PE Week Wire, Oct. 6, 2006

Just a few quick notes, before heading outside to rake up the hundreds of apples that my tree has dropped (blessing, meet curse).

*** Buyouts Magazine reports that U.S.-based buyout and mezzanine funds raised approximately $140 billion over the first three quarters of 2006, compared to “just” $111 billion raised over the same period last year. It is almost a foregone conclusion that the final 2006 tally will surpass the $183 billion raised last year, which was a record in its own right. Around $42 billion of the 2006 figure comes from mega-funds, and firms like Thomas H. Lee Partners, Providence Equity Partners and Goldman Sachs all could up that total in Q4. It also is worth noting that Dow Jones has slightly different figures, with $172.2 billion raised through Q3 2006, compared to its 2005 total of $162.5 billion.

VC fund-raising, on the other hand, experienced a slow quarter, but still should end 2006 with more committed capital than in any of the past three years.

In other data, Thomson Financial and the NVCA released VC-backed M&A activity for Q3, which showed the second-straight quarter of volume decline. Couple that with the VC-backed IPO shortage discussed here last week, and you can see why alternative exits like SPAC reverse mergers are becoming more popular.

*** It’s now been nearly three months since the HCA buyout was announced, and several weeks since the 50-day window closed for competing bids. So why hasn’t the hospital giant set a shareholder meeting date? I’m not (necessarily) saying that there is a hiccup (that would be some bankers), but it is a bit odd…

*** I’ve received some inconsistent information on those joining Tom Stemberg’s new retail-focused private equity effort, but none of the suggested names have much private equity experience. Retail experience, yes. M&A experience, yes. But no PE pros yet, save for Stemberg, who is a venture partner with Highland Capital Partners. I’ll share the specifics soon, but am not certain enough yet. Apologies to those who keep asking.

*** Lots of press speculation about the next casino LBO, following this week’s news that TPG and Apollo have bid $15 billion for Harrah’s. This must be killing AA Capital Partners’ John Orecchio, who has a demonstrated affinity for all things Vegas. He and AA could have joined a future casino consortium via co-investment, if only he weren’t prevented by that pesky SEC restraining order.

*** Sad to see some good reporters go during the latest round of BusinessWeek layoffs, although I’m glad that Sarah Lacy got a book deal from Penguin (Digg cover headline or not). My own book deal will be signed… well, whenever I can find some free time to begin writing a book. How about: “Fortunes Lost: How Mega-LBO Firms Nearly Bankrupted America’s Public Pension Systems.” It’s a forward-looking piece…

Top Three

Atlas Copco AB of Sweden has agreed to sell the majority of its construction equipment rental business to Ripplewood Holdings and Oak Hill Capital Management. The deal is valued at approximately $3.3 billion, with Atlas Copco retaining a 14.5% ownership stake in the business. It is expected to close by year-end. Deutsche Bank advised Atlas Copco on the sale.

MedServe Inc. a Houston, Texas-based medical waste management company, has raised $70 million in new private funding. Avista Capital Partners led the deal with $50 million, and was joined by return backers Chrysalis Ventures, Murphree Venture Partners, Cogene Biotech Ventures and Erasmus Louisiana Growth Fund. MedServe was formed last year via the merger of Med-Shred Inc. and Enserv LLC.

DLJ Merchant Banking Partners has closed its fourth fund with $2.1 billion in capital commitments.

VC Deals

Healthcare Brands International has raised £25 million in first-round funding. Backers include Abingworth Management, MVM Ltd., 3i Group and Sofinnova Partners. The UK-based startup plans to developer consumer-branded OTC medical products.

CardioMems Inc., an Atlanta-based developer of wireless medical pressure sensors for the management of abdominal aorticaneurysms and congestive heart failure, has secured $17.5 million of a $22.75 million Series D round, according to a regulatory filing. Arcapita was joined by return backers like Boston Millennia Partners and Foundation Medical Partners.

Miradia Inc., a Sunnyvale, Calif.-based developer of digital micro displays components, has raised around $15 million in third-round funding. Return backers include Global Catalyst Partners, Jafco Ventures, Sequoia Capital, VentureTech Alliance and Worldview Technology Partners.

Avolent Inc., a San Francisco–based provider of self-service electronic billing and payment software, has raised $9 million. RBC Technology Ventures led the deal, and was joined by return backers like Columbia Capital, Constellation Ventures and Rho Ventures. Avolent has raised over $120 million in total VC funding since 1998.

Anchor Semiconductor Inc., a Sunnyvale, Calif.-based provider of semiconductor DFM software for controlling IC layout-to-silicon pattern transfer, has raised $7.2 million in second-round funding led by H&Q Asia Pacific.

