PE Week Wire, Oct. 27, 2006

I’m sick and tired of… Actually, I’m just sick and tired (cold + jetlag = whining). But so as not to crawl into bed and leave you with nothing…

Venture capital is apparently a tough habit to break. The Boston Globe’s Steve Bailey this morning reports that Wyc Grousbeck is rejoining Highland Capital Partners, which he left four years ago in order to buy and run the beloved Boston Celtics. Grousbeck is one of three primary Celtics owners – his father Irv and Bain Capital’s Steve Pagliuca are the others – although the minority ownership ranks are filled with PE/VC folks like Jim Breyer of Accel Partners and Bill Egan of Alta Communications (no word on how any of these otherwise intelligent men permitted this year’s introduction of cheerleaders). Wyc will continue to focus most of his attention on the Celts, but also will do some healthcare deals for Highland.

Bailey’s piece also has further details on the retail-focused fund being run by Highland venture partner Tom Stemberg, as first reported here last month. The vehicle has a $250 million target, and will be run by Stemberg, Highland’s Dan Nova and “a third partner.” Expect that third partner to be Ted Phillip, a former Lycos and Disney honcho last in the news for helping to buy The Yankee Group in May 2004 (sold it last November). There also is talk that at least one of Stemberg’s former Staples colleagues will be involved.

*** John Cook’s readers sound off on my Wednesday mention of a geographic inferiority complex in the Pacific Northwest.

*** Miguel Helft of the NY Times delves back into the “Is VC Dead?” argument, which he kicked off two weeks ago with his Sevin Rosen article. A bit more skepticism this time around…

*** Matt Marshall reports that the founder of podcasting company Odeo has bought back the stakes of VC backers Amicus and Charles River Ventures. He’s also renamed it Obvious.

*** During my Wednesday keynote interview with John Connors, I asked about that infamous quote about spending more time on his boat. He held fairly firm, insisting – rightfully so, methinks – that VCs have more time flexibility than does a C-level exec at a Fortune 100 company (whose time is essentially scheduled by others). But he was wrong in one respect: Connors recently realized that he isn’t much of a boating enthusiast..

*** Finally, “big new project” is very close to launch. I know that I’ve given very little away, but will certainly be far more generous with prospective advertisers. If you’ve ever considered placing an ad in this space – I promise that you’ll want to take a look at what we’re cooking up. Just send me an email, and I’ll forward it on to the right people…

Have a great weekend.

Top Three

Providence Equity Partners and TA Associates have acquired minority stakes in Idea Cellular Ltd., a provider of wireless communications services in India. Each deal was transacted separately. No financial terms were disclosed, but a source close to Providence says that it paid $400 million for a 15% position. TA would not disclose specific numbers, except that it acquired a slightly smaller stake than did Providence. Idea Cellular’s largest shareholder is the Aditya Birla Group.

Hertz Global Holdings Inc., a Park Ridge, N.J.-based automobile and equipment rental company, has set its proposed IPO terms to 88.235 million common shares being offered at between $16 and $18 per share. This could make the deal worth up to $1.8 billion (including underwriters’ options), compared to an original S-1 filing for $1 billion. Hertz plans to trade on the NYSE under ticker symbol HTZ, with Goldman Sachs, Merrill Lynch and Lehman Brothers serving as co-lead underwriters. Hertz was bought out from Ford Motor Co. last year for around $15 billion by Clayton, Dubilier & Rice, Carlyle Group and Merrill Lynch Global Private Equity.

CalPERS has committed $400 million to Centinela Capital Partners, which will oversee a new private equity fund-of-funds for emerging managers. The managers will be from across the private equity spectrum, including venture capital, expansion capital and leveraged buyouts. Centinela was founded by Cesar Baez, previously with Deutsche Bank Asset Management and a former head of alternative investments for the State of New Jersey.

VC Deals

Miasole Inc., a Santa Clara, Calif.-based developer of thin-film solar cells, has raised $35 million in Series C funding, according to VentureWire. No participant information was disclosed, although the company previously had raised over $21 million from firms like Kleiner Perkins Caufield & Byers, Bessemer Venture Partners and VantagePoint Venture Partners.

Action Pharma AS, a Swedish drug company focused on cardiovascular diseases and diabetes, has raised €6 million in first-round funding. The deal also includes an option for an additional €3 million. Backers include InnovationsKapital, Growth Foundation and Incuba Ventures.

CMP Therapeutics Ltd., an Oxford, UK-based developer of treatments for such conditions as asthma and hay fever, has closed its Series A funding with €4.5 million. Inventages Capital led the deal, and was introduced to CMP by the Oxford Inv*stment Opportunity Network., a Madison, Wis.-based comparison shopping search engine, has raised $5 million in VC funding from Kegonsa Capital Partners and Clyde Street Investments.

Buyout Deals

Leonard Green & Partners is nearing a deal to buy the David’s Bridal retail chain from Federated Department Stores Inc. (NYSE: FD), according to Reuters. The deal is expected to be for between $600 million and $1 billion.

