PE Week Wire: Thurs, March 15, 2007

Today’s column became a bit convoluted and needs some editing. But it had a good lead: “Let’s collectively acknowledge two things: The vast majority of buyout firms invest in the middle-markets, and those investing in the mega-markets are more important.” Discuss amongst yourselves, or wait until I discuss it tomorrow.

In the meantime, let’s be interactive on two fronts. First, there has been a lot of ink spilt lately on how presidential candidates are busy prostrating themselves in front of private equity’s old money and nouveau riche. So I figured it was timer to gauge the PE Week Wire readership’s sense of the election – even though it is a ridiculously long way off. So I’ve put together a quick poll for you to take, which asks just three questions: (1) With which political party are you most closely aligned? (2) Do you have a favored presidential candidate? (3) Who’s your horse? Take the poll, and I’ll publish results tomorrow. Just as a reminder, we last did this a few weeks before the 2004 presidential election – and you were split nearly dead-even between Bush and Kerry.

*** The second front is our March Madness Extravaganza. We’ve got over 500 players so far, and just about 120 more minutes until tip-off. If you’d still like to sign up, the instructions are here.

*** In other competitive news, the field has been set for VCIC Finals, which will be held from April 12-14 in Chapel Hill. For those who don’t know, VCIC is an international event whereby teams of MBA candidates form fictional VC partnerships, and then get judged on their due diligence and investment acumen by real VC judges (plus pretenders like me). Forty schools competed this year in five regional events, with many first having internal competitions just to pick a regional representative. The final field is: BYU, Chicago, Colorado, HBS, Insead, Maryland, MIT, Virginia and USC. Congrats so far, and I look forward to seeing you next month…

Top Three

Microsoft Corp. has agreed to acquire Tellme Networks Inc., a Mountain View, Calif.-based provider of voice applications like directory assistance and mobile search. No financial terms were disclosed, although various reports put the price tag in excess of $800 million. Tellme raised around $263 million during 1999 and 2000, from firms like Kleiner Perkins Caufield & Byers, Benchmark Capital, AT&T, Amerindo, Bowman Capital and Van Wagoner Capital Management. Some of the VC shares since have been acquired on the secondary marker by firms like Millennium Technology Ventures and Saints Capital.

Tragara Pharmaceuticals Inc., a San Diego-based drug company focused on cancer and inflammatory diseases, has raised $40 million in Series A funding. Backers include Domain Associates, ProQuest Investments, Morgenthaler Ventures, Oxford Biosceince Partners and Mitsubishi International Corp.

Smurfit Kappa Group, a cardboard packaging company formed via the 2005 merger of Ireland-based Jefferson Smurfit and The Netherlands-based Kappa, raised €1.3 billion via an IPO on the Irish Stock Exchange and a secondary listing on the London Stock Exchange. Shareholders include Cinven, CVC Capital and Madison Dearborn Partners. The €16.5 per share offering valued Smurfit Kappa at around €3.4 billion.

VC Deals

Capella Intelligent Subsystems Inc. (f.k.a. Capella Photonics), a San Jose, Calif.–based provider of wavelength selective switch modules, has raised $20 million in venture recap funding. Levensohn Venture Partners and Rustic Canyon Partners co-led the deal, and were joined by Formative Ventures. The deal also included a small debt tranche from Square 1 Bank. Capella previously had raised around $48 million in total VC funding. Existing shareholders Bay Partners, BCE Capital and Vanguard Ventures did not participate.

WhiteFence, a Houston, Texas-based online comparison shopping site for residential home services, has raised $14 million in second-round funding. Adams Street Partners led the deal, and was joined by return backer Internet Capital Group.

Open-Silicon Inc., a Milpitas, Calif.-based fabless semiconductor company, has raised $10 million in Series D funding. Bridgescale Partners led the deal, and was joined by return backers Norwest Venture Partners, Sequoia Capital, InterWest Partners and Artis Capital Management.

Expresso Fitness, a Sunnyvale, Calif.-based provider of interactive cardio fitness systems, has raised $9.3 million in Series C funding. Sierra Ventures led the deal, and was joined by return backer Enterprise Partners Venture Capital.

