marketing business to Pikes Peak Direct Marketing Inc., a newly-formed company controlled by private equity firm JH Partners LLC. No financial terms were disclosed. Neiman Marcus acquired Chef’s Catalog in 1998, and was advised by Elixir Advisors on the sale to Pikes Peak.

Audax Group has completed its $210 million acquisition of concrete plant operator Southern Equipment Co. (a.k.a. Ready Mixed Concrete Co.). High-yield financing was led by J.P. Morgan Chase, with Jefferies & Co. also participating.

Centre Partners has sponsored a recapitalization of New York-based money management firm Munn, Bernhard & Associates. The deal includes a $50 million equity investment from Centre Partners affiliate Centre Pacific, and the re-launch of Munn Bernhard as MB Investment Partners.

U.S. Equity Partners, the buyout wing of private equity firm Wasserstein & Co., has sponsored a management recap of MasterCraft Boat Co., a Vonore, Tenn.-based maker of ski, wakeboard and luxury performance powerboats, according to The Deal. No financial terms were disclosed.

Goldman Sachs Urban Investment Group and C.H. James Restaurant Holdings LLC have teamed up to acquire 37 Burger King restaurants in the greater Chicago area. Bank of America Restaurant Finance Group provided a bank facility. No pricing details were disclosed.

Spheris, a Franklin, Tenn.-based provider of medical transcription technology and outsourcing services, has completed a recap transaction sponsored by Warburg Pincus and Soros Private Equity. Company management also participated on the deal, although no financial terms were disclosed. As part of the recap, Warburg Pincus replaces Parthenon Capital as Spheris’ majority shareholder.

S1 Corp. (Nasdaq: SONE) has agreed to acquire Mosaic Software Holdings Ltd., a UK-based provider of electronic payment and ATM solutions. The deal is valued at $37 million in cash, plus the possibility of an additional $15 million earn-out at the end of 2005. Mosaic has raised venture capital funding from GE Equity and Comparex Holdings.

DHL Express (Singapore) Pte Ltd. has agreed to acquire a 68.21% stake in Blue Dart Express Ltd. from four company founders and VC backer Schroder Capital Partners. The deal is valued at approximately $168 million. Blue Dart is an India-based logistics company, and has had an operational relationship with DHL since late 2002.

Annex Capital and Coller Capital have completed their previously-announced acquisition of 22 North American private equity assets from the institutional restructuring unit of Dresdner Bank. Annex Capital is a new firm formed by the former Dresdner portfolio managers, and is led by Alexander Coleman, former managing investment partner of Dresdner Kleinwort Capital and a managing director of Dresdner Kleinwort Wasserstein. No financial terms were disclosed.

Accuitive Medical Ventures has held a final close on its inaugural fund with $55 million in limited partner commitments.

Ropes & Gray LLP reportedly will acquire Fish & Neave LLP, a New York-based law firm focused on intellectual property matters. The combined company will feature approximately 740 attorneys, including 200 working in the IP practice.

Rich McGinn, a general partner with RRE Ventures, is one of three former Lucent Technologies Inc. (NYSE: LU) executives who may face federal charges for alleged violations of the Foreign Corrupt Practices Act. The information comes from an SEC report filed yesterday by Lucent, which says that the alleged violations include a bribery scheme connected to Lucent’s Saudi Arabian operation between 1997 and 2000. During that time, McGinn served as Lucent’s chairman and CEO.

Jeff Pierson has left his position as associate administrator for investment at the U.S. Small Business Administration (SBA), after 27 months on the job. He plans to return to the private side of the private equity market, although no specific plans have been disclosed.

Jane Swift has joined the WellCare Health Plans Inc. (NYSE: WCG) as a director. She currently serves as a general partner with Arcadia Partners, and is the former Governor of Massachusetts.

Worldview Technology Partners, a Palo Alto, Calif.-based VC firm, has promoted: Tim Weingarten to the position of partner; Jeb Miller to the position of principal and Pete Goettner to the position of venture partners.

Laura Hom has joined the capital markets group of GE Commercial Finance as a senior vice president. She previously served as executive director of the media and telecom leveraged finance group with CIBC World Markets.

HarbourVest Partners has made the following promotions: Julie Eiermann, Diane Goodwin and Karin Lagerlund have been named senior vice presidents; Jeffrey Keay and Laura Thaxter have been named vice president; Kyle Bohannan has been named senior associate; and Carolina Espinal de Carulla and Olga Tater have been named associates.

Sullivan & Worcester LLP has added four attorneys to its technology practice group. Each of them at one time worked with Testa, Hurwitz, & Thibeault. Alfred Brown, Edwin Miller and Miguel Vega join as partners, while Diana Steel joins as counsel.

