PE Week Wire: Tues., Jan. 8, 2008

Hedge fund Jana Partners yesterday disclosed a plan to wrest board control of CNet Networks Inc., an online information provider known for its vast audience and anemic revenue growth. This space doesn’t typically care about such things, but did take notice because venture capital firm Spark Capital was also cited as a participant. Most reports mentioned Spark in a secondary capacity, and I initially assumed that it was being brought along for its digital media expertise. After all, why would an early-stage VC firm lead what could well become a public proxy fight?

But my assumption was wrong: Spark is actually the lead, with Jana being the strategic tag-along.

To uncover the deal’s genesis, you need to go back around 18 months. Spark was less than two-years old, and was hoping to recruit veteran Internet executive Paul Gardi. Probably as a venture partner or entrepreneur-in-residence. But Gardi had different priorities: He wanted to lead a buyout of CNet, which he felt could achieve amazing growth under different leadership. Gardi said thanks but no thanks to Spark, and successfully lined up some acquisition partners.

CNet, however, had no interest in being acquired. It did not respond to Gardi’s repeated inquiries, and his sponsors weren’t game for a hostile bid.

Throughout Gardi’s travails, Spark Capital’s Santo Politi stayed in close contact. It was basically on-again/off-again recruitment, with most of the conversations revolved around Gardi’s CNet obsession. Politi told him to give up the ghost, but was slowly becoming more intrigued by the ROI possibilities that CNet presented. Politi began helping Gardi out on the side, and kept seeing what he believed to be fixable inefficiencies. Not cost cutting, per se, but more a lack of certain best practices and some woeful infrastructure. It was a Web 1.0 company in a Web 2.0 market.

Politi pushed to get Spark involved, but also realized that his venture firm had no idea how to buy up shares in a public company. It also didn’t have enough money. It was at this point that Spark and Gardi teamed up with Jana Partners and a few others — with the group quickly acquiring a 21% stake in CNet. The plan is to gain a majority of CNet board seats, by expanding the board and installing a slate of directors that includes Gardi, Politi, former AOL CEO Jon Miller and former Overture executive Jaynie Studenmund.

CNet has responded by calling the effort “improper,” in part because of company rules designed to preclude short-term investors from gaining board control. The battle will likely be resolved in Spark/Jana’s favor by a Delaware court, although the tandem will still need to secure significant shareholder support at CNet’s upcoming annual meeting (again, assuming it’s not legally enjoined from presenting its case).

Politi says that Spark and Jana had approached CNet prior to this less-friendly strategy, but had been rebuffed. He also says that the two firms may be short-term investors in terms of how long they’ve held stock so far, but that they both intend to be in CNet for at least the next two to three years. “One reason we partnered with Jana is that we are both committed to creating long-term value,” Politi explains. “We are not planning to generate some value over the next 60 days and then get out… We expect to be successful [in the legal matter], and are hoping that this won’t go to a proxy fight.” He adds that there “is no Plan B,” if the Delaware court rules in CNet’s favor.

One final note: Spark is viewing this deal purely on its own merits, and not as a strategic play for the improvement of its other portfolio companies. As Politi says: “If we had just wanted to get on a public board, we could have done it a lot easier than this.”

*** Last summer, we reported on BCE Capital spinning out into an independent firm known as Summerhill Venture Partners. Later today, it will announce that it has closed its debut fund with $175 million in capital commitments, from LPs like Bell Canada, Paul Capital, Permal Capital Management, Montagu Newhall, Credit Suisse Strategic Partners and Nortel.

*** Quiz Time: The big Bear Stearns news today is that Jimmy Cayne is stepping down as CEO. Can you name another recent departure from Bear Stearns, which has far more relevance for this publication?

*** Online employment site JobFox has raised $20 million in new VC funding. peHUB has the scoop.

*** Finally, tickets for our peHUB Shindig in Philadelphia sold out in less than a day. Wow. I’m going to speak with the venue about securing additional space, and will let you know if that’s possible. If you are interested in attending but did not get a ticket, please let me know via email. Looking to get a better understanding of how much more space we’d need.

Top Three

Apollo Management has completed its $1 billion equity investment in the parent company of Norwegian Cruise Line, in exchange for a 50% ownership stake. The investment was in the form of common stock alongside NCL’s sole shareholder, Star Cruises.

EnerTech Environmental Inc., an Atlanta-based developer of renewable energy facilities that use biosolids and other high-moisture wastes (SlurryCarb), has raised $42 million in second-round funding. Citi Sustainable Development Investments and Masdar Clean Tech Fund co-led the deal, and were joined by Nimes Capital and CNM Inc. It previously raised a first round from Paperboy Ventures.

