PE Week Wire, Sept. 15, 2006

Private equity consultancy Pacific Corporate Group is volcanic. It and its leader Chris Bower erupt from time to time, with senior managers flowing away like hasty lava.


Sources tell me that PCG this week has lost three top pros from its asset management group, which advises public pension systems on private equity fund commitments. They are: Monte Brem, group president; Tara Blackburn, the group’s most senior member; and Steve Moseley, who oversees co-investments. I can’t yet confirm their reason for leaving, nor whether or not they have non-compete agreements.

Most public pension funds can cancel consulting contracts without cause on 30-day notice, and the loss of this trio could trigger instantaneous cancellations. No wonder Bower has scheduled an emergency meeting today with at least one client, while his firm calls other consultants to inquire as to their employment availability.

This is hardly the first time that PCG has suffered major personnel defections. In fact, its list of former pros is nearly as impressive as the roster of active big leaguers who used to play for the Red Sox. It includes Mike Moy, Kelly DePonte, Scott Vollmer, Craig White, Peter Martinson and more.

But I’d wager that the loss of Blackburn is by far the most troublesome Bower has ever faced. When Vollmer, White and others left last year, more than one PCG client said something like the following: “It’s obviously not a good situation, but we’re satisfied so long as Tara is there.” Now that she’s gone, expect some serious reevaluation at longtime PCG clients like CalPERS, Oregon, Washington and Ohio PERS, plus new client Illinois Teachers.

Oh, and there is one additional PCG client of note: The New York City public pension system. When NYC lost Tim Kelly last week, one insider said that the zero-person staff would be okay in the short-term because PCG conducted most of the system’s due diligence anyway. Now, however, the NYC private equity team is staffed at less than zero (although it does have Aldus consulting on more focused PE investing). How none of the New York papers have picked up on this disgrace is beyond me…

PCG spokeswoman Lisa Baker declined comment. I’ll have more on Monday.

*** Ford today announced a giant restructuring, with the big news being voluntary buyouts of hourly workers. It also said that it would not sell off any brands until new CEO Alan Mulally had been given a chance to review potential offers. Well, I can tell you that San Francisco-based Citron Capital has made a formal play for Land Rover, while both One Equity Partners and Apax Partners are snooping around Jaguar and/or Aston Martin. So Alan has some homework to do…

Top Three

Amicus Therapeutics Inc., a Cranbury, N.J.-based drug company focused on genetic diseases like Fabry disease, has raised $60 million in Series D funding. New Enterprise Associates led the deal, and was joined by Och-Ziff Capital Management and return backers Canaan Partners, CHL Medical Partners, Frazier Healthcare Ventures, Palo Alto Investors, Prospect Venture Partners, Quaker BioVentures and Radius Ventures. Amicus has now raised $146.5 million in total VC funding, including a $55 million Series C round at a $111 million post-money valuation. It withdrew a proposed IPO last month, citing poor market conditions.

Nortel Networks is nearing an acquisition of Force10 Networks Inc., according to an interview with Susquehanna Financial Group analyst Joe Chiasson in The Deal. Force10 is a Milpitas, Calif.-based provider of 10-Gigabit Ethernet switching and routing solutions, and recently raised Series F funding at a pre-money valuation of around $420 million. Overall, the company has raised over $300 million in VC funding from firms like NEA, Crosslink Capital, U.S. Venture Partners, Pacesetter Capital Group, Morgenthaler Ventures, Meritech Capital Partners and Worldview Technology Partners.

Nautic Partners of Providence, R.I. is raising up to $1.2 billion for its second private equity fund since becoming the independent successor to Fleet Equity Partners. The fund’s official name is Nautic Partners VI. Credit Suisse is serving as placement agent.

VC Deals

Command Information Inc., a Herndon, Va.-based provider of Internet protocol version 6 (IPv6) consulting and product development services to Fortune 1000 and government customers, has raised $16 million in Series B funding, according to a regulatory filing. Paladin Homeland Security Fund was joined by return backers Novak Biddle Venture Partners, Carlyle Venture Partners and Blue Water Capital.

Aristos Logic Corp., a Foothills Ranch, Calif.-based provider of RAID storage processor technology, has raised $15 million in Series F funding, according to a regulatory filing. Return backers include JPMorgan Partners, TPG Ventures, Woodwide Fund and QTV Capital. Aristos Logic now has raised over $85 million in VC funding since its 2000 inception.

