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    PE Week Wire -- Thursday, May 25

ABRY vs. Providence: The Resolution

Ever since ABRY Partners first sued Providence Equity Partners for financial fraud, Iíve felt that the case would be lose-lose for all involved. Were ABRY to be vindicated by verdict, it still could have been considered a litigious firm that conducted lackluster due diligence. Were Providence to have prevailed, it still would have been forced to provide an uncomfortable level of transactional transparency. And then there is F&W Publications itself, the company at the center of this tempest. Either it would continue to be owned by a firm that officially didnít want it anymore, or by a firm that had already sold it. Lose-lose-lose.

But I was wrong. This deal has turned into a win-win-win, and maybe even a fourth win if limited partners are to be considered (after all, they indirectly pay the legal fees). What my analysis missed was the viability of intelligent compromise. Maybe it was simply that both sides seemed so angry, or perhaps I simply had tunnel vision. Whatever the explanation for your not-so-humble correspondentís failings, ABRY and Providence have stepped back from the brink of their legal and PR nightmare, and done so hand-in-hand.

Before continuing, a backgrounder on the dispute can be found here.

The settlement is confidential, but sources say that it will result Providence being brought back into the F&W ownership fold. Thatís right, ABRY and Providence are going to be partners.

Providence will make a payment to F&W in exchange for a minority equity position and the right to appoint one board member. F&W is then expected to use the new capital to help repay some of the $350 million in debt it got saddled with via ABRYís $500 million acquisition. Providence will not make any payments directly to ABRY, and ABRY will withdraw its financial fraud claims and its request that the Delaware courts rescind the original sale.

Whatís important to note is that neither firm is likely to view F&W as an unfortunate portfolio albatross. Itís actually a pretty good business, albeit one that got overpriced and overleveraged. Now that some of the debt will be paid off, it is conceivable that both ABRY and Providence could eventually generate a positive return (or, in Providenceís case, a second positive return). A big part of that will hinge on whether ABRY and Providence can maintain their newfound goodwill, but itís obviously in both of their interests to do so.

ABRY did not return requests for comment, but a Providence spokesman said: "ABRY Partners and Providence Equity Partners reached an amicable resolution to our dispute regarding F&W Publications. We have entered into a confidential settlement agreement that ends the pending litigation between us and which we believe is a win-win resolution in the best interests of both firms and our limited partners."


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    Top Three

Apollo Management has agreed to buy Rexnord Corp. from The Carlyle Group and company management for $1.825 billion. The deal is subject to government approvals, and is expected to close in Q3. Rexnord is a Milwaukee-based manufacturer of power transmission equipment that Carlyle acquired in November 2002 for around $900 million. Carlyle was advised on the sale by Merrill Lynch and Credit Suisse, while Apollo was advised by Lehman Brothers.

Lux Biosciences Inc., a Jersey City, N.J.-based biotech company focused on ophthalmic diseases, has raised $36 million in Series A funding. HBM Partners, Novo AS and SV Life Sciences all participated as equal shareholders.

Vonage Holdings Corp. (Nasdaq: VG) shares dropped 12.6% in their first day of trading. The company raised $531.25 million by selling 31.25 million common shares at $17 per share, but closed yesterday at just $14.85 per share. It was the weakest first-day performance since Lumera Corp. lost 13.5% of its value in July 2004. Vonage has raised around $396 million in total VC funding from firms like Bain Capital, Meritech Capital Partners, New Enterprise Associates, 3i Group and Institutional Venture Partners.

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    VC Deals

IAG Research, a New York-based provider of analytics for television ad effectiveness, has raised $47.5 million in Series E funding from Insight Venture Partners and Bessemer Venture Partners.

Sourcefire Inc., a Columbia, Md.-based provider of network security solutions, has raised $20 million in fourth-round funding. Meritech Venture Partners led the deal, and was joined by return backers Sierra Ventures, New Enterprise Associates, Sequoia Capital, Core Capital Partners and Inflection Point Ventures. SourceFire has raised $53.8 million in total VC funding since its 2001 inception, and was blocked this past March from consummating a proposed merger with Check Point Software of Israel.

Energy Innovations Inc., a Pasadena, Calif.-based developer of low-cost rooftop photovoltaic solar concentrator systems, has raised $25 million in Series C funding, according to a regulatory filing. Existing shareholders include Idealab and Mohr, Davidow Ventures.

