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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet -- Thursday, December 2

Date:

02-12-2010 15:35:31
Message

Fortune Finance Street Sweep Term Sheet Economics Tech Wall Street Washington

The Term Sheet by Dan Primack

Thursday -- December 2, 2010
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Random Ramblings
J.W. Childs Associates last Thursday announced that it had agreed to sell its majority stake in Advantage
Sales & Marketing to Apax Partners. It came just days after the Boston-based firm priced a $125 million
SPAC (i.e., blank check acquisition company), which is designed to acquire a consumer product or retail
business in North America.
Can you remember the last time that J.W. Childs made two headlines within the same month, let alone the
same week? Hell, within the same year?
Not too long ago, Childs was one of the nations busiest middle-market buyout firms. It had over $3 billion
in capital under management, including a $1.86 billion vehicle raised in 2002. Portfolio companies included
such well-known brands as Brookstone, NutraSweet and Meow Mix. In fact, I remember watching a buyout
panel in 2004 (I think), in which a Childs partner was seated in between someone from Blackstone and
someone from THL Partners (plus Peter Dolan of Harvard Management, who should be required to do at
least a dozen conference panels per year).
But then it all seemed to fall apart. The firm attempted to raise $2.5 billion for a fourth fund in late 2006,
only to be rebuffed by liquidity-hungry limited partners. It then began losing key staffers including firm
president Dana Schmaltz and co-founder Steven Segal -- and figured that a SPAC could help it stay in the
de novo deal-making game. Like with the private fund, investors had no interest. Childs couldnt price the

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offering, and appeared to be on its way to permanent zombie-hood (as if there is another kind).
To be clear, Im not saying that Childs is back. Instead, Im saying that there is a glimmer of life.
The Advantage sale is a big win nearly a 3x return from a deal whose total value (including debt) was
$1.05 billion and the SPAC means that Childs can once again consider new deal-flow beyond existing
portfolio add-ons.
Adam Suttin, a co-founding partner at Childs, tells me that the revived SPAC came at the suggestion of
Citigroup, which pitched a more streamlined process than last time out. He doesnt quite agree that the
effort is a mildly-desperate attempt to update the firms track record more opportunistic, he argues -- but
does acknowledge that there is still hope of raising a new traditional PE fund within the next couple of
years.
He also sketched out the fund a bit: It would be smaller than the $1.86 billion raised for Fund III (which
included $1.75b of outside money, plus $115m of GP commit), and the firms management structure would
flatten out. Specifically, chairman and CEO John Childs would transition into a partner role.
I always like an underdog, so will be keeping tabs on this one
*** Adam Grosser recently stepped down as a general partner with Foundation Capital, as we noted in a
recent news blurb. Im now being told by multiple sources that Grosser is planning to launch his own fund,
although specifics remain scarce. Grosser, by the way, had one of Foundations board seats with Silver
Spring Networks once considered among the hottest IPO candidates for 2010 (less than a month to go in
the year, and it still hasnt filed an S-1).
*** Hearing some talk out of Silicon Valley that certain "super-angels" are making financing commitments
that their bank accounts can't match. Specifically, the investors are in the midst of raising new funds, and
were more optimistic than they should have been.
Can't imagine this is too common -- given that most angel financing rounds are simultaneous sign-and-fund
-- but plan to investigate further. If you know of any examples...
*** My former colleagues over at Buyouts magazine have an interesting piece out this week, with some
anti-portfolio misses from major private equity pros. Here are some highlights:

David Morgenthaler: Sided with partner who didnt want to make an investment in YouTube around

six years ago.

Alan Patricof: Didnt think the world needed another coffee shop, so he passed on Starbucks.

Steve Klinsky (CEO of New Mountain Capital): Had handshake deal to acquire MTV-Nickelodeon
in 1980s, but ultimately lost out.

*** The more I think about it, the SECs proposed registration exemption for venture capital funds is
relatively worthless. Yes, exempted firms will be able to save some up-front costs. But both registered and
exempted firms be subject to SEC audit, which means that each must spend extra dollars on back-end
book-keeping (plus some sort of kitty in case the SEC does come calling).

