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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet -- Friday, November 5

Date:

05-11-2010 14:56:50
Message

Fortune Finance Street Sweep Term Sheet Economics Tech Wall Street Washington

The Term Sheet by Katie Benner

Friday -- November 5, 2010
Email Katie | Follow Dan on Twitter | Subscribe

Hands down
Now that Citigroup has beaten Guy Hands in the EMI case, I wonder what will become of
Terra Firma and Hands. EMI is still flirting with bankruptcy and the whole debacle, as Peter
Lattman writes in the New York Times, has become a vivid illustration of the excesses of the
most recent buyout boom. But unlike other deals made over the past decade that exploded, the
fight over EMI could hurt Terra Firma in a way that Chrysler could not crush Cerberus and
Masonite could not damage KKR.
In the EMI lawsuit, Hands claims that he was tricked into overpaying for the music company
because Citi investment banker David Wormsley**** lied about the existence of competing
bidders. In its statement, Terra Firma said: We are disappointed that the jury found that we did
not prove that we relied on misrepresentations from Citi, which caused a loss to our investors
We believe that this was an important action to bring and that we had a responsibility to our
investors to bring it.
Terra Firma failed in its responsibility to investors, but now because it lost its lawsuit. Hands
claim basically says, At Terra Firma, we make our price decisions based not on sober
evaluations, but on the whispers of bidding wars from a Citi investment banker.** This is indeed
a failure if your job is to make smart investing decisions based on your teams financial
assessments.
Other firms that overpaid for companies, overlevered their balance sheets, and pushed them

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into bankruptcy blamed the markets, blamed their financial analysis, and blamed the bubble.
They may not have fully embraced their roles in the blowups, but they certainly didnt try to pin
it all on their bankers.
Separately, a reader emailed yesterday to say Betawave might be in trouble and
TechCrunch has the full story (or full-ish story) today. The niche ad network that had raised
$22.5 million in financing has run out of money. According to Term Sheet's reader, the company
was never profitable, and was backed by Global Asset Capital, Panorama Capital, Rustic Canyon
Ventures and Rembrandt Venture Funds. TechCrunch writes that some publishers have not been
paid in 6 months and were only hanging on to see if Betawave would merge with
Realgirlsmedia, a deal which apparently fell though.
*What really happened between Mark Hurd and Jodie Fisher? Last night, Fortune
posted an incredible (and incredibly bizarre) look at what led to Hurds downfall at HP. Theres
talk of cougars, a shark lawyer, and a board that didnt know what it was chasing and seems to
have acted more out of hurt feelings (how could they trust their CEO?) than solid information.
Its not the typical Term Sheet fodder, but for anyone involved in investing in, running, or sitting
on boards of public companies, its a real eye opener into how bad decisions can pile up on each
other. http://bit.ly/bINgV3
** Venture news: Venture capitalists from around the world invested $7.8 billion in 995 deals
for companies based in the US, Europe, Canada, Israel, Mainland China and India, down from
$7.9 billion put into 1,025 deals during the same period last year, according to a new report
from Dow Jones VentureSource. Europe has not recovered, but the US is returning to health.
More info here. http://bit.ly/a8VXIE.
*** You know what BlackRock is gonna do? Finance and securitize US mortgages, thats
what. http://dealbook.blogs.nytimes.com/2010/11/05/blackrock-fund-to-finance-and-securitizeu-s-mortgages/
**** Admittedly, the name Wormsley sounds an AWFUL LOT like Wormtongue, who helped
bring Rohan to its knees, so I can see how a jury might wonder whether this is the kind of guy
whose whispers could bring down an investment house so noble as Terra Firma.
Ill be filling in for Dan while hes away on paternity leave. Feel free to ping him to say
congratulations, and please send all work related emails (news, tips, scoops, corrections) to me
at Katie_benner@fortune.com

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The Big Deal

Investigations to watch:
Louis Vuitton is being investigated by Frances stock-market regulator for its accrual of 17.1% of
Hermes, with regulatory head Jean-Pierre Jouyet saying that the countrys rules governing M&A
need to be stricter.
Meanwhile, the UKs communications regulator has been asked to review News Corps proposed
$12.6 billion acquisition of British Sky Broadcasting Group, with the countrys Business Secretary

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Vince Cable saying the deal could give Rupert Murdochs company too much influence over
media in the UK.

