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  PE Week Wire - Monday, August 27

Random Ramblings

Today’s top news is that a tentative agreement has been reached by the feuding Hatfields, McCoys, Dimons, Fulds, Langones and every other party involved in the Home Depot Supply sale. The original $10.3 billion price-tag has been knocked to $8.5 billion, with Home Depot expected to retain a 12.5% position. Three quick reactions:

  • The big lesson here is simply a confirmation of what I wrote Friday: These deals will invariably close, because each of the three factions – buyers, sellers and bankers – has intractable incentives. The only foreseeable exception will be when outside regulatory bodies intervene.
  • The final leverage terms are unknown as of this writing, but they could certainly be used as a template for: (1) Other mega-deals in limbo and (2) The next generation of mega-deals.
  • The idea of a big-name seller slashing its sale price makes me (once again) wonder about a different kind of reduction: Buyout fund size cuts. We saw plenty of this in the venture capital world after the dotcom bubble burst – largely at the behest of limited partners. I haven’t yet heard LPs say to expect a similar buyout trend, unless certain firms do so in order to “reset” lousy vintages. Top reason? Too much ego. Ok, but VCs also had pretty big heads circa 1999, and a few lean months can really do some deflating…

*** VenturePAC has given 56% of its first-half contributions to Democratic candidates, according to The San Jose Mercury News. This is a pretty significant shift, as the nonpartisan group traditionally favors Republicans.

*** Answer Key: On Friday I asked if you could name the software-focused VC who just left to co-found a private investment firm targeting the infrastructure market? My hint was that his former firm is raising a new fund.

The answer is Jim Furnivall, formerly of Canaan Partners. He's now with something called Alterna Capital. More on the move here.

*** Finally, a bizarre situation at Nixon Peabody. The corporate law firm commissioned a ridiculous song about itself, which sounds like something that would run over the credits of a bad Whoppi Goldberg comedy from 1985. It got posted on YouTube, which caused Nixon Peabody to get so indignant as to demand it be pulled for “copyright” violations. Insert absolutely any lawyer joke here.

Thank goodness for Above the Law, which still has the audio file. Listen at your own risk...

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   Top Three


Home Depot Inc. reportedly has reached a tentative agreeement to sell its HD Supply unit for $8.5 billion. The original sale price had been $10.3 billion. The potential buyers are Bain Capital, Carlyle Group and Clayton, Dubilier & Rice – while the bankers are JPMorgan, Lehman Brothers and Merrill Lynch. More info here (this link will update throughout the day, as events warrant).


MedAssets Inc., an Alpharetta, Ga.-based provider of software to improve operating margin and cashflow for hospitals and health systems, has filed for a $230 million IPO. It plans to trade on the Nasdaq under ticker symbol MDAS, with Morgan Stanley and Lehman Brothers serving as co-lead underwriters. MedAssets shareholders include Galen Partners (23.2% pre-IPO stake), Parthenon Capital (18.6%) and Grotech Capital Group.


New Leaf Venture Partners is raising its second fund with a $400 million target, although it could conceivably close as high as $500 million.The bi-coastal firm was founded in 2004 by the life sciences team of Sprout Group – the longstanding affiliate of DLJ (and later Credit Suisse). It closed its inaugural fund in August 2005 with $310 million, and late last year had a big hit with the $480 million sale of Cerexa to Forest Labs. That deal could grow even larger, with $100 million in possible milestone payments.



VSS Structured Capital
provides non-control capital to middle market media companies for acquisitions, growth capital, recapitalizations, buyouts and other initiatives. Investments are structured to balance the funding needs and capital servicing abilities of the company using a combination of subordinated notes, preferred stock, common stock and common stock warrants. The fund is integrated with the VSS team comprised of media industry operators, media investment professionals, and former media-focused investment
and commercial bankers. (

   VC Deals

Prestwick Pharmaceuticals Inc., a Washington, D.C.-based drug company focused on CNS disorders, has raised $20 million in new VC funding, according to VentureWire. Return backers include Atlas Venture, Pequot Ventures, Scale Venture Partners, Sofinnova Ventures, Vivo Ventures and Warburg Pincus. The company now has raised around $140 million in total VC funding since 2002.

Primus Retail Ltd., an Indian fashion retailer, has raised around $12 million from Citigroup and UTI Ventures, according to The Economic Times.

Reva Systems Corp., a Chelmsford, Mass.-based RFID company, has raised $10.5 million in additional Series B funding, according to a regulatory filing. The company had raised a $13.5 million first tranche last year at a post-money valuation of approximately $38 million. Company shareholders include Charles River Ventures, North Bridge Venture Partners Cisco Systems and SAP Venture.

Reklaim Technologies Inc. has secured $7 million of a $10 million Series B round led by Goldman Sachs, according to a regulatory filing. The Bellevue, Wash.-based company is developing a climate-neutral solution to recover materials and trapped energy from discarded products such as tires, computers and automobile plastics.

Secure Energy Inc., a St. Louis-based coal gasification company, has secured $5.5 million of an $8 million Series A round, according to a regulatory filing. The deal is structured as 10% cumulative convertible preferred stock, with Kenny Securities serving as placement agent.

Food Quality Sensor International Inc. has raised $5.6 million in Series B funding. Inventages Venture Capital and DSM Venturing co-led the deal, and were joined by Navigator Technology Ventures and individual angels. FQSI is a Lexington, Mass.-based company that merges homeland security sensor science with food safety technology.