Prism Pharmaceuticals Inc., a King of Prussia, Pa.-based developer of acute care cardiovascular products, has secured $15 million of a $30 million Series B funding, according to a regulatory filing. Backers include Essex Woodlands Health Ventures and Shah Investors.

S5 Wireless, a Draper, Utah–based provider of wireless location technologies, has raised $11.5 million in Series B funding. Eagle River Holdings led the round, and was joined by return backers vSpring Capital and Wasatch Venture Fund.

SolarCity Corp., a Foster City, Calif.-based provider of solar power solutions, has raised $10 million in VC funding led by PayPal co-founder Elon Musk.

Tibion Corp., a Moffett field, Calif.-based provider of active orthotic devices, has raised $3.5 million in Series A funding. Claremont Creek Ventures led the deal, and was joined by Saratoga Ventures.

Buyout Deals

CCMP Capital has agreed to acquire substantially all of Generac Power Systems Inc., a Waukesha, Wis.-based manufacturer of standby power products in North America. Sellers included company founder Robert Kern. No financial terms were disclosed, although LBOWire puts the pricetag in excess of $1 billion.

3i Group says that it is putting together a management buyout bid for UK property and financial services company Countrywide PLC. Such a deal could be valued at around Gbp900 million.

The Riverside Co. has acquired Phoenix-based Sun Health Hospice Group for an undisclosed amount. Riverside will roll SH into its existing American Hospice platform.

Vornado Realty Trust (NYSE:VNO) has agreed to buy up to 44 previously-closed Toys ‘R’ Us stores for up to $190 million. Vornado holds a 32.9% stake in the toy retailer, based on its participation in a $5.6 billion buyout last year, which also included KKR and Bain Capital.

Littlejohn & Co. has acquired Stolle Machinery Co., a Centennial, Colo.-based provider of equipment to the beverage and food can-manufacturing industry, from American Industrial Partners. No financial terms were disclosed.

The Wicks Group of Cos. has acquired certain assets of CMP Entertainment Media Inc., CMP Media LLC and UEMedia Community Sites Inc. from United Business Media (LSX: UBM.L). No financial terms were disclosed. The assets will be rolled into the NewBay Media LLC platform, and consist of 14 magazines, 8 events and other products for enthusiast musicians, recording professionals, sound engineers, audio and video systems installers and technology educators.

PE Exits

Apax Partners has sold five million shares of apparel and accessories retailer Charlotte Russe Holding Inc. (Nasdaq: CHIC) in a secondary public offering. The shares were sold at 26.25 per share, with Goldman Sachs serving as lead bookrunner. This represents around a 27x return for Apax, which retains 2.7 million shares and originally made the investment via Sanders Karp & Megrue.

KPS Special Situations Funds has sold its controlling equity ownership interest in Blue Heron Paper Co. to an employee stock ownership plan formed by the company. No financial terms were disclosed for the deal, which creates a 100% employee-owned company. Blue Heron Paper is a producer of newsprint and other specialty paper products from a predominantly recycled fiber base. It was formed by KPS in May 2000 to to acquire the newsprint assets of the Smurfit-Stone Container Corp. in Oregon City, Oregon.

PE-Backed IPOs

Biovitrum AB, a Sweden-based drug company, has completed a $92 million flotation on the Stockholm Stock Exchange. All of the available shares were sold by non-company owners, like VC backers HBM Bioventures, MPM Capital and Nordic Capital.

Firm & Fund News

AIG has held a $664.4 million final close for its AIG Co-Investment Fund, which commits alongside middle-market and large buyout firms in North America and other developed markets. The AIG Employee Retirement Plan also has committed to a side vehicle, which increases the overall program’s size to around $700 million.

Sequoia Capital India, a group formed earlier this year via Sequoia’s acquisition of WestBridge Capital Partners, has closed its latest fund with $400 million in capital commitments. The fund will make later-stage and growth capital plays in a variety of industry sectors throughout India.

Human Resources

Gary Jungels and Olga Loy have joined Mayer, Brown, Rowe & Maw as Chicago-based partners, with a focus on private equity fund formation. They previously were partners with Kirkland & Ellis. In other Mayer Brown news, the firm said that Brian Trust – co-head of the financial restructuring and bankruptcy practice – has been promoted to partner-in-charge of the New York office.

Andrew Sossen has joined KKR Financial LLC (NYSE: KFN) as general counsel. He previously was with Simpson Thacher & Bartlett LLP.

Richard Haythornthwaite, managing director of UK-based Star Capital Partners, has been elected to non-executive chairman of the board at Mastercard Inc. (NYSE: MA). He already had been a Mastercard director.