HaloSource Inc., a Bothell, Wash.-based antimicrobial technology company focusing on safe water and infection control, has raised $6 million in VC funding. Unilver Ventures led the deal, and was joined by return backers like Alexander Hutton Venture Partners, and Britannia Holdings and WRF Capital.

T-Vips, an Oslo, Norway-based developer of VoIP solutions, has raised around $2.45 million in second-round funding. Return backers included Northzone Ventures and Selvaag Venture Capital.

MovingHealth Inc., a Cambridge, Mass.-based provider of online consumer health information, has raised $1.5 million in seed funding led by General Catalyst Partners, according to a regulatory filing.

Proteogenix Inc., a Portland, Ore.-based developer of proteomic and genomic tests to detect and monitor fetal disorders, confirmed that it has raised $20 million in Series B funding. PE Week Wire first reported the news last week. New Leaf Ventures and TPG Ventures co-led the deal, and were joined by return backer Burrill & Co.

Buyout Deals

The Blackstone Group and GE Capital Solutions has agreed to acquire and split PHH Corp. (NYSE: PHH), a Mt. Laurel, N.J.-based company spun off from Cendant Corp. in early 2005. The deal is valued at around $1.69 billion, with PHH shareholders to receive $31.50 per share in cash (closed yesterday at $27.81). PHH has two business units: PHH Mortgage, which originates private-label mortgages for groups like Merrill Lynch; and PHH Arval, which provides fleet management services in North America. Under terms of the deal, Blackstone will get PHH Mortgage while GE will retain PHH Arval.

Macquarie Bank has agreed to acquire the auto garage facilities of UK-based National Car Parks from 3i Group for Gbp790 million. 3i will retain the company’s towing services unit.

Ensus Group PLC. A UK ethanol producer, said that Carlyle/Riverstone has agreed to fund the construction of a wheat ethanol production facility in Teesside. No financial terms were disclosed.

Brenco, a Brazilian ethanol producer, has raised $200 million in private equity funding, according to Dow Jones. Goldman Sachs placed the shares. The report cites investors as including Vinod Khosla, Steve Case and Ron Burkle – but it is unclear if the capital technically came from their investment firms (Khosla Ventures, Revolution Partners and Yucaipa Cos.).

Cadbury Schweppes said today that it will split into two companies: One focused on drinks, and another focused on confectionary products. The move could come either via a demerger or a sale, with reports suggesting that buyout firms already are scouting out either one or both of the new companies.

Entrepreneur Partners of Philadelphia has acquired American Filing Technologies Inc., a St. Louis-based direct marketer of specialized office products that help the healthcare market create, store, maintain and retrieve medical records. No financial terms were disclosed. The deal’s equity tranche was provided by the principals of Entrepreneur Partners, while leverage came from CapitalSource.

Platte River Ventures has acquired Precision Machine Works Inc., a Tacoma, Wash.-based maker of hard-metal structural components for the commercial and defense aerospace markets. No financial terms were disclosed. In related news, David Baublits has been promoted from VP of operations to CEO of PMW, with former CEO John Gazecki becoming company chairman.

Compass Diversified Trust has completed its $62.5 million acquisition of HALO Branded Solutions Inc. from H.I.G. Capital. HALO is a Sterling, Ill.-based distributor of logo-based promotional products.

Chrysalis Capital Partners has completed its $44 million acquisition of Malden Mills Industries Inc., the Lawrence, Mass.-based maker of Polartec fleece apparel. The company was renamed Polartec LLC.

Atos Origin SA shares jumped as much as 30% yesterday on a Dow Jones report that Permira and Cerberus Capital have made a €4 billion, or €58 per share, buyout bid. Atos Origin is a France-based IT services provider.

Archer Capital has taken one giant step closer toward its Au$370 million buyout of Australian sporting goods retailer Rebel Sport, after company shareholders approved the Au$4.60 per share deal.

