PE Week Wire — Friday, September 16

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Just Linking Around

*** The private equity-tinged political scandal in Illinois deepens.

*** The back-story on Skype’s original VC backing, including how much Bill Draper put in (free sub req.). Speaking of Skype, Dave Cowan of Bessemer notes that the deal will return around 150x for Bessemer/DFJ ePlanet/Index/Mangrove, which put in a combined $18.8 million in 2004 (check comments section on Stavis/Skype post). Cowan also mentions thatr Bessemer and Catamount Ventures have backed a new startup named Flock.

*** I was searching for new SPACs the other day (three more this morning, including one led by former fed terrorism chief Richard Clarke), when I came across a bizarre filing for something called Apollo Publications. Paul Kedrosky posts it on his site (scroll down), and reports that the SEC is taking action.

*** Quiz Answer: On Monday’s brief discussion of SV Life Sciences, I asked you to name another VC firm with offices in Boston (or at least around Boston) and London that is in market with a new fund that will focus, at least in part, on life sciences? Good job to those of you who answered Atlas Venture.

*** Hopefully a good time had by all during yesterday’s “Meet the Press” event hosted by the NVCA. Best line came from Robert Weisman of The Boston Globe, who noted that one reason he likes visiting VC firms is that he can always find his car in the parking lot.

    Top Three


Fidelity National Information Services Inc., Jacksonville, Fla.-based information services subsidiary of title insurer Fidelity National Financial Inc. (NYSE: FNF), has agreed to merge with St. Petersburg, Fla.-based Certegy Inc. (NYSE: CEY). The combined company will be valued at $7.6 billion, with the merger providing a strong on-paper return for Thomas H. Lee Partners and Texas Pacific Group, which acquired a 25% stake in Fidelity National Information Services earlier this year for approximately $500 million (their ownership stake will be approx. 17.2% of the combined company).


Workflow Management Inc., a Washington, D.C.-based provider of printing and promotional products, has agreed to acquire Relizon Co., a Dayton, Ohio-based supplier of business process solutions for document outsourcing, billing and marketing. No financial terms were disclosed for the deal, which is expected to close next month. Financing will be provided by CSFB, National City Bank and Royal Bank of Canada Workflow Management is a portfolio company of Perseus and The Renaissance Group, while Relizon has been owned by The Carlyle Group since 2000.

Actions Semiconductor Co., a China-based chip design company, is planning to raise over $80 million in Series A funding, according to VentureWire. New Enterprise Associates, Intel Capital and Government of SingaporeInv*stment Corp. are co-leading the deal, which also includes HSBC, Rim Asia Capital and Shanghai Industrial Holdings. The round is designed to position the company for an IPO, with Actions already retaining CSFB Asia as its underwriter.

    VC Deals

Adaptive Planning Inc., a Mountain View, Calif.-based provider of on-demand budgeting, forecasting and reporting applications, has raised $5 million in Series B funding. Monitor Venture Partners led the round, and was joined by return backer Onset Ventures.

Versatel Networks, a Quebec, Canada-based provider of VoIP gateway and service delivery solutions for telecom service providers, has raised Cdn$10 million in third-round funding. Solidarity Fund QFL led the deal, and was joined by Multiple Capital.

BodyMedia Inc., a Pittsburgh-based developer of Internet-compatible health monitors, has raised $6.05 million in Series E funding, according to a regulatory filing. Backers included DFJ ePlanet Ventures, Draper Triangle Ventures, DQE Enterprises and Prescient Partners.

DioBex Inc., a San Francisco-based metabolic therapeutics company, has raised $7.075 million in Series A-2 funding, according to a regulatory filing. Return backers include Domain Associates, Pequot Capital and Sofinnova Venture Partners.

ECnext Inc., a Westerville, Ohio-based provider of technology and services for marketing business content via the Web, has raised $4 million in Series D funding. Reservoir Venture Partners was joined by return backer Athenian Venture Partners on the deal.

Aestherx Inc., a Woodland Hills, Calif.-based provider of medical product R&D, has raised just under $1 million in startup funding led by Versant Ventures, according to a regulatory filing. The company is led by former Amgen executive Keith Leonard.

X-Sten Corp., an Englewood, Colo.-based medical device startup, has raised $725,000 in Series A funding, according to a regulatory filing. Backers include Aweida Venture Partners and DFJ Mercury Venture Partners. LLC, an Elmhurst, Ill.-based developer of marketing resource management software, has raised an undisclosed amount of second-round funding from Midwest Inv*stment Partners.

Dimerix Bioscience Pty Ltd., an Australia-based drug company, has raised nearly Au1 million in Series A funding led by Foundation Capital.

    Buyout Deals


Gresham has sponsored a management buyout of Olaer, a UK-based provider of pressure regulators and coolers for the industrial hydraulic market, from Expamet International Ltd. No financial terms were disclosed, except that Bank of Ireland provided financing. Gresham says that Olaer has annual sales of Gbp70 million.

Parthenon Capital has agreed to acquire a majority stake in American Wholesale Insurance Group, a Charlotte, N.C.-based independent insurance wholesaler. No financial terms were disclosed for the deal, which would result in company management retaining a “substantial” ownership position.

MDSI Mobile Data Solutions Inc. (TSX: MMD; Nasdaq: MDSI) shareholders have approved a proposed acquisition of the company by Vista Equity Partners. The total transaction is valued at approximately US$70 million, or $8 per share, with MSDI to subsequently delist from both the TSX and Nasdaq. MDSI is a British Columbia, Canada-based provider of mobile workforce management software.

    PE-Backed IPOs

Turbolinux Inc., a Japan-based provider of Linux-based solutions, has raised approximately $9.02 million via an IPO on the Osaka Stock Exchange. Nikko Citygroup Ltd. served as lead underwriter, while the company will trade under identification number 3777. The company had raised around $95 million in VC funding during 1999 and 2000, from firms like August Capital, Dell Ventures, Intel Capital, IBM, Broadview Associates, JPMorgan Partners, Mobius Venture Capital and Novell.

