PE Week Wire, Oct. 12, 2006

The buyouts market is expected to record its third-straight year of record-breaking deal volume, according to Q3 numbers released this week by Buyouts Magazine. The first three quarters of 2006 saw U.S. firms participate in a total of 770 control-stake deals valued at $181 billion in disclosed value (including leverage), compared to $198 billion for 840 such deals in all of 2005. Moreover, Buyouts reports that there is approximately $150 billion worth of agreed-upon deals that will close either this quarter or in Q1 2007. Included in this pipeline is HCA.

As for specific Q3 2006 data, U.S. firms participated in 259 control-stake transactions valued at $56 billion. The largest was the $12 billion TDC buyout, followed by the $9.7 billion VNU deal. Buyouts Magazine subscribers can read more either at, or in the October 9 print edition.

*** Vanguard Ventures does not plan to shut down, despite yesterday’s news that general partner Don Wood is leaving to join DFJ. But that doesn’t mean that the future is terribly bright.

Vanguard entered 2005 with five general partners: Wood, Tom McConnell, Dan Eilers, Bob Ulrich and firm co-founder Jack Gill. Soon after, the firm began pre-marketing a $150 million-targeted eighth fund, but told LPs that neither Ulrich nor Gill would be listed as partners (although they would continue to be involved on a part-time basis). Once LPs began balking at the lack of substantial liquidity events, Vanguard’s remaining trio put the entire process on hold — in order to squeeze additional value out of its existing portfolio.

Fast forward to yesterday, and Wood leaves for DFJ (although at least one other notable Valley firm was recruiting him). He will continue to work with his existing Vanguard portfolio companies, but it will be Eilers and McConnell who have to shoulder most of the load. Vanguard does have two companies in registration for IPOs – Asthmatx (on its road show) and Hansen Medical – but it will be a tough ride.

If successful, Vanguard will hire additional partners and resume fundraising in 2008. If not, it will join what is becoming a long list of dearly-departed firms.

*** Apax Partners is planning to close its Menlo Park, Calif. office at year-end. Some of the staffers are leaving – like partner Paul Vais – while others will relocate to New York.

The move is part of Apax’s continuing shift away from venture capital investing. There were some internal conversations about keeping a California presence in order to better participate in tech buyouts, but the ultimate decision was that such deals could be done by teams based in New York.

*** Remember all that talk in 2003 and 2004 about emerging VC fund managers? Well, LPs who backed such efforts are now facing an interesting dilemma: Do they also support successor funds, when the first one is not yet mature enough to have a demonstrable track record? It’s kind of like doubling down on a blind bet. Thoughts?

Top Three

Amyris Biotechnologies Inc., an Emeryville, Calif.-based synthetic biology company focused on the development of pharmaceuticals, fine chemicals and biofuels, has raised $20 million in Series A funding. Khosla Ventures led the deal, and was joined by Kleiner Perkins Caufield & Byers and TPG Ventures. In related news, Amyris appointed John Melo as CEO. He previously was president of U.S. fuels operations for British Petroleum.

Conduit Capital Partners of New York has retained BNP Paribas to help it sell the assets of its first two private equity funds – Latin Power I ($100m) and Latin Power II ($157m). The portfolios contain power generation assets in Jamaica, Mexico, Colombia and Peru totaling 398 MW of net equity in installed capacity.

Wavin Group, a Dutch plastic pipe manufacturer, raised around €371 million via an IPO on the Euronext in Amsterdam. The company was acquired last year by CVC Capital Partners, and priced at the bottom of its €11-€13.50 per share offering range. It also reduced the number of offered shares by nearly one-third.

VC Deals

CoDa Therapeutics Inc., a San Diego-based drug company focused on wound care therapeutics, has raised $10 million in Series A funding from Domain Associates. It plans to close on an additional $5 million to $10 million within the next 90 days.

Zebra Imaging Inc., an Austin, Texas–based developer of 3D holographic visualization tools, has raised $5.93 million in Series C funding, according to a regulatory filing. Backers include SAIC Venture Capital Corp., Sierra Ventures, Nuevo Private Equities, Ford Motor Co. and Voyager Capital.

Newstep Networks Inc., a Toronto-based provider of convergence solutions for carriers and enterprises, has raised US$2.86 million in new Series B funding, according to a regulatory filing. Shareholders include Newbury Ventures, Bell Canada, BDC Capital and Vengrowth Capital.

LightPointe, a San Diego-based maker of optical wireless products based on free-space otpics technology, has been revived by an undisclosed amount of VC funding from West Coast Venture Capital and Exa Ventures. The company closed its doors back in May, and then filed for Chapter 11 bankruptcy protection. Before that, it had raised over $70 million in VC funding from firms like Rho Ventures, Huawei Technologies Co., Sevin Rosen Funds, Ampersand Ventures, Telecom Partner, Cisco Systems and Corning Inc. News of the revival was first reported by

MI5 Networks Inc., a Sunnyvale, Calif.-based provider of anti-spyware solutions, has raised Series A funding from First Round Capital.

Tacere Therapeutics Inc., a San Jose, Calif.-based biotech company focused on Hepatitis C treatments, has raised an undisclosed amount of seed funding from Hokkaido Venture Capital of Japan.

