PE Week Wire, Oct. 31, 2006

The sun is shining, the patriarchal leprechaun will be sorely missed tomorrow night and I’ve got to buy some candy before my front door is besieged by the grammar school mob. In other words, it’s time for Tuesday TalkBack…

First up, a few emails on yesterday’s discussion of venture returns. LP David writes: “I did some research this morning, and found that the pooled return for VC vintage years 1999-2006 is -4.2%, with the top-quartile being 0.2% (through 6/30/06). Adding 1998 to those totals, the pooled becomes 0.1%, and the top quartile is 2.8%. Adding 1997 and the result for pooled is 3.6% and top-quartile is 5.1%. None of these data sets are very good. To get double-digit returns for the last 10 vintage years in aggregate, you have to be in the 81st percentile.”

Ronald adds: “This is not a knock on the data providers, but there always is going to be a positive bias in performance numbers – because good performance is more likely to get reported than poor performance. So you’d have to take even a slightly dimmer view of your ‘optimistic’ data, which didn’t have too much margin to begin with.” Just as a quick note, it is true that some of the performance data does come from GPs, but a large percentage comes from limited partners (and Thomson analyzes the cash-flows, rather than regurgitating GP-defined IRRs). Also, the GP identities are not disclosed, so as to reduce the likelihood of selective reporting. In other words, Ronald’s point has some validity, but the data folks have done their best to diminish its impact.

*** John points out that Univision might not be the only regulatory problem for some potential Clear Channel buyers: “Another regulatory hurdle for TH Lee and Blackstone would be their recent $1.2 billion purchase [along w/ Bain Capital] of Susquehanna Radio — the largest-privately held radio broadcaster in the US with stations in several big markets including Dallas and San Francisco.”

I regards to Clear Channel, I wrote: “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.” M responds: “Well that would certainly be ironic given that both TH Lee and Providence, as well as most (all?) other large GPs, make it a point when talking with LPs to highlight how actively involvedthey are in managing their portfolio companies these days.Which is it?”

I’m not so sure it’s splitting hairs M, but can see why it might seem that way. LBO firms doing big media deals have been careful to club up, and I think size is only part of it. The bigger issue, it seems, is some forethought given to their ability to do future deals. Would LPs prefer minority involvement – which does not preclude “active involvement” in both Susquehanna and Clear Channel, or control of just Susquehanna? Can you believe I just wrote that – or feel that way this morning? It seems so unlike me…

*** Joanna: “Dan, I keep hearing that VCs are pushing embryonic stem cell initiatives in order to enrich themselves down the road. Part of me doesn’t care so long as cures can be developed, but another part of me wishes the VCs would just fund the research themselves – rather than me and other taxpayers.”

Joanna, it is true that ES cell research – if largely successful – will spawn a whole generation of new pharma companies ripe for VC investment. But the unfortunate reality is that most ES cell-based research remains too early – in part due to federal limitations – for VCs to invest right now. Remember, VCs have an outside marker of 10 years in which to return capital, and I’m not aware of many ES cell-based therapies that are expected to be monetized within the next decade. I strongly support such research and the lifting of federal limitations on it, but also do not feel it is yet VC-ready. It’s not about greed. It’s about time.

Finally, “big new project” is now one week away from unveiling. Much appreciation for your patience. I hope you will find the wait worth your while…

Top Three

NovImmune SA, a Geneva, Switzerland-based drug company focused on immune-related diseases, inflammation and organ transplantation, has raised CHF 58 million (approx. $46m) in Series B funding. BZ Bank and several of its clients led the deal, and was joined by Pictet Private Equity and return backers Lombard Odier Darier Hentsch, Novartis Venture Fund and Aravis Venture.

3V Transaction Services Ltd., a UK–based pay-as-you-go credit card voucher company, has raised €20 million in Series A funding from Atlas Venture and Benchmark Capital Europe.

CBRL Group Inc. (Nasdaq: CBRL) has agreed to sell the Logan’s Roadhouse Inc. restaurant chain to Bruckmann, Rosser, Sherrill & Co. and Canyon Capital Advisors for $486 million. Wachovia advised CBRL on the deal. Logan’s Roadhouse had been in registration for a $350 million IPO.