Israel Growth Partners Acquisition Corp., an Israel-based blank check acquisition company, has filed to raise $51.71 million via an IPO. It plans to trade on the OTC BB, with HCFP/Brenner Securities serving as lead underwriter. The group’s management includes: chairman Marty Karp, co-founder of Concord Ventures; CEO Carmel Vernia, former CEO of Tower Semiconductor; and executive VP and director David Silberg, a managing director of Mercator Research (unit of Mercator capital).

Global Services Partners Acquisition Corp., a Fairfax, Va.-based blank check acquisition company, has filed to raise $30.46 million via an IPO. It plans to trade on the OTC BB, with HCFP/Brenner Securities serving as lead underwriter. The group’s management includes: chairman and CEO Rahul Prakash, CEO of Everest Telecom, and president Abhishek Jain, CEO of WTP Capital.

    PE-Backed M&A

ScanSoft Inc. (Nasdaq: SSFT) has completed its merger with Nuance Communications Inc. (Nasdaq: NUAN), with Nuance shareholders receiving 0.77 shares of ScanSoft common stock and $2.20 of cash for each share of Nuance common stock that they own. The deal financed through Warburg Pincus’ $75 million PIPE infusion into ScanSoft.

Esprit Pharma Inc. of Princeton, N.J. has acquired Pompano Beach, Fla.-based Metagen Pharmaceuticals Inc. and its operating subsidiaries Star Pharmaceuticals and Stellar Pharmacal. The deal is valued at approximately $58.28 million. Esprit has raised VC funding from Domain Associates, Apax Partners and New Enterprise Associates.

    Firm News

Capstone Partners and Palomar Capital Advisors have merged, to form a combined partnership that will provide global private equity fund placement and advisory serves. It will include a team of 12 dedicated distribution principals and a total staff of 20, working from offices in Dallas, New York, Zurich, Geneva and Amsterdam. It will be called Capstone Palomar Partners.

ARC Inv*stment Partners LLC has launched as a Beverley Hills, Calif.-based inv*stor into, and executor of, reverse merger transactions. Firm founder and CEO Adam Roseman previously was a partner with Tompkins Capital Group.

BISYS (NYSE: BSG) has agreed to sell its Information Services group, which includes its Banking Solutions, Document Solutions and Corporate Financial Solutions businesses, to Open Solutions Inc. (Nasdaq: OPEN) for approximately $470 million in cash.

    Human Resources

Jeffrey Feinberg has joined GE Commercial Finance Global Media & Communications as senior vice president of origination. He most recently was a director in the telecom group of CIBC World Markets’ I-banking division.

Vinod Khosla of Kleiner Perkins Caufield & Byers has resigned from the board of Qwest Communications International Inc. (NYSE: Q), after having served for nearly seven years. Quest also announced two new board members: James Unruh, principal of Alerion Capital Group and former CEO of Unisys Corp., and Wayne Murdy, chairman and CEO of Newmont Mining.

Charlie Troup has decided to leave his London-based partnership position with Permira at year-end, according to PrivateEquityOnline.

Cecilia Claudio has joined Mercury Interactive Corp. (Nasdaq: MERQE) as chief information officer. She most recently served as VP of engineering and CIO with Align Technology Inc. (Nasdaq: ALGN), before which she was an executive-in-residence with Clearstone Venture Partners, where she still maintains an advisory role.


Running Early

Early PE Week Wire this morning, as I’ve dumbly scheduled a 10:15am meeting in Cambridge (and then will be sitting on the NVCA’s Meet the Press panel at 12:30). But because I’d hate to leave you with nothing.

Ford Motor Co. earlier this week agreed to sell rental car giant Hertz Corp. for $15 billion to private equity firms Clayton, Dubilier & Rice (CD&R), Carlyle Group and Merrill Lynch Global Private Equity. There’s obviously been a lot written about the deal, including that it would be the second-largest leveraged buyout in history (behind Nabisco, topping SunGard), how Ford originally favored an IPO to a sale, etc. Those are, of course, the most important angles, but here are a couple of tidbits you may not know (if you do know, just politely smile, nod your head and move on):

*** This deal should guarantee that CD&R not only hits its $3.5 billion fund-raising target, but actually hits its $4 billion maximum cap. The buyout firm and placement agent CSFB began marketing the fund in late 2004 and held a first close on approximately $1.5 billion by January, but the process seemed to get a bit bogged down after that (we are in September, after all). Hertz, however, has jump-started the effort, in large part because: (A) CD&R has proved that it can lead a mega-deal and form a top-tier consortium; and (B) Because Hertz will be a portfolio company of Fund VII.

CD&R isn’t commenting on fund-raising, but a source familiar with the situation says that the firm already has $3.5 billion in verbal commitments, and should easily hit $4 billion before a final close occurs later this year. “If Hertz had happened six months ago,” the source says. “The fund probably would have been raised by now.”

*** CD&R originally approached Ford about selling Hertz back in 2002, but was summarily rebuffed (not that they weren’t persistent). There were a bunch of complicated financing roadblocks, but the main problem was that Ford couldn’t envision how the private equity markets could reasonably handle such a large transaction. In the past three years, however, big-time private equity has undergone massive changes. Not only are certain firms raising enormous amounts of capital (e.g., $12b for Blackstone, $10b for Apollo, etc.), but those firms have shown an increased willingness to syndicate, thus enabling deals that would have been impossible just a few years ago (e.g., $11.3b for SunGard).

CD&R certainly was responsible for getting Ford to even consider selling Hertz, but it was larger market forces that ultimately greased the wheels.

Unrelated 1: A rep for KKR has taken some offense to the snide remark I made yesterday about the firm’s decision to tap non-locals to open offices in Hong Kong and Tokyo. Specifically, I cited how other LBO firms were, indeed, having locals run their Asian offices, and how many VC firms were surprised to learn that Silicon Valley culture (let alone laws) didn’t necessarily translate in London or Paris. Why the offense? Because KKR has a very successful European business that was originally formed after a pair of Bay Area folks were dispatched to open a London office. In other words, it has worked for KKR in the past, making its decision quite sensible. I plan to discuss this whole matter in greater depth next week, but felt a note was probably appropriate today.

