Term Sheet — Thursday, June 2

Updated: Jun 02, 2016 2:00 PM UTC

Random Ramblings

I am on the record as liking Uber. I like its service, which has revolutionized urban mobility by improving convenience, taking cars off the road, and (most likely) reducing incidents of impaired driving. I'm partial to its swashbuckling style, particularly when confronting taxi interests and municipal regulators who are more concerned with self-preservation than the good of their customers/constituents. And I think that many of the most disquieting complaints about Uber—particularly when it comes to the safety of female passengers—are exaggerated for the sake of grievance clickbait.
But I don't like Uber right now. Not today. Not after this.
The ride-hailing giant disclosed last night that it has secured a whopping $3.5 billion investment from Saudi Arabia's Public Investment Fund, and that PIF managing director Yasir Al Rumayyan will join its board of directors.
Put another way: Uber has taken a $3.5 billion investment from a government that effectively prohibits women from driving—let alone driving for Uber. Uber also has accepted a $3.5 billion investment from a government that requires women to have male guardians. Uber also has accepted a $3.5 billion investment from a government whose court system has sentenced men to jail time and corporal punishment for the "crime" of homosexuality—not to mention all of the harsh sentences, sometimes including death, for political protest.
Moreover, this is no passive investment. By naming political appointee Al Rumayyan, the company has basically invited the Saudi government into its board room. To my knowledge, no other Silicon Valley startup has a director from the sovereign wealth fund of a repressive political regime.
Uber CEO Travis Kalanick won't publicly comment on any of this (at least not yet), but sources close to the company lay out three basic defenses:
1. This investment is actually good for Saudi women, which make up around 80% of Uber's current user base in the country. The argument here is about improved mobility, particularly when being able to get to work or school. Unfortunately, it rings very hollow. First, the only reason for the massive gender imbalance in Uber users is because of the aforementioned prohibition against women drivers. Second, Uber already was operating (and expanding) in Saudi Arabia before the $3.5 billion investment. There is no reason to believe this deal will put more Ubers on Saudi roads. Third, Uber sources say that, on the one hand, Al Rumayyan's job responsibilities are purely financial—but, on the other, that his directorship could give Uber some political influence in Saudi. That's a surge-priced contradiction right there.
2. Uber needed the money, and where else are you going to get $3.5 billion? No doubt, it must be tough to fundraise after you've already tapped out venture capitalists, private equity firms, mutual funds, hedge funds, Wall Street high-net worth clients, and strategic corporate and other sovereign wealth funds (yes, including from noxious Qatar). But there is another option: Go public. Pretty sure Uber could have raised at least $3.5 billion via an IPO.
3. Plenty of other companies, including Apple, cozy up to problematic regimes. Moreover, the Saudi PIF holds shares in all sorts of publicly-traded U.S. companies (and, of course, holds U.S. treasuries). But Uber remains private, meaning that it has full discretion over who does, and who doesn't, purchase its stock. This is supposed to be one of the side benefits of not going public. And, again, it gave PIF a board seat.
"It goes to the heart of who Travis is," says one Uber investor. "He just doesn't give a shit about optics. Ever."
But this is about more than optics, although clearly the optics of this are worse for Uber than they would be for most any other Silicon Valley startup. It's about sometimes being willing to make hard choices that might not directly benefit the company in the short term, but could help its customers in the long term. Uber could have easily continued providing Saudi women with greater mobility while simultaneously denying the Saudi government the opportunity for a financial gain until it accelerates reforms.
I'm not so naive as to think that the Saudi government will base policy on the back of a $3.5 billion investment (or lack thereof), but it could have been a decent poke at the dam. But rather than trying to be a maker, it chose to be a taker.
• In other news... There are all sorts of other big industry stories that have broken in the past 24 hours or so, but this column is already too long. So let's just link around and return to some of these tomorrow:
Former CalPERS CEO Fred Buenrostro has been sentenced to 4.5 years in jail for his role in a private equity pay-to-play scheme. Read more.
Fugitive venture capitalist Ifty Ahmed, already indicted for insider trading and fraud, is now facing new charges that he effectively embezzled around $54 million from his former firm, Oak Investment Partners. Read more.
A Delaware court ruled that Dell Inc. shortchanged former shareholders via its 2013 buyout, by around 21% (or the difference of $3.87 per share). Or, put another way, the court said that Michael Dell and Silver Lake were indeed getting the steal that Carl Icahn accused them of getting (even though no other suitor offered up a superior bid). Got to wonder if certain EMC shareholders took note.. Read more.
The SEC yesterday announced an agreement whereby Maryland-based Blackstreet Capital Management will pay more than $3.1 million to settle charges that it acted as a broker-dealer without registering as a broker-dealer. LPs were aware of its activities, but that didn't excuse the lack of registration. Blackstreet is a small private equity firm, but big ones will certainly be taking note. Read more.

