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Term Sheet — Monday, August 25

Friday Feedback

Today’s big deal is that Miami, Fla.-based Burger King is in talks to buy Canadian coffee-and-doughnut chain Tim Horton’s, in a massive tax inversion deal.

Most tax-inversions have involved large U.S. companies buying substantially smaller foreign companies, but Burger King and Tim Horton’s are fairly comparable in size. Burger King’s current market cap is $9.55 billion, while Tim Horton’s is valued at $8.35 billion. Moreover, Tim Horton’s actually generates more than three times Burger King’s revenue, and also has more profit.

A few quick issues to consider while this all plays out:

1. McDonald’s has got to be loving it. Just imagine all of the passive-aggressive patriotic advertising its marketing gurus would come up with.

2. What would Warren say? Burger King is majority owned by 3G Group, a Brazilian private equity firm that last year partnered with Warren Buffett to buy Heinz. Buffett has publicly lauded 3G, and said he’d like to work with them again. But he’s also said that U.S. companies are not unduly burdened by taxes, when asked about the inversion issue. Seems something may have to give here.

3. Will Canadians revolt? Tim Horton’s is to Canadians what Dunkin’ Donuts is to Bostonians — not just their morning jolt, but part of their identity. The company already spent many years owned by Wendy’s — and even was incorporated in Delaware for a short period — and it’s hard to imagine that there is much enthusiasm for yet another American chain taking control.

4. Tipping point. Most proposed tax inversions so far have been for healthcare-related companies that don’t have much consumer brand awareness. Burger King, however, is much different. Got to wonder if this could be the spark that lights some congressional action (now that Walgreens has abandoned its own attempt)…

• Speaking of tax inversions: Bloomberg’s Zachary Mider has a piece up this morning about how private equity firms regularly employ their own style of tax inversions, by creating foreign holding companies to house newly-purchased U.S. assets. Examples include Bain Capital’s Sensata Technologies – a Massachusetts company based in the Netherlands – and a note about how Dell considered “relocating” out of Texas when negotiating its own buyout (it choose to remain in Round Rock, in part due to its many U.S. government contracts). Got to wonder if any executive action on inversions (since Congress has lost the will to act on anything) would address such situations…

Fantasyland: Today’s largest VC funding is for DraftKings, a real-money fantasy sports site that raised $41 million in Series C funding led by The Raine Group. Word is that the deal was done at a pre-money valuation just shy of $200 million, and that chief rival Fanduel is working on its own new (similarly-sized) funding round (think Los Angeles for the lead investor).

The real question for these sites isn’t user growth, but rather if that growth will cause regulators at the state and/or federal level to reexamine their legality. At issue is whether fantasy sports is a game of skill (legal to wager on via the web) or game of chance (not so much). DraftKings will argue that it’s a game of skill, by pointing to statistics showing how its best players are able to win consistently, by using statistical analysis. Of course, that’s something that some online poker companies also have tried (and failed) to argue. Also will be interesting to see if the NFL formally makes an argument on behalf of the sites, given how fantasy sports has driven increased interest in its league. Around half of DraftKings business is tied to NFL football, and the company today also announced that it will award four players $1 million during the upcoming season.

• Old-fashioned: Despite what you may read, not all information theft is done via the Internet. Over the weekend of July 19-20, someone broke into the Sand Hill Road offices of venture capital firm Kleiner Perkins, and made off with “several laptops” (two of which were password-protected devices from the firm’s finance department). The theft was revealed in a KP letter to New Hampshire officials, as it seems one of the laptops contained personal information of a New Hampshire resident.

• VC scoop: Mike Dauber is joining Amplify Partners as a partner, after having spent the past six years as a principal with Battery Ventures (where his deals included Duetto, RelateIQ and Splunk).

Silicon Valley-based Amplify was launched in late 2012 by former Battery partner Sunil Dhaliwal, who wanted a small firm that would focus exclusively on early-stage tech infrastructure opportunities. It raised nearly $50 million for its debut fund — around half of which already has been committed — and plans to raise its second fund next year. 

