From: "Dan Primack"

Name: Dan Primack

Email Address: Dan_Primack@fortune.chtah.com

Subject: Term Sheet -- Monday, November 8

Date: 08-11-2010 16:07:20

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Fortune Finance Street Sweep Term Sheet Economics Tech Wall Street Washington

The Term Sheet by Katie Benner

Monday -- November 8, 2010

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CORRECTED VERSION

The end of green and natural gas?

I wonder whether all the activity in the natural gas and green sectors will come to a screeching halt post-Republican sweep of the House. Why invest in alternative energy (which is so very capital intensive) when it will have mixed political support and the prices of oil, gas, and coal are super cheap.

The Republican win has also been framed as a win for natural gas (shale drilling free for all!) butI’d raise one leetle teenie issue with that idea. Keep in mind, electricity production accounts for most of our natural gas demand, and the election seriously diminishes the chances for any sort of real tax or levy on carbon emissions. Making it expensive to use coal prices is what would really incent power producers to switch to natural gas once and for all, and keep demand steady. Without costly coal, any big production (shale or otherwise) is just gonna exacerbate the current demand glut and push futures lower. That in turns often leads to production halts. The fix to this bad downward spiral seems like it would come from increased demand... and if it’s notcoming from the power grid, where from? The fleets of electric cars about to hit the road?

This could be bad for all of the big recent JVs being inked in the Marcellus, among otherplaces…

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** Rumors Among the many floating today, the idea of AOL fixing to buy Yahoo got everyone going this morning, but I agree with Kara Swisher over at All Things D who writes that the story looks like a lot of hype from bankers. Why would AOL, which just untangled itself from a messy, costly, value destroying merger jump into a deal that would at the very least be messy and hard-to-value? Also in the press are whispers that ExxonMobil may bid for BP. If nothing else, the idea pushed BP shares higher, as has talk that Massey Energy is weighing takeover offers. And these statements from the man who blocked the Potash-BHP deal make a future deal look like a pipe dream.

*** In other news: PwC released its quarterly M&A update for the US Technology sector, and says that tech M&A activity is increasingly being driven by a smaller group of active players and that the middle market dominates the space (oh yeah!).

**** Hank Morris, a former political advisor to NY ex-State Comptroller Alan Hevesi andmiddleman between investment firms and the NY State Common Retirement Fund, is pleading guilty to a felony charge, reports the New York Times. The fate of Quadrangle’s Steven Rattner is up in the air, but the former car czar recently penned an op-ed in the FinancialTimes saying that green shoots are piercing through the bad economy. “Like a fully loaded jumbo jet lumbering down the runway, the US economy is pulling hard to gain enough speed tobecome airborne. And like the jet that always manages to fly, its nose has finally begun to pointupward.”

***** And from the reader mailbag I like the back and forth I had with Jeff about the GM tax break. He takes issue with my comparison of GM and GE. GE isn’t paying taxes because the company is “simply abiding by the crazy IRS rules as written.” Whereas GM’s break is “acontinued and veiled bailout of a failed company on the backs of taxpayers.” He also reminds us that in the GM bankruptcy, contract law was broken and first in line bondholders were crammed down in favor of the unions. “The GM tax deal Bond holders were deprived, not taxpayers, that's for sure.”

I agree certainly on his points about the GM bond deal, which happened, I think, because the bondholders were hedge funds and other reviled investors. Chrysler bondholders, on the other hand, were investment firms that had mom and pop investors, and to screw them over would have created unwanted political populist outrage. (Yeah, even more than what we have now…)

Interestingly, the GM bond deal wasn’t bad for everyone. Michael Kao, of the species hedge fund, made a fortune on it. As he described last month at the Value Investing Congress, the situation with Obama and GM reminded him of FDR commandeering the railroads and destroying the value of railroad bonds during WWII. Bear Stearns made its name on Wall Street by correctly guessing that fears of permanent government interference and nationalization wereoverdone, and the bank scooped up railroad bonds at bargain basement prices. Similarly, Kao bought the bonds of automakers that were hit by similar fears in 2008 and made a killing. Kao's Akanthos was up 270% net of fees in 2009.

I’ll be filling in for Dan while he’s away on paternity leave. Feel free to ping him to saycongratulations, 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

Amazon and Quidsi

I couldn’t have said it better than Dan Primack, writing from paternity leave: "What Amazon fears most: Diapers" declared the cover of BusinessWeek earlier this fall. Now it's clear that Amazon didn't fear diapers, it just wanted them for itself."