Protagonist Inc., a Queensland, Australia-based drug company focused on molecules that modulate protein-protein interactions, has secured around US$6.78 million of a US$17.34 million Series A round, according to a regulatory filing. Backers include Lilly Ventures, Start-Up Australia Ventures and Starfish Technology Fund.

Get Lower Inc., an Irvine, Calif.-based online provider of real estate financing services, has raised $3 million in Series A funding from Miramar Venture Partners, according to a regulatory filing.

MSpot Inc., a Palo Alto, Calif.-based provider of audio and video entertainment to mobile phones, has raised $2.33 million in Series A funding led by Trinity Ventures, according to a regulatory filing.

Voddler Inc., a Palo Alto, Calif.-based virtual cable television system developer, has raised around $2.2 million in VC funding, according to a regulatory filing. Backers include Freja Ventures (Sweden) and Lotsa SA (Luxembourg).

Xsigo Systems Inc., a Sunnyvale, Calif.-based provider of datacenter solutions, today will agree to a new VC funding deal, according to VentureBeat. No terms were disclosed, except that it will come at a higher valuation than last year’s $20 million infusion from Greylock and Kleiner Perkins Caufield & Byers.

Buyout Deals

MDS Inc. (NYSE: MDZ) has agreed to sell its Canadian laboratory services business to Borealis Infrastructure Management for Cnd$1.325 billion. MDS is being advised by RBC Capital Markets and UBS Securities.

Arcapita has agreed to acquire listed UK utility Viridian Group PLC for £1.62 billion (23% premium).

JLL Partners has completed its public-to-private buyout of check-cashing store operator Ace Cash Express Inc. (Nasdaq: AACE) for $30 per share, or $455 million.

Michaels Stores Inc. (NYSE: MIK) shareholders have approved a $44 per share buyout offer from Bain Capital and The Blackstone Group. The entire deal is valued at approximately $6 billion.

Alchemy Partners is in talks to acquire UK-based Marston Hotels from family founders for around £180 million, according to The Times of London.

PE-Backed IPOs

This month’s IPO calendar includes expected pricings from SAIC (10/12), eHealth (10/12), Trubion Pharmaceuticals (10/18) and Susser Holdings Corp. (1018).

PE-Backed M&A

GPX International Tire Co., a Malden, Mass.-based portfolio company of Sterling Investment Partners, has acquired the Hebei Starbright tire factory in China. No financial terms were disclosed.

Phoenix Exploration Co. has completed its previously-announced acquisition of the Gulf of Mexico and south Louisiana assets of Cabot Oil & Gas Corp. and one of its affiliates.No financial terms were disclosed. Phoenix was formed this past April with a $250 million capital commitment from Carlyle/Riverstone.


West Corp. (Nasdaq: WSTC) has paid $44.5 million in cash to acquire InPulse Response Group, a Phoenix-based provider of outsourced sales solutions to direct response marketers, from Petra Capital Partners.

Firms & Funds

Horsley Bridge Partners of San Francisco is raising up to $1 billion for its fourth international fund-of-funds, according to a regulatory filing.

InnovationsKapital of Sweden has closed its fourth venture capital fund with SEK 1 billion ($136 million) in capital commitments. The vehicle will focus on startup and early-stage companies in the Nordic regions. Limited partners include Access Capital Partners, Chalmers University of Technology, The First Swedish National Pension Fund, The Third Swedish National Pension Fund, W Capital, The Wellcome Trust, BP Pension Fund, DnB NOR, Etera, KLP Insurance and Wega Support.

Pine Creek Partners has closed its inaugural fund with $53 million in capital commitments. The Washington, D.C.-based firm will sponsor management buyouts in a range of industries.

Piper Jaffray of Minneapolis is raising up to $275 million for its third leveraged buyout fund, according to a regulatory filing. It also is raising up to $225 million for a new venture capital fund.

Flag Capital Management of Stamford, Conn. has raised $161 million for an international fund-of-funds, according to a regulatory filing.

Formative Ventures has raised $12.5 million in additional LP commitments for its inaugural fund, bringing the total to $90 million.

Human Resources

E. Scott Mead has agreed to join Apax Partners, according to The New York Times. Mead is the former co-head of Goldman Sachs’ global communications, media and entertainment group. His track record includes advising Vodafone on its $183 billion hostile takeover of Mannsesmann.

Sam Gabbita and Moonkyung Kim have joined DFJ Element as a senior associate and associate, respectively. Gabbita previously was with Lazard, while Kim comes over from Booz Allen Hamilton. The news was reported by VentureWire.