PE Week Wire: Monday, November 17, 2008

The sun is shining, the Citi is falling and the proposed auto bailout is paradoxically necessary and unacceptable.

Leading us off are some replies to Friday’s column about Adeo Ressi’s “Canary” slideshow, which argued that the VC market is fundamentally flawed. K writes: “It really shouldn’t be the VC’s job to tell an entrepreneur how to present their idea/company, because 1) We need to get a ‘clean read’ on the team, and an unadulterated pitch is the tried and true way to do this, and 2) Given the volume of companies we meet, it simply isn’t practical from a time standpoint anyway.”

Tom: “Ressi seems to be arguing that far too few companies get funded, but I would think LPs – and many GPs — believe the exact opposite.” Victor: “As an entrepreneur, I want to second many of Ressi’s points. Raising venture capital is extremely time-consuming for startups, and the lack of VC transparency on what they’re looking for (presentation, terms, etc.) just makes it take that much longer… We would be a more efficient company if VCs were more transparent, because people like me would get to spend more time actually running the business.”

I also asked Ressi himself to put some contextual meat on his slideshow’s bones, and he’s done so here with a Vox Populi post.

*** Next up is CalPERS, which had been tardy in posting new fund-specific performance data, and is not releasing the values of its general partnership stakes (Apollo, Silver Lake, etc.). Aaron: “I’m not personally involved, but I’m certain that CalPERS’ agreements with firms like Apollo were that they would not disclose the value of their equity positions. Asking them to do so is asking them to violate their own confidentiality agreements.” Perhaps Aaron, but I’d argue that a public pension had no right to sign such confidentiality agreements in the first place. Admittedly I’m no lawyer, but this is a debate CalPERS has already lost once, and I get the sense that it expects to lose again if a challenge comes its way.

Sarah: “Give CalPERS a break. It’s hard to pay attention to things like public disclosure when you’re losing billions of dollars.” I wouldn’t know Sarah, but can say that the performance data was revised through Q2 as of this morning. You can see it here.

*** Glenn on the carried interest debate ending when Barack Obama was elected president: “You had better hope you’re wrong, or else there will be a lot fewer firms for you to write about.”

*** Last, but certainly not least, we have Neil: “Did you read about what happened at VC-backed Siport on Friday? A fired employee came in and killed three people, including the CEO.”

Yes Neil, and it’s an astonishing brand of horrible. The victims included Siport CEO Sid Agrawal, VP of operations Brian Pugh and HR chief Marilyn Lewis. In a statement sent out over the weekend, SiPort founder Aiman Kabakibo said:

“All three people were extremely well liked and will be sorely missed. We are a team of entrepreneurs, engineers and scientists who enjoy working with each other very much. We grieve along with their families and friends.”

Information on contributions to the family is said to be forthcoming, and we’ll make sure to pass it on at that time. They are in our prayers.

Top Three

Novolipetsk Steel (NLMK) of Russia has pulled out of a $3.5 billion deal to acquire U.S. steelmaker John Maneely Co. from The Carlyle Group. The original agreement was signed in August, while Carlyle sued NLMK in October to complete the deal. That lawsuit is still pending. In related news, NMLK has canceled a $2 billion syndicated bridge l! oan that had been launched to syndication in August by Deutsche Bank, Merrill Lynch and Societe Generale.

ZafGen Inc., a Cambridge, Mass.-based developer of an obesity therapy based on the vascular targeting of adipose tissue, has raised $14 million in Series B funding, according to a regulatory filing. Third Rock Ventures was joined by return backer Atlas Venture. The company previously raised around $5.2 million from Atlas and GreatPoint Ventures.

Citigroup plans to cut approximately 50,000 employees, via layoffs, unit sales and attrition, according to CNBC. This would be on top of the 23,000 jobs Citi has already cut this year, and would leave the company with around 300,000 global employees.

VC Deals

Pacira Pharmaceuticals Inc., a San Diego–based maker of controlled-release injectable products, has expanded its Series A round to $85 million, according to a regulatory filing. It had previously secured approximately $30 million. Backers include MPM Capital, HBM BioVentures, OrbiMed Advisors and Sanderling Ventures.