Deutsche Bank and JPMorgan have each taken minority positions in BATS Trading Inc., a Kansas City-based electronic exchange. No financial terms were disclosed for the deals, which were done separately. BATS last year raised $45 million in second-round funding from Citigroup, after having originally launched in 2005 with around $40 million from Credit Suisse, Getco, Lehman Brothers, Lime Brokerage, Merrill Lynch, Morgan Stanley and Wedbush.

VC Deals

iVerify US Inc., a Charlotte, N.C.-based interactive video monitoring company, has raised $21 million in private funding from RBC Century Bank and a “private equity sponsor.” The company also announced the $8.5 million cash acquisition of Smart Interactive Systems Inc., the video monitoring business of Magal Security Systems (Nasdaq: MAGS).

Benvenue Medical Inc., a Mountain View, Calif.-based developer of minimally-invasive solutions for spine repair, has raised $15 million in Series B funding. Three Arch Partners led the round, and was joined by return backers Versant Ventures and De Novo Ventures.

Cellectar Inc., a Madison, Wisc.-based maker of radiopharmaceuticals for oncology, has raised $13 million in private funding. Venture Investors LLC led the round, and was joined by Advantage Capital, Wisconsin angel groups and an undisclosed “large private equity firm.”

Iclinix Inc., a Wilmington, N.C.-based enrollment contract research organization and provider of clinical trial recruitment solutions, has raised $10 million in expansion funding from Frontier Capital.

SoonR, a Campbell, Calif.-based provider of computer file availability and continuity solutions, has raised $9.5 million in Series B funding. Cisco Systems led the round, and was joined by return backers Intel Capital and Clearstone Venture Partners. The company has now raised $15.5 million in total funding since launching two years ago.

CyberHeart Inc., a Menlo Park, Calif.-based developer of a non-invasive system to treat cardiac arrhythmias, has raised $9 million in Series A funding. Emergent Medical Ventures and United Investments (Taiwan) co-led the round, and were joined by Venture Select GmbH and Mitsubishi Corporation.

Movea SA, a Grenoble, France-based developer of motion sensing technologies, has raised €7.3 million in first-round funding. I-Source Gestion and GIMV co-led the deal, and were joined by a subsidiary of Thomson SA. In other Movea news, the company has acquired the assets of Gyration Inc., a provider of technology that senses human motion to interface with digital media content. Thomson was the seller. No financial terms were disclosed.

STEP Labs, a San Jose, Calif.-based provider of voice separation technology and acoustic design services, has raised $6.5 million in Series B funding. Gabriel Venture Partners led the round, and was joined by Individuals’ Venture Fund, Garage Technology Ventures, Garage Canada and individual angels.

Novus Communication Technologies Inc., a New York-based provider of digital advertising solutions like electronic billboards, has raised $5 million in second-round funding. Backers included Allen & Co. and outdoor advertising executive Karl Eller.

Epocrates Inc., a San Mateo, Calif.–based provider of clinical solutions for healthcare professionals, has raised an undisclosed amount of funding from Goldman Sachs.

Memeo Inc., an Aliso Viejo, Calif.-based provider of digital life management solutions for the consumer and small business markets, has raised an undisclosed amount of Series B funding led by the Foundry Group. Ryan McIntyre, a co-founding managing director of Foundry Group, will join the Memeo board of directors.

Buyout Deals

The Audax Group has acquired a controlling interest in Reed Group Ltd., a Westminster, Colo.-based provider of outsourced absence and clinical case management services that assist in the reduction of disability and absence costs for employers. No financial terms were disclosed for the deal, which included participation by company management. Allied Capital provided one-stop financing, while Houlihan Lokey advised Reed Group on the sale.

Cognetas has agreed to acquire Gebrüder Gienanth-Eisenberg GmbH, an Eisenberg, Germany-based maker of engine blocks and compacted graphite iron products for use in clutch and transmission systems in the automotive industry. The seller is family holding company Fink Holdings, and the deal is expected to close early this year, pending regulatory approval. No financial terms were disclosed.

Key Bridge Partners has acquired Magic Wand Inc. No financial terms were disclosed. Magic Wand is a Bristol, Va.-based seller of professional carwash equipment, like spraying systems, vacuums and carwash bays.

KRG Capital Partners has acquired Tri-County Petroleum Inc., a Riddlesburg, Penn.–based specialty distributor of industrial and commercial lubricants. No financial terms were disclosed. KRG will bridge the entire transaction with its fund capital, and will complete the leveraged financing post-close.

Vector Capital has completed its acquisition of Printronix Inc. (Nasdaq: PTNX), an Irvine, Calif.-based manufacturer of integrated enterprise printing solutions for the supply chain. The total deal was valued at $109 million, with Printronix stockholders receiving $16 per share. Printronix CEO Robert Kleist and other members of senior management hold a 9.9% ownership position, post-transaction. Printronix was advised by Houlihan Lokey Howard & Zukin Capital.