Today is the day that online retail giant Amazon is to announce an acquisition of Quidsi, theparent company of websites like Diapers.com and Soap.com, in a deal estimated at $540 million in cash, or $200 million over what Quidsi was valued at in its latest round of venture financing. As new father Primack now knows, parents want to buy their diapers and soap in bulk, on the cheap, and have it delivered to their doors. Amazon, along with VCs like Accel Partners, Bessemer Venture Partners, BEV Capital, MentorTech Ventures, and New Enterprise Associates, saw the potential.

I guess in the battle between fear and desire, desire won out for Amazon.

VC Deals

PathCentral, an Irvine, CA-based anatomic pathology services company, completed a Series B financing round for $10 million. It was co-led by Baird Venture Partners and included ArboretumVentures and Okapi Venture Capital. http://pathcentral.net/

Gazillion Entertainment, a developer, publisher and operator of massively multiplayer online games, received $60 million in funding from a group led by Singapore's Temasek Holdings.Gazillion, the maker of LEGO Universe, is also backed by Oak Investments, Hearst Corporation, Revolution Ventures, Pelion Ventures, and the Abu Dhabi Media Company. http://www.gazillion.com/

Vipshop, Beijing-based online retailer, has closed a $20 million round of funding from global VC firms DCM and Sequoia Capital. www.vipshop.com

Infochimps, an Austin-based marketplace for lists and other data sets, has raised $1.2 million in its first round of institutional funding. The money came from DFJ Mercury. www.infochimps.com

Trooval, a San Francisco-based company that develops software for timeshare operators, has raised $1.6 million in equity, according to a filing with the SEC. North Bridge Venture Partners participated in the round. www.troovalinc.com

Exchange Corporation K.K., a Japanese peer-to-peer lending service, has received an undisclosed amount from the Silicon Valley-based venture capital fund, 500 Startups. www.exchange.co.jp

Private Equity

TPG Capital could submit a rival bid for CommScope, the telecom company with a $3.36 billion deal to be acquired by the Carlyle Group, the Wall Street Journal reports. In order to justifypaying up for CommScope, TPG would need a strategic partner, the newspaper says, naming the specialty glass and ceramics maker Corning as a possible partner. http://www.tpg.com/

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Central Pacific Financial, Hawaii’s fourth largest bank, will receive a $195 million combined capital infusion from The Carlyle Group and Anchorage Capital. The deal is contingent on the bank’s ability to raise an additional $130 million to reach its goal to raise $325 million. https://www.centralpacificbank.com/

Dynegy said that Institutional Shareholder Services has recommended that shareholders approve Blackstone’s $4.7 billion, or $4.50 per share, bid from Blackstone Group. The advisory firm says that with the average price for natural gas down 7.1%, Dynegy stock’s standalone value would be $2.66.

A shareholder vote on the deal is scheduled for Nov. 17. www.dynegy.com

Ashland, the specialty chemicals company, said on Monday that it would sell its global distribution business to TPG Capital for $930 million in cash. http://www.ashland.com/

MacDonald, Dettwiler & Associates, a British Columbia-based maker of the robotic arm used on NASA space shuttles, is selling its property-data unit to TPG Capital for about $849.6million. http://www.mdacorporation.com

Vue Entertainment, Britain’s third-largest cinema chain, will be sold to Doughty Hanson in a deal that values the business at roughly $729 million. As part of the deal, Vue stakeholders Coller Capital and Och-Ziff would sell their stakes to Doughty Hanson. http://www.myvue.com/

Centro Properties Group, which owns shopping centers in the US and Australia, could receive a preliminary bid from a partnership that includes NRDC Equity Partners and Australian real-estate investor Lend Lease Corp, the Wall Street Journal reports. Australia’s Centro recently disclosed "expressions of interest" from potential buyers and is soliciting and evaluating bids. http://www.centro.com.au/

myTECHNIC, a Turkish greenfield maintenance, repair and overhaul center, is selling a majority stake to Bravia Capital and HNA Group. Terms of the deal were not disclosed. http://www.braviacapital.com/

RMS, an accounts receivable management firm, was acquired by iQor Holdings business process outsourcing company backed by Huntsman Gay Global Capital. Terms of the deal were not disclosed. Citi Venture Capital International and Starr International Company also have investments in iQor. RMS was spun off from Dun & Bradstreet in 2001 and has 3,000 employees in the U.S., Canada, Hong Kong, India and Mexico. www.iqor.com

ATC Group, a Dutch services provider to corporations and financial institutions, sold a 61% stake to HgCapital, reports AltAssets. Terms of the deal were not disclosed. http://www.atcgroup.com/

Blackstone recently paid a $16.2 million "clawback" to investors in a real estate fund for not meeting investment targets, Reuters reports. The clawback refunds investors for profits that may have been taken out by the general partners early in the life of the fund.

