PE Week Wire: Thurs., May 15, 2008

Last week, I asked the following: Can you name the venture capital firm that recently asked its limited partners to help arbitrate a spat amongst the general partners? Hint: Some of its partners need a passport to visit each other face-to-face. Same goes for its LPs.

The correct answer is Partech International, the Franco-American firm that also has an outpost in Israel. Three of you got it right, which puts you on the list for those T-shirts I keep promising to make (think they’ll be ready for the peHUB Across America events).

All of this has to do with Partech’s fifth fund, which recently closed on $300 million. Specific details of the dispute are unclear, except to say that it has more to do with personalities than investment strategy. When the general partners were unable to reconcile their differences, they asked for their LP advisory board to arbitrate. It has since done so, and issued a set of recommendations that would result in the departure – or “transition – of certain firm personnel.

Partech’s general partners adopted the recommendations in principle, and have since sent out amended fund documents to all of their fund V investors. The process is expected to be complete by month’s end, but in the meantime means that Partech cannot make any new investments. It can do follow-on deals from its past fund portfolios, but Fund V is static until the changes are baked in.

Vincent Worms, Partech’s co-founder and managing partner, acknowledged the situation in an interview earlier this week. “These are discussions related to the management of the fund, but it is not going to result in a major reorganization,” Worms explained. “Partech will remain trans-Atlantic… It’s not going to disappear.”

More details expected once LPs adopt the new structure. Should be interesting to see who remains, given that Partech has already lost three partners since the beginning of 2006 – plus a couple of associates and its in-house marketing manager. For the record, Worms says he’s among the expected survivors.

New at peHUB

* Chris Douvos of TIFF asks general partners to justify his love, particularly early-stage VC firms that want to raise $500 million funds.

* RedLasso, a company that helps bloggers embed video clips from local and national television networks, is looking to new VC funding. We’ve got details.

* My UK colleague Justin Pugley on Glam Rock, Platform Boots and Stagflation.

* A new study shows that one in four CEOs lose their job in a private equity buyout.

* peHUB First Read, including a big VC-backed bust and how covenant-lite is good for society.

Top Three

CBS has agreed to acquire CNET Networks Inc. for approximately $1.8 billion in cash. The move comes five months after hedge fund Jana Partners began an effort to wrest control of the CNet board, in partnership with Spark Capital, Velocity Interactive Capital, Sandell Asset Management Corp and Paul Gardi of Alex Interactive Media.

SilkRoad Technology Inc., a Winston-Salem, N.C.-based provider of online talent management solutions, has raised $54 million in new VC funding. Foundation Capital led the round, and was joined by return backers like Azure Capital Partners and SilkRoad Equity.

Verso Paper Corp., a Memphis, Tenn.-based producer of coated papers, has reduced its IPO terms set its IPO terms to 14 million common shares being offered at $12 each. It had previously filed to sell 18.75 million common shares at between $16 and $18 per share. Verso is wholly-owned by Apollo Management.

VC Deals

ProCure Treatment Centers Inc., a Bloomington, Ind.-based developer of a network of proton therapy centers for cancer patients, has raised $35 million in second-round funding from McClendon Venture Co. The company received a prior $35 million infusion from MVC and individual angels in December 2006.

Fulcrum Microsystems Inc., a Calabasas, Calif.-based developer of circuit architecture for fabless semiconductors, has raised around $29 million in Series E funding. New Enterprise Associates led the round with $15 million, and was joined by fellow return backers Infinity Capital, Palomar Ventures, Worldview Technology Partners and Granite Ventures. It has now raised over $96 million in total VC funding.

OmniGuide Inc., a Cambridge, Mass.-based developer of a flexible CO2 laser scalpel for minimally-invasive surgeries, has raised $25 million in Series E funding. Psilos Group led the round, and was joined by return backers Ray Stata, Stata Venture Partners, 3i, Argonaut Ventures, ESI, Gainesborough Investments, Jeff Swartz and Westbury Partners. Thomas Weisel Partners served as placement agent.

Talyst, a Bellevue, Wash.-based provider of automated systems to hospitals and other centralized pharmacies to improve accuracy and patient safety, has raised $20 million in Series C funding. Return backers include AIG Investments, Ignition Partners and OVP Venture Partners. The deal includes an up-front investment of $8.5 million, with the remainder to be called down as needed.

GreenFuel Technologies Corp., a Cambridge, Mass.-based developer of algae farm technologies for recycling CO2 emissions, has raised $13.9 million in new VC funding. Return backers include Access Private Equity, Draper Fisher Jurvetson and Polaris Venture Partners.

MMIC Solutions Ltd., a Ledbury, UK-based provider of module and subsystem solutions for commercial millimetre wave applications, has raised £2.7 million in Series A funding. YFM Group led the round, and was joined by return backers Scottish Venture Fund, NESTA and

eTix, a Morrisville, N.C.-based provider of on-demand ticketing software, has raised $1 million from Southern Capitol Ventures.