Waterfront Media, a New York-based online health media company, has raised $20 million in fifth-round funding, according to a regulatory filing. No investor information was disclosed. The company had previously raised around $42 million in venture capital and debt funding from Scale Venture Partners, Foundation Capital, Rho Ventures, Time Warner Ventures, BEV Capital, Neocarta Ventures and Hercules Technology Growth Capital.

Rim-Tec Inc. (a.k.a. FireApps), a Scottsdale, Ariz.-based provider of foreign exchange exposures management solutions, has raised $7.5 million in new VC funding, according to a regulatory filing. Trilogy Equity Partners was joined by return backer Ignition Partners. As part of the deal, Trilogy’s Chuck Stonecipher has joined the Rim-Tec board of directors.

Rave Wireless Inc., a New York–based provider of mobile phone programs for colleges and universities, has raised $7 million in Series D funding, according to a regulatory filing. Listed shareholders include Bain Capital Ventures, Sigma Partners and RRE Ventures. The company previously raised around $35 million, including an $18 million Series C round last year led by Trilogy Equity Partners., a New York–based online television network, has raised $5.2 million in Series B funding led by Bain Capital Ventures, according to a regulatory filing. The round was originally announced last month, but without a dollar amount.

DigitalArbor, a Cohasset, Mass.-based provider of back-end production services to the digital advertising, marketing and content/communications markets, has raised $5 million in Series A funding. Flybridge Capital Partners led the round, with partner Jeff Bussgang joining the company’s board of directors.

Ifbyphone, a Skokie, Ill-based provider of voice infrastructure and applications to SMBs, has raised $4.6 million in Series B funding. Return backers Apex Venture Partners and Origin Ventures co-led the round, and were joined by Spring Mill Venture Partners and Illinois Innovation Accelerator Fund. The $4.6 million also included an undisclosed amount of venture debt from Blue Crest Capital Finance. Ifbyphone previously raised a $2.75 million Series A round.

Evogen Inc. (fka Sceptor), a Kansas City-based developer of on-site biological detection systems, has raised $3 million in Series B funding, according to VentureWire. L Capital Partners led the round, and was joined by return backer Midwest Research Institute and individual angels.

ZipZapPlay Inc., a Burlingame, Calif.-based provider of an online platform for developing Flash games, has raised around $1.1 million in VC funding led by Harrison Metal Capital.

TravelMuse Inc., a Menlo Park, Calif.-based travel planning website, has raised $600,000 in additional Series A funding from existing backer Azure Capital Partners, according to a regulatory filing.

The Mechanical Zoo, a San Francisco-based social search startup, has raised $2 million in convertible promissory note funding led by August Capital, according to a regulatory filing. David Hornick of August has taken a board seat.

Buyout Deals

The Gores Group is in talks to sell Global Tel*Link Corp. to Veritas Capital and an affiliate of Goldman Sachs, according to LBO Wire. Credit Suisse and Wells Fargo are agenting the transaction, which is reported to include more than $200 million in debt financing. Global Tel*Link is a Mobile, Ala.-based provider of telephony services to county jails.

Joshua Partners has acquired Medicia Corp., a Dayton, N.J.–based contract manufacturer of personal care products, OTC drug preparations and private label products. No financial terms were disclosed.

Magnum Capital is leading a buyout of Portuguese wind power company Enersis from Babcock & Brown Ltd. for €1.2 billion. Magnum is being joined by Banco Espirito Santo and Fjord Capital.

Momentum Capital Partners has acquired Magnum Tunneling & Boring, a Houston, Texas-based infrastructure services company focused on heavy underground construction. No financial terms were disclosed. Focus Strategies advised Magnum on the deal.

Realogy Corp., a real estate services company owned by Apollo Management, has offered to exchange around $1.1 billion in existing bonds at a discount for new notes. The move is an attempt to stave off default, with the company saying in a regulatory filing: “There can be no assurance that we will not violate this or other covenants under our senior secured credit facility or that this will not result in a default under our indentures.” Realogy reported $209 million in losses over the first three quarters of 2008. It was acquired by Apollo for $6.6 billion in April 2007.

