Kuwait Financial Centre “Markaz” P R I V A T E E Q U I T Y U P D A T E

Private Equity

Month End February, 2008 Market Trends update: Compiled from various public - The Private Equity market in 2008 has started off slow, with no sources expectation to pick up quickly. The sluggish start was expected for 2008, so this doesn’t come as a surprise to investors. Total leveraged buy-out volume so far in 2008 is down to $34 billion, two-thirds of the volume at this time the previous year. A single mega-deal from 2007 eclipses the total buy-out volume for 2008. While the level of activity has been slow-moving, the industry is still sitting on $820 billion of uncalled capital from investors. The average size of buy-outs this year, $120 million, is the lowest since 2001. - For the average private equity firm, about 38 individuals are employed for every $1 billion of , and this number decreases to 15 or less at many of the larger firms. With this type of a work force, it will prove influential since $10 billion buy-outs occur daily. However, if the investors deploy the funds across an array of smaller deals, it will result in longer waiting periods, as well as smaller returns. - Investors in the real estate market in 2008 are the most optimistic, due to predictions of higher or the same returns for this year. Investors intend on using the same type of strategy for deals in 2008. More than 50% of investors plan to maintain the same level of exposure in private equity real estate.

PE News

- ADS files suit to force Blackstone . The Blackstone Group has become the latest private equity shop to be sued after indicating it would abandon a deal agreed prior to credit market volatility and slowing economic indicators. Lone Star Funds, JC Flowers and Cerberus Capital Management are among the firms that have recently been taken to court for scrapping deals, most having claimed a material adverse change in the target’s business had occurred. But in Blackstone’s case, Authors it’s faulting a regulator that intervened. Adel Nuseibeh - UPDATED Blackstone lawsuit news. The Blackstone Group is +965 224 8000 ext. 1309 “gratified” that Alliance Data has discontinued legal action it [email protected] commenced late last month to force the $7.8 billion it agreed in June 2007. The -based provider of transaction, credit, Khalid Al-Abduljalil and marketing services said it dismissed the lawsuit “with prejudice”, +965 224 8000 ext. 1310 meaning it is not prevented from filing the same claims in a new [email protected] lawsuit, because Blackstone court filings and correspondence with regulators indicated it was still committed to closing the deal. - Three US pensions approve nearly $2bn in commitments. Despite the Kuwait Financial Centre slowed LBO market, US pension funds’ private equity appetites are as “Markaz” voracious as ever. Megafunds, mid-market specialists, distressed vehicles, and European and Asia-focused funds are among the latest Private Equity Department recipients of fund commitments. Address: P.O.Box 23444, Safat - KKR and Pessina take Boots into China. Kohlberg Kravis Roberts 13095, Kuwait portfolio company Alliance Boots has invested in a £41 million ($81.5 Tel: +965 224 8000 Ext: 1401 million; €55.1 million) joint venture in China with Guangzhou Fax: +965 242 5828 Pharmaceuticals Company, taking a 50 percent stake each in the newly [email protected] www.markaz.com P R I V A T E E Q U I T Y U P D A T E

formed company. Boots’ partner is the fourth largest pharmaceutical business in China with a circa 3 percent market share and it also has a 16 percent market share in its native Guangdong province. - Korea finds Lone Star guilty of stock price manipulation. The South Korean Central District Court has found US firm Lone Star Funds guilty of manipulating the stock price of the credit card division of the Korea Exchange Bank, in order to acquire the division on the cheap shortly after paying $1.2 billion for a 51 percent stake in the bank in 2003. Lone Star and the Korean Exchange Bank were fined $26 million each. Lone Star’s South Korea country head, Paul Yoo, was sentenced to five years in prison. Lone Star said in a statement that there is “no credible evidence to support the court’s findings”, and that it intends to appeal the decision. - 3i purchases pharmaceutical company for $395m. The global firm has bought Nordic company Active Pharmaceutical Ingredients, which may be signaling a possible increase in in the traditionally big pharmaceutical-dominated medical device sector. The Norwegian business provides ingredients for a number of injectable antibiotic products including Vancomycin, Bacitracin and Polymyxin. It had revenues of $138.7 million in the first nine months of 2007. - Navigation with LP Goldman invest $20m in subprime auto loans. US private equity firm Navigation Capital Partners has invested $20 million (€13 million) in Exeter Finance, a -based company that buys and services subprime auto loans. Navigation committed $10 million in equity, and Navigation limited partner Goldman Sachs Vintage Fund co- invested $10 million. The deal also included a $20 million credit facility provided by ReMark Capital Group in New York. - West LB syndicates £225m of Islamic Aston Martin debt. The largest Islamic funded leveraged buyout debt in the UK has been syndicated by German bank West LB to investors in the Middle East, some of whom do not participate in Western market debt syndication for religious reasons. The debt backing the £522 million buyout by two Kuwaiti firms Adeem Investment and Investment Dar was bought by investors from both the Gulf Co-operation Council and the UK familiar with Islamic finance. - Canaan closes $650m venture fund. The US firm’s eighth fund will continue its 20-year investment strategy, targeting early-stage tech and healthcare companies, with an increased focus on Israeli and Indian deals. - Baring Asia invests in Chinese medical device manufacturer. Baring Private Equity Asia has bought a significant minority stake in Amsino Medical Group for an undisclosed sum, according to a statement. Amsino provides medical devices such as blood collection and transfusion devices as well as anesthetic and surgical products. The medical device sector is a rich source of deals. In the US alone venture and deals in the medical device sector rose 40 percent in 2007 to $3.9 billion across 385 deals, according to a report by the US industry body National Association. - Lynch wins dentist auction in UK. Merrill Lynch Private Equity has bought Integrated Dental Holdings from UK mid-market buyout firm LGV Capital, according to a statement. Terms were undisclosed but the firm paid around $583.6 million, according to someone close to the deal. The US bank managed to trump bids from Duke Street Capital- owned dentist chain Oasis Healthcare, US buyout firm The Blackstone Group and European buyout firm Bridgepoint, according to media reports. - Riverside-backed Sage seals $180m communications merger. Sage Holdings was set up in June 2007, with backing from The Riverside

