PE Week Wire: Thurs., Feb. 7, 2008

Running late this morning, due to a semi-aborted CNBC appearance. Andrew Ross Sorkin and I were supposed to discuss the five buyout deals most likely to fail, but WalMart reported earnings in the middle of our conversation. Plus, Jim Cramer was the loquacious guest host, which meant we were already a bit behind schedule (but he felt bad for us getting cut off, which has generated all sorts of sarcastic email)… Anyway, here’s what I would have said, were things to have gone as planned.

“Thanks for having me on. I believe that most of the pending take-privates will get done. A lot of the detritus is already gone, and the overall pool actually stands at just a couple dozen. But since naming “five deals” makes for better television, here goes:

1. Blackstone/ADS: At first, I thought Blackstone was just angling to renegotiate. Then lawsuits started flying, and both sides wound up in front of Judge Leo Strine in Delaware Chancery Court. That makes this one DOA, as Strine has become something of an LBO gravedigger.

2. Myers Industries/Goldman Sachs: Goldman has already paid the breakup fee, and can walk in mid-April. Expect Goldman to begin lacing up its Nikes, particularly given that Myers is now trading nearly 50% lower than the purchase price.

3. Clear Channel/Bain & THL: Multiple trouble signs. The first approach was made back in 2006. The sponsors severely overpaid, after succumbing to activist pressures at the boom’s peak. Oh, and the stock is trading $10 per share lower than the sale price. But insiders insist this will get done, and my bet would be that the massive breakup fee will help push Clear Channel through in the end. But I’m not certain enough to actually buy the stock…

4. 3Com/Bain: Probably going to close, unless it becomes a political football like Dubai Ports. Bain’s partner on the deal is a Chinese tech firm, and 3Com apparently makes some sensitive national security gizmos. Certain Congressmen have already raised red flags, which could lead to grandstanding, which could lead to talk radio outrage, which could lead to failure. Failure here is more speculative than success.

5. Penn Gaming/Fortress: Can’t quite understand the problem here, but it makes the list due to a $17 per share spread. Yes it still needs to pass some regulatory hurdles, but Harrah’s managed to close. Plus, this isn’t an easy deal for Fortress to bail on. But still, that spread…”

*** 5 Questions for Roddy Swire, founder of Pantheon Ventures.

*** Jeff Bussgang of IDG Ventures Boston asks if the VC exit window is closing. Short piece, but an important close: If you are raising capital and have the option, raise a bit more.

*** Denise Palmieri returns from the UNC Private Equity Conference, and has some reflections.

*** Bob Nolan of Halyard Capital makes his case for continued middle-market private equity growth.

Top Three

Children’s Place Retail Stores Inc. (Nasdaq: PLCE) shares surged in pre-market trading today, after the company said that it has received a buyout approach. Ezra Dabah sent the company a letter, asking it to enter into negotiations with Golden Gate Capital about a deal, although no specifics were disclosed. Dadah resigned as chairman and CEO last September, but remains on the board and owns around 17.2% of the company’s outstanding shares. Its market cap was around $611 million, as of market close yesterday.

Kohlberg & Co. has agreed to sell Critical Homecare Solutions Holdings Inc. to MBF Healthcare Acquisition Corp. (AMEX: MBH), for approximately $420 million. CHS is a Conshohocken, Pa.-based provider of home infusion therapy and specialty infusion services. MBF Healthcare is a special purpose acquis! ition vehicle. The transaction includes approximately $180 million in cash, $180 million in debt provided by Jefferies Finance and a $35 million issuance of MBF common stock to Kohlberg, other shareholders and CHS management.

Dynogen Pharmaceuticals Inc., a Waltham, Mass.-based drug company focused on gastrointestinal and genitourinary disorders, has agreed to go public via a reverse merger with blank check company Apex Bioventures Acquisition Corp. (AMEX: PEX). The deal includes an upfront payment of $98 million in Apex stock, plus up to another $46 million in stock earn-outs. Dynogen has raised around $67 million in VC funding since 2002, from firms like Oxford Bioscience Partners, Pappas Ventures, Atlas Venture, HealthCare Ventures, Medica Veture Partners, Abingworth Management and SV Life Sciences.

VC Deals

OraMetrix Inc., a Richardson, Texas-based provider of 3D technology solutions for orthodontic care, has raised $20 million in Series C-1 funding, according to a regulatory filing. Return backers include Rho Ventures, CenterPoint Venture Partners, Brentwood Venture Capital, Star Ventures and Versant Ventures. The company has now raised around $100 million in total VC funding since 1999, and VentureWire reports that the latest round has a post-money valuation of $104 million.

SugarCRM, a Cupertino, Calif.-based provider of open-source customer relationship management software, said that it has raised $20 million in Series D funding. peHUB first reported on the round last month. Return backer New Enterprise Associates led the deal, and was joined by Draper Fisher Jurvetson and Walden International. SugarCRM previously raised around $26.5 million.

