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    PE Week Wire -- Tuesday, May 16

Random Ramblings

I do not pretend to understand the wisdom of Highland Capital Partners’ deal size-agnostic investment strategy. To me, it seems instinctively improper to conduct the same amount of due diligence time and money on a $35 million investment (like FastClick) and a $500,000 million investment (like Virtual Iron Software), even if Highland is the first institutional backer in both cases. But the firm’s recent returns have proven my gut to be a liar.

Highland has gained a bad ROI rap in some quarters, in large part because its $500 million Fund V is a crater-like performer (based on performance data from CalPERS and benchmarks from Thomson Financial). But its subsequent $800 million fund – closed in 2001 – is top-quartile thanks to major IPO exits for companies like VistaPrint and the IPO-to-acquisition exit of FastClick. It could be argued that the jury’s still out on a firm whose past two funds have split returns, but Fund VI features more than just a superior portfolio. It also is the first Highland fund to include folks like former Lycos chief Bob Davis and Staples founder Tom Stemberg. I regularly carp about VC shops that rest on the laurels of departed partners, so credit should be afforded to one whose current team is producing tangible results.

Venture Capital Journal subscribers can read more about Highland in this month’s issue, via a profile I wrote after spending some time at its Lexington, Mass. headquarters (which features a semi-incubator on its ground floor, and VistaPrint HQ across the parking lot).

For the rest of you, a mini-scoop: Highland tomorrow will announce that Peter Bell has signed on as a full-time venture partner. Bell most recently founded Stowe Capital and, before that, served as co-founder and CEO of StorageNetworks Inc. He and Highland’s Dan Nova co-founded the Boston College Technology Council six years ago, and also both went to HBS. Also, expect Highland to announce some additional hires in early June.

*** A pair of interesting stories in the latest edition of PE Week. First, Constance Loizos reports that former Stanford Management Co. CEO Mike McCaffrey will run a $6 billion hedge fund. Next, Alexander Haislip with a piece on how Invesco is offering major bonuses as part of a last-minute effort to retain private equity talent.

*** There has been a lot of Web 2.0 hand-wringing of late, accelerated by Josh Kopelman’s blog post on how the average TechCrunch reader will not necessarily translate into a future non-geek consumer. What this means, of course, is investor beware. Most of us don’t live within Silicon Valley, and only adopt new technologies once they become pervasive (which is exactly when we drop the old ones). Om Malek has an insightful write-up.

*** This Thursday I’ll be interviewing Steve Brotman of Silicon Alley Venture Partners, as part of the Fundraising for PE & VC Firms Master Class hosted by Capital Roundtable in New York. The official topic of our conversation is "Darwinism in the PE Industry – Why GPs and LPs Need to Adapt." Hope to see some of you there…

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    Top Three

Infor Global Solutions, an Alpharetta, Ga.-based provider of ERP and supply chain solutions, has agreed to acquire SSA Global Technologies (Nasdaq: SSAG) for $19.50 per share, or around $1.36 billion. Infor is controlled by Golden Gate Capital and Summit Partners, while Cerberus Capital Management is SSA shareholders include Cerberus Capital Management and General Atlantic Partners.

Nanosphere Inc., a Northbrook, Ill.-based molecular diagnostics company with a nanotech-based platform to enable earlier disease detection and treatment, has raised $57 million in Series D funding. Bain Capital led the deal via its Bain Capital Ventures and Brookside Capital affiliates, and was joined by Allen & Co. and return backer Lurie Investments.

Marathon Acquisition Corp., a New York-based blank check acquisition company, has filed for a $300 million IPO. Citigroup is serving as lead underwriter. Marathon is being run by former Apollo Investment Corp. chief Michael Gross, while directors include former Vail Resorts CEO Adam Aron and Jarden Corp. CEO Martin Franklin.

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    VC Deals

Intercept Pharmaceuticals Inc., a New York-based drug company focused on the treatment of chronic liver and metabolic diseases, has raised $41 million in new VC funding. Genextra SpA of Italy led the deal, and was joined by Balyasny Asset Management and JAFCO Life Science Investment.

Viron Therapeutics Inc., a London, Ontario-based drug company focused on anti-inflammatory therapeutics, has raised US$20 million in Series A funding. The Canadian Medical Discoveries Fund led the deal, and was joined by Amgen Ventures, BDC Venture Capital, GrowthWorks Capital and existing backers Novartis Pharma AG and Trudell Medical Ltd. Viron also secured an additional $4.5 million from the Canadian government’s TDC program.

3jam Inc., a Menlo Park, Calif.-based text messaging startup, has secured $500,000 of a $1 million Series A commitment from New Enterprise Associates, according to a regulatory filing.

Pando Networks Inc., a New York–based provider of P2P distribution solutions for consumers’ digital media, has raised $7 million in second-round funding. Intel Capital led the deal, and was joined by return backers BRM Capital and Wheatley Partners.

