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Term Sheet — Monday, November 30

Random Ramblings

Some notes as everyone returns to work for the three-week sprint:

• Hanging in the bond balance: Reuters reported on Friday that UBM PLC is in “the final stages of discussion” to sell PR Newswire Association, with Vista Equity Partners and Ciscion (backed by GTCR) as the two remaining bidders. UBM had originally sought around $700 million for the financial news service, but Reuters adds this caveat to the entire process: “The leveraged finance markets have been challenging in recent weeks, weighing on the value of the offers and making a deal uncertain.”

This is just the latest in a series of reports about deals (either in negotiation or already agreed upon) that are being hampered by Wall Street’s inability to syndicate leveraged loans (even at steep discounts to original asking price). This is particularly true of junk issues, even if rising high yield spreads arguably are more reflective of macro factors (expected Fed action, oil prices, etc.) than of the specific underlying companies. What I’m beginning to wonder is at what point do banks begin deciding that the risk of hung loans outweighs the instant gratification of lucrative financing fees? And if it’s on the horizon, will that cause private equity slow down deal-making, or simply seek better credits?

• Fit to print? Politico‘s Ken Doctor reported over the weekend that Apollo Global Management had reached out to newspaper company Tribune Publishing Co. (NYSE: TPUB) about a possible buyout, after which it possibly would have sold off the LA Times and San Diego Union-Tribune — which represent around 40% of TPUB’s business — to Eli Broad.

All of this reporting was apparently sparked by a Rupert Murdoch tweet that said: “Strong word Tribune newspaper group to be bought by big Wall St firm, LA Times to go to philanthropist Eli Broad and local group.”

Only trouble, according to Doctor, is that Tribune Publishing never returned Apollo’s calls: “Apollo Global Management first approached Tribune Publishing about a month ago, telling board chair Eddy Hartenstein of its interest in buying the company, as confirmed by confidential sources. After receiving that expression, Tribune Publishing has been ‘non-responsive,’ unwilling to schedule meetings or provide deeper-than-public financials.”

Three thoughts on this: (1) If Doctor is correct, then Hartenstein and the Tribune board may be breaching their fiduciary duties to Tribune Publishing shareholders. Apollo is a deep-pocketed investor that theoretically could pay a significant premium to the company’s ever-sinking share price. How do you not at least engage in a conversation? Let alone announce that there was an informal approach (thus encouraging other potential bidders — unless that was the purpose of this leak, although Murdoch’s prompting makes that appear unlikely). Unless…

(2) Apollo’s approach was so informal as to be considered in jest. You know, because Tribune Publishing is barely profitable (it was actually in the red for Q3), already has a bunch of debt on its books (long term debt $$ > current market cap $$) and is…. well, it’s a newspaper publisher (i.e., an industry in secular decline).

I know Apollo did deep due diligence earlier this year on Digital First Media (owner of the Denver Post and San Jose Mercury News, among others), but it ultimately passed. Just like almost every private equity firm has passed on legacy print media assets — save for B2B trades — for around a decade. The only notable exceptions to that rule — Platinum Equity buying the aforementioned SD Tribune and Avista Capital Partners’s much larger purchase of The Star Tribune of Minneapolis — were decidedly split in terms of success (Platinum nearly tripled the SD Tribune’s value, while the Star Tribune went bust). Unless Apollo has a sweetheart deal lined up with Eli Broad, it’s hard to see why it would volunteer for the aggravation.

(3) A source familiar with the situation declined to comment on the original contact, but says there are no current discussions between Apollo and Tribune Publishing.


• In memoriam: Venture capitalist Kathryn Gould passed away on Thanksgiving Day, after a long battle against cancer.

Kathryn was one of the first female trailblazers in Silicon Valley venture, serving as a general partner with Merrill Anderson Pickard & Eyre, before going on to co-found Foundation Capital. But it’s not something she talked too much about, preferring instead to focus on mentoring the next generation of investors (both female and male), while also finding time to paint, pilot and tend to her vineyards.

For those who didn’t know her, I suggest you read this Q&A conducted by Connie Loizos back in February.

Rest in peace Kathryn. You’ll be missed.


• Atlassian Corp., an Australia-based provider of cloud-based workplace collaboration software, has set its IPO terms to 20 million shares being offered at between $16.50 and $18.50 per share. It would have an initial market cap of $3.6 billion in the middle of that range. For context, the company’s most recent private round was priced at $16 per share. Its road show is expected to begin today.

Atlassian plans to trade on the Nasdaq under ticker symbol TEAM, with Goldman Sachs listed as left lead underwriter. The company reports nearly US$7 million of net income on $319.5 million in revenue for the year ending June 30, 2015 — compared to $19 million of net income on $177 million in revenue for the year-earlier period. Shareholders include venture capital firm Accel (12.5% pre-IPO stake), T. Rowe Price and Dragoneer Investment Group.


• Tyro Payments, an Australian provider of point-of-sale payment solutions, has raised A$100 million in new VC funding from Tiger Global, TDM Asset Management and Mike Cannon-Brookes (co-founder of Atlassian). Read more.

• Jibo, a Boston-based developer of “social robots” for homes, has raised an undisclosed amount of VC funding from Fenox Venture Capital. The company previously raised $34.5 million in VC funding this year from RRE Ventures, CRV, Acer, Dentsu Ventures, KDDI, LG Uplus and NetPosa.


