peHUB Wire: Tuesday, December 1, 2009

Canopy Financial update: The fraud hit the fan yesterday, as Canopy Financial officially filed for Chapter 11 bankruptcy protection. It reported between $1 million and $10 million in assets, and between $50 million and $100 million in liabilities.

What’s more interesting than the bankruptcy filing, however, is an attached declaration from Canopy Financial lawyer Dan Stevenson. In it, we get a bit of clarification on some key issues:

• Canopy Financial raised $75 million in Series D funding over the summer (two tranches), compared to the $62.5 million that had been previously reported. That brings its total VC capitalization up to over $100 million.

• Over $39 million of that amount was used to buy back shares from existing investors. Granite Global Ventures is not specifically named, but previous reports have said that it at least partially cashed out on the round.

• Stevenson confirms that Canopy discovered that financial statements provided to its investors and lenders were “fraudulent, and also uncovered other significant financial and accounting regularities.”

• These inaccuracies represented a MAC under its loan agreements and certain customer agreements. The lenders have already assumed control of a Canopy bank account worth over $5 million, and certain customers have canceled their accounts.

• Canopy laid off all but 31 of its 123 full-time employees.

• Stevenson says that the company blames two officers for the fraud, but does not name them. We believe that they are company president Jeremy Blackburn and chief technology officer Anthony Banas.

*** Datapoints: Private equity deal volume dropped in November, according to data just sent over by a Thomson Reuters colleague. I’ll have it posted at about five minutes after this email is sent.

There were 164 global PE deals last month, compared to 217 in October and 221 in November 2008. Disclosed deal values, however, rose from $17.6 billion in October to $18.08 billion last month.

Overall global M&A last month was $244 billion in disclosed value for 2,809 transactions.

*** Wasn’t aware that we had many readers from New Orleans, until the snarky emails began pouring in last night. For example, Dan wrote to “congratulate the Patriots on forcing the Saints to punt twice last night.”

I’m expecting to be down there in late January, so perhaps we’ll need to do some sort of bet on who’s team will still be playing (my stakes are simple: a gutful of grilled oysters).

*** I’m off tomorrow through Friday, for an abbreviated version of my annual couch vacation. Erin will be pinch-hitting, so please send all press releases and other such info her way ( We’ll talk again on Monday…

Top Three

Broadcom Corp. (Nasdaq: BRCM) has agreed to buy Dune Networks, a Sunnyvale, Calif.-based maker of networking devices, for $178 million in cash. Dune had raised approximately $50 million in VC funding, from firms like Alta Berkeley Venture Partners, Aurum-SBC Ventures, Evergreen Venture Partners, Jerusalem Venture Partners, Pitango Venture Capital and U.S. Venture Partners.

Montagu Private Equity has ended exclusive talks about selling Survitec to Permira, leaving Warburg Pincus in pole position. Survitec is a Belfast-based maker of life rafts and life jackets, and is being valued at a minimum of £280 million by Montagu.

Steve Miller, former chairman and CEO! of Delphi Corp., has been named chairman of mid-market private equity firm MidOcean Partners. Mark Angelson, who was named firm chairman in December 2007, will remain on the MidOcean executive committee, but will devote most of his time to serving as chairman and CEO of publicly-heldWorld Color Press.

VC Deals

Aquantia Corp., a Milpitas, Calif.-based developer of physical-layer transceiver ICs, has secured $35 million of a Series D round that ultimately could be worth $44 million. New Enterprise Associates led the round, and was joined by return backers Lightspeed Venture Partners, Greylock Partners, Pinnacle Ventures and Venture Tech Alliance. Aquantia previously raised around $40 million.

Forma Therapeutics, a Cambridge, Mass.-based small molecule drug developer with an initial focus on cancer, has raised $25.5 million in Series B funding. Lilly Ventures led the round, and was joined by return backers Novartis Option Fund and Bio*One Capital. The company previously raised $25 million.

Lumexis Corp., a Costa Mes! a, Calif.-based developer of in-flight entertainment and connectivity systems, has raised $15 million in new VC funding. Perseus LLCled the round, whichalso includes an option for $7.5 million in additional investment. Return backers included PAR Capital Management and Zone Ventures.

Soasta, a Mountain View, Calif.-based provider of cloud-based testing solutions, has raised $10 million in Series C funding. UV Partners led the round, and was joined by return backers Formative Ventures and The Entrepreneurs’ Fund. The company previously raised around $10.4 million.