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Company, to consolidate the communications industry with approximately $200 million to invest. Communications and D.F. King will be the cornerstones of Sage, the company’s chief executive Oliver Niedermaier said. - BC club wins battle for Turkish retailer. The BC Partners-led consortium has pulled off its YTL3.9 billion bid for Migros Türk in the face of strong competition including The Blackstone Group and Kohlberg Kravis Roberts. It is Europe’s largest deal since credit markets seized up. - Growth equity deals strengthen global venture markets. Record growth in European and US venture capital markets last year was fueled by increased investment in growth-stage companies, providing further evidence that the lines between the private equity and venture capital asset classes continue to blur. Later stage VC deals increased substantially in the US from 2006 to 2007, both in terms of total capital invested and quantity of deals, according to data released by the National Venture Capital Association. Investors placed $12.2 billion into 1,168 deals last year, a 24 percent increase from the 9.8 billion placed into 1,006 deals in 2006. Later-stage companies also accounted for an increasing share of deal flow, representing 31 percent of all 2007 deals, a 3 percent year over year increase. - Close Brothers to open in Manchester. The UK bank is putting its recent takeover trials behind it to expand its UK operations into the regions and capture some of the healthy dealflow around the North West of England. - Buy and builds peak in 2007. In 2007 there was a record number of buy and build acquisitions with 385 bolt-ons carried out by European private equity-backed companies, according to research by mid-market firm PPM Capital. The strategy has boomed alongside the advance of the industry since the turn of the millennium. Since 2000 the number of bolt-on deals has increased more than tenfold. The strategy has been on a continuous growth path since 2002 and in 2004, portfolio companies carried out more than 100 bolt-ons for the first time. - KKR targets $30bn for buyouts globally. Kohlberg Kravis Roberts is the standard of mega firm fundraising remaining feverish despite the lack of liquidity in the market and quasi-cessation of megadeals.

Top Deals

- A $2 billion partnership has been announced between The Blackstone Group, First Reserve, and PetroPlus Holdings AG, in order to obtain crude oil refineries in the . PetroPlus is responsible for gathering a team of professionals to analyze potential opportunities. Each of the partners have committed $667 million, and PetroPlus chairman Tom O’Malley will lead the operation. - MoneyGram International Inc, agreed to a recapitalization plan with Thomas H. Lee Partners and Goldman Sachs. The deal includes a $710 million equity investment that could be increased to $775 million, depending on the price at which MoneyGram can sell certain investment portfolio assets. It also includes up to $500 million in debt financing from Goldman Sachs, and another $200 million in debt financing from third-parties. - Canaan Partners has announced the promotion of healthcare investor, Stephen Bloch, from venture partner to partner. Also, Canaan has closed its seventh venture capital fund with $650 million of commitments. Canaan closed its prior fund in 2005 with $450 million of capital. - Kohlberg Kravis Roberts & Co. has agreed to invest $250 million in

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Bharti Infratel, a wholly owned subsidiary of Bharti Airtel Limited, India’s leading integrated telecom services provider.

