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    PE Week Wire -- Friday, September 2

Sick from it All

A surprising amount of PE news for the Friday before Labor Day (why are you at work?), including some VC funding info on Visto Corp., and a new SPAC that includes Apple Computer vet Steve Wozniac. For all relative purposes, however, none of it much matters. In fact, business as usual seems a bit obscene, considering what is happening in the Gulf Coast region, and New Orleans in particular.

I obviously have no unique insight into the situation, as the majority of my knowledge comes from massive consumption of TV news. My few acquaintances and family members from the area – including a NOLA-based cousin with the Army Corps of Engineers – are safe, if not sound. But I do have a remarkable amount of shame in my country, which has been borne of anger, frustration and impotence. It is shame in our inability to provide for our fellow citizens in their time of greatest need. Not in our lack of desire or effort, mind you, but in our collective failure -- this is our representative government, by the people and for the people.

I don’t doubt for a minute that most elected and appointed officials aren’t working as hard as they can, but it simply seems that they are not up to the logistical task. It breaks my heart.

What follows are two items from others. One from political blogger Andrew Sullivan, and the other from a physician stuck in NOLA (passed on by a reader). The first is right on the money, while the second is simply poignant.

Sullivan: “I have to say this seems to me to be a new situation. This has morphed from a natural disaster into a social meltdown. The Lousiana governor seems overwhelmed (Barbour seems much more effective); New Orleans’ civic authorities seem non-existent (and bear responsibility for the insufficient preparation for this potential and widely predicted nightmare); and the president's response has been decidedly weak. His call to restrain from using gas was, well, Carteresque.

It seems to me inconceivable that we cannot impose basic law and order in a major American city five days after a hurricane has hit. This is a very basic governmental responsibility and all I can say is that I see no evidence of competence or effectiveness so far. FEMA had no solid evacuation plan? The feds had no plans to maintain order in such a situation? The explosion of complete lawlessness is beginning to make Haiti look like a pleasant place to live. This is America? Where order is so distant that snipers can prevent the evacuation of a hospital? The fundamental reason for my inability to support a second Bush term was his demonstrated incompetence in performing the basic functions of government. It seems to me that the people of New Orleans are now as much a victim of this as the people of Iraq. I guess we can merely be thankful that Rumsfeld hasn't yet appeared to say "Stuff happens." Yes, it does. When your government seems unable to do the most basic things required of it.”

Email from Tuesday at 2pm: “I am now a temporary resident of the Ritz Carleton Hotel in New Orleans. I figured if it was my time to go, I wanted to go in a place with a good wine list. In addition, this hotel is in a very old building on Canal Street that could and did sustain little damage. Many of the other hotels sustained significant loss of windows, and we expect that many of the guests may be evacuated here…

Bodies are still being recovered floating in the floods. We are worried about a cholera epidemic. Even the police are without effective communications. We have a group of armed police here with us at the hotel that are admirably trying to exert some local law enforcement. This is tough because looting is now rampant. Most of it is not malicious looting. These are poor and desperate people with no housing and no medical care and no food or water trying to take care of themselves and their families….

There are physicians in at this hotel attending an HIV convention. We have commandeered the world famous French Quarter Bar to turn into a makeshift clinic. There is a team of about 7 doctors and PA and pharmacists. We anticipate that this will be the major medical facility in the central business district and French Quarter… and will start admitting patients today…

The biggest question to all of us is where is the National Guard? We hear jet fighters and helicopters, but no real armed presence, and hence the rampant looting. There is no Red Cross and no Salvation Army.

In a sort of cliché way, this is an edifying experience. One is rapidly focused away from the transient and material to the bare necessities of life. It has been challenging to me to learn how to be a primary care physician. I don't know how long it will be and this is my greatest fear… The greatest pain is to think about the loss. And how long the rebuild will [take]. And the horror of so many dead people.