Unrelated 2: I’ll be sitting in on a “Meet the Press” panel hosted by the National Venture Capital Association, today at 12:30 at the Charles Hotel in Cambridge, Mass. It’s invite-only for VC/PE marketing pros…

    Top Three


GlobeImmune Inc., a Denver-based developer of immunotherapy products for the treatment of cancer and chronic infectious diseases, has raised $34.3 million in Series B funding. Lilly Ventures led the round, and was joined by Medica Holdings, Adams Street Partners, Biogen Idec Inc., Genentech Inc., Partners Healthcare and GC&H Inv*stments. Return backers included HealthCare Ventures, LLC, Morgenthaler Ventures and Sequel Venture Partners. The company now has raised over $42 million in total funding, including a $4 million Series A round and $4 million in grant financing.


The Blackstone Group is leading a private equity consortium that has agreed to acquire health and life insurer UICI (NYSE: UCI) for $37 per share (19% premium to yesterdays closing price of $31.08). The equity group also includes Goldman Sachs Capital Partners and DLJ Merchant Banking Partners, and it will commit over $1 billion to the transaction. The deal also includes more than $125 million in equity from company management and employees.

Mark Gallogly, a senior managing director and head of private equity for The Blackstone Group, will leave at the end of this month to form a new firm with Jeffrey Aronson, head of distressed securities and leveraged loan activities at Angelo, Gordon & Co. Blackstone is in the midst of raising up to $12 billion for a new private equity fund, but Gallogy’s departure is not expected to hamper the effort.

    VC Deals

Earnix Inc., an Israel-based provider of price and revenue optimization software to the financial services industry, has raised $7 million in Series B funding. Jerusalem Venture Partners led the deal, and was joined by return backer Formula Ventures.

    Buyout Deals


Gibraltar Industries Inc. (Nasdaq: ROCK) has agreed to acquire Alabama Metal Industries Corp. from CGW Southeast Partners and other shareholders for approximately $240 million. Alabama Metal is a Birmingham, Ala.-based manufacturer of products for the industrial and building products markets, and was advised on the transaction by Houlihan Lokey Howard & Zukin. The deal is expected to close early in the fourth quarter.

Advent International has acquired a majority interest in German nursing home company Casa Reha Betriebs und Beteiligungsgesellschaft. The selling parties were JPMorgan Partners, Covenant Care International and German Equity Partners, with company management rolling over its ownership stake. No financial terms were disclosed.

Albertson’s Inc. (NYSE: ABS) is beginning to generate buyout interest from three distinct groups, according to The Deal. KKR, Apollo Advisors and Texas Pacific Group are working together, as are Thomas H. Lee Partners, Bain Capital and Yucaipa Cos. Cerberus Capital Management and Kimco Realty also are reported to be involved, with Merrill Lynch Global Private Equity possibly joining the KKR group and Warburg Pincus possibly joining the TH Lee group. The deal could be worth up to $16 billion, including $6.7 billion in assumed debt.

Cigars International Inc., a catalog and Internet marketer of premium cigars, has been recapitalized. Fifth Third Bank Chicago led the financing, which included a $16 million Term Loan A, an $8.75 million Term Loan B and a $3.25 million revolving line of credit. Cigars International is a portfolio company of private equity firm Svoboda Collins LLC.

W.P. Carey & Co. has acquired and leased back a Norwich, Conn.-based warehouse distribution facility from Bob’s Discount Furniture Inc., a Manchester, N.H.-based portfolio company of Apax Partners (original deal for Saunders, Karp & Megrue, which since has merged with Apax). The total transaction is valued at $22.6 million, including $12.3 million to fund expansion of the facility.

Sara Lee Corp. (NYSE: SLE) is in talks to sell its European packaged meats division, as part of its larger divestiture strategy. According to the Times of London, parties interested in buying the Gbp1 billion-plus unit include Lion Capital, Blackstone Group, Carlyle Group, BC Partners, CVC Capital Partners and PAI Partners. The same article adds that Novartis AG (NYSE: NVS) has retained CSFB to sell its Nutrition et Sante unit for around 250 million euros.

Motorola Inc. (NYSE: MOT) has retained J.P. Morgan Chase & Co. to explore the possible sale of its automotive products unit, according to The Wall Street Journal. The deal could be valued at between $1 billion and $2 billion.

    PE-Backed IPOs

Regency Energy Partners LP of Dallas, Texas has filed to raise $289.8 million via an IPO of 12 million common units. Lehman Brothers and UBS are serving as lead underwriters. Regency is a Delaware limited partnership recently formed by Hicks, Muse, Tate & Furst to capitalize on opportunities in the midstream sector of the natural gas industry.

Vimicro, a China-based chipmaker, soon will file to raise $100 million via an IPO in the U.S., according to The Standard of Hong Kong. Morgan Stanley is arranging the offering, which would allow Vimicro to trade on the Nasdaq. The company was seeded in 1999 by China’s Ministry of Information, raised early-stage capital from Infotech and then got $20 million from General Atlantic last year.

    PE-Backed M&A

Seagate Technology LLC (NYSE: STX) has acquired Mirra Inc., a Sunnyvale, Calif.-based provider of networked digital content protection products for the home and small business markets. No financial terms were disclosed. Mirra has raised $9.5 million in VC funding since its 2002 inception, from Sunrise Capital Partners, VSP Capital and Sequoia Capital.

ZentivaNV, a Czech drug company controlled by Warburg Pincus, has agreed to acquire a 51% stake in Romanian drug company Sicomed SA for $102 million. Zentiva also will make a voluntary offer for the remaining 49% position.

    Firm News

Commonfund Capital is raising up to $750 million for its sixth private equity fund-of-funds, named Commonfund Capital Private Equity Partners VI. It already has secured over $250 million in commitments, with an earlier filing showing that the firm has closed its Commonfund Capital Venture Partners VII fund with just over $500 million.

    Human Resources

Ryan Moore has been promoted from principal to general partner of GrandBanks Capital. He was a co-founding member of the venture capital firm in 2000, and focuses on opportunities in the wireless and software sectors.

Suhail Shaikh has been named a managing director in the financial sponsors and I-banking group of Banc of America Securities. He previously was executive director in the leveraged finance/financial sponsors group of CIBC World Markets.