Innotech Solar AS, a Navrik, Norway-based company focused on increasing the effectiveness of solar cells, has raised approximately$9.6 million in VC funding! from Investinor and company employees.

Horizon Data Center Solutions, a Plano, Texas-based data center and IT flexsourcing firm, has raised $7.5 million in VC funding led by Ballast Point Ventures.

Covagen AG, a Zurich-based developer of a novel class of protein therapeutics, has secured an undisclosed amount of seed funding from Ventech.

Buyouts Deals

Mill Road Capital has increased its takeover bid for Canadian advertising company Cossette Inc. (TSX: KOS), from $7.87 per share to C$8.10 per share (total of C$135.3 million). Mill Road has been competing with Cosmos Capital for the deal.

Olympus Partners has sponsored a $110 million recapitalization of existing portfolio company K-Mac Enterprises Inc., the nation’s second-largest Taco Bell franchisee. The deal included a $59 million dividend for existing shareholders, $2.7 million in bonuses to 25 K-Mac employees and the remainder will be used as working capital.

Seaside National Bank & Trust, an Orlando, Fla.-based commercial bank, has r! aised over $40 million in private equity funding. Lovell Minnick Partners, Parthenon Capital and Continental Investors each invested $15 million, and were joined by existing shareholders.

Snai SpA (Milan: SNAI), an Italian gaming company, said that its board will examine a buyout offer from AXA Private Equity and Bridgepoint Capital.

Smith & Williamson, the administrators of Kaupthing Capital Partners (former PE arm of Kaupthing Bank), has! sold a majority stake in Associated Dental Practices a group of private equity investors that includes Palamon Capital Partners, AlpInvest Partners, Morgan Stanley Alternative Investment Partners and LDC. The total deal is valued at £136 million,including £72 million in equity. Leveraged financing was provided by Lloyds TSB Corporate Markets Acquisition Finance and Royal Bank of Scotland. Associated Dental is the second largest provider of National Health Service dentistry in the UK.

CyrusOne, a Houston-based enterprise data center colocation provider,has secured a new $150 million senior secured credit facility. The banking syndicate included TD Securities, RBC Capital Markets, SunTrust Robinson Humphrey and SG Americas S! ecurities. CyrusOne is a portfolio company of ABRY Partners.

PE-Backed IPOs

KAR Auction Services Inc., a Carmel, Ind.-based provider of vehicle auction services in North America, has set its IPO terms to 23 million shares being offered at between $15 and $17 per share. It would have an initial market cap of approximately $2.2 billion, were it to price at the high end of its range. KAR plans to trade on the NYSE under ticker symbol KAR, with Goldman Sachs and Credit Suisse serving as co-lead underwriters. Shareholders include Kelso & Co. (42% pre-IPO stake), Parthenon Capital, Goldman Sachs and ValueAct Capital.

Gartmore, a UK-based fund manager owned by Hellman & Friedman, reportedly is planning to raise around £400 million in a London listing early next month. The deal would value Gartmore at around 800 million were it to price in the middle of its expected offering range.

PE-Backed M&A

Beam Reach Education, a portfolio company of Summer Street Capital Partners,has acquired The Refrigeration School Inc., a Phoenix-basedoperator of career schools for heating ventilation, air conditioning and refrigeration. No financial terms were disclosed.

New Silk Route reportedly is looking to merge portfolio company Aster Infrastructure, a Hyderabad, India-based tower leasing company, with India’s Essar Telecom Infrastructure. New Silk Route is an Asia-focused private equity firm.

PE Exits

Ghana’s state oil company reportedly has reached a “critical stage” in talks to acquire a stake in the giant Jubilee oilfield from Kosmos Energy, a portfolio company of The Blackstone Group and Warburg Pincus.

Firms & Funds

The Carlyle Group reportedly has been sued by a Kuwaiti conglomerate, which alleges that Carlyle misrepresented the safety of an affiliated public debt fund that collapsed in 2008.

Human Resources

Tim Shannon has joined Canaan Partners as a venture partner, with a focus on the healthcare sector.He previously was president and CEO of CuraGen Corp., a publicly-held oncology drug company acquired by Celldex Therapeutics in October.

David Wurzer has joined Connecticut Innovations as a managing director. He previously was executive vice president, treasurer and CFO for CuraGen Corp. (Nasdaq: CRGN).

Alfred Macdaniel has joined Santé Ventures as vice president of finance and general counsel.He previously was a senior associate with Fish & Richardson PC.