VC Deals

Narus Inc., a Mountain View, Calif.-based provider of network security software, has raised $20 million in new venture capital funding. It also has secured a $10 million revolving line of credit. American Capital Strategies led the equity tranche, and was joined by return backers Mayfield Fund, Pacven Walden Ventures, JPMorgan Partners and NeoCarta Ventures. The company has raised nearly $120 million in total VC funding since its 1997 inception.

Moteiv Corp., a San Francisco-based developer of wireless sensor networks, has raised $3.85 million in Series A funding, according to a regulatory filing. Onset Ventures and Claremont Creek Ventures are listed as beneficial owners, while existing shareholders include PacRim Venture Partners and Capital Valley Ventures.

Ekahau Inc., a Finnish provider of Wi-Fi-based real-time location systems, has raised $12 million in Series B funding. It also secured $4 million in venture loans and government funding. Company backers include Nexit Ventures, 3M Co., Finnish Industry Inv*stment Ltd., Sampo Group, and the Finnish Funding Agency for Technology and Innovation.

Spreadtrum Communications Inc., a Sunnyvale, Calif.-based maker of wireless chipsets, has secured $10 million of a $20 million Series D round, according to a regulatory filing. Return backers include Fortune Venture Group and New Enterprise Associates. The company has several offices in China.

Esperance Pharmaceuticals Inc., a Baton Rouge, La.-based developer of anti-cancer agents, has raised $9 million in Series A funding. Backers include The Louisiana Fund, Themelios Ventures Partners Research Corporation Technologies Inc.

WaterHealth International Inc., a Lake Forrest, Calif.-based water purification company, has secured $7.25 million of a $12 million Series C round, according to a regulatory filing. Shareholders include Dow Chemical Co., Monsanto Corp., Johnson & Johnson Development Corp. and Plebys International.

ChipVision Design Systems AG, a Germany-based provider of low-power EDA solutions, has raised $6.4 million in Series B funding from return backers Target Partners and BayTech Venture Capital.

TalkPlus, a Menlo Park, Calif.-based provider of mobile voice services, has raised $5.5 million in Series A funding from Menlo Ventures.

IntelliMat Inc., a Roanoke, Va.-based provider of digital floor displays, has raised $5 million in Series A funding. NewVa Capital Partners and SPI Inv*stments co-led the deal, and were joined by Carilion Biomedical Institute.

LifeLock, a Tempe, Ariz.-based identification theft prevention company, is close to securing a $5 million Series A deal from Bessemer Venture Partners, according to VentureWire.

Clarus Systems Inc., a San Francisco-based provider of automated testing solutions for VoIP, has raised $3.33 million in Series B funding, according to a regulatory filing. The company completed a $5 million Series A recap last year. Significant shareholders include Trinity Ventures, Mobius Venture Capital, Sigefi, Burnett & Vallee and Trident Capital.

eSnips Ltd., an Israel-based social content sharing site, has raised $2 million in Series A funding from Greylock Partners and Gemini Israel Funds.

HiveLive Inc., a Louisville, Colo.-based social networking startup, has raised around $1.15 million in Series A funding led by Aeneas Ventures, according to a regulatory filing.

Genos Pty Ltd., an Australian company that creates online tools to assess and develop emotional intelligence, has raised Au$1 million in Series A funding from Divergent Capital Partners.

High Tower Software Inc., an Aliso Viejo, Calif.-based provider of security event management solutions, has secured $1 million of a $6 million Series F round, according to a regulatory filing. Existing shareholders include Liberty Partners and InRoads Capital Partners.

Buyout Deals

Doughty Hanson has agreed to invest around €100 million for a majority stake in Zobele, a Trento, Italy-based manufacturer of air freshener and insecticide products. Family shareholders will retain a significant stake. Unicredit Group and Interbanca are providing leverage.

Golden Gate Capital has acquired Haband Inc., an Oakland, N.J.-based direct mail and online retailer for the 50+ baby boomer market. No financial terms were disclosed.

Kimberly Clark de Mexico, a unit of Kimberly Clark (NYSE: KMB), has sold a 60% interest in its industrial products division (PIMSA) to Eton Park Capital Management and Impulso de Desarollos Estrategicos SA. The deal is valued at $434 million, with KCM retaining a 40% equity interest.

European Capital has acquired Whitworths Ltd., a UK-based supplier of dried fruit and nut-based products. This is considered a “one-stop buyout,” with European Capital providing senior facilities, subordinated debt, equity and a revolving credit facility.

