PE Week Wire, Oct. 24, 2006

Greetings Wire readers. Dan is spending the day trying to get from one end of the country to the other without going insane, and so you must tolerate me, Matthew Sheahan, Dan’s Red Sox-hating colleague from New York and an Associate Editor of Buyouts.

Two weeks from today I’ll be in San Francisco at this year’s Buyouts Symposium West, where I’ll have the distinction of moderating a panel discussion entitled ‘Lenders Take The Stage.’ The panel will feature four representatives of the private equity lending industry: Trevor Clark of Madison Capital Funding, Steve Etter of Greyrock Capital Group, Andrea Greene of Allied Capital and Andy Steuerman of Golub Capital.

I wrote about the private equity lending market this past August and what I found was a market as flooded with competition and new entrants as the rest of the private equity market. One of the big questions that people I spoke with said was hanging over everyone’s head is if the new lenders on the market would be able to hack it once the going gets tough. Foreign lenders that crowded U.S. private equity markets prior to 2001 beat a hasty retreat, they said. What’s to keep these new lenders from packing it in once things aren’t so rosy? Another topic I plan to broach is the increasing popularity of “one-stop” lending for buyout deals. Lenders are increasingly offering one-stop lending, preferring to provide all the debt for a buyout transaction. This makes things easier for sponsors and helps them close deals faster, but do they lose something by not having more input on a transaction? Will it cause lenders to lose their focus on a part! icular segment of the lending market?

I’m interested to know what you think, Wire readers. Let me know what your view is of the lending market: And if you’re interested in learning more about our Buyouts Symposium West conference or registering to attend, please click the link on the right. I hope to see you there; I’ll be the guy trying to sneak beer into the Monday wine tasting.

Top Three

Q3 Venture Capital Totals: Venture Capitalists invested $6.2 billion in 797 deals in Q3 of 2006, a decrease of eight percent from Q2, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data by Thomson Financial (publisher of PEW Wire ). The quarter saw increased investment in seed and early stage deals as well as sectors such as telecom, media and entertainment and industrial and energy. First time financings were also strong.

Starbucks (Nasdaq: SBUX) bought control of the Chinese operator of 60 Starbucks stores from H&Q Asia Pacific and other shareholders. The management entity that has run the stores, Beijing Mei Da Coffee Co. Ltd., opened the first Starbucks store in China in 1999. Financial terms of the deal were not disclosed.

FPT Corp., a Vietnamese information and communication technology provider, received $36.5 million from Texas Pacific Group and Intel Capital. The investment is one of the largest foreign investments into Vietnam. The company plans to use the funding to develop new products and services.

VC Deals

Cleantech investing in North America hit a record $933 million in Q3 2006 investment, according to the Cleantech Venture Network. It was the 9 th consecutive quarter of growth. Clean energy investments were the favorite among investors, raking in $837 million in investments in Q3, a 41% increase over Q2.

Tablus, a San Mateo, Calif.-based content protection service provider, raised $16 million in Series B funding from Trident Capital and Menlo Ventures. Trident Capital’s Peter Meekin will join the company’s board of directors.

Skyrider, a Mountain View, Calif.-based peer-to-peer networking platform provider, raised $12 million in Series C funding. ComVentures led the round, which included previous investors Sequoia Capital and Charles River Venture Partners. The company has raised a total of $20 million.

GetWellNetwork, a Bethesda, Md.-based provider of software, hardware and other services to aid healthcare providers care for patients, closed a $9 million Series B round of funding. Valhalla Partners led the round, which included previous investors The Grosvenor Funds, Point Judith Capital, Long River Ventures, Village Ventures and Tall Oaks Capital.

DeviceVM, a San Jose, Calif.-based software developer that uses virtualization technology, raised more than $10 million from Storm Ventures, DFJ DragonFund China, Tim Draper, AsusTek Computer, iD Innovation, Harbinger Ventures and strategic and angel investors.

NewStep Networks, a Toronto-based provider of fixed-mobile convergence services, raised $7 million in Series B funding from existing investors, including VenGrowth Private Equity Partners.

Edgeio, a Menlo Park, Calif.-based online classified ad service developer, has raised $5 million in a first round of funding led by Intel Capital and including Transcosmos, according to VentureBeat.

Zebra Imaging, an Austin, Texas-based display technology product developer, raised $5.9 million in Series C funding. Voyager Capital led the round, which includes Nuevo Private Equities and SAIC Venture Capital. The company will use the funding for product development and business expansion.

