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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet - - Monday, Sept. 27

Date:

27-09-2010 14:01:10
Message

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The Term Sheet by Dan Primack

Monday -- September 27, 2010

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Betting on The Bomb

With each passing day, Israel and Iran move one step closer to military conflict. A recent Atlantic article even put the odds of an Israeli
strike by next July at better than 50%, based on an informal survey of American, Arab and Israeli government officials.
It's nightmarish: A non-official nuclear power attacking a regional enemy before it too has the bomb. Even were Israel to be successful,
side-effects would almost certainly include death and global economic disruption.
For Randy Slifka, however, war could equal returns.
Fortune has learned that the New York fund manager, whose father formed Halcyon Investment Management in the early 1980s, may
raise a "geopolitical volatility fund" based on an investment thesis that Israel will strike. It's called GeoVol, and draft marketing documents
suggest a bifurcated structure of two long/short portfolios in commodities, equities, currencies and debt:

"Portfolio A" would aim for medium returns on between 25 and 30 positions, and would be "designed to preserve capital in case of
no strike or a delayed strike, but provide significant upside when the event occurs."
"Portfolio B" would aim for high returns on between 10 and 15 positions, and is "designed to maximize returns through the use of
options, derivatives and leverage with a higher degree of risk due to option decay."

There have been plenty of funds predicated on economic events, including ones that make certain geopolitical assumptions. But a fund
entirely based on war? That seems new.
"I've never heard of anything like it," said one hedge fund formation lawyer, who has not met with Slifka. "I guess you could call it novel."

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Slifka began his career at E.M. Warburg Pincus. He then spent eight years as a principal and senior portfolio manager at Halcyon, before
launching a series of funds on which he is the sole investment advisor.
His colleagues on GeoVol include principal Nathan Troutman (ex-Vulcan), CFO William McEnroe and research and intelligence director
Shai Baitel (ex-Israel and UN legal official). The draft documents name Alston & Bird as legal counsel and Goldman Sachs as prime
broker, but neither has formally committed.
The listed target capitalization is $500 million.
When contacted by Fortune, Slifka would only say the following: "While Slifka Asset Management has generated strong investor returns
by pursuing risk-adjusted strategies that account for special situations, including geopolitical events, the strategy in question is purely a
concept. We developed materials to test this concept but no such fund currently exists."
Slifka also sent a revised page of marketing materials, which claimed that at least 20% of fund profits would be distributed to Israelis
affected by a possible counter-attack.
My sense here is that Slifka honestly believes what he's selling: This fund would be a hedge in its most literal sense, protecting investors -including those who have invested in other Slifka-managed funds -- from future market instability. I also believe that his devotion to the
well-being of Israel is sincere, and that he'd be thrilled if Iran voluntarily halted its nuclear program.
The reality, however, is that Slifka is neither a diplomat nor a full-time philanthropist. He's a fund manager, and the vehicle he's proposing
is designed to make money from a specific act of military aggression.
The road to war profiteering can be paved with good intentions, even if some of those profits are given to charity.

Five things you should read @Fortune.com

Pre-Marketing, including bankers of the apocalypse, Sacca responds to Conway, Rattner (sort of) responds to Quadrangle, Yale's
endowment returns and zucchinis as weapons.
Is Japan the next global time bomb?
The "troubled bank list" begins to shrink
Why the EU banned Avandia but the FDA didn't
Ron Conway was wrong: Super-angels must be about "making a buck"

The Big Deal

Chegg.com, a Santa Clara, Calif.-based online marketplace for textbook rentals, reportedly has raised $75 million in Series E funding
from a Hong Kong-based firm called Ace Limited. The company previously raised around $90 million in equity and $55 million in debt.
Existing equity backers include Foundation Capital, Kleiner Perkins, Gabriel Venture Partners and Primera Capital.
This is a big deal because Chegg is a company that elicits strong reactions. Many believe it's a brilliant first-mover, and poised to keep
outpacing other rival startups (plus new rental programs at college bookstores). Others consider it to be a decade tardy, and soon to be
made irrelevant by the iPad and other tablet computers.
Ace Ltd. is obviously part of the former group, and perhaps this new capital will help Chegg become Netflix -- a mail-order company that
has successfully handled straight-to-device delivery -- rather than become Blockbuster.

VC Deals

Quantenna Communications Inc., a Fremont, Calif.-based provider of wi-fi video networking for home entertainment, has raised $21
million in Series E funding. DAG Ventures led the round, and was joined by return backers Sequoia Capital, Sigma Partners, Southern
Cross Venture Partners and Venrock. The company previously raised around $65 million. www.Quantenna.com
OpGen Inc., a Gaithersburg, Md.-based commercial phase genomics company, has raised $17 million in Series B funding. iVen Capital
led the round, and was joined by return backers CHL Medical Partners, Highland Capital Partners, Mason Wells Biomedical and Versant

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Ventures. www.opgen.com
TimeTrade Systems, a Tewksbury, Mass.-based provider of online appointment scheduling services, has raised $5.7 million in new VC
funding (including conversion of $1.7m in notes issued last December). Ascent Venture Partners led the round, and was joined by return
backer CommonAngels. www.timetrade.com
Innovid, a New York-based provider of interactive pre-roll video technology, has raised $4 million in new VC funding. T-Venture was
joined by return backer Genesis Partners. www.innovid.com
DecImmune Therapeutics, a Cambridge, Mass.-based company focused on improving outcomes associated with ischemia reperfusion
injury, has raised $1 million in equity funding from Astellas Venture Management, Amgen Ventures and HealthCare Ventures. The
company also secured a $2.2 million NIH grant.

