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    PE Week Wire -- Tuesday, December 20

Random Ramblings: Ohio Update and More

The Ohio Bureau of Workers’ Compensation is delaying the release of its private equity valuation report until at least January 6, according to a letter emailed yesterday to all of its general partners. The letter was signed by OBWC attorney Tom Sico, and included a summary of Ohio trade secret law and a test adopted by the Ohio Supreme Court for analyzing trade secret claims. Sico writes that the information is not intended to be legal advice, and that each firm should have its own counsel contact OBWC if it feels potential trade secrets are in jeopardy of being disclosed. It also is worth noting that the letter was sent using the CC function instead of the BCC function, which should make it easier for all potentially aggrieved parties to interact with one another.

In other OBWC correspondence, I received an email this morning from press secretary Jeremy Jackson, in response to yesterday's column. It reads:

A couple thoughts in response to this. First, BWC has taken a position that the information in the Ennis Knupp report is public record. Ohio's sunshine laws cast a broad ray on what is public domain, and the bureau rightly believes it should conform with those rules. For that reason, we've gone through an exercise of letting all 68 private equity funds know of our intent to release the information on January 6.

However, we've also provided an avenue for these funds to come back to us and explain why some or all of their information is not public record. It is incumbent on them, and not the public agency, to show where in the law an exemption exists for the information they wish to shield. We are in the process of entertaining those concerns right now and will continue to do so until the release date on January 6.

I can see where you'd think there would be a void of intelligence on this issue, but quite the contrary is true. We are all sensitive to this issue and realize the significance it could have on our relationship to the private equity asset class. However, we are bound by the law and cannot unilaterally decide whether to abide by public records statutes on an issue such as this. Quite simply, we received a public records request for this report, so we have a responsibility to release it. You may quantify it as ignorance, but I think we'd characterize it more as compliance.

I simply wanted to take a moment and present the issue from our side. Should you wish to discuss further, please don't hesitate to call or e-mail me.

I took Jeremy up on his offer, and spoke to him about an hour ago. He said that the release delay was made as a holiday-related courtesy, so that each firm would be aware of the situation and have time to respond. Through yesterday, around half of the affected partnerships had requested their un-redacted report information. Jackson also confirmed that OBWC had no imminent plans to make additional private equity fund commitments, and that all options for the current portfolio – including a possible secondary sale – are on the table.

Finally, I asked him why OBCW has behaved so differently than other public pensions in response to similar Open Records requests (i.e., why it’s put the legal burden on the firms, instead of on itself), particularly given OBCW’s extensive portfolio experience. He answered: “The way we have monitored all aspects of our private equity investments has been grossly immature. For example, if someone had asked us about specific valuation about companies inside of funds, we couldn’t have answered. We had no reconciling of performance numbers, or any benchmarking of returns… The difference is that I don’t think we were of a nature to have intelligently considered the issues, because we weren’t running a functional program.”

*** Stu Phillips and Dave Shrigley have left the general partnerships of U.S. Venture Partners and Sevin Rosen Funds, respectively. No formal response yet from USVP on Phillips, but Sevin Rosen’s John Jaggers says that Shrigley is transitioning out because his later-stage focus no longer meshes with the firm’s increased emphasis on seed-stage and early-stage deals. Shrigley is still working out the firm’s Palo Alto office, and plans to maintain at least one of his board seats.

*** Finally, a bunch of rumors have been floating about Lighthouse Capital Partners, a venture debt firm with offices in both California and Massachusetts. The source seems to be Lighthouse itself, which recently told limited partners to expect some partnership changes in the near future. Gwill York, a managing director and firm co-founder, told me yesterday that certain members may leave, but that the firm is not going anywhere. “I’m not sure what the exact lineup will be, but there will be a Fund VI,” she said. She adds that the investment strategy will not change, and that Lighthouse has enough dry powder in its fifth fund ($366m, closed in 2002) to last until Q1 2007.

