PE Week Wire: Tues., Sept. 4, 2007

The Tuesday after Labor Day is a lot like the day after you get married or the day after you turn a new decade (30, 40, etc.). Everyone keeps asking “how it feels” – but the only real change since last Friday is that you have one less thing to look forward to (three-day weekend, wedding, birthday presents, etc.). Real change comes more gradually, and can only be appreciated in distant retrospect. So while we wait to see what the stretch run brings, a few quick notes:

*** Sometimes you can learn something from a regulatory filing, besides just how much money a company raised. Case in point is a recent Form D from Rocketon Inc., a San Francisco-based MMO gaming startup, which has called down $500,000 of an $800,000 Series A commitments.

The rub here is that the investor is something called Bertram Ventures, with Jeff Drazen listed as the board member. Drazen is a former Sierra Ventures partner who runs a private equity firm named Bertram Capital, but its $350 million fund is focused on middle-market buyouts and growth equity transactions – not seed-stage venture capital. So I called Drazen to clear up the confusion.

Drazen says that Bertram Ventures is an independent angel fund, which he co-manages with former PayPal and Intuit CEO Bill Harris. Other portfolio companies include LoadStar Sensors and FatDoor. Bertram Ventures is currently independent, but Drazen says that it could soon become an institutional part of the Bertram Capital platform. Maybe something like a $50 million fund that would begin raising late this year. Also, expect another Bertram Capital buyout/growth equity fund to be raised next year.

*** A very interesting M&A battle could soon heat up on the North Side of Chicago. Various news reports say that if/when Sam Zell finishes buying Tribune Co., he will put the Cubbies up for sale. Two of the expected bidders are Madison Dearborn chief John Canning and Dallas Mavericks owner Mark Cuban. A contrast in styles, to say the least…

*** Speaking of baseball, it seems that HRJ Capital managing partner Harris Barton was in the stands for both Hank Aaron’s 715th homerun in 1974 and Barry Bonds’ 756th homerun last month. What are the odds?

*** Next Wednesday I’ll be speaking to an MIT Sloan class about how biz people interact with biz press. We’ll certainly discuss oldies like VSP Capital, newbies like Nixon Peabody and General Atlantic’s 5:20pm press release from last Friday.

*** Andy Cowherd joins the Vox Populi at peHUB, by wondering if my strategic M&A boomlet theory from last week will apply to healthcare. For those who don’t know him, Andy is the head of healthcare for I-bank Peter J. Solomon & Co.

Top Three

SolFocus Inc., a Palo Alto, Calif.–based developer of solar concentrator photovoltaic systems, has raised $52 million in new VC funding. This includes $27.4 million for a new European subsidiary (SolFocus Europe), and $24.6 million in Series B funding for the U.S. parent company. Return backer New Enterprise Associates led the deal, and was joined by Moser Baer India, Metasystem Group, NGEN Partners and Yellowstone Capital. SolFocus announced in July 2006 that it had secured $25 million of a Series A round that was expected to be capped at $32 million. That deal is separate from the new infusion.

J.C. Flowers has added its name to the list of potential bidders for ailing German state-controlled bank WestLB, according to The Times of London. German regional banks Landesbank Baden-Wuerttemberg and BayernLB are also in the running. In August, WestLB announced first-half results with losses of more than €600 million in proprietary trading due to bad bets on the spread between preferred and ordinary shares in some German companies. The bank last month also agreed to sell its shareholding in HSH Nordbank to institutional investors advised by JC Flowers.

IPC The Hospitalist Company Inc., a North Hollywood, Calif.-based network of hospitalist physicians, has filed for a $105 million IPO. It plans to trade on the NYSE under ticker symbol IPCM, with Credit Suisse and Jefferies & Co. serving as co-lead underwriters. Shareholders include Bank of America Ventures (30.92% pre-IPO stake), Morgenthaler Ventures (25.13%), Bessemer Venture Partners (17.36%) and CB Health Ventures (14.8%).

VC Deals

Spatial Photonics Inc., a Sunnyvale, Calif.-based microdisplay maker, has raised around $26 million in Series B funding, according to a regulatory filing. Khosla Ventures was joined by return backers Intel Capital and Kleiner Perkins Caufield & Byers. DAG Ventures also seems to have participated, given the addition of DAG’s John Cadeddu to the Spatial Photonics board of directors.

