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Term Sheet — Monday, November 23

Random Ramblings

Some notes to kick off your Monday…

• Head, meet wall: As we discussed last week, the California Public Employees Retirement System (CalPERS) is planning to release its data on carried interest payments at just about the same time that most American attentions will be turned toward turkey and transit. But I’m sure this timing is just a coincidence, as the pension giant required its private equity partners to submit their carry information just a scant 133 days ago.

All of this prompted a WSJ story this morning, which breathlessly claimed that public pension systems are now publicly disclosing that “total costs were as much as 100% higher than originally disclosed.” No footnote about how total disclosed costs are almost always 100% more than they were when not disclosed (or infinitely higher, depending on your mathematical lexicography). Nor a mention about how such fees were typically included in net returns.

But here is the real stunner from the WSJ, in regards to South Carolina’s public pension system:

“Pension officials said quarterly financial statements provided by private-equity managers typically didn’t show precisely how the value of the state’s investments had changed or how profits had accrued over multiple years. The statements also often followed a calendar year rather than the state’s fiscal year, said Andrew Chernick, managing director of operations for the state retirement system investment commission. That made it difficult to isolate the impact on South Carolina, he said.”

Seriously? You are fiduciaries of a $30 billion pension system and cannot reconcile two a calendar year with your fiscal year. Even harder to imagine is that they confessed to such failures to a national newspaper (under the presumed guise of pity).

I continue to struggle with which is worse: Private equity firms trying to pull one over on their public pension investors, or those public pensions so readily allowing it to happen.

• Personnel scoop: George Kollitides, the former Cerberus executive who later served as CEO of Cerberus-backed firearms conglomerate Remington Outdoor (f.k.a. Freedom Group), has quietly joined private equity firm A&M Capital as a partner and managing director. Prior to joining Cerberus in 2004, Kollitides was president of TenX Capital Management and a principal with Catterton Partners.

• Dodgy: New York-based pharma giant Pfizer (NYSE: PFE) this morning formally agreed to acquire Ireland-based Botox maker Allergan (NYSE: AGN) for around $160 billion. Actually, that’s not quite right. Allergan is technically buying Pfizer, even though: (a) Pfizer is larger, (2) Pfizer shareholders will own most of the combined company, (3) Pfizer’s CEO will run the combined company; and (4) The combined company will still be called Pfizer.

As you might have imagined, the official buyer/seller paradigm is prompted by tax savings — with Pfizer readily admitting that it will save more from tax inversion than from actual merger synergies. Remember, Allergan is an Ireland-domiciled company (albeit one objectively headquartered in Parsippany, NJ), and now Pfizer will be as well (even though none of its C-suiters are giving up their Park Ave. apartments for Dublin digs).

As you might have also imagined, I find all of this quite repulsive. Not illegal, but arguably immoral. And before telling me to blame federal politicians for not reforming the corporate tax code, please understand that my capacity for disgust is vast enough to encompass both tax inverters and Congress. The best anti-inversion argument I’ve read so far actually came last year in Fortune from Allan Sloan, and I suggest you read it by going here. And, per usual, I’m always interested in your thoughts via email.

• Related: During an analyst call, Pfizer said that the merger includes up to $3.5 billion in possible termination fees. Further info is expected to be disclosed in SEC filings. It says something about the silliness of the buyer/seller identities that we really have no idea how that $3.5 billion is split up or in which direction most of it would go.

• Go Pats!


• CVC Capital Partners and the Canadian Pension Plan Investment Board reportedly have agreed to acquire Petco, a San Diego-based pet supplies retailer currently owned by TPG Capital and Leonard Green & Partners. The deal could be announced as early as this morning, and would be valued at around $4.7 billion. Other bids had come from Apollo Global Management and a partnership of KKR with Hellman & Friedman. Read more.


• Airbnb has expanded its recent $1.5 billion funding round (at a $25.5b valuation) by $100 million, according to the WSJ. Read more.

• ObsEva, a Swiss developer of drugs that address “serious conditions compromising pregnancy from conception to birth,” has raised around $60 million in Series B funding. HBM Healthcare Investments, New Enterprise Associates, OrbiMed and Rock Springs Capital were joined by return backers , Sofinnova Ventures, Novo Ventures and MS Ventures.

• Quizlet, a San Francisco-based digital learning tool, has raised $12 million in Series A funding. Union Square Ventures and Costanoa Venture Capital co-led the round, and were joined by Altos Ventures and Owl Ventures.

