PE Week Wire: Tues., Aug. 21, 2007

“What are these regulatory filings you often cite? I’ve searched in Edgar, but can’t find them.”

I get that question at least a few times per week, particularly when said filings have led to news of an unannounced venture capital deal or private equity fundraising effort. The answer is that the filings are Form Ds – which are filled out by companies that use a Regulation D exemption from registering their securities with the SEC. These filings are only required after an initial sale, and are used by the SEC for two primary purposes: (a) Collection of data for use in rulemaking efforts; and (b) Enforcement of federal securities laws, including Regulation D.

For a variety of reasons, Form Ds are prepared and submitted in paper form. The SEC then dumps them into cardboard boxes in its Washington DC reference room, for anyone masochistic enough to sort through them. Lucky for Wire readers, masochism is a job requirement at Thomson Financial – so the company has someone who scans every last Form D into its Thomson Research database. Actually, they first go into a server and then put into queue for the database, but I have access to the server. Good for me and good for you, dear reader.

So why am I bringing all of this up today. Because the SEC is proposing a rules change that would, among other things, require that Form Ds be filed electronically. Such a change would mean that everyone could access Form Ds via a searchable, Internet-based SEC system (like Edgar, but probably not Edgar). The SEC suggests that the change would reduce filing fees, promote transparency, promote federal/state regulatory coordination and improve data collection.

I would really like to make an argument against this proposal, but everything I come up with reeks of self-interest. It’s certainly true that certain stealth companies would prefer that their funding rounds remain difficult to uncover — and some VCs and VC attorneys have devised clever ways to disguise what a filer actually does (via bogus names or business descriptions) – but that shouldn’t be the SEC’s problem. If such public disclosure is required, then why should only a limited number of people have access? (That question is only partially rhetorical – as a compelling argument could really help me out.)

I’ve posted the proposed rules change here. You can send comments to the SEC at

Top Three

Metacafe Inc., a Palo Alto, Calif.-based video sharing website, has raised $30 million in second-round funding. Highland Capital Partners and DAG Ventures co-led the deal, and were joined by return backers Accel Partners and Benchmark Capital. Metacafe raised a $15 million first round last summer.

The Blackstone Group has agreed to acquire 50.1% of Gokaldas Exports Ltd., a listed Indian largest garment exporter. Blackstone also will offer to buy an additional 20% from public shareholders, for a total transactional value of around $165 million.

Charlesbank Capital Partners has sponsored a recapitalization of The Horn Companies, a provider of specialized maintenance and installation services for the power and refinery markets. No pricing details were disclosed. Term financing was provided by GSO Capital Partners and funds managed by Oak Hill Advisors, with Wells Fargo providing the revolver. Company management also participated.

VC Deals

Building B, a Belmont, Calif.-based digital media company, has raised $17.5 million in first-round funding. Backers include Index Ventures, Omni Capital, Morgenthaler Ventures and individual angels. Building B is developing a turnkey home video entertainment solution that integrates traditional television content in HDTV with on-demand premium content and Internet video — delivered to the living room television without the need for a PC.

Diligent Technologies Corp., a Framingham, Mass.-based provider of enterprise-class de-duplication and data protection solutions, has raised $10.5 million in Series D funding. Eastward Capital was joined by return backers Matrix Partners, Accel Partners and Gemini Israel Funds. Diligent has now raised $46.5 million in total VC funding since 2002.

Exabre, a UK-based provider of online music recommendation service The Filter, has raised $5 million in VC funding. Backers include Eden Ventures and musician Peter Gabriel.

AlarmPoint Systems, a Pleasanton, Calif.-based provider of IT event notification and resolution solutions, has raised $4.5 million in Series C funding led by JMI Equity. It also secured $3 million in term financing from Bridge Bank.

Google Inc. said that it has taken a stake in Chinese community Web site, but did not disclose the size. Google also announced the launch of two new Tianya services. The first, Tianya Laiba, is an online community in which people can connect with friends and share content, and the second is Tianya Wenda, a question-and-answer service using the technology behind the now-defunct Google Answers.

Buyout Deals

ACON Investments has completed its purchase of specialty retailer Spencer Gifts Holdings Inc. from GB Merchant Partners. Leveraged financing was led by CIT and by Laminar Direct Capital. No pricing terms were disclosed. ACON was advised by Fianco, while BG Merchant Partners was advised by Thomas Weisel Partners.

Alta Communications has acquired HMP Communications, a Malvern, Penn.–based provider of information and education services for healthcare professionals, from BG Media Investors. No financial terms were disclosed. Alta partnered on the deal with B2B media veterans Paul Mackler and Ken Fisher, who will serve as president/CEO and CFO/CTO, respectively. Mackler previously was CEO of Cygnus Business Media, while Fisher served as Cygnus’ CFO. Berkery, Noyes & Co. represented the seller.

