PE Week Wire: Mon., March 5, 2007

Today’s column would be much better if it were finished (these happen about once per month), so I’ll just direct you to a few others who actually met their deadlines…

*** Matt Marshall delves into the reconstitution of Bay Partners. Larry Aragon looks back at some of our past reporting, and came up with a slightly different take.

*** I think I’ve figured out why Elevation Partners originally hired Bono. No, not to entertain at annual meetings and convince star-struck LPs to fork over fund commitments. But because he has apparently developed a contraption whereby he gets to spend more than 24 hours in a day. Rock star, investor, activist and now magazine editor?

*** Wise Foods, a portfolio company of Palladium Equity Partners, announced that it has been named the official potato chip and cheese doodle sponsor of The Boston Red Sox. Well, at least my cheese doodle choices have been whittled down. Coming soon, fellow Palladium portfolio company ATC Panels will be named official fiberboard of the New York Yankees…

*** Clear Channel did not receive any competing bids during its go-shop period. Combine that with the recent public market correction, and perhaps Fidelity and others will reconsider their buyout opposition. In any case, Clear Channel is using U.S. Postal to make its pro-buyout case to shareholders.

*** What’s a reasonable starting point for an options pool? AskTheVC has some answers.

*** Last, but certainly not least, Todd Brooks’ family has set up a memorial fund that will be used to support charities and causes close to Todd’s heart. Donations can be sent to:

Todd Brooks Memorial Fund

c/o Merrill Lynch

101 California Street, Suite 2100

San Francisco, CA 9411

Top Three

Federal regulators have charged several unnamed individuals with insider trading, related to the proposed $45 billion buyout of energy company TXU. The SEC said in its complaint that “highly profitable and suspicious” purchases of TXU stock options occurred last month, with the proceeding buyout announcement putting the buyers in a position to gain more than $5.3 million in profits. That money has now been frozen, but the buyers have yet to be identified because the purchases were made via foreign brokerages.

The Blackstone Group is considering an offer for carmaker Chrysler Group, according to The Detroit News. Other possible bidders could include General Motors, Cerberus Capital, Carlyle Group, Apollo Management and Ripplewood Holdings.

Meru Networks Inc., a Sunnyvale, Calif.-based WiFi company, has raised $27.6 million in Series D funding, according to a regulatory filing. D.E. Shaw was joined by return backers like Lehman Brothers Venture Partners, Clearstone Venture Partners, BlueStream Ventures, JumpStartUp Ventures, Evercore Ventures and NeoCarta Ventures. Meru has raised over $83 million in total VC funding since its 2002 inception.

VC Deals

Liquidia, a Morrisville, N.C.-based developer of fluoro-polymer materials for the life sciences and advanced materials market, has raised $16 million in Series B funding. New Enterprise Associates led the deal, and was joined by return backers like Firelake Capital and the Wakefield Group.

Arxan Technologies Inc., a Bethesda, Md.-based provider of IP protection from software tampering, has raised $13 million in Series C funding. Legend Ventures and TDF were joined by return backers EDF Ventures, Paladin Homeland Security Fund, Solstice Capital and Trident Capital.

Ciclon Semiconductor Device Corp., a Bethlehem, Pa.-based developer of high-frequency power semiconductor solutions, has raised $12 million in Series B funding. Guggenheim Venture Partners led the deal, and was joined by return backers TL Ventures and Venrock Associates.

Andigilog Inc., a Chandler, Ariz.-based fabless analog and mixed-signal semiconductor company, has raised $11.55 million in Series B funding, according to a regulatory filing. Backers include Intel Capital, Newbury Ventures, Palisades Ventures, Shepherd Ventures, Mission Ventures and Valley Ventures.

Rohati Systems Inc., a Sunnyvale, Calif.-based data center startup, has raised around $11 million in Series B funding from Matrix Partners and Foundation Capital.

Transera Communications Inc., a Cupertino, Calif.-based provider of virtual call center solutions, raised $10 million in Series C funding last November, according to a regulatory filing. Return backers include Accel Partners, Apax Partners and Storm Ventures.

