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    PE Week Wire -- Thursday, April 13

Random Ramblings

*** On Tuesday night I helped judge the semi-finals of a clean-tech business plan competition up in Lowell. Almost all of it was off-the-record, but a few quick observations:

  • Lowell is home to Konarka, a VC-backed company that makes flexible photovoltaic materials (particularly for military use). Listening to clean-techies talk about Konarka is like listening to Web 2.0 disciples discuss Google, except without the malevolent envy. It seems that almost every photovoltaic b-plan was viewed through the Konarka lens. Big-market folks like GE, however, were hardly mentioned at all.
  • I was on a judging team with Robert Shaw of Arete Corp. He is a clean-tech know-it-all, but in the most literal sense.
  • Most of the b-plans involved solar tech, which apparently reflects the larger clean-tech market opportunity. Not wind, biofuels, hydrogen, water, etc. – but solar. This is probably old hat to many of you, but was new to me.
  • There were a bunch of clean-tech VCs at the event, and I tried to ask each of them the following questions: “Is there enough clean-tech dealflow to justify the amount of venture capital being allocated to the space?” The unanimous answer was “no.” Kind of reminds me of China...

*** Amp’d Mobile finally announced its third round of funding, which doubles as the year's largest VC deal. The total is $150 million, with new backers including Tudor Investments, Intel Capital, Rho Ventures, Qualcomm, Quilvest Ventures, Polygon Investment Partners and Heights Capital Management. Return backers include MTV, Universal Music Group, Highland Capital Partners, Columbia Capital and Redpoint Ventures. Speaking of MVNOs, the curious entity known as Xero Mobile has gone public on the OTC BB via a reverse merger with a shell company. Guess a fictional $300 million doesn’t buy what it used to…

*** A bunch of you wrote in yesterday to dispute my contention that Massachusetts is middle of the road in terms of tax burden. Specifically, you pointed out new U.S. Census data showing that Massachusetts is seventh in per capita tax payments. This point is fair, but ignores the fact that Mass. also is one of the highest in terms of per capita income (not to mention property values). Of course we pay a lot – because we make a lot. Moreover, the nonpartisan Tax Foundation ranks Mass. #27 in terms of its State Business Tax Climate Index. The top state on the Index, by the way, is Wyoming, while New York comes in dead last.

*** MeetUp Inc., a New York-based provider of Internet software for managing community groups, last month disclosed that it had sold just over 10% of the company to eBay, Omidyar Network, Draper Fisher Jurvetson, Esther Dyson, Allen & Co. and former Senator Bill Bradley. But they wouldn’t say how much they sold it for. So thank goodness for regulatory filings. First, eBay reported that its participation was $2 million. Then, a Meetup filing dated March 15 indicates that the total round (Series C) came in at around $4.62 million. So, carry the one and transpose your decimal points to get… MeetUp is worth somewhere in the neighborhood of $40 million.

*** VentureWire is reporting that the beleaguered Ohio Bureau of Workers’ Compensation is finally taking the first steps toward selling off its private equity portfolio. It has received permission to solicit managers to help negotiate the process, although no RFP is yet available. Expect secondary buyers to jump at this one for two reasons: (A) Secondary buyers, on the whole, have far too much dry powder; (B) It’s a very good portfolio, particularly once you correct the bad math that plagued consultant Ennis Knupp’s original report. Sure there are a few dogs in there – mostly in-state funds – but there also are a bunch of gems. In fact, this could be one of the year’s best secondary opportunities, topped only by theoretical offerings from other Ohio pension systems (if a judge foolishly rules for full transparency) or from Illinois pension systems (if legislators don’t amend the Sudan divestment bill).

*** Quiz Time: Which publicly-traded pharma company is piquing LBO firm interest? Hint: It’s got a market cap of approximately $750 million.

*** Please join me in welcoming Alex Haislip into our joyous editorial family here at Thomson Financial. Alex previously worked at Red Herring (who didn’t?), and will focus on venture capital for PE Week and Venture Capital Journal from our San Francisco office. Please feel free to welcome him at

*** Finally, I shall join fellow Jews all over America in taking Good Friday as a holiday. Be back Monday…

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    Top Three

Stone Point Capital confirmed that it is leading an offer to buy reinsurer AXA Re for approximately $1.5 billion. Other members of the consortium include Hellman & Friedman, Vestar Capital Partners, Crestview Capital Partners, Och-Ziff Capital Management, ABN AMRO and New Mountain Capital.