Altor has acquired NorthStar Battery Company LLC, a Springfield, Mo.–based maker of lead-acid batteries and standby power systems for a variety of industrial applications. No financial terms were disclosed. Goldsmith-Agio-Helms advised NorthStar on the deal.

Chrysalis Capital Partners has acquired substantially all of the assets of The Holliston Mills Inc., a bankrupt Church Hill, Tenn.-based maker of coated cloth materials for book covers, other bound materials, security documents, specialty packaging and other industrial products. The deal was valued at around $11.7 million. National City Business Credit provided credit facilities for the transaction, while Palomino Capital served as financial advisor to the seller.

High Street Capital has acquired Mac & Massey LLC, an Ocala, Fla.-based broker and distributor of ingredients to manufacturers of food products. The deal was supported by $7.5 million in financing from Patriot Capital Funding — $7.25 million in subordinated notes and a $250k equity contribution – while Mac & Massey management also participated. No total transactional price was disclosed.

Industri Kapital has bought a majority stake in Germany’s Schenck Process from HgCapital for an undisclosed sum. Schenck has annual revenue of around €350 million, and specializes in industrial weighing, feeding, screening and automation equipment and solutions. HgCapital bought the business from German automotive technology group Durr in 2005.

J.F. Lehman & Co. has completed its $140 million acquisition of the Inertial Products business of BAE Systems (Nasdaq: BEAS). Inertial Products supplies military and commercial customers with inertial sensors and measurement units for the control, navigation and guidance of aircraft, precision weapon systems, missiles, unmanned aerial vehicles, aerial targets and drones, tanks and fighting vehicles. The sale also included BAE Systems’ share of Silicon Sensing Systems, a joint venture between BAE and Sumitomo Precision Products.

Macquarie Infrastructure Company has acquired a majority equity interest in Mercury Air Centers Inc. from Allied Capital for an enterprise value of $452 million. Mercury is a Cleveland–based provider of refueling services to non-commercial airlines.

Sentinel Capital Partners has acquired Inscape Publishing, a Minneapolis-based provider of technology-enabled corporate training solutions, from The Riverside Company. No pricing terms were disclosed. Debt financing was provided by NewStar Financial, Madison Capital Funding and New Canaan Funding. Edgeview Partners served as financial advisor to Inscape Publishing.

Smith & Wollensky (Nasdaq: SWRG) shareholders have approved an $11 per share buyout offer from Bunker Hill Capital. The total deal is valued at around $94.6 million.

Asia Water Technology Ltd., a listed Singapore-based provider of water purification and wastewater treatment, has raised $60 million in private mezzanine financing managed by CLSA Capital Partners. The deal is structured as a combination of senior secured bonds with detachable warrants and junior secured convertible bonds.

PE-Backed IPOs

BioForm Medical Inc., a San Mateo, Calif.-based developer of an injectable dermal filler for aesthetic improvement, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol BFRM, with JPMorgan and Piper Jaffray serving as co-lead underwriters. The company has raised nearly $65 million in total VC funding since 2000, from firms like Essex Woodlands Health Ventures (20.5% pre-IPO stake), PTV Sciences (18.3%), Vivo Ventures (15.4%), Veron International Ltd. (9.6%) and Teknoinvest (9.1%).

Firms & Funds

IEV Capital has formed a $1.83 billion energy fund – structured as a special purpose facility – that will target energy savings, renewable or alternative energy and oil drilling.

Human Resources

Jeff Perez and Jeff Stark have joined Third Security LLC as managing directors. Perez will evaluate the intellectual property portfolios of potential portfolio companies, and previously was with law firm Hunton & Williams LLP. Stark will help Third Security portfolio companies leverage opportunities in developing markets, and previously was with Tyco Telecom for Europe, the Middle East and Africa.

Josh Goldman has joined Norwest Venture Partners as a venture partner, with a focus on consumer-facing Internet products. He previously was CEO of Akimbo Systems Inc. and, before that, was an entrepreneur-in-residence with Sprout Group.

Adam Graev has joined RREEF Private Equity, the alternative investments business of Deutsche Bank. He previously was a vice president with Pomona Capital.

Mark Wojciechowski and Andrew Mattei have joined law firm Allen & Overy as partners in the firm’s leveraged finance practice. Both will be based in New York, and previously were with Mayer, Brown, Rowe & Maw LLP.

Eric Sodberg reportedly has resigned as managing director of Citigroup Venture Capital International, where he was responsible for activities in Japan. His new job is with a hedge fund.