Distressed and Special Situation Investing Conference
Friday, September 16, 2005
The University Club, NYC

Hear from top professionals in distressed and activist investing, plus keynote addresses from these industry leaders:

Daniel Och, Och-Ziff Capital Management
Howard Marks, Oaktree Capital Management
David Matlin, MatlinPatterson Global Advisers
Marty Whitman, MJ Whitman / Third Avenue Funds

Attendance will be limited to:

        • Wharton Private Equity Partners members
        • Buy-side professionals
        • Institutional LPs

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    Top Three


Visto Corp., a Redwood City, Calif.-based provider of mobile access solutions, has raised more than $66.6 million in eighth-round (Series BB) funding. PE Week reported in May that the company was looking for between $60 million and $100 million, and the company currently is authorized to raise upwards of $92.5 million. (Note: that ceiling may still rise, due to intense buyer interest). DFJ ePlanet Ventures led the deal, and was joined by Oak Inv*stment Partners, Rustic Canyon Ventures, Meritech Capital Partners and Draper Fisher Juvertson, VantagePoint Venture Partners and Allegis Capital. Visto has now raised over $220 million in total VC funding.

Acquicor Technology Inc., a Newport Beach, Calif.-based blank check acquisition company, has filed to raise $150 million via an IPO. It would trade on the OTC Bulletin Board, with Wedbush Morgan Securities and ThinkEquity Partners serving as lead underwriters. Acquicor management includes: Gilbert Amelio, chairman and CEO of Acquicor, and senior partner with Sienna Ventures; Ellen Hancock, president and COO of Acquicor, and former CEO of Exodus Communications; Steve Wozniac, executive vice president and CTO of Acquicor, and a former vice president of engineering at Apple Inc. who currently serves as president and CTO of Wheels of Zeus.

School Specialty Inc. (Nasdaq: SHCS), a Greenville, Wis.-based provider of supplemental learning products to the pre K-12 market, has completed its acquisition of Nashua, N.H.-based Delta Educations LLC from Wicks Learning Group LLC, an affiliate of private equity firm Wicks Group of Cos. The deal was valued at $272 million, with School Specialties utilizing its current credit facility and a $100 million term loan credit agreement recently agreed to with Bank of America. School Specialties announced in May that it would be acquired for $49 per share ($1.5 billion with assumed debt) by Bain Capital. That deal now also includes Thomas H. Lee Partners, which would hold a 40% stake in School Specialties with Bain holding the other 60% (both stakes would be reduced pro-rata to facilitate a small percentage of management ownership). The $49 per share price remains intact, and the deal recently received Canadian regulatory approval.

    VC Deals

Algeta ASA, a Norway-based drug company focused on cancer, has raised approximately $29 million in Series A funding. HealthCap, Advent Venture Partners and S.R. One were joined by return backers Selvaag Venture Capital, NorgesInvestor, Marlin Verdi AS, and the new investors HealthCap, Advent Venture Partners and SR One.

CanyonBridge Inc., an Orem, Utah-based provider of Web-access solution for corporate messaging and calendar systems (including Microsoft Exchange), has raised $8.37 million in Series A funding, according to a regulatory filing. Backers include Venrock Associates, NorthBridge Venture Partners and Wasatch Venture Partners.

Video54 Technologies Inc., a Mountain View, Calif.-based wireless company focused on home media networking, has raised over $8 million in Series C funding, according to a regulatory filing. Return backers include Sequoia Capital and the W.K. Technology Fund.

    Buyout Deals

Berkshire Partners has successfully completed its cash tender offer for of a majority stake in National Vision Inc. (AMEX: NVI) for $7.25 per share. In related news, National Vision has acquired all the outstanding common stock of Consolidated Vision Group Inc. for approximately $88 million, including around $48 million in debt repayment. Consolidated Vision was a portfolio company of Kelso & Co.

SeaSpecialties Inc. has agreed to sell the assets of its Barnacle Seafood division to Meriturn Partners for approximately $3.5 million. The company said it had filed voluntary petitions in the U.S. Bankruptcy Court in Ft. Lauderdale, Fla., together with a motion seeking bankruptcy court approval of the sale. The company expects to announce a buyer for its Homarus/Marshall Smoked Fish Inc. unit in the near future, and will file a similar motion to implement that sale.

3i Group reportedly has acquired a 10% stake in Pilatus Flugzeugwerke AG, a Switzerland-based aircraft maker. No financial terms were disclosed.