3i Group has agreed to invest $44.4 million in Indian infrastructure construction company Navayuga Engineering Company Ltd., in exchange for a minority ownership position.

Collins Industries Inc. (OTC BB: CNSI) shareholders have approved a $12.5 per share buyout offer from Steel Partners and American Industrial Partners. The total transaction is valued at approximately $110 million, and is expected to close later today.

Hettinger Welding Inc., a Gillette, Wyoming-based provider of welding and facilities construction services for customers building natural gas infrastructure in the Rocky Mountain region, has completed a recapitalization sponsored by Clearview Capital. No financial terms were disclosed, except that Hettinger management will retain a “substantial equity stake.”

Brown Jordan International Inc., a Pompano Beach, Fla.-based provider of luxury indoor and outdoor furniture, has completed a financial restructuring. The deal includes a $50 million equity infusion, a $200 million credit facility from LaSalle Bank and the exchange of nearly all of the company’s $105 million worth of senior subordinated notes for cash or equity. Brown Jordan is a portfolio company of Trivest Partners.

PE-Backed IPOs

Allot Communications Ltd., an Israel-based provider of broadband service optimization solutions using DPI technology, has filed for an IPO of 6.5 million ordinary shares to be sold at between $9 and $11 per share. It plans to trade on the Nasdaq under ticker symbol ALLT, with Lehman Brothers and Deutsche Bank Securities serving as co-lead underwriters. The company has raised nearly $26 million in VC funding from firms like Tamir Fishman Ventures, Gemini Capital, Genesis Partners, Partech International and Jerusalem Venture Partners.

Hansen Medical Inc., a Mountain View, Calif.-based developer of medical robotics for accurate positioning, manipulation and stable control of catheters, has set its proposed IPO terms to 6.25 million common shares being offered at between $11 and $13 per share. It plans to trade on the Nasdaq under ticker symbol HNSN, with Morgan Stanley and JPMorgan serving as co-lead underwriters. Hansen Medical has raised around $57 million in VC funding since its 2002 inception, from firms like Prospect Venture Partners, Skyline Ventures, Thomas Weisel Healthcare Partners, De Novo Ventures and Vanguard Ventures.

PE-Backed M&A

Active Interest Media Inc., an El Segundo, Calif.-based media company, has acquired Yachts magazine, a Ft. Lauderdale, Fla.-based luxury yachting publication. No financial terms were disclosed. Active Interest Media was formed in 2003 by Wind Point Partners.

Neiman Marcus Group has acquired the founders’ equity of Kate Spade, which should help facilitate a stalled sale of the brand, according to the NY Post. Nieman Marcus already owned a majority stake, and was acquired last year in a $5.1 billion public-to-private buyout by Texas Pacific Group and Warburg Pincus.

PE Exits

3i Group has agreed to sell its 60% stake in Damcos AS to Emerson Electric Co. (NYSE: EMR) for approximately €162 million. Damcos is a Danish supplier of management and control solutions for marine applications.

Firms & Funds

Crown Advisors International of New York is raising up to $200 million for its second Crown Growth Partners private equity fund.

Platte River Ventures, a Denver-based private equity firm focused on industrial SMEs, has closed on over $54 million for its $60 million-targeted inaugural fund. The firm was founded last year by Landis Martin, who most recently served as chairman and CEO of Titanium Metals Corp.

Legacy Partners has closed its second real estate private equity fund with $457 million in capital commitments. Atlantic-Pacific Capital served as placement agent.

Human Resources

David Dreesen has joined Battery Ventures as a Menlo Park-based partner focused on clean-tech opportunities. He previously was a partner with Nth Power. Battery also has promoted Jason Matlof to partner. Matlof joined the firm in early 2005 as a venture partner, and also focuses on the clean-tech market.

Charles Wahle has joined Brown Gibbons Lang & Co. as a director, and head of a new Boston office. He has previously worked with such firms as Barrington Associates, Harris Williams and Tucker Anthony Sutro.

Jean-Marc Cuvilly has joined Triago-X, according to PrivateEquityOnline. He previously was a vice president with Probitas Partners.

Michael Paley has joined wealth management firm Focus Financial Partners as senior vice president of business development. He previously was a principal with private equity firm Kidd & Co.

Dorothee Fischer-Appelt has joined the London office of Gibson, Dunn & Crutcher as a capital markets partner in the firm’s corporate transactions practice group. She previously was with Allen & Overy.