VC Deals
AeroScout, a Redwood City, CA-based real-time location technology developer, has secured
$16 million in venture funding. New investor Evergreen Venture Partners led the round, and all
of AeroScouts existing investors Cisco, Greylock Partners, Intel Capital, Menlo Ventures,
Pitango Venture Capital and Star Ventures participated as well. The new money will help
AeroScout expand its technology and adoption of its Wi-Fi-based RFID products.
www.aeroscout.com
DICOM Grid, a Phoenix-based maker of a cloud-based platform for medical imaging
management, has secured $7.5 million in Series A financing from a syndicate led by Canaan
Partners with participation from CHL Medical Partners and private investors.
www.dicomgrid.com
H.BLOOM, a New York-based flower subscription service provider, has completed a $2.1 million
series A round led by Battery Ventures. www.hbloom.com
Rocket Ninja, a San Francisco-based games and apps company, has raised a $3.5 million
Series A round from unnamed investors. www.rocketninja.com

Private Equity
West Brothers Companies, North Carolina-based provider of transportation, logistics and
leasing has been acquired by James Brown Contracting, a dedicated short-haul truckload carrier
owned by Navigation Capital Partners, an Atlanta-based middle market private equity firm.
Terms of the deal were not disclosed. www.WestBros.com
Central Pacific Finance will receive $98 million from The Carlyle Group and an additional $98
million from New York-based Anchorage Capital Group as part of a planned $325 million
recapitalization. Each firm will net a 24.9% stake in the company following the investments, and
will each hold a board seat. www.centralpacificbank.com
Cardell Cabinetry, based in San Antonio, received an undisclosed investment from H.I.G.
Capital. www.cardellkitchens.com
A group of private companies missed a deadline Thursday to provide a $750 million down
payment to purchase Nigeria's ailing state-run telephone company, the latest setback in efforts
to privatize the firm, The Associated Press reported. http://nyti.ms/d1rbpO
The Carlyle Group and Kelso & Co. are buying a minority stake in privately held investment
bank Sandler ONeill, Reuters reported. The financing, terms of which were not released, is
designed to fund growth. The deal will close at the end of 2010, Reuters said.
International Technidyne Corporation, a New Jersey-based provider of hemostasis
management and point-of-care testing products, completed its sale to affiliates of Warburg
Pincus in an all cash transaction valued at $55 million. www.itcmed.com
Spencer Pharmaceutical, Boston-based pharmaceutical R&D company, has received an allcash offer from a private equity firm to acquire any and all shares of the company. The board of
directors has agreed to keep the offer confidential until an investment bank can review the
offer. www.spencerpharmaceutical.com

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Maranon Capital, a Chicago firm that specialized in mezzanine loans and co-investments, has
provided mezzanine debt and equity to support the acquisition of DayMen Photo Market in
partnership with Brockway Moran & Partners and the companys management. The transaction
was Maranons fifth investment of 2010. www.maranoncapital.com
Hosted Solutions Acquisition, a Raleigh-based Infrastructure as a Service (IaaS) provider,
will be acquired by Windstream and ABRY Partners in an all-cash transaction valued at $310
million. www.windstream.com

IPOs
Mail.ru, a Moscow-based investor in Facebook, raised $912 million in its initial public offering
and surged in London trading, according to Bloomberg News. Mail.ru sold 32.9 million global
depositary receipts at $27.7 each, at the high range of its IPO price.

Exits
Accertify, a venture capital-backed anti-fraud software company, will be acquired by American
Express for $150 million, Reuters report. Accertify helps merchants prevent fraud on online
purchases, and is backed by venture investor Intel Capital. The acquisition will close during the
fourth quarter of 2010..

Other Deals
Sea Island Company, the bankrupt resort and real estate developer, will sell its assets to a
new company formed by Oaktree Capital Management, Avenue Capital Group, Anschutz
Corporation and Starwood Capital Group. Financial terms of the sale which is part of Sea
Islands Chapter 11 bankruptcy plan were not released. www.ourfuture.seaisland.com
Lagan Technologies has been acquired by KANA Software Inc. The terms of the transaction
were not disclosed. www.KANA.com
AMP, the Australian wealth manager, has talk to buy AXA Asia Pacific for $10 billion, according
to Bloomberg.
Sphere Minerals, an Australian-listed iron ore prospector, fended off an attempt by its biggest
shareholder to derail its agreed $522 million takeover from global miner Xstrata, Reuters
reported.
Coca-Cola said it plans a $4 billion debt offering, the biggest in its history, to take advantage
of low borrowing rates. http://www.thecocacolacompany.com/presscenter/nr_20101104_cash_tender.html

Firms & Funds

---

Moving In, Up and On

Brad Paddock, Anthony Sine, and Elisabeth Sandoval have been appointed to key
management positions at the surgical business of Bausch + Lomb, the Aliso Viejo, CA-based
contact lens company majority owned by Warburg Pincus. Paddock has been hired as vice
president, sales; Sine was appointed vice president, business development; and Elisabeth

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Sandoval was named vice president, global marketing.

http://www.bausch.com/en_US/default.aspx
Jeffrey Hudson has been appointed chief executive of CEO Venafi, Inc., a Sandy, UT-based
provider of enterprise digital certificate and encryption key management. Hudson was previously
CEO of Vhayu Technologies. Venafi is backed by Foundation Capital, UV Partners and Origin
Partners. w

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