Photobucket Inc., a Palo Alto, Calif.-based provider of visual content hosting and publishing services, has raised $10.5 million in Series B funding from Trinity Ventures.

Sierra Design Automation Inc., a Santa Clara, Calif.-based provider of IC implementation solutions, has raised $14 million in Series B funding. Backers include Artiman Ventures, Telesoft Partners, and Evercore Venture. Inc., an Orem, Utah-based online service provider for entrepreneurs and angel investors, has raised an undisclosed amount of Series A funding co-led by Grow Utah Ventures and Provo Labs.

Blue Ridge Numerics Inc., a Charlottesville, Va.-based developer of engineering simulation software, has raised around $3.1 million in Series A funding led by Global Environmental Fund Management (GEF).

JWire Inc., a South San Francisco-based provider of WiFi hotspot discovery services, has secured $1.25 million of a $2.5 million Series C round, according to a regulatory filing. Company backers include DFJ Frontier, Draper Associates, Nob Hill Capital Partners and Mosaic Technology Fund.

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    Buyout Deals

Texas Pacific Group and Thomas H. Lee Partners reportedly have joined a private equity consortium looking to buy Spanish-language broadcaster Univision. The group already included Providence Equity Partners and Madison Dearborn Partners, and is expected to compete with Mexican media giant Grupo Televisa.

Reliant Equity Investors has acquired Rhinotek Computer Products Inc., a Carson, Calif.-based marketer and distributor of compatible imaging supplies. No financial terms were disclosed for the deal, which included a second-lien term loan from Fifth Street Capital and senior note financing from Comerica.

DBI Capital LLC and EFM Capital Partners have completed a majority recapitalization of Pro-Motion Distributing Inc., a City of Industry, Calif.-based distributor of automotive aftermarket performance products. No financial terms were disclosed. RSM EquiCo Capital Markets initiated the transaction and acted as the exclusive financial advisor to Pro-Motion.

Investor AB and EQT Partners have upped their offer for the remaining 81.1% of Swedish dialysis company Gambro AB. The revised bid comes it at approximately $5.4 billion.

CVC Capital Partners reportedly has offered to buy Danish cosmetics store chain Matas AS for approximately $876.2 million. CVC is one of five short-listed buyers.

Industri Kapital has agreed to acquire German fire protection system company Minimax from Investcorp. No financial terms were disclosed. Minimax was acquired by Investcorp from Barclays Private Equity in 2003, and currently features 3,200 empoyees and 2005 revenue of approximately €443 million.

Investcorp has agreed to sell Dutch leather-treating chemicals company Stahl Holdings BV to Oranje-Nassau Groep, a portfolio company of The Carlyle Group and Wendel Investissement. The deal is valued at approximately €520 million, including around €160 million in equity from ONG and Carlyle.

Electra Partners is considering a bid for UK-based Regent Inns, according to The Daily Telegraph of London.

Kohlberg Kravis Roberts & Co. is in exclusive talks to acquire around a 50% stake in Turkish retailer Boyner, according to The Financial Times. The deal would be worth approximately $200 million.

The Carlyle Group has agreed to buy the travel agency group of Spanish tourism company Iberostar, according to Cinco Dias. The deal is reportedly valued at around €900 million.

    PE-Backed IPOs

Allegiant Travel Co., a Las Vegas–based operator of a low-cost passenger airline with leisure destinations like Las Vegas and Orlando, has filed to raise $100 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol ALGT, with Merrill Lynch serving as lead underwriter. Allegiant raised $39.5 million last year from ComVest Investment Partners, Irelandia II and company CEO Maurice Gallagher.

Town Sports International Holdings Corp., a New York-based health-club chain operator, has set its proposed IPO terms to 10 million common shares being offered at between $16 and $18 per share. It plans to trade on the Nasdaq under ticker symbol CLUB, with Credit Suisse and Deutsche Bank Securities serving as lead underwriters. Significant Town Sports shareholders include Bruckmann, Rosser, Sherrill & Co., Farallon Capital Partners and Canterbury Mezzanine Capital.

Activant Solutions Holdings Inc., an Austin, Texas-based provider of business management solutions in the hardware, home center, lumber/building materials and automotive parts aftermarket sectors, has withdrawn its proposed $200 million IPO filing. The company was sold on May 2 to Hellman & Friedman, Thoma Cressey Equity Partners and JMI Equity. Its previously controlling shareholder was HM Capital Partners.

This week’s IPO calendar included expected offerings from both Burger King Holdings and Penson Worldwide.

    PE Exits

Dutchess Capital Management plans to sell its remaining two million shares in Eagle Broadband Inc. (AMEX: EAG), via a secondary public offering. Eagle Broadband is a League City, Texas-based provider of broadband, IP and other communications technology and services.