• Related: Worth noting that Amplify is the fourth active VC firm to be founded or co-founded by ex-Battery folk. The others are Spark Capital (Todd Dagres), Homebrew (Satya Patel) and Shasta Ventures (Ravi Mohan). If this was pro sports, you’d refer to this as a successful coaching tree…

 

THE BIG DEAL

• Burger King (NYSE: BKW) is in talks buy Canadian coffee-and-doughnut chain Tim Horton’s (NYSE: THI), in a massive “tax-inversion” deal that would create an $18 billion fast-food giant. Read more.

VENTURE CAPITAL DEALS

• DraftKings Inc., a Boston-based real-money fantasy sports site, has raised $41 million in Series C funding. The Raine Group led the round, and was joined by return backers Atlas Venture, GGV Capital and Redpoint Ventures. The company also announced the acquisition of Cambridge, Mass.-based daily fantasy site StarStreet for an undisclosed amount. www.draftkings.com 

• Aldea Pharmaceuticals, a Westport, Conn.–based developer of therapeutics to treat aldehyde metabolism disorders, has raised $24 million in Series B funding. RusnanoMedInvest and WuXi PharmaTech Corporate Ventures were joined by return backers Canaan Partners and Correlation Ventures. www.aldeapharma.com

• Guavus Inc., a San Mateo, Calif.-based provider of “big data analytics solutions for operational intelligence,” has raised $20 million in new VC funding. Backers include Artiman Ventures, Sofinnova Ventures, Intel Capital, SingTel Innov8, Investor Growth Capital, QuestMark Partners and Goldman Sachs. The company has now raised a total of $107 million. www.guavus.com

• Dynamic Signal, a San Bruno, Calif.-based provider of social marketing solutions for brands, has raised $12 million in Series C funding. Rembrandt Venture Partners led the round, and was joined by return backers Venrock, Trinity Ventures, Time Warner Ventures and Cox Enterprises. Dynamic Signal also announced that it has acquired PaperShare, a Kirkland, Wash.-based social content distribution network that had raised VC funding from Rembrandt. www.dynamicsignal.com

• Lastline, a Redwood City, Calif.–based malware defense platform, has raised $10 million in new VC funding. Dell Ventures and Presidio Ventures were joined by return backers Redpoint Ventures and e.ventures. www.tllod.com

• MobileDay, a Boulder, Colo.-based provider of on-tap mobile dialing into online meetings or conference calls, has raised more than $6 million in Series A funding. Foundry Group led the round, and was joined by Innoventure Partners, Drummond Road Capital and return backers SoftBank, Google Ventures, Bullet Time Ventures and SoftTechVC. www.mobileday.com

• Swift Navigation, a San Francisco-based developer of “centimeter-accurate GPS technology,” has raised $2.6 million in seed funding. First Round Capital led the round, and was joined by Fall Line Capital, Felicis Ventures, Kal Vepuri, Lemnos Labs, Qualcomm Ventures and VegasTechFund. www.swiftnav.com

• Advanced Cooling Therapy, a Chicago-based developer of an esophageal cooling device to control patient temperature, has raised $1.5 million in Series A funding. Backers include Heartland Angels, Gopher Angels and TWB Investment Partnership. www.advancedcoolingtherapy.com

PRIVATE EQUITY DEALS

• Aperion Management and Falcon Investment Advisors have agreed to acquire Ontario Drive & Gear Ltd., a Canadian maker of amphibious utility/extreme terrain vehicles for commercial and recreational use, from Stone Arch Capital. No financial terms were disclosed. www.odg.com

• Apollo Global Management is in exclusive talks to purchase Portuguese insurer Tranquilidade for approximately €200 million, according to the FT. Read more

