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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet - - Tuesday, September 28

Date:

28-09-2010 14:39:41
Message

Fortune Finance

Street Sweep

Term Sheet

Economics

Tech

Wall Street

Washington

The Term Sheet by Dan Primack

Monday -- September 27, 2010

Email Dan | Follow Dan on Twitter | Subscribe

Random Ramblings
Last night I finished reading King of Capital, a new book on The Blackstone Group by David Carry and John E. Morris. Kind of reads like a
broad history of private equity, with Blackstone as the touchstone. Pretty sympathetic toward the firm (and PE in general), although Steve
Schwarzman takes some hits for his notorious tin ear and quick temper.
Here are some pull-outs:

The book suggests that Blackstone's break-up with Larry Fink was partially caused by Schwarzman's ongoing divorce
negotiations. Basically, Fink wanted more economics for his group (now Blackrock) than Schwarzman thought he was entitled to
receive.
When Clayton Dubilier & Rice met with IBM chairman John Akers about the deal that would become Lexmark, Akers held up a
copy of Barbarians at the Gate, and said: "The reason I am talking with you is because you are not mentioned in this book."
The one ex-Blackstone exec really savaged is David Stockman.
Bret Pearlman, on how Charter Communications overpaid for Blackstone's cable industry companies: "We used to get up every
morning and thank Paul Allen. Hallelujah!"
Before hiring Tony James as firm president, Blackstone offered the job to Jimmy Lee.
From an investment standpoint, James insisted that deal teams look at extreme best-case and worst-case scenarios. Schwarzman
called them "tooth fairy scenarios."
When KKR went public in Amsterdam, more than a dozen U.S.-based PE firms readied similar offerings. Blackstone's was codenamed Project Panther.
Blackstone's deal for Equity Office was actually its third bite at the apple. Its original attempt included CalPERS as a co-investment
partner.
There is a lot about the birthday party. Oddly, no quotes from Schwarzman on the debacle (even though he was interviewed
repeatedly for the book).

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Pete Peterson was not initially in favor of the IPO. By then, however, Peterson didn't really much matter at Blackstone.
Schwarzman didn't pose for that infamous Fortune magazine cover. It was a stock photo, and used without his knowledge.
Tony James fell ill with kidney stones while pitching the IPO in Kuwait. He went to the pitch meetings anyway.
The book talks a bit about the Hertz deal, and tries to debunk the idea that it was a "quick flip." To do so, it points out that the
company's revenue soared after being acquired by Carlyle, CD&R and Merrill Lynch. What it fails to note, however, is that much of
that revenue ramp came courtesy of Hurricane Katrina, which necessitated an unprecedented amount of heavy equipment rentals.

*** AOL this morning announced that it has acquired 5Min, a New York-based syndication middleman for online videos. All Things D
broke the news a few hours earlier, saying the deal was valued at between $50 million and $65 million. A source familiar with the situation
has since told me that the actual figure is $65 million in cash.
5Min had raised around $13.9 million in VC funding, including a $400k seed round, a $5 million Series A round (Spark Capital) and a $7.5
million Series B round (Spark and Globespan Capital Partners). It had been approached by multiple VCs for a Series C round, but opted
for the sale.
*** Facebook board member Peter Thiel yesterday said not to expect an IPO until 2012. Pretty sure that somewhere in Facebook HQ,
the following is written in stone: "When asked about an IPO, always say it is at least two years from today's date."
*** Doug Hickey has quietly left Hummer Winblad Venture Partners, where he had been a managing director since 2001. He previously
was CEO of Critical Path.
No word yet on why Hickey left, his next move or if Hummer Winblad plans to name a replacement. Hickey's investments for Hummer
Winblad included Cittio, Communicado, Move Networks, Scalent Systems and Yosemite Technologies.

