PE Week Wire: Mon, March 17, 2008

Ok, I know there are more important things going on, but a promise is a promise…

Today represents the beginning of that very special time of year, when corporate America turns its collective blind eye toward sports gambling. That’s right dear reader, it’s time for oursixth annual March Madness Extravaganza.

The contest is open to all PE Week Wire and peHUB readers, with the top finisher to receive three prizes: (1) A complimentary Premium Membership to, which includes access to our entire editorial archive; (2) A complementary one-year subscription to the ThomsonFinancial publication of their choice: Buyouts, PE Week, Venture Capital Journal or European Venture Capital Journal; and (3) The opportunity to write a lead column for PE Week Wire, which could mean everything from an essay to a company advertisement to a plea for work.

To Play:

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

2. Select “Join a Group” (you may have to hit it twice)

3. I have createdsix groups, with each one capable of holding up to 50 people. If one is full, try another. If they all fill up, I’ll add more (only one entry per reader, please).

4. You will need the Group ID and Password to join the group. The group IDs are: 84992, 85126, 85222, 85270, 85312 and 85581. The password to each group is: crunch.

5. Finally, I ask that each participant let me know your group name, real name and place of business. Please email to me here (special email address only for this purpose), with the team name in the subject heading.

6. Good luck!

*** As almost all of you must know by now, JPMorgan has agreed to buy Bear Stearns for the bargain basement price of $2 per share. For context, this deal is essentially worth less than the value of Bear Stearns’ midtown Manhattan real estate (which it sort of owns via synthetic lease). For further context, Bear Stearns shares began trading Friday at $57 per share, and still managed to close at $30 per share. Pity anyone who went long at that price.

What will be particularly interesting for our purposes is how this affects Bear Stearns’ various private equity activities. For example, will the firm complete its Au$116 million acquisition of Macquarie Private Capital, which was announced last month? Will it maintain its commitment to be an anchor investor in the $250 million VC fund being marketed by independent affiliate Constellation Ventures? Will it honor the uncalled capital commitment to independent affiliate Bear Stearns Merchant Banking (it had committed around 18% of a $2.7 billion fund that closed in 2006)? Will the back-office/shared services arrangements will BSMB be maintained? What of the fund placement group, which expanded last year via the acquisition of Crane Capital?

I haven’t yet gotten answers to most of these questions – probably because there aren’t any yet. Private equity is obviously way down the totem poll in terms of immediate merger considerations, and JPMorgan has had a love/hate relationship with the asset class for quite some time (e.g., spinning out JPMorgan Partners, yet maintaining One Equity Partners). It’s just too early to know, although I’d expect that some answers are on their way. Make sure to check over at peHUB for any updates (and be sure to send them over, if you’ve got ‘em).

*** Answer Key: On Friday I asked you to name the venture capital firm that next week will announce both a new name and a new fund? Well, next week is now this week – and your answer is IDG Ventures Boston. The firm today said that it’s changing its name to Flybridge Capital Partners, and has raised $280 million for its third fund. Get more info here.

*** Clear Channel is down over 7% in early trading, after a roller-coaster Friday that saw it dip real low before settling up a few cents per share. So what’s going on?

On its face, CCU shares should be inching up toward the $39.20 per share buyout price. After all, Bain’s limited partners wired in their capital calls last Friday, and there has now been a formal resolution of the legal three-way between Clear Channel, Providence Equity Partners and Wachovia. In other words, the deal is closer to getting done than ever before.

The problem, however, is that traders are very worried that the banks are going to bail. This has been a concern for some time, but became particularly acute in the wake of Bear Stearns’ collapse. Such a theory assumes one of two scenarios: (A) The lenders may have liquidity troubles of their own, so really cannot afford to close the deal, or (B) The lenders expect to lose far more than the $500 million breakup fee, plus whatever additional liabilities Bain and Thomas H. Lee Partners are able to successfully sue for.

Neither of these scenarios negates the fact that Bain and THL really do seem intent on closing the deal – in spite of the inflated purchase price. They both believe that this can someday become an ROI winner, which is heightened by the number of man-hours already invested. But, that said, Bain and THL are also being savvy by making the capital calls. If the banks do pull out, then both firms will have a paper trail proving that they were will to do the deal. Their argument? “We had the money in the bank.”

Top Three

Bain Capital has closed its third European buyout fund with €3.5 billion in capital commitments, peHUB is reporting. The fund had been marketed with a €2.5 billion target, and closed out at a hard cap that was more than triple the €1 billion Bain raised in 2005 for its second European fund.