Neocase, a San Francisco-based provider of customer service software, raised $6.5 million in its second round of venture funding. Iris Capital led the round, which included Caisse des Depots et Consignations (CDC) and Supporter Group. The company will use the new capital to expand internationally.

CMP Therapeutics raised $5.6 million (€4.5 million) in Series A funding from Inventages Capital Investments and others. The Oxford, U.K.-based company is developing a nasal spray to aid asthma and allergy sufferers.

Axial Biotech, a Salt Lake City-based medical device manufacturer and service provider, raised approximately $650,000 in bridge financing and expects to raise Series B funding later this year, according to VentureWire. The company raised $4.1 million in Series A funding earlier this year.

EarlySense, an Israel-based asthma and heart monitoring device developer, raised $3 million in a second around of funding. Etgar Challenge Fund led the round, which included investment from ProSeed Venture Capital Fund. The funding brings the company’s total funds raised to $4.25 million.

SupportSpace, a Herzliya, Israel-based tech support provider, raised $4.25 million in Series A funding from BRM Capital and Gemini Israel Funds. The company will use the funding to develop its online tech support services and establish operations in the U.S.

Buyout Deals

Kohlberg Kravis Roberts & Co. (KKR) will buy 50% of Tarkett , a French flooring company for approximately $1.8 billion (€1.4 billion).

Texas Pacific Group and Leonard Green Partners received approval from the shareholders of PETCO Animal Supplies (Nasdaq: PETC) to take the company private. The public-to-private transaction has a total value of approximately $1.8 billion, including assumed debt, and is expected to close this week.

Merrill Lynch & Co. has agreed to buy Denver investment bank Petrie Parkman & Co. Petrie Parkman serves as an advisor to the energy industry and had filed for an IPO last month. The deal is expected to close in Q4. Keefe Bruyette & Woods advised Petrie.

Bayside Capital announced that it invested in ServiceCraft Logistics , a Buena Park, Calif.-based logistics services provider. The company says it plans to use the funding to broaden its service offerings.

Fortis Private Equity has taken a 33% stake in media and entertainment provider Studio 100 . Both Fortis and Studio 100 are based in Belgium .

Permira Advisors was approved by the European Union to buy most of Unilever ‘s frozen food business.

PE-Backed IPOs

Asthmatx, a Mountain View, Calif.-based medical device developer that treats asthma, has pulled its IPO. The company says it will pursue an “alternative strategic option.” Asthmatx raised venture funding from Boston Scientific Corp., HBM Partners, MedVenture Associates, Menlo Ventures, Montreux Equity Partners, Polaris Venture Partners and Vanguard Ventures.

Firm & Fund News

Lion Capital, the Hicks Muse Tate & Furst spin-off based in London, plans to raise up to $2.5 billion (€2 billion) for its second fund, according to PrivateEquityOnline. The fund would be more than double its initial $1 billion (€820 million) fund, which closed last year.

Porticoes Finance formed a finance company to focus on debt financing to middle market companies. The new entity will allow Porticoes to offer “one-stop” financing up to $125 million in the middle market.

AEA Holdings will invest up to $2 billion in India, according to the Business Standard. AEA was formed after a merger of New York-based AEA Investors and Hong Kong-based Aietos Capital.

H&Q Asia Pacific announced it would invest approximately $500 million in the China-based operations of a well known hotel chain. The firm declined to name the chain.

Vision Capital Advisors, a New York-based private equity firm, has invested in Moventis Capital (OTCCB: MVTS). The investment is part of an agreement that finalizes Moventis’ acquisition of PTL Electronics.

Reliant Equity Investors, a Chicago-based private equity firm, announced that it opened an office in Detroit to invest in Michigan-based and Michigan-affiliated businesses. Reliant focuses on middle market buyouts.

Human Resources

Craig Milius, Michael Rovner, Phil Siegel and Krishna Srinivasa! n have all been promoted to the position of partner by Austin Ventures.

William Allard has joined Polaris Venture Partners as an Executive in Residence. Allard was chairman and CEO of Marquis Jet Partners.

Rich Green, a vice president of Sun Microsystems, and William Janeway, a vice chairman of Warburg Pincus, have joined Fortent ‘s board of directors. Fortent provides enterprise-wide risk and compliance services to financial institutions.

Ed White has been elected to the board of directors of eMeter. eMeter is a Redwood City, Calif.-based software provider for electric, gas and water utilities. White is the Chairman of Field2Base and the founder of White Ventures.

John Heard has been named as general counsel of U.K. life sciences investing group Abingworth. He joins the firm from Intel Capital.