PE Week Wire: Tuesday, December 16, 2008

*** Answer Key: Earlier this month, I asked you to name the private equity fund within a fund (not a “fund-of-funds”) that had been terminated, with its portfolio to be managed by a separate private equity firm. Your hint was that this situation had old Wall Street all over it.

The answer is Bear Growth Capital Partners, a mid-market group launched by Bear Stearns in 2003 to invest in companies valued at between $10 and $100 million. The separate private equity firm is CCMP Capital.

Bear Growth Capital was originally part of the Bear Stearns Merchant Banking (BSMB) umbrella, but received all of its fund commitments – a total of $375 million – from its parent company. When Bear Stearns went belly-up earlier this year, BSMB spun out into an independent firm called Irving Place Capital. Bear Growth Capital, on the other hand, remained captive to new owner JPMorgan. The bank late last month essentially hired CCMP to manage the legacy fund, although it’s unclear if new deals can also be done from the unfunded commitments. Also unclear is what role CCMP’s existing relationship with JPMorgan played, since CCMP previously was known as JPMorgan Partners (and Chase Capital Partners, before that).

Neither CCMP nor JPMorgan is commenting, but we have learned that Joe Scharfenberger, a senior managing director with Bear Growth Capital, is now working out of CCMP’s offices and has a CCMP email address. Fellow senior managing director Paul Lattanzio did not make the move, and sources say that most other group members were laid off.

According to the legacy BSMB website, Bear Growth Capital has 14 active portfolio companies. This includes a minority stake in the massive Harrah’s buyout, although it’s unclear how that ever worked into the group’s investment strategy. Other deals include Crestcom International, Amerifit Brands, Capmark Financial Group and Everything But Water. You can get links to the fund portfolios here.

*** TransMedics pulled its IPO registration yesterday, which makes it the third VC-backed IPO to bail so far this week. According to our records, that makes just 27 VC-backed companies left in registration to price on U.S. exchanges. There are 39 buyout-backed companies left. That’s a pretty thin pipeline… I’ll post the spreadsheets at peHUB later this morning.

*** KKR last night announced that it was restructuring its asset management business, by forming a new umbrella for its publicly-traded debt affiliate KKR Financial, its fixed income businesses and all other non-LBO activities (like mezzanine). The new group will be run by William Sonneborn, who previously was president and chief operating officer of The TCW Group.

The firm also said that KKR Financial CEO Saturnino Fanlo and COO David Netjes are both leaving the firm. A source tells me that the moves will not be followed by additional departures of senior KKR professionals, and that they are not part of larger-scale layoffs.

*** The Bernie Madoff scandal does not yet seem to directly touched any private equity pros, at least judging by the initial victim lists. But I’d have to think that there will be at least some indirect touching (I know, sounds kind of dirty). What I mean is that at least some of Madoff’s victims are likely limited partners in private equity funds, and soon may be forced to default on their commitments. Not a big part of this story, but worth mentioning…

*** Please note that you can now automatically change the email address at which you receive PE Week Wire. A link to do so is near the top of the email.

*** Kudos to Flybridge Capital Partners, which today announced a new scholarship program for college students based in Massachusetts. It’s called Stay in MA, and provides financial assistance for students interested in either attending tech/business industry events or joining local tech/ business organizations.

Each scholarship is worth up to $100, and students can apply for up to three scholarships per calendar year. You can get more info – including applications – at

Top Three

Konarka Technologies Inc., a Lowell, Mass.-based developer of flexible solar energy technology called “Power Plastic,” has raised $45 million in strategic funding from Total Gas & Power. The deal is part of a larger R&D partnership agreement, and values Konarka just shy of $225 million. Konarka previously raised around $100 million from firms like 3i Group, Ardesta, Angeleno Group, Chevron Technology Ventures, Draper Fisher Jurvetson, Good Energies, Massachusetts Green Energy Fund, NGEN Partners, New Enterprise Associates, Presidio STX, Siemens Venture Capital and Vanguard Ventures.