InnerWireless Inc., a Richardson, Texas-based provider of in-building enterprise converged wireless solutions, has raised $9.5 million in venture debt funding from Silicon Valley Bank. The company has previously raised around $62 million in VC funding since 1998, from firms like Sevin Rosen Funds, Centennial Ventures, HO2 Partners, Johnson Controls Inc., Massey Burch Capital, Rho Ventures, StarTech Early Ventures and Technology Associates Management. It also merged last year with PanGo Networks, which had raised $15 million from IDG Ventures Boston, Columbia Capital and Investcorp.

Amarin Corp. (Nasdaq: AMRN), an Ireland-based developer of cardiovascular and CNS drugs, has agreed to raise up to $60 million in PIPE funding. The tranched-out deal could include $56 million from an investor consortium that includes Sofinnova Ventures, OrbiMed Advisors, Thomas, McNerney & Partners, Panorama Capital, Longitude Capital and Fountain Healthcare Partners. The remainder would come from company directors. Cowen & Co. is serving as lead placement agent.

Buyout Deals

Hilco Consumer Capital and Gordon Brothers won court approval to be the “stalking horse bidder” for bankrupt retailer The Sharper Image Corp. (PK: SHRPQ). The auction is set for May 28, with Hilco and GB to receive up to 2% of the purchase price if their acquisition does not occur. They are partnering on the deal with Windsong Brands LLC and Crystal Capital.

Neenah Paper Inc. (NYSE: NP) has agreed to sell its Pictou, Nova Scotia pulp mill, together with its associated timberlands business, to Atlas Holding and Blue Wolf Capital Management.

Nordic Capital has extended the expiration date of its $1.7 billion offer to buy Nordic IT services business TietoEnator, for the third time. The latest deadline had been May 16, but has now been pushed back to May 23. So far, TietoEnator has rebuffed the offer as being too low.

Candover has recapitalized Qioptiq Group, a France-based maker of high-precision optical solutions for the defense, medical and industrial markets. No financial terms were disclosed, except that European Capital and American Capital invested a combined $85 million on the mezzanine tranche.

Performance Food Group Co. (Nasdaq: PFGC) shareholders have approved a $34.50 per share buyout offer from The Blackstone Group and Wellspring Capital Management. The entire deal is valued at approximately $1.3 billion. Once closed, Performance would be merged with Vistar Corp., a foodservice distributor already owned by Blackstone and Wellspring. Evercore Group is serving as financial advisor to Performance.

PE-Backed M&A

Fintiles, a portfolio company of Permira and Private Equity Partners, has offered to acquire listed Italian ceramic tile maker Marazzi. The €7.15 per share offer represents a 14% premium to Monday’s closing price.

PHNS, a portfolio company of Nautic Partners, has acquired AmeriVault Corp., a provider of managed data protection and offsite storage services. No financial terms were disclosed. AmeriVault was advised by Madison Parker Capital.

Strands, a Corvallis, Ore.–based developer of a personalized discovery platform and social recommender engine, has acquired NetworthIQ, a website that lets people track, share, and compare their net worth. No financial terms were disclosed. Strands has raised $55 million in VC funding from Spanish bank BBVA and Debaeque.

PE-Backed Exits

Comcast has agreed to acquire Plaxo Inc., Mountain View, Calif.-based social networking company that helps users keep their online address books updated. No financial terms were disclosed. Plaxo has raised around $23 million in VC funding since 2002, from firms like Sequoia Capital, Globespan Capital Partners, DAG Ventures, Cisco Systems and Harbinger Venture Management.

Firms & Funds

3i Group said that the value of its assets under management rose 37% for the year ending in March. Its return-on-investment was 18.6%, compared to 26.8% the prior year.

Oaktree Capital Management has raised $10.6 billion for its eighth fund (OCM Opportunities Fund VIIb), according to LBO Wire. The Los Angeles-based distressed firm has not yet made a capital call on the new vehicle, but has fully invested its $3.5 billion predecessor.

Human Resources

Paul Grayson has been named president and CEO of Fate Therapeutics, a Seattle-based stem cell biotech company focused on cell fate control. He previously was a managing director of Sanderling Ventures. Fate also named former Adnexus CEO John Mendlein as its executive chairman. The company has raised $15 million in VC funding from ARCH Venture Partners, Polaris Venture Partners, Venrock and OVP.

Trinity Ventures has promoted Ajay Chopra to general partner. He joined the firm in 2006 as a venture partner, and has worked on such deals as 21Vianet, Guard ID Systems, Mobile Messenger and Skyfire.

Indigo Capital has promoted Martin Hook to partner. He had joined the firm in 1999, after spending four years with Dresdner Kleinwort Benson. Indigo also has hired two new investment executives: Burkhard Wangenheim (formerly with M-Cap in Germany), and Guillaume Claire (formerly with JPMorgan).

Hansen Yuan has joined the scientific advisory board of Healthpoint Capital. He is a professor emeritus in the department of orthopedic and neurological surgery at SUNY Health Science Center.