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Term Sheet — Wednesday, November 19

Random Ramblings

Two years ago next month, a deranged young man walked into a Connecticut elementary school and used a Bushmaster rifle to kill 26 children and staff members. Shortly thereafter, private equity firm Cerberus Capital Management pledged to sell the maker of that weapon, Freedom Group, in part due to pressure from investors like The California State Teachers’ Retirement System (CalSTRS).

But it still hasn’t happened. Moreover, Fortune has learned that Cerberus never followed through on a plan that would have allowed groups like CalSTRS to exit that particular deal, without selling their broader positions in Cerberus funds.

The limited exit plan was first reported last December by Reuters, which said that Cerberus had turned to the debt markets for an expanded credit facility that would buy out LPs who no longer wanted Freedom Group exposure. By last March, a source was telling me that the process had moved a bit slower than expected, but that all LPs have relevant information within a matter of weeks (per fund rules, all LPs had to be offered the same opportunity at the same terms).

But it never happened. I’m told that while the credit facility was indeed extended, Cerberus subsequently sought out equity co-investors to help meet expected demand. But by the time it made the calls, the broader firearms market had begun to experience major valuation declines (in part, because many gun enthusiasts had stocked up after Newtown, expecting tighter regulations that never came). Moreover, in early April, Freedom Group recalled approximately 1 million weapons after learning that, under certain circumstances, the triggers could unintentionally discharge.

So while Cerberus continues to be open to an exit — either partial or complete — there seems to be little belief that it will come before the business regains its footing. In the meantime, LPs like CalSTRS are unwilling investors.

“CalSTRS has requested and continues to push our partner, Cerberus, to sell holdings of Remington Outdoors from the investment pool in which CalSTRS is a limited partner,” said system spokesman Ricardo Duran. “However, despite CalSTRS’ continued pressure and Cerberus’ earnest efforts, Cerberus has not been able to sell the holdings, or to find a way out of Remington Outdoors to investors like CalSTRS. You will also notice, CalSTRS has not made additional investments into Cerberus funds since 2012.”

A Cerberus spokesman declined to comment.

• This is not the candidate you are looking for: The Boston Globe yesterday floated several names as possible candidates to challenge Charlie Baker for the Massachusetts governor’s office in 2018 (!!), including local venture capitalist Jeff Bussgang of Flybridge Capital Partners. But Bussgang quickly threw cold water on the idea, issuing a Shermanesque statement via Twitter. He added, “I care deeply about civic affairs but I love what I do and have no plans to do anything different.”

• Speaking of Charlie Baker: The New Jersey Investment Council has its monthly meeting scheduled for this morning, but word late last night was that it will not receive a completed investigation on the pay-to-play allegations against General Catalyst and Baker. It’s largely academic at this point, given that NJ already sold the stake and their are no potential fines attached, but the lack of finality remains confounding. Don’t be surprised, however, if a different pay-to-play issue is raised related to contributions made to a local state senator. I couldn’t get a name from my source, except that the issue was raised by the potentially offending firm, which voluntarily submitted an amended disclosure form.

• Just asking: You’ll notice in the PE deals section that KKR is partnering with other buyout firms in a pair of auctions. Is the leveraged lending environment causing the creeping return of clubs, or are these one-offs?  

• Storyboard: It isn’t the day’s largest VC funding, but to me the most interesting might come from Cue, a San Francisco-based company that plans to offer a “box” that lets users take a variety of at-home health tests. Everything from vitamin deficiency to fertility to influenza. It basically works a bit like the printer or disposable razor model, in which Cue basically will sell the box at cost and then each test as a cartridge. I’ll be writing a long post on this later today but, from my perspective, this could become a partial challenger to Silicon Valley’s current biotech darling, Theranos. Could the big disruptor already have someone nipping at its heels?


• Kik Interactive Inc., a Canada-based chat network, has raised $38.3 million in Series C funding. Valiant Capital Partners led the round, and was joined by Millennium Technology Value Partners, SV Angel and return backers Foundation Capital, RRE Ventures, Spark Capital and Union Square Ventures. Kik also announced that it has acquired Relay, a GIF messaging startup, for an undisclosed amount.


