peHUB Wire: Tuesday, June 23, 2009

Private equity firms have a penchant for naming themselves after rocks, trees or… themselves. But a 1970s jazz-rock band? Pretty sure that’s a new one.

The firm is Blood, Sweat & Capital LLC, a new Texas shop focused on the healthcare services space.

“We met with a lot of healthcare executives when we were setting things up, and one of them mentioned that we should run a name contest through the Internet,” says Pat Abele, a BS&T partner who has served as CEO for both New West Health Service and the Catholic Health Care Network. “There were probably a thousand different names submitted, and Blood Sweat & Capital really resonated with us. Maybe it’s because of our ages, or maybe it’s because we’re putting lots and lots of sweat in along with our money.”

The firm was founded about six months ago, and looks to invest between $1 and $2 million in healthcare services startups. That sounds more VC-ish than PE-ish (at least with PE=buyout for so many), but Abele says that BS&C plans to be more operationally involved than the typical VC firm. Specifically, its four partners will work fulltime in various portfolio company roles (CEO, CIO, CMO, etc.) while the startups recruit outside managers.

The firm is not yet identifying any of its portfolio company names, although Abele disclosed that BS&C investments include an electronic medical records company, and interoperability startup and a company that helps patients finance elective surgery and deductibles.

BS&C is currently investing its partners’ money, and seems undecided on raising a formal fund. “We’ve gotten requests from people who want to put money to work with us, but we have plenty of money internally to do what we want to do right now,” Abele explains. “We’re not looking for major homeruns — just really good ideas with really good entrepreneurs behind them.”

*** Every time my Twitter feed adds another thousand followers, I like to remind you to become one:

*** Speaking of Twitter, a Verified Identity Pass (i.e., Clear) board member has spent the past week tweeting about how the company was on its last legs. He didn’t actually name the company (just said it was one of his investments), although I had narrowed it down to three before Clear announced late last night that its airport security lines were shutting down.

Sounds like negotiations with the company’s creditor were pretty intense late last week, and continued through yesterday. A few hours later, he wrote “Well, I guess we can stick a fork in that one.”

As an aside, I think this is the first major bomb for Spark Capital, which led Clear’s $44.5 million round last year. Everyone has one eventually…

*** Data Point: There are only 16 VC-backed companies left in IPO registration. This includes LogMeIn, which is road-showing and expects to price within the next few weeks. I know P&L is king — and LogMeIn’s is great — but I also wonder if a successful LogMeIn IPO could have broader ramifications.

After all, it’s a techie type of tech deal, rather than a consumer type of tech deal (i.e., OpenTable). A majority of venture deals in the IT sector belong to the former class, but investors have been beaten down by talk that the public markets don’t love them anymore. Perhaps LogMeIn could serve as an emboldening flirtation.

*** Audience Participation: We’re in the midst of compiling our 2010-2011 PE/VC Partnership Terms & Conditions Study, and we’d like your participation. In exchange, we’ll send you a complimentary copy of the study when it is published.

The deadline is June 30, so please act fast. For a signed promise of confidentiality, please contact our research editor Eamon Beltran at

Top Three

BC Partners this morning invested $350 million into retailer Office Depot Inc. (NYSE: ODP), which represents approximately a 20% ownership stake. The investment includes $275 million in newly-created 10% Series A convertible perpetual preferred stock, convertible at $5 per share (32% premium to yesterday’s $3.79 per share closing price), and $75 million of newly-created 10% Series B convertible perpetual preferred stock, convertible at the same terms (assuming shareholder approval).

Chroma Therapeutics, a UK-based developer of treatments for inflammatory diseases like rheumatoid arthritis, has signed a commercialization deal with GlaxoSmithKline (GSK.L) that could be worth upwards of $1 billion. The deal includes an undisclosed upfront cash payment, possible milestone and options payments and participation in a new £15 million Series D round. Chroma previously raised around $85 million from firms like Abingworth Management, Essex Woodlands Healthcare Ventures, Gilde Healthcare, Nomura Phase4 Ventures and the Wellcome Trust.

Verified Identity Pass, operator of the “Clear” system that allowed members to pass quickly through airport security, ceased operations last night. The company was founded in 2004 by media mogul Steven Brill, and last year raised $44.5 million from Spark Capital, Syncom Venture Partners, Lockheed Martin, GE Security, RRE Ventures, Baker Capital and Lehman Brothers.

VC Deals

CoAxia Inc., a Maple Gove, Minn.-based developer of perfusion augmentation therapies to improve outcomes for patients with cerebral ischemia resulting from stroke, has raised $21.5 million in Series D funding. Sofinnova Partners led the round, and was joined by return backers Affinity Capital Management, Baird Venture Partners, Canaan Ventures Partners, Johnson and Johnson Development Corp. and Prism VentureWorks. The compan! y had previously raised around $52 million.