SoloPower Inc., a Milpitas, Calif.-based thin-film solar cell startup, has raised $9.8 million in Series A funding, according to a regulatory filing from last July. Backers include Crosslink Capital and Firsthand Capital Management.

Airgain Inc., a Carlsbad, Calif.-based provider of wireless connectivity solutions, has secured $5.55 million of a $6.75 million Series F round, according to a regulatory filing. Backers include Gen 3 Partners and Northwater IP Fund.

Appistry Inc., a St. Louis-based provider of application fabric software, has secured $3.25 million of a $14 million Series B round, according to a regulatory filing.

Telkore Inc., a Mechanicsburg, Penn.-based provider of installation and maintenance services for wireless communication towers, has raised $1.4 million in Series A funding led by SJF Ventures.

Buyout Deals

General Atlantic and Francisco Partners have agreed to acquire Aeroflex Inc. (Nasdaq: ARXX), a Plainview, N.Y.-based provider of high technology solutions to the aerospace, defense, cellular and broadband communications markets. The deal is valued at approximately $1 billion, with Aeroflex stockholders to receive $13.50 per share.

Ripplewood Holdings LLC has completed its public-to-private buyout of The Readers’ Digest Association Inc. (NYSE: RDA) for $17 per share. The total deal was valued at $2.4 billion, with other members of the buying consortium including J. Rothschild Group, GoldenTree Asset Management, GSO Capital Partners, Merrill Lynch Capital and Magnetar Capital. Leverage was provided by JPMorgan, Citigroup, Merrill Lynch and Royal Bank of Scotland, while Merrill Lynch advised RDA on the deal. As previously announced, Mary Berner will succeed Eric Schrier as president and CEO of Readers’ Digest, with Schrier becoming an industrial partner with Ripplewood and a consultant to Readers’ Digest.

Universal American Financial Corp. (NYSE: UHCO) said that its board of directors has rejected an $18.15 per share buyout offer from a group that includes CEO Richard Barasch, Capital Z Partners, Lee Equity Partners, Perry Capital and Welsh, Carson, Anderson & Stowe. The deal would have valued UAF at around $1.06 billion. The board said that the offer was too low, but that it would still consider any future proposals from the consortium.

Friedman Fleischer & Lowe of San Francisco has acquired VIP Sales Company Inc., a Tulsa, Okla-based processor and distributor of frozen food products. No financial terms were disclosed. RSM EquiCo Capital Markets advised VIP on the sale.

The Compass Group has acquired Aeroglide Corp., a Cary, N.C.–based maker of industrial drying systems. The deal was valued at $57 million, and included participation by companuy management. Aeroglide previously had been family-owned, and was advised on the sale by Edgeview Partners.

GS Capital Partners may participate in The Carlyle Group’s proposed $5.46 billion buyout of Taiwan’s Advanced Semiconductor Engineering, according to The Commercial Times of Taipei.

EQT Partners has agreed to acquire Scandic Hotels AB from Hilton Hotels Corp. (NYSE: HLT) for an undisclosed amount. Scandic is the largest hotel chain in the Nordic region with 132 hotels and more than 23,000 rooms in 9 countries in northern Europe. In 2006, the company reported sales in excess of SEK 6 billion and has approximately 5,700 employees.

Silver Lake Partners and Texas Pacific Group have received European Commission approval for their pending $5 billion acquisition of travel reservations company Sabre Holdings (NYSE: TSG).

Alltel Corp. (NYSE: AT) has been shopping itself to fellow carriers like AT&T, Verizon and Spring Nextel, according to The Wall Street Journal. The report adds that Verizon has discussed an Alltel acquisition with several private equity firms. Alltel’s current market capitalization is approximately $22 billion.

Palm Inc. (Nasdaq: PALM) has retained Morgan Stanley to explore strategic options, according to The Wall Street Journal. This could include anything from a sale, a stock buyback or a PIPE deal.

PE-Backed IPOs

This week’s IPO calendar includes expected pricings from Symmetry Holdings Inc., Clearwire Corp. and Xinhua Finance Media Ltd.

