To ensure this email is delivered to your inbox, please add the email
address to your address book.
If you are having trouble viewing this email, please go here.

    PE Week Wire -- Wednesday, June 21

Pundit, Heal Thyself…

Last year, I wrote that too many entrepreneurs were forming companies with the expectation of said companies being acquired within the first few years of operation. This trend was a severe departure from the previous “build an independent empire” mentality, and belied a disturbing reality that a growing number of company founders were more interested in a quick buck than in the long haul. Usually these companies were of the Internet services variety – “We expect Yahoo and Google will get into a bidding war over us once we hit $1 million in revenue” – but it even began dispersing into less likely sectors like life sciences (replace Google and Yahoo with Pfizer and J&J). And so I did what any respectable writer would do: I mocked.

Somewhere along the way, however, mocking apparently gave way to acceptance and (gasp) adoption. No, not with any company I’m building, but in the way I discuss new investments with venture capitalists. What follows is a paraphrased excerpt of a conversation I had yesterday with Erik Straser of Mohr Davidow Ventures, in regards to a $75 million Series C deal for MDV portfolio company Nanosolar Inc.:

Dan: Did you consider selling the company before raising the Series C round?

Erik: Why would we have done that?

Dan: Well, you needed $100 million or so to build the manufacturing facility, and companies like GE probably would have been interested in a developed technology that is so disruptive from a cost perspective.

Erik: I still don’t see why we’d sell.

Dan (now thinking my question should be self-evident): In order to remove the extra capital risk…

Erik: We knew we’d need to build manufacturing when we invested in the Series B round… and want to build a solar company that leads in terms of both price and technology. I still don’t understand why we would want to do anything else.

I don’t know if Erik was being a bit coy – for example, he wouldn’t tell me if Nanosolar had received acquisition approaches – but his message was a refreshing jolt back into reality. The claim that VCs “are in the business of building businesses” has become so cliché that some of us stopped believing it was true. Such a lapse in judgment is regrettable, but it has now been rectified so far as this space is concerned. Hopefully, the larger contagion can also be reversed.

Paid Advertisement
The Overseas Private Investment Corporation (”OPIC”)

Seeks private equity or real estate fund managers anticipating investing in affordable housing. All nationally, regionally, or globally oriented investments concentrated in low- and middle-income housing are acceptable.

Investments could include housing development, mortgage based
financial services, housing related infrastructure, construction
companies, and housing services.

OPIC anticipates providing up to $100 million for
each selected fund. OPIC's call for proposals will appear
on around July 1, 2006.

    Top Three

Nanosolar Inc., a Palo Alto, Calif.-based provider of lower-cost solar energy panels, has raised around $75 million in Series C funding. Return backers include Mohr, Davidow Ventures, Benchmark Capital, Mitsui & Co. and Onpoint, while new shareholders include SAC Capital, GLG Partners, Swiss Re, Grazia Equity, Christian Reitberger (original Q-Cells backer) and Capricorn Management. The company also secured around $25 million in government factory subsidies.

Rib-X Pharmaceuticals Inc., a New Have, Conn.-based antibiotics company, has raised $50 million in Series C funding. Warburg Pincus led the deal, and was joined by fellow return backers Axiom Venture Partners, Cardinal Partners, EuclidSR Partners, Oxford Bioscience Partners and S.R. One Ltd. Rix-X also added two new shareholders: MedImmune Ventures, Inc. and Radius Ventures.

Phillips Electronics NV (NYSE: PHG) has decided to sell or float its semiconductor unit by the end of this year. The unit had 2005 sales of €4.62 billion, and could be worth up to €6 billion in a sale.

    VC Deals

Transave Inc., a Monmouth Junction, N.J.-based biotechcompany focused on lung disease therapeutics, has closed on $35 million in Series C funding. Fidelity Biosciences Group and Prospect Venture Partners were joined by return backers like TVM, ABN Amro and Easton Hunt Capital Partners. A regulatory filing from earlier this year indicates that the company may raise up to $45 million via the round, but a company spokesman says no final decision has yet been reached.

Amyris Biotechnologies Inc., an Emeryville, Calif.-based developer of synthetic biology to provide high-value natural compounds, has called down around $6.5 million of a $20.1 million Series A round. Participants include Kleiner Perkins Caufield & Byers, Khosla Ventures and TPG Ventures. The company’s board now includes John Doerr of KPCB, Samir Kaul of Khosla Ventures and Geoff Duyk of TPG.

Navini Networks Inc., a Richardson, Texas-based provider of portable wireless broadband network solutions, has raised $17.5 million in sixth-round funding from return backers. The company did not disclose individual participants besides Intel Capital, but existing shareholders include Austin Ventures, GAXT Ventures, Cross Atlantic Capital Partners, Granite Ventures, Investor Growth Capital, Lehman Brothers, Motorola Ventures, Sequoia Capital, Sternhill Partners, TI Ventures and WI Harper Group. Navini has raised around $163 million in total VC funding since its 2000 inception.

Dataupia Inc., a Somerville, Mass.-based provider of enterprise computing data management solutions, has called down $10 million of a $15 million Series A-1 round, according to a regulatory filing. Backers include Polaris Venture Partners and Valhalla Partners.

iCrossing, a Scottsdale, Ariz.–based interactive marketing agency, has raised $15 million in Series D funding from Oak Investment Partners.

SciBase AB, a Sweden-based provider of skin cancer detection solutions, has raised around $13.73 million in new VC funding. Investor AB led the deal, and was joined by return backers SEB Foretagsinvest and Capman.

Topio Inc., a Santa Clara, Calif.-based provider of next-generation data replication and disaster recovery solutions, has raised $8 million in Series C funding, according to a regulatory filing. Return backers include Sequoia Capital, Star Ventures and Sigma Partners.

ServiceBench Inc., a Fairfax, Va.-based provider of on-demand service management solutions, has raised $7.3 million in Series D funding. Valhalla Partners led the deal, and was joined by return backer JMI Equity.

Autotask, a Rensselaer, N.Y.-based provider of an on-demand business platform for IT services has raised $6 million in Series C funding. JMI Equity led the deal, and was joined by return backer FA Technology Ventures.

Mashery Inc., a provider of mashup-related developer tools has raised seed funding from First Round Capital and angels like Jeff Clavier, according to VentureWire.

Abgenial Systems, a Santa Clara, Calif.-based provider of development solutions for Web applications, has raised an undisclosed amount of Series A funding from Leapfrog Ventures.

Celera Genomics (NYSE:CRA) has sold an undisclosed preclinical small molecule program to an undisclosed venture capital firm for an upfront payment of $250,000 and a 5% equity stake in the new company formed to move the program forward. If the program meets certain developmental milestones, future payments could net Celera an additional $15 million and single-digit percentage royalties on annual sales of any drugs commercialized from this program.

    Buyout Deals

Genstar Capital has agreed to acquire substantially all the assets of Fort Dearborn Co., an Elk Grove Village, Ill.-based provider of decorative labels to the consumer goods industry. No financial terms were disclosed for the deal, which is expected to close within the next month. Company management and certain selling shareholders will retain a minority ownership position. Jefferies & Co. is leading the bank debt, with Caisse de depot et placement du Quebec providing mezzanine debt.

Texas Pacific Group may compete with an existing Macquarie Bank bid for the phone and media business of Hong Kong-based PCCW Ltd., according to Reuters. Lehman Brothers is advising PCCW on the Macquarie offer.

CDC Corp. has offered to buy Onyx Software Corp. (Nasdaq: ONXS) for $96 million, or $4 million more than an accepted buyout offer from M2M Holdings Inc. (a.k.a. Made2Manage). Onyx says that it will review the new offer. M2M is owned by Battery Ventures and Thoma Cressey Equity Partners.

Wellspring Capital Management has completed its acquisition of Checkers Drive-In Restaurants Inc. (Nasdaq: CHKR), which will request delisting from the NASDAQ as a result of the transaction.

Altor has agreed to acquire a 70% interest in Scandpower Petroleum Technology Holding ASA, a Norway-based provider of flow assurance and production, drilling and reservoir moeling software for the oil and gas industry. No financial terms were disclosed for the deal, which results in existing shareholders like HitecVision Private Equity retaining a 30% pro-rata position. Also, SPTH will withdraw its application for a listing on the Oslo Stock Exchange.

    PE-Backed IPOs

BioVex Group Inc., a Cambridge, Mass.-based developer of oncolytic virus technology that replicates and spreads within solid tumors, has filed to raise $45 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol BVEX, with Janey Montgomery Scott serving as lead underwriter. BioVex has raised around $66 million in VC funding since its 1999 inception, from firms like Merlin Biosciences, Innoven, Lloyds Development Capital, Scottish Equity Partners, ABN Amro Capital, WestLB, V-Sciences and Genechem Therapeutics Venture Fund.

    PE Exits

EQT Partners has completed its sale of Tradex Converting AB to Brady Corp. (NYSE: BRC) for approximately $151.6 million. Tradex is a Sweden-based manufacturer and supplier of pressure sensitive, die-cut adhesive components for the mobile handset and electronics industries. Robert Baird & Co. advised Brady Corp. on the deal.

Electronic Arts (Nasdaq: ERTS) has agreed to acquire Mythic Entertainment, a Fairfax, Va..-based online gaming company backed by TA Associates. No financial terms were disclosed.

    PE-Backed M&A

Focus Diagnostics, a Herndon, Va.-based provider of healthcare testing services for complex diagnostics, has sold pharmaceutical testing business Focus Bio-Innova to Eurofins Scientific for an undisclosed amount. Focus Diagnostics is a portfolio company of DLJ Merchant Banking Partners and the Sprout Group.

Orbital Data Corp., a San Mateo, Calif.-based provider of WAN optimization and application acceleration solutions, in February acquired Jibe Networks Inc., a provider of WAN acceleration for distributed workforces. According to a regulatory filing, Jibe shareholders received around 2.36 million shares of Orbital common stock as part of the deal. Orbital has raised over $14 million in VC funding from firms like Sevin Rosen Funds and Redpoint Ventures.

Exegy Inc., a St. Louis-based provider of feed data processing, has agreed to merge with HyperFeed Technologies Inc. (OTC BB: HYPR). The resulting private company will be privately-held, with current Exegy and Hyperfeed stockholders each owning a 50% stake. Exegy raised $12 million in Series A funding from Bush O'Donnell & Co. and the Acartha Group, according to VentureWire.

    Other Deals

Great Lakes Dredge & Dock Corp., an Oak Brook, Ill.-based dredging services company controlled by Madison Dearborn Partners, has agreed to a reverse merger with Aldabra Acquisition Corp. (OTC BB: ALBAU), a blank check acquisition company run by managers of Terrapin Partners. Under terms of the agreement, all outstanding capital stock of Great Lakes' parent company will be exchanged for a minimum of $160 million of Aldabra common stock, subject to a post-closing working capital adjustment and an adjustment based upon Great Lakes' consolidated debt. This implies an enterprise value for Great Lakes of approximately $410 million, based on approximately $250 million of assumed debt at closing. Once the transaction is closed, Madison Dearborn will hold a 67% ownership stake, Aldabra will hold a 28% stake and Great Lakes management will hold approximately five percent.

Avatech Solutions Inc. (Nasdaq BB: AVSO), an Owings Mills, Md.-based provider of design automation and technology services, has sold $2 million in common stock to Pacific Asset Partners and Sigma Opportunity Fund. It also sold $4 million of convertible preferred stock to The Tail Wind Fund and Solomon Strategic Holdings.

    Firm & Fund News

Parish Capital is raising its first European fund-of-funds with a €300 million target. It already has secured €130 million in commitments from the North Carolina Treasury and the New York State Teachers’ Retirement System. The Chapel Hill, N.C.-based firm also is in the midst of raising its second domestic fund-of-funds with a $600 million target.

    Human Resources

Teo Dagi has joined HLM Venture Partners as a general partner. He previously was a managing partner with Cordova Ventures.

Jim Breyer, a general partner of Accel Partners, has joined the board of Marvel Entertainment Inc. (NYSE: MVL).

Sigma Capital Group has promoted Maydan Rothblum from senior associate to principal.

Private Equity Week

This is a free service of Private Equity Week, the only industry publication that tracks and researches private equity deals for the entire venture capital market. The weekly newsletter and daily website give you in-depth news on industry trends, companies seeking investors, deals at all stages, participating firms, deal conditions, proceeds and pricing. The experienced business reporters of Private Equity Week go beyond the press releases to find the stories behind the headlines. Private Equity Week offers:
  • Informative reporting on deals at every stage
  • Commentary on important trends in private equity
  • Regional roundup of SEC filings Breakdowns of private equity funds
  • Tables of venture-backed IPOs in registration and pricing
  • Strategy and market insight on venture fund activity
  • PEW Scoreboard: a comprehensive list of the past week's venture deals
  • Private Equity People: a list of the comings and goings of private equity professionals
  • Conference Calendar: a list of upcoming private equity events
Subscribe to Private Equity Week Now!


June 21, 2006

Interested in placing
your ad above?
Learn How

View Online Version | Subscribe | Advertising Info

Thomson Financial | 195 Broadway, 10th Floor, | New York, NY 10007

Copyright 2006 by Thomson Financial. All rights reserved.