PE Week Wire: Wed., Jan. 23, 2008

The sun is shining, the U.S. markets keep falling and we’re just eleven days away from Pats vs. Giants. In other words, it’s time for some Wednesday Warblings.

Most of your emails involved last Friday’s incident in Philly, and my subsequent analysis. So let’s get to ‘em:

Andy: “I was in the room the whole time the protestors were there. I wonder if half of them could have even explained why they were there. One sat at our table and did nothing… However, I didn’t see Rubenstein’s comment about English lessons as racial at all. In fact, I’m not sure what the race of the protestor was. He was trying to dismiss a rude person, who didn’t have a coherent point of view, who was disrupting the conference. In fairness, he gave her the opportunity to explain what she wanted, and she blew it badly.”

Brent: “I was truly worried as the protest unfolded that the whole thing could end disastrously. To me, the protesters seemed surprised that there were allowed to gain their 15 minutes of fame and really didn’t have much of an agenda beyond making a lot of noise and harassing Rubenstein. The fact that Carlyle had recently closed on the deal and had yet to make any changes took the wind from their sails. Having said that, I think Rubenstein did a miserable job as well. Not only was the comment about remedial language needlessly insulting, he failed to make the case for private equity ownership. In his prepared remarks, he noted that the private equity has failed to state its case to the public for improving companies and increasing employment opportunities. Well, he had an opportunity to make that case in front of the protesters and blew it.”

Scott: “Rubenstein was polite to her for most of the time. She continually and repeatedly insulted him as ‘Old’ and dismissed everything he said because he is a ‘billionaire.’ He only made the comment after repeatedly being insulted. She was upset he didn’t give her time in his office, so he told her she could ask her questions at that moment. He was far more gracious than he should have been with them. Rather than use the time to ask questions, she got on her soapbox and just spouted propaganda… These employees were not there about care of their patients, they want to preserve the status quo and their jobs.”

Shawn: “I was at the event and sat next to the group in the balcony stage right, and was wondering what they were doing there. They didn’t look like they belonged and we all soon found out why. It was a bit scary at first, particularly with the struggle going on between the one security guard and the protestors trying to unfurl their silly banner on the other side… I do believe, in their garbled message, some claimed to be concerned for the patients care, which is noble, and worthy of protest. Of course the cynic in me wonders if they are just concerned with actually having to work while at work – the thought of potentially slashing possibly bloated staffing levels would be heresy to the Union, I know… But that really wasn’t the thrust of their chants: Rubenstein is a billionaire, so he should guarantee their jobs.”

Sim: “As one the organizers for MIT’s VC conference, I have to sympathize with my counterparts at Wharton. It would be great for the public to see the tapes, but I am familiar firsthand with the hurdles and red tape needed for a major b-school to approve just about anything. Second, pretty much all of us are looking for a job in the VC or PE space, and I can imagine many organizers not wanting to piss off a potential employer.”

Jon: “Don’t kid yourself, Wharton is a business, not an educational institution. B-schools are obsessed by PR and I am 0% surprised they buried the story as quickly as they could.”

Joe: “No one is mentioning a golden opportunity here – get the SEIU member and Rubenstein (who I am sure would decline) together to debate. If either member won’t do it, then get a representative to take each side and have them debate the topic. A couple of academics perhaps.”

You’re right Joe. I made such a suggestion several months ago, but Rubenstein declined. On the other hand, a TPG partner did participate in Great Debates at Buyouts West, alongside an SEIU rep. We’re doing it again at Buyouts East, along with Vic Flescher of University of Illinois, Robert Stewart of the PE Council and Carl Thoma of Thoma Cressey Bravo.

Nari: “The top 5% in this country are increasingly looking like the aristocracy in France, complaining about the incoherence of the peasants, trying to explain why they were unhappy! It might be worthwhile to pay attention to what followed, the guillotine part, I mean. The peasants may be worried about their livelihood, outsourcing, job loss, income loss while the aristocrats are worrying about why carried interest should be taxed at Capital Gains rate and not the regular income rate. A better approach than complaining about the language skills of the peasants may be to brace for changes that are-a-coming.”

Top Three

Allied Capital Corp. and Goldman Sachs have reached an investment agreement, whereby Goldman agrees to invest at least $125 million in future Allied funds. In additional, Goldman will purchase $170 million in existing Allied private equity and debt investments.

Automattic Inc., creator of the WordPress blog platform, has raised $29.5 million in Series B funding. The New York Times Co. led the round, and was joined by return backers like Polaris Venture Partners, Radar Ventures and True Ventures.

Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA) has agreed to acquire CoGenesys Inc., a Rockville, Md.-based developer of peptide- and protein-based medicines. The deal is valued at $400 million in cash, and is expected to close by the end of Q2. CoGenesys raised a $55 million Series A round in June 2006 from New Enterprise Associates, OrbiMed Advisors, Red Abbey Venture Partners and former parent company Human Genome Sciences Inc.