•, a London-based flash sales site for outdoor and sports gear, has raised £9.5 million in Series C funding from Scottish Equity Partners, Grafton Capital and Draper Esprit.

• Sidecar, a Philadelphia-based e-commerce marketing company, has raised $8 million in Series B funding. Ascent Venture Partners led the round, and was joined by Osage Venture Partners, NextStage Capital, Robin Hood Ventures, Ben Franklin Technology Partners, Innovation Capital Advisors, ARC Angel Fund and individual angels.

• Ruby Ribbon Inc., a Burlingame, Calif.-based shapewear and fashion company that sells exclusively via its “social commerce network of stylists,” has raised $7.5 million in Series C funding. DBL Partners and Direct Selling Capital co-led the round, and were joined by return backers Trinity Ventures and Mohr Davidow Ventures.


• Abtran, an Ireland-based provider of customer and business process management services, has reached an investment agreement with Carlyle Cardinal Ireland. No financial terms were disclosed.

• Ares Management, via its Ares EIF Group, has completed its previously-announced acquisition of the Van Hook Gathering System in North Dakota from WPX Energy (NYSE: WPX) for around $185 million. WPX will continue to manage the pipeline system.

• The Blackstone Group and The Carlyle Group have approached Woolworths (ASX: WOW) about a potential takeover of the A$30 billion Australian retailer, according to The Australian. Read more.

• Eurazeo has agreed to acquire a 90% stake in Fintrax, an Irish provider of VAT refunds for tourists, for upwards of €335 million. Read more.

• EMR Capital is leading an investor group that has agreed to acquire the Martabe gold mine in Indonesia for $775 million (including assumed debt) from G-Resources (HK: 1051). Read more.

• Forefront Dermatology, a Manitowoc, Wis.-based dermatology practice network backed by Varsity Healthcare Partners, has acquired Premier Dermatology, a Crest Hill, Ill.-based dermatology practice with 10 providers in six offices. No financial terms were disclosed.

• Home Retail Group PLC (LSE: HOME), a slumping British home goods retailer, is being circled by private equity firms for what could be a £1 billion takeover, according to The Sunday Times. Read more.

• Peabody Energy (NYSE: BTU) has agreed to sell its New Mexico and Colorado coal assets to Bowie Resource Partners for $358 million (plus the assumption of around $105m in related liabilities). Bowie said it would “fund the transaction through a debt refinancing and an equity commitment from a major private equity firm.”


• No IPO news this morning.


• Biosense Webster Inc., a subsidiary of Johnson & Johnson (NYSE: JNJ), has acquired Coherex Medical Inc., a Salt Lake City-based developer of catheter-based technologies for the treatment of structural heart defects. No financial terms were disclosed. Coherix had raised over $30 million in VC funding from firms like Oxford Bioscience Partners and Psilos Group.

• The Carlyle Group has agreed to sell its 62% stake in Eastern Broadcasting Co., a Taiwanese broadcaster, for around $370 million to Dan Mintz, CEO of Los Angeles-based media company DMG Entertainment. Read more.

• United Generations LLC has acquired Pangborn Group, a Fairburn, Ga.-based maker of surface preparation equipment and related aftermarket parts and services, from Atlas Holdings. No financial terms were disclosed.


• AstraZeneca (LSE: AZN) has agreed to sell the U.S. rights for its Crohn’s disease drug Entocort to Perrigo Company PLC (NYSE: PRGO) for $380 million. The deal is expected to close by year-end.

• Jack Ma, founder and executive chairman of Alibaba Group (NYSE: BABA), is in talks to acquire a stake in the publisher of Hong Kong newspaper South China Morning Post, according to Bloomberg. Read more.

• The National Bank of Hungary has agreed to acquire a majority stake in the Budapest Stock Exchange from a group of Austrian companies, according to a local media report. Read more.

• Tod’s SpA (BIT: TOD), a luxury Italian shoemaker, has agreed to acquire the Roger Vivier shoe brand for around €415 million from the family of Tod’s CEO Diego Della Valley. Read more.


• Gilde Buy Out Partners, a private equity firm focused on mid-market companies in the Benelux region, has closed its fifth fund with €1.1 billion in capital commitments.

• Warburg Pincus has closed its twelfth flagship private equity fund with $12 billion in capital commitments.

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