IPOs

IPO watch for the week: IPO tracker Renaissance Capital notes that this week’s high profile IPOs include General Motors, Booz Allen Hamilton, and LPL Investment.

Caesars Entertainment, the world’s biggest casino operator, plans to sell 31.25 million shares at between $15 to $17. The company was acquired by Apollo and TPG as Harrah’s

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Entertainment. http://sec.gov/Archives/edgar/data/858339/000119312510249535/dex991.htm

Fresh Market stock closed at $32.11 to end the company’s first day of trading on the Nasdaq, up 46% following the IPO. The Greensboro, NC-based grocery chain sold 13.2 million shares for $22 a share, above the expected price range of $18-$20. http://www.thefreshmarket.com/

Primo Water Corp shares closed at $12.95 on their first day of trading on the Nasdaq, up 7.9% from their IPO price of $12. The maker of three- and five-gallon water bottles anddispensers sold 8.3 million shares. http://www.primowater.com/

Exits

Bumble Bee Foods, the San Diego-based seafood company owned by Centre Partners Management, will be bought by Lion Capital. Terms of the deal were not disclosed. http://www.centrepartners.com/

Apax Partners, a private equity group, has sold most of its early-stage technology investments to Azini Capital, marking its exit from the venture capital business, according to the Financial Times. Azini specializes in buying unwanted stakes in start-ups. Terms of the deals were notdisclosed.

The Hotel de Crillon, which is owned by Starwood Capital, will be sold to Saudi investors with ties to the royal family in a deal worth about $353.6 million, Reuters reported, citing an article in Le Figaro. The unnamed buyers may also need to spend an additional $140 million for restoration work on the Paris hotel.

Eversholt, a UK-based train leasing business owned by HSBC Holdings, will be sold to aconsortium of infrastructure funds including Morgan Stanley Infrastructure, 3i Infrastructure, and Star Capital in a deal worth $3.39 billion, Reuters reported. HSBC bought Eversholt in 1997 for approximately $1.2 billion.

Castro Cheese Company, which was backed by Palladium Equity Partners, has been sold to Dairy Farmers of America. Terms were not disclosed. www.palladiumequity.com

Other Deals

Massey Energy, the coal mining company that became a household name after one of itsmines collapsed and killed 29 miners, received a takeover offer from rival Alpha Natural Resources, the Wall Street Journal reports. The stock sank by as much as 52% following the April collapse, and is now trading 14% from its high this spring with a $4.8 billion market cap. Massey's board retained Perella Weinberg to advise on the Alpha bid, the newspaper said, adding that Arch Coal and Consol Energy are also interested in acquiring Massey. http://www.masseyenergyco.com/

Quidsi Inc., which owns Diapers.com and Soap.com, is to be acquired by Amazon.com for an estimated $540 million in cash, or $200 million over what Quidsi was valued at in its latest round of venture financing. Dan Primack has a full write up here, http://finance.fortune.cnn.com/2010/11/06/amazon-to-buy-diapers-com-for-540-million/ which says Wal Mart also made a competing offer.

Avis Budget Group chief executive Ronald Nelson said during last Friday’s earnings call that it needs more funding to acquire Dollar Thrifty, which has been the subject of a takeover battle between Avis and Hertz. The Federal Trade Commission is looking into whether a deal between Avis and Dollar Thrifty might create a monopoly in the budget car rental space. www.avis.com

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BP has sold assets in Namibia, Botswana and Zambia to Trafigura, Reuters reported, citing comments made by a Namibian government minister to a newspaper. Terms of the deal were not disclosed. www.bp.com

High Speed 1, the UK’s first high speed railway line, will be acquired by the Ontario Teachers’Pension Plan, and OMERS, another large Canadian pension plan, in a deal worth about $3.4 billion that entitles the pension funds to operate the 68 mile line for the next 30 years. High Speed 1 connects London to the Channel Tunnel. The deal will help the UK reduce its budget deficit. http://www.omers.com/

Avid Radiopharmaceuticals, a Philadelphia-based drug company, will be acquired by Eli Lilly for $300 million upfront and an additional $500 million based on approvals for Avid’s florbetapir, which can be used to detect a brain chemical that could be a factor in the onset of Alzheimer’sdisease. http://www.lilly.com/