Christopher Jun has joined Warburg Pincus as vice president of marketing. He previously was a deputy managing director and financial communications practice leader for Asia with Edleman Public Relations.

Atlantic-Pacific Capital has made three new hires. John Chase joins as a vice president focused on sales distribution, after previously serving as a vice president with Lazard Asset Management. Kelsie Clark joins as an associate from Probitas Partners. Kavita Bagga also joins as an associate, and previously was an I-banking analyst for the global industries group of Merrill Lynch & Co.

Correction: Blue Lane Technologies Inc. raised $13.4 in Series B funding, not in Series D funding.


Random Ramblings

*** Jerry Levin, former CEO of Sunbeam and Revlon, has decided not to retire after all. The man who took over for Chainsaw Al has instead launched a private equity firm focused on turnaround opportunities of branded consumer companies. It actually may be more accurate to say ”private equity firm of sorts,” because Levin hasn’t yet decided whether or not his shop will raise an actual fund (although it has done some test marketing). For now, he is simply working in tandem with some undisclosed private equity firms in search of an appropriate deal (they’ve looked seriously at a few, but he deemed the prices too high). Once one is found, Levin and his partners – Steve Isko and Mike Topsen – will invest their own personal capital alongside their private equity partner, with Levin taking over as the company’s interim CEO for between six to nine months (average deal expected to be held between three-to-five years).

One interesting note is that Levin has received some partnership interest from hedge funds (those looking for longer-term plays), but is worried that such a deal could put off his LBO peers, since such groups continue to fear the full-scale movements of hedge funds into the private equity market. More on Levin’s efforts in Monday’s issue of Buyouts Magazine.

*** You’ll see below that Oak Hill Capital Management has closed its second private equity fund with $2.5 billion. Significance here is that it’s the first Oak Hill fund to be majority-backed by institutions. The firm was initially formed as the family office of hotelier Bob Bass, and its $1.6 billion initial fund was mostly supported by individuals like Bass, Nike honcho Phil Knight and Intel co-founder Gordon Moore. Those guys still have a lot of skin in the game (Bass and Knight committed a combined $450 million), but the bulk of capital comes from public pensions (CalPERS, Oregon, Ohio, Alaska, San Fran, etc.) and other institutions (American Airlines, Stanford, GIC, etc.).

*** KKR is all over the news today, given the pending departures of general partners – and former Stanford B-School roommates – Scott Stuart and Ed Gilhuly. Of equal interest, however, should be its long-awaited decision to open offices in Asia (Hong Kong and Tokyo). This follows similar announcements from LBO heavyweights like Bain and Tom Lee, but there is something a bit odd about the KKR move: The two people named to run the offices are not from Asia. I’m sure Asian natives will be added soon, but doesn’t KKR remember the regret of VC firms that tapped Bay Area folks to run  UK offices during the late 1990s?

*** Om wonders where SimpleFeed went. Me too.

    Top Three


Kohlberg Kravis Roberts & Co. has announced plans to open offices in Hong Kong and Tokyo, which would be the firm’s first offices in Asia. Joseph Bae, a KKR managing director, will lead the effort, and will move from New York to Hong Kong at the end of this year. He will be joined by Justin Reizes, a KKR principal who currently is based in London. In other KKR news, the firm is about to lose general partners Scott Stuart and Ed Gilhuly, who have decided to form their own firm focused on the public markets.

Jefferson Smurfit Group PLC of Ireland and Kappa Packaging Group BV of The Netherlands have agreed to merge, thus creating Europe’s largest packaging company. Under terms of the deal, existing Smurfit shareholders will own 58.3% of the combined company, while Kappa shareholders will own 41.7%. Kappa shareholders also will receive a total of 300 million euros in cash and a 75 million euros subordinated promissory note. Smurfit is controlled by Madison Dearborn Partners, with other shareholders including JPMorgan Partners, DB Capital Partners and Merrill Lynch Capital Partners. Kappa is controlled by CVC Capital Partners and Cinven.

Blue Frog Mobile Inc., a Seattle-based mobile media and entertainment provider, has raised $16 million in Series A funding. Canaan Partners led the deal, and was joined by MK Capital. Rutberg & Co. served as exclusive financial advisor to Blue Frog Mobile on the financing.

    VC Deals

Aperto Networks Inc., a Milpitas, Calif.-based WiMAX systems provider, has raised around $17 million in the first tranche of Series E funding round. Canaan Partners led the deal, and was joined by return backers JK&B Capital, Alliance Ventures, Innovacom, Tyco Ventures, Labrador Ventures, and Satwik Ventures. Aperto has now raised $94 million in total VC funding since its 1998 inception.

SmartBargains Inc., a Boston-based online retailer, has raised $18 million in new venture capital commitments from return backers like Highland Capital Partners, Maveron, General Catalyst Partners, Gordon Brothers and Time Warner. The company also promoted chief marketing officer Benjamin Fischman to the position of CEO. SmartBargains earlier this year withdrew plans for a $80.5 million IPO, and now has raised over $200 million in total VC funding since its 2000 inception.

SME Global Solutions Inc., an Irvine, Calif.–based provider of local online advertising products and solutions, has raised $5 million in Series A funding from Redpoint Ventures.

Replication Medical Inc., a West Conshohocken, Pa.-based developer of implantable hydrogel devices for the treatment of degenerative spinal disc disease, has raised $15 million in Series D funding from the Abbott Spine division of Abbott Labs.

Blue Lane Technologies Inc., a Cupertino, Calif.-based developer of an inline patch proxy for enterprise server protection, has raised $13.4 million in Series D funding. Duff Ackerman & Goodrich led the deal (which closed in Q2), and was joined by Series A backers Benchmark Capital and Matrix Partners. The company has raised $18.4 million in total VC funding.

BladeLogic Inc., a Waltham, Mass.-based provider of data center automation software, has raised $7 million in Series D funding. MK Capital led the deal, and was joined by return backers Battery Ventures, Bessemer Venture Partners, and Globespan Capital Partners. In sother BladeLogic news, the company named Steve Walske, former chairman and CEO of Parametric Technology Corp., as chairman of its board of directors.