Infinity Pharmaceuticals Inc., a Cambridge, Mass.-based cancer drug discovery and development company, has agreed to a reverse merger with San Diego-based drug research company Discovery Partners International Inc. (Nasdaq: DPII). Infinity has raised over $150 million in total VC funding since its 2001 inception, from firms like Prospect Venture Partners, Tallwood Venture Capital, Venrock Associates, HBM Partners, Advent Venture Partners, Vulcan Capital and Novartis.

The California Pubic Employees’ Retirement System disclosed that in February it made the following fund commitments: $200 million to ArcLight Capital Partners III (closed at $2.1 billion); $80 million to Aisling Capital II (closed at $550 million); $175 million to Francisco Partners II (targeting $2 billion); €150 million to KKR Europe II (closed at €4.5 billion); $70 million to TPG Biotech Partners II (targeting $400 million); $200 million to TowerBrook Investors II (closed at $1.3 billion).

    VC Deals

Corus Pharma Inc., a Seattle-based drug company focused on respiratory diseases, has raised $25 million in funding from Gilead Sciences Inc. (Nasdaq: GILD). The deal makes Gilead the company’s second-largest stockholder, and also gives it an exclusive option to purchase the remaining Corus shares at a specified – albeit undisclosed – price. Corus previously raised around $123 million in total VC funding, including a $65 million Series C round in early 2004 at a post-money valuation of approximately $155 million. Backers include Burrill & Co., JPMorgan Partners, MDS Health Ventures, OrbiMed Advisors, RBC Capital Partners, Integra Ventures, Bear Stearns Health Innoventures, Anthem Venture Partners, Novo AS, Pacific Rim Ventures and SunAmerica Ventures.

Zoom Systems, a San Francisco-based developer of robotic retail stores, has raised $10 million in Series C funding. Goldman Sachs led the deal, and was joined by return backers Sierra Ventures and NeoCarta Ventures.

New Global Telecom Inc., a Boulder, Colo.-based provider of teelcom services like wholesale VoIP, has raised $10.75 million in Series A funding, according to a regulatory filing. Backers include Comcast Interactive Capital, Columbia Capital and Centennial Ventures.

vMix Media Inc., a San Diego-based online community for the distribution of video content, secured $5 million in Series A funding from Mission Ventures and Enterprise Partners Venture Capital, according to a regulatory filing. The company announced the round earlier this year, but didn’t disclose the amount.

Displaytech Inc., a Longmont, Colo.-based provider of microdisplay panels, has raised $7 million in Series A-1 funding, according to a regulatory filing. Backers include Hewlett-Packard, Fleming US Discovery Partners, Allen & Co. and DTech Inv*stments. Displaytech has raised around $70 million in total VC funding since 2000.

Voxpath Networks Inc., an Austin, Texas-based provider of hosted IP telephone services, has secured $9.9 million of an $11 million Series E round, according to a regulatory filing.

Network Physics Inc., a Mountain View, Calif.-based provider of networking products to improve Internet performance, has raised $8.63 million in Series D-1 funding. Backers include Trinity Ventures, Palomar Ventures, Sofinnova Ventures and SunAmerica Investments.

    Buyout Deals

Titan International Inc. (NYSE: TWI) and One Equity Partners have discontinued discussions about a possible acquisition of Titan by One Equity. At this time, Titan is not negotiating with any other potential acquirers.

VNU NV has postponed its annual shareholders meeting from April 18 to June 13, as it fights for approval of a controversial €7.5 billion buyout plan. The company said the June 13 meeting would focus solely on the offer.

The Carlyle Group has completed its acquisition of MultiPlan Inc., a New York-based preferred provider organization (PPO). No financial terms were disclosed.

