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Term Sheet — Thursday, January 28

Random Ramblings

Belated greetings from the home office, where we have beset by all sorts of technical difficulties. Some notes, as my heart rate descends toward something more healthy:

• Deal deadlines: During yesterday’s EMC earnings call, a bank analyst asked if the $67 billion Dell merger remained on track. EMC CEO Joe Tucci replied affirmatively: “We have a binding, solid merger agreement in place. We are confident we’ll meet contractual terms. There are significant penalties in place both ways if this doesn’t happen.”

And it makes sense for Tucci to be confident. After all, EMC shareholders should be thrilled that they’re getting taken out at a price that doesn’t account for the recent public equities dive. And Dell only has two real shareholders to satisfy (Michael Dell and Silver Lake). I would question the lenders, except I didn’t think they’d materialize in the first place ― so clearly we’re not on the same mental plane.

A bigger question is what will happen to several other M&A transactions that were agreed upon in Q2-early Q4 of last year, particularly ones where public shareholders are on both sides of the equation. For example, yesterday came news that SunEdison is seeking buyers for some rooftop solar assets of Vivint Solar Inc. (listed, but still controlled by Blackstone), which it had agreed to acquire last summer for $1.9 billion. Since that agreement, SunEdison stock has fallen by more than 90%, giving it a market cap of just $1.05 billion (although its EV is nearly 13x higher).

This isn’t quite analogous to 2009 when M&A agreements began failing because credit dried up, but I’d be stunned if we don’t begin to see some broken (or at least heavily renegotiated) deals.

 

• Today in Theranos: The U.S. Centers for Medicare and Medicaid Services yesterday published a letter it sent to Theranos, finding that conditions in its Newark, Calif. lab “pose immediate jeopardy to patient safety” ― adding that Theranos has 10 calendar days to address the issues. Among the lab’s failings were its hematology and analytic systems. I’m no doctor, but that seems problematic for a blood-testing company.

Here was part of the Theranos response to an email inquiry from Fortune: “This survey of our Newark, CA lab began months ago and does not reflect the current state of the lab. As the survey took place we were simultaneously conducting a comprehensive review of our laboratory’s systems, processes and procedures to ensure that we have best-in-class quality systems… We are still reviewing the report, but we addressed many of the observations during the survey and are actively continuing to take corrective action. A full plan of correction will be submitted to CMS within days.”

Theranos also said that it has replaced its Newark lab director, and stressed that over 90% of its tests are done in an Arizona lab.

It also is worth noting that this letter was referred to on Sunday in The Wall Street Journal. In that article, Theranos said it had no knowledge of the letter. Given that the actual letter was dated one day after the WSJ story appeared, the company’s claim seems to pass the sniff test (and suggests that some WSJ leaks are coming from regulators, not the company itself).

• Remember IPOs? Those were fun.

• Quiz Time: Can you name the corporate VC unit that quietly shut down? Hint: It invested in tech startups, but the parent company was not a tech firm. 

• Just linking around: Some of you have asked for a link to yesterday’s Term Sheet column on Silicon Valley’s big data problem. Here you go.

• Fond farewell: Tonight in New York, a bunch of journalists and private equity folks will gather for a retirement party celebrating Peter Rose, the onetime Goldman Sachs communications lead who has been with The Blackstone Group since 2007. I regretfully cannot attend, but didn’t want the occasion to go unremarked.

In this job, I deal with hundreds of communications pros, both internal and external to their clients. Peter has been, quite simply, one of the very best. He responds quickly, has intimate knowledge of what’s happening within Blackstone and expertly tightropes his firm’s desire for privacy with the reporter’s desire for information. In short, he knows which battles are worth fighting and which ones aren’t.

Have a good time tonight Peter. It’s been a real pleasure.

THE BIG DEAL

• Anheuser-Busch InBev NV does not plan to divest itself of CR Snow, the China beer business of SABMiller, according to the WSJ. The move comes as a surprise, as InBev keeps working toward regulatory approvals for its $108 billion buyout of SABMiller. In other mega-brew news, Reuters reports that KKR is now a player for SABMiller’s Peroni and Grolsch brands, while Bain Capital has left the process. Read more.

VENTURE CAPITAL DEALS

• Pindrop Security, an Atlanta-based provider of voice fraud prevention software, has raised $75 million in Series C funding. Google Capital led the round, and was joined by return backers Andreessen Horowitz and Institutional Venture Partners. Read more at Fortune.