    Top Three

Asthmatx Inc., a Mountain View, Calif.-based medical device company focused on outpatient procedures for asthma treatment, has raised $27 million in Series C funding. Vanguard Ventures and HBM BioCapital co-led the deal, and were joined by return backers Polaris Venture Partners, MedVenture Associates and Montreaux Equity Partners.

Vivato Inc., a Spokane, Wash.-based provider of indoor and outdoor WiMax stations, is shutting down. It plans to sell off its intellectual property and other assets, according to this message. The company had raised around $73 million in VC funding since its 2000 inception, plus a $2.2 million bridge loan this past September. Backers included Advanced Technology Ventures, Intel Capital, Leapfrog Ventures, US Venture Partners and Walden International.

Shutterfly Inc., a Redwood City, Calif.-based provider of online digital photo services, has secured $20 million of a $40 million Series F funding round, according to a regulatory filing. Significant shareholders include Mohr, Davidow Ventures and Jim Clark’s Monaco Ventures. The company has raised $90 million in total VC funding since its 1999 inception.

    VC Deals

Hypnion Inc., a Lexington, Mass.-based neuroscience drug company focused on sleep disorders, has raised $20.1 million in additional Series B funding. This brings the round total to $67.6 million, with backers including MPM Capital, Advanced Technology Ventures, Forward Ventures, Flagship Ventures, Oxford Bioscience Partners, GIMV, S.R. One Ltd., JAFCO, Alexandria Real Estate Equities and Mintz Levin Investments.

Centrality Communications Inc., a Santa Clara, Calif.–based provider of navigation infotainment system-on-a-chip platforms, has raised $20 million in Series D funding. Focus Ventures led the deal, and was joined by return backers Acer Venture Partners, Enspire Group, Harbinger Ventures, Menlo Ventures, Venture Tech Alliance and Walden International. The company has raised over $46 million in total VC funding since its 1999 inception.

PureVideo Inc., a Los Angeles-based provider of user-generated and professional video content for the web and wireless devices, has raised $5.6 million in VC funding from SoftBank Capital.

Tubel Technologies Inc., a The Woodlands, Texas-based developer of oil and gas exploration and production technologies, has raised an undisclosed amount of second-round funding. CTTV Investments, the VC arm of Chevron Technology Ventures, joined return backer Altira on the deal.

Edge Dynamics Inc., a Redwood City, Calif.–based provider of channel commerce management solutions, has raised $12 million in Series B funding. Greylock Partners led the deal, and was joined by EMC, Silicon Valley Bank and return backers Foundation Capital.

ITSolutions LLC, a Gaithersburg, Md.-based provider of IT services to the federal sector, has raised an undisclosed amount of venture capital from The Edgewater Funds.

Adapt Advertising Inc., a San Francisco-based provider of targeted online advertising solutions, has raised $2.37 million of a $2.96 million Series B funding round, according to a regulatory filing. Shareholders include Generation Capital Partners and Transcomos Investments and Business Development.

CardioMEMS Inc., an Atlanta-based developer of wireless medical devices to measure a patient’s vital signs, has raised around $16 million in Series C funding, according to a regulatory filing. Backers include Foundation Medical Partners and Boston Millennia Partners.

Plastic Logic Ltd., a Cambridge, UK-based developer of plastic electronics, has raised $4 million in additional Series C funding from new backer Oak Investment Partners. The company announced a $24 million first close earlier this month from BASF Venture Capital, Intel Capital, Morningside Technology Ventures, Quest for Growth, Amadeus Capital Partners, Bank of America, Dow Chemical, Nanotech Partners, PolyTechnos Venture-Partners, Siemens and Yasuda. The company has raised approximately $51 million in total VC funding since its 2000 inception.

BioAxone Therapeutic Inc., a Montreal, Canada-based neuroscience company, has raised Cdn$5.1 million in new second-round funding. This brings the round total to Cdn$12.15 million, with backers including T2C2/Bio2000, Solidarity Fund QFL, Desjardins Venture Capital and Lothian Partners 27 SARL.

iRex Technologies BV, a Dutch developer of portable electronic reading and writing solutions, has raised an undisclosed amount of VC funding from ABN Amro Capital and Main Capital. IRex is a spinout from Royal Phillips Electronics.

