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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet -- Tuesday, December 7

Date:

07-12-2010 15:01:02
Message

Fortune Finance Street Sweep Term Sheet Economics Tech Wall Street Washington

The Term Sheet by Dan Primack

Tuesday -- December 7, 2010
Email Dan | Follow Dan on Twitter | Subscribe

Random Ramblings
Last weeks overblown private equity story was about how Steve Schwarzman was temporarily moving to
Europe (the guy is on the road over 200 days a year and owns a home in France this is not any sort of
national defection). Yesterdays was about how AOL would merge with Yahoo, even though it hadnt yet
bothered to discuss the matter with anyone at Yahoo.
And now we have this Bloomberg item about how The Carlyle Group is planning an IPO. Excuse me while I
yawn.
The big get here is that Carlyle co-founder Bill Conway said of a possible listing: There will be significant
advantage to having a lot more capital Investors are reducing commitments to funds and making
economic terms much less attractive.
Bloomberg also cites two anonymous sources as saying that a filing would come late next year, with pricing
most likely to occur in 2012.
Four points:

1. There is nothing new here. Carlyle has been bandying about the idea of an IPO for years. Not just
privately, but publicly. Heres David Rubenstein speaking to the Washington Post more than three

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years ago: "It's fair to say that Carlyle . . . would be thought to be a natural candidate to go public
We don't have our heads in the sand and we're not ignoring what's going on with Blackstone or
Fortress or others.

2. Saying that Carlyle plans to file in late 2011 and go public in 2012 is kind of like telling people that
you plan to go on a diet sometime next summer. Intent is one thing. Follow-through is another.

3. Does Conway know that fund economics will still be much less attractive in late 2011? Of course
not. If GP/LP dynamics shift back to GPs (as they typically do), does that mean no IPO? Also,
would Carlyle really use IPO proceeds for future investments? If so, it would be a different strategy
than most other PE firms, which have used proceeds for liquidity, hiring incentives and/or expansion
capital (buying other investment groups, etc).

4. Carlyles decision will almost certainly be influenced by the IPO performance of Apollo
Management, which is next in line. And dont be surprised if TPG Capital, not Carlyle, is next in
queue.
To be clear: I expect that Carlyle will go public someday. Maybe in 2011 or 2012. But the idea that a
calendar has been drawn up seems specious.
*** There is no bigger name in venture capital right now than Digital Sky Technologies, the Russian
Internet conglomerate run by Yuri Milner. Its believed to be the largest outside shareholder in Facebook,
and also holds big pieces of companies like Zynga (both of which it bought at massive, late-stage
valuations). It also appears to have just lost out on a big new round for Twitter.
The group has been bankrolled by a few global investors including Goldman Sachs and Tiger Global
Management plus Russian oligarch Alisher Usmanov. Now Im told that DST is looking to broaden its
capital base, with plans to raise approximately $1 billion for a new fund from traditional limited partners.
No books are out yet, but multiple sources tell me that a road show is expected to begin within weeks. Its
being managed by a guy named Andy Brown out of Goldman Sachs San Francisco office. The investment
strategy apparently is to continue buying up shares in relatively-mature Internet startups, but ones with
slightly lesser public profiles (the next layer, as one LP put it).
Attempts to reach Milner and Brown were unsuccessful.
*** Some of you have asked about an RSS feed for the Term Sheet blog, which I update regularly
throughout the day. You can get the codes by going to http://money.cnn.com/services/rss. Look for Term
Sheet near the bottom of the page.

6 things to read @Fortune.com

Pre-Marketing, including a J Crew fiduciary fail, founders keep more control of their companies,

taxpayers exit Citi and how standing by Tiger Woods helped Nike's bottom line.
Cyrus Sanati: Hedge funds tell insider trading investigators to bring it on

John Byrne: Wharton overhauls its MBA program

Allan Sloan: Progressive's dividend is the way it ought to be
Dan Primack: Quadrangle Group unveils its future plans
Dan Primack: Let's put this bookseller merger in perspective

The Big Deal

KKR and El Paso Midstream Group, a subsidiary of El Paso Corp. (NYSE: EP) have formed a new

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midstream joint venture. Under terms of the deal, KKR will acquire a 50% interest in El Pasos Altamont
gathering and processing assets for $125 million. Both KKR and el Paso also each will invest up to $500
million in future midstream projects. The two firms will split ownership 50/50, with El Paso managing the
effort. www.kkr.com

VC Deals
Zendesk, a San Francisco-based provider of SaaS helpdesk solutions, has raised $16 million in Series C
funding. Matrix Partners led the round, and was joined by return backers Benchmark Capital and Charles
River Ventures. The company has now raised over $25 million. www.zendesk.com
Panzura, a San Jose, Calif.-based developer of converged cloud storage and application optimization
products, has raised $12 million in Series B funding. Khosla Ventures led the round, and was joined by
CTTV Investments and return backer Matrix Partners. www.panzura.com
Estech, a San Ramon, Calif.-based developer of a minimally-invasive cardiac ablation surgical platform,
has raised $8.5 million in new VC funding. Saints Capital Everest, Telegraph Hill Partners, NBGI Ventures
and Tullis Health Investors. www.estech.com
Gazzang Inc., an Austin, Texas-based cloud infrastructure software startup, has raised $3.5 million in
Series A funding led by Austin Ventures. www.gazzang.com
OnShift Inc., a Cleveland-based, has raised $2.3 million in VC funding. Draper Triangle Ventures led the
round, and was joined by return backers Early Stage Partners, JumpStart Inc., North Coast Angel Fund
and Glengary. www.onshift.com