I-Therapeutix, a Waltham, Mass.-based, has raised $15 million in Series C funding. Polaris Venture Partners led the round, and was joined by return backers Versant Ventures and SV Life Sciences.

Alchimer SA, a French provider of wet deposition processes for interconnections in advanced 3D-packaging applications, has raised $10 million in Series D funding. Backers include AGF, CEA Investissement and Emertec Gestion.

Zymeworks Inc., a Vancouver-based computational biotech company, has raised C$3.5 million in new VC funding from firms like CTI Life Sciences Fund. No additional financial information was disclosed.

Reductive Labs, a Portland, Ore.-based provider of enterprise It automation solutions, has raised $2 million in Series A funding led by True Ventures.

Frog Capital has doubled its holdings in SiC Processing AG, a Germany-based service provider of wet separation, treatment and reclamation of used slurry, via a purchase from other shareholders. No seller identities or financial terms were disclosed. SiC Processing previously raised €53.4 million in 2007 from Zouk Ventures, Merrill Lynch CPI Group, CC Private Equity Partners, Masdar Clean Tech Fund, Foursome Investments and the Heckmann family. The company is profitable and with expected 2009 revenue approaching €100 million.

Tensilica Inc., a Santa Clara, Calif.-based semiconductor IP company specializing in dataplane processor cores, has raised an undisclosed amount of strategic funding from DoCoMo Capital, the corporate venture arm of Japanese wireless carrier NTT DoCoMo. Tensilica previously raised around $90 million since 1997, from firms like Altera Corp., Cisco Systems, Conexant Systems, Matsushita Electric Industries, NEC, Foundation Capital, Meritech Capital, Oak Investment Partners and Worldview Technology Partners.

Buyout Deals

Ceva Group, a Dutch logistics firm owned by Apollo Management, last Friday launched a discounted bond exchange. The notes had a total face value of €680.75 million, but the company said it wouldn’t issue more than €210 million of new notes in the exchange offer.

Elliott Associates and other lenders to Delphi Corp. are not getting access to the company’s books, hindering their efforts to mount a takeover bid, according to The New York Post. Delphi is a bankrupt auto parts maker that had agreed to sell its assets to Platinum Equity, before a judge ruled that it must open up the process to other bidders.

GOME Electrical Appliances Holdings (HK: 0493) saw its shares double today, when trading resumed after the company announced that Bain Capital had agreed to invest up to $418 million.

J.F. Lehman & Co. announced that it has agreed to buy marine services business Drew Marine from Ashland Inc. (NYSE: ASH). The deal is valued at approximately $120 million, and is expected to close within 90 days. And earlier LBO Wire report said that the transaction would include more than $70 million in debt financing, with CIT and BNP Paribas arranging senior debt, and Babson Capital arranging around $20 million in mezzanine notes.

Swander Pace Capital has acquired Insight Pharmaceuticals Corp., a Langhorne, Penn.-based provider of niche OTC brands like Sucrets, Dermarest, Gentle Naturals, Bonine, Anacin and Nix. No financial terms were disclosed.

PE-Backed M&A

International Automotive Components Group, a portfolio company of WL Ross & Co., has agreed to acquire certain operations of bankrupt German auto parts supplier Stankiewicz. No financial terms were disclosed.

Voyager Learning Co. (OTC BB: VLCY), an educational publisher for the K-12 market, has agreed to merge with Cambium Learning Inc., a provider of education services to at-risk and special student populations. The deal will result in Cambium sponsor Veronis Suhler Stevenson holding a majority stake in the combined public company, with Voyager stockholders to receive approximately $194 million.

Firms & Funds

VinaCapital is planning to raise a $350 million Vietnam real estate private equity fund.

Human Resources

James Hance, a senior advisor to The Carlyle Group, has been named to the board of Morgan Stanley. He is a former Bank of America executive, and currently sits on the boards of Duke Energy, Cousins Properties, Rayonier Inc. and Sprint Nextel Corp.

Johan Leven is retiring as co-head of Asian M&A with Goldman Sachs, according to a memo obtained by Reuters.

Kevin Scheetz has joined Moelis & Co. as a managing director in the firm’s technology practice. He previously was head of semiconductor and electronics I-banking for Merrill Lynch.

Marc Seidner is leaving Harvard Management Co. at the end of June, where he serves as head of domestic debt investing.

David Stith has joined Cantor Fitzgerald as a managing director, head of leveraged finance and head of financial sponsor coverage. He previously was a managing director in Merrill Lynch’s leveraged finance group.

Judy Tyler has joined Standish Management, a provider of outsourced accounting infrastructure services to venture capital and private equity firms. She will lead the firm’s new Los Angeles office, and previously was CFO of Steamboat Ventures.

W. Anthony Vernon has stepped down as a partner with Ripplewood Holdings, in order to become president of Kraft Foods North America. He officially joins Kraft in mid-August.