peHUB Wire: Tuesday, November 10, 2009

The winter weather is hibernating, Accel Partners had an even better Monday than the Dow and I’m pondering what to do with my four remaining weeks of 2009 vacation time (feels wrong to tell Erin on Thanksgiving that I’ll be back in touch after Christmas). In other words, it’s time for some Tuesday Talkback.

*** First up, an email from Larry on yesterday’s secondary market conversation: “Your statement criticizing secondary funds for hesitating to buy ‘Early Secondaries’ surprised me. The fact is that ‘Early Secondaries’ are not secondaries at all…. The only shared aspect is that the transfer occurred after the fund was closed and that is irrelevant to future performance. They do not have significantly reduced blind pool risk and their duration is virtually identical to a primary investment. They are based upon a bet that the ‘historically-strong manager’ will remain so, not upon an analysis of the value of a portfolio of identified i! nvestments.

Those investments are best made by primary fund investors (and in fact, that is who is buying these deals according to Cogent). As a secondary fund manager, we promised our investors a portfolio with the attributes of secondary investments that make them, in our opinion, relatively more attractive. Not investing in assets that lack those characteristics does not indicate a “lack of faith in the asset class.” Rather, it shows investment discipline. In our view, that is to be applauded, not criticized.”

*** Michael on 20-year fund investment cycles: “The great advantage of such a long horizon, especially the fact that you do NOT have to cut things short at 10 years, is that in a 20 year window, you are certain to be able to buy low AND sell high as you are running at least through one 7-10 year market cycle. Hence you can eliminate the market timing / exit problem, that has dragged down the VC industry over the last 10 years with its short-te! rm thinking.”

*** Joanna on my criticism of a VC firm for (temporarily) keeping an alleged inside trader under contract: “I think that it was completely unfair of you to assume that everyone should fire Chen Tang and not enable him to have any employment during his trial. Have you forgot the assumption that someone is innocent until proven guilty? You seem to believe that everything the government alleges about folks is necessarily true, and we all know that it not the case.”

I understand such sentiments, but a VC firm’s primary obligation is to its limited partners. As such, how can you have someone overseeing your books who was charged with insider trading while serving in a very similar function? Moreover, this individual never disclosed the ongoing SEC investigation to his new employer, nor why he was dismissed from his previous job. 5AM Ventures had a choice: Possibly be unfair to one man or possibly be unfair to its investors. Not sure that’s really a choice…

! *** Jordan: “When will you be posting the Internship Rodeo listings?” My hope is to do so tomorrow, Jordan, although please don’t hold me to it. Once they’re up, I’ll be sure to announce it very loudly.

*** Finally, there is Fred: “No love for the Yankees? Not even a bit of hating to make us New Yorkers revel in your Boston pain?” Apologies Fred. Congratulations on finally climbing back up to the top perch, and my sincerest hopes that you fall back off of it with alarming speed….

Top Three

Google has agreed to buy AdMob, a San Mateo, Calif.-based mobile advertising marketplace, for $750 million in stock. AdMob has raised over $46 million in VC funding, from firms like Accel Partners, Sequoia Capital and DFJ Growth Fund.

BC Partners has agreed to buy U.S. career training company ATI Enterprises from The Riverside Company. The deal is valued at approximately $581 million, including around $250 million of assumed debt.

Lee Scott, former president andCEO of Wal-Mart, has joined Solamere Capital as an operating partner and member of the firm’s investment committee. He had joined Wal-Mart in 1979 as an assistant director in the co! mpany’s logistics division, and served as president and CEO for nine years until leaving this past February.

VC Deals

BioVex Inc., a Woburn, Mass.-based drug company whose lead candidate is designed to help treat advanced melanoma, has raised $30 million in new Series F funding. This brings the round total to $70 million, including a $40 million first close back in March. Morningside Venture, Ventech and MVM Life Science Partners co-led the new tranche, and were joined by fellow new backers Sectoral Asset Management and Ysios Capital Partners. Forbion Capital Partners had led the initial tranche, alongsideCredit Agricole Private Equity, Harris & Harris Group, Innoven Partners, New Science Ventures, Triathlon Medical Venture Partners and Scottish Equity Partners. BioVex has now raised around $180 million.

SandForce Inc., a Santa Clara, Calif.-based developer of flash solid-state drive processors, has raised $21 millio! n in Series C funding. TransLink Capital led the round, and was joined by fellow new investors UMC Capital, LSI Corp., Red Maple Ventures, Darwin Ventures and A-Data Technology. Return backers included DCM, Storm Ventures and unnamed “tier-1 storage OEMs.”

Plex Systems Inc., an Auburn Hills, Mich.-based provider of ERP software for manufacturers, has raised $6 million in new funding led by return backer Apax Partners.

ElectraTherm Inc., a Carson City, Nev.-based developer of waste-heat recovery technology, has raised $5.4 million in new funding from undisclosed investors. It has now raised around $10 million in total funding.

AppNexus Inc., a New York-based maker of a virtualized cloud computing p! latform for online advertising applications, has raised $5 million in third-round funding. Kodiak Venture Partners led the round, and was joined by fellow return backers Venrock and First Round Capital. Previous investor was not listed. Read more…

SDI Health, a Plymouth Meeting, Penn.-based provider of healthcare analytics, has raised an undisclosed amount of equity funding from Tailwind Capital. SDI had previously raised funding from LLR Partners.

Buyouts Deals

The Carlyle Group has agreed to buy OpenLink Financial from TA Associates. No financial terms were disclosed for the deal, which is expected to close later this quarter. Bank of America Securities and Credit Suisse Securities are providing leveraged financing. OpenLink is a Long Island-based provider of software for the commodity, energy and financial services industries.

