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

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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 nation’s 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 couldn’t 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, I’m not saying that Childs is back. Instead, I’m 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 doesn’t quite agree that the

effort is a mildly-desperate attempt to update the firm’s 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 firm’s 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. I’m 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 Foundation’s 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 hasn’t 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 didn’t want to make an investment in YouTube around

six years ago.

� Alan Patricof: Didn’t 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 1980’s, but ultimately lost out.

*** The more I think about it, the SEC’s 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 first-

lien 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 Moody’s 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 Brunswick’s

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 Beceem’s 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 receiveapproximately $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 O’Neill, founding principal of Sandler O’Neill & 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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