Wellogix Inc., a Houston, Texas-based provider of on-demand business workflow solutions for energy companies and their service providers, has raised $8 million in new private equity funding. First Capital Group led the deal, and was joined by Capital Southwest Corp. and other return backers. The company now has raised $38 million in totals funding, including earlier infusions from firms like Accenture Technology Ventures, Battery Ventures, Beacon Partners and SCF Partners.

Lumidigm Inc., an Albuquerque, N.M.-based developer of human identification techniques using light, has raised $8.14 million in Series B funding. Participants included Draper Fisher Jurvetson, Intel Capital, Solstice Capital, Wasatch Ventures, Motorola, New Mexico Co-Inv*stment Partners and Fort Washington Capital Partners.

    Buyout Deals


KRG Capital Partners has agreed to sell The Tensar Corp. to an affiliate of Arcapita Inc. for approximately $385 million. The deal is expected to close by the end of October. Tensar is an Atlanta-based provider of technology-driven real estate site development. KRG had completed a $187 million recap of Tensar earlier this year, in which it recouped its initial inv*stment.

Roark Capital Group has acquired Wood Structures Inc., a Biddeford, Maine-based wood truss manufacturer and distributor of engineered wood products. No financial terms were disclosed.

Merit Capital Partners has sold Peak Sulfer to Chemtrade Logistics Income Fund for approximately $23.95 million. Merit originally acquired the Lenexa, Kansas-based sulfuric acid maker in 2002, with the help of William Blair Mezzanine Finance.

SR Technics, a Switzerland-based provider of technical solutions for commercial aircrafts, has received a $325 million term loan facility from GE Commercial Aviation Services. The deal will help fund expansion, plus allow the repayment of debt – retiring senior debt in total and partial repayment of mezzanine and investor loans. SR Technics was acquired by 3i Group and Star Capital via a Gbp425 million management buyout from SwissAirGroup in November 2002.

    PE-Backed IPOs

AmComp Inc., a North Palm Beach, Fla.-based property and casualty insurer specializing in workers’ compensation, has filed to raise $110 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol AMCP, with Friedman Billings Ramsey serving as lead underwriter. Significant shareholders include Sprout Group (25.1% pre-IPO stake) and Welsh Carson Anderson & Stowe (35.6%). The company previously filed for a $50 million IPO in 1998, but withdrew the registration in 2000.

Taleo Corp., a San Francisco-based provider of Web-based applications for corporate recruiting, has set its proposed IPO terms to 6.7 million shares being offered at between $14 and $16 per share. It plans to trade on the Nasdaq under ticker symbol TLEO, with Citigroup serving as lead underwriter. Taleo has raised nearly $37 million in venture capital funding since its 1999 inception, from firms like Bain Capital Ventures, General Catalyst Partners and Telesystem Ltd. Other significant shareholders (due to acquisitions) include Infinity Capital, EdgeStone Capital, RRE Ventures, Venrock Associates, Wachovia Capital Inv*stments

    PE-Backed M&A

MedImmune Inc. (Nasdaq: MEDI) has agreed to acquire Cellective Therapeutics Inc., a Durham, N.C.-based drug company focused on therapeutic monoclonal antibodies targeting key receptors found on the surface of B-lymphocytes. No pricing terms of the all-cash deal were disclosed. Cellective last September raised $27.5 million in Series A funding at a post-money valuation of approximately $41.2 million, from Alta Partners, BA Venture Partners, Forward Ventures, Latterell Venture Partners, Sofinnova Ventures, MedImmune and Genentech.

Medsn Inc., a Culver City, Calif.-based provider of medical education, sales training, and marketing in the U.S., has merged with the Indegene group of companies, a medical education, training, and marketing services provider in India and Asia. No financial terms were disclosed. Medsn has raised around $50 million in VC funding since its 1998 inception, from firms like Apax Partners, BV-Cornerstone, Delphi Ventures, GE Equity and Leeds Weld & Co. Indegene has been backed by Nadathur Fareast, Karnataka Asset Management Co. and Antfactory.

Debisys Inc. and Emida Technologies Inc., both providers of electronic prepaid solutions, have merged and raised $7.5 million in venture funding for the combined company. The new company will be named Emida Technologies Inc., but will continue to market the Debisys brand in North America and the Puntoflex brand internationally. Dennis Andrews, Debisys’ CEO, will serve as CEO, while former Emida CEO David Brillembourg will serve as executive vice president focused on global business development. GRP Ventures and Stone Canyon Venture Capital co-led the financing round. Emida previously had raised $9 million over two rounds of VC funding.

Alphatec Spine Inc., a Carlsbad, Calif.–based spinal implant company owned by HealthpointCapital, has acquired Cortek Inc., a Dedham, Mass.-based manufacturer of allografts for spinal inter-body fusion. Cortek has raised approximately $30 million in VC funding from firms like Partech International, Delphi Ventures, Galen Associates, The Kaufman Fund and Prism Venture Partners.

Angiotech Pharmaceuticals Inc. (Nasdaq: ANPI) has agreed to acquire Afmedica Inc., a Kalamazoo, Mich.-based developer of a medication that would prevent scarring after heart surgery. Afmedica had raised startup funding in 2003 from Apjohn Ventures and TGap Ventures, and reportedly has been looking to raise a $20 million follow-on round. No financial terms of the acquisition were disclosed.

LegaLink, a Boston–based provider of global court reporting and litigation support services, has acquired Docuserve Inc., a Marlborough, Mass.–based provider of document management, e-discovery, and court reporting services. No financial terms were disclosed. LegaLink is a subsidiary of WordWave Inc., which is backed by Berkshire Partners, Highland Capital Partners and TCW/Crescent Mezzanine.

    Firm News

Oak Hill Capital Management has closed its second private equity fund with $2.5 billion in committed capital.

Sequoia Capital has raised $520 million for its Sequoia Capital Growth Fund III, which will focus on later-stage venture capital opportunities.

    Human Resources

Jonathan Grad has joined Parthenon Capital as a principal in the firm’s Boston office. He previously served as a principal with Golden Gate Capital in San Francisco.

Correction: Saratoga Partners does not own 100% of KI Holdings Inc. Instead, it owns 100% of the company’s convertible prefered stock.