Buyout Deals

- Spring Air, a Boston–based mattress manufacturer, has raised $22 million in financing from existing shareholders H.I.G. Capital and American Capital Strategies. - The Carlyle Group and Riverstone Holdings have committed $450 million for investment in Dynamic Offshore Resources LLC, a Houston-based oil and gas startup that will acquire and develop producing properties in the Gulf of Mexico. Dynamic’s founders and managers have committed an additional $50 million. - Baring Private Equity Asia has taken a “significant minority” position in Amsino Medical Group, a Pomona, Calif.-based maker of disposable medical devices. No financial terms were disclosed. - IMI, a listed UK engineering company, saw its shares rise today on speculation that The Blackstone Group is considering a bid. IMI’s market cap is approximately $2.38 billion. Blackstone had made an approach last year, when IMI was worth around twice what it’s worth today. - Nike Inc. has agreed to sell its Bauer Hockey subsidiary to KKR and Canadian businessman W. Graeme Roustan for $200 million. Bauer makes branded ice hockey products like skates, sticks and helmets. Lazard advised Nike on the process. - Kurt Geiger Ltd., a U.K.-based luxury shoe retailer, has been acquired in a $186 million buyout that was backed by Graphite Capital Management Ltd. Barclays Private Equity, as the seller, acquired a 72 percent stake in Kurt Geiger as part of a of the business from Harrods in 2005.

VC Deals

- Carlyle Venture Partners has invested an undisclosed amount into an Overland Park, Kansas-based provider of drug screening and electronic hiring program management solutions, eScreen. - Lehman Brothers Venture Partners and Samsung Ventures co- led the $18 million fourth-round funding of a Sunnyvale, California– based provider of communications processing and software solutions, Ubicom Inc.

PE-backed IPO

- Transoma Medical Inc., a St. Paul, Minn.-based maker of implantable wireless vital sign monitors, has withdrawn its IPO. It had previously postponed the offering, due to unfavorable market conditions. Transoma had planned to price four million common shares at between $14 and $16 per share, which could have given it an initial market cap of up to $290 million. Transoma has raised just over $38 million in total VC funding, from firms like Polaris Venture Partners, Canaan Partners, Affinity Capital Management and Cross Creek Capital. - Biolex Inc., a Pittsboro, N.C.-based drug company whose lead candidate focuses on hepatitis C, has withdrawn registration for an $80 million IPO, citing “unfavorable market conditions.” It had planned to

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trade on the Nasdaq, with Lehman Brothers and Deutsche Bank Securities serving as co-lead underwriters. Biolex has raised nearly $100 million in total VC funding since its 1997 inception, including a venture recap. Shareholders include Intersouth Partners, Johnson & Johnson Development Corp., Quaker BioVentures, and Polaris Venture Partners. - IncArchemix Corp., a Cambridge, Mass.-based biopharmacy company focused on developing aptamer therapeutics, has withdrawn its IPO registration, due to unfavorable market conditions.” The company had planned to offer 4.5 million common shares at between $12 and $14 per share. It would have an initial market cap of over $261 million, were it to price at the high end of its range, which was virtually identical to Achemix's valuation at the end of its most recent venture capital round. Banc of America Securities and Bear Stearns had been serving as co-lead underwriters. - Critical Homecare Solutions Inc., a Conshohocken, Penn.-based provider of home infusion therapy services to patients suffering from acute or chronic conditions, has withdrawn registration for a $125 million IPO. The move comes shortly after Critical Homecare owner KKR agreed to sell the company to MBF Healthcare Acquisition Corp. for approximately $420 million. That sale has not yet closed.

PE-backed M&A

- United Arab Emirates private equity firm, Abraaj Capital has signed an agreement with Orascom Construction Industries of Cairo, Egypt. In this deal, Orascom will take on net debt of $1.1 billion, and the deal will merge fertilizer production operations under Orascom Construction for combined cash and shares equity of approximately $1.59 billion. - Optimization Alternatives, a Texas based provider of transportation control systems for intermodal terminals, has been acquired by RMI, an Atlanta-based provider of rail information services to the transportation industry and a portfolio company of Carlyle Venture Partners. - A Walnut Creek, California-based benefits administration outsourcing company, COLT Express Outsourcing, had certain assets acquired by Ceridian Corp. Ceridian Corp is an HR services provider that was taken private in 2007 by Thomas H. Lee Partners and Fidelity National Financial. - USI Holdings Corp., a New York–based distributor of and financial services to businesses and a portfolio company of Goldman Sachs Capital Partners, has acquired Webster Insurance Inc., a Connecticut-based middle-market insurance brokerage firm focused on the New England Market, from Webster Financial Corp.