• The Carlyle Group and affiliates of Louis Bacon have completed its previously-announced acquisition of a majority stake in Traxys Group, a Luxembourg–based physical metals and minerals commodity merchant, logistics and trading firm. Sellers include Kelso & Co.Pegasus Capital Advisors and Resource Capital Funds. No financial terms were disclosed. www.traxys.com

• Crimson Investment has acquired Aqua-Chem, a Knoxville, Tenn.–based provider of water purification and heat transfer solutions, from Altus Capital Partners. No financial terms were disclosed. www.aqua-chem.com

• Oak Hill Capital Partners has agreed to acquire Berlin Packaging LLC, a Chicago-based packaging company, from Investcorp for $1.43 billion (including debt). The deal is valued at $1.43 billion (including debt). Read more.

• Warburg Pincus has acquired TriMark USA, a South Attleboro, Mass.-based provider of equipment and related services to the foodservice market, from Audax Group. No financial terms were disclosed. www.trimarkusa.com

IPOs

• Fairmount Santrol, a Chesterland, Ohio-based maker of sand-based proppant solutions, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol FMSA, with Morgan Stanley listed as left lead underwriter (14 other banks also are listed). The company reports around $79 million in net income on $629 million in revenue for the first half of 2014, and is owned by American Securities. www.fairmountminerals.com

• Metaldyne Performance Group Inc., a Plymouth, Minn.-based manufacturer of engine, transmission, and driveline, has filed for a $150 million IPO. It plans to trade under ticker symbol MPG, with Goldman Sachs, BofA Merrill Lynch and Deutsche Bank serving as lead underwriters. American Securities acquired Metaldyne in late 2012. The company reports $38 million in net income on $1.18 billion in revenue for the half of 2014. www.metaldyne.com

EXITS

• MBK Partners has agreed to sell its majority stake in cable operator China Network Systems for approximately $2.4 billion (including debt) to Taiwan’s Wei family (owner of Ting Hsin International Group), according to Bloomberg. Read more

OTHER DEALS

Dynegy Inc. (NYSE:DYN) has agreed to acquire $6.25 billion worth of coal and natural gas generation assets via two transactions: A purchase of certain Midwest generation assets from Duke Energy and EquiPower Resources Corp., and the acquisition of Brayton Point Holdings from ECP. Read more

• Endo International PLC (Nasdaq: ENDP) is seeking a buyer for its AMS medical device business at an asking price of around $2 billion, according to the WSJ. Endo purchased the unit in 2011 for $2.9 billion, and earlier this year paid $830 million to settle claims that an AMS product led to injuries. Read more

• Neustar Inc. (NYSE: NSR), a Sterling, Va.-based provider of telecom directory and routing services, has hired J.P. Morgan Chase to explore strategic options, including a possible sale, according to Reuters. The company has a current market cap of around $1.6 billion. Read more

• Roche Holding (Swiss: ROG) has agreed to acquire InterMune (Nasdaq: ITMN), a Brisbane, Calif.-based maker of respiratory drugs, for $8.3 billion in cash, or $74 per share (38% premium over Friday’s closing price). Read more.

• Sonoco (NYSE:SON) has agreed to acquire Weidenhammer Packaging Group, a Germany–based provider of composite cans, composite drums and rigid plastic containers, for approximately $383 million in cash. www.weidenhammer.de

FIRMS & FUNDS

• The Blackstone Group is in talks to invest in a Arkkan Capital Management, a new Hong Kong-based distressed hedge fund led by Jason Brown (ex-head of Goldman Sachs’s special situations group), according to Bloomberg. Read more

• Holtzbrinck Ventures reportedly has agreed to acquire a 2.5% stake in European incubator Rocket Internet, in exchange for its stakes in several Rocket-backed startups. Rocket is expecting to go public later this year with a valuation in excess of €4 billion. www.rocket-internet.de 

MOVING IN, UP, ON & OUT

• Robert Berendes has joined Flagship Ventures as a venture partner. He previously was head of business development at Syngenta (Swiss: SYNN). www.flagshipventures.com

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