PE-Backed IPOs

BigBand Networks Inc., a Redwood City, Calif.-based provider of broadband multimedia service routers, priced 10.7 million common shares at $13 per share ($10-$12 range), for an IPO take of approximately $139.1 million. It will trade on the Nasdaq under ticker symbol BBND, while Morgan Stanley and Merrill Lynch served as co-lead underwriters. BigBand has raised $100 million in VC funding since its 1999 inception, from firms like Charles River Ventures, Cedar Fund, Lauder Partners, Meritech Capital Partners, Redpoint Ventures and Time Warner Ventures.

Polypore International Inc., a Charlotte, N.C.-based supplier of filtration products, has filed for a $362.25 million IPO. It plans to trade on the NYSE under ticker symbol PPO, with JPMorgan serving as lead underwriter. Warburg Pincus acquired the company in 2004 from GTCR Golder-Rauner and The InterTech Group.

This week’s remaining IPO calendar includes expected pricings from FCStone Group Inc., Photowatt Technologies Inc. and Tongjitang Chinese Medicines Co.

PE-Backed M&A

Consona Corp. (f.k.a. Made2Manage), an Indianapolis–based provider of enterprise customer management and process solutions, has completed its acquisition of Knova Software Inc. (OTC BB: KNVC). The deal was valued at approximately $47 million in cash, or $5 per share. M2M is owned by Battery Ventures and Thoma Cressey Equity Partners.

NPC International Inc., a Lenexa, Kan.-based franchisee and operator of Pizza Hut franchises, has completed its acquisition of 59 additional Pizza Hut units located primarily in Idaho and the Spokane Valley for $27.1 million. The sellers were Pizza Hut of Idaho, Rocky Mountain Pizza Huts, Northwest Restaurant Group and Northern Idaho Pizza Huts. NPC was acquired last year by Merrill Lynch Global Private Equity.


Castle Harlan has sold Gravograph-Technifor Group to LBO France. No financial terms were disclosed. Gravograph-Technifor Group includes: Gravograph Industrie International, an Atlanta-based maker of machines, accessories and materials used in the engraving industry; and Technifor SA, a Miribel, France-based maker of devices for permanent product identification in a variety of industrial applications. Castle Harlan acquired Gravograph in 2000 and Technifor in 2003.

Esprit Capital Partners has sold NetEconomy to Fiserv Inc. (Nasdaq: FISV) for an undisclosed amount. NetEconomy is a Netherlands–based provider of financial crime management and compliance solutions to financial institutions.

OnCap has sold Canadian aerospace/defense avionics company CMC Electronics Inc. to Esterline Corp. (NYSE: ESL) for approximately $335 million in cash.

Perseus-Soros Management has sold its remaining 1.7 million share stake in drug company Adams Respiratory Therapeutics (Nasdaq: ARXT) for around $44 million, according to The New York Post.

Firms & Funds

Sun Capital Partners has raised the ceiling of its fifth buyout fund to $6 billion, after originally targeting $4 billion, according to Buyouts Magazine. Its prior fund closed on $1.5 billion in 2005.

TCW of Los Angeles is raising up to $1 billion for its fourteenth energy and infrastructure private equity fund, according to a regulatory filing. It already has secured around $115 million.

The Edgewater Funds of Chicago is raising up to $430 million for a new growth capital fund, according to a regulatory filing.

Human Resources

Michael Ellwein and Roderick Young have joined Three Arch Partners as venture partners. Ellwein has spent the past 17 years with Medtronic, most recently as vice president and chief development officer. Young previously served as CEO of former Three Arch portfolio company Vivant Medical (sold to Tyco).

Jeffrey McDermott has resigned as one of three co-heads of global I-banking at UBS, effective June 30.

Matt Crisp has joined Adams Street Partners as a Palo Alto, Calif.-based partner focused on direct venture capital opportunities. He previously was with VSP Capital and, before that, with Rosewood Capital.

Brandon Halm has joined Calvert Street Capital Partners as an associate. He previously was a financial analyst in the I-banking group of Stifel Nicolaus.

Evan Flaschen and Gregory Nye have agreed to join Bracewell & Giuliani LLP as partners. The pair currently are partners in the financial restructuring group at Bingham McCutchen.