6 things to read @Fortune.com

Pre-Marketing, including Thomas H. Lee's role in the Madoff mess, Australia gets tough on private

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equity profits, year's top biz stories and how Amazon may defend itself against Goo-pon.

WikiLeaks dive: New biz info from last night's doc dump
Colin Barr: The Fed's dodgiest deals

Shaun Tully: The IRS's problem with minorities

Shelly DuBois: Wal-Mart's Africa strategy

Dan Primack: Why the mayor of Beverly Hills joined a private equity firm

The Big Deal

Pepsi Co. this morning announced that it has agreed to acquire a two-thirds stake in Russian juice-maker
Wimm-Bill-Dann for approximately $3.8 billion, or $33 per share (32% premium to yesterday's closing
price). It then would seek to acquire the company's remaining shares via a follow-on offering.
Rumors of the deal began swirling yesterday afternoon, but papers couldn't be signed until preliminary
Russian antitrust concerns were satisfied. In fact, a source familiar with the negotiations said that Vladimir
Putin himself was somehow involved in the sign-off.
How come? Because this deal, once completed, would give Pepsi more than a 48% piece of the Russian
juice market (based on more recent numbers than the accompanying graph).
It began its quest back in 2007, when it paid $1.4 billion for around a 75% stake in Lebedyansky (approx.
30% market share). That put it just ahead of rival Coca-Cola (COKE), which in 2005 had acquired Multon
(23% stake). Coke then upped the ante earlier this year by purchasing Nidan from private equity firm Lion
Capital, and now Pepsi is coming back over the top with Wimm-Bill-Dann (which also holds various baby
food and dairy assets).
Take a look back at that Lebedyansky figure for a moment: At the time, Pepsi believed that acquiring a
30% stake in the Russian juice market was worth $1.4 billion. Today, it is adding another 18% or so for
around $5.4 billion (when the follow-on offering is included). Are Russians mixing in more OJ with their
vodkas, or did Pepsi get a steal back in 2007?

VC Deals
PhaseBio Pharmaceuticals Inc., a Malvern, Penn.-based drug developer focused on metabolic and
cardiovascular diseases, has raised $15 million in new Series B funding. This completes the round at $25
million, including a $10 million first close in late 2010. Backers include New Enterprise Associates, Astellas
Venture Management, Johnson & Johnson Development Corporation, Hatteras Venture Partners and
Fletcher Spaght Ventures. www.phasebio.com
Envista Corp., a Beverly, Mass.-based provider of map-based coordination for smarter streets, has raised
$4.1 million in new VC funding. It is planning to raise a total of $7.6 million. Backers include Borealis
Ventures, Egan-Managed Capital and Point Judith Capital (Providence, RI). www.envista.com
Betterment.com, a New York-based provider of an online investing service, has raised $3 million in Series
A funding. Bessemer Venture Partners led the round, and was joined by Anthemis Group, Thomas
Lehrman, Fabrice Grinda and Dave Abner. www.betterment.com
Standing Cloud, a Boulder, Colo.-based developer of a cloud application management platform, has
raised $3 million in Series B funding. Avalon Ventures led the round, and was joined by return backer
Foundry Group. www.standingcloud.com

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Private Equity Deals

Behrman Capital has completed its $435 million recapitalization for portfolio company Pelican Products
Inc., a maker of protective cases and professional lighting equipment. The deal includes $405 million firstlien term loan and a $30 million revolving credit facility, which was unfunded at close. Credit Suisse served
as lead arranger, with GE Capital also participating. Proceeds were used to pay Behrman a dividend, plus
to repay existing debt. www.behrmancap.com
Huntsman Gay Global Capital has agreed to lead an acquisition of a control stake in Sunquest
Information Systems Inc., a Tuscan, Ariz.-based provider of diagnostic tech and outreach solution for the
healthcare market, according to a Moodys report first noticed by Buyouts newsletter. The deal is expected
to be valued in excess of $200 million. www.sunquestinfo.com
Macquarie Renaissance Infrastructure Fund has agreed to invest $125 million into Brunswick Rail, a
Russian leaser of rail rolling stock, in exchange for a 16% ownership stake. The deal is part of Brunswicks
larger, $500 million capital raise plan. www.macquarie.com
QuEST Global Services Pte Ltd, a Singapore-based provider of outsourced engineering services, has
secured a $75 million equity commitment from Warburg Pincus, in exchange for a minority ownership
position. www.warburgpincus.com