TZero Technologies Inc., a Sunnyvale, Calif.-based fables semiconductor company that provides UWB solutions for delivering video throughout the home without wires, has raised an undisclosed amount of new Series B funding from Miven Venture Partners. The company previously raised $25.5 million in Series B funding from firms like OVP Venture Partners, August Capital, Lightspeed Venture Partners and U.S. Venture Partners.

Buyout Deals

Tenaska Capital Management has agreed to acquire 3,145 megawatts of natural gas-fired generation assets from Constellation Energy (NYSE: CEG) for $1.635 billion in cash, subject to closing adjustments. The deal includes six facilities, including ones in California, Texas, Illinois, Virginia and West Virginia.

France Telecom has completed a sale of its 54% stake in directories company PagesJaunes for around €3.3 billion, to a private equity consortium that includes KKR, Goldman Sachs Capital Partners, AXA Private Equity and Eurazeo.

Silver Lake Partners, Bain Capital and Texas Pacific Group each are bidding to buy H-3C, according to The Wall Street Journal. H-3C is a China-based joint venture between 3Com and Huawei Technologies Co., and is expected to fetch between $1 billion and $1.5 billion.

Texas Pacific Group and Apollo Management have upped their offer for casino operator Harrah’s Entertainment (NYSE: HET) from $81 per share to $83.5 per share. There is speculation, however, that the Harrah’s board may insist on an $85 per share price before recommending the deal to shareholders.

Main Capital Partners has sponsored a management buyout of Actuera BV, a Dutch provider of software for pension funds and insurance companies. No financial terms were disclosed.

PE-Backed IPOs

Hexion Specialty Chemicals Inc., a Columbus, Ohio-based maker of thermosetting resins, has canceled a proposed $800 million IPO. The company said back in June that it was delaying the offering, due to “recent volatility within the overall equities markets and the specialty chemical sector.” That move followed several changes to the IPO terms, including a significant increase in the number of shares being offered by controlling shareholder Apollo Management. Credit Suisse and Goldman Sachs had been serving as co-lead underwriters. Apollo formed Hexion last year as a rollup of Borden Chemical Inc., Resolution Specialty Materials LLC and Bakelite AG.

GlobalStar Inc., a Milpitas, Calif.-based provider of voice and data communications services via satellite, has withdrawn registration for a proposed $100 million IPO. No reason was given. Wachovia Securities had been serving as lead underwriter, while shareholders include Thermo Funding Co., Columbia Ventures Corp., Banc of America Securities and Qualcomm.

Acme Packet Inc., a Burlington, Mass.-based maker of session border controllers for service providers (i.e., VoIP infrastructure), has raised its proposed IPO price range from $6.50-$7.50 per share, to $8-$9 per share. It still plans to offer around 11.47 million shares, with Goldman Sachs and Credit Suisse serving as co-lead underwriters. The company has raised $45.5 million in total VC funding since its 2000 inception, from firms like Menlo Ventures, Advanced Technology Ventures and Canaan Partners.

Optium Corp., a Chalfont, Pa.-based maker of optical subsystems for use in telecom network systems, has set its proposed IPO terms to 5.2 million common shares being offered at between $13.50 and $15.50 per share. It plans to trade on the Nasdaq under ticker symbol OPPTM, with Credit Suisse and Morgan Stanley serving as co-lead underwriters. Optium has raised nearly $65 million in VC funding from firms like Battery Ventures, KPLJ Ventures, TL Ventures, TPG Ventures and Corning Innovation Ventures.

PE-Backed M&A

Broadview Networks, a New York-based communications networking company, has completed its acquisition of ATX Communications Inc., a King of Prussia, Pa.–based provider of communications and managed services to Mid-Atlantic businesses. No financial terms were disclosed. Broadview shareholders include MCG Capital, Baker Capital and New Enterprise Associates.

PE Exits

The Blackstone Group reportedly has retained Morgan Stanley to explore a sale of Global Tower LLC, which could generate around $1.5 billion. Blackstone acquired the mobile tower operator in April 2005 from Great Hill Partners for around $332 million, after which Global Tower made a series of acquisitions.

ConnectCapital and The View Group have exited Integreon Managed Solutions Inc., via a management buyout sponsored by the parent company of Ayala Corp. No financial terms were disclosed. Integreon is a New York–based provider of business process outsourcing solutions.

Other Deals

iWatt Inc., a Los Gatos, Calif.-based power management company, has raised $7 million in mezzanine debt financing from Hercules Technology Growth Capital. The company’s VC backers include Horizon Ventures, PTI Ventures, Sigma Partners and VantagePoint Venture Partners.

Firms & Funds

GTCR of Chicago has closed its ninth fund with $2.75 billion in capital commitments, according to The Chicago Tribune.

Human Resources

Brian Phillips has joined Greenhill & Co. as a London-based managing director, in charge of launching a European primary merchant banking business focused on the small- and middle-markets. He previously was with Legal & General Ventures.

Sam Jadallah is in the process of transitioning from general partner to venture partner at Mohr, Davidow Ventures, according to VentureWire. He will continue to work with his existing portfolio companies, but will not lead new deals on MDV’s behalf.

Neil Ashe has been named CEO of CNet Networks Inc. (Nasdaq: CNET), following the resignation of company co-founder and CEO Shelby Bonnie. Ashe joined Cnet in 2002 as senior vice president of corporate strategy and development. Between 1996 and 1999, he served as a managing director of private equity firm Crest Communications Holdings.