PE Week Wire, Jan. 25, 2007

I had hoped to lead off today with some additional info on the $40 million Series D funding round for A123 Systems, which was first reported yesterday at Unfortunately, my desktop just decided to catch fire (thanks Dell – it lasted three whole months), which is ironic since one of A123’s big selling points is that its lithium-ion batteries are non-combustible. This means that my notes are currently singed and unavailable, although I distinctly recall A123 investor and board member Howard Anderson telling me (from India, where he’s teaching biz school classes) that “there is not a better IPO candidate in all of New England than A123.” Anyway, you can read my original story here.

*** Moving on from memory: I can’t quite explain what is happening over at Garnett & Helfrich Capital, but my general comment would be “Uh oh.”

You might remember that the San Mateo-based venture buyout shop recently lost director Mike Guthrie to Symphony Technology Group, which helped prompt co-founder Terry Garnett to cancel a planned move to London. The next to go was Betty Hung, who had been hired just six months earlier as vice president of portfolio company operations (she’s now with Vista Equity Partners). I reported at yesterday that G&H had removed the “Team” page from its website, and it soon after removed some backdoor/direct URL access that I cited.

Now comes word that director Mark Barrenechea also is gone, which leaves the firm with just two senior private equiteers (Garnett and David Helfrich). No wonder it postponed fund-raising for a second vehicle that was expected to target between $700 million and $750 million. A firm spokeswoman declined to comment, even though she previously had hyped Barrenechea in the aftermath of Guthrie’s departure. Again, uh oh.

*** The Oregon Investment Council has postponed selection of its next non-discretionary private equity consultant, which had been expected to occur during this past Tuesday’s board meeting. The delay came because board members wanted some additional info, plus one member was absent from the meeting. No formal selection date has been set, but April is most likely because the February agenda is jammed and there is no March meeting (OIC could, however, convene a special meeting in the interim).

The two finalists are Hamilton Lane and incumbent Pacific Corporate Group. Yup, you read that last part correctly. In fact, PCG also is a finalist for Colorado Fire & Police Pension and may be close to securing some new CalPERS mandates. So much for the theory that the La Jolla, Calif.-based firm would retreat from advisory work in order to focus on direct and fund-of-funds investing. So much for needing to keep key senior personnel in order to maintain clients.

Perhaps you’re thinking: “Didn’t Oregon only issue the new RFP because PCG had just lost several top managers, including its primary contact Tara Blackburn?” The answer is yes, which makes its selection as a finalist all the more vexing. There is a case to be made that most of the back-office number-crunchers remain the same (and this is a non-discretionary contract) – plus — but it is a fairly weak case given the firm’s overall instability and dysfunction. Definitely one to watch…

*** Check out the latest Vox Populi posting from Alexis Lakes. It uses Mike Scanlin’s recent move to Battery Ventures as a jumping-off point to discuss VC networking.

*** Speaking of Battery, the firm just lost partner Carl Stjernfeldt to Castile Ventures. The move comes as Castile is almost done raising its third fund. Castile recently held a $100 million close, and regulatory filings indicate a $130 million target.

Top Three

The Blackstone Group has raised its offer for Equity Office Properties Trust from $48.50 per share to $54 per share, bringing the overall transaction value to $38.3 billion (including $16 million in assumed debt). The move comes one week after Blackstone was topped by a $52 per share bid from Vornado Realty Trust, Starwood Capital and Walton Street Capital. Even at Blackstone’s original bid price, the deal would be the largest leveraged buyout in history.

Halyard Capital has agreed to sell Dallas-based community newspaper publisher American Consolidated Media to Macquarie Media Group for $80 million.

Avestha Gengraine Technologies Pvt. Ltd., an India-based biotech company focused on preventive personalized medicines, has raised Euro 25 million in Series C funding. New backers include Fidelity International, Limagrain Group, Daninvest and Danone, while return backers include ICICI Venture, Cipla, Godrej Industries, Tata Industries and bioMérieux.

VC Deals

Gynesonics Inc., a Redwood City, Calif.-based developer of a minimally-invasive device to treat uterine fibroid tumors, has raised $16.5 million in Series B funding. Advanced Technology Ventures led the deal, and was joined by InterWest Partners and Abingworth Management.

Nexterra Energy Corp., a Vancouver, Canada-based maker of gasification systems that use waste fuels “inside-the fence” at industrial and institutional facilities, has raised Cdn$6.8 million in third-round funding. Return backer ARC Financial Corp. led the deal.

Response Analytics Inc., a Scottsdale, Ariz.-based provider of software that helps financial services companies optimize customer demand, has raised $4.25 million from RWI Ventures and Peninsula Equity Partners.

MarketClusters Ltd., a London-based provider of market intelligence solutions, has raised $3 million in new VC funding led by NewMedia Spark.

SEMDirector, a San Diego-based maker of search marketing automation software, has raised an undisclosed amount of venture funding from Voyager Capital.

Sulfurcell Solartechnik GmbH, a Berlin, Germany-based maker of photovoltaic solar modules, has raised an undisclosed amount of funding from Masdar Clean Tech Fund and return backers Vattenfall Europe, Ventegis Capital and IBB Beteiligungsgesellschaft.