Chef Solutions Holdings LLC (a.k.a. Orval Kent),a Wheeling, Ill.-based manufacturer of fresh prepared foods for retailers and food service accounts, has raised $24 million from Mistral Equity Partners.

CVC Capital Partners has pulled out of a planned joint bid with General Electric, for the transmission and distributio! n of Areva.

Hellman & Friedman and JMI Equity have agreed to acquire Datatel Inc., a Fairfax, Va.-based provider of enterprise information management solutions for higher education institutions. No financial terms were disclosed. Sellers include Thoma Bravo, Trident Capital, HarbourVest Partners and JP Morgan Asset Management–which sponsored a management buyout of Datatel in early 2005.

Mill Road Capital has agreed to buy Canadian advertising agency Cossette Inc. (TSX: KOS), besting a rival offer from Cosmos Capital. Mill Road will pay C$7.87 per Cossette share, which values the company at approximately C$97.6 million.

Six Flags Inc., the bankrupt theme park operator, has submitted a new reorganization plan based on proposals from hedge fund Avenue Capital Management and other bondholders. Avenue had criticized the initial plan, which would have transferred almost all of the company’s stock to senior lenders like J.P. Morgan Chase & Co.

PE-Backed IPOs

Archipelago Learning Inc., a Dallas-based provider of online education tools and services, has set its IPO terms to 6.25 million common shares being offered at between $15 and $17 per share. It would have an initial market cap of approximately $427 million, were it to price at the high end of its range. The company plans to trade on the Nasdaq under ticker symbol ARCL, with BoA Merrill Lynch and William Blair & Co. serving as co-lead underwriters. Providence Equity Partners acquired a majority stake in Archipelago Learning in January 2007, for $84.5 million. It currently holds a 70.1%

PE Exits

Electronic Arts (Nasdaq: ERTS) has agreed to buy social gaming company Playfish Inc. for $400 million, including a $100 million earn-out. The company had raised $21 million in VC funding from Accel Partners and Index Ventures.

DW Healthcare Partners has sold Global Physics Solutions Inc., a Cypress,Texas-based provider of provider of medical physics services to hospitals and radiation therapy centers,to Landauer Inc. (NYSE: LDR). The deal was valued at $22 million in cash.

GigOptix Inc. (OTCBB: GGOX) has agreed to acquire ChipX, Santa Clara, Calif.-based provider of ASIC products. ChipX investors will receive 3.5 million common shares of GigOptix stock, currently valued at approximately $12.25 million and representing a 26% stake in GigOptix. ChipX has raised approximately $65 million in total VC funding, including a recap in 2004. Current backers include Elron Electronic Industries, Needham Asset Management, Newlight Associates, Parker Price Venture Capital, UMC Capital, VantagePoint Venture Partners and Wasserstein Ventures.

Norvestor has agreed to sell Intelecom Holding AS, a Norway-based provider of communications solutions in Western Europe, to Carrot Communications AS. No financial terms were disclosed. Norvestor acquired Intelecom in December 2008, taking it private from the Oslo Stock Exchange. This represents the first exit for Norvestor’s fifth fund.

PE-Backed M&A

GridPoint Inc., an Arlington, Va.-based smart-grid company, has acquired ADMMicro, a Roanoke, Va.-based provider of energy management systems for the commercial and industrial sector. No financial terms were disclosed. GridPoint has raised around $220 million in total VC funding, from firms like Goldman Sachs, New Enterprise Associates, Susquehanna Private Equity, Perella Weinberg Partners and Robeco.

Tyden Group Holdings Corp., a portfolio company of Crimson Investment, has acquired E.J. Brooks Co., a Livingston, N.J.-based provider of security seals and metering related products. No financial terms were disclosed.

Firms & Funds

Kohlberg Capital Corp. (Nasdaq: KCAP) said the filing of its Q3 results would be delayed after its Deloitte & Touche LLP raised questions about the process of valuing certain loan portfolio investments.

Lone Star Funds has agreed to cut the fees on some of its funds, according to The Wall Street Journal.

Tennenbaum Capital Partners has secured over $330 million in capital commitments for its first fund focused on debtor-in-possession (DIP) financing.

Human Resources

Allen Bouch and Scott Norby have joined UBS Investment Bank as managing directors within the firm’s financial sponsors group. Bouch will be based in San Francisco, and previously was with Citigroup. Norby will be based in New York, and previously was with Goldman Sachs.

Martin Gibson has joined Accel Partners as a venture partner in the firm’s London office. He had previously been a London-basedpartner with Atlas Venture, but left earlier this year as a part of a personnel restructuring after Atlas closed its eighth fund well below target.

John LaMattina, former president of Pfizer’s global R&D efforts, has joined PureTech Ventures as a senior partner. PureTech also announced the promotions of Eric Elenko and Steve Muniz to partner.

Catherine Lewis La Torre has been name! d a partner with Fondinvest Capital, a French fund-of -funds manager. She previously was a founding partner of Proventure, a fund-of-funds manager focused on the European middle markets.

Louis de Saint-Marcq has joined placement agent Capstone Partners as an associate partner in the firm’s European office. He previously was in the London office of Goldman Sachs as an executive director of equities.

Mark Wesseldine has joined the London office of law firm Fried Frank, as a partner focused on leveraged finance transactions. He previously was a partner with Allen & Overy.

Sean Carroll has joined executive ! search firm Polachi & Co. as a Stamford, Conn.-based partner, with a focus on C-level tech executives. He previously was a managing partner with the Barlow Group, and before that was with both Pequot Capital’s venture capital unit and Heidrick & Struggles.