PE Exits

- Nvidia has agreed to acquire Ageia Technologies Inc., a Mountain View, Calif.-based developer of gaming physics technology. No financial terms were disclosed. Ageia has raised around $55 million in VC funding since 2003, from firms like CID equity Partners, HIG Ventures, Granite Global Ventures, and WK Associates. - CounterPath Corp., a provider of desktop and mobile VoIP software, has acquired BridgePort Networks Inc., a Chicago-based provider of fixed-mobile convergence solutions for service providers. No financial terms were disclosed. BridgePort had raised $48 million in VC funding since 2003, from firms like General Catalyst Partners, Polaris Venture Partners, Summerhill Venture Partners and TD Capital. - Yahoo has acquired online video hosting and distribution company

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Maven Networks for $160 million. Maven had raised around $24 million in VC funding since 2004, including a $12 million Series C round at a pre-money valuation of approximately $42 million. Backers include Accel Partners, General Catalyst Partners and Prism VentureWorks. - American Public Education Inc. a Charles Town, West Va.-based provider of online postsecondary education for the military and public service communities, has raised $131.35 million through a secondary public offering. The company priced 3.7 million shares at $35.50 per share, including around 2.38 million shares from ABS Capital Partners and 750,000 shares from Camden Partners. The deal reduces ABS’ ownership position from 40% to 26%, and Camden’s from 9.9% to 4.7 percent. - HCL Technologies has acquired Capital Stream Inc., a Seattle– based provider of end-to-end lending and straight-through processing solutions to commercial banks and finance companies in North America. The deal was valued at approximately $40 million in cash. Capital Stream had raised around $70 million in VC funding since 1998, including a 2001 round at a $40 million post-money valuation. Backers include FT Ventures, Polaris Venture Partners, Softbank Technology Ventures and Voyager Capital. - Univision has agreed to sell its music recording unit to Universal Music Group. No financial terms were disclosed, although the LA Times reports a sales price of nearly $140 million. Univision was acquired last year for $12.3 billion by Madison Dearborn Partners, Providence Equity Partners, Haim Saban, Thomas H. Lee Partners and TPG Capital.

Firms & Funds

- Allcargo Global Logistics Ltd. is an Indian logistics operator and a niche global logistics player, has approved a $60 million dollar investment from The Blackstone Group. This investment will allow Blackstone to have representation on Allcargo’s board. Blackstone also plans to purchase more Allcargo shares from the open market, but aims to maintain its ownership below 15%. - ABRY Partners, is a private equity firm that has a focus on the media industry, and it is based in Boston. For it’s sixth fund, ABRY is currently raising up to $1.35 billion, and has already secured approximately $700 million in commitments. - Baring Private Equity Partners is raising $450 million for its third India-focused fund, with a cap of $550 million. It already has secured $210.5 million of commitments.

Human Resources

- Morgan Stanley is in talks to hire Jim Howland as an operating partner in its recently-reformed private equity unit, according to LBO Wire. Howland is the former president of Dun & Bradstreet. - Stephen Gray has joined The Carlyle Group as a senior advisor to the firm’s global telecom and media practice. He is the former president of McLeod USA, and currently serves as chairman of both SecurityCoverage Inc. and ImOn Communications LLC. He also serves on the boards of Carlyle portfolio companies Insight Communications and Hawaiian Telecom. - John Kanas has joined WL Ross & Co. as a senior advisor, with a focus on distressed financial services opportunities. Kanas previously served as CEO of North Fork Bank, until it was acquired by Capital One Financial in 2006. He will continue as an advisor to Capital One.

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- Ned Kelly has been named president of Citi Alternative , a platform with more than $59 billion in assets under management. Kelly had joined Carlyle Group just seven months ago as a managing director in the firm’s financial institutions group. Before that, he was president and CEO of Mercantile Bankshares. - UBS has named Jerker Johansson as chairman and CEO of , effective March 17. He previously was vice chairman of Europe for Morgan Stanley. - Morgan Stanley said that private equity banker David Law is moving to Dubai, as chairman of I-banking for the Middle East and North Africa. He previously was in charge of non-U.S. financial sponsors. - Olivier Boyadjian has joined H.I.G. Europe as a Paris-based managing director. He previously was head of the investment team at CDC Capital Investissement, which manages a €700 million fund. H.I.G. Europe is the European affiliate of H.I.G. Capital, and closed its first fund last year with €600 million in capital commitments. - Christopher Varelas is leaving Citigroup, where he serves as co- global head of tech media and telecom I-banking. His new job will be as a founding partner of Bigwood Capital, a new private equity firm formed by former Flextronics CEO Michael Marks, who currently serves as a senior advisor to KKR.

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Disclaimer This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz), which is regulated by the Central Bank of Kuwait. The information and statistical data herein have been obtained from sources we believe to be reliable but in no way are warranted by us as to its accuracy or completeness. The report is intended to be circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Kuwait Financial Centre S.A.K (Markaz) does and seeks to do business, including investment banking deals, with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only one of the factors in making their investment decision. The analysts principally responsible for the preparation of this report have received compensation based upon various factors, including quality of research, investor client feedback, performance of stock recommendations, competitive factors and investment banking revenues.

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