    Monday 11/8

The Evolution of Series A Deals

Lots of news this morning, and I apparently slept in a position that caused my neck a considerable amount of pain (caution: the combination of Advil, iced coffee and computer usage may cause dizziness). As such, just time for a few quick notes:

* In the VC deals section below, you’ll notice a $10 million Series A round for 3am Labs Inc., a Woburn, Mass.-based provider of remote access solutions for mobile professionals. In human-speak, that means you can get into your work computer from anywhere, and do things like print files, copy files and manage network resources. Anyway, the deal is interesting for a variety of reasons, including that it is the first transaction for Woody Benson since he joined Prism Venture Partners earlier this year, and also because its completion was, in part, predicated on a pair of $200-million-plus M&A exits for GoToMyPC (acquired by Citrix) and Zone Labs (acquired by Check Point Software).

For our purposes, however, the interest lies in its existence as a Series A round, given that 3am Labs has an established product and established revenue. It even would be at cash-flow positive, if not for an extensive marketing campaign (“download the free version, and we’re sure you’ll want the more expensive one”). If this ‘Series A as expansion funding’ story sounds familiar, it may be because last week announced that it had raised the year’s largest domestic Series A round ($75 million), even though the company is four years old.

My point here – and I really am trying to get to one – is that the standard system of grouping/ranking deals based on “Series” should be retired. There no longer is much analytical value in comparing the fundraising fortunes of expansion-stage companies like 3am Labs and FastClick to actual early-stage companies like Neosis (see below). That means a bit more work for folks like me (and PR people), but it’s necessary.

*One more day for private equity and VC firms to submit interest in getting a summer intern. We’ve got around 15 interested firms, but more are wanted. Just send me an email as soon as possible.

* Lastly, a bunch of you have written in to ask about U.S. Venture Partners excluding most public LPs from its latest fund (including public pensions from states like California, Washington and Virginia). It will be discussed in tomorrow’s column, which also should include some interesting disclosure-related notes from an interview I conducted with a managing editor of the Austin-American Statesman (whose editorial board is uncritically in the corner of Texas AG Greg Abbott).

- Email Dan Primack

Knowledge Learning Corp. has agreed to acquire Portland, Ore.-based KinderCare Learning Centers Inc. for approximately $550.3 million in cash, plus the assumption or repayment of approximately $490 million in KinderCare debt. Kindercare has been majority-owned by Kohlberg Kravis Roberts & Co. (KKR) since 1997. Oaktree Capital Management also is a significant shareholder of Kindercare.

Neosil Inc., a South San Francisco-based drug company focused on dermatology, has raised $32 million in Series A funding. MPM Capital and Burrill & Co. co-led the deal, and were joined by Shalon Ventures. In other company news, Neosil has named Eugene Bauer as its new CEO, and Clarence “Butch” Dellio as its new COO. Bauer served as dean of the Stanford University School of Medicine from 1995 through 2001, while Dellio most recently served as COO with Xoma (Nasdaq: XOMA).

General Atlantic Partners and Oak Hill Capital Partners have teamed up to acquire a majority ownership interest in GE Capital International Services (Gecis), the global business processing operation of General Electric Co. (NYSE: GE). The two private equity firms will receive a 60% stake in exchange for approximately $500 million, with GE retaining the remaining 40% ownership. The deal is expected to close within six months.

3am Labs Inc., a Woburn, Mass.-based provider of remote access applications for mobile professionals, has raised $10 million in Series A funding. Prism Venture Partners led the deal, and was joined by Integral Capital Partners and 3TS Venture Partners.

Credant Technologies, an Addison, Texas-based provider of mobile enterprise security software, has raised $16 million in new venture capital funding. Crescendo Ventures led the deal, and was joined by fellow new investor Cisco Systems Inc. Return backers Austin Ventures, Menlo Ventures and Intel Capital also participated. Credant has raised a total of $38 million in VC funding since its 2001 inception, including a $14 million infusion in late 2002 at a post-money valuation of approximately $26.5 million.

TuVox Inc., a Los Altos, Calif.-based provider of enterprise software for speech applications, has raised $15 million in Series D funding. Norwest Venture Partners led the deal, and was joined by return backers Foundation Capital Granite Ventures and Adobe Ventures. The company has raised over $26 million in total VC funding since its 2000 inception. Inc., a Santa Monica, Calif.-based provider of search engine solutions for businesses, has raised $10 million in venture capital funding from Benchmark Capital. The company now has raised over $87 million in total VC funding since its 1999 inception, including investments from original backers McGraw Hill, Pearson and Reed Business Information.

Enpocket, a New York-based provider of mobile media content and marketintg solutions, has raised $9.5 million in Series C funding. Straumur Investment Bank and its Bru Venture Capital subsidiary led the deal, and were joined by return backers Nokia Venture Partners, GrandBanks Capital and Dolphin Equity Partners. In other company news, Peter Larsen has been named CEO, after having served as Enpocket’s managing director for Europe, the Middle East and Africa.