Federated Media Publishing, a Sausalito, Calif.-based advertising network for blogs, has raised $4.5 million in Series B funding, according to a regulatory filing. Return backers include JPMorgan Partners and Omidyar Network. It’s unclear how much the company had raised previously (it won’t say), but our database indicates a $750,000 seed round in mid-2005 and at least $2 million in Series A funding last year. FM declined to comment.

Masala Inc., a San Francisco-based social networking startup, has raised $4.5 million in Series A funding from VantagePoint Venture Partners, according to a regulatory filing. The company is run by onetime Sevin Rosen Funds partner Amra Tareen. Social networking consultant Erik Sundelof also is listed as an executive.

   Buyout Deals

Altus Capital Partners and Dunrath Capital have sponsored a buyout of Gichner Shelter Systems from Dominion Capital, a subsidiary of Dominion Resources Inc. No financial terms were disclosed. Gichner is a Dallastown, Penn.-based maker of tactical shelters, containers and subsystems for the U.S. and European Armed Forces. Company management and select equity co-investors also participated.

Eaton Corp. (NYSE: ETN) has completed the sale of its mirror controls unit to Englefield Capital for $111 million. The unit is part of Eaton's automotive group, and makes mirror actuators and power-fols actuators for external automotive mirror systems.

DC Capital Partners has agreed to acquire a controlling interest in both ClearComm Technologies LLC and RelComm Technologies LLC. No financial terms were disclosed. ClearComm is a Fruitland, Md.-based maker of filter products for the wireless and telecom markets. RelComm is a Salisbury, Md.-based maker of application-specific RF coaxial relay products for high volume military and commercial communications applications. Both transactions are expected to close in Q4.

Kachi Partners has acquired Genesee Group, a precision metal stamping and fabricating company with operations in Tennessee and Texas. Citibank provided senior financing, but additional terms were not disclosed.

MidOcean Partners has completed its acquisition of Bushnell Outdoor Products from Wind Point Partners. No financial terms were disclosed, except that Bushnell senior management would maintain its role and have a "significant" ownership position. GE Antares Capital has committed leveraged financing. Bushnell is an Overland Park, Kan.–based provider of sports optics, premium eyewear, and outdoor accessories.

Tata Group of India has confirmed interest in Ford Motor Co.’s Jaguar and Land Rover brands. Previous reports suggest that the auction will also include both One Equity Partners and Ripplewood Holdings.

Topps Co. (Nasdaq: TOPP) has postponed a stockholder vote on a proposed $9.75 per share buyout offer from Madison Dearborn Partners and Michael Eisner's Toronte vehicle. The vote was originally scheduled for this Thursday, but will now take place on September 19. Topps said that the change will allow shareholders to reevaluate their options, after rival Upper Deck Co. last week withdrew a $10.75 per share tender offer.

   PE-Backed IPOs

Sonics Inc., a Mountain View, Calif.-based provider of interconnect solutions that manage on-chip communications in SoCs devices has filed for an $80 million IPO. It plans to trade on the Nasdaq under ticker symbol SNCS, with UBS serving as lead underwriter. Sonics has raised around $62 million in VC funding from firms like InveStar Capital (16.3% pre-IPO stake), TL Ventures (12.3%), Smart Technology Ventures (11.4%) and Easton Hunt Capital Partners (8.4%).

   PE Exits

Chrysalis Capital Partners has completed the sale of Central Lewmar LLC to International Paper (NYSE: IP) for approximately $185 million. Central Lewmar is a Newark, N.J.–based paper and packaging distributor with annual sales of approximately $900 million. It will operate as part of International Paper unit Xpedx.

   PE-Backed M&A

Luvata Oy, an industrial solutions company owned by Nordic Capital, has acquired ECO SpA, a portfolio company of Compass Partners European Equity Fund. No financial terms were disclosed. ECO is a Pocenia, Italy-based manufacturer of coils and coolers for the heating, ventilation, air conditioning and refrigeration industries. Baird advised Compass Partners on the sale.

   Firms & Funds

Deutsche Bank has cut its final ties as a direct private equity investor, by spinning out its Australian unit DB Capital Partners. The newly-independent firm – led by Peter Dowding and Albin Kurti – has been renamed Propel Investments.


Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & MacRae LLP have agreed to merge, creating a combined law firm with more than 1,300 attorneys in 12 countries.


Goode Partners has closed its debut fund with $225 million in capital commitments, according to LBO Wire. The New York-based firm focuses on the consumer sector, and used Champlain Advisors as its fund placement agent.

   Human Resources


Jesse Brandl has joined Pacific Community Ventures as an associate, after receiving an MBA from the Kellogg School of Management. Brandl spent last summer interning with Meritun Partners.

Martin Gadalin has joined Focus Ventures as an associate. He previously was a product manager with Oracle, responsible for core components of Fusion CRM.

Bob Hall has joined Summit Partners as a Palo Alto, Calif.-based vice president. He previously was a consultant to Granite Ventures and, before that, was a product manager with Mahi Networks.

Craig Walters has joined Calvert Street Capital Partners as a vice president in the firm's mezzanine group. He previously led the small-cap equity research group at Agora Financial.

The Gladstone Cos. has promoted Blair Gertmenian to associate for private finance, and Erika Highland to associate for private finance/portfolio management.


August 27, 2007

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