Because It Works

Have you heard that eBay is buying Skype for up to $4.1 billion? OK, that’s just a little joke, since there already have been over 350 print articles on the deal and at least one thousand Internet mentions (it also was our top news item yesterday). The vast majority of these articles are of the “The bubble is coming, the bubble is coming” variety, with folks unable to reconcile a commerce/payment company like eBay paying so much for a communications company like Skype. My opinion on the matter is that I don’t have an opinion, since my primary interaction with eBay involves searching for last-minute Patriots tickets. So rather than laud the deal for shock value or slam the deal to be popular, let me talk a bit about the original VC investment that will produce a multiple in excess of 100x.

Luxembourg-based Skype was seeded in 2002 by Draper Investment Co. (Bill Draper’s firm), but got its major VC infusion — $18.8 million — in early 2004 from Draper Fisher Jurvetson (Tim Draper’s firm, via its ePlanet arm), Bessemer Venture Partners, Index Ventures and Mangrove Capital Partners. It likely will go down as the most lucrative deal done by any of those firms (including DFJ’s play), so I spent some time yesterday asking Rob Stavis of Bessemer why he pushed for the original investment. His answer is stunning in its simplicity.

According to Stavis, Bessemer was already looking around the VoIP space when it first met with Skype in the summer of 2003. The firm was impressed with the founding team’s P2P pedigree (they previously co-founded Kazaa), and thought that the business model made sense from a scaling perspective. What really seems to have sold them, however, was the ease and reliability of Skype’s software, which they initially tried out in beta. Specifically, this was one of those rare pieces of software that Stavis and a far-flung colleague could download at the same time and be using five minutes later. No firewall issues, no “this doesn’t work on my PC” problems. It may sound basic, but think about all the times you and a colleague have tried to download a piece of software (particularly communications software), only to find out that it works far better on his computer better than on yours.

“Regardless of the firewall, it would traverse the network and find the connection,” Stavis explains. “And then it worked 100 times better than anything else we had seen.”

I’m not saying that VCs should always invest in something just because it works (and there obviously were other factors in the Skype decision), but it is worth remembering that a product is only as good as is the customer experience with that product. Bessemer understood that, which is why its limited partners are about to be much richer.

    Top Three


Ford Motor Co. (NYSE: F) has agreed to sell rental car company The Hertz Corp. to private equity firms Clayton, Dubilier & Rice, The Carlyle Group and Merrill Lynch Global Private Equity. The deal is valued at $15 billion, including approximately $10 million in assumed debt, which would make it the second-largest leveraged buyout in history.

Stoke Inc., a Mountain View, Calif.-based telecom company, has raised $19.8 million in Series B funding, according to a regulatory filing. Backers include Sequoia Capital, Kleiner Perkins Caufield & Byers, Pilot House Ventures and Integral Capital Partners. The company’s website says that it is manufacturing a new category of service delivery infrastructure that enables fixed-mobile convergence supporting any service over any infrastructure using any end-user device.

Pomona Capital has closed its sixth fund with $821 million in committed capital. Like its predecessors, the new vehicle will purchase limited partner interests in buyout and venture capital funds, plus direct secondary portfolios.

    VC Deals

Xelor Software Inc., a Salem, N.H.-based provider of service quality management for enterprises deploying IP telephony systems, has raised $6 million in Series B funding. Still River Fund led the deal, and was joined by return backers Technology Venture Partners, Starfish Ventures and Foundation Capital.

Impress Software, a Waltham, Mass.-based provider of packaged integration applications for SAP enterprise asset and project management, has raised $10 million in Series C funding. Key Venture Partners led the deal, and was joined by return backers General Catalyst Partners, Carmel Ventures, Star Ventures and Techno Venture management. The company has raised approximately $45 million in total VC funding since its 1996 inception.

BuildForge Inc., an Austin, Texas-based provider of development automation solutions for application lifecycle management, has raised $6 million in Series B funding from Austin Ventures.

Taligen Therapeutics Inc., an Aurora, Colo.-based biotech company focused on inflammatory diseases, has raised Series A funding from Sanderling Ventures, according to a regulatory filing. The total deal is valued at around $3.86 million, with just over $1 million called down to date. Taligen was formed in March 2004 to develop and commercialize technology from the University of Colorado.

Full90 Sports Inc., a San Diego-based maker of head protection for soccer players, has received a strategic inv*stment from Mitsui & Co.

Affy Tapple, a Niles, Ill.-based producer of distributor of caramel dipped apples, has raised an undisclosed amount of growth equity funding from Bridge Street Capital.

    Buyout Deals


School Specialty Inc. (Nasdaq: SHCS), a Greenville, Wis.-based provider of supplemental learning products to the pre K-12 market, said that its shareholders have approved a proposed acquisition by Bain Capital and Thomas H. Lee Partners. The deal is valued at $49 per share, with Bain holding a 60% stake post-acquisition and TH Lee holding a 40% stake (both percentages would be reduced pro-rata to facilitate a small percentage of management ownership). It is expected to close later this month.

Goldman Sachs Capital Partners has expressed interest in buying West Greenwich, R.I.-based gaming company Gtech Holdings Corp. (NYSE: GTK), according to The Deal. Gtech announced yesterday that it had received “non-binding preliminary expression of interest from an unidentified third party.” The article also says that Goldman is looking for a partner on the deal, considering that Gtech’s market cap is around $3.9 billion. So far, it has been rebuffed by such firms as Apollo and Blackstone. Gtech shares rose 14% on the news.

CVC Capital Partners has completed its acquisition of Ruhrgas Industries GmbH from German utility E.On. The deal was valued at approximately 1.5 billion euros, including around 300 million euros of assumed debt. Ruhrgas is an Essen, Germany-based maker of gas meters, electric meters, water meters and furnaces.

The Blackstone Group has offered to buy UK-based leisure company Rank Group PLC (Nasdaq: RANKY) for Gbp2 billion, or 320 pence per share, according to The Daily Mail. Rank operates casinos, Hard Rock Cafes and provides various services to the motion picture and media industries.

    PE-Backed IPOs

KI Holdings Inc., a Pittsburgh-based provider of carbon compounds and commercial wood treatment products, has filed to raise $125 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol KOP, with CSFB and UBS serving as lead underwriters. Saratoga Partners holds a 100% pre-IPO ownership position.