Special Devices Inc., a portfolio company of J.F. Lehman & Co., has filed for Chapter 11 bankruptcy protection. The Moorpark, Calif.-based company makes initiators for auto airbags, detonators for mining companies and pyrotechnic devices used by aerospace and defense companies.

William Sonneborn has joined Kohlberg Kravis Roberts & Co., as head of a new asset management division. He previously was president and chief operating officer of The TCW Group, and succeeds Santurino Fanlo and David Netjes, who are both leaving the firm.

VC Deals

Endoscopic Technologies Inc., a San Ramon, Calif.-based provider of cardiac surgery devices, has held an $11.2 million first close of a planned $20 million round of financing. Saints Capital Everest led the round, and was joined by return backers Telegraph Hill Partners and Waveland Venture Partners.

BlueKai, a Seattle-based online intent data exchange, has raised $10.5 million in Series B funding. Battery Ventures led the round, and was joined by return backer Redpoint Ventures.

Laurus Energy, a Houston, Texas-based developer of underground coal gasification projects, has raised $9 million in VC funding from Mohr Davidow Ventures. The round closed back in April, but Larus held the announcement until naming a new CEO — veteran energy executive Rebecca McDonald.

Aravo Solutions Inc., a San Francisco-based provider of supplier management software, has raised $7 million in Series D funding, according to VentureWire. The round was led by a personal investment vehicle of Charles Schwab Sr., and was joined by fellow angels like Stephen Friedman (ex-chairman of Goldman Sachs) and Tony Mayer (ex-CEO of JPMorgan Capital).

Image Metrics, a provider of facial animation solutions for the entertainment industry, has raised $6.5 million in Series B funding led by return backer Saffron Hill Ventures. Image Metrics has offices in both Santa Monica, Calif. and Manchester, England.

Qualtre Inc., an Atlanta-based developer of inertial sensors, has raised $5.05 million in Series A funding led by Matrix Partners, according to a regulatory filing.

Seventh Sense Biosystems Inc., a Cambridge, Mass.-based medical device startup, has raised $4.18 million in Series A funding, according to a regulatory filing. Backers include Flagship Ventures, Polaris Venture Partners and Third Rock Ventures. The company does not have a website.

DotBlu Inc., an online “community dedicated to friendly competitive online gaming,” has raised $2 million in Series A funding, according to a regulatory filing. Backers include Maples Investments and D.E. Shaw. The company is based in San Francisco.

Pendo Systems Inc., a Newark, N.J.-based provider of accounting software for global financial institutions, has raised $1.02 million from Chess Ventures, according to a regulatory filing. The deal includes the conversion of existing convertible notes.

Biopharmacopae Design International Inc., a Quebec City-based developer of plant-derived products for the skin care, cosmeceutical, and nutrition industries, has raised an undisclosed amount of Series A funding from Avrio Ventures., a Brooklyn, N.Y.-based developer of local news/blog websites, has an undisclosed amount of new funding. Return backers include Union Square Ventures, the New York City Investment Fund and Betaworks. It had previously raised around $5.4 million.

Worksoft Inc., a Dallas-based provider of solutions for accelerating deployment of SAP applications, has raised an undisclosed amount of fifth-round funding from return backers Austin Ventures and Crescendo Ventures. The company had previously raised around $25 million.

Buyout Deals

Cadbury said that preparations to sell its Australia Beverages business are moving forward.

Castle Creek Capital has applied for approval to raise its ownership stake in Guaranty Bancorp (Nasdaq:GBNK) from 5% to 19.9 percent.

CVC Asia Pacific has agreed to invest an additional A$335 million ($225 million) into Australia’s PBM Media, as part of a recapitalization plan.

Goode Partners has acquired a minority equity stake in Skullcandy, a Park City, Utah-based maker of stereo headphones and earbuds targeting action sports and core audio consumers. No financial terms were disclosed.