Sky MobileMedia Inc., a San Diego-based provider of mobile applications software platforms for wireless handsets, has raised $6.25 million in Series A funding. Enterprise Partners Venture Capital led the deal.

Inpharmatica Ltd., a London, UK-based drug discovery company, has raised GBP 13.9 million (approx. $25.8 million) in its third round of institutional VC funding. Reed Elsevier Ventures led the deal, and was joined by Abingworth Management, Advent International, Gilde Investment Management, GIMV and 3i Group. The company has raised nearly GBP 50 million in total VC funding since its 1998 inception.

TA Associates has acquired a majority interest in Agra Monotype Corp., a Wilmington, Mass.-based subsidiary of Belgium-based Agfa-Gevaert Group NV. No financial terms were disclosed. The company has been renamed Monotype Imaging Inc., with employees holding a minority ownership position. Harris Williams & Co. advised Agfa-Gevaert on the deal.

Thayer Capital Partners has completed its acquisition of Morton Welding Co., a Morton, Ill.-based supplier of machined, tubular, and assembled products to companies such as Caterpillar Inc., Deere & Co., and Allison Transmission. Financial terms were not disclosed. Corporate Finance Associates acted as exclusive advisor to Morton Welding.

Crescent Capital Investments has agreed to acquire Cypress Communications Holding Company Inc. (OTC BB: CYHI), an Atlanta-based provider of converged voice and data communications solutions. The deal is valued at approximately $39.35 million.

MedAssist Holding Inc., a Louisville, Ky.-based portfolio company of RoundTable Healthcare Partners, has acquired Argent Healthcare Financial Services Inc., a Chicago-based portfolio company of GTCR Golder-Rauner. Both companies provide outsourced revenue cycle management services to the healthcare industry. RoundTable provided additional equity funding to help finance the acquisition, although financial terms were not disclosed.

Peak 10 Inc., a Charlotte, N.C.-based provider of data center services, has acquired Xodiax, a Louisville, Ky.-based provider of managed services, collocation, hosting and connectivity. No financial terms were disclosed. Peak 10 is a portfolio company of private equity firms Seaport Capital and Frontier Capital.

Convergys Corp. (NYSE: CVG) has acquired Finali Corp., a Westminster, Colo.-based provider of contact center analytics, for $25 million in cash. Finali had raised over $33 million in total VC funding since its 1999 inception, including a $2.25 million infusion in 2003 at a post-money valuation of approximately $52 million. Shareholders included Sequel Venture Partners, Hillman Co., Mobius Venture Capital, Silicon Valley Bancshares, Hexagon Investments and Boulder Ventures.

Thomson Venture Economics (publisher of the PE Week Wire) and the National Venture Capital Association have released venture-backed M&A data for the third quarter of 2004. Eighty-three VC-backed companies were acquired, which is down slightly from the 83 VC-backed companies acquired during Q2 2004. Overall, 247 VC-backed companies have been acquired through the first three quarters of 2004, compared to the 290 VC-backed companies acquired in all of 2003.

PA Early Stage Partners has closed its third fund with $86 million in limited partner commitments, which was just shy of its $100 million target. The Wayne, Pa.-based firm had held a $68 million first close in early 2003, with investors like the Pennsylvania State Employees’ Retirement Systems and the Philadelphia Pension Fund.

Baird Capital Partners, a Milwaukee-based private equity affiliate of Robert W Baird & Co., has opened a satellite office in Shanghai. It is the firm’s second Asian office opening, following the establishment of a Hong Kong branch earlier this year. In related news, Bob Dods, Peter Chung and Bo Yu have joined Baird to run its Asian operations.

Stonehenge Capital Company LLC and Jemison Investment Co. have jointly formed the Alabama Opportunity Fund, a $19.5 million vehicle that will provide both equity and debt financing to Alabama-based companies seeking growth and expansion capital. The fund will operate within the State of Alabama’s CAPCO program, and be managed by James Davis and David Brown of Jemison, plus new Stonehenge director Steven Davis. Davis previously served as a senior vice president in the corporate banking division of SouthTrust Bank.

Pratik Shah has joined healthcare-focused private equity firm Thomas, McNerney & Partners as a San Francisco-based venture partner. Shah most recently served as co-founder and chief business officer for Kalypsys Inc., a San Diego-based drug company.

Paul Shultz has joined 4D Global Energy Advisors, a Paris-based investment advisory specializing in the energy sector. He previously worked at both ABN AMRI and Societe Generale.

Richard Kroon, former chairman and managing partner of the Sprout Group, has been named an independent director for a series of mutual funds managed by Cohen & Steers.


Click here for last week’s complete PE Week Wire.