Week in review, May 14, 2007

Ares joins sell-off bakeoff

Ares Management could be the next private equity firm to sell a piece of its management company to institutional investors, according to a source familiar with the situation. The Los Angeles-based firm is said to be early in discussions with potential buyers, and has not retained an investment bank.

“They seem to really just be testing the waters at this point,” the source said.

Ares manages several private equity and debt funds, plus a publicly-traded business development company called Ares Capital Corp. (Nasdaq: ARCC). Its first private equity fund had called down about 80% with a 27.1% IRR through the end of Q3 2006, according to limited partner California Public Employees’ Retirement System. Its second private equity fund closed just last year, and only had called down about 10% of its capital through the CalPERS reporting period.

An Ares spokesman said that the firm would have “no comment” on the sale process.

But Ares is not unique in its pursuit of a management company stake. Many private equity firms have put out feelers about such a transaction, and a few have already closed on such deals in the recent past (such as The Carlyle Group with CalPERS, for example). —Dan Primack

News Corp. to acquire Photobucket

. agreed to buy Photobucket for $250 million last week, according to reports, posting impressive returns for its investors and giving hope to a sea of photo-related startups.

Photobucket reports having 17 million unique monthly users and $6.3 million in revenue during 2006. The acquisition valuation is nearly 40 times the startup’s trailing revenue and $14.70 per monthly unique visitor: a hefty premium for eyeballs.

Trinity Ventures, Trinity General Partner Gus Tai, IVP/BB Investment, Red Tail Hawk and Land Meets the Sea invested $14.5 million in the company’s Series B last year. It’s a deal that Trinity had to fight for. “While we were meeting with them, the founder’s cell phone was ringing off the hook from other VCs dancing around the company,” Trinity General Partner Larry Orr told Venture Capital Journal (PE Week’s sister publication) last fall.

The day after news of the Photobucket deal broke, Erin Breen, an assistant account executive at Matter Communications, sent emails to journalists touting major customer traction milestones from PhotoShelter. The startup is backed by General Catalyst Partners and caters to professional photographers, allowing them to sell their pictures online. PhotoShelter raised a $4.1 million Series A in March.

The Photobucket deal may also help other startups that have latched onto MySpace. SnapVine, a voice player that plugs into social networks such as MySpace, has raised $8 million of a $10 million Series B investment from Draper Fisher Jurvetson and former Kleiner Perkins Caufield & Byers investor Russ Siegelman. The startup had raised $2.1 million in its Series A investment round last summer. —Alexander Haislip

Intel fuels Tutor.com, five other startups

announced last week that it has invested $31 million in six companies worldwide. The recipients include two China-based companies (51.com, a social networking platform, and Phoenix Microelectronics, which makes SIM cards for mobile devices); two Israeli companies (application management software startup Aternity and portable computing application developer Ceedo) and two U.S. companies (VoIP telephony provider Jajah and online tutor provider Tutor.com).

Tutor’s $9.5 million in expansion capital was led by Intel Capital and included investments from Ascend Venture Group, Kidron Opportunity Fund and previous investor Dawntreader Ventures.

In announcing its recent deals, Intel Capital says that during the first quarter it invested $154 million in 43 companies worldwide. About 75% of its invested dollars were in companies based outside the United States. —Joanna Glasner