PE Week Wire, Oct. 11, 2006

I spent most of yesterday working on “big new project,” and this morning must do a bit of actual reporting (it seems I get paid to do so). So, in the meantime…

*** Details remain sketchy on the apparent U.S. Department of Justice probe into possible collusion between private equity firms, with most journalists either rehashing the original WSJ story, or hinting that I-banks might actually be the DOJ’s target. The only real story movement today came from Andrew Ross Sorkin in the NY Times, who adds The Carlyle Group and Clayton, Dubilier & Rice to the list of firms that have received inquiry letters. He also reports that many of the contacted firms are expected to meet individually with DOJ officials, in order to better understand exactly what they are being asked for (and probably why they’re being asked in the first place). Key line: Sources “described the [DOJ] letters as indicating a lack of familiarity with how the industry works.”

*** Fred Wilson chimes in on the Sevin Rosen decision. Lots of you have been writing me on this, with the letters falling into two distinct camps — both of which think Monday’s column was a bit too naïve, but for different reasons. More on this to come…

*** Bill Burnham returns to blogging about VC issues, but he’s now running a hedge fund.

*** Connie Loizos sends a wet kiss to Sequoia Capital in today’s Merc, but the firm undoubtedly deserves it. As one well-known VC sighed to me yesterday: “There’s Sequoia, and then there’s the rest of us.”

*** I really appreciate all of you who have been using the “Top Secret” button to send me anonymous tips, and encourage you to keep doing so (if your html is off, turn it on). But please let me reiterate that the notes are “anonymous,” which means that they shouldn’t be used to ask me narrow questions to which you desire individual answers. I don’t know who you are, and therefore have no way to respond (unless its so general that it would apply to the readership at large). But, again, keep the scoop coming.

*** This is completely off-topic, but the today’s Washington Post details the decline in cursive/script/longhand writing among today’s youth. I remember spending countless hours on this in elementary school – there even was an outside tester who came in once per month to rate our progress – but my current notebooks are filled with an illegible form of short-hand.

Top Three

Texas Pacific Group and AXA Private Equity have agreed to acquire a 60% stake in TDF SA, a France-based operator of radio and television broadcast towers. The Wall Street Journal pegs the transaction price at around €3.3 billion, with selling shareholders Caisse des Depots et Consignations and Charterhouse Capital Partners retaining minority stakes of 24% and 14%, respectively. TPG will hold 44%, while AXA will hold 18 percent.

Macroflux Corp., a Mountain View, Calif.-based developer of has transdermal drug delivery technology, has raised $75 million in first-round funding, to help it spin out from Johnson & Johnson subsidiary ALZA Corp. Nomura Phase4 Ventures led the deal, and was joined by New Enterprise Associates and HBM Partners. ALZA Corp. will retain a minority position.

Airport Management & Investment Ltd. has agreed to sell the London City Airport to AIG Financial Products and Global Infrastructure Partners, an infrastructure-focused joint partnership between Credit Suisse and GE Infrastructure. AIG-FP and GIP will each own 50% of the airport’s equity interest following the deal close, which is expected to come next month. No financial terms were disclosed. London City Airport is located in East London (Royal Docks in Newham), offers flights to 27 destinations within Europe and is the UK’s third-largest corporate aviation facility.

VC Deals

Achaogen Inc., a South San Francisco-based developer of antibacterial compounds, has raised $26.57 million in Series B funding. Domain Associates led the deal, and was joined by return backers 5AM Ventures, Arch Venture Partners, Venrock Associates and Versant Ventures.

Ping Identity Corp., a Denver–based provider of Internet identity technology for enabling secure business collaboration, has raised $13 million in Series C funding. Appian Ventures led the deal, and was joined by return backers Draper Fisher Jurvetson, General Catalyst Partners, Fidelity Ventures, SAP Ventures and I-Vent.

Tower Cloud Inc., a St. Petersburg, Fla.-based provider of backhaul solutions to wireless carriers, has raised $10 million in Series A funding. Backers include El Dorado Ventures and Sutter Hill Ventures.

Cellpoint Diagnostics Inc., a Richmond, Va.-based developer of tools for the screening, diagnosis and monitoring of cancer through the examination of bodily fluids, has raised $8.5 million in Series A funding, according to a regulatory filing. Mohr, Davidow Ventures led the deal.

Insception Biosciences Inc., a Toronto-based cord blood bank, has raised US$2.75 million in VC funding from MMV Financial.

IntegriChain Inc., a Princeton, N.J.-based provider of secure chain intelligence, has raised $2 million in Series A funding led by the NJTC Venture Fund.

Intent MediaWorks Inc., an Atlanta-based digital media distribution company, has raised $1.2 million in Series A funding, according to a regulatory filing. Backers include Menemsha Capital Partners and IMW Partners.

Innovatic Vision, a Sweden–based provider of wood scanning systems for quality control in the wood-working industry, has raised an undisclosed amount of VC funding from Priveq Investment and Eqvitec Partners.

Buyout Deals

Apollo Management has agreed to buy Jacuzzi Brands Inc. (NYSE: JJZ) for $12.50 per share. The total transaction is valued at $1.25 billion, including the assumption of $260 million in outstanding debt. Lazard Frères & Co. advised Jacuzzi Brands on the dale, which is expected to close in Q1 2007. Jacuzzi Brands is a West Palm Beach, Fla.-based manufacturer and distributor of branded bath and plumbing products for the residential, commercial and institutional markets.

