PE Week Wire, Nov. 9, 2006

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*** Silver Lake Partners is moving full-steam ahead with its middle-market practice, by quietly agreeing to essentially acquire Shah Capital Partners, a Santa Clara, Calif.-based firm focused on small and mid-cap tech buyouts. Neither firm is commenting publicly yet, in large part because marketing is soon expected to begin on the $750m-$1 billion middle-market fund (not to mention a $7.5 billion-targeted large-market fund).

*** A couple of unannounced personnel moves for you: On the buyout side, Walid Musallam has agreed to join The Carlyle Group, in order to build up the firm’s Middle East and North Africa operations. He previously was CEO of as head of the Abu Dhabi Investment Company. On the VC side, Steve Weinstein has joined Novartis Venture Fund as a managing director in the firm’s Cambridge, Mass. office. He previously was a principal with Prism Venture Partners.

Top Three

3M has agreed to sell its global pharmaceuticals division in three separate deals worth a total of around $2.1 billion. First, Graceway Pharmaceuticals, a Bristol, Tenn.-based drug company owned by GTCR, will pay $875 million for 3M’s pharma operations in the U.S., Canada and Latin America. Graceway also will subsume fellow GTCR portfolio company Chester Valley Pharmaceuticals. Second, Ironbridge Capital and Archer Capital (both of Australia) will acquire 3M’s Asia-Pacific pharma operations for $349 million. Finally, Sweden’s Meda will acquire 3M Pharma’s European business for $857 million. Press reports earlier this week had indicated that Warburg Pincus and a pair of Indian drug companies had been considering bids for the assets.

Solstice Neurosciences Inc., a Malvern, Pa.-based drug company whose first product is a botulinum toxin type B, has raised $85 million in Series B equity and debt financing. The breakdown is $50 million of equity, and $35 million of debt. Highland Capital Management of Dallas led the deal, and was joined by Series A backers Thomas, McNerney & Partners, Investor Growth Capital Inc., Morgan Stanley Venture Partners and Oxford Bioscience Partners.

Hertz Global Holdings has dropped Deutsche Bank Securities as an underwriter of Hertz’s upcoming $1.6 billion IPO. The move came after Hertz discovered that a Deutsche employee had forwarded an apparently-improper email to around 175 institutional clients. Hertz was bought out from Ford Motor Co. last year for around $15 billion by Clayton, Dubilier & Rice, Carlyle Group and Merrill Lynch Global Private Equity.

VC Deals

Brightcove Inc., a Cambridge, Mass.-based IP video company, is looking to raise around $55 million in third-round funding at a pre-money valuation of around $170 million, according to GigaOm. The company already has raised around $20 million in funding from Accel Partners, General Catalyst Partners, AOL, Allen & Co., Hearst Corp. and InterActive Partners.

Norsun, an Oslo, Norway-based solar energy company, has raised around $23 million in VC funding from Norsk Hydro.

BlackArrow Inc., a provider of video ad insertion solutions, has raised a total of $14.75 million in VC funding, according to VentureBeat. Backers include Intel Capital, Mayfield, Polaris Venture Partners and Comcast. The company has offices in both New York and San Mateo, California.

Scali Inc., a Marlborough, Mass.-based provider of clustering solutions for datacenters, has raised $3.5 million in Series A recap funding from existing shareholders Atlas Venture and Four Seasons Venture. The company previously had raised around $20 million since its 1997 inception.

Buyout Deals

Golden Gate Capital has acquired Neways International, a Springville, Utah-based supplier of dietary supplements and personal care products. No financial terms were disclosed.

TotalStone, a Millstone Township, N.J.-based warehouse distributor of Owens Corning Cultured Stone, has raised an undisclosed amount of private equity funding from Brookstone Partners.

PE-Backed IPOs

Physicians Formula Holdings Inc., an Azusa, Calif.-based cosmetics company, priced 7.5 million common shares at $17 per share ($15-$17 forecast), for an IPO take of approximately $127.5 million. It will trade on the Nasdaq under ticker symbol FACE, while Citigroup and Deutsche Bank Securities served as co-lead underwriters. Summit Partners held a 76.8% pre-IPO position, and was expected to sell around 43% of its shares in the offering.

Canadian Solar Inc., a China-based maker of solar power modules, priced 7.7 million common shares at $15 per share ($13-$15 forecast), for an IPO take of approximately $115.5 million. It will trade on the Nasdaq under ticker symbol CSIQ, while Deutsche Banc and Lehman Brothers served as co-lead underwriters. Shareholders include HSBC Asian Ventures and Jafco Asia Technology Fund II.

ActivBiotics Inc., a Lexington, Mass.-based developer of antibacterials for high-value chronic and infectious diseases, has reduced its IPO pricing forecast from $12-$14 per share to $8-$10 per share. It still plans to offer 4 million common shares, and trade on the Nasdaq under ticker symbol ACTV. HSBC is serving as lead underwriter. ActivBiotitics has raised around $52 million in total VC funding since its 1996 inception, from firms like HealthCare Ventures, BioVentures Inv*stors, MDS Health Ventures, Delphi Ventures, China Development Industrial Bank, Canadian Medical Discoveries Fund, New England Partners and Vengrowth.

PE-Backed M&A

MediaWhiz, a provider of performance-based online marketing services, has acquired Cincinnati-based Text Link Ads. No financial terms were disclosed for the deal , which was partially financed by existing MediaWhiz investor Lake Capital.

PE Exits

Celanese Corp. (NYSE: CN) shares fell as much as 5.5% yesterday, after backers Blackstone Group and BA Capital Investors said that they will sell 30 million Celanese shares via a secondary offering.

Neiman Marcus Group has agreed to sell handbag maker Kate Spade to Liz Claiborne Inc. (NYSE: LIZ) for $124 million (including to-be-retired debt). Neiman Marcus was acquired last year in a $5.1 billion public-to-private buyout by Texas Pacific Group and Warburg Pincus.

KPS Special Situations Funds has agreed to sell Speedline Technologies Inc. to Illinois Tool Works (NYSE: ITW). No financial terms were disclosed. Speedline is a Franklin, Mass.-based maker of equipment used in the assembly of printed circuit boards and semiconductor

Indegene has acquired MedCases LLC, a Philadelphia–based provider of interactive continuing medical education. No financial terms were disclosed. MedCases has raised nearly $12 million in total VC funding, including an $8.6 million Series B round in 2001 at a post-money valuation of approximately $29 million. MedCases backers include Adler & Co., Brooks Capital Group, Churchill Investment Partners, PA Early Stage, PPM America, Siparex Group and Wynnefield Capital Advisors.

Firm & Fund News

Frontenac Company of Chicago is raising up to $450 million for its ninth private equity fund, according to a regulatory filing.

Innova Capital, a Poland-based private equity firm focused on mid-market European buyouts, has closed its fourth fund with Euro 225 million in capital commitments. Axon Partners served as exclusive placement agent.

Fortress Investment Group, a New York-based alternative asset manager, has filed for a $750 million IPO. Fortress manages private equity funds, hedge funds and publicly-traded alternative vehicles.

Keefe, Bruyette & Woods, a New York-based I-bank, priced a $163.2 million IPO.

Human Resources

Walid Musallam reportedly has agreed to join The Carlyle Group, in order to build up the firm’s Middle East and North Africa operations. He previously was CEO of as head of the Abu Dhabi Investment Company.

GE Commercial Finance has named Jeffrey Lupoff senior managing director of Industrial Project Finance within the firm’s Corporate Lending business. He previously led GE’s team responsible for identifying corporate and project finance opportunities outside of the