PE Week Wire, Sept. 25, 2006

On Friday, I linked you over to the AA Capital Partners website, where suspended managing partner John Orecchio was still listed as an active team member. Hope you saw it early, because the entire site went MIA by early that afternoon. I don’t know if this was done because: (A) AA Capital hopes to avoid any additional publicity or (B) The firm does not know how to edit its own website. I say even money.

Anyway, a formal hearing on the case is scheduled for tomorrow in Chicago. Maybe AA Capital really does have a good explanation for its shenanigans, but I’m even more doubtful after obtaining a 99=-page affidavit filed in the case. First, the sheer extravagance of Orecchio’s T&E expenses — not to mention those that replace E with A — is staggering. For example, he spent more than $175,000 on private jets in May 2006, over $67,000 at the Tryst Nightclub in Vegas on February 4, 2006 and more than $75,000 at the Temple at Tao nightclub in Vegas this past New Year’s Eve. And that really is just the beginning.

Even more troubling is that AA Capital actually does have a compliance officer/CFO named Mary Beth Stevens. But I have no idea what she actually does. She allegedly told SEC investigators that the firm “does not keep a general ledger or journal throughout the year. Rather, AA Capital assembles financial records just before its outside auditors arrive to begin field work as part of the firm’s annual audit.” Before that process begins, Stevens said that “she does not know AA Capital’s current financial position.” Heck of a job Mary.

*** Parthenon Capital has received a fund-raising extension from its limited partners, despite having been in market for nearly two years on its $1 billion-targeted Fund III. It also has retained MVision to serve as placement agent.

Parthenon has pretty good returns, so the only explanation here is that LPs are still turned off by Parthenon’s 2003 decision to commit around 20% of its $750 million second fund into since-failed Atkins Nutritionals. I wrote one year ago that the Boston-based firm would hit its target, and I still believe that. But it sure is taking way too long.

*** The Australian management team of Deutsche Bank Venture Capital has spun out into an independent entity called Accede Capital.

*** My colleague Alexander Haislip attended the CleanTech Venture Forum in New York last week, and reports on several new firms.

*** Andrew Ross Sorkin writes in yesterday’s NY Times that the clubby world of mega-LBO firms is beginning to chill, in part due to intentional uncooperativeness during the HCA and Freescale deals. But the piece’s most prescient line comes at the end: “Even the idea of a hostile bid by a private equity firm, once all but unthinkable, could become a reality.”

Top Three

CVC Capital Partners has agreed to buy DCA Group Ltd. (ASX: DVC), an Australian nursing home and radiology clinic operator, for Au$1.7 billion (US$1.3 billion).

NovaCardia Inc., a San Diego-based drug company focused on cardiovascular disease, has raised $48 million in Series B funding. Skyline Venture led the deal, and was joined by InterWest Partners and return backers Domain Associates, Forward Ventures, Montreux Equity Partners and Versant Ventures.

Lehman Brothers has closed its Co-Investment Partners fund with $1.6 billion in capital commitments. The fund will make minority plays of between $5 million and $150 million in transactions led by other private equity firms. It already has committed around $330 million to 10 deals.

VC Deals

Ecast Inc., a San Francisco-based operator of a broadband-enabled touchscreen media network, has raised $20 million in new venture capital. Focus Ventures led the deal, and was joined by return backers Mobius Venture Capital, Crosslink Capital, DCM and El Dorado Ventures. The company has raised over $80 million in total VC funding since its 199 inception.

ContextWeb Inc., a New York-based provider of real-time contextual advertising solutions, has raised $15.5 million in Series C funding. Draper Fisher Jurvetson led the deal, and was joined by fellow return backers DFJ Gotham Ventures, Updata Partners and DFJ New England.

Compellent, an Eden Prairie, Minn.-based provider of data storage and data management solutions, has raised $15 million in new venture capital. Nomura International led the deal, and was joined by return backers Cargill Ventures, Centennial Ventures, Crescendo Ventures and El Dorado Ventures. It has raised more than $53 million in total VC funding.

Nexaweb Technologies Inc., a Burlington, Mass.-based company focused on helping enterprises deploy Web 2.0 applications, has raised $10 million in Series B funding. Return backers include Egan-Managed Capital, Masthead Venture Partners and Velocity Partners.

Full Capture Solutions Inc., an East Hartford, Conn.-based provider of predictive solutions for the insurance industry, has raised $7 million in Series B funding. Greylock Partners led the deal, and was joined by return backer Ignition Partners.

Mobile Cohesion, a Belfast, Ireland-based provider of partner relationship management solutions for the telecom industry, has raised $4.8 million in second-round funding. Enterprise Equity led the deal, and was joined by Viridian Growth Fund and return backers Accel Partners and Cross Atlantic Partners.

Buyout Deals

Merchant Equity Partners has agreed to acquire loss-making UK furniture retailer MFI Retail from MFI (LSE: MFI) for just £1 million. The deal also includes MFI paying MEP 74 million over the next 18 months to further support the stores, and around £52 million to cover existing customer deposits. MEP will invest approximately £62 million into the chain, and arrange at least £40 million worth of working capital facilities. Apax Partners and Argyll Capital also had made bids on MFI Retail.