J. H. Whitney Capital Partners has agreed to buy 120 Joe’s Crab Shack restaurants from Landry’s Restaurants Inc. (NYSE: LNY). The deal is valued at approximately $192 million, and is scheduled to close later this quarter. The remaining 23 Joe’s Crab Shack restaurants will be converted to another Landry’s concept, operated under a license agreement with J. H. Whitney or closed and sold. North Point Advisors represented Landry’s.

Texas Pacific Group and Apollo Management have upped their offer for casino operator Harrah’s Entertainment (NYSE: HET), according to The New York Times. The two firms originally offered $81 per share, with the revised bid reported to be between $83 and $83 per share. An $84 per share offer would push the deal’s overall value from $15.05 billion to more than $15.5 billion.

PPM Capital and Triton reportedly have put allergy-testing company Phadia AB on the block, with bidders expected to include Blackstone Group, Charterhouse Capital Partners, Cinven and CVC. The deal could value Phadia at up to €1.2 billion (including debt), with UBS running the auction.

Strength Capital Partners has agreed to acquire Postle Distributors Inc., an Elkhart, Ind.–based distributor and manufacturer of aluminum extrusions and related components. No overall price was disclosed, although Allied Capital said that it is supporting the acquisition with a $72.5 million commitment of senior secured notes, a revolving credit facility, an undrawn capital expenditures facility and an equity co-investment.

Milestone Capital Partners has acquired Flow Dry Technology Inc., a Brookville, Ohio–based provider of gasket and sealing technology. No financial terms were disclosed.

Milestone Capital Partners has bought Brentwood, Md.-based mechanical contractor American Combustion Industries Inc. from the Washington Gas Light Holdings Co. (NYSE:WGL). No financial terms were disclosed. As part of the deal, Milestone has named industry veterans John and Tim Kirlin as CEO and president/COO, respectively.

Creo Capital Partners of Los Angeles has acquired National Harvest LLC, a Kansas City–based provider of frozen food products under the Bakers Express and National Harvest Brands. No financial terms were disclosed.

PE-Backed IPOs

GateHouse Media Inc., a Fairport, N.Y.-based community newspaper publisher, has set its proposed IPO terms to 11.5 million common shares being offered at between $16 and $18 per share. It plans to trade on the NYSE under ticker symbol GHS, with Goldman Sachs and Wachovia Securities serving as co-lead underwriters. Fortress Inv*stment Group holds a 95.9% pre-IPO position.

Cadence Pharmaceuticals Inc., a San Diego-based developer of hospital-use drugs, has set its proposed IPO terms to six million common shares being offered at between $11 and $13 per share. It plans to trade on the Nasdaq under ticker symbol CADX, with Merrill Lynch serving as lead underwriter. It has raised $79 million in total VC funding, including a $53.8 million second-round deal earlier this year. Backers include Frazier Healthcare Ventures, Versant Ventures, Technology Partners, Domain Associates, ProQuest Inv*stments, BB Biotech Ventures, CDIB BioScience Venture and Management.

PE-Backed M&A

ITC Holdings Corp. (NYSE: ITC) has completed its acquisition of Michigan Electric Transmission Company LLC for approximately $865 million ($554m cash, 2.2 million ITC shares). This is the first merger of independent electric transmission systems to be approved by the Federal Energy Regulatory Commission. Sellers include Evercore Capital Partners, Macquarie Essential Assets Partnership and TE Power Opportunities Inv*stors. ITC shareholders include KKR, Trimaran Capital Partners, CIBC and the State of Michigan.

Wilks Broadcast Group LLC, an affiliate of The Wicks Group of Cos., has agreed to acquire seven radio stations from CBS Corp. (NYSE: CBS) for $138 million. The stations are: KFKF-FM, KBEQ-FM, KMXV-FM and KCKC-FM in Kansas City, and WLVQ-FM, WHOK-FM and WAZU-FM in Columbus, Ohio.

PE Exits

Automatic Data Processing Inc. (NYSE: ADP) has acquired VirtualEdge Corp., a Yardley, Pa.-based provider of recruiting and talent lifecycle management solutions for HR organizations. No financial terms were disclosed. VirtualEdge has raised nearly $5 million from Edison Venture Fund and Carmel Associates.

Other Deals

Surfect Technologies Inc., an Albuquerque, N.M.-based developer of single-cell electroplating tools for the semiconductor industry, has gone public via a reverse merger with defunct mineral exploration company Windy Creek Developments Inc. It will trade on the OCT Bulletin Board under ticker symbol SUFH, and also raised $2.8 million via a private placement. Surfect previously had raised over $2.3 million in VC funding from ITU Ventures.

Firms & Funds

CITIC Capital Partners has held a $220 million first close on its inaugural China-focused private equity fund. The fund has a target capitalization of $250 million, and will concentrate on buyouts and privatizations of established Chinese companies.

Spire Equity has launched as a Los Angeles-based venture capital firm focused on early-stage opportunities in the software and new media markets. Its principals are: Michael Edell, founder of Warehouse Auction Centers and founding partner of real estate-focused Warp Nine Partners; Ron Means, former CEO of Market Scan Information Systems; and Frederick Ackourey, former vice president of product development with Zhone Technologies Inc.

Human Resources

Don Wood has joined Draper Fisher Jurvetson as a managing director. He previously was a general partner with Vanguard Ventures, where he led such deals as ZipRealty, Vocera and Sylantro. Before Vanguard, he was president of Metricom.

Roger Holstein, former CEO of WebMD Corp., has joined Vestar Capital Partners as a senior advisor.

Intersouth Partners has promoted Katrin Burt from analyst to associate. She joined the firm in 2004, before which she was with HSBC.