PartSearch Technology Inc., a New York-based provider of outsourced parts management solutions, has secured $7.75 million of a $10.75 million Series E round, according to a regulatory filing. Backers include Enhanced Capital Partners, Stonehenge Capital, Westbury Partners, Best Buy and Idealab.

Oorja Protonics Inc., a Menlo Park, Calif.-based developer of alcohol-based fuel cells, has raised around $5.52 million in Series A funding led by Sequoia Capital, according to a regulatory filing. The company is run by Sanjiv Malhotra.

Applied Identity Inc., a San Francisco-based provider of network security control and compliance solutions, has raised around $12.03 million in Series C funding. OVP Venture Partners led the deal, and was joined by return backers Bay Partners, Globespan Capital Partners and Bay Partners. Applied Identity has raised around $24 million in total VC funding since its 2003 inception.

Nimaya Inc., a Fairfax, Va.Ėbased provider of revenue maximization applications, has raised $3 million in Series A funding from Updata Partners.

Real Image Technologies, an India-based digital media technology company, has raised an undisclosed amount of VC funding from Intel Capital.

Utility Associates Inc., an Atlanta-based provider of hosted mobile field workforce solutions, has raised $1.5 million in Series A funding from Braemar Energy Ventures.

    Buyout Deals

Diamond Castle Holdings has agreed to acquire NES Rentals Holdings Inc., a Chicago-based provider of aerial and general equipment rental and traffic safety services. The deal is valued at approximately $850 million, including $18.75 per outstanding share in cash.

The Blackstone Group and CapVest Equity Partners reportedly re considering a joint bid of around Gbp1 billion for Unileverís frozen foods division.

Hellman & Friedman has agreed to acquire Gartmore Investment Management PLC from Nationwide Mutual Insurance Co. for an undisclosed amount. Gartmore IM is the London-based arm of Gartmore Group, with Nationwide retaining Ė and renaming Ė the U.S. operations.

Wynnchurch Capital Partners has purchased a majority interest in Calyx Transportation Group Inc., via a recapitalization in partnership with Calyx management. No financial terms were disclosed. Calyx is a Toronto-based provider of logistics and transportation services to the Canadian marketplace. Senior debt financing was arranged by BMO Nesbitt Burns with a syndicate of lenders that includes Bank of Montreal, The Bank of Nova Scotia and GE Capital, while McKenna Gale Capital provided subordinated notes.

TAV Hava Limanlari Isletme AS, a Turkey-based airport development, management and operating company, has raised $73 million in private funding from the Islamic Development Bank Infrastructure Fund. TAV manages airports like Istanbulís Ataturk Airport and the Tblisi and Batumi Airports in the Georgian Republic.

Fairchild Industrial Products Co., a Winston-Salem, N.C.-based provider of industrial control products, has completed a recapitalization with the help of existing sponsor Patriot Capital Funding. Patriot provided $1.5 million in additional senior secured notes and $500,000 in preferred and common equity. It had previously provided $20.2 million in debt financing to support the July 2005 acquisition of Fairchild by Hampshire Equity Partners.

Transportation Resource Partners has sponsored a recap of Smith System Driver Improvement Institute Inc., an Arlington, Texas-based provider of fleet driver safety training. No financial terms were disclosed for the deal, which include participation by company management.

Harvest Partners has completed a recap of portfolio company Coveright Surfaces GmbH, a Germany-based supplier of surfacing materials for applications in the furniture, flooring, woodworking and automotive industries. The deal provides shareholders with a Ä30 million dividend. Harvest and Deutsche Beteiligungs AG acquired the company from Akzo Nobel NV in July 2003.

KCAEP LLP, a KCA Partners acquisition company that includes Apex-Carex Healthcare Products and Vanís International Foods, has received a $25 million debt infusion from existing sponsor Caltius Mezzanine.

    PE-Backed IPOs

Volcano Corp., a Rancho Cordova, Calif.-based developer of intravascular ultrasound and functionalmeasurement products, has set its proposed IPO terms to 6.8 million common shares to be offered at between $10 and $12 per share. It plans to trade on the Nasdaq under ticker symbol VOLC, with JPMorgan and Piper Jaffray serving as co-lead underwriters. Volcano has raised around $62 million in VC funding from firms like Domain Associates, Johnson & Johnson Development Corp., Ferrer Freeman & Co., OrbiMed Advisors, Mayo Medical Ventures, Medtronic and NeoMed Management.