The Carlyle Group and Zodiac SA have completed their acquisition of Water-Pik Technologies Inc. (NYSE: PIK) for $27.75 per share. The deal's total equity tranche works out to about $380 million, with Carlyle providing 80% and Paris-based Zodiac providing the remainder. Water-Pik is a Newport Beach, Calif.-based provider of personal health care products and pool products. JPMorgan served as Water Pik's financial advisor on the deal, while Carlyle and Zodiac were advised by Lazard.

Industrial Opportunity Partners and American Capital Strategies have acquired The Algoma Group, an Algoma, Wash.-based manufacturer of interior wood doors for use in commercial construction. No financial terms were disclosed.

New Energy Capital Corp. has agreed to invest $142 million into a 110 million gallon per year ethanol production facility currently under construction in Clymers, Indiana. The plant, adjacent to a grain storage terminal owned by The Andersons Inc. (Nasdaq: ANDE), will produce ethanol from corn grown by local farmers and will also produce a feed supplement for the region's dairy industry. The facility is expected to close in Q1 2007, and it will be managed by The Andersons.

American Capital Strategies has acquired an 85% stake in Primrose Holdings Inc., an Acworth, Ga.–based franchisor of early childhood education and child care in the upscale demographic segment of the child care industry. American Capital contributed $63 million, which took the form of convertible preferred and common equity, and senior and junior subordinated notes. In addition, Wachovia Corp. and CIT Group provided a senior term loan.

MidOcean Partners has completed its previously-announced acquisition of Palace Entertainment Inc., a Newport Beach, Calif.–based operator of water parks and family entertainment centers, from Windward Capital. No financial terms were disclosed.

    PE-Backed IPOs

Chart Industries Inc., a Garfield Heights, Ohio-based manufacturer of equipment used in the production, storage and end-use of hydrocarbon and industrial gases, has filed to raise $250 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol GTL, with Lehman Brothers, Morgan Stanley and UBS serving as lead underwriters. First Reserve Corp. bought Chart Industries last year for $460 million from Oaktree Capital Management and Audax Group.

Vanda Pharmaceuticals Inc., a Rockville, Md.-based, priced 5.75 million common shares at $10 per share, for an IPO take of approximately $57.5 million. It closed its first day of trading down at $9.68 per share. The company had previously raised $62 million in total VC funding from firms like Care Capital, Domain Associates, Prospect Venture Partners, Rho Ventures, MedImmune Ventures and Bio*One Capital.

    PE Exits

3i Group has agreed to sell its 49% stake in Dutch soft drink company Refresco Holding BV to an FL Group-led consortium for approximately €461 million.

Energy Investors Funds has sold its 36.4% stake in Jamaican power generation company Jamaica Energy Partners to Conduit Capital Partners. No financial terms were disclosed.

Pacgen Biopharmaceuticals Corp. has agreed to acquire anti-inflammatory drug company IL Therapeutics Inc. from Western Life Sciences Venture Fund.

Murata Manufacturing Co. Ltd. has agreed to acquire SyChip Inc., a Plano, Texas–based provider of radio frequency scale modules. The deal is valued at approximately $140 million, and is expected to close at the end of April. SyChip has raised around $55 million in VC funding from firms like Alliance Technology Ventures, Masthead Venture Partners, Markpoint Venture Partners, Pacesetter Capital Group, Sierra Ventures, Austin Ventures, 3i Group and Intel Capital.

    Firm & Fund News

Thompson Street Capital Partners of St. Louis is raising $250 million for its second fund, according to a regulatory filing. Monument Group is serving as placement agent.

London Merchant Securities plans to spin out its non-property investment division, which will be renamed Leo Capital.

    Human Resources

Ray Pullaro has agreed to join Blackstone Alternative Asset Management, a fund-of-hedge-funds, on June 1. He previously was senior investment officer of UBS Fund-of-Funds.

Tom Wrenn has joined ECI Partners as an investment executive. He previously was with the Close Brothers Private Equity.

Adrian Mee has agreed to join Lehman Brothers as co-head of global healthcare, according to The Financial Times. He previously was co-head of European M&A with Morgan Stanley.

Gerry Williams has joined Hunton & Williams LLP as an Atlanta-based partner in the firm’s global capital markets and M&A team. He previously was with Lord, Bissell & Brook LLP.

Private Equity Week

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April 13, 2006

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