Royal Dutch Shell is selling nearly a third of its stake in Australian energy firm Woodside Petroleum for about $3.3 billion. After the sale, Shell will still own roughly a quarter of Woodside. http://www.shell.com/

Cambron Credentials, a credentialing company based in St. Johnsbury, VT, has been acquired by IntelliSoft Group. Terms of the deal were not disclosed. Cambron Credentials CEO SarahEmery will join IntelliSoft as vice president of credentialing services. www.intellisoftgroup.com

Micromem Technologies, a Toronto-based semiconductor company, completed a private placement of 500,000 units for gross proceeds worth $99,950. Each unit is comprised of one common share and one common share purchase warrant that may be exercised at a price of 22 cents for a period of six months. http://www.micromeminc.com

Enson Assets, a Chinese remote control maker, was acquired by Universal Electronics in a deal valued at approximately $110 million. http://www.uei.com//press.php?page_id=737

Redilearning, a Delray Beach, FL-based education company, completed a $1.75 million share offering, according to an SEC filing. The news was first reported by CityBizList in Florida. http://southflorida.citybizlist.com/business-news.aspx.

Carrefour, a French retailer, has received second-round bids from Britain’s Tesco and Singapore’s Dairy Farm for its Southeast Asian assets, according to Reuters. Reuters previouslyreported that private equity fund Navis Capital and Japanese retailer Aeon would also bid for some of Carrefour’s assets.

China's national oil companies have been on a massive spending spree, spending $24.6 billion on overseas acquisitions so far this year, The Financial Times reports.

Firms & Funds

Point State Capital, is a firm being opened by Stanley Druckenmiller’s former employees at Duquesne Capital Management, Bloomberg reports. Point State plans to open with $5 billion in assets, the second-largest hedge fund start-up ever. Druckenmiller will invest about $1 billion in the new fund and the remainder will come from former Duquesne investors, according toBloomberg.

Citigroup plans to hire hundreds of bankers and other staff to its investment banking and European securities divisions, reports Financial News.

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Infinity Group, based in Tel Aviv, has raised $33 million for a China-focused life science fund. The firm launched its fund – Tianjin Israel Life Science Fund – with Chinese investors Tianjin Venture Capital, Tianjin Economic and Technological Development Zone, Tianjin MingxuanInvestment and Tianjin Tianying Venture Capital Management. http://www.infinity-equity.com/

Cordiant Capital, a Canadian fund manager, is seeking to raise more than $1 billion for a fund that will focus on the financial services sector, reports the Financial Times.

New York Private Bank & Trust has changed its to New York Private Trust Company. New York Private Trust Company, which advises high net worth families, is a subsidiary of Emigrant Bancorp. www.nyptrust.com

Moving In, Up and On

Eugene T. Starr has been elected president, chief executive, and a member of the board of directors of Vascular Pathways, a medical device maker that recently raised $14 million in Series B venture capital from CHL Medical Partners, Ascension Health Ventures, MVM Life Science Partners, and Arcus Ventures. The company is also moving its headquarters from Los Altos, CA to Naples, FL. http://www.businesswire.com/news/home/20101108005476/en/Vascular-Pathways-Hires-Eugene-Starr-President-CEO

George Hornig has joined PineBridge Investments as senior managing director and chief operating officer. Hornig was previously a managing director and co-global chief operating officer at Credit Suisse Asset Management. He has also worked as executive vice president and COO at Deutsche Bank, and co-founder and COO of Wasserstein Perella. www.pinebridge.com

Scott Hendon has been elected to the board of BDO USA, LLP, a financial advisory firm. The election is for a three-year term and effective immediately. Hendon is a tax partner in BDO’s Dallas office and is a member of the firm’s National Private Equity Practice and Transactional Advisory Services Group. www.bdo.com

Jerry Dentinger has joined BDO USA as director of the Midwest Transaction Advisory Services Practice, which performs due diligence for equity investors and debt capital providers,specializing in private equity and strategic merger and acquisition transactions. www.bdo.com

Benjamin Cheng, a partner at private equity firm Actis, is retiring from the firm that he joined in 2003, Reuters reports. Cheng is among the first China-focused dealmakers.

MatlinPatterson is set to hire a credit investment team that previously worked for KeyCorp, according to the Financial Times.

Michael Fields, former chief executive officer of KKR-backed KANA Software, passed away on Sunday October 24th 2010 after a 10-month struggle with cancer. www.kana.com

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