PE Week Wire: Wednesday, July 23, 2008

No real column this morning, due to some glitches with the home office PC (had to start the news over at around 8:45am, which led to me yelling, which led to my elderly neighbor looking over quizzically from his morning smoke). So two quick notes, and then a bunch of links from peHUB.

*** I got lots of feedback on yesterday’s column about removing the moral hazard from private equity, and you can read some of it here. Feel free to pile on.

Many of you argued strong counterpoints, but I was puzzled by the most prevalent comment. It went something like this: Had the Mervyn’s buyout not happened, the company simply would have failed earlier. Therefore, the buyout was still good for Mervyn’s.

Pardon me while I pull you out of your buyout bubble and slap you silly. Yes, it is possible that Mervyn’s would have failed sans buyout. But it’s also possible that former owner Target would have turned things around on its own, or that different buyers would have been successful where Sun and Cerberus failed. It’s also possible that the buyout was actually a negative event for Mervyn’s, due either to operational mismanagement by the buyout firms (yes, that has been known to happen) or due to the split structure. We just don’t know, and my argument doesn’t pretend to.

*** It looks like I’ll be bunking in Palo Alto next week, because I’m moderating a panel at the Private Equity CFO conference. Any interest in another small get-together at the Dutch Goose? If so, let me know and I’ll try to set it up.

Top Three

The Boeing Co. has agreed to acquire Insitu Inc., a Bingen, Wash.-based developer of long-range autonomous unmanned aircraft systems. The deal is valued at approximately $400 million, according to Connie Loizos’ report at peHUB. The company had raised around $55 million in VC funding from firms like Battery Ventures, Second Avenue Partners and Pteranodon Ventures.

Zynga Game Network, a San Francisco-based social gaming company, has raised $29 million in new VC funding. Kleiner Perkins Caufield & Byers led the round, and was joined by Institutional Venture Partners and return backers Avalon Ventures, Foundry Group and Union Square Ventures. The company had previously raised around $15 million.

Texas Pacific Group has been identified as a suitor circling UK mortgage lender Paragon (LSE: PARA ). The company’s stock surged more than 30% yesterday, on talk that firms like Blackstone Group had expressed interest. Its current market cap is nearing $700 million.

VC Deals

Fluxome Sciences AS of Denmark has raised €13 million in new VC funding. Capricorn Venture Partners was joined by return backers Seventure Partners, Incuba Venture and Vectata AS. Fluxome has developed a microbial metabolic engineering technology platform to build cell factories for the production of nutraceutical ingredients.

Sierra Surgical Technologies Inc., a Palo Alto, Calif.-based developer of female sterilization technology, has raised $14.5 million in Series B funding. Return backers include Alta Partners and De Novo Ventures.

Athenix Inc., a Research Triangle Park, N.C.-based developer of products and technologies for agricultural and industrial applications like biofuels, has raised $10 million in new “Series S” funding, according to a regulatory filing. Return backers include Hunt Ventures, Intersouth Partners and Polaris Venture Partners.

ResponseLogix Inc., a San Francisco-based provider of technology to manage online sales leads for auto dealers, has raised $8 million in Series A funding. GRP Partners and Shasta Ventures co-led the round, and was joined by A.H. Belo Corp. and Belo Corp.

Vericept Inc., a Denver-based provider of data leakage prevention solutions, has raisedup to$8 million in new VC funding from return backer Sigma Partners. The company has now raised over $72 million in total funding since 2000.

ActaCell Inc., an Austin, Texas-based lithium-ion battery startup, has raised $5.8 million in Series A funding. DFJ Mercury led the round, and was joined by Applied Ventures and’s RechargeIT program.

ChipX, Santa Clara, Calif.-based provider of ASIC products, has raised $4 million in Series BB funding, according to a regulatory filing. Backers include Elron Electronic Industries, Needham Asset Management, Newlight Associates, Parker Price Venture Capital, UMC Capital, VantagePoint Venture Partners and Wasserstein Ventures.

Conformia Software Inc., a Sunnyvale, Calif.-based provider of compliance management software for regulated process industries, has called down $2.95 million of a $4 million Series D round, according to a regulatory filing. Return backers include Sequoia Capital, Jafco Ventures and Foundation Capital.

Carbonflow Inc., a San Francisco-based maker of software for carbon market participants, has raised $2.9 million in Series A funding, peHUB has learned. Clean Pacific Ventures led the round, and was joined by OVP Venture Partners and Meridian Energy Ltd.

Impact Radius Inc., a Los Angeles-based developer of online infrastructure, has raised nearly $2.5 million in Series B-1 funding led by Redpoint Ventures, according to a regulatory filing.