LogLogic, a San Jose, Calif.–based developer of log lifecycle management appliance, has raised $13.5 million in Series D funding. Focus Ventures led the round, and was joined by Sequoia Capital, Telesoft Partners, Worldview Technology Partners and Invesco Private Capital. The company previously raised around $21 million.

cVidya Networks, a London-based provider of telecom data integrity revenue assurance and dealer management systems, has raised $12 million in Series C funding. Battery Ventures led the round, and was joined by return backers Carmel Ventures, Hyperion, Stage One and Star Ventures.

PacketExchange Ltd., a London-based provider of wide-area Internet exchange services, has raised $12 million in Series B funding. Return backers include DFJ Esprit and Bank of Scotland Growth Equity. The company also named a new CEO: Rick Mace, former chief operating officer of Tekelec Inc. (Nasdaq: TKLC).

Kotura Inc., a Monterey Park, Calif.-based silicon photonics company, has raised $10 million in third-round funding. The round was led by new Kotura chairman Andrew Rickman, co-founder of Bookham Inc. Return backers include ARCH Venture Partners, ComVentures, GF Private Equity, Rockley Ventures and Viterbi Group.

Howcast Media, a New York-based operator of a website for “how-to” videos, has raised $8 million in Series A funding led by Tudor Investment Corp.

TurnHereInc., an Emeryville, Calif.-based provider of an online video platform, has raised $7.5 million in first-round funding from Venrock and Hearst Interactive Media. Cascadia Capital advised TurnHere on the deal.

Buyout Deals

Argonne Capital has acquired Stevi B’s Pizza, a 28-unit pizza franchise chain, from company founders Robert Stoll and Richard Stoll. No financial terms were disclosed. Capital Growth Advisors advised the sellers.

Bharti Airtel, a listed Indian mobile operator, has secured $250 million in private equity commitments from Kohlberg Kravis Roberts & Co. The deal values Bharti Airtel at between $10 billion and $12.5 billion.

BBC Worldwide reportedly is in talks to partner with private equity firms, in order to secure expansion capital.

TMB Industries, a Chicago-based private equity firm, has acquired Prospect Foundry LLC, a Minneapolis-based provider of gray, ductile and high-alloyed iron castings. No financial terms were disclosed.

PE-Backed IPOs

Archemix Corp., a Cambridge, Mass.-based biopharma company focused on developing aptamer therapeutics, has withdrawn its IPO registration, due to unfavorable market conditions.” The company had planned to offer 4.5 million common shares at between $12 and $14 per share. It would have an initial market cap of over $261 million, were it to price at the high end of its range, which was virtually identical to Achemix’s valuation at the end of its most recent venture capital round. Banc of America Securities and Bear Stearns had been serving as co-lead underwriters. Archemix has raised around $135 million in VC funding since 2001, from firms like Atlas Venture (13.9% pre-IPO stake), Prospect Venture Partners (13.9%), Highland Capital Parnters (13.2%), SV Life Sciences (11.6%), KGaA (11.3%), Rho Ventures (9.6%) and Care Capital (5.3%).

Transoma Medical Inc., a St. Paul, Minn.-based maker of implantable wireless vital sign monitors, has postponed its IPO due to unfavorable market conditions. The company had registered tooffer four million common shares at between $14 and $16 per share. It would have an initial market cap of approximately $290 million, were it to price at the high end of its range. Transoma filed to trade on the Nasdaq under ticker symbol TSMA, with Piper Jaffray and Thomas Weisel Partners serving as co-lead underwriters. Transoma has raised just over $38 million in total VC funding, from firms like Polaris Venture Partners (24.47% pre-IPO stake), Canaan Partners (20%), Affinity Capital Management and Cross Creek Capital.

PE Exits

Exar Corp. (Nasdaq: EXAR) has acquired the rights to all of Fyrestorm Inc.’s intellectual property, including rights to 30 patents related to digital predictive algorithms. No financial terms were disclosed. Fyrestorm had raised $50 million in VC funding since 2002, from firms like ComVentures, Telos Venture Partners, TPG Ventures, Worldview Technology Partners and Intel Capital.
Francisco Partners has sold FX Solutions LLC to UK-based City Index Group. No financial terms for the all-cash deal were disclosed. FX Solutions is a Saddle River, N.J.-based retail foreign exchange electronic trading platform. It was acquired by Francisco last April.

PE-Backed M&A

HD Supply has sold its lumber and building materials assets to ProBuild Holdings of Denver. No financial terms were disclosed. HD Supply was bought last year for $8.5 billion from Home Depot, by Bain Capital, Carlyle Group and Clayton Dubilier & Rice. ProBuild is owned by Fidelity Capital.

Welocalize Inc., a Frederick, Md.–based provider of integrated globalization services, has acquired Sinometrics, a Seattle-based provider of translation and localization services. Welocalize has raised VC funding from LLR Partners.

Firms & Funds

Novacap, a Montreal-based private equity and VC firm, has closed two new funds: Novacap Industries III, a Cnd$400 million fund focused on industrial or consumer product manufacturers and service companies; and Novacap Technologies III, a Cnd$165 million fund focused on IT and communications companies.

York Capital Management has held a $425 million first close on a private equity fund that will focus on distressed middle-market companies, according to a regulatory filing. LBO Wire reports that the minimum target is $750 million, with a $1.5 billion hard cap.