    Firm News

Garnett & Helfrich Capital has raised an additional $100.1 million for its inaugural fund, which had closed in March 2004 with $250 million. The new commitments came on a pro rata basis from existing limited partners, including Harvard Management Co., Stanford University, HarbourVest Partners, Grove Street Advisors, University of Michigan, Columbia University, Park Street Capital and Rho Fund Inv*stors. The Menlo Park, Calif.-based venture buyout firm also may begin raising its second fund as early as the middle of next year.

Henderson Private Capital has begun raising its second private equity fund focused on the Asia-Pacific market. In related news, Henderson said that it has promoted principal Scott Greck to the position of partner, while principal Sanjiv Kapur will leave the firm to pursue independent inv*stment opportunities. Henderson also is finishing up fund-raising for a Gbp300 million secondary fund.

The Blackstone Group is raising up to $1.2 billion for its second international real estate fund, according to a regulatory filing. So far, it has secured over $700 million in capital commitments.

Sports Venture Partners of Champagne, Ill. is looking to raise upwards of $50 million for its second fund-of-funds, according to a regulatory filing. The firm was founded in 2000 by former Philadelphia Eagle Jim Flanigan, former Washington Redskins marketing director John Wagner and former Redskins player Darrell Green, while former NBA player Greg Anthony has since signed on as its fourth managing director.

    Human Resources

Ted Anderson has been named president of Ventures West Capital, where he has worked since 1996. He succeeds Robin Louis, who will remain with Ventures West as chairman.

Thomas Regan has joined GE Commercial Finance Global Media & Communications as managing director of origination. He previously served as a managing director of Gefinor Mezzanine Management.

Probitas Partners has promoted Jeffrey Mills to the position of vice president.

Michael Bingle, a managing director of Silver Lake Partners, has joined the board of directors at Ameritrade Holding Corp. (Nasdaq: AMTD). He also will serve on the board’s audit committee.


Random Ramblings

A few notes to kick off our week:

*** SV Life Sciences recently began raising its fourth VC fund with a $400 million target, according to today’s print edition of PE Week. The Boston-based firm has satellite offices in London and San Francisco, and focuses on early-stage life sciences companies. Quick quiz: Can you name another VC firm with offices in Boston (or at least around Boston) and London that is in market with a new fund that will focus, at least in part, on life sciences?

*** I kind of have SV Life Sciences on the brain, because I just wrote a Venture Capital Journal piece on SPACs, and SV is a minority investor in Confluence Acquisition Partners. Interesting fact that emerged during my research: 42 new SPACs have filed for IPOs in 2005, with a staggering 31 that feature some sort of private equity involvement (thanks to The Reverse Merger Report for their research help). Most are simply limited to board seats, but you obviously have the McCown De Leeuw one and another in which Paladin Homeland Security fund is acting much like SV Life Sciences (minority investor/advisor). By the way, Paladin is planning to send out books for its second homeland security fund at the beginning of next year.

*** While lauding OncoMed Pharmaceuticals last Thursday, I probably should have mentioned the failure of another VC-backed drug company hoping to identify cancer stem cell targets: Xerion Pharmaceuticals AG. The German company had raised VC funding from such firms as 3i Group and Burrill & Co., but filed for insolvency in late 2004 before going out of business earlier this year. There are tons of differences between the two companies (location, technology, exclusive focus, etc.), so one’s failure clearly does not predetermine another’s. I only bring it up to underscore how difficult a journey OncoMed is embarking on. But, again, if successful, it could save untold numbers of lives.

*** Austin Ventures is matching up to $100,000 in Hurricane Katrina relief funds raised by Austin-area techies. Are other VC firms doing anything similar?

    Top Three


EBay Inc. (Nasdaq: EBAY) has agreed to acquire Skype Technologies SA, a Luxembourg-based P2P telephony company. The total transaction is valued at approximately $2.6 billion, including $1.3 billion in up-front cash and 32.4 million shares of eBay common stock (which instead could be paid in cash, at eBay’s discretion). Skype shareholders include Draper Fisher Jurvetson, Bessemer Venture Partners and Index Ventures.

Wave7 Optics Inc., an Alpharetta, Ga.-based supplier of fiber-to-the-premises equipment for residential and business services, has raised $18 million in Series C funding. Ballast Point Ventures came in as the company’s only new inv*stor with a $3 million commitment. Return backers included Advanced Technology Partners, Armada Venture Partners, Lucent Venture Partners, Mellon Ventures, Morgenthaler Ventures and Oak Investment Partners. The company has raised $86.5 million in total VC funding since its 2000 inception.

The Carlyle Group has established an office in Sydney, Australia. It will be run by Simon Moore, managing director and head of the Australia buyouts team, who will join Carlyle next month after having served as a managing director with Investcorp. Other Australia-based staffers will include vice president Adrian Siew and associate Harold Ong.

    VC Deals

Mendocino Software Inc., a Fremont, Calif.-based recovery management company, has raised $18 million in Series B funding. Foundation Capital led the deal, and was joined by fellow return backers Accel Partners, Advent International and Mayfield.

Verid Inc., a Ft. Lauderdale, Fla.-based provider of identity verification technologies, has raised $13.2 million in Series F-1 funding. Fidelity Ventures and CIBC Capital Partners co-led the deal, and were joined by Palisades Capital and unnamed return backers.

TapRoot Systems Inc., a Morrisville, N.C.-based provider of smart-phone software, has raised $6.5 million in second-round funding. Harbert Venture Partners led the deal, and was joined by return backers Intersouth Partners and Mid-Atlantic Venture Funds.

Teranode Corp., a Seattle-based provider of experiment design automation software for the life sciences industry, has raised $9.5 million in Series B funding. Cargill Ventures and Trident Capital co-led the deal, and were joined by return backers Ignition Partners and WRF Capital.

Zyme Solutions Inc., a San Carlos, Calif.-based developer of inventory control solutions for software companies, has raised around $3.04 million in a Series A funding round led by Artiman Ventures, according to a regulatory filing.

