PE Week Wire: Tues., April 17, 2007

Greetings from the Grand Hyatt hotel in New York City, where I’m stationed for Buyouts Symposium East. Big day planned, including: An 11:30am keynote from Carlyle Group co-founder Dan D’Aniello; A 2:45pm panel on take-private buyouts moderated by yours truly; and our first-ever Buyouts Awards Dinner, emceed by ESPN’s Kenny Mayne. In the meantime, a few quick notes…

*** Last week, I expressed astonishment that two Dow Chemical executives wouldsolicit buyout offerswithout the board’s knowledge or authorization. These were rogue employees who hoped their brazenness might result in such a good offer that the board would forgive their misdeeds… Misguided for certain, and unusual within a “don’t rock the boat” company like Dow… Right?

Well, maybe not. Since that column – which included a facetious offer to help market a sale of Thomson Financial – several readers have written in to say that the Dow situation is not unique. Or even all that rare.

Instead, I’ve been told than a number of well-known buyouts have their origins in discussions between LBO firms and target company executives – discussions that directors were not aware of for weeks or months. The only rarity in the Dow Chemical situation, they say, is that the executives were fired and then publicly raked over their coals for their alleged impropriety.

I hope to confirm some additional info later today, at which point I may be able to name (company) names. In the meantime, it’s worth noting that both fired Dow execs have now professed their innocence. Romeo Kreinberg did so within hours of getting pink-slipped, while J. Pedro Reinhard yesterday issued a formal statement categorically denying that he was “part of any secret effort to take over or acquire Dow Chemical.” Part of me wants to pay extra-special attention to the word “secret” – but that seems a bit too picky…

*** Basic Horangic is leaving Austin Ventures, after having served as a general partner for the past six years. More info here, based on conversations I had yesterday with both Horangic and AV managing director John Thornton.

*** Speaking of personnel moves, Beth Bronner has agreed to join Mistral Equity Partners – the new consumer-focused private equity firm launched last month by Trimaran Capital vets Andrew Heyer and Bill Phoenix. Bronner most recently served as senior vice president and chief marketing officer for Jim Beam Brands. Past jobs include a partner gig with LERA Consulting and a president/COO role with direct mail marketing company ADVO Inc. Expect Mistral to hold a first close for its inaugural fund next month.

*** I was flipping through some regulatory filings last week, and noticed that Centrify Corp. had raised what looked like $15 million in Series C preferred equity funding. But a bit further down, I noticed that the company had listed all $15 million on the “debt” line, instead of on the “equity” line. So what did it raise? Equity or debt?

The answer – not surprisingly – is equity. Seems a legal staffer made an “oops,” and already has sent a revised filing into the SEC. Of more relevance, Centrify will formally announce the round tomorrow, with Sigma leading and return backers Mayfield Fund, Accel Partners and Invesco Private Capital also participating.

Tom Kemp, Centrify’s CEO, says that the deal was an up-round over the $15 million Series B deal it closed in mid-2005. Not terribly helpful since he declined to share the Series B valuation, except that it also was an up-round, over the $14m post-money Centrify received from its $7 million Series A in late 2004. Kemp says that the company has not yet achieved profitability, but says that it has over 200 customers, compared to just 17 when it began raising the Series B. It also has a new product. For the uninitiated, Centrify is a Mountain View, Calif.-based network security company focused on integrating non-Microsoft platforms with Microsoft Active Directory management services.

*** Time to put on the blue suit and get downstairs. Hope to see many of you later today…

Top Three

BCE (NYSE: BCE), the parent company of Bell Canada, has confirmed that it is in talks to take the company private. Such a deal could be worth $45 billion, which would make it the largest leveraged buyout in history. The group BCE is currently speaking with includes KKR and three Canadian pension plans — Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec and Canada’s Public Sector Pension Investment Board.

Bear Stearns Merchant Banking has agreed to acquire Universal Hospital Services Inc. from JW Childs Associates, The Halifax Group and UHS management. The deal is valued at approximately $712 million, and is expected to close later this quarter. UHS is an Edina, Minn.–based provider of medical equipment lifecycle services.

RainDance Technologies Inc., a Guilford, Conn.-based nanotech company that is developing a platform for droplet-based microfluidics, has raised $23.66 million in Series B funding. Backers include Mohr Davidow Ventures, Pequot Capital (via Acadia Wood Partners) and JDS Capital.

VC Deals

Cybernet-SlashSupport (CSS), a San Jose, Calif.-based provider of outsourced technology operations management, has raised $25 million in second-round funding led by Goldman Sachs.

