PE Week Wire, Oct. 26, 2006

Some quick hits before embarking on the return trip from Portland, Ore. to Boston…

*** Today’s big LBO deal news is the possibility that Clear Channel could go private for around $18.5 billion. There are lots of angles of this deal worth discussing – high leverage multiples, family management control but not financial control, a number of non-core assets that could be sold off – but the most interesting may be that Providence Equity Partners and Thomas H. Lee Partners may be among the eventual bidders (alongside omnipresent players Blackstone and KKR).

Why so interesting? Because Providence and TH Lee also are just some final paperwork away from acquiring Univision, and ownership of both Univision and Clear Channel could raise the hackles of certain media ownership regulators. The FCC actually is about to take public comment on cross-ownership rules, but it is extremely unlikely that any changes would be voted on – let alone enacted – before the Clear Channel deal comes to pass. Complicating the matter even further is speculation that both firms also might be interested in bankrolling a Jack Welch/Jack Connors bid for The Boston Globe.

Providence and TH Lee likely would argue that they only are part of a Univision ownership group, just as they only would be part of a Clear Channel group. In other words, no controlling interest. Probably persuasive in the end, but still a looming headache…

*** Blackstone Group has raised its current fund target to $20 billion (it had been $15.6b), according to The Wall Street Journal.

No big surprise there. The firm steadfastly believes that bigger is better – as expressed by senior managing direct/chief administrative offiver Bob Friedman during a 2004 panel discussion. As an FYI, I’ll be doing a keynote interview with Friedman at the Yale School of Management Private Equity Conference in December. I’ll challenge him on the theory (i.e., in’t it all built on a debt bubble?), but he’ll certainly respond with recent return numbers (which are fantastic). More on that as it gets closer.

*** Matthew Growney is leaving Motorola Ventures, where he is a co-founder and managing director. His new gig will be as executive vice president and chief of strategy with Boston-based software and services company Darwin Partners.

*** It was good meeting many of you yesterday here in Portland, and my only regret is that I did not have time to visit the rugged coastline. I guess that means I’ll have to return…

Top Three

Clear Channel Communications (NYSE: CCU) has retained Goldman Sachs to evaluate “various strategic alternatives to enhance shareholder value.” One such alternative could be an $18.5 billion buyout, with interested firms including Blackstone, KKR, Providence Equity Partners and Thomas H. Lee Partners.

Apax Partners France has agreed to acquire Telenor Satellite Services from Telenor (Nasdaq: TELN) for $400 million in cash. Telenor Satellite Services offers communication solutions via satellite to land, air and sea – but does not own any actual satellites itself.

Home Inns & Hotels Management Inc., an operator of an economy hotel chain in China, priced 7.9 million American depository shares at $13.80 per share ($10-$12 range), for an IPO take of approximately $109 million. It will trade on the Nasdaq under ticker symbol HMIN, while Credit Suisse and Merrill Lynch served as co-lead underwriters. Shareholders include Poly Victory Inv*stments Ltd., AsiaStar IT Fund, IDG Technology Ventures and Kangaroo Inv*stments LLC.

VC Deals

Quorum Systems Inc., a San Diego-based fabless semiconductor manufacturer specializing in CMOS RF transceivers, has raised $15 million in Series C funding. Crescendo Ventures led the deal, and was joined by return backers Greylock Partners, Kleiner, Perkins, Caufield and Byers, and Enterprise Partners Venture Capital.

Talent Technology Corp., a Vancouver-based provider of human resources technologies, has raised Cnd$17 million in private equity funding from JPMorgan Chase Bank and other undisclosed private equity firms.

Extricom, an Israel-based provider of WLAN infrastructure solutions, has raised $12 million in Series C funding. Belden (NYSE: BDC) led the deal, and was joined by return backers Motorola Ventures, Magnum Communications Fund and Vertex Venture Capital.

Layer 7 Technologies, a Vancouver-based provider of XML security and networking appliances, has raised US$8.7 million in Series B funding. BDC Venture Capital and GrowthWorks co-led the deal, and Shoreline Venture Management also participating.

Strix Systems Inc., a Calabasas, Calif.-based wireless mesh networking company, has secured $7 million of a $12 million Series G round, according to a regulatory filing. Return backers include Palomar Venture Partners, Crosslink Capital, El Dorado Ventures and Windward Ventures. The company has raised around $80 million in total VC funding since its 2000 inception.

eBuddy, an Amsterdam-based provider of Web-based messaging, has raised €5 million in Series A funding from Lowland Capital Partners.

Eyespot Corp., a San Diego-based provider of video editing and mashup applications, has raised $3.7 million in Series A funding. Gabriel Venture Partners led the deal, and was joined by Express Ventures and executives from and DivX.

GotVoice Inc., a Kirkland, Wash.–based provider of voice messaging solutions, has raised $3 million in first-round funding from Ignition Partners and Second Avenue Partners.

Luxul Corp., a North Salt Lake, Utah-based wireless networking company, has secured $554,000 of a $1 million Series C round from Canopy Ventures, according to a regulatory filing.

