Two weeks ago, I compiled a list of the five take-private buyouts least likely to close. It included a few hedgy caveats (ok, a lot of them), but we’re going to conveniently ignore such things this morning, as one of the five has indeed met its maker.
The busted deal is Bain Capital proposed $2.54 billion buyout of 3Com. My concern on this deal was regulatory, and that seems to be what did it in. At issue was Bain’s partner on the deal, China-based Huawei Technology. Certain legislators weren’t keen on the notion of a Chinese company owning 3Com and, in particular a 3Com unit named TippingPoint, which makes security software for the U.S. government. Bain had looked like it would be able to allay those fears last week, when it said that it was willing to make concessions in order to secure regulatory approval. It wasn’t specific, but it’s safe to say that those concessions would have included some sort of pre-buyout sale or independent spin-off of TippingPoint.
But Bain’s multiple mitigation proposals were not enough to win the hearts or minds of those on the Committee on Foreign Investment in the United States (CFIUS), which threatened to block each of them. Bain and 3Com announced this morning that they have withdrawn their application for merger approval with CFIUS, which is much like quitting a job moments before you’re about to get fired.
3Com president Edgar Masri said the following, in a press release: “We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction. While we work closely with Bain Capital Partners and Huawei to construct alternatives that would address CFIUS’ concerns, we will continue to execute our strategy to build a global networking leader.”
What is unclear, however, is what those alternatives could include. Bain could try to launch a new bid for 3Com either alone or with a U.S. partner, but its original deal theory was that Huawei could help 3Com tap the lucrative Chinese market. For now, this buyout appears to be busted.
In a formal statement, 3Com president Edgar Masri said the following: “We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction. While we work closely with Bain Capital Partners and Huawei to construct alternatives that would address CFIUS’ concerns, we will continue to execute our strategy to build a global networking leader.”
It is unclear what the alternatives are at this point. Bain could try to launch a new bid for 3Com either alone or with a U.S. partner, but its original deal theory was that Huawei could help 3Com tap the lucrative Chinese market. The deal also relied on debt from Asian banks, which were brought in largely thanks to the Huawei participation. It’s also possible that Bain could team up with Huawei to buy a different network equipment company, but I’m really just spit-balling here… The short story this morning is that Bain-3Com is toast.
*** Speaking of Bain, I’ve learned that the firm invested $200 million for its ninth fund into a special situations vehicle formed by Bain affiliate Sankaty Advisors. This was one of those hung bridge funds that were all the rage last summer. Additional details here.
*** Denise Palmieri on what to do about your GPA when applying for a job… particularly if you’ve already lied about it.
*** 3i leaves early-stage investing behind.
*** A reminder that I’ll be at VC in the Rockies this time next week. Will you?
Top Three
Bain Capital and 3Com announced that they have withdrawn their joint filing to the Committee on Foreign Investment in the United States (CFIUS), concerning Bain’s proposed $2.5 billion buyout of 3Com.
Tesla Motors Inc., a San Carlos, Calif.-based maker of electric cars, has raised $40 million in “bridge financing.” Valor Equity Partners and Tesla chairman Elon Musk co-led the round. The company previously raised a $45 million Series D round last May from Musk, Technology Partners, Capricorn Investment Group, Vantage Point Venture Partners, Draper Fisher Jurvetson, JP Morgan Bay Area Equity Fund, Valor Equity Partners and Compass Venture Partners. Tesla recently said that it was hoping to raise another $250 million, via a combination of a private placement and an IPO in either the U.S. or Europe.
The Soros Economic Development Fund, Omidyar Network and Google.org have formed a $17 million investment fund for small-and-medium enterprises in India. It is designed to fill a gap between the microfinance and commercial loan markets.
VC Deals
Ocera Therapeutics Inc., a San Diego-based drug company focused on gastrointestinal and liver diseases, has raised $35.5 million in Series C funding. Montagu Newhall Associates led the round, and was joined InterWest Partners, AgeChem Venture Fund, Cross Creek Capital, FinTech and CDIB BioScience. Return backers included Domain Associates, Sofinnova Ventures and Thomas, McNerney & Partners. The company had previously raised over $26 million.
N-trig, a Tel Aviv-based maker of natural input digitizer solutions for mobile computers, has raised $28 million in new VC funding. Backers include Canaan Partners and Evergreen Venture Partners. It also raised $5 million in venture debt from Plenus.
IPP of America, a national network of independent neighborhood-based e-payment centers, has raised $20.5 million in new VC funding. Old Lane led the round, and was joined by Hamilton Investment Partners and return backer Edison Venture Fund.
Ubicom Inc., a Sunnyvale, Calif.–based provider of communications processor and software solutions, has raised $18 million in fourth-round funding. Lehman BrothersVenture Partners and Samsung Ventures co-led the round, and was joined by return backers like Levensohn Venture Partners and Mayfield.
Jackpot Rewards, a Newton, Mass.-based online shopping rewards company, has raised $16.7 million in Series A funding. Backers include Jack Connors, founder of Hill Holiday; Peter Lynch of Fidelity Investments, Cluck Clough, former chief investment strategist for Merrill Lynch; and Tom McDonnel, CEO of DST Systems.
TrialPay, a San Jose, Calif.-based developer of a payment platform that allows a company’s customers to access premium content and services by participating in relevant offers, has raised $12.7 million in Series B funding. Index Ventures led the round, and was joined by Atomico Ventures, “former PayPal executives,” and return backers Battery Ventures, Ron Conway and Bob Pittman.
GraftCath Inc., a Coon Rapids, Minn.-based, has raised $12 million in Series D funding, according to VentureWire. Affinity Capital Management led the round, and was joined by Ascension Health Ventures and return backers Cutlass Capital, Sapient Capital and Three Arch Partners. Existing shareholder Boston Scientific did not participate, because it recently sold off its vascular surgery business.