Private Equity Deals

Bain Capital, Cinven and New Mountain Capital are competing to acquire Dutch chemicals distributor
IMCD, according to Reuters. The company currently is owned by AAC Capital (fka ABN Amro Private
Equity), and reports 925 million in annual revenue.
Bay Grove Capital has acquired Flint River Services Inc., a cold storage company with three facilities in
Georgia. No financial terms were disclosed. www.baygrovecapital.com
Black Pearl Capital Partners and Aeternum Capital have acquired a British bio-diesel refinery in
Bromborough. No financial terms were disclosed. www.blackpearlcap.com
GHX Industrial LLC, a Houston-based provider of gaskets and hoses, has acquired Stockton, Calif.-based
Delta Rubber Company. No financial terms were disclosed. GHX is a portfolio company of The CapStreet
Group. www.ghxinc.com
Irving Place Capital has agreed to acquire Thermadyne Holdings Corp. (Nasdaq: THMD), a St. Louis
based maker of metal cutting and welding products and accessories. The deal is valued at $422 million, or
$15 per share. Oppenheimer & Co. is advising Thermadyne on the transaction. www.irvingplacecapital.com
KRG Capital Partners has agreed to acquire the parent company of AllPoints Foodservice from
Pfingsten Partners. No financial terms were disclosed. AllPoints is a Mount Prospect, Ill.-based distributor
of replacement parts, supplies and equipment to the foodservice industry. www.allpointsfps.com

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Mid Europa Partners has agreed to sell esk Radiokomunikace, a Czech provider of radio, data and
telecom services, to Macquarie. The deal is valued at approximately 574 million, with Goldman Sachs
International advising the sellers. www.mideuropa.com
Sun Capital Partners has acquired the Ontario pork processing business of Maple Leaf Foods Inc. (TSX:
MFI). No financial terms were disclosed. www.suncappart.com

PE-backed IPOs
Targa Resources, a Houston-based provider of midstream natural gas and natural gas liquid services,
raised approximately $360.3 million in its IPO. The company priced 16.4 million shares at $22 per share,
above the companys $19-$21 per share offering range. It will trade on the NYSE under ticker symbol
TRGP, while Barclays Capital, Morgan Stanley and BoA Merrill Lynch served as co-lead underwriters.
Company backers Warburg Pincus and Merrill Lynch Ventures both sold shares as part of the offering.

Exits
Advent International has sold its stakes in Uruguayan bank Nuevo Banco Comercial and Uruguayan
consumer finance company Pronto to Scotiabank. No financial terms were disclosed.
www.adventinternational.com
Citigroup Venture Capital International and Partners in Life Sciences have launched an auction for
portfolio company Biofarma, according to Reuters. The Turkish generic drug-maker could garner in excess
of $500 million. J.P. Morgan is managing the process.
Juniper Networks (NYSE: JNPR) has acquired Altor Networks, a Redwood Shores, Calif.-based provider
of virtualization security technology. The deal is valued at $95 million in cash. Altor had raised around $16
million in VC funding, from Accel Partners, DAG Ventures and Foundation Capital.
www.junipernetworks.com
Mid Europa Partners has agreed to sell Aster, a provider of media and communications services in
Poland, to a Polish affiliate of Liberty Global Inc. The deal is valued at approximately 600 million, and is
expected to close in 2011. www.mideuropa.com

Other Deals
Aetna (NYSE: AET) has agreed to acquire Medicity, a Salt Lake City-based provider of health
information exchange solutions, for approximately $500 million. www.medicity.com
AGL Resources (NYSE: AGL), a natural gas distributor focused on the Southeastern U.S., has
agreed to acquire Nicor Inc. (NYSE: GAS) for approximately $2.4 billion in cash and stock. The
$52.32 per share deal represents around a 20% premium to Nicors closing price on December
1, after which talk of a possible deal emerged.
Noranda Aluminum (NYSE: NOR), a Franklin, Tenn.-based portfolio company of Apollo
Management, priced ten million common shares at $11.35 per share. Underwriters have the
option to purchase an additional 1.5 million shares. Proceeds will be used to pay down debt.
www.norandaaluminum.com
Scotts Miracle-Gro (NYSE: SMG) has agreed to sell its Global Professionals unit to Israel
Chemicals for approximately $270 million.

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Firms & Funds

The Carlyle Group has agreed to acquire a 55% stake in Claren Road, a long/short credit hedge fund with
$4.5 billion in assets under management. No pricing terms were disclosed for the deal, which includes
cash, an ownership stake in Carlyle and performance-based earn-outs. www.carlyle.com
PineBridge Investments has launched an emerging markets corporate bond fund. It begins with $25
million, and is being managed by Steve Cook. www.pinebridge.com

Moving In, Up and On

First Round Capital has promoted Charlie ODonnell from entrepreneur-in-residence to principal.
www.firstround.com

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