5 things you should read @Fortune.com

Pre-Marketing, including how farmers and robots can be friends, I-bank indictments on the horizon, TechCrunch nears a sale and
how a PE big could reshape Canadian government.
Who killed the electric motorcyle?
Shining a light on shadow inventories
Demographics: iPad owners vs. Kindle owners
Reid Hoffman (sort of) returns to his super-angel roots

The Big Deal

Berkshire Partners has agreed to sell its ownership stake in Advanced Drainage Systems Inc., a Hilliard, Ohio-based maker of
corrugated high-density polyethylene (HDPE) pipe products. The buyer is an undisclosed private equity firm based in New York. No
financial terms were disclosed.
This is a big deal because Berkshire has held ADS for a whopping 22 years. The Boston-based firm first invested in 1988 as part of a
management recap, and five years later got some liquidity when ADS put an ESOP in place. There were a handful of other dividend
recaps along the way, but by 2002 Berkshire knew it needed to tie off the two funds holding ADS shares (Funds I and II).
Only problem was that Berkshire still thought ADS was a better opportunity than most of the new deal-flow it was seeing, particularly as
the storm drainage market kept moving from heavy (concrete/steel) to lighter-weight (plastic) pipes. So it basically sold its stake to Funds
V and VI, generating a 9x return on the original investment. Today's deal represents a 5x return on the 2002 deal, and the overall IRR is
somewhere in the 20s.

VC Deals

Revolution Prep, a Los Angeles-based provider of academic test preparation software, has raised $15 million in its first institutional round
of funding from Kennet Partners. www.revolutionprep.com
NetShelter Technology Media, a San Francisco-based online ad network for tech-focused publishers, has raised $15 million in Series B
funding. Rho Ventures led the round, and was joined by return backers Rho Canada and JLA Ventures. www.netshelter.net

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FitBit, a San Francisco-based maker of a 3D motion sensor that tracks calorie-burned and other personal health information, has raised
$9 million in new VC funding. Foundry Group led the round, and was joined by return backers True Ventures and SoftTech VC.
www.fitbit.com
Verve Wireless Inc., a San Diego-based provider of provider of mobile publishing and advertising technologies to local media companies,
has raised $7 million in new VC funding. BlueRun Ventures led the round, and was joined by existing backer The Associated Press.
www.vervewireless.com
TetraLogic Pharmaceuticals, a Malvern, Penn.-based developer of small-molecule cancer drugs, has raised $5 million in new Series C
funding from Pfizer Ventures. The company previously held a $32 million first close on the round, from Clarus Ventures, Hatteras Venture
Partners, Amgen Ventures, HealthCare Ventures, Latterell Venture Partners, Novitas Capital, Quaker BioVentures and the Vertical
Group. www.tetralogicpharma.com
Ixtens, a New York-based provider of SaaS that powers marketplaces for online retailers and media companies, has raised $4.6 million in
Series A funding. Greycroft Partners and BV Capital co-led the round, and were joined by Marvin Traub Associates. www.ixtens.com
Buysight (f.k.a. Permuto), a Palo Alto, Calif.-based builder of an index of consumer purchase intent, history and activity data, has raised
$4 million in new VC funding. It has now raised a total of $10 million, from Onset Ventures, Rembrandt Venture Partners, Reid Hoffman
and others. www.buysight.com
Reach Call Inc., an Augusta, Ga.-based provider of telemedicine solutions, has raised $5 million in Series A funding. Council Ventures
led the round, and was joined by Croft & Bender Capital and return backer Georgia Health Sciences University. www.reachcall.com
Masabi, a London-based developer of mobile ticketing technology for the transport sector, has raised $2 million in VC funding from m8
Capital. www.masabi.com
Harvest Automation, a Billerica, Mass.-based developer of cooperative robotics for agricultural material handling, has raised $1.3 million
in new funding from Founder Collective. The company has now raised 45.3 million to date, including earlier commitments from Life
Sciences Partners, Cultivian Ventures and Massachusetts Technology Development Corp. www.harvestai.com