Expand Networks Inc., a Roseland, N.J.-based provider of WAN compression and acceleration appliances, has agreed to acquire DiskSites Inc., a Potomac, Md.-based provider of wide-area file services software for delivering applications to distributed organizations. Expand has raised around $45 million in VC funding from firms like America Online, Comcast Interactive Capital, DIC, Federated Kaufman Fund, Omninet Capital, RBC Capital Markets, Tamir Fishman Ventures and Robeco Investment Management. DiskSites has raised around $9 million from backers like ProSeed Venture Capital and Tamir Fishman Ventures.

AirBand Communications Inc., a Dallas, Texas–based fixed wireless company for business customers, has acquired the fixed wireless business and all monitoring contracts associated with enterprise-deployed Wi-Fi networks from WindChannel Communications Inc. No financial terms were disclosed. AirBand has raised around $72 million in VC funding since its 2000 inception, from firms like Crescendo Venture Management, Sevin Rosen Funds, Dolphin Equity Partners, PacRim Venture Management and Key Venture Partners.

Onset Technology Inc., a Santa Cruz, Calif.–based developer of enterprise access software for wireless handhelds, has agreed to acquire MessageVine Inc., a Natick, Mass.–based provider mobile instant messaging and presence solutions. Onset has raised around $17 million in VC funding from firms like FLV Management, Catalyst Venture Partners, Intel Capital and Jerusalem Global Ventures, while MessageVine shareholders include CSK Venture Capital, Cedar Fund and T-Venture.

Planning Force Inc. (OTCBB: PLFC) has acquired substantially all outstanding shares of Quintessence Photonics Corp. in a reverse merger transaction. No financial terms were disclosed for the deal, which results in planning force changing its name to QPC Lasers Inc. Quintessence is a Sylmar, Calif.-based optoelectronics company that has raised VC funding from firms like DynaFund Ventures.

    PE-Backed M&A

Gray Wireline Service Inc., a subsidiary of Gray Energy Services LLC, has completed its acquisition of Oilfield Pro-Log Services Inc., a provider of cased-hole wireline services in the Permian Basin region of West Texas. No financial terms were disclosed. Gray Energy was formed earlier this year by company management and Centre Partners.

Implus Footcare LLC, a Research Triangle Park–based provider of insoles, performance socks and other “below the ankle” products, has acquire YakTrax, a Port Orchard, Wash.–based brand of snow and ice traction devices. No financial terms were disclosed. Implus Footcare is a portfolio company of FdG Associates., a Champlain, N.Y.-based jewelry e-tailer, has acquired business of Odimo Inc. (Nasdaq: ODMO). No financial terms were disclosed. recently raised VC funding from Ignition Partners.

SecurePipe Inc., a Lincolnshire, Ill.-based provider of network security services, has acquired Farm9 of Emeryville, California. No financial terms were disclosed. SucurePipe has raised over $12 million in VC funding from firms like Prism Capital, First Analysis Corp. and The Argentum Group.

Gryphon Colleges Corp., a post-secondary education platform of Gryphon Investors, has acquired Delta Educational Systems, an operator of 16 accredited career colleges located in Georgia, Louisiana, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and Virginia.No financial terms were disclosed.

    Firm & Fund News

The Blackstone Group has closed its second mezzanine fund with $1.06 billion in capital commitments. The firm’s inaugural mezzanine fund closed at $1.1 billion in 1999.

Siguler Guff & Co. has secured around $800 million for its second distressed fund-of-funds, according to LBOWire. The vehicle is targeting $1 billion. In related news, the New York-based firm also is marketing the $300 million-targeted Siguler Guff Small Buyout Opportunities Fund, which will make commitments to small-market buyout funds.

Capital Z Investment Partners announced its sponsorship of Aviator Fund Management LP, a Greenwich, Conn.-based hedge fund focused on select Asian markets.

    Human Resources

Roland Beaulieu has joined GrandBanks Capital as an entrepreneur-in-residence. He is the former CEO of NewRiver Inc. and, before that, was chief operating officer of CCBN (sold to Thomson Corp. in 2004).

Brian Warrington has joined Phoenix IP Ventures as a venture partner. He recently retired from his position as vice president of UK technology development for GlaxoSmithKline Discovery Research.

Gustavo Eiben has joined SV Investment Partners as director if investor relations and business development. He previously was associate director of the private equity funds group at UBS.

Nancy Wu has joined the intellectual property practice group of Cooley Godward LLP as a San Francisco-based partner. She previously was a partner with Morgan Lewis & Brockius LLP.

Patricia Schneider has been promoted to program director of The Florida Venture Forum. She joined the group in October 2005 as the executive assistant to the program director, and previously was executive assistant to the president and CEO of The Florida Aquarium in Tampa.

Eric Burner has joined Hunton & Williams LLP as a partner in its global capital markets and securitization practice group. He previously worked in the capital markets group of Cadwalader, Wickersham & Taft LLP.

David Duke has joined Headwaters MB as a principal. He previously was a vice president with Synovous Investment Banking.

Private Equity Week

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May 16, 2006

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