    PE-Backed IPOs

SGX Pharmaceuticals Inc. (f.k.a. Structural Genomics), a San Diego-based drug company focused on cancer therapeutics, has filed to raise $80.5 million via an IPO of common stock. The company plans to trade on the Nasdaq under ticker symbol SGXP, with CIBC World Markets and Piper Jaffray serving as lead underwriters. The company has raised over $90 million in total VC funding since its 1998 inception, from firms like Atlas Venture (22.85% pre-IPO position), BA Venture Partners (22.61%) Sprout Capital (14.44%), Index Ventures (9.28%) and Prospect Venture Partners (7.78%).

Sunesis Pharmaceuticals Inc., a South San Francisco-based drug company focused on oncology and inflammatory diseases, has set its proposed IPO terms to 6 million common shares being offered at between $9 and $11 per share. It plans to trade on the Nasdaq under proposed ticker symbol SNSS, with Lehman Brothers and SG Cowen & Co. serving as lead underwriters. The company has raised over $93 million in total VC funding since its 1998 inception, from significant shareholders like Abingworth Management, CSFB Private Equity, Mayfield, Venrock Associates and Warburg Pincus.

Intarcia Therapeutics Inc., an Emeryville, Calif.-based drug company focused on cancer and infectious diseases, has set its proposed IPO terms to 5 million common shares being offered at between $12 and $14 per share. The company plans to trade on the Nasdaq under proposed ticker symbol ITCA, with Credit Suisse First Boston serving as lead underwriter. Intarcia originally filed for a $57.5 million IPO in November 2000, but withdrew the offering in April 2001. Significant shareholders include New Enterprise Associates, Venrock Associates, Alta Partners, Granite Global Ventures and InterWest Partners.

SkinMedica Inc., a Carlsbad, Calif.-based drug company focused on dermatological conditions, has set its proposed IPO terms to 5.25 million common shares being offered at between $11 and $13 per share.. It plans to trade on the Nasdaq under ticker symbol SKMD, with SG Cowen & Co. serving as lead book manager. SkinMedica has raised around $92 million in total VC funding since its 1999 inception, including a $15 million Series E round in March. Backers have included EuclidSR Partners, Apax Partners, Domain Associates, HealthCare Ventures, Montreux Equity Partners, Perseus-Soros BioPharmaceutical Fund and Split Rock Partners.

D-Pharm Ltd., an Israel-based drug company focused on CNS disorders and cancer, has unable to raise enough capital for a planned listing on the Alternative Inv*stment Market (AIM). It now must go search for additional private equity funding. To date, D-Pharm has raised $55 million from Care Capital, Clal Biotechnology, Apax Partners, Vertex Management, Morgan Stanley Venture Partners, Gemini, Quintiles Transnational Corp., Rho Management, SG Cowen Ventures and Denali Ventures.

Q-Cells AG, a Germany-based solar cell maker owned by Apax Partners, reportedly is planning for a stock exchange listing next month.

    PE-Backed M&A

New Energy Capital, a portfolio company of VantagePoint Venture Partners, yesterday announced the start of construction of a 40 million gallon per year ethanol production facility in Rensselaer, Ind., named the Iroquois Bio-Energy Co. New Energy provided most of the project’s equity, secured a $38.6 million loan from Farm Credit Services of Mid-America and will undertake financial and asset management for the approximately $70 million project. Other backers include nearly 300 local farmers and businesses, Fagen Inc., The Andersons Inc., Noble Americas Inc. and Indeck Energy Services Inc. In addition, the U.S. Department of Energy provided a grant.

    Firm News

Dunedin Capital Partners of Scotland reportedly is in negotiations to buy UK-based Sand Aire Private Equity.

    Human Resources

FTI Consulting Inc. (NYSE: FCN) has added three senior executives to its corporate finance/restructuring practice. Jerome Gold, former CFO for Platinum Equity LLC, and David Smalstig, former director for PwC’s transaction services group, have joined the company as senior managing directors within the transaction advisory services group. Christopher Nicholls, formerly a senior vice president with GE Capital’s media communications group, has joined as senior managing director within the communications & media industry team.

Scott Meadow, a former general partner with Sprout Group, has joined the board of directors at Advanced Life Sciences Holdings Inc. (Nasdaq: ADLS). Also joining the ALS board in Richard Reck, founder and president of Business Strategy Advisors, and a former partner with KPMG.

John Schweiters, vice chairman of Perseus LLC, has joined the board of Choice Hotels International Inc. (NYSE:CHH).


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September 2, 2005


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