• The Blackstone Group has agreed to acquire Armacell, a German provider of insulation materials, from Charterhouse Capital Partners. The deal is valued at €960 million. Charterhouse had paid €520 million to acquire the company in 2013.

• Cision, a PR software maker owned by GTCR, and Vista Equity Partners are the two final bidders for New York-based financial news service PR Newswire Association, according to Reuters. Current PR Newswire owner UBM PLC (LSE: UBM) reportedly was seeking more than $700 million, but that figure may change given recent challenges in the leveraged financing market. Read more.

• EQT Partners has acquired around 63% of the outstanding shares of Industrial and Financial Systems (Oslo: IMS), a Swedish provider of enterprise software for enterprise resource planning. Sellers include Förvaltnings AB Wasatornet, Gustaf Douglas, Catella Fondförvaltning AB, Lannebo Fonder AB, SEB, AP4, Anders Böös AB, Greenfield AB, Heinz Kopfinger and DNB.

• iKang Healthcare Group (Nasdaq: KANG), a Chinese provider of medical examinations and healthcare services, has received a non-binding takeover proposal that would value the company at around $1.48 billion, or $44 per share. That’s a 36.9% premium to where the company’s shares were trading in August, before receiving a $35.60 per share buyout bid from company chairman and CEO Ligang Zhang (working with FountainVest Partners). Those involved in the new takeover bid include Meinian Onehealth Healthcare, Shenzhen Ping An Decheng Investment Co., Taiping Guofa Capital Management Co., Huatai Ruilian, Sequoia China Investment Management and Cathay Capital Private Equity.

• Kohlberg Kravis Roberts & Co. has agreed to acquire a majority stake in Webhelp, a Paris-based call center business, from Charterhouse Capital Partners. No financial terms were disclosed, but Dow Jones reports that the deal valued Webhelp at around €1 billion. Deutsche Bank managed the process.


• eASIC Corp., a Santa Clara, Calif.-based fabless maker of zero mask-charge ASIC chips, has withdrawn registration for a $75 million IPO (originally filed in February 2015). No explanation was provided. The company had reported a $1 million net loss on $67 million in revenue during 2014. Shareholders include Khosla Ventures (20.8% pre-IPO stake), Crescendo Ventures (15%), Seagate (14.6%), Kleiner Perkins Caufield & Byers (8.8%), Evergreen Partners (7.8%) and Advanced Equities (5.9%). Morgan Stanley and Deutsche Bank Securities were serving as lead IPO underwriters.


 Mobify, a Vancouver-based mobile engagement platform for e-commerce companies, has acquired Dónde, a Cincinnati-based provider of location-based services for retailers, according to Fortune. No financial terms were disclosed. Dónde had been seeded by such firms as Chicago Ventures, Mercury Fund, Upwest Labs and Vine Street Ventures. Read more.

• Silverfleet Capital has agreed to sell Office Retail Group, a UK-based footwear retailer focused on the youth market, to South Africa’s Truworths International (JSE: TRU) for £256 million. The deal is expected to close early next month. Read more.


• Agecroft Partners, a Richmond, Va.-based hedge fund consulting and third party marketing firm, has acquired the business of Alta Via Advisors, a New York-based hedge fund third party marketing boutique. No financial terms were disclosed.

• Anheuser-Busch InBev plans to sell beer brands Grolsch and Peroni, following its pending acquisition of SABMiller PLC (LSE: SAB), according to multiple media reports. Read more.

• Margarita Louis-Dreyfus, majority shareholder of Louis Dreyfus Commodities, has been asked by the firm’s founding family to buy out most of their shares, according to the FT. The family is seeking to sell a 16% position in the firm (it holds 20% overall), for around $1 billion. Read more.

• Sanofi (Paris: SAN) has retained Lazard to manage either sale of listing of its Merial animal health unit, which could be valued at upwards of €12 billion, according to Reuters. Read more.


• Kern Partners, a Canada-based private equity firm focused on the energy sector, has renamed itself Azimuth Capital Management. The firm has $1.6 billion in assets under management.

• Madison Dearborn Capital Partners has secured around $3 billion in capital commitments for its seventh fund, according to a regulatory filing. It is targeting a total of $3.75 billion.


• Andre Esteves has stepped down as chairman and CEO of Brazilian investment bank BTG Pactual SA, following his arrest on suspicion of obstructing an investigation into corruption at state-run oil company Petrobras. Esteves remains the company’s controlling shareholder. Read more. Persio Arida has been named chairman, while Roberto Sallouti and Marcelo Kalim will serve as co-CEOs. Read more.

• Andy Jones has been named managing director of the Maryland Venture Fund, a $106 million evergreen VC fund focused on Maryland-based startups. He previously worked on acquisitions and corporate development for Kingspan Group PLC (LSE: KGP) and, before that, was VP of corporate strategy for High Street Partners.

• Eric Lefkofsky has returned to his position as co-managing partner of Lightbank, the Chicago-based VC firm he launched with Brad Keywell. Lefkofsky had spent the past two years as CEO of Groupon — where he and Keywell were co-founders — and will remain Groupon chairman.

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