Term Sheet — Monday, October 12

October 12, 2015, 2:01 PM UTC

Random Ramblings

Dell and EMC (NYSE: EMC) made it official this morning, with the former agreeing to buy the later for approximately $67 billion. That price includes around $24.05 per EMC share in cash, plus an estimated $9.10 worth of a tracking stock for VMWare, an EMC-owned cloud and virtualization software company that already has around a 20% equity “stub” trading on the public markets.

Silver Lake, the private equity firm that helped take Dell private in 2013, is participating on the deal. So are MSD Capital (Michael Dell's family office) and Singapore sovereign wealth fund Temasek.

There is a lot to address here, so let’s do it in notes form:

History: The genesis of this deal can be found in 2014, when Elliott Management began agitating for change at EMC and, next, when merger talks between EMC and Hewlett-Packard collapsed. Those events led Michael Dell to reach out to EMC chairman and CEO Joe Tucci, with the two men beginning to speak in earnest this past January. Not only did they meet up at the World Economic Forum in Davos, but Tucci also visited Dell’s home back in April (along with EMC directors Bill Green and EMC exec Harry You). Things began getting much more serious at the end of July, with Dell/Silver Lake meeting with EMC's full board in early September. After that, it was all about financial structuring (taxes, debt, etc.).

Public vs. private: This deal will make (most of) EMC a privately-held company, but the new debt would also mean that Dell's financial performance will become a matter of public record. As you might recall, Dell has kept its post-LBO earnings secret by structuring its original debt as Rule 144(a) for life.

Private equity play: Silver Lake isn't disclosing how much equity it will contribute, but my understanding is that it will effectively double down on its original investment (as will MSD, with Temasek being a smaller equity player). To be clear, that doesn't mean Silver Lake is committing another $1.04 billion -- which was its piece of the original Dell buyout, minus co-investments from its limited partners. Instead, the "double down" is based on the more recent carrying value of Silver Lake's Dell stake, which the WSJ reported last year had already appreciated by around 90%. It seems that the limited partnership agreement in Silver Lake's $10.3 billion fourth flagship fund allows more than 10% (or 20%) exposure to a single portfolio company.

Banks: Morgan Stanley served as lead financial advisor to EMC, while J.P. Morgan served as lead financial advisor to Dell and Silver Lake. Debt has been committed by Barclays, BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, Goldman, Sachs & Co., J.P. Morgan and RBC Capital Markets. Or, put another way, every major bank except for Morgan Stanley is part of the lender group.

Go shop: EMC insisted on a 60-day period during which it can solicit superior offers. Hard to imagine where that would come from. IBM? Microsoft? HP again? Then again, who would have expected the Carl Icahn and Blackstone maneuverings during Dell's original buyout?

Headcount: Michael Dell said on CNBC this morning that the "revenue synergies here are three times larger than the cost synergies." On that latter point, both companies are taking great pains to downplay possible layoffs at EMC headquarters in Hopkinton, Mass. -- which happens to be just a few miles from my home office (so, in the spirit of full disclosure, I have some rooting interest here).

Ranking: This would be the second-largest tech merger of all time, behind only AOL-Time Warner.

Giant seed: This morning's other big news is that a $450 million fund has been raised to invest exclusively via the AngelList platform, mostly by backing syndicates. It's called Upshot, and includes a $400 million commitment from China's CSC Group.

While formally independent of AngelList, this fund does help founder Naval Ravikant realize his long-held goal of adding a large amount of institutional capital to the seed platform.

Ravikant acknowledges that $450 million is an enormous amount of capital for the seed space, but says that the goal is for this fund to truly last four years and to provide follow-on capital for portfolio companies (many existing AngelList syndicate deal, like Shyp, have grown far too large for syndicate follow-ons). As a side announcement, AngelList also is launching an SPV program to aid in later-stage deals.

Upshot will be co-led by Huoy-Ming Yeh (ex-PacRim Venture Partners, Silicon Valley Bank) and Veronica Wu (ex-Apple, Tesla). More on this later this morning on the website.