HCA shareholders will still be allowed to vote on a proposed $21 billion buyout on Nov. 16, after a Tennessee judge rules against six shareholder groups that had been seeking a delay. The groups had alleged that the offer is unfairly low, but the judge ruled that they had failed to prove their case. One final hope for the plaintiffs will come on Nov. 13, during a motion for an injunction.

Texas Pacific Group has dropped out of the bidding for H-3C, according to Dow Jones. That leaves Silver Lake Partners and Bain Capital as the remaining suitors for H-3C, which is a China-based joint venture between 3Com and Huawei Technologies Co. The deal is expected to be worth between $1.5 billion and $2 billion, with the report saying that Bain’s current offer is the highest.

The Riverside Company has acquired Agens Holding BV, a Dutch provider of unemployment-to-work services. No financial terms were disclosed.

LLR Partners announced that it is part of the group that has acquired Franklin Mint Co., a Philadelphia-based collectibles company. The deal was led by Steve Sisskind and Moshe Malamud, who run coin and stamp marketing company Morgan Mint Inc.

Promerica Bank, a new commercial bank in California focused on the Hispanic market, has agreed to receive an undisclosed amount of private equity funding from Palladium Equity Partners.

PE-Backed IPOs

Optium Corp., a Chalfont, Pa.-based maker of optical subsystems for use in telecom network systems, priced 5.2 million common shares at $17.50 per share ($13.50-$15.50 range), for an IPO take of approximately $91 million. It will trade on the Nasdaq under ticker symbol OPPTM, while Credit Suisse and Morgan Stanley served as co-lead underwriters. Optium had raised nearly $65 million in VC funding from firms like Battery Ventures, KPLJ Ventures, TL Ventures, TPG Ventures and Corning Innovation Ventures.

LHS AG, a German provider of telecom customer care and billing systems, priced 4.6 million primary shares at €8 per share, for an IPO take of approximately €37 million. It has begun trading on the Frankfurt Stock Exchange under ticker symbol LHS, with an initial market cap of €116 million. LHS is a portfolio company of General Atlantic.

PE-Backed M&A

SGS International Inc., a Louisville, Ky.-based provider of graphics and packaging services, has acquired two companies: The Box Room Ltd., a UK-based artwork and project management services company; and the packaging division of Lukkien Foto & Design BV, a Netherlands-based media and advertising services company. No financial terms were disclosed. SGS is a portfolio company of Court Square Capital Partners.

PE Exits

Capgemini, a France-based provider of tech consulting and outsourcing, has agreed to acquire Kanbay International (Nasdaq: KBAY), a Rosemont, Ill.-based provider of IT services for the financial services market. The total deal is valued at $1.25 billion, with Kanbay shareholders to receive $29 per share in cash. Kanbay went public in 2004, but VC backers like Cross Atlantic Capital Partners remain shareholders.

Firms & Funds

The Pennsylvania State Employees’ Retirement System has approved the following private equity fund commitments: $15 million to InterMedia Partners VII; to $30 million to Sofinnova Venture Partners VII; $20 million to VIMAC Ventures IT III; $80 million to AXA Secondary Fund IV (follow-on); $125 million to Hellman & Friedman VI (follow-on); $50 million to Providence Equity Partners VI (follow-on).

NewSmith Capital Partners, a UK-based asset management firm whose platform includes direct private equity plays, has received a $500 million funding commitment from the Wellcome Trust.

Battery Ventures today is moving its headquarters from Wellesley, Mass. to Waltham, Mass.

Thoma Cressey Partners is planning to close its Boston office, according to Private Equity Insider. The firm will continue to maintain its Chicago and San Francisco offices, with East Coast interests to be run out of Chicago. David Mayer, a TCP partner who launched the Boston office two years ago, is expected to leave the firm.

Sierra Ventures has held a $400 million final close on its ninth fund, according to VentureWire.

Human Resources

Bill Harrison will retire at year-end as chairman of J.P. Morgan Chase & Co. It is expected that the board will replace him with current CEO Jaime Dixon.

Mark Evans has joined Hartford, Conn.-based private equity firm Smith Whiley & Co. He previously was been with such firms as Great Hill Partners, M/C Partners and Translations Capital.

Will Weisman has left Maveron, where he was a principal, in order to take an operating role with an undisclosed company.

Chris Coonfield and Reid Strand have joined GulfStar Group as analysts in the firm’s Houston, Texas office. Coonfield previously was an equity research analyst for Simmons & Co., where he covered small-to-mid-cap oilfield services companies. Strand had worked in the corporate development group of Oil States International Inc.

Shyam Kamadolli and Joshua Maxey have joined Fidelity Ventures as associates. Kamadolli previously led worldwide business development for the data security division of RSA Security, while Maxey was vice president and head of Gerson Lehrman Group’s international tech, media and telecom practice.