• Farmers Edge, a Winnipeg-based provider of agriculture and independent data management solutions, has raised C$58 million in new VC funding from return backers Mitsui & Co., Ltd., Kleiner Perkins Caufield & Byers and Osmington Inc. www.farmersedge.ca

• College Ave Student Loans, a Wilmington, Del.-based student loan marketplace lender, has raised $20 million in new funding. Comcast Ventures led the rounmd, and was joined by Fenway Summer Ventures, DW Partners and individual angels. www.collegeavestudentloans.com

• Lever, a San Francisco-based provider of recruiting software, has raised $20 million in Series B funding. Scale Venture Partners led the round, and was joined by Correlation Ventures, an AngelList syndicate led by Naval Ravikant and return backers Matrix Partners and Index Ventures. www.lever.co

• NewVoiceMedia, a UK-based a UK–based cloud contact center vendor, has raised $30 million in new VC funding. BGF Ventures led the round, and was joined by return backers Bessemer Venture Partners (BVP), Eden Ventures, Highland Capital Partners Europe, Salesforce Ventures and Technology Crossover Ventures. Read more at Fortune.

• Gridstore, a Mountain View, Calif.-based provider of hyper-converged all flash infrastructure, has raised $19 million in new VC funding. Atlantic Bridge Capital led the round, and was joined by return backers Acero Capital, GGV Capital and ONSET Ventures. www.gridstore.com

• JobToday, a mobile app for hiring service and blue collar workers, has raised $10 million in Series A funding. Accel led the round, and was joined by Felix Capital and return backer Mangrove Capital Partners. Read more.

• Booster Fuels, a Seattle-based provider of on-demand fuel fill-ups, has raised $9 million in Series A funding from Madrona Venture Group, RRE Ventures and Version One Ventures. Read more.

• Neurotrack, a Palo Alto, Calif.-based maker of digital cognitive assessment tests, has raised $6.5 million in new VC funding. Khosla Ventures led the round, and was joined by Social Capital, Founders Fund, AME Cloud Ventures and iSeed Ventures. www.neurotrack.com

• Tapdaq, a London-based in-app ad platform, has raised $6.5 million in Series A funding. Backers include Balderton Capital, BGF Ventures, Spring Partners and Open Ocean Capital. www.tapdaq.com

• Wrecker, a Dutch container-centric automation platform, has raised $4.5 million in Series A funding. Inkef Capital led the round, and was joined by return backer Notion Capital. Read more.

PRIVATE EQUITY DEALS

• Asciano (ASX: AIO), an Australian ports operator, has received a US$6.3 billion takeover offer from an investor group that includes rival Qube (ASX: QUB), Global Infrastructure Partners, the Canada Pension Plan Investment Board and CIC Capital. Read more.

• Ares Management has agreed to acquire up to a 20% equity stake in Montage Hotels & Resorts LLC, a luxury hospitality company, for up to $200 million. Read more.

• Component Hardware Group, a Lakewood, N.J.-based portfolio company of Windjammer Capital Investors, has acquired Specialty Food Service Hardware Inc., an Ontario-based provider of components and parts to the Canadian commercial foodservice and wholesale plumbing markets. No financial terms were disclosed. www.componenthardware.com

• Curo Health Services, a Mooresville, N.C.-based hospice provider owned by Thomas H. Lee Partners, has acquired New Century Hospice, a regional hospice provider operating in Colorado and Oklahoma. No financial terms were disclosed. Sellers were Scale Venture Partners and Petra Capital Partners. www.curohealthservices.com

• Excelligence Learning Corp., a portfolio company of Brentwood Associates, has acquired Really Good Stuff Inc., a Monroe, Conn.-based multi-channel marketer of K-8 classroom products and teaching tools. No financial terms were disclosed. www.excelligence.com

• Greencross (ASX: GXL), an Australian veterinary care company, has rejected a A$6.45 per share non-binding takeover offer from TPG Capital, which in December acquired a 6.9% equity stake. Read more.

• Saw Mill Capital has acquired Wolf-Gordon, a Long Island City, N.Y.-based maker of wallcoverings and other interior products for commercial markets. No financial terms were disclosed. Sellers include Corinthian Capital. www.wolf-gordon.com

• Sentinel Capital Partners has acquired Marketplace Events, a Cleveland-based organizer of consumer home and garden shows. No financial terms were disclosed. www.marketplaceevents.com

• Tech Air, a Danbury, Conn.-based distributor of gases and related welding supplies, has acquired two companies: Ravena Welding Supply (New York) and Hