PE Week Wire, Oct. 23, 2006

The sky is gray, the World Series is tied and I’ve got a lot of “big new project” work to do before heading to Portland, Oregon for Venture Northwest (via Phoenix, ugh). In other words, it’s time for Monday Mouth-Off.

*** Thomas on the spinout of Shore Points Capital from BNP Paribas: “These types of deals are happening more and more often, at least in Europe. Typically, a fund manager struggles to raise their next fund because existing LPs won’t reinvest… so the GP strikes a deal whereby a secondary specialist comes in and (1) Makes a primary investment in the new fund and(2) Buys old LP stakes. It’s a bit more common on the VC side (vs. buyout) and other similar deals include: IDG Ventures Europe (secondary backer was Partners Group); Penta Capital (secondary backers: AXA, Bregal and Goldman Vintage Fund).

*** Michael on the PowerShares ETF: “A conundrum: How to balance the ‘for the masses’ approach to private equity with the big government requirements traditionally imposed by SEC regulations? Isn’t accreditation really the issue? You say ‘old boy’s club,’ but that is more a function of how the government established it way back when, as opposed to any ‘clubby’ issues.Also, because large/public pensions are so heavily relied upon as LPs for the mega-funds, aren’t the ‘working classes’ inherently part of the club already?If you are arguing for ‘direct investment’ by the layman, then that is a completely different issue — and I would be surprised if you think that the average Joe off the street could pick a good investment team that would pick the winning investments.”

Andy: “The fundamental problem with these co-mingled security-like vehicles is just the fact that they are, by necessity, pre-funded.We all know that it typically takes an average of two years for fund managers to invest their commitments, and pre-funding an entire commitment into an intermediary vehicle causes either: (A) An IRR-drag from parking the commitments in cash prior to their investment in deals or (B) Taking equity exposure with the commitments and risking default if the capital is drawn during a market correction.”

David: “I very seldom take issue with anything you say; however, I must write to tell you I found the detail ‘struck head-on by an SUV that had careened across a highway median’ to be unnecessary and sensational, under the circumstances.” Agreed David.

*** Johnson: “Dan, could you give us a hint as to what ‘big new project’ is?” Unfortunately I cannot… but soon Johnson, soon.

Publishing Note: I will be in the air tomorrow morning, so my colleague Matthew Sheahan will be pinch-hitting. Please send the next 24 hours worth of press releases his way.

Data Note: VCs disbursed $6.36 billion into 611 deals in Q3 2006, according to VentureOne and Ernst & Young. MoneyTree Survey data from Thomson Financial, NVCA and PwC will be coming tomorrow.

In Memoriam: Jay Shiveley passed away last Thursday night from an apparent heart attack. Before joining OQO, Jay had been serving as CEO of portable PC company OQO, and before that was a partner with VC firms like VantagePoint Venture Partners, Sprout Group and Atlas Venture. He also spent time in operating positions with Oracle, Vitria and Forte. As one reader wrote over the weekend, Jay was “one of the most highly respected sales VPs in the Valley.”

A funeral service will be held today at 11am at the Trinity Episcopal Church, 330 Ravenswood Avenue in Menlo Park. A memorial reception will follow at the family home in Atherton. ??

Top Three

Jingle Networks Inc., a Menlo Park, Calif.–based operator of a national consumer telephone directory assistance service, has raised $30 million in Series C funding. Goldman Sachs and Hearst Corp. co-led the deal, and were joined by return backers Comcast Interactive Capital, IDG Ventures Boston, Liberty Associated Partners, First Round Capital and Lead Dog Ventures.

Investcorp has agreed to sell Boston-based nursing and long-term care company Harborside Healthcare Corp. to Sun Healthcare Group (Nasdaq: SUNH). The deal is valued at approximately $625 million, including $350 million in cash and $275 million in assumed or refinanced debt. Sun has received leverage commitments from Credit Suisse and CIBC World Markets, with a final close slated for the first half of 2007.

BA Capital Partners Europe has completed a spinout from Bank of America. The newly-independent firm is called Argan Capital, and features a 12-person team led by managing partners Wojciech Goc, Carlo Mammola and Lloyd Perry. Argan recently held a €425 million first close on its new fund, which will acquire mid-market European companies with enterprise values in excess of €100 million. Bank of America is a minority limited partner.

VC Deals

Enfora Inc., a Plano, Texas-based developer of radio modules for the wireless data communications market, has raised $19 million in its first round of institutional funding since being formed in 1999 as a spin-off of Inlet Technologies (NasdaQ: INTI). Kodiak Venture Partners and Adams Street Partners co-led the deal.

Sadra Medical, a Campbell, Calif.-based developer of medical devices for the treatment of aortic valve disease, has raised $19 million in Series B funding. Oakwood Medical Investors and Boston Scientific were joined by return backers Pequot Ventures, Onset Ventures and SV Life Sciences Advisors.

Colubris Networks Inc., a Waltham, Mass.–based provider of WLAN switching systems, has raised $14 million in fifth-round funding. Return backers include Prism VentureWorks, GrandBanks Capital, DCM-Doll Capital Management, Mid-Atlantic Venture Funds, the Telecom Development Fund and the Business Development Bank of Canada.

Optiway, an Israel-based developer of optical access solutions for mobile communications, has raised $5 million in first-round funding led by Leo Greenwald, a managing director with ASG Financial Corp. of Canada. The news was first reported by the Globes newspaper.

Mall Networks Inc., a Lexington, Mass.-based company that connects online retailers with consumer rewards programs universe, has raised $2 million in Series B funding. The Venture Capital Fund of New England led the deal, and was joined by return backers IDG Ventures Boston and LBO Enterprises.

Amorcyte Inc., a Hackensack, N.J.-based developer of cell therapy products to treat cardiovascular disease, has raised an undisclosed amount of new VC funding from PA Early Stage Partners. The company previously announced a $4.2 million first round, led by Colt Ventures.

Buyout Deals

Ripplewood Holdings is considering a bid for bankrupt auto parts maker Delphi Corp., according to The Wall Street Journal. The deal could be worth up to $10 billion, and is being led by Ripplewood partner and former Chrysler Corp. president Thomas Stallkamp.

Apprise Media and Prism Business Media are both bidding for business magazine publisher Penton Media, according to the New York Post. The sale could fetch up to $500 million. Apprise is backed by Spectrum Equity Investors.

Apollo Management, Madison Dearborn Partners and Providence Equity have teamed up to buy newspaper publisher Tribune Co. (NYSE: TRB), according to The Wall Street Journal. A second group includes Thomas H. Lee Partners and Texas Pacific Group, while The Carlyle Group also is interested.

Oak Hill Capital Partners has agreed to acquire Arnold Logistics, a Harrisburg, Pa.–based provider of outsourced warehouse and transportation logistics. No financial terms were disclosed for the deal, which will result in company founder Ed Arnold, LongueVue Capital and company management retaining a 14% equity stake.

LLR Partners and Greenhill Capital Partners have co-sponsored a $56.2 million recapitalization of First Equity Card Corp., a Northy Wales, Pa.–based credit card issuer focused on the small business market. Citigroup Global Markets Realty Corp. provided debt financing and participated in the equity tranche.

Standish Capital of Pittsburgh has sponsored a management buyout of MJ1 Inc., a provider of manufacturing and outsourcing services to the metals industry. No financial terms were disclosed. First Commonwealth Bank provided a working capital facility, while Gladstone Capital provided term debt. The Lenox Group advised company management on the deal.

Dyad Partners has completed its acquisition of Thermex-Thermatron Inc., a Louisville, Ky.-based manufacturer of industrial microwave generators/ovens and RF heating equipment. No financial terms were disclosed. TTI was advised on the deal by Matrix Capital Markets Group.

PE-Backed IPOs

Veraz Networks Inc., a San Jose, Calif.-based provider of VoIP products to wireline and wireless service providers, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol VRAZ, with Lehman Brothers and Credit Suisse serving as co-lead underwriters. Shareholders include ECI Telecom, Norwest Venture Partners, Battery Ventures, Argonaut Private Equity, Liberty Mutual and Levensohn Venture Partners.

BioVex Group Inc., a Cambridge, Mass.-based developer of oncolytic virus technology that replicates and spreads within solid tumors, has withdrawn registration for a proposed $45 million IPO, citing “unfavorable market conditions.” It had planned to trade on the Nasdaq, with Janey Montgomery Scott serving as lead underwriter. BioVex has raised around $66 million in VC funding since its 1999 inception, from firms like Merlin Biosciences, Innoven, Lloyds Development Capital, Scottish Equity Partners, ABN Amro Capital, WestLB, V-Sciences and Genechem Therapeutics Venture Fund.

ActivBiotics Inc., a Lexington, Mass.-based developer of antibacterials for high-value chronic and infectious diseases, has set its proposed IPO terms to four million common shares being offered at between $12 and $14 per share. It plans to trade on the Nasdaq under ticker symbol ACTV, with HSBC 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.

Home Inns & Hotels Management Inc., an operator of an economy hotel chain in China, has received more than $1 billion in orders for its Nasdaq IPO listing, according to Reuters. The offering is currently designed to raise just $95 million, with Credit Suisse and Merrill Lynch serving as co-lead underwriters. It is scheduled to price on Wednesday. Company shareholders include Poly Victory Inv*stments Ltd., AsiaStar IT Fund, IDG Technology Ventures and Kangaroo Inv*stments LLC.

PE-Backed M&A

MDSI Mobile Data Solutions Inc., a Richmond, British Columbia–based provider of enterprise mobile workforce management software, has agreed to acquire Indus International Inc. (Nasdaq: IINT), an Atlanta–based provider of service delivery management solutions. The all-cash transaction is valued at around $240 million, with Indus stockholders receiving $3.85 per share in cash. MDSI is a portfolio company of Vista Equity Partners, while Credit Suisse is advising Indus on the deal.

PE Exits

H.I.G. Capital has completed its sale of Cable Express Holding Co. to Dycom Industries Inc. (NYSE:DY) for $63 million (including assumed debt). Cable Express is a Columbus, Ohio-based provider of outsourced residential installation services to the cable television industry.

Dunkin’ Brands Inc. has retained Trinity Capital to help sell its Togo’s Eateries Inc. sandwich shops chain. Dunkin’ was acquired earlier this year for just over $2.4 billion by Bain Capital and Thomas H. Lee Partners.

German Media Partners has retained Morgan Stanley and JPMorgan to help sell its control stake in German broadcaster ProSiebenSat.1 Media AG, according to Dow Jones. GMT is led by Haim Saban, and also includes Bain Capital, Hellman & Friedman, Providence Equity Partners, Quadrangle Group and Thomas H. Lee Partners.

Firms & Funds

Golub Capital has held a $700 million first close on its fifth fund. The New York-based lender expects to hit its $1 billion target before year-end.

Business Partners International is raising up to $15 million for a VC fund focused on small and mid-sizes enterprises in Kenya. It already has received more than $5 million in commitments from CDC, the European Investment Bank, International Finance Corp., Trans-Century Ltd. (Kenya) and the East African Development Bank.

Merrill Lynch (NYSE:MER) has agreed to acquire Petrie Parkman & Co., an I-bank focused on the North American oil and gas industry. No financial terms were disclosed.

Human Resources

John Snow, former U.S. Treasury secretary, has been named chairman of Cerberus Capital Management. Before joining the Bush Administration in 2003, Snow had been chairman and CEO of railroad operator CSX Corp.

Alois Flatz and Tom Singh have joined UK-based Zouk Ventures as a partner and venture partner, respectively. Flatz is co-founder of the Dow Jones Sustainability Index, and previously served as a partner with SAM Group Ltd. Singh is an active angel inv*stor, and founder of the New Look retail chain.

John McCormick has joined Monument Group as a director. He previously was with Cambridge Associates.

John Clough and Tom Wong have joined the board of CDC Software, a wholly-owned subsidiary of CDC Corp. (Nasdaq: CHINA), as independent directors. Clough is a special advisor to General Atlantic, while Wong is a founding senior partner of Asia Global Capital and, before that, was a senior managing director of Transpac Capital.