Lithium Technologies Inc., an Emeryville, Calif.-based provider of on-demand online community solutions, has raised $9 million in Series A funding. Shasta Ventures and Emergence Capital Partners co-led the deal, with Shata’s Ravi Mohan and Emergence’s Gordon Ritter joining the Lithium board of directors.

Memento Inc., a Concord, Mass.-based developer of internal security software, has raised $7.5 million in third-round funding. 406 Ventures led the deal, and was joined by return backers Bain Capital Ventures, Rock Maple Ventures and individual angels.

Shocking Technologies Inc., a San Jose, Calif.-based provider of voltage switchable dielectric materials to the semiconductor and electronics industries, has raised $7 million in Series A funding. ARCH Venture Partners and ATA Ventures co-led the round.

Exinda Networks, a Boston-based provider of unified performance management solutions, has raised $6 million in first-round funding from OpenView Venture Partners.

Accuri Cytometers Inc., an Ann Arbor, Mich.-based developer of bench-top flow cytometer systems, has raised $5 million in Series B funding co-led by Baird Venture Partners and Arboretum Ventures.

SecureInfo Corp., a McLean, Va.-based provider of information assurance solutions, has raised $5 million in Series C funding. Insight Venture Partners led the deal, and was joined by fellow return backer Nortel Networks. The company has now raised $26.5 million in total VC funding.

Semprius Inc., a Durham, N.C.-based developer of transfer printing technology for the manufacture of advanced semiconductor devices, has raised $4.1 million in Series A funding. Arch Venture Partners and Intersouth Partners co-led the deal, and were joined by seed backer Illinois Ventures.

Buyout Deals

Apollo Investment Corp. (Nasdaq: AINV), a business development company affiliate of Apollo Management, has agreed to acquire Innkeepers USA Trust (NYSE: KPA), a hotel REIT, for $17.75 per share. Lehman Brothers and UBS are advising Innkeepers on the deal, which is valued at around $1.5 billion.

Alinda Capital Partners has agreed to acquire Canadian income trust UE Waterhead Income Fund (TSX: UWH.UN) for Cdn$23 per unit. The total deal is valued at approximately Cnd$1.74 billion.

Gridiron Capital has acquired Ramsey Industries Inc., a Tulsa-based manufacturer of products for the towing and construction industries. No financial terms were disclosed.

MidOcean Partners has acquired Hunter Fan Co. from Lehman Brothers Merchant Banking Group. No financial terms were disclosed for the deal, which included leveraged financing from JP Morgan and Goldman Sachs. Hunter Fan is a Memphis, Tenn.-based maker of branded ceiling fans.

CalPERS says that it plans to vote against the $19 billion buyout of Clear Channel Communications by Bain Capital and Thomas H. Lee Partners. It becomes the latest Clear Channel shareholder to publicly oppose the deal, following Fidelity Investments, Highfields Capital Management and T. Rowe Price. CalPERS holds just under 1% of Clear Channel stock.

Buckingham Capital Partners has completed its $8.65 per share buyout of CPAC Inc., a Leicester, N.Y.-based maker of cleaning products and imaging chemicals. The total deal is valued at around $49.5 million, with CPAC having delisted from the Nasdaq.

General Atlantic has acquired a minority position in Global Electronic Trading Co. (Getco), a Chicago–based electronic liquidity provider and trading firm. No financial terms were disclosed for the deal, which is expected to close next month. General Atlantic CEO Bill Ford and managing director Rene Kern will join the Getco board of directors.

Custom Foods Products Inc., a Carson, Calif.-based meat processing company owned by William E Simon & Sons and Triton Partners, has filed for Chapter 11 bankruptcy protection. The move was made in order to help facilitate a sale to stalking horse bidder Contrarian Financial Services, which has offered to pay between $30 million and $35 million.

PE-Backed IPOs

SoundBite Communications Inc., a Burlington, Mass.-based provider of on-demand automated voice messaging solutions, has filed for a $69 million IPO. It plans to trade on the Nasdaq under ticker symbol SDBT, with Cowen & Co. and Thomas Weisel Partners serving as co-lead underwriters. The company has raised around $30.4 million in VC funding since 2000, from firms like North Bridge Venture Partners (46.2% pre-IPO stake), Mosaic Venture Partners (20.9%), Commonwealth Venture Capital (16.5%) and Venture Capital Fund of New England (9.9%).