PE-Backed M&A

Merlin Entertainments Group, the Legoland theme-park operator controlled by The Blackstone Group, has agreed to acquire wax museum operator Tussauds Group from Dubai International Capital. The deal is valued at approximately $1.9 billion, with DIC retaining a 20% stake.

The Riverside Company has carved out Insurance Claims Management from existing portfolio platform The Dwyer Group, in order to create a new company. ICM owns both Harmon Solutions Group, a third-party administrator providing auto glass and property claim administration services for insurance and fleet customers; and CodeBlue, a full-service claims processing network handling property insurance claims. The Dwyer Group was acquired by Riverside in 2003, and is a holding company of six franchise businesses.

PE Exits

Eli Lilly & Co. has agreed to acquire Hypnion, a Lexington, Mass.–based drug company focused on sleep disorders. No financial terms were disclosed for the deal, which is expected to close later this quarter.. Hypnion has raised around $88 million in VC funding since its 2000 inception, from firms like Advanced Technology Ventures, Coastview Capital, Flagship Ventures, Forward Ventures, GIMV, Jafco Ventures, Mintz Levin, MPM Capital and Oxford Bioscience Partners.

PIPE Deals

JLL Partners has agreed to acquire US$150 million worth of convertible preferred shares in Patheon Inc. (TSX: PTI), an Ontario–based provider of contract drug manufacturing and development services to pharma and biotech companies. The preferred shares will be convertible into Patheon common shares at JLL’s option at a price equivalent to Cdn$5.55 per common share. Patheon previously had announced that it had retained RBC Capital Markets and Greenhill & Co. to explore strategic options.

H.I.G. Capital has acquired approximately 7.9 million shares, or around 49.7%, of staffing services company Westaff Inc. (Nasdaq: WSTF) from shareholders including company founder W. Robert Stover. The deal was valued at around $45 million. H.I.G. partnered in the transaction with Michael Willis, a serial staffing industry entrepreneur who has founded both Talent Tree Inc. and CoreStaff Inc.

Firms & Funds

MPM Capital has closed its fourth venture capital fund with $550 million in capital commitments. Limited partners include GE Healthcare Financial Services, Itochu, the Kauffman Foundation, Scottish Widows Investment Partnership, AlpInvest, Dow Employees’ Pension Plan, Skandia and Union Carbide Employees’ Pension Plan. Atlantic-Pacific Capital served as placement agent.

CGW Southeast Partners of Atlanta is winding down, with three partners teaming up with former BellSouth COO Mark Fiedler to form a new firm called MSouth Equity Partners, according to LBO Wire. The three partners are Garrison Kitchen, Michael Long and Bart McLean. Cravey Green will continue to oversee the 12 remaining portfolio companies from CGW Southeast Partners IV, a $405 million fund that closed in 1999.

Union Square Partners (f.k.a. Capital Z) has held a $250 million first close on its latest fund, according to LBO Wire. The fund will form a diverse portfolio rather than maintaining an exclusive focus on financial services, and is being marketed with a $500 million target and $750 million hard cap.

Patron Capital of London has closed its third real estate private equity fund with €895 million in capital commitments (including €45 million from the general partner). Monument Group served as placement agent.

Lake Pointe Partners, a Chicago-based consultancy, has opened an office in Shanghai, China.

Human Resources

James Kim has joined CMEA Ventures as a partner focused on opportunities in the energy and materials space. He previously was a vice president in the tech venture team of GE Commercial Finance.

Michael McNamara, former global president of Neutrogena Corp., has agreed to joined beauty brand Philosophy Inc. as CEO, effective May 15. The appointment was announced by The Carlyle Group, which in January agreed to acquire a majority stake in Philosophy. At the time, Carlyle said that it would name a new CEO, with current chief Cristina Carlino transitioning into an executive chairwoman role.

Harris Williams & Co. has promoted Todd Morris to managing director. Morris joined the firm’s Richmond, Va. office in 1997 as an analyst, and later moved to San Francisco to help build out Harris Williams’ West Coast office.