Pythagoras Solar Inc., a Tel Aviv-based photovoltaic startup, has raised $10 million in Series A funding. Israel Cleantech Ventures led the round, and was joined by Pitango Venture Capital and Evergreen Venture Partners. www.pythagoras-solar.com
Ranier Technology, a Cambridge, UK-based maker of spinal implant products, has raised £8 million in third-round funding from Alliance Trust Equity Partners and First Ventures.
SilkRoad Technology Inc., a Winston-Salem, N.C.-based provider of online talent management solutions, has raised $10 million in new VC funding. Azure Capital Partners led the deal, and was joined by SilkRoad Equity.
Blist Inc., a Seattle-based online database startup, has raised $6.5 million in Series A funding. Frazier Technology Ventures and Morgenthaler Ventures co-led the round.
Formatta, a Fairfax, Va.-based provider of e-form solutions for electronic data capture and transfer, has raised $4.3 million from Edison Venture Fund.
ThreadSmith, a Vestal, N.Y.-based retailer of custom embroidery, has raised $1 million in VC funding from Advantage Capital Partners.
Buyout Deals
Apollo Group has agreed to acquire Chilean communications and arts university Universidad de Artes, Ciencias y Comunicación. The deal is valued at $40 million (including assumed debt), plus a possible $9 million in earn-outs over the next four years. It is expected to close within 30 days.
Bain Capital began buyout discussions with Bright Horizons Family Solutions Inc. (Nasdaq: BFAM) last June, according to details released yesterday in a regulatory filing. At the time, Bain said it was willing to offer $47 per share, while Bright horizons wanted $54 per share. The two sides agreed last month to a $48.25 per share offer, although Bright Horizons remains in the midst of its “go-shop” process. www.brighthorizons.com
Carousel Capital has acquired Brasseler USA, a Savannah, Ga.-based provider of dental and surgical instruments. No financial terms were disclosed. Leverage was provided by Unitranche Fund LLC, a fund co-managed by affiliates of Allied Capital and GE Commercial Finance.
NewWest Capital Partners has acquired Speedypin, a San Diego-based online reseller of prepaid phone cards. No financial terms were disclosed for the deal, which included participation by company management and leveraged financing from Convergent Capital Partners. Shoreline Partners advised Speedypin on the sale.
Ripplewood is considering a bid for troubled German bank IKB Deutsche Industriebank AG, according to Financial Times Deutschland. Ripplewood could be interested in taking over the entire bank or in acquiring IKB’s risk-carrying securities block, the report said.
Sun Capital Partners has completed its $21 per share tender offer for apparel maker Kellwood Co. The deal valued Kellwood’s equity at around $541.8 million, for a total transaction value of $762 million.
TPG has completed its acquisition of a 40% stake in listed Japanese lender NIS Group Co. for approximately $288 million. The deal also gives TPG warrants that are convertible into an additional 3.4% stake in NIS, and indirectly gives TPG a 50% stake in Nissin Leasing (China).
PE-Backed IPOs
BioHeart, a Sunrise, Florida-based developer of heart muscle regeneration therapies, raised around $5.8 million in its IPO. The company had originally planned to offer 3.6 million shares at between $14 and $16 per share, but kept slashing until the offer was just 1.1 million shares at between $5 and $5.50 per share (it priced at $5.25). It also dropped underwriters BMO Capital Markets and Janney Montgomery Scott for Merriman Curhan Ford & Co. and Dawson James Securities.
The company began trading yesterday on the Nasdaq under ticker symbol BHRT, and finished the day down at $5.11 per share. It had raised around $40 million in VC funding since 2000, from firms like Ascent Medical Ventures, Guidant, Tyco Capital and Advent-Moro Equity Partners. www.bioheartinc.com
PE Exits
The Anchor Hocking Co., a portfolio company of Monomoy Capital Partners, has sold its E.O. Brody division to Syndicate Sales Inc. No financial terms were disclosed. E.O. Brody is a provider of floral glassware to floral wholesalers and retailers. It was acquired by Anchor Hocking via last November’s purchase of Indiana Glass Co. from the Lancaster Colony Corp. (Nasdaq: LANC).
Autodesk Inc. (Nasdaq: ADSK) has agreed to acquire Kynogon SA, a Paris-based maker of artificial intelligence middleware. No financial terms were disclosed. Kynogen has raised VC funding from Innovacom and CapDecisif.
PE-Backed M&A
Graceway Pharmaceuticals LLC, a portfolio company of GTCR Golder Rauner, has acquired all of the assets related to Estrasorb in North America from Novavax (Nasdaq: NVAX) and Allergan (NYSE: AGN). Estrasorb is a prescription drug for the the treatment of vasomotor symptoms associated with menopause. No financial terms were disclosed.
Firms & Funds
Avalon Ventures has closed its eighth fund with $150 million in capital commitments. It will continue to focus on early-stage opportunities in the biotech, wireless communications and digital media applications spaces. Limited partners include Harvard Management Co., AlpInvest Partners, Paul Capital and Grove Street Advisors.
Human Resources
Jim Bankoff has joined Providence Equity Partners as a senior advisor, focused on the online and digital media markets. He previously was executive vice president of programming and products at AOL.
John Budreski has joined Tricor Pacific Capital as an advisor for special projects. He was CEO of Orion Securities and Orion Financial before their sale to Macquarie Group. www.tricorpacific.com
Matthew Reber has joined Cowen Healthcare Royalty Partners as a vice president. He previously worked at Accretive LLC and, before that, at Paul Capital. www.cowenroyalty.com
Joe Zhou, head of Kleiner Perkins’ Beijing office, has left to launch his own firm, according to Asian Venture Capital Journal.
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