InQuira Inc., a San Bruno, Calif.-based provider of intelligent search solutions, has raised $8 million in Series E funding, according to a regulatory filing. Return backers included Partech International, Sutter Hill Ventures and Walden International.

Tizor Systems Inc., a Maynard, Mass.-based provider of compliance auditing and information theft detection solutions, has raised $12 million in Series B funding. Hummer Winblad Venture Partners led the deal, and was joined by return backers Masthead Venture Partners, Navigator Technology Ventures and CommonAngels.

Preventsys Inc., a Carlsbad, Calif.-based provider of security risk management and automated compliance reporting, has raised $7 million in new VC funding. Return backers include Enterprise Partners Venture Capital, Apax Partners and Utah Ventures. The company has raised over $22 million in total VC funding since its 2002 inception, and also announced that it has named Patrick Harr as its new CEO.

Chiasma Inc., a Jerusalem-based biotech company focused on oral delivery of macromolecule drugs, has raised $6.2 million in Series B funding. F-2 Ventures and the Ofer Hi-Tech Group co-led the deal, and were joined by Yissum Ltd. and return backer InnoMed Fund.

Handmark Inc., a Kansas City-based content aggregator and wireless solutions developer, has raised $5 million in second-round funding. Participants included Apax Partners, Borealis Ventures, Village Ventures, Argnor Wireless Ventures and return backer Hanna Ventures.

inQ Inc., a Los Angeles-based provider of live chat-enabled marketing solutions, has raised $2.5 million in new venture capital funding. Vertrue Inc. (Nasdaq: VTRU) was joined on the deal by return backers Dolphin Equity Partners and Hudson Ventures.

    Buyout Deals


Behrman Capital has completed a $337.5 million recapitalization for portfolio company ILC Industries Inc., a Bohemia, N.Y.–based provider of defense, aerospace and industrial products. The deal includes a $195 million first-lien term loan, a $77.5 million second-lien loan, $35 million in subordinated debt and a $30 million unfunded revolving credit facility. UBS and GE Capital co-led the recap. Behrman acquired a majority stake in ILC through a $303 million buyout in April 2003.

The Carlyle Group has agreed to sponsor a management buyout of Gakusei Engokai Co. Ltd. and its subsidiaries from the founding family. No financial terms were disclosed for the deal, which is expected to close by next month. Gakusei Engokai is a Japanese publisher of job placement magazines.

Goldner Hawn Johnson & Morrison has increased the terms of its proposed acquisition of Green Bay, Wis.-based retailer ShopKo Stores Inc. (NYSE: SKO) from $24 per share to $25 per share. The deal has been approved by the ShopKo board of directors, but still must receive shareholder approval.

Recycled Paper Greetings Inc., a Chicago-based greeting cards company, has retained Piper Jaffray to explore strategic options, including a possible sale to private equity firms, according to The Deal. The article cites anonymous sources, but adds that a Piper Jaffray spokesman denied any knowledge of his firm being retained by Recycled Paper.

    PE-Backed IPOs

Harry & David Holdings Inc., a Medford, Ore.-based provider of gift-quality gourmet food baskets, will offer its IPO shares at between $13 and $15 per share. It plans to trade on the NYSE under ticker symbol HND, with UBS serving as lead underwriter. The company was acquired last year in a $252.9 million leveraged buyout sponsored by Wasserstein and Highfields Capital Management.

    PE-Backed M&A

Zinio Systems Inc., a San Francisco-based provider of digital publishing and marketing services, has merged with Blue Dolphin Group Inc., a Sudbury, Mass.–based online magazine retailer. As part of the deal, Zinio raised $7 million in VC funding from Blue Dolphin shareholders North Bridge Venture Partners and Commonwealth Capital. Blue Dolphin had raised approximately $32 million in VC funding, while Zinio has secured a total of over $35 million from firms like Intel Capital, New Enterprise associates, Palisades Ventures and Apax Partners.

CTC Communications Group Inc., a Waltham, Mass.-based portfolio company of Columbia Ventures, has agreed to acquire Connecticut Broadband, a North Haven, Conn.-based telecom services provider. No financial terms were disclosed.

    Firm News

Natural Gas Partners has held a $94.1 million initial closing on NGP Energy Technology Partners LP, a new fund that will provide growth capital and buyout funding for companies that develop energy technologies or which provide tech-driven products and services to the energy industry. The Irving, Texas-based firm also announced that the fund’s managing partner with by Philip Deutch, a former managing director of Perseus.

Hermes Private Equity has closed its second direct private equity fund with Gbp250 million in committed capital from BT Pension Scheme (owner of Hermes) and the Royal Mail Pension Plan (which also committed new capital to Hermes Private Equity’s first direct fund).

Prometheus Partners of Atlanta is raising up to $50 million for its Windward V private equity fund focused on lower-middle-market services and distribution companies, according to a regulatory filing. It already has secured $42.1 million from limited partners like Hallador Alternative Assets, The Duke Endowment, American Trading & Production Corp. and the Santa Barbara Hospital Cottage/Foundation.

The Mass Software Council has merged with the New England Business and Technology Association to form the Mass Technology Leadership Council.

    Human Resources

Brett Wynard has agreed to join The Carlyle Group as a managing director and co-head of its distressed inv*stment team (Carlyle Strategic Partners), effective next month. He previously served as a managing director in the corporate opportunities group of Oaktree Capital Management.

Petri Myllyneva reportedly has joined EQT Partners as head of its Helsinki office. He most recently worked with Roschier Holmberg Attorneys Ltd.

Werner Quillmann has joined AXA Private Equity as an inv*stment manager in Germany. He previously served as managing partner of Equita Management GmbH.

George Cooney has joined BCE Capital as a Boston-based venture advisor. He most recently served as co-founder of InfoClarus Inc.

Marty Welch has joined United Rentals Inc. (NYSE: URI) as interim chief financial officer. He most recently served as director and advisor to private equity firm York Management Services, and before that was CFO of Kmart Corp.

Ronald Hendrixson has joined executive search firm DHR International as an executive vice president and member of its advanced technology practice. He previously was worked for the tech practices of both Heidrick & Struggles and Korn/Ferry International, and founded RC Hendrixson & Associates.