Buyout Deals

TA Associates has completed a $130 million minority leveraged recap of American Access Care, a Glen Rock, Pa.-based operator of outpatient vascular access centers for people with end-stage renal disease. RSM EquiCo Capital Markets served as financial advisor to AAC, while CIT Healthcare acted as lead arranger and administrative agent for the senior bank facility. TA Associates provided both equity and mezzanine capital.

Candover has agreed to acquire Swedish bed manufacturer Hilding Anders for approximately €1 billion, according to eFinancial News. Texas Pacific Group also had been interested in the company.

RTL-Robinson Enterprises Ltd., a transportation and construction company for Canada’s Northwest Territories, has received an undisclosed amount of private equity funding from TriWest Capital Partners of Calgary.

RBC Capital Markets has agreed to acquire the broker-dealer business of Carlin Financial Group. No financial terms were disclosed for the deal, which is expected to close in Q1 2007. Carlin was advised on the deal by Freeman & Co.

Zenith Products Inc., a New Castle, Del.-based provider of decorative bathroom storage products, has completed a recapitalization of its senior debt. Golub Capital structured and led the recap, while other lenders include NewStar financial and Madison Capital Funding. Zenith is a portfolio company of Charlesbank Capital Partners.

PE-Backed IPOs

Achillion Pharmaceuticals Inc., a New Haven, Conn.-based drug company focused on infectious diseases, priced 4.5 million common shares at $11.50 per share ($14-$16 range), for an IPO take of approximately $51.8 million. It will trade on the Nasdaq under ticker symbol ACHN, while Cowen & Co. and CIBC World Markets served as lead underwriters. The company had raised around $120 million in total VC funding since its 1998 inception, from firms like Atlas Venture, SV Life Sciences, Advent International, Bear Stearns Health Innoventures, SGC Partners, Gilead Sciences and Connecticut Innoventions.

Cadence Pharmaceuticals Inc., a hospital-focused drug company based in San Diego, priced six million common shares at $9 per share ($11-$13 range), for an IPO take of approximately $54 million. It will trade on the Nasdaq under ticker symbol CADX, while Merrill Lynch served as lead underwriter. Cadence had raised around $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 Investments, BB Biotech Ventures, CDIB BioScience Venture and Management.

SourceFire Inc., a Columbia, Md.-based provider of intrusion prevention and real-time network awareness solutions, has filed for a $75 million IPO. It plans to trade on the Nasdaq under ticker symbol FIRE, with Morgan Stanley and Lehman Brothers serving as co-lead underwriters. SourceFire has raised around $64 million in VC funding from firms like Sierra Ventures, New Enterprise Associates, Inflection Point Ventures, Core Capital Partners and Sequoia Capital.

PE-Backed M&A

Oak Pacific Interactive, a China-based provider of Internet products, has agreed to buy, a Chinese social networking site for college students, according to Red Herring. Oak Pacific plans to merge with existing asset 5Q. No financial terms were disclosed. Oak Pacific has raised nearly $60 million in VC funding from Accel Partners, DCM-Doll Capital Management, General Atlantic, Legend Capital and Technology Crossover Ventures.

John Maneely Co., a portfolio company of The Carlyle Group, has agreed to acquire Atlas Tube Inc. No financial terms were disclosed. The combined company will become the largest North American manufacturer of steel tubing, with annual sales in excess of $2 billion.

PE Exits

Riverdeep Group PLC of Ireland is expected to buy Boston–based publishing house Houghton Mifflin Co. in a $3.5 billion reverse merger, according to The Deal. Houghton Mifflin is currently controlled by Bain Capital, Blackstone Group and Thomas H. Lee Partners. Leverage for the deal will be led by Credit Suisse.

PAI Partners plans to put French clothing company Vivarte on the block, according to Les Echos. A sale would be expected to generate between €2.5 billion and €3 billion. No bank has yet been selected.

Cisco (Nasdaq: CSCO) has agreed to acquire Orative Corp., a San Jose, Calif.-based provider of mobile software solutions, for $31 million in cash. Orative had raised around $18 million in VC funding since its 2002 inception, from firms like Mayfield, Diamondhead Ventures and Trinity Ventures.

Firms & Funds

Valhalla Partners, a Vienna, Va.–based VC firm, is expected to close its $250 million second fund within the next few weeks, according to VentureWire.

Adobe Systems (Nasdaq: ADBE) is committing $100 million to a direct venture investing program, according to VentureWire.

The U.S. Small Business Administration has approved an SBIC Debenture License for the third fund from Chicago-based CapX Partners. The fund is now capped with $93 million.

Human Resources

Wael Aburida has joined San Francisco-based Nollenberger Capital Partners as a managing director of technology I-banking. He previously was a managing director with Douglas, Curtis & Allyn and, before that, was director of M&A for Intel Corp.

Alvarez & Marsal has added five members to its transaction advisory group. They are: Michael Gacek as a Chicago-based director (formerly with Deloitte & Touche); Brandon Crawley as a Chicago-based associate (PwC); Kevin Karl as a New York-based manager (PwC); and Scott Francis and Ryan Rockwood as New York-based associates (both had been with KPMG).