Kovio Inc., a Sunnyvale, Calif.-based developer of semiconductor products using thin-film technologies,, has held a $19.5 million first close on its Series D round. Pinnacle Ventures led the deal, and was joined by return backers Bessemer Venture Partners, DAG Ventures, DEA Capital, Flagship Ventures, Harris & Harris Group, Jerusalem Venture Partners, Kleiner Perkins Caufield & Byers, NCD Investors and Yasuda Enterprise Development. Kovio previously had raised around $34 million since 2001. Inc., a Santa Monica, Calif.-based provider of online auto sales, has raised $13.5 million in fourth-round funding, according to VentureWire. Capricorn Management led the deal, and was joined by return backers Anthem Venture Partners, Arcturus Capital, Capital One Financial Corp. and GRP Partners. The round is technically considered a Series B, with past rounds all converted to Series A stock. Zag has raised $47 million in total VC funding, plus $21 million in venture debt.

Media Machines Inc. has raised around $9.4 million in Series A funding led by Mohr, Davidow Ventures, according to a regulatory filing. The San Francisco-based company makes tools for 3D virtual world-making and content creation.

Solarcentury Holdings Ltd., a London-based supplier of solar energy systems, has raised £13.5 million in new VC funding. Zouk Ventures led the deal, and was joined by Vantania Holdings, Foursome Investments and return backers VantagePoint Venture Partners and Scottish and Southern Energy.

Whole Body Inc., a national chain of yoga and fitness studios, has raised $13 million in Series B funding, according to a regulatory filing. Highland Capital Partners led the deal, with Dan Nova and Corey Mulloy taking board seats. Whole Body was founded by Rob Wrubel, an entrepreneur-in-residence with Highland between June 2001 and July 2002.

Black Sand Technologies Inc., an Austin, Texas-based developer of mixed-signal semiconductors, has raised $8.19 million in first-round funding. Backers include Austin Ventures and North Bridge Venture Partners. The round closed in July.

ClearEdge Power, a Hillsboro, Ore.-based fuel cell develops, has secured around $6.47 million of a $19.47 million Series C round, according to a regulatory filing. The only listed backer is existing shareholder Applied Ventures.

Spectrum K12 School Solutions Inc., a Towson, Md.-based provider of special education and IEP management software, has raised $5.7 million in Series B-1 funding, according to a regulatory filing. Backers include Novak Biddle Venture Partners and Updata Partners. Past backer Warburg Pincus is not listed on the filing, but lists Spectrum K12 as a portfolio company on its website.

Sierra Nevada Solar Inc., a Sacramento, Calif.-based solar energy startup, has raised $4.5 million in Series A funding, according to a regulatory filing. No investor information was disclosed.

ReShape Medical Inc., a Lake Forest, Calif.-based developer of a medical device to help treat obesity, has raised $3 million in follow-on Series A funding, according to a regulatory filing. Return backers include New Leaf Venture Partners and SV Life Sciences. The company previously was known as Abdominis Inc., and has now raised a total of around $8 million.

RollStream Inc., a Fairfax, Md.-based provider of business community management software, has secured $1.5 million of a $2 million Series A-1 round led by Grotech Capital Group, according to a regulatory filing.

SevOne Inc., a Newark, Del.–based provider of and network performance management software, has raised $1.5 million in Series A funding from Osage Ventures.

Molecular Vision Ltd., a UK-based handheld diagnostic device company, has raised £500,000 from Imperial Innovations Group PLC.

Buyout Deals

Accredited Home Lenders Holding Co. (Nasdaq: LEND) has rejected a reduced buyout offer from Lone Star Funds, and will instead pursue litigation against the private equity firm. Lone Star had originally offered $15.10 per share, but cut the offer to $8.50 per share following changes to the mortgage credit market. The revised offer still represented a 36% premium, but Accredited will argue in court that Lone Star must honor the original $15.10 price.

BC Partners has not approached listed Dutch chemical company Univar NV about a potential buyout, according to comments made today at the Univar’s shareholder meeting. A Dutch news agency had reported on such an approach several weeks ago.

Blue Point Capital Partners has recapitalized Dispatch Transportation Inc., a Fontana, Calif.-based transportation and logistics company for the construction and aggregate industries in Southern California. Blue Point and Dispatch management provided equity, while Comerica Bank provided leveraged financing. No terms were disclosed. RSM EquiCo Capital Markets advised Dispatch on the deal.

Southern Water last Thursday received several buyout bids expected to be in the range of £4 billion, according to The Sunday Telegraph. One group includes Goldman Sachs, General Electric, Babcock & Brown and RREEF. Another is led by Morgan Stanley’s infrastructure fund, while both Merrill Lynch and JP Morgan also are reported to have submitted bids. Deutsche Bank is running the process for Southern Water, which provides water to more than one million homes in southeastern England. It was acquired for £2 billion in 2003 by RBS and Veolia, but Veolia sold its stake to RBS last year.