The Riverside Company has acquired GreenLine Foods Inc., a Bowling Green, Ohio–based provider of fresh-trimmed, microwaveable packaged green beans. No pricing terms were disclosed. KeyBank acted as administrative agent for the senior financing package, with Freeport Financial and Orix also providing senior funding. New Canaan Funding provided subordinated notes. KeyBank advised GreenLine Foods on the sale.

Mobile Telecommunications Co. of Kuwait is considering a bid for Greek mobile phone operator TIM Hellas, according to Dow Jones. TIM Hellas was acquired for €1.1 billion last year by Apax Partners and Texas Pacific Group, but now is reportedly on the block for! up to €4 billion.

Inter Link Foods, a listed UK producer of private-label and branded cakes, said that it is in talks to be acquired by a private equity firm. No additional information was disclosed, except that any formal offer is “likely to be substantially in excess of the closing mid-market price on Friday.” At the close of trading on Friday, Inter Link was valued at around £47 million.

Sterling Capital Partners and Citigroup Private Equity are sponsoring a proposed $8 per share management buyout of Educate Inc. (Nasdaq: EEEE). The company’s stock price closed at $7.06 per share on Friday, and Educate says that it will review the proposal.

France Telecom has received European Commission approval to sell its 54% stake in directories company PagesJaunes for around €3.3 billion, to a private equity consortium that includes KKR, AXA Private Equity, Eurazeo and Goldman Sachs.

Poteza Adriatic Fund has acquired Serbian animal feed producer Proteinka Sabac for approximately €4.5 million.

PE-Backed IPOs

arrols Holding Corp., a Syracuse, N.Y.-based operator of Burger King, Pollo Tropical and Toca Cabana franchise restaurants, has filed to raise $210 million via an IPO of common stock. It plans to trade on the Nasdaq, with Wachovia Securities and Banc of America Securities serving as co-lead underwriters. Shareholders include Madison Dearborn Partners.

eHealth Inc., a Mountain View, Calif.-based online source of health insurance for individuals, families and small businesses, has set its proposed IPO terms to five million common shares being offered at between $10 and $12 per share. It plane to trade on the Nasdaq under ticker symbol EHTH, with Morgan Stanley and Merrill Lynch serving as co-lead underwriters. The company raised around $86 million in VC funding, from firms like Sprout Group, Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners, QuestMark Partners and Lake Street Partners.

This week’s IPO calendar includes expected pricings from Mindray Medical International Ltd., Shutterfly Inc. and Bare Escentuals Inc.

PE-Backed M&A

Caribe Acquisition Holdings, a portfolio company of Welsh, Carson, Anderson & Stowe, has agreed to acquire ACS Media LLC for Cdn$188 million. ACS Media is the largest publisher of print and Internet advertising directories in Alaska.

Ply Gem Industries Inc., a portfolio company of Caxton-Iseman Capital, has agreed to acquire Alcoa Home Exteriors from Alcoa Inc. (NYSE: AA) for approximately $305 million in cash. Alcoa Home Exteriors is a manufacturer of vinyl siding, aluminum siding, injection molded shutters and vinyl, aluminum and injection molded accessories.

RigNet Inc., a Houston, Texas-based provider of managed communications services for the upstream oil and gas industry, has acquired OilCamp AS, a Norwegian provider of communications services to the oil industry. No financial terms were disclosed. RigNet has raised nearly $14 million in VC funding from firms like Altira Group, HitecVision and Sanders Morris Harris, while OilCamp had been backed by HitecVision and TeleVenture Management.

PE Exits

Siemens Building Technologies Inc. has agreed to acquire VistaScape Security Systems Corp., an Atlanta-based provider of video analytic technology designed to protect critical infrastructure from a broad spectrum of threats. No financial terms were disclosed for the deal, which is expected to close within 30 days. VistaScape has raised over $18 million in VC funding from firms like H.I.G. Capital, Paladin Capital Group, CDP Capital and Visionaria Venture Capital.

Firms & Funds

Reliance Capital, a unit of the Indian financial services company Reliance ADA Group, is planning to raise a $500 million private equity fund, according to The Economic Times.

Newstone Capital Partners is seeking up to $500 million for its inaugural mezzanine fund, according to a regulatory filing. The firm was launched by former KZC Catalyst Partners principal Robert Brougham and former TCW/Crescent Mezzanine pros Timothy Costello and John Rocchio. It already has secured $374 million in commitments from limited partners like The Prudential Life Insurance Co. and Metropolitan Life Insurance Co.

Baring Private Equity Asia has closed its third fund with $490 million in capital commitments, according to Buyouts Magazine.

Human Resources

Preston Kavanagh has agreed to join Homesite Insurance as chief financial officer, after having previously served as a partner and CFO with CCP Equity Partners. In related news, Private Equity Insider reports that CCP Equity will shut down by early next year, with staffers splitting up to form two separate firms (Talcott Partners and Farmington Capital Partners).

Salem Partners has promoted Brendan Houlihan to vice president, where he will focus on M&A and financial advisory work in the firm’s entertainment practice.

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