Sugar Daddy

He's Jewish already a good starting point. His sister has lived in Haifa for thirty years. After the first week of the Yom Kippur War he came to Israel to volunteer as a cowboy on Kibbutz Beit Nir, taking leave from his legal studies at Temple University. He speaks a few words of Hebrew, and he's in Israel to do business. Meet leveraged buyout fund Fox Paine's CEO, Saul Fox. He's just closing the deal to take Paradigm Geophysical (Nasdaq:PGEO) private and no, he isn't afraid to do business in Israel. On the contrary, that is exactly what he plans to do.

Fox has racked up twenty-five years of in leveraged deals, including MBOs (Management Buy-Outs) he carried out over the years both at Fox Paine and as a partner with Kolberg Kravis Roberts, where he learned the ropes and met his partner, Dexter Paine III. Just like that.

"Dexter lent me money when I wanted to found the company and make my first leveraged buyout, Motel 6, in 1985. I never forget anyone who lends me even a dollar so later, in 1997, we formed the joint company." The deal he did then was for $881 million.

Unusual deal in Israeli landscape

In the meantime, the company made 27 MBOs since 1984, worth $1.2 billion, which it claims are now worth $4.4 billion. OF that sum, $3.5 billion made their way into investors' pockets. The impressive list of Fox Paine investors includes Citigroup, Deutsche Bank, Credit Suisse, Banc of America, Aetna Insurance, and even the Singapore government pension fund.

The deal taking Paradigm private is unusual in the Israeli landscape. This is not the story of a tiny Israeli company being swallowed by an American giant dealing in complementary areas and no one is saying words like "synergy" or "room to streamline". If Fox Paine's management is really sharing its real plans with us, they don't plan to change a thing at Paradigm or in its business plan, just supply the company with the cash reserves to fulfill its strategy and take it private.

The maker of software for the oil and gas exploration industry will be sold to Fox Paine for $100 million in cash. Each Paradigm share will be converted into $5.15 in cash, a 37.8% premium over the average share price in the three months prior to the deal. This is Fox Paine's first straight technology deal.

Fox says, "In general, our record is that we buy one of every 200 companies that bleep on our radar. This is a good time to invest, also in Israel. But that is not necessarily what motivates us: we don't focus on a country, rather a type of activity, so it is not unlikely we will make more deals in Israel . We know the situation in Israel is tough, but we are apparently not afraid to do business here."

So how did you get to Paradigm?

"We have been looking at companies associated with the oil and gas sectors for many years and I served as a director at a large petroleum company at one point. We knew this area interested us, and Troy Tucker, a vice president in our operation, pointed Paradigm out to us a number of years ago."

Why then? As a public company it is much easier to raise financing and be recognized by large institutionals.

"That is true, but it's a burden. You must understand it is easier to play poker without showing your hand than to play with open cards. This is particularly true regarding Paradigm's competitors, as it is better to work behind the scenes and far from the spotlight than at center stage. Our general plan is to leverage the company, lead it to higher growth rates and take it public again in the future."

>To order reprints of this article, click here: Reprints