TPG reportedly is in talks to acquire a 60% stake in Russian supermarket and clothes retailer Sedmoi Kontinent (Seventh Continent), from its billionaire owners Vladimir Gruzdev and Alexander Zanadvorov. The deal could be worth around $700 million.

Tricor Pacific Capital has acquired CPI Card Group, a Littleton, Colo.–based manufacturer of financial payment cards and other laminated card products and services. No pricing terms were disclosed for the deal, which was done in partnership with company management.. Jefferies Finance provided senior notes, while McKenna Gale Capital provided subordinated notes. Houlihan Lokey advised CPI Cards Group on the deal, which closed in June.

PE-Backed IPOs

Anacor Pharmaceuticals Inc., a Palo Alto, Calif.-based developer of topical therapeuticals, has filed for a $57.5 million IPO. It plans to trade on the Nasdaq under ticker symbol ANAC, with Morgan Stanley and Cowen & Co. serving as co-lead underwriters.VC backersinclude Rho Ventures, Venrock,Red Abbey Venture Partners and Aberdare Ventures.

Merrion Pharmaceuticals Ltd., a Dublin, Ireland-based developer of oral-dosage forms of drugs with poor bioavailability, has set its IPO terms to four million American depository shares being offered at between$10 and $12 per share. It plans to trade on both the Nasdaq and IEX under ticker symbol MERR. Punk, Ziegel & Co. is serving as lead underwriter. Shareholders include Growcorp Ltd. and Elan Corp.

PE Exits

CNET Networks Inc. (Nasdaq: CNET) has acquired TechTracker Inc. for an undisclosed amount. TechTracker is a Portland, Ore.-based publisher of VersionTracker, a service that provides continual updates for more than 100,000 software products. It also operates the troubleshooting website. TechTracker had raised over $6.6 million in VC funding since 1999, from firms like SmartForest Ventures, INT Media Group and

MBK Partners has agreed to sell its majority stake in South Korean leasing company Hanmi Capital to Woori Financial Group for approximately $289 million, according to The Financial Times.

Sentinel Capital Partners has agreed to sell MetroCare Dental to American Dental Partners Inc. (Nasdaq: ADPI) for $85 million in cash. The deal is expected to close later this quarter. MetroCare Dental is a multi-specialty dental group with 34 dental facilities in the Minneapolis-St.Paul area.

PE-Backed M&A

Canon Communications LLC of Los Angeles has acquired Engel Publishing Partners from Euromoney Institutional Investor PLC. No financial terms were disclosed. Engel is a B2B media company focused on the pharmaceutical market. Canon is controlled by Spectrum Equity Investors.

Firms & Funds

Advent International has opened an office in Kiev, Russia. It will be run by Tamas Nagy, an existing Advent principal who previously worked in Budapest. Natalie Polischuk also is joining the office as a principal, after previously having been a partner with Delta Private Equity Partners in Moscow.

GrowthWorks Manitoba has agreed to acquire the manager of ENSIS Growth Fund, a VC and private equity fund focused on Manitoba-based companies. No financial terms were disclosed.

Moelis & Co. has closed its debut fund with $1.8 billion in capital commitments, according to LBO Wire. The Los Angeles-based merchant bank firm was launched earlier this year by former UBS I-banking chief Ken Moelis, and will mostly participate in private equity club deals – in order to avoid M&A client conflicts that could arise if it were to lead deals.

Human Resources

Daniel Leff is leaving Harris & Harris Group at the end of this month. He had been a managing director and executive vice president. No word yet on his future plans.

Hank Plain has joined Morgenthaler Ventures as a partner. He will continue to serve as vice chairman of medical device incubator The Foundry. Plain was CEO of Perclose Inc. from 1993 to 2000, during which time the company went public and then sold to Abbott Labs for $650 million.

Joseph DeAngelo last Thursday resigned as chief operating officer of Home Depot (NYSE: HD). The move came as Home Depot closed the $8.5 billion sale of its HD Supply unit to three private equity firms, and DeAngelo is expected to work with the newly-independent company.

Stefan Hollander and Caroline Rosenstand Moller have joined Danish private equity firm Axcel as associates. Hollander previously was a consultant with Booz Allen Hamilton, while Moller had been a consultant with A.T. Kearney.