PE-backed IPOs
Beceem Communications, a Santa Clara, Calif.-based provider of mobile WiMAX chipsets, formally
withdrew registration for a $100 million IPO. The move follows Beceems agreement to be acquired by
Broadcom Corp. (Nasdaq: BRCM) for $316 million in cash, minus unvested employee options. Beceem
has raised around $110 million in VC funding since 2003, from Intel Capital (20.3% stake), Walden
International (16.3%), Global Catalyst Partners (16.3%), Khosla Ventures (5.9%), NEC, KTB Ventures,
Mitsui, Motorola and Samsung. www.beccem.com

Exits
GI Partners has completed its sale of The Linc Group, a global provider of technical building services, to
ABM Industries Inc. (NYSE: ABM). The deal was valued at $300 million in cash, which GI says represents
a 4.4x return on its invested capital. GI originally acquired TPG in 2003 via a management buyout from the
Enron bankruptcy process. www.gipartners.com
Insmed Inc. (Nasdaq: INSM) has acquired Transave Inc., a N.J.-based developer of inhaled
pharmaceuticals for the site-specific treatment of serious lung infections. The deal is valued at around $90
million (including repayment of Transave debt), with Transave backers to hold a 46.7% equity stake in the
combined company. Transave has raised VC funding from Quaker BioVentures, Fidelity Biosciences,
Prospect Venture Partners, TVM Capital, Forbion Capital Partners, Bessemer Venture Partners, and
Easton Hunt Capital Partners.
Motorola Inc. has agreed to acquire 4Home Inc., a Saratoga, Calif.-based based developer of connected
home services. No financial terms were disclosed. 4Home had raised VC funding from Pond Venture
Partners, Parker Price Venture Capital and Verizon Investments. www.motorola.com
Thermo Fisher Scientific Inc. has agreed to acquire Lomb Scientific Pty, a provider of chemicals,
consumables and instrumentation to science and healthcare markets in Australia and New Zealand. The

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seller is Anacacia Capital. No financial terms were disclosed. www.lomb.com.au

Other Deals
Liberty Media Corp. has exchanged its entire equity stake in IAC (Nasdaq: IACI), in exchange
for the IAC subsidiary that holds the Evite and Gifts.com business. Liberty also will receive
approximately $220 million in cash. In related news, Barry Diller exchanged around 4.3 million
shares of IAC company stock for an equal number of Class B shares in Liberty Media (giving him
around a 34% voting interest). Diller also will step down as IAC CEO. www.libertymedia.com
Cisco Systems has agreed to acquire LineSider Technologies Inc., a Danvers, Mass.-based
provider of cloud automation software. No financial terms were disclosed. www.cisco.com
Research in Motion (RIM) has acquired The Astonishing Tribe, a Swedish developer of
mobile user interfaces. No financial terms were disclosed. www.tat.se

Firms & Funds

3i Group next year plans to launch a $1.5 billion India-focused infrastructure fund, according to a Reuters
interview with firm CEO Michael Queen. www.3i.com
GI Partners has struck a deal to manage and invest CalEast Global Logistics, a $3.4 billion industrial and
logistics-related real estate portfolio owned by CalPERS. www.calpers.com

Moving In, Up and On

Thomas ONeill, founding principal of Sandler ONeill & Partners, has agreed to join Ranieri Partners as
chairman of a new platform that will acquire and manage companies in the financial services sector. He
also will serve as chairman of the holding company for First Allied, a San Diego-based broker-dealer.
James Guddy has joined Linsalata Capital Partners as a vice president. He previously was president of
Symmetry Advisors. www.linsalatacapital.com
Thomas Hassen has joined Macquarie Group as chairman of its oil and gas banking group. He previously
was with private equity firm Irving Place Capital. www.macquarie.com

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