Buyout Deals

Cardinal Health (NYSE: CAH) has agreed to sell its pharmaceutical technologies and services (PTS) business to The Blackstone Group for approximately $3.3 billion. PTS develops, manufactures and packages medication and other products for pharma and biotech firms, and employs approximately 10,000 people at more than 30 global facilities. It generates approximately $1.8 billion in annual revenue.

Gryphon Investors has agreed to acquire G.I. Joe’s Inc., a Wilsonville, Ore.–based sporting goods and outdoor retailer in the Pacific Northwest. No financial terms were disclosed.

UnumProvident Corp. (NYSE: UNM) has agreed to sell subsidiary GENEX Services Inc. to a fund managed by Stone Point Capital. No financial terms were disclosed for the deal, which is expected to close by June. GENEX is a Wayne, Pa.-based provider of workers’ compensation and medical cost containment services. It was acquired by UnumProvident in 1997.

Eddie Bauer Holdings Inc. (Nasdaq: EBHI) has postponed a special shareholder meeting that had been scheduled for today, due to the identification of errors related to its tax accounting for 2005 and prior years. The meeting has now been pushed back to February 8, at which point shareholders will be asked to vote on a $9.25 per share buyout offer from Sun Capital Partners and Golden Gate Capital. The total deal is valued at approximately $614 million, including around $328 million of debt to be repaid.

Time Warner has agreed to sell 18 titles to Sweden-based Bonnier Publications for less than $300 million, according to The NY Post. Other bidders are reported to have included Quadrangle Group, Boston Ventures, Intermedia Advisors and Active Media/Windpoint Partners. The titles include Field & Stream, Outdoor Life, Snowboarding and TransWorld.

Barclays Private Equity has agreed to sell UK-based fashion retailer Phase Eight to a group led by Icelandic bank Kaupthing, according to The Times of London. The deal is valued at Gbp51.5 million.

Bay to Bay Capital Partners has acquired the assets of L&S Supplies Inc., a Hudson, Fla.-based regional supplier of pre-hung doors and millwork products. No financial terms were disclosed. The sellers were company founders John Schroder and Mike Mahoney, who will remain in charge of day-to-day operations at L&S.

Wafra Partners of New York has acquired Century Fire Protection from Brighton Partners for an undisclosed amount. Century Fire is an Atlanta-based maker and installer of fire protection products like sprinklers. CapitalSource Finance provided leverage.

PE-Backed IPOs

Oculus Innovative Sciences Inc., a Petaluma, Calif.-based developer of products intended to help prevent and treat infections in chronic and acute wounds, priced 3.025 million common shares at $8 per share, for an IPO take of approximately $24.2 million. It had planned to sell 3.5 million common shares at between $8 and $10 per share. It will trade on the Nasdaq under ticker symbol OCLS, while Roth Capital Partners served as lead underwriter. Oculus had raised over $56 million in private equity funding, from firms like Western Technology Investment and Brookstreet Securities.

PE-Backed M&A

TwistBox Entertainment, a Los Angeles-based mobile content distributor, has acquired the mobile gaming assets of InfoSpace, according to The Seattle Post-Intelligencer. No financial terms were disclosed. TwistBox raised $12.75 million from Spark Capital last fall.

TimePlus Payroll, an Atlanta–based provider of payroll, tax and benefit services, has acquired American Business Payroll of West Columbia, S.C. No financial terms were disclosed. TimePlus Payroll shareholders include Chicago Growth Partners and Goldman Sachs.

PE Exits

Tranzeo Wireless Technologies Inc. (TSX: TZT) has agreed to acquire the assets of Sensoria Corp., a San Diego-based developer of wireless broadband mesh communications and wireless sensor networks. The deal is worth less than Cdn$3 million in cash and stock. Sensoria shareholders include Hummer Winblad Venture Partners.

Firms & Funds

The Pennsylvania State Employees’ Retirement System approved the following fund commitments: Euro 100 million for Apax Europe VII (follow-on), $30 million to The Baring Vostok Private Equity Fund IV; $50 million to CVI Global Value Fund; $25 million to Bain Capital Asia Fund; $50 million to Sankaty Credit Opportunities III; $25 million to Weathergage Venture Capital and; $75 million to Blackstone Real Estate Partners VI.

CVCI Asia Pacific reportedly is planning to open an office in Japan. It will be run by managing director Eric Solberg, who will relocate from Hong Kong to Tokyo.

Sonnenschein Nath & Rosenthal LLP announced plans to open a Silicon Valley office this March. It will be located in Menlo Park.

Human Resources

Carl Stjernfeldt has joined Waltham, Mass.-based VC firm Castile Partners as a partner. He previously was a partner with Battery Ventures.

Philip Nelson has joined, a venture-backed shopping search engine, as advisory chief technical officer. He previously was an entrepreneur-in-resident with Accel Partners.

Lincoln International has promoted Andrew Bohutinsky to managing director. He originally joined the firm as a vice president in early 2002, and was promoted to senior vice president in June 2005. He heads up the firm’s building products industry group.

TRG, a New York–based turnaround advisory firm, has promoted Tim Lewis to principal. He will continue to lead the firm’s new performance improvement practice.