• Zomato, an India-based restaurant search and discovery service, has raised $60 million in new VC funding at what TechCrunch reports is a $600 million pre-money valuation. Vy Capital was joined by return backers Info Edge and Sequoia Capital. The company previously raised around $53 million. Read more.

• Prezi, a San Francisco-based presentation platform, has raised $57 million in growth equity funding. Spectrum Equity led the round, and was joined by return backer Accel Partners.

• CipherCloud, a San Jose, Calif.-based provider of cloud visibility and data protection solutions, has raised $50 million in Series B funding. Transamerica Ventures led the round, and was joined by Delta Partners and return backers Andreessen Horowitz and T-Venture.

• BigCommerce, an Austin, Texas-based e-commerce platform for SMBs, has raised $50 million in Series D funding. SoftBank Capital led the round, and was joined by Telstra Ventures, American Express  and return backers Revolution Growth and General Catalyst.  According to VentureWire, the round values BigCommerce north of $500 million.

• Teespring, a San Francisco-based custom commerce platform, has raised $35 million in Series B funding. Khosla Ventures led the round, and was joined by return backer Andreessen Horowitz.

• Boost Media, a San Francisco-based creative optimization platform for advertisers, has raised $19 million in Series C funding. Battery Ventures led the round, and was joined by Javelin Venture Partners, Pinnacle Ventures and Webb Investment Network.

• Sweetgreen, a Washington, D.C.-based salad chain, has raised $18.5 million in Series E funding led by return backer Revolution Growth. Read more.

• Accompani, a Los Altos, Calif.-based relationship intelligence platform for professionals, has raised $15 million in Series B funding from ICONIQ Capital, Charles River Ventures and Cowboy Ventures.

• Valence Health, a Chicago-based provider of clinical integration and population health solutions, has raised $15 million in growth equity funding. Heritage Group led the round, and was joined by Foundation Medical Partners, GE Ventures and North Bridge Growth Equity.

• Novaerus, a Chicago–based provider of a plasma-based airborne pathogen control technology, has raised $10 million in VC funding from Polaris Partners and Fidelity Biosciences. Existing company shareholders include Oyster Capital Partners.

• Cue, a San Francisco-based provider of at-home health testing solutions, has raised $7.5 million in VC funding led by Sherpa Ventures.

• LeddarTech, a Quebec City-based provider of detection and ranging systems, has raised C$7 million in VC funding co-led by BDC Capital and GO Capital.

• Bloc, a San Francisco-based “online bootcamp” for software development and design, has raised $6 million in Series A funding led by Shasta Ventures. The company previously raised $2.5 million in seed funding from Harrison Metal, Baseline Ventures, Learn Capital and First Round Capital.

• RealScout, a Mountain View, Calif.-based home search platform, has raised $6 million in Series A funding. DCM led the round, and was joined by fellow seed backer Formation 8.

• The Marcus Buckingham Co., a Beverly Hill, Calif.–based provider of “strengths-based performance tools and content,” has raised $5 million in Series A funding led by SurveyMonkey.

• Seriously, a Helsinki-based mobile games studio formed by ex-Rovio executives, has raised $5 million in new VC funding from return backers Upfront Ventures, Sunstone Capital and Daher Capital.

• Clef, an Oakland-based two-factor authentication solution that uses Apple’s fingerprint reader rather than passwords, has raised $1.6 million in seed funding from Morado Ventures and individual angel investors.

• SimScale, a German developer of a web-based platform for numerical simulation, has raised an undisclosed amount of VC funding from Earlybird Venture Capital, Bayern Kapital and High-Tech Gründerfonds.


• The Blackstone Group has agreed to buy the chemicals business of Australian explosives maker Orica Ltd. (ASX: ORI) for A$750 million. The deal is expected to close in Q1 2015.

• DBRS Ltd., a Toronto-based credit rating firm, is nearing a deal to sell itself for more than $500 million, according to the WSJ. Bidders reportedly include The Carlyle Group, Birch Hill Equity Partners and Thomas H. Lee Partners. Read more.

• Investindustrial has agreed to acquire an 80% stake in Spanish car rental company Goldcar Spain for €300 million from company founders (who will retain the remaining 20% position).