PE Exits

AthenaHealth Inc. (Nasdaq: ATHN), a Watertown, Mass.-based provider of online business services for physician practices, has filed for a secondary public offering of around 3.11 million common shares. Selling shareholders include Oak Investment Partners (1.1m shares) and Cardinal Partners (473k). Both firms would retain ownership stakes following the sale. Fellow venture backers Venrock and DFJ are not planning to sell shares via this offering.

Electronic Arts Inc. (Nasdaq: ERTS) has completed its acquisition of gaming companies BioWare Corp. and Pandemic Studios from Elevation Partners. Elevation acquired BioWare and Pandemic in 2005 for “more than $300 million,” and put them under a holding company umbrella called VG Holding Corp. EA chief executive John Riccitiello had recused himself from negotiating terms of the deal, as he is a former partner with Elevation.

PE-Backed M&A

BPL Global Ltd., a Pittsburgh–based smart grid technology company, has acquired Serveron Corp., a Hillsboro, Ore.-based provider of technology and services to monitor electric utility assets. No financial terms were disclosed. BPL raised a $26 million Series C round last year from firms like Morgan Stanley Private Equity and Novitas Capital. Serveron had raised around $48 million in VC funding since 1999, from firms like Perseus, Siemens Venture Capital, El Dorado Ventures, Nth Power, Cascadia Pacific Management, Oregon Life Sciences and Ventures West. Both Perseus and Siemens will take BPL board seats, as part of the sale agreement.

Healthcare Brands International, a UK-based provider of OTC medicines, has acquired Antula Holdings AB, a Scandinavian OTC healthcare business, and its subsidiaries. No financial terms were disclosed. HBI financed the deal via a new venture infusion co-led by Essex Woodlands Health Ventures and existing shareholders 3i Group and MVM Life Science Partners. Other return backers included Goldman Sachs, Sofinnova Partners and Abingworth Management.

Firms & Funds

MedImmune, the biologics unit of AstraZeneca, announced that its venture capital group will broaden its focus to include the therapeutic areas of cardiovascular disease, metabolic disease, pain, CNS disorders and gastrointestinal disease. The group had previously been focused only on infectious disease, oncology and inflammatory disease. Since its inception in 2002, MedImmune Ventures has invested in 22 companies.

Stony Lane Partners is targeting $750 million for its debut fund, according to LBO Wire. UBS is serving as placement agent. The firm was formed by Heico Acquisitions CEO Michael Heisley, and plans to make control deals for middle-market industrial companies in need of turnarounds.

VantagePoint Venture Partners is raising up to $400 million for its second cleantech fund, according to a regulatory filing. The firm’s cleantech group is co-led by Alan Salzman and Stephan Dolezalek.

Human Resources

FBR Capital Markets has named Phil Facchina as group head of financial sponsors. It also completed the group’s senior staffing, by naming Michael Cerretani as senior managing director, Michael McClintock as managing director and Adam Butterworth and Paul Woo as vice presidents.

John Bernstein has joined General Atlantic as a managing director in its London office. He has spent the past 11 years with Advent International, and most recently was a partner in charge of its European telecom and tech practice.

Laurel Bowden has joined Greylock Partners Israel as a partner. He previously was with JVP and, before that, was a director with GE Capital.

Chi-Hua Chien has joined Kleiner Perkins Caufield & Byers as a partner. He previously was an associate with Accel Partners. News of the move was first reported by VentureBeat.

Dr. Hamish Cameron has joined SV Life Sciences as a venture partner. He previously was CEO of Cambridge Antibody Technology, following its 2006 acquisition by Astra Zeneca.

Adam Maidment and Cameron Crockett have joined mid-market private equity firm Greenhill Capital Partners Europe as principals. They both join from PPM Capital, where they had worked together since 2002. GCP Europe is an affiliate of Greenhill & Co., an recently closed its debut fund with £191 million.

Nixon Peabody LLP has named Richard Langan Jr. as CEO and managing partner. The move becomes effective on May 1, at which point current CEO and managing partner Harry Trueheart III will become non-executive chairman. Langan joined Nixon Peabody in 1980, and most recently served as chair of its business and financial services department.

Brad Barton has joined NGP Energy Technology Partners as a principal. He previously served as the Director of Commercialization & Deployment for the Department of Energy’s Office of Energy Efficiency and Renewable Energy.

Littlejohn & Co. has promoted Steven Raich to managing director. He joined the firm in 2000 from Golub Capital, and was named a principal in 2006.

Wellspring Capital Management has promoted Alexander Carles and Joshua Cascade to partner. Carles joined Wellspring seven years ago from Whitney & Co., while Cascade joined in 2002 from Odyssey Investments.