Private Equity Deals

Centerbridge Capital Partners has 3i Group has agreed to acquire debt management firm Mizuho Investment Management U.K. Ltd.
from its Japanese parent bank, for 18.3 million. www.3i.com
Ancor Capital Partners has acquired Carex Health Brands, a provider of in-home self-care medical products, from KCA Partners Ltd.
No financial terms were disclosed. Harris Williams advised Carex on the transaction. www.carex.com
Cinven has agreed to acquire Spice (LSE: SPI), a UK installer of water meters, for 251.1 million. www.cinven.com
The Blackstone Group reportedly is in talks to acquire Pulse, a UK-based staffing agency for doctors, nurses and social workers. The
seller would be HgCapital, which has been preparing Pulse for a 2011 flotation. www.pulsejobs.com
Endesa, a Spanish utility owned by Italy's Enel SpA, has agreed to sell 80% of its natural gas distribution business to a pair of Goldman
Sachs infrastructure funds. The deal is valued at around 800 million. www.gs.com
Fortitech Inc., a Schenectady, N.Y.-based maker of custom nutrient premixes, has raised an undisclosed amount of private equity
funding from Trilantic Capital Partners. www.trilanticpartners.com
Hyland Software Inc., a Cleveland-based provider of enterprise content management software, has acquired CSC Group, a Brecksville,
Ohio-based provider of business and clinical healthcare software and document conversion services. No financial terms were disclosed.
Hyland Software is a portfolio company of Thoma Bravo. www.hyland.com
KKR has agreed to buy Visma Holdings, a Norwegian provider of accounting and payroll software, from HgCapital. The deal is valued at
around 1.2 billion, which HgCapital says represents a 37% IRR and 3.7x investment multiple. www.visma.com
Newton Energy Partners has secured a $75 million equity commitment from Kayne Anderson Energy Funds. The Houston-based
company was formed this month to acquire and develop oil and natural gas properties with identifiable upside in the Permian Basin, MidContinent and onshore Gulf Coast regions. www.kayneanderson.

PE-backed IPOs
Quark Pharmaceuticals Inc., a Fremont, Calif.-based developer of RNA interference-based therapeutics, has filed for a $20 million IPO
on the Tel Aviv Stock Exchange. The company had filed for an $86.25 million IPO on the Nasdaq in 2007, but later withdrew its
registration due to "unfavorable market conditions." Backers include SBI Holdings and ZenShin Capital. www.quarkpharma.com

Exits

Bright Food Group of China is considering a $3.2 billion bid for British bakery group United Biscuits, according to Reuters. The
Blackstone Group and PAI Partners bought United Biscuits in 2006.
Doughty Hanson has agreed to sell packaging company Impress Cooperatieve to Ireland-based Ardagh Glass Group for 1.7 billion.
www.impressgroup.com

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LDC has sold St Tropez Holdings Ltd., a UK-based maker of sunless tanning products, to PZ Cussons PLC. The deal was valued at
62.5 million in cash.
PLX Technology Inc. (Nasdaq: PLXT) has agreed to acquire Teranetics Inc., a San Jose, Calif.-based provider of mixed-signal
semiconductors. The deal is valued at approximately $35.5 million, in stock, cash and promissory notes. PLX also will assume $18 million
of Teranetics obligations, including indebtedness. Teranetics had raised nearly $90 million in VC funding, from Global Catalyst Partners,
GGV Capital, Columbia Capital, U.S. Venture Partners, Venrock and Portview Communications. www.teranetics.com

Other Deals
Unilever PLC has agreed to acquire Alberto Culver (NYSE: ACV), maker of hair and skin-care products, for $3.7 billion in cash. The deal
values Alberto Culver at $37.50 per share, which represents a 19% premium to Friday's closing price. www.unilever.com
Southwest Airlines (NYSE: LUV) has agreed to acquire AirTran Holdings Inc. (NYSE: AAI) for approximately $1.04 billion in cash and
stock. The $3.75 per share deal represents a 69% premium to Friday's closing price. www.southwest.com

Firms & Funds

The Blackstone Group is in talks to acquire a stake in Brazilian private equity group Ptria Investimentos, according to a local news
report. www.blackstone.com
Southern Cross Group, a private equity firm focused on Latin America, has held a $1.68 billion final close on its fourth fund. Stanwich
Advisors served as placement agent. www.southerncrossgroup.com

Moving In, Up and On

Masato Marumo has joined Lazard as a Tokyo-based managing director of investment banking. He previously was a partner with The
Carlyle Group, where he was a managing director of a Japan-dedicated buyout fund. www.lazard.com

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