NeurogesX Inc., a San Carlos, Calif.-based drug company focused on pain management therapies, has set its proposed IPO terms to 4 million common shares being offered at between $13 and $15 per share. It plans to trade on the Nasdaq under ticker symbol NGSX, with Morgan Stanley serving as lead underwriter. The company has raised around $90 million in VC funding since 2000, from firms like ARCH Venture Partners (24.7% pre-IPO stake), Alta Partners (18.6%), Walden International (14.3%) Montreaux Equity Partners (10.2%) and Global Life Sciences Ventures (4.4%).

PE-Backed M&A

Ampac Packaging LLC, a Cincinnati-based packaging company backed by Falcon Investment Advisors and Prudential Capital Group, has acquired the Trigon Security Products business of Sealed Air Corp. (NYSE: SEE). No financial terms were disclosed. Trigon makes security bag products for financial institutions, armored carriers and retailers for the depositing and shipping of cash, checks and other valuables.

Bright Media Group, a San Francisco-based alternative media company backed by Trimaran Capital Partners, has acquired AdverTickets, a Dallas, Texas–based provider of advertisements on valet parking tickets. No financial terms were disclosed.

Lone Star Fasteners, a Spring, Texas-based company backed by Trinity Hunt Partners, has completed its acquisition of PRD Holdings Ltd., a UK-based maker of fasteners to the energy and heavy industrial markets. The combined company has an enterprise value of around $150 million.

EV Energy Partners LP (Nasdaq: EVEP) has agreed to acquire oil and natural gas properties in Central and East Texas from Anadarko Petroleum Corp. (NYSE: APC). The purchase price will be $100 million. EnerVest is EVEP’s largest shareholder.

PE Exits

Eltek Energy, a subsidiary of listed Norweigen telecom company Eltek Group, has agreed to acquire Valere Power Inc., a Richardson, Texas-based provider of power supply solutions for communications providers. The combined company will be called Eltek Valere, and is expected to “investigate a separate listing of the company in the US or another major global exchange in the future.” Valere shareholders will receive around $83 million in cash, plus a minority stake in the new company. Valere had raised around $63 million since 2001, from firms like Sierra Ventures, Alcatel Ventures, Dali Hook Partners, JPMorgan Partners and Lehman Brothers.

Intelsat Ltd., the world’s largest commercial satellite operator, reportedly is on the block for up to $6 billion. The company was acquired in August 2004 by Apollo Management, Madison Dearborn Partners, Apax Partners and Permira. One year later, it acquired rival PanAmSat for around $3.2 billion.

First Data Corp. (NYSE: FDC) has agreed to acquire FundsXpress, an Austin, Texas-based provider of online banking and bill payment services for consumers and small businesses. No financial terms were disclosed. FundsXpress was advised by Lane Berry & Co., and has raised $80 million in total VC funding from firms like Warburg Pincus, Beacon Partners, Cendant Corp. and Texas Growth Fund. KKR recently agreed to acquire First Data for $29 billion.

Chockstone Inc. has acquired Peppercoin Inc., a Waltham, Mass.-based provider of card-based merchant loyalty programs and related consulting and analytical services. No financial terms were disclosed. Peppercoin had raised over $24 million in VC funding since 2002, from firms like MIT, POD Holdings, Total Technology Ventures, Pangaea Ventures and Allianz Private Equity Partners.

Firms & Funds

CITIC Capital Partners has closed its first China-focused private equity fund with $425 million, according to PrivateEquityOnline.

General Electric is launching a $250 million equity fund to invest in digital media companies that could be of strategic value, according to Reuters. Its first portfolio company is Adify.

Human Resources

Eric Karp is stepping down as head of Bank of America’s financial sponsors group, as first reported by The Deal. No word yet on his future plans.

Jim Adox has joined Venture Investors as a managing director. He also will help the Madison, Wis.-based firm open a new office in Ann Arbor, Michigan. Adox previously led RidgeLine Ventures, where he co-founded university spinouts and advised early-stage companies. Before that, he was a partner with EDF Ventures.

Granite Global Ventures has added two new partners. The first is Menlo Park-based JC Huang, who previously served as a managing partner with telecom consultancy RTC Partners. The other is Shanghai-based Helen Wong, who is being promoted from the position of principal.

Lorraine Hliboki has joined Pomona Capital as a partner and director of co-investments. She will be based in New York. Hliboki has spent the past 15 years with General Electric, most recently as a senior managing director for GE Equity.

Polaris Venture Partners has promoted Amir Nashant to general partner. He joined the firm’s Waltham, Mass. office in 2002 as a principal, and focuses on healthcare opportunities.