THE BIG DEAL

•  Vista Equity Partners has agreed to acquire Ping Identity, a Denver-based provider of authentication software for company employees. No financial terms were disclosed. Ping Identity reportedly had been considering an IPO, and has raised around $140 million in VC funding from forms like KKR, DFJ, Appian Ventures, General Catalyst, Ten Eleven Ventures, Sapphire Ventures and Volition Capital. Read more.

VENTURE CAPITAL DEALS

•  WalkMe, a San Francisco-based guidance engagement platform for the enterprise market, has raised $50 million in Series E funding led by Insight Venture Partners at what TechCrunch reports is a post-money valuation of around $400 million. Existing shareholders include Greenspring Associates, Scale Venture Partners, Giza Venture Capital and Gemini Israel Ventures. Read more.
•  EarlySense, an Israel-based provider of “contact-free continuous monitoring solutions” for healthcare facilities, has raised $25 million in new VC funding. Bank Hapoalim led the round, and was joined by return backers like Pitango Venture Capital and JK&B Capital. www.earlysense.com
•  Cognical (d.b.a. Zibby), a New York-based lease-to-own payment option for in-store and online shopping, has raised $12.5 million in Series B funding. Victory Park Capital led the round, and was joined by return backers Blumberg Capital and Tribeca Venture Partners. www.zibby.com
•  Tile, a San Mateo, Calif.-based maker of smart location devices, has raised $18 million in Series B funding. Bessemer Venture Partners led the round, and was joined by return backers GGV Capital, Khosla Ventures, Tandem and Tencent. www.thetileapp.com
•  Strata Oncology, an Ann Arbor, Mich.-based provider of tumor sequencing to advanced cancer patients and a portfolio of matching clinical trials, has raised $12 million in Series A funding. Arboretum Ventures and Baird Capital co-led the round, and were joined by return backer Michigan eLab. www.strataoncology.com
•  SevenFifty, a New York-based online platform for wholesale alcohol sales, has raised $8.5 million in Series A funding. Formation 8 led the round, and was joined by Pritzker Group VC. www.sevenfifty.com
•  TheSkimm, a millennial-targeted newsletter publisher, has raised $8 million in Series B funding. 21st Century Fox led the round, and was joined by return backers Homebrew, RRE Ventures and Greycroft. Read more.
•  Thread, a London-based men’s online personal styling service, has raised £4 million in new VC funding from Beringea and return backer Balderton Capital. www.thread.com
•  Droom, an Indian online marketplace for used cars, has raised an undisclosed amount of Series B funding. TechCrunch puts it at between $25 million and $30 million at a post-money valuation north of $200 million. Beenet and Digital Garage were joined by return backers Lightbox and Beenos Partners. Read more.