WL Ross & Co. has agreed to acquire the mortgage loan services unit of Option One Mortgage Corp. from H&R Block Inc. (NYSE: HRB). The deal is valued at $1.1 billion. H&R Block last year had agreed to sell all of Option One to Cerberus Capital Management, but the deal later collapsed.

IDG Ventures Boston has renamed itself Flybridge Capital Partners, and has closed its third fund with $280 million in capital commitments.

VC Deals

Luminus Devices Inc., a Billerica, Mass.-based maker of LED products for both display and illumination applications, has raised over $72 million in Series E funding. Braemar Energy Ventures led the round, and was joined by CMEA Ventures, Paladin Capital Group and return backers Battery Ventures, Argonaut Private Equity, Draper Fisher Jurvetson, DFJ New England, Eastward Capital and Stata Venture Partners.

RecycleBank, a Philadelphia-based company that partners with cities and businesses to reward households that recycle, has raised $30 million in Series B funding, according to VentureWire. Kleiner Perkins Caufield & Byers led the round, and was joined by return backers RRE Ventures and Sigma Partners. The company previously raised a $13.1 million Series A round, and before that secured seed capital from Columbia University’s Eugene M. Lang Center for Entrepreneurship.

Miramar Labs Inc., a Menlo Park, Calif.-based developer of medical devices for aesthetic indications, has raised $20.34 million in Series B funding, according to a regulatory filing. Backers include Domain Associates, Morgenthaler Ventures and Split Rock Partners. The company does not have a website.

ePAC Inc., a San Leandro, Calif.-based provider of printing and logistics solutions to the high-tech market, has raised $20 million in Series C-1 funding from new investor HarbourVest Partners, according to a regulatory filing. The company had announced a $30 million Series C round in May 2006, from firms like Menlo Ventures, Investor Growth Capital and Thorner Ventures. Those firms are each listed as existing shareholders, but did not contribute to the $20 million.

Liquiavista BV, a Dutch fabless display manufacturing company, has raised €8 million in Series B funding. The round includes both equity and debt. Return backers include Amadeus Capital, GIMV and New Venture Partners.

WebVisible Inc., an Irvine, Calif.-based provider of online advertising search solutions for small businesses, has raised $12 million in Series B funding. Sutter Hill Ventures led the round with $8 million, while return backers Redpoint Ventures contributed $4 million. The company had raised a $5 million Series A round back in 2005.

Cenzic Inc., a Santa Clara, Calif.-based provider of enterprise software for analyzing IT errors, has called down $10 million of a $15 million Series D round, according to a regulatory filing. Return backers include Advanced Technology Ventures, Hummer Winblad Venture Partners, JK&B Capital and Mohr Davidow Ventures. Cenzic had previously raised over $32 million in total VC funding since 2001.

Endeca Technologies Inc., a Cambridge, Mass.-based provider of search and information access software, has raised $10 million in previously-undisclosed Series F funding. The company had announced earlier this year that Intel Capital and SAP Ventures had invested $15 million, but the filing does not indicate who provided the new capital. Endeca previously had raised around $45 million from Bessemer Venture Partners, Lehman Brothers, Ampersand Ventures, Venrock, Monarch Capital Partners, DN Capital and Granite Global Ventures.

Clearleap, an Atlanta-based developer of video delivery technologies for television, has raised $9 million in Series A funding. Trinity Ventures and Noro-Moseley Partners co-led the round.

Bungee Labs Inc., an Orem, Utah-based provider of a system for creating and delivering next-generation Web applications, has raised $8 million in SeriesC funding, according to a regulatory filing. Backers include North Bridge Venture Partners, Venrock and Wasatch Venture Fund. The company had raised a $7.1 million Series B round in November 2006 at a post-money valuation of approximately $30 million.

Car Advisory Network, a Seattle-based developer of an online portal for automobile information, has raised around $6.5 million in Series A funding, according to a regulatory filing. Backers include Accel Partners and Greylock Partners.

GizMoz, a San Francisco-based social expression and user-generated media service, has raised $6.5 million in Series B funding. DoCoMo Capital led the round, and was joined by NGI Capital and return backers Benchmark Capital and Columbia Capital.

Nellix Inc., a Palo Alto, Calif.-based developer of an endograft for treating abdominal aortic aneurysms and thoracic aortic aneurysms, has raised $6.49 million in Series C-2 funding, according to a regulatory filing. Return backers include Essex Woodlands Health Ventures. The company has now raised around $20 million in total VC funding since 2005.

Vivisimo, a Pittsburgh-based provider of enterprise search software, has raised $4 million in first-round funding from North Atlantic Capital.