Private Equity Deals

Bridgepoint said that its proposed sale of German eyeglass maker Rodenstock to Trilantic Capital has fallen through over terms.
Bridgepoint and Rodenstock creditors now will refocus on restructuring the company's 303 million in debt.
Fieldglass Inc., a Chicago-based provider of SaaS vendor management systems, has raised an "substantial investment" from Madison
Dearborn Partners. The deal values Fieldglass at more than $200 million. www.fieldglass.com
Shamrock Capital Advisors has agreed to acquire a majority stake in Screenvision, a New York-based provider of in-cinema
advertising solutions. Sellers include ITV PLC (its entire 50% stake) and Technicolor (retaining minority position). No financial terms were
disclosed. www.screenvision.com
Valero Energy Corp. has agreed to sell a Paulsboro, N.J. refinery, a connecting natural gas pipeline and related assets to PBF Holding
Co., a Greenwich, Conn.-based portfolio company of First Reserve, The Blackstone Group and Petroplus Holdings. The deal is valued at
$180 million in cash, plus the value of the facility's existing hydrocarbon inventory. In other PBF news, Petroplus has agreed to sell its
position to First Reserve and Blackstone. http://www.pbfenergy.com

PE-backed IPOs

Amyris Biotechnologies Inc., an Emeryville, Calif.-based synthetic biology company that develops renewable hydrocarbon biofuels,
raised $84.8 million in its IPO. The company priced 5.3 million shares at $16 per share (below $18-$20 offering range), which gives it an
initial market cap of nearly $647 million. It will trade on the Nasdaq under ticker symbol AMRS, while Goldman Sachs, J.P. Morgan and
Morgan Stanley serving as co-lead underwriters. Amyris had raised over $240 million in VC funding, from Kleiner Perkins (15.4% pre-IPO
stake), Kohsla Ventures (15.4%), TPG Biotech (12.1%), Advanced Equities (6.7%), Temasek Holdings, DAG Ventures, Votorantim Novos
Negocios, Grupo Cornlio Brennand, Naxos UK, The Westly Group and Stratus Group. www.amyrisbiotech.com

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Country Style Cooking Restaurant Chain Co., a quick service restaurant chain in China, raised around $82.5 million in its IPO. The
company priced 5 million American depository shares at $16.50 per share(above $14-$16 offering range), for an initial market cap of
approximately. It will trade on the NYSE under ticker symbol CCSC, while, BoA Merrill Lynch and Credit Suisse served as co-lead
underwriters. Shareholders include Sequoia Capital China (15% pre-IPO stake) and SIG China Investments (15%).

Exits
Apax Partners has agreed to sell Qualitest Pharmaceuticals, a Huntsville, Ala.-based distributor and manufacturer of generic
pharmaceuticals, to Endo Pharmaceuticals (Nasdaq: ENDP). The deal is valued at approximately $1.2 billion. www.endo.com
Crescent Capital Partners has agreed to sell NHC Group Pty Ltd., an Australian hearing aid distributor, to Amplifon SA for A$460
million.
IBM has agreed to acquire Blade Network Technologies, a Santa Clara, Calif.-based provider of data center networking. No financial
terms were disclosed. Blade Networks spun out of Nortel Networks in 2006, in a $30 million deal led by Garnett & Helfrich Capital. The
company later raised another $10 million, from Garnett & Helfrich, NEC Corp., Juniper Networks and an undisclosed strategic investor.
www.ibm.com
JLL Partners has agreed to sell McKechnie Aerospace Holdings to TransDigm (NYSE: TDG) for $1.27 billion in cash. McKechnie is an
Irvine, Calif.-based maker of aerospace products, and was acquired by JLL in 2007 for around $850 million. www.transdigm.com

Other Deals
e-Rewards, a Dallas-based provider of online market research panels, has agreed to acquire Peanut Labs, a San Francisco-based
provider of Generation Y market research for social networks and other online content providers. No financial terms were disclosed. TA
Associates is a minority shareholder in e-Rewards, while Peanut Labs raised $3.2 million in Series A funding from Leapfrog Ventures and
BV Capital. www.researchnow.com

Firms & Funds

HarbourVest Partners has agreed to invest around $300 million into five companies controlled by Arcapita, a Bahrain-based investment
bank. www.arcapita.com

Moving In, Up and On

George Bell has been named CEO of Jumptap, a Cambridge, Mass.-based mobile advertising startup. He will take an indefinite leave
from his role as a managing director with VC firm General Catalyst, which is one of Jumptap's investors. www.jumptap.com

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