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    PE Week Wire -- Monday, June 5

IDG Bails on Europe

It's no secret that global VC bulls are trampling Europe on their way to Asia, and IDG Ventures Europe is one of the rampage’s first official casualties. The London-based group recently lost its corporate sugar daddy, sold off its portfolio companies and reorganized under the nascent banner of Acacia Capital Partners.

For the uninitiated, IDG Ventures Europe was formed in 2000 with a $100 million commitment from International Data Group, a Massachusetts-based tech publisher and event planner that already had VC operations in China and San Francisco. IDG later would add Boston and Vietnam VC satellites, for which it also served as sole limited partner. In late 2004, however, IDG decided to scale back some of its investment exposure, and told regional managers that each office would need to raise third-party capital for future funds. IDG Ventures Boston, for example, raised $180 million for a new fund that included IDG only as a minority LP, while IDG Ventures China formed a $250 million vehicle in tandem with Accel Partners.

It is unclear how hard IDG Ventures Europe worked at raising an independent fund – no one is talking much until a formal announcement comes later this week – but IDG apparently abandoned its affiliate late last year by ending management fee payments. Soon after, IDG began prepping for a $150 million India-focused fund.

IDG Ventures Europe immediately began hitting up secondary buyers for its remaining portfolio companies: Level 5 Networks, a UK-based Ethernet company; Empower, a UK-based provider of wireless messaging infrastructure; Automsoft, an Ireland-based provider of data management systems for process manufacturing; and Shazam, a London-based mobile music service.

A handful of buyers passed, but the portfolio was recently sold to Partners Group and Access Capital Partners. Former IDG Ventures Europe general partners Ajay Chowdhury, Hitesh Mehta and Chris Smart will continue managing the existing portfolio, and also will have the ability to make new deals under the name Acacia Capital Partners.

IDG said that it “has been assessing all its funds in recent months and has decided to reallocate resources from Europe to India, China, the US, and Vietnam.” It declined to provide a rationale for its decision, perhaps assuming that most folks recognize the larger regional shift from Europe to Asia. If they were willing to answer questions, however, I’d give them this one: Aren’t VCs supposed to identify underserved/unpopular markets, rather than rushing over to the next big thing? I’m sure someone once told me that…


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    Top Three

International Paper (NYSE: IP) has agreed to sell its coated and super-calendered papers business to an affiliate of Apollo Management for approximately $1.4 billion. The deal is expected to close later this summer.

Capital H Group Inc., a Chicago-based human capital consulting and outsourcing firm, has raised $25 million in private equity funding from FTVentures. Capital H previously received a $25 million infusion in 2003 from PPM America Capital Partners.

Alphatec Holdings Inc., a Carlsbad, Calif.-based medical device company focused on surgical treatments for spine disorders, last week priced 9.3 million common shares at $9 per share, for an IPO take of approximately $83.7 million. The pricing came in blow the original $13-$15 range and a revised $11-$12 range, with Alphatec shares dropping to $8.44 Friday before closing at $8.98. Deutsche Bank Securities and First Albany Capital served as co-lead underwriters, while HealthPoint Capital Partners led a buyout of Alphatec in March 2005.

Cliffwater LLC is looking to hire a Private Equity Associate based in Marina del Rey, CA.
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    VC Deals

Convergence Inc., a Maynard, Mass.-based provider of services for scaling, securing and controlling VoIP, has raised $15 million in Series C funding. Globespan Capital Partners led the deal, and was joined by return backers Highland Capital Partners and North Bridge Venture Partners.

Viator Inc.
, a San Francisco-based online resource for tours and activities, has raised $4 million in second-round funding from return backers Carlyle Venture Partners and Technology Venture Partners.

Neutral Tandem Inc., a Chicago-based provider of tandem and voice peering services, has raised $12 million in Series C funding. Montagu Newhall Associates led the deal, and was joined by Wasatch Advisors and return backers Mesirow Financial, DCM-Doll Capital Management and New Enterprise Associates.

Lovejuice Ltd., a UK-based chain of branded juice bars, has raised £2.3 million in VC funding from Smedvig Capital.

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    Buyout Deals

Advent International has completed its acquisition of Neuvo Banco Commercial SA, Uruguay’s largest commercial bank, from the Uruguayan government. The deal was valued at $167 million.

Linden LLC has acquired Focused Health Solutions Inc., a Deerfield, Ill.-based provider of disease management services. No financial terms were disclosed.

ISIS Equity Partners has sponsored a £13.5 million management buyout of Fisher Outdoor Leisure Ltd., a UK-based bicycle parts and accessories distributor.

Trimaran Capital Partners has agreed to acquire Standard Steel LLC, a Burnham, Pa.–based manufacturer of steel wheels and axles for use in freight railcars, locomotives and passenger railcars, from Citicorp Mezzanine Partners. No financial terms were disclosed for the deal, which is expected to close later this quarter.

    PE-Backed IPOs

Luna Innovations Inc., a Roanoke, Va.-based developer of molecular technology and sensing solutions, priced 3.5 million common shares at $6 per share, for an IPO take of approximately $21 million. It originally planned to sell 4 million shares at between $11 and $13 per share, but later lowered the range to between $6 and $8 per share. It will trade on the Nasdaq under ticker symbol LUNA, while ThinkEquity Partners served as lead underwriter. The company had raised around $21.5 million in total VC funding from firms like Novak Biddle Venture Partners, Columbia Capital, Envest Ventures and Dawntreader Ventures.

GNC Corp., a Pittsburgh-based provider of nutritional supplements, has filed to raise $400 million via an IPO of common stock. It plans to trade on the NYSE under ticker symbol GNC, with Merrill Lynch, Lehman Brothers and UBS serving as co-lead underwriters. GNC was acquired by Apollo Management in 2003 for approximately $750 million. It filed for a $345 million IPO in May 2004, but pulled it later that year due to “unfavorable market conditions.”