THE BIG DEAL (other than EMC)

 58 Daojia, the home services unit of China’s 58.com Inc. (NYSE: WUBA), has raised $300 million in Series A funding from Alibaba Group, KKR and Ping An Group. www.58.com


 Cabify, an on-demand ride service in Latin America and Spain, has raised $12 million in Series B funding. Rakuten led the round, and was joined by return backer Seaya Ventures. www.cabify.es

 Wynd, a French tech platform for restaurants, has raised €7 million in Series A funding from Alven Capital and Orange Digital Ventures. Read more.


 Clearlake Capital Group has agreed to acquire Syncsort Inc., a Woodcliff Lake, N.J.-based provider of big data enterprise software. No financial terms were disclosed. Sellers include Bessemer Venture Partners, Insight Venture Partners and Goldman Sachs. www.syncsort.com

 KKR has agreed to acquire a majority stake in Selecta Group, a Swiss provider of vending and coffee machines, from Allianz Capital Partners. No financial terms were disclosed. KKR and Selecta have an existing financial relationship, with KKR’s credit arm having provided Selecta with €220 million in long-term debt financing last year. www.selecta.com


 Ten companies are expected to price IPOs on U.S. exchanges this week, including First Data and Albertson’s, and could raise upwards of $5 billion in aggregate. Read more.

 Fiat Chrysler Automobiles today announced plans for its Ferrari spinoff. The sports-carmaker is expected to sell around 17 million shares at between $48 and $52 per share, and plans to list on the NYSE under ticker symbol RACE. Read more.

 Voyager Therapeutics, a Cambridge, Mass.-based developer of gene therapy solutions for fatal and debilitating CNS diseases, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol VYGR, with Cowen & Co. and Piper Jaffray serving as lead underwriters. The company has raised around $105 million in VC funding from Third Rock Ventures (52.6% pre-IPO stake), Aventis (11.2%), Fidelity (7.5%), Brookside Capital (5.6%), Partner Fund Management (5.2%), Wellington Management and Casdin Capital. www.voyagertherapeutics.com


 CJ Group (South Korea) is considering a takeover bid for Coway Co., a South Korean maker of air purifiers that is 31% owned by MBK Partners. Read more.

 Paine & Partners has completed its sale of Sunrise Growers, a Placentia, Calif.-based organic frozen fruit supplier, to Canada’s SunOpta (TSX: SOY) for approximately $450 million. www.sunrisegrowers.com

 ProSiebenSat.1 Media has acquired Etraveli Holding AB, a Swedish online travel agency, for around €235 million from private equity firm Segulah. Read more.


 Dakang New Zealand Farm Group, which is majority-owned by Shanghai Pengxin Group, has pulled out of an agreement to acquire 3,300 hectares of farmland on New Zealand’s North Island, over regulatory concerns. Read more.

 Delek Group (Tel Aviv: DLEKG) has acquired 20% of Ithaca Energy (TSX: IAE) for around $66 million. Read more.

 Deutsche Bank is considering the sale of Abbey Life, a UK-based insurance group that helps pension funds protect themselves from members living longer than expected, according to Bloomberg. The business could be worth upwards of $4.6 billion. Read more.

 RetailNext, a San Jose, Calif.-based provider of in-store data analytics for retailers, has agreed to acquire mobile content startup Perkota, according to VentureWire. No financial terms were disclosed. RetailNext earlier this year raised $125 million in new VC funding from Activant Capital Group, August Capital, Star Vest Partners, Nokia Growth Partners, Qualcomm Ventures and AMEX Ventures. www.retailnext.com


 Coatue Management has secured more than $543 million for its second private equity fund, according to regulatory filings. www.coatue.com


 Laurie Coben has joined Evercore as a New York-based senior managing director, leading the firm’s power and utilities sector. She previously was a managing director and global co-head of the energy and power investment banking group at Bank of America Merrill Lynch. www.evercore.com

 Peter Finn has joined Nomura as a senior director of mergers and acquisitions. He previously was senior VP of M&A with Macquarie Capital. www.nomura.com

 Jared Friedman, co-founder and CTO of Scribd, has joined Y Combinator as a partner. Read more.

 Nick Jordan has been named CEO of Finstar Financial Group, a Moscow-based private equity firm. He previously was with Goldman Sachs, where he co-led Russian operations. www.finstar.com

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