Trolltech AS, a Norway-based provider of Linux software for mobile phones, has filed for an IPO on the Oslo Stock Exchange. No financial terms have been disclosed. Trolltech has raised VC funding from firms like Index Ventures, Northzone Ventures and Teknoinvest Management.

    PE Exits

Insight Venture Partners is planning to sell its remaining 3.34 million shares in Website Pros Inc. (Nasdaq: WSPI) via a secondary public offering. Website Pros stock closed Tuesday trading at $11.60 per share.

Siemens AG has agreed to acquire Photonic Bridges Inc., a Shanghai, China-based provider of carrier-grade optical transport products. No financial terms were disclosed. Photonic Bridges has raised around $37 million in VC funding from firms like Acer Technology Ventures, China Merchants & Fortune Asset Management, FAT Capital Management, J.H. Whitney & Co., Jafco, Legend Capital, Morningside Group and Sycamore Networks.

Ethicon Inc., a subsidiary of Johnson & Johnson, has acquired Vascular Control Systems Inc., a San Juan Capistrano, Calif.Ėbased developer of medical devices to treat fibroids and to control bleeding in obstetric and gynecologic applications. No financial terms were disclosed. Vascular Control had raised around $23 million in VC funding from firms like MedVenture Associates, Three Arch Partners, Shea Ventures and Johnson & Johnson Development Corp.

    PE-Backed M&A

Jobster Inc., a Seattle-based provider of online recruiting tools and services, has acquired, a startup that helps jobseekers get noticed via tagging techniques. No financial terms were disclosed. Jobster has raised nearly $30 million in VC funding from firms like Ignition Partners, Mayfield and Trinity Ventures.

Barjan LLC, a distributor of consumer products to travel centers, truck stops, car washes and convenience stores, has acquired Astatic Mobile Communications from Omnitronics LLC.Astatic is a manufacturer of aftermarket CB microphones and other CB radio equipment. No financial terms were disclosed. Barjan is a portfolio company of Monomoy Capital Partners.

Pro Mach Inc., a Cincinnati-based provider of integrated packaging products and solutions, has acquired Allpax Products Inc., a Covington, La.Ėbased provider of sterilization, material handling and automated control systems for the food, beverage and pharmaceutical industries. No financial terms were disclosed. Pro Mach is a portfolio company of Odyssey Investment Partners.

    Firm & Fund News

New Enterprise Associates has secured over $2.25 billion in capital commitments for its twelfth fund, which is expecting to hold a $2.5 billion final close in July.

Renaissance Acquisition Corp., a Pompano Beach, Fla.-based blank check acquisition company focused on consumer products, consumer/business/financial services and manufacturing, has filed to raise $87 million via an IPO. It plans to trade on the AMEX, with Ladenburg Thalmann & Co. serving as lead underwriter. Company management includes Logan Delany, president of private equity firm Delany Capital Management.

CLSA Capital Partners, the private equity arm of Credit Lyonnais Securities Asia, has raised $330 million for its latest fund. CLSA Capital has offices in Hong Kong and Singapore.

Religare, an Indian financial services group, is forming a $150 million private equity fund focused on mid-market companies in smaller Indian cities focused on the healthcare, retail, financial services, manufacturing and infrastructure markets. Evercore Partners is helping to sponsor the fund with a $20 million commitment.

    Human Resources

U.S. Venture Partners has promoted both Paul Matteucci and Arati Prabhakar to general partner. Matteucci joined USVP in 2001, and focused on opportunities in spaces like Web 2.0, mobile applications, enterprise storage and business optimization software. Prabhakar also joined in 2001, and focuses on fabless semiconductor and semiconductor manufacturing opportunities.

Gemini Israel Funds and Lightspeed Venture Partners announced that Dan Ciporin and Ouriel Ohayon will serve as chairman and general manager, respectively, of Internet Lab, an Israel-based early-stage Internet investment firm that the two firms launched and funded in February. Ciporin is the former chairman and CEO of, while Ohayon is a TechCrunch contributor who most recently was regional business director for Europe and Asia with ICQ.

Andrew Filgor has left Nautic Partners, where he had been a vice president.

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May 25, 2006

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