VC Deals

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Point Biomedical Corp., a San Carlos, Calif.-based developer of medical imaging and drug delivery solutions, has raised $57.32 million in Series A recap funding. The round is tranched out, with the first $25 million already called down. The remainder is based on a milestone that Point Biomedical plans to achieve this April. Vedanta Capital led the round, and was joined by return backers like William Blair Capital Partners, De Novo Ventures, Institutional Venture Partners, Saints Capital, Sprout Group and CHL Medical Partners. Point Biomedical previously had raised over $100 million.

Mauna Kea Technologies, a French provider of in-vivo cellular imaging, has raised $30 million in second-round funding. Psilos Group led the deal, and was joined by Seventure and return backer Creadev.

Airbiquity Inc., a Seattle-based provider of wireless data communications solutions for product suppliers and service providers in the M2M and telematics industries, has raised $25 million in fifth-round funding. Ignition Partners was joined by return backers Acorn Ventures, Kirnaf LTD and Shell Internet Ventures. The company previously raised around $52 million between 1999 and 2001.

Siperian Inc., a San Mateo, Calif.-based maker of master data management software, has raised $25 million in Series E funding. Investor Growth Capital led the round, and was joined by return backers Constellation Ventures, Red Rock Ventures, ArrowPath Venture Capital, Blumberg Capital Ventures, Brightspark Ventures, Saffron Hill Ventures, Reed Elsevier Ventures and Anthem Venture Partners. Siperian has now raised $61.5 million in total VC funding since 2001.

ViewRay Inc., a Gainesville, Fla.-based maker of an MRI-guided radiation therapy device, has raised $25 million in Series B funding. OrbiMed Advisors and Fidelity Biosciences co-led the round, and were joined by Aisling Capital, and Kearny Venture Partners.

Fat Spaniel Technologies, a San Jose, Calif.-based provider of monitoring and reporting services for renewable energy systems, has raised $18 million in Series B funding. Ignition Partners led the round, and was joined by Pacific Corporate Group, Applied Ventures and return backers Element Partners and Chrysalix Energy.

United Mobile, a Liechtenstein-based low-cost roaming mobile operator, has raised $15 million in VC funding. Accel Partners and Grazia Equity were joined by individual angels Morten Lund, Thomas Geitner and Robert Zacconi.

NovaMed Pharmaceuticals, a Chinese provider of outsourced development and commercialization services for pharma and biotech companies, has raised $13.8 million in Series B funding. Fidelity Asia Ventures and Fidelity Biosciences co-led the round, and were joined by return backer Atlas Venture.

Ad Infuse, a San Francisco-based provider of personalized mobile advertising solutions, has raised $12 million in new VC funding. SoftBank Capital led the round, and was joined by return backers ComVentures and Storm Ventures. The company previously had raised nearly $6 million.

Aveska Inc., a Waltham, Mass.-based provider of enterprise access governance solutions, has raised $12 million in Series B funding. FTVentures led the round, and was joined by retrun backers Pequot Ventures, Charles River Ventures and Aveska chairman Barry Bycoff.

FN Stars Co., a South Korea-based provider of insurance products, has raised $11.1 million from Carlyle Asia Growth Partners.

Knopp Neurosciences Inc., a Pittsburgh-based developer of biomarkers and drug therapy for amyotrophic lateral sclerosis, has raised $10 million in Series B funding. Backers include Saturn Partners, Kramer Capital Partners and LaunchCyte LLC.

Unisfair, a Menlo Park, Calif.-based provider of virtual meeting spaces for corporate events, has raised $10 million in new VC funding. Norwest Venture Partners led the round, and was joined by return backer Sequoia Capital.

MixerCast, a San Mateo, Calif.-based provider of social media marketing tools, has raised $6 million in Series B funding. Intel Capital led the round, and was joined by Onset Ventures and return backer Velocity Interactive Group.

SmartTurn Inc., an Oakland-based provider of on-demand inventory and warehouse management systems, has raised $5 million in Series A funding. New Enterprise Associates and Emergence Capital Partners co-led the round.

GoldSpot Media, a Sunnyvale, Calif.-based provider of ad-insertion solutions for mobile broadcast TV, has raised $3 million in Series A funding from Exa Ventures.

TrafficCast International Inc., a Madison, Wis.-based provider of digital traffic data and software, has raised $1.5 million in additional Series A funding, to close the round at $3.5 million. Ceres Venture Fund led the extension, and was joined by previously-announced backers NEW Capital Fund, Phenomenelle Angels Fund and Women Angels.