PRIVATE EQUITY DEALS

•  ALS Ltd. (ASX: ALQ), an Australian chemicals company that is valued at just over A$2 billion, has rejected a joint takeover bid from Advent International and Bain Capital, which they say undervalues the company. Read more.
•  Altor has agreed to acquire Realia Group, a Finland-based provider of real estate management and brokerage services. No financial terms were disclosed. www.realiagroup.fi
•  Angeles Equity Partners has acquired a controlling stake in ERP Power LLC, a Moorpark, Calif.-based LED driver business. No financial terms were disclosed. www.erppowerllc.com
•  Apax Partners has agreed to acquire Agencyport, a UK-based provider of digital distribution software for the property and casualty insurance industry, from Thomas H. Lee Partners and Dowling Capital Partners. No financial terms were disclosed. The deal is being done in conjunction with the formation of Duck Creek Technologies, a joint venture between Apax and Accenture, an independent insurance software platform that will house Agencyport. www.apax.com
•  Bridgeport has agreed to acquire Peyman, an Istanbul-based dried fruits and nuts producer, from Esas Holdings and company founders. No financial terms were disclosed, but Reuters puts the price-tag at around $110 million. Read more.
•  Cranemere has acquired Marmite, a Swedish maker of bathroom fittings, from Polish private equity firm Innova Capital. No financial terms were disclosed. Marmite generates around $56 million in annual revenue. Read more.
•  Francisco Partners has made a “substantial investment” in QGenda, an Atlanta-based provider of cloud-based automated physician scheduling solutions. www.qgenda.com
•  Genstar Capital has agreed to acquire the Operational Excellence & Risk Management business of IHS Inc. (NYSE: IHS) for an undisclosed amount. The Chicago-based business unit, which will be led by former Marsh ClearSight president Paul Marushka, provides software that helps companies manage their environmental, health, safety and sustainability processes. www.gencap.com
•  Mason Wells has acquired MGS Manufacturing Group Inc., a Germantown, Wis.-based provider of injection molded plastic components, tooling and equipment. No financial terms were disclosed. www.mgstech.com
•  OpenGate Capital has agreed to acquire the zinc chemicals production unit of Umicore (Belgium: UMI) for an undisclosed amount.www.umicore.com
•  Pacific Equity Partners has agreed to acquire Patties Foods Ltd., an Australian frozen packaged foods company, for A$231 million, or A$1.65 per share (24% premium to Friday’s closing price). Read more.
•  PT Telekom, Indonesia’s state-owned telecom operator, has terminated a deal whereby it would team with Japanese private equity firm Advantage Partners to acquire Guam’s AP Teleguam Holdings Inc. for around $300 million. No explanation was provided. Read more.
•  Veritas Capital has completed its previously-announced purchase of the healthcare services business of Verisk Analytics Inc. (Nasdaq: VRSK), a Waltham, Mass.-based provider of data analytics, for $820 million. www.verisk.com

IPOs

•  Clearside Biomedical Inc., an Alpharetta, Ga.-based developer of therapies to treat blinding diseases of the eye, raised $50 million in its IPO. The company priced 7.2 million shares at $7 per share, compared to original plans to offer 4 million shares at between $14 and $16 per share. The pre-revenue company will trade on the Nasdaq under ticker symbol CLSD, while RBC Capital Markets served as lead underwriter. Shareholders include Hatteras Venture Partners (28.4% pre-IPO stake), RMI Investments (12.5%), Santen Pharmaceutical Co. (9.2%), GRA Venture Fund (7.2%), Aju IB Investment, Cormorant Asset Management, Perceptive Advisors and Rock Springs Capital Management. www.clearsidebio.com
•   JELD-WEN Holding, a Charlotte, N.C.-based residential door and window manufacturer, has filed for a $100 million IPO. Barclays and Citigroup are serving as lead underwriters. The company reports $98 million in net income on $3.44 billion in revenue for the 12 months ending March 26, 2016. Jeld-Wen was acquired for $871 million by Onex Partners in 2011. www.jeld-wen.com
•   Nant Health LLC, a Culver City, Calif.-based personalized healthcare company led by Patrick Soon-Shiong, raised $91 million in its IPO. The company priced 6.5 million shares at $14 per share (middle of offering range), for an initial market cap of around $1.65 billion. It reports a $72 million net loss on $58 million in revenue for 2015. NantHealth will trade on the Nasdaq under ticker symbol NH, with Jefferies and Cowen & Co. serving as lead underwriters. Shareholders include Allscripts Healthcare Solutions, Celgene Corp., BlackBerry Corp., Kuwait Investment Authority and Verizon Ventures. www.nanthealth.com

EXITS

• Johnson & Johnson (NYSE: JNJ) has agreed to acquire Vogue International LLC, an Orlando, Fla.-based shampoo maker that is 49%-owned by The Carlyle Group, for $3.3 billion in cash. Read more.

OTHER DEALS

•  Infoblox Inc. (NYSE: BLOX), a Santa Clara, Calif.-based provider of network control and security solutions, has hired Morgan Stanley to defend against activist investors, according to Bloomberg. The company has a current market cap of around $1.1 billion, and has been targeted by Starboard Value. Read more.

FIRMS & FUNDS

•  Actis has closed its third Africa-focused private equity real estate fund with more than $500 million in capital commitments. www.act.is

MOVING IN, ON & UP

•  The Carlyle Group confirmed that Olivier Sarkozy, head of the firm's financial services group, is transitioning into a senior advisor role. It also said that managing director John Reddit and new hire Brian Schreiber (ex-AIG) will co-lead financial services going forward. www.carlyle.com 
•  Colin Granger has joined British private equity firm YFM Equity Partners as an investment director focused on Southern England. He previously was with Milestone Capital. www.yfmep.com
•   Mike Salvino, group CEO of Accenture Operations, has joined private equity firm Carrick Capital Partners as an operating partner, effective September 6. www.carrickcapitalpartners.com
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