Good Data Corp., a Cambridge, Mass.-based provider of SaaS collaborative business intelligence solutions, has raised $2 million in first-round funding. Backers include Esther Dyson, Tim O’Reilly and Windcrest Partners., a Philadelphia-based online ticket exchange, has raised $2 million in Series A funding. Backers include MentorTech Ventures and Ben Franklin Technology Partners of Southeastern Pennsylvania.

DocVerse, a Seattle-based developer of a document-sharing and collaboration tool, has raised $1.3 million in VC funding. News of the deal was first reported by the Seattle Post-Intelligencer, while VentureWire identified Baseline Ventures as the lead investor. DocVerse soon plans to move its headquarters to San Francisco.

Buyout Deals

Advent International has agreed to acquire a majority interest in Bradco Supply, an Avenel, N.J.-based building materials company. No financial terms were disclosed. The company’s founding family will retain a minority equity position.

Blackbird Capital Partners has acquired the job lot paper division of Cincinnati-based Sabin Robbins Paper Co. No financial terms were disclosed. Amvest advised Blackbird on the deal.

The Carlyle Group has invested approximately $75 million in financial services company Boston Private Financial Holdings Inc. (Nasdaq: BPFH). The newly-issued shares are part of a larger capital-raising plan, which also will include $85 million in a public offering of common stock.

Centre Partners has acquired a stake in Covenant Care LLC, an Aliso Viejo, Calif.-based operator of 46 long-term care centers. No financial terms were disclosed.

Century Park Capital Partners has acquired Moss Holding Co., a maker of tensioned-fabric structures and displays, from The Riverside Co. No financial terms were disclosed. Edgeview Partners advised Moss Holding on the deal.

Hellman & Friedman has acquired British IT company SSP Holdings PLC for £198 million, or 190 pence per share. Company management will role over part of their existing equity holdings, which were 29% prior to the buyout.

Lion Capital has agreed to buy European frozen food manufacturer FoodVest Group from CapVest. The deal is worth £1.1 billion, with JPMorgan leading the £730 million leveraged loan syndicate.

Siemens AG is in talks to sell its Siemens Enterprise Networks (SEN) unit to The Gores Group, according to a German newspaper.

PE Exits

GSC Group has sold Burke Industries Inc., a maker of resilient flooring and roofing products, to Mannington Mills Inc. for an undisclosed amount. McColl Partners advised Burke on the deal.

The Stanley Works (NYSE: SWK) has completed its acquisition of Sonitrol Corp. from Carlyle Venture Partners, Wachovia Capital Partners, Spire Capital Partners and Sonitrol management. The deal is valued at $275 million in cash. Sonitrol is a Berwyn, Penn.-based provider of security monitoring services, access control and fire detection systems to commercial customers in North America . It had been acquired by the PE firms in 2004 from Tyco for approximately $125 million, and had already paid out a dividend.

PE-Backed M&A

iPipeline, an Exton, Pa.-based provider of on-demand sales distribution software for insurers and financial services firms, has acquired COSS Development Corp., a provider of Web-based illustration systems and fill-able forms technology. No financial terms were disclosed. iPipeline recently raised $18 million in Series A funding from NewSpring Capital, Fidelity Ventures and company management.

Marquiss Wind Power Inc., a Folsom, Calif.-based developer of roof-top wind turbines, has acquired the assets of Cirrus Technologies Inc., a Carson City, Nev.-based developer of wind power technologies. Marquiss has raised around $2 million in VC funding led by Velocity Venture Capital.

MediZine LLC, a publisher of health and fitness magazines like Healthy Living, has acquired the assets of University Health Publishing Group. No financial terms were disclosed. UHPG was represented by The Jordan, Edmiston Group. Veronis Suhler Stevenson has acquired a control position in MediZine last year.

Firms and Funds

Cowen Healthcare Royalty Partners has closed its debut fund with over $500 million in capital commitments. The group has launched last year, and invests in commercial and near-commercial stage healthcare products and companies through the purchase and monetization of passive royalties and the creation of synthetic royalties.

OrbiMed Advisors has raised $150 million for a Pan-Asian healthcare venture capital fund, according to VentureWire. It also has hired Sunny Sharma, a former VP with Investor Growth Capital, as a partner to lead its new office in Mumbai.

PAI Partners has formed Akkadia, a new investment firm that will acquire “significant” minority stakes in listed mid-cap companies. It will be led by Philippe Guez, who previously ran French I-banking for Deutsche Bank.

Human Resources

Jonathan Glass has joined Millennium Technology Ventures as chief financial officer. He previously was controller and VP of finance for Venrock.