Buyout Deals

Advanced Technology Services Inc., a Peoria, Ill.-based provider of outsourced production equipment maintenance and managed IT solutions, has raised $15 million in private equity funding from WestView Capital Partners. The deal was part of a management-led recapitalization of the company.

BlackEagle Partners has acquired certain assets of Rockford Products, a bankrupt manufacturer of highly-engineered chassis and suspension products.

Morgenthaler has sponsored a recapitalization of Avtron Manufacturing Inc., an Independence, Ohio–based engineering and manufacturing company with aerospace, load bank and industrial automation product lines. No financial terms were disclosed for the deal, which results in senior managers holding an equity position. Leveraged financing was provided by KeyBanc Capital Markets, ORIX Leveraged Finance, Madison Capital Funding, and Norwest Mezzanine Partners. Western Reserve Partners managed the process.

Spell Capital has acquired a majority interest in Pacific Production Technologies, a Mt. Carmel, Ill.-based manufacturer of continuous and cut-sheet thermoforming machines. No financial terms were disclosed.

Titan Fitness, a franchise owner of Gold’s Gym locations in the U.S., has raised an undisclosed amount of private equity funding. WestView Capital Partners led the deal, and was joined by National City Equity Partners. M&T Investment Banking Group served as financial advisor to Titan. In conjunction with the financing, Titan acquired 14 fitness clubs in North Carolina and Minnesota and expects to grow its Gold’s Gym portfolio to more than 60 open locations nationwide during the next five years.

3i Group has made a $97 million investment in GAIN Capital Group, an independent provider of online foreign exchange trading services for individuals and institutions. Existing GAIN shareholder VantagePoint Venture Partners invested an additional $20 million.

PE-Backed IPOs

Cardiovascular Systems Inc., a St. Paul, Minn.-based maker of a minimally-invasive catheter system for the treatment of peripheral arterial disease, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol CSII, with Morgan Stanley and Citi serving as co-lead underwriters. The company has raised around $54 million in VC funding since 2006, from firms like Maverick Capital (15% pre-IPO stake), Easton Hunt Capital Partners (9.1%) and Mitsui & Co. (5.6%).

PE Exits

HP has agreed to acquire Exstream Software LLC, a Lexington, Mass.-based provider of enterprise software for streamlining the creation and delivery of personalized documents and other communications materials. The seller is American Capital Strategies. No financial terms were disclosed.

IBM has agreed to acquire AptSoft Corp., a Burlington, Mass.-based provider of business coordination software solutions. No financial terms were disclosed. AptSoft has raised around $14 million in VC funding from firms like Egan-Managed Capital, Portage Venture Partners and Lazard Technology Partners.

Bad News

Buffets Inc., an Egan, Minn.-based portfolio company of Caxton-Iseman Capital, has filed for Chapter 11 bankruptcy protection. The company was acquired in late 2006 from Ryan’s Restaurant Group Inc., with leverage arranged by Credit Suisse Securities, UBS Securities and Goldman, Sachs & Co. The buyout also included a sale-leaseback transaction arranged by affiliates of Fortress Investment Group.

Propex Inc., the world’s largest maker of carper backing, has filed for Chapter 11 bankruptcy protection. The company was acquired for $232.6 million in 2006 by a private equity consortium that included Genstar Capital, Laminar Direct Capital and Sterling Group.

Firms & Funds

Ingencio, a French payment security company has sued U.S. private equity firm Francisco Partners, for breach of a non-disclosure agreement.

TPG has held final closings on both its first middle-market buyout and fifth Asian buyouts funds, according to LBO Wire. The middle-market fund closed on around $1.5 billion ($1b target), from limited partners like the New Jersey Division of Invesmtent, Washington State Investment Board, LACERA, Oregon State Treasury and CalPERS. The Asian fund closed on $4.25 billion, from LPs like CalPERS, the University of Michigan and PSERS.

Human Resources

Ralph Davis has agreed to join Cressey & Co. as a partner. He currently is chairman of law firm Waller Lansden Dortch & Davis LLP, where he has been a partner since 1995.

Alvin Sun has joined Granite Global Ventures as a partner in the firm’s Shanghai office. He previously was with ePlanet Ventures.

Larry Resnick and Anthony Giorgio have joined Arsenal Capital Partners as operating directors. Resnick previously was a corporate M&A executive with Triumph Group, and will focus on the aerospace and defense industries. Giorgio worked in corporate development for SYMYX Technologies and International Specialties Products, and will focus on the specialty chemicals and materials sectors.

Morgan Stanley has promoted both Tej Shah and Ivy Wang to vice president of financial sponsors in San Francisco. Both were previously senior associates with the group.

Global Life Science Ventures has promoted Kuno Jung to principal. He had joined the firm’s Zug, Switzerland office as a principal in 2006, after having co-founded Aravis Ventures and served as CEO of Timaq Medical Imaging.