Rio Tinto Ltd. has retained Dresdner Kleinwort to begin selling its talcs and borates businesses, and is expecting to receive interest from both strategic and financial buyers.

PE-Backed IPOs

ChemoCentryx Inc., a Mountain View, Calif.-based developer of oral drugs for autoimmune diseases, inflammatory diseases and oncology, has withdrawn registration for a $57.5 million IPO, citing “market conditions.”

The company had planned to trade on the Nasdaq, with Credit Suisse serving as lead underwriter. ChemoCentryx recently raised $50 million from existing investor GlaxoSmithKline, at a higher valuation than on its Series D round in March 2007 ($30m round at a $188m post-money). Overall, the company has raised around $155 million from GSK, OrbiMed Advisors, HBM BioVentures, Alta Partners, HealthCap and GIMV.

PE Exits

Citrix Systems Inc. has acquired Vapps Inc., a Hoboken, N.J.-based provider of audio and video conference calling technology, for $26.6 million. Vapps had raised $2.5 million in VC funding last year from Azure Capital Partners.

PE-Backed M&A

Campus Management Corp., a provider of administrative and academic solutions to enhance institutional performance, has acquired the Talisma CRM business from nGenera Corp., an Austin, Texas-based provider of on-demand enterprise software No financial terms were disclosed. Campus Management is a portfolio company of Leeds Equity Partners.

NGenera has raised over $70 million in VC funding, from firms like Foundation Capital, Hummer Winblad Venture Partners, Oak Investment Partners and Powershift Group. It acquired Talisma earlier this year for an undisclosed amount, from venture firms Oak Investment Partners, Madrona Venture Group, Seapoint Ventures, Cedar Grove Investments, Thomas Weisel Venture Partners and Carlyle Venture Partners.

Dexia SA has sold its U.S. bond insurance unit FSA to Assured Guaranty Ltd. (NYSE: AGO), a portfolio company of WL Ross & Co. The deal is valued at $722 million, including $361 million in cash and the remainder in AG shares (for a 24.7% stake).

Firms & Funds

Climate Change Capital said that it plans to invest 5 billion yuan ($732m) in Chinese environmental projects over the next two to three years, including industrial waste management and clean technology efforts.

EQT Partners has raised €1.2 billion for an infrastructure fund that will focus on opportunities in Northern and Eastern Europe. Limited partners include Investor AB, AP4, Skandia, Pantheon Ventures and Varma Mutual Pension Insurance Co.

American Beacon Advisors is raising up to $250 million for its third private equity fund-of-funds, according to a regulatory filing. The vehicle is called American Private Equity Partners III, and so far has secured over $13 million in capital commitments. Foreside Fund Services is serving as a placement agent. The Fort Worth, Texas-based firm’s second fund-of-funds closed on $145.7 million in July 2006.

Aviva Investors is receiving a lukewarm response to its new private equity fund-of-funds, according to Reuters.

Genesis Partners, an Israel-based venture capital firm, has held an $85 million first close on its fourth fund, according to a regulatory filing. It is targeting upwards of $150 million.

Hastings Equity Partners is raising up to $100 million for its second fund, according to a regulatory filing. It already has secured around $56 million in capital commitments. The Waltham, Mass.-based firm focuses on buyouts of small-cap and mid-cap companies.

MerchantBridge and UBS AG have formed a 50/50 joint venture to make private equity investments in the Middle East. Each firm has committed an initial $40 million, and hopes to raise a total of $500 million.

Susquehanna Financial Group, the I-banking division of Susquehanna International Group, has closed its midtown Manhattan office and laid off around 30 employees.

Human Resources

Mark Graf, former chief financial officer of Fifth-Third Bank, has joined Aquiline Capital Partners as an investment professional. He most recently was a partner with Barrett Ellman Stoddard Capital Partners, with a focus on the financial services sector.