• KKR and CVC Capital Partners have engaged Goldman Sachs and HSBC to advise them on their joint bid for a majority stake in Kuwait Food Co., which has a market cap of approximately $4 billion, according to Reuters. Read more.

• KKR and Clayton Dubilier & Rice are prepping a joint bid for pet supplies retailer PetSmart (Nasdaq: PETM), according to the NY Times. Read more.

• One Rock Capital Partners has acquired Airxcel Inc., a Wichita, Kansas–based maker of climate control solutions, from Bruckmann, Rosser, Sherrill & Co. No financial terms were disclosed.

• Peak Rock Capital has acquired Main Steel Polishing Co., an Elk Grove Village, Ill.-based processor and polisher of stainless steel, aluminum and nickel alloys. No financial terms were disclosed.

• Providence Equity Partners has acquired a majority stake in VendorSafe Technologies, a Houston–based provider of cloud-managed IT security services for small and mid-sized businesses. No financial terms were disclosed.


• Bellicum Pharmaceuticals Inc., a Houston, Texas-based developer of cellular immunotherapies, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol BLCM, with Jefferies, Citigroup and Piper Jaffray serving as lead underwriters. The company has raised around $107 million in VC funding, from such firms as Baker Brothers Life Sciences (20.5% pre-IPO stake), Remeditex Ventures (14.9%), AVG Ventures (6.1%), RA Capital Management (5.5%), Perceptive Advisors, Jennison Associates, Sabby Capital, Ridgeback Capital Management, venBio Select, Redmile Group, and AJU IB Investment.


• M/A-Com Technology Solutions (Nasdaq: MTSI) has agreed to acquire BinOptics Corp., an Ithaca, N.Y.-based maker of lasers and monolithically-integrated optoelectrical components, for $230 million in cash. BinOptics had raised around $37 million in VC funding from firms like Advantage Capital Partners, Enhanced Capital Partners, Gefinor Ventures, Onondaga Venture Capital Fund, Rand Capital, ArrowPath Venture Partners, Cayuga Venture Fund, Draper Fisher Jurvetson and FA Technology Ventures.

• MedeAnalytics, an Emeryville, Calif.–based provider of healthcare analytics, has acquired OnFocus Healthcare, a Brentwood, Tenn.–based provider of healthcare enterprise performance management solutions. No financial terms were disclosed. MedeAnalytics is a portfolio company of Bain Capital Ventures, while OnFocus was backed by Heritage Group.

• PluralSight, a Layton, Utah-based provider of online education for software developers, has acquired Smarterer, a Boston-based skills assessment company, for $75 million. PluralSight recently raised a $135 million Series B round at nearly a $1 billion valuation from Insight Venture Partners, Iqoniq Capital and Sorenson Capital. Smarterer had raised around $2 million from backers like Rethink Education, Deborah Quazzo (GSV Advisors), Google Ventures and True Ventures.


• No other deals this morning…


• The Blackstone Group is considering the formation of a “core” private equity fund that would have a longer time horizon than the 10-year terms of its traditional private equity funds, according to Reuters. It also would back slower-growing and less volatile companies, in what may be an effort to compete with groups like Berkshire Hathaway. Read more.


• David Denechaud and Joe Flack III have joined law firm Sidley Austin LLP as Houston-based partners focused on private equity and energy M&A. Both men previously were with Andrews Kurth.

• Tomas Ekman has joined CVC Capital Partners as a Stockholm-based partner. He previously was a partner and managing director with 3i Group, focused on the Nordic region.

• David Holt, an Oklahoma state senator, has joined Hall Capital as the firm’s first director of investor relations.

• Hiromichi Mizuno, a London-based partner with Coller Capital, is set to be named the first chief investment officer of Japan’s $1.1 trillion public pension fund, according to Dow Jones. Read more.

• Anand Subramanian has agreed to join tech-focused investment bank Qatalyst Group as a partner and head of private capital markets. He previously was a managing director and head of private capital markets for Morgan Stanley.

• Masao Yoshikawa has agreed to join Greenhill & Co. as a Tokyo-based managing director. He previously was with Citigroup as head of the telecom, media and tech group for Japan. Before that, he spent three years with Silver Lake Partners.

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