Aprigo Inc. has raised $3 million in Series A funding led by Cedar Fund, according to a regulatory filing. No information has been disclosed about the Waltham, Mass.-based startup, except that it’s run by former Cedar Fund entrepreneur-in-residence Gil Zimmermann.

Gamook Inc., a Menlo Park, Calif.-based casual gaming company with an advertising component, has raised $1.5 million in “Series 1” funding from U.S. Venture Partners, according to a regulatory filing.

iSirona, a Panama City, Fla.-based provider of data automation solutions for healthcare providers, has raised $1 million in first-round funding. No investors were identified.

Korea Bone Bank, a Seoul-based processor of allograft bones and connective tissues for transplant, has raised an undisclosed amount of Series B funding from ePlanet Ventures.

Buyout Deals

Axcelis Technologies Inc. (ACLS) has rejected a $6 per share buyout offer from TPG Capital and Sumitomo Heavy Industries, which would have valued the company at approximately $630 million. The move comes less than a month after Axcelis rejected a $5.50 per share bid from the same suitors. Axcelis makes ion implantation devices for chip makers.

Inflexion Private Equity has sponsored a management buyout of Pims Group, a UK-based seller, installer and servicer of submersible pumps for water sewage and drainage systems. Gresham Private Equity was the seller, and reports a 3.4x return on investment. No specific financial terms were disclosed. Inflexion will hold a majority equity stake, with HSBC providing a package of debt facilities.

JMI Equity is in talks to acquire a stake in Catapult Learning LLC, a Philadelphia-based provider of tutoring and other supplemental education services to public, private and parochial schools, according to LBO Wire. No financial terms were reported. Catapult is a division of Educate Inc., which was taken private last year in a $535 million deal by Citigroup Private Equity and Sterling Capital Partners.

North Castle Partners has acquired the assets of International Fitness Inc. (a.k.a. World Health Club), an operator of fitness facilities in Alberta, Canada. No financial terms were disclosed.

Tulcan Private Equity Investors has recapitalized The Dyson Corp., a Painesville, Ohio-based maker of metal fasteners and forgings for domestic manufacturing and large infrastructure projects. No financial terms were disclosed. RSM EquiCo Capital Markets advised Dyson on the deal.

PE Exits

Deutsche Telekom AG has agreed to acquire a 20% stake in Greek phone company Hellenic Telecom from Marfin Investment Group. The €2.5 billion deal values Hellenic Telecom shares at €26 a piece, with Deutsche Telekom saying it would like to increase its position in the future. Marfin is Hellenic’s second-largest shareholder, behind the government of Greece.

Microsoft Corp. has agreed to acquire Rapt Inc., a San Francisco-based developer of price optimization and profitability management software. No financial terms were disclosed. Rapt has raised around $55 million in total VC funding since 1998, from firms like Accel Partners and Levensohn Venture Partners. In 2006, Accel and Levensohn reached an out-of-court settlement with two of Rapt’s three co-founders, who had alleged fraud and breach of fiduciary duty.

Nycomed AS, a Danish drug company, is seeking a buyer for its cancer research operations, according to Financial Times Deutschland. No word yet on desired pricing. Nycomed acquired the assets as part of its 2006 purchase of Altana AG’s pharmaceuticals division. Nordic Capital holds a 51% stake in Nycomed, with other shareholders including DLJ Merchant Banking Partners, Blackstone Group and AlpInvest.

Tinicum Capital Partners has sold Hallmark Data Systems to EBSCO Industries Inc. for an undisclosed amount. Hallmark is a Skokie, Ill.-based circulation fulfillment provider for the b-to-b sector.

Firms & Funds

Carlyle Capital Corp. announced that it will wind down operations, after receiving default notices for its entire $21.7 billion portfolio of mortgage-backed securities.

Human Resources

Mark Lotke has left FTVentures, where he was a partner. The move comes as the San Francisco-based firm is finishing up fundraising for its $600 million-targeted third fund, which already has secured over $465 million in capital commitments. Lotke was listed on regulatory filings for the fund. No word yet on his future plans. FTVentures said that he will be replaced as head of the firm’s software practice by existing partner Eric Byunn.

Daniel Healy has joined Permira as a senior advisor, with a focus on financial services. He previously was CFO and executive vice president of North Fork Bankcorporation.

Harris Williams & Co. has made four promotions: David Joncas and John Neuner to managing director, John Arendale to director and Jeff Cleveland to vice president.

Citi has named Michael Klein chairman and John Havens chief executive officer of its institutional clients group, effective immediately. Havens also will serve as chairman of Citi Alternative Investments, a unit of the institutional client group. Both men will report to Citi CEO Vikram Pandit.