    Buyout Deals

Prides Capital is leading a buyout of Pegasus Solutions Inc. (Nasdaq: PEGS), a Dallas-based provider of technology and services to hotels and travel distributors. Other equity participants include Tudor Investment Corp. and Belfer Management. The total transaction is valued at approximately $275 million, and is expected to close in the first half of 2006. J.P. Morgan Securities is arranging the debt financing.

Alchemy Partners has agreed to sponsor a management buyout of UK-based Inventive Leisure PLC, the publicly-traded operator of Revolution Vodka Bars. The total deal is valued at Gbp42.5 million.

Kohlberg Kravis Roberts & Co. has received European Commission approval for its proposed 835 million euros buyout of FL Selenia SpA from Vestar Capital Partners. FL Selenia is a Turin, Italy-based producer of branded automotive lubricants and other functional fluids in Europe. Financing and debt facilities for the deal will be underwritten by Mizuho Corporate Bank and HVB.

Apollo Advisors is in advanced talks to acquire the plastics and adhesives unit of Tyco International Ltd. (NYSE: TYC) for approximately $1 billion, according to The Wall Street Journal.

Newcastle Partners and Steel Partners have lowered their acquisition offer for Fox & Hound Restaurant Group (Nasdaq: FOXX), from $14.75 per share to $14.50 per share.

Aritzia LP, a Vancouver, Canada-based retailer of women’s apparel, has received an undisclosed amount of private equity funding from Berkshire Partners. Under terms of the deal, Berkshire and existing Aritzia management will share board control. The company plans to generate $100 million in 2006 sales.

    Public Exits

NTelos Holding Corp., a Waynesboro, Va.-based provider of wireless and wireline communication services in Virginia and West Virginia, has raised the target of its proposed IPO, from $175 million to $264.5 million. It plans to trade on the Nasdaq under ticker symbol NTLS, with Lehman Brothers and Bear Sterns serving as lead underwriters. The company was acquired earlier this year for around $750 million by Citigroup Venture Capital and Quadrangle Capital Partners.

SSA Global Technologies Inc. (Nasdaq: SSAG), a Chicago-based provider of enterprise application software, has filed for a secondary offering of nine million common shares. Selling shareholders include General Atlantic and Cerberus Capital Management.

Herbalife Ltd. (NYSE:HLF) has completed a secondary offering of 13 million common shares. Selling shareholders included Whitney & Co. and Golden Gate Capital.

    Private Exits

3i Group has sold its minority stake in A Warren & Sons Ltd. to the BSS Group for Gbp14 million, plus up to Gbp750,000 in earn-outs. A Warren & Sons is a UK-based supplier of industrial products to the construction industry.

    Firm & Fund News

Burrill & Co. of San Francisco has held a $110 million first close on its Burrill Life Sciences Capital Fund III. The overall fund-raising target is $300 million.

    Human Resources

Battery Ventures has promoted Christopher Schiavo to the position of chief financial officer. He joined the firm in 2000 as controller, and was promoted to vice president of finance in 2002.

Simba Gill has joined TPG Ventures as a venture partner and entrepreneur-in-resident, effective in January. He most recently served a president of biotech company Maxygen Inc., and will work out of both San Francisco and Hong Kong for TPG Ventures.

Luc Saucier has joined Paul, Hastings, Janofsky & Walker LLP (Paul Hastings) as a Paris-based partner in the firm’s corporate department. He previously was with Rambaud Martel.

Stephen Murray, a partner with JPMorgan Partners, has taken a board seat with Cabela’s Inc. (NYSE: CAB), a Sidney, Neb.-based retailer of hunting, fishing and camping merchandise. JPMorgan Partners is a Cabela’s shareholder.

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December 20, 2005

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