The Orchid Group, a UK-based pub and restaurant group backed by GI Partners, has completed a financial restructuring. The deal provides Orchid’s bankers – HBOS and Deutche Bank – with minority ownership stakes in exchange for relaxing covenants.

Refresco Holding BV, a Dutch fruit juice maker, is being circled by private equity firms like Blackstone Group and Lion Capital, according to LBO Wire. The company’s current owners acquired it in 2006 from 3i Group for €463 million.

Topspin Partners LBO has acquired IDS Sports, an Oviedo, Fla.-based maker of fitness nutritional supplements. No financial terms were disclosed.

PE-Backed IPOs

TransMedics Inc., an Andover, Mass.-based developer of portable life support systems for organ transplants, has withdrawn its registration for an $86.25 million IPO, citing “market conditions.” It had planned to trade on the Nasdaq under ticker symbol TMDX, with Morgan Stanley serving as lead underwriter. The company has raised around $90 million in total VC funding since 2000, including a $25.5 million Series D round earlier this year. Shareholders include 3i Group (24.4% stake), Tudor Investment Corp. (14.7%), Flagship Ventures (14.3%), VantagePoint Venture Partners (10%), Sherbrooke Partners (9.2%), Alta Partners (8.9%), CB Health Ventures ! (7.4%), Posco BioVentures and Sagamore Bioventures.

PE Exits

Magellan Navigation Inc., a portfolio company of Shah Capital Partners, has agreed to sell its consumer products division to MiTAC International Corp. No financial terms are being disclosed for the deal, which is expected to close next month.

Trapeze Networks, a provider of wireless LAN equipment and network management software, has acquired Newbury Networks, a Boston-based provider of WLAN location systems. No financial terms were disclosed. Trapeze was a VC-backed company acquired earlier this year for $133 million by Belden (NYSE: BDC), while Newbury was a portfolio company of Idealab.

PE-Backed M&A

Baarsma Wine Group, a wine distribution business based in The Netherlands, has acquired Rutishauser Weinkellerei of Switzerland with undisclosed backing from its private equity owner AAC Capital Partners.

Kornicis Group, a London-based restaurant group backed by NBGI Private Equity, has acquired the Smollensky’s Bar & Grill brand for an undisclosed amount.

The Olon Group Inc., a platform acquisition company focused on the office furniture and consumer cabinet markets, has acquired Creative Products Inc., a Canadian maker of profile-wrapped components. No financial terms were disclosed. Olon Group is sponsored by Huron Capital Partners.

Firms & Funds

Arboretum Ventures has received a $5 million commitment from its second fund, from the Renaissance Venture Capital Fund, a new venture fund-of-funds focused on the Michigan market. This is Renaissance’s first commitment.

Morgan Keegan & Co. has acquired Burke Capital Group, an Atlanta-based investment bank focused on M&A and private capital advisory services to financial institutions in the Southeastern U.S.

Human Resources

John Kenney has joined TSG Consumer Partners as a partner and managing director. He previously was with AEA Investors as co-head of the firm’s consumer product and retail investment practice.

Victor Caruso has joined Piper Jaffray as a New York-based managing director with the firm’s financial restructuring team. He previously was a managing director with Morgan Joseph & Co.

Advanced Technology Ventures has made three promotions: Tom Rogers to partner, Christian Cortis to principal and Andrew Friendly to principal.

ARCH Venture Partners has promoted Kristina Burow and Paul Thurk to the position of partner. Burow joined the firm’s San Francisco office in 2002, and is a co-founder and director of Sapphire Energy. Thurk joined the firm’s Austin, Texas offi! ce in 2000, and co-founded Innovalight.

Alexander Chaplin has joined private equity placement agent BerchWood Partners as an associate in the firm’s London office. He previously was an analyst with Vision Private Equity Advisers.