AirCastle Ltd., a Stamford, Conn.-based acquirer and leaser of commercial jet aircraft to passenger and cargo airlines, has filed to raise $175 million via an IPO of common stock. It plans to trade on the NYSE, with JPMorgan, Bear Stearns and Citigroup serving as co-lead underwriters. Fortress Investment Holdings has a 98% pre-IPO position.

Panther Expedited Services Inc., a Seville, Ohio-based provider of expedited transportation services in North america, has filed to raise $250 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol PTHR, with UBS and Bear Stearns serving as co-lead underwriters. Fenway Partners is the company’s controlling shareholder with a 77.83% pre-IPO stake, while York Street Mezzanine Partners holds a 7.69% pre-IPO position.

Trubion Pharmaceuticals Inc., a Seattle-based drug company focused on inflammatory diseases and cancer, has filed to raise $86.25 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol TRBN, with Morgan Stanley serving as lead underwriter. The company has raised around $46 million in VC funding from firms like Frazier Healthcare Ventures, Oxford bioscience Partners, Prospect Venture Partners, Venrock Associates and ATP Capital.

Acme Packet Inc., a Burlington, Mass.-based maker of session border controllers for service providers (i.e., VoIP infrastructure), has filed to raise $85 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol APKT, with Goldman Sachs and Credit Suisse serving as co-lead underwriters. The company has raised $45.5 million in total VC funding since its 2000 inception, from firms like Menlo Ventures, Advanced Technology Ventures and Canaan Partners.

Hexion Specialty Chemicals Inc., a Columbus, Ohio-based maker of thermosetting resins, has again revised its proposed IPO terms, this time to 19 million common shares being offered at between $25 and $28 per share. It originally offered 20 million shares at between $21 and $24, before changing it to 18.52 shares at between $26 and $28 per share. The revisions continue to reflect a growing number of shares being offered by controlling shareholder Apollo Management, which now will have around 14.3 million shares on the block (originally had just 7.9 million). Hexion still plans to trade on the NYSE under ticker symbol HXN, with Credit Suisse and Goldman Sachs serving as co-lead underwriters. Apollo formed Hexion last year as a rollup of Borden Chemical Inc., Resolution Specialty Materials LLC and Bakelite AG.

Southern Cross Healthcare Ltd., a UK-based nursing home operator, is expected float in London next month at a valuation of around £500 million. The company was acquired by Blackstone Group from West Private Equity for £162 million in 2004. It since has acquired other companies like NHP and Ashbourne.

    Other Deals

Paul Capital Partners has struck a royalty deal with Glenmark Pharmaceuticals Inc., whereby Paul will invest up to $27 million to finance the development of 16 dermatological products by Glenmark for the US market. In return, Paul will receive undisclosed royalties on net sales following US FDA approval, and the launch of each product.

Glisson Capital has agreed to provide project financing to Robert Sandford Stewart for exploration and development of new gas and oil fields. No financial terms were disclosed. Glisson Capital is run by Linda Glisson, former director of venture capital for Eastman Kodak. Stewart has been a Canadian foreign service diplomat with responsibility for World Bank programs in Africa.

Interpharm Holdings Inc. (AMEX: IPA), a Hauppauge, N.Y.-based generic pharmaceuticals company, has raised $10 million in PIPE financing from Tullis-Dickerson.

    Firm & Fund News

Evolvence Capital of Dubai has launched a $150 million private equity fund focused on growth-stage pharmaceutical and biotech companies in India.

Mekong Capital of Vietnam has closed its second private equity fund with $50 million in capital commitments.

Benson Elliot Capital Management has closed its inaugural European real estate private equity fund with 264 million euros in capital commitments, according to The Financial Times. The UK-based firm was launched last year by Marc Mogull, who previously ran real estate for Doughty Hanson.

Noro-Moseley Partners has begun raising its sixth VC fund with a $200 million target, according to The Atlanta Business Chronicle.

Okapi Venture Capital has closed its inaugural fund with approximately $30 million in capital commitments. Limited partners include Advanced Medical Optics Inc., Conexant Systems, Edwards Lifesciences and Western Digital Corp. The Laguna Beach, Calif.-based firm will focus on seed and early-stage IT and life sciences opportunities in Southern California, with a particular emphasis on Orange County.

Goodwin Procter has added a private equity team to its Washington, D.C. office, through the hiring of former Hogan & Hartson partners J. Hovey Kemp, Christopher Hagan and James Hutchinson.

    Human Resources

Jose Torres has joined Energy Investors Funds as a senior vice president in the firm’s Mill Valley, Calif. office. He previously was vice president and head of structured finance with CoBank in Denver.

Klaus Hommels has joined Benchmark Capital Europe as its first venture partner. He is a former partner with BV Capital, and before that was with Apax Partners.

Peter Brooks has joined UK private equity firm Pi Capital as a managing director and partner. He previously was managing partner of Sovereign Capital.

Claude Lamoureux, CEO of the Ontario Teachers’ Pension Plan, told Bloomberg that he plans to retire by the end of 2007.

Daniela Barone has joined UK venture philanthropy group Impetus Trust as CEO. She previously was with BancBoston Capital, and also served as head of institutional support at Save the Children Fund.

Michael Lynch has been named a senior managing director with GSC Partners. Prior to joining GSC as an advisor last March, Lynch spent around 30 years with Goldman Sachs. 

Terrance O’Malley has joined Fried, Frank, Harris, Shriver & Jacobson as a partner in the firm’s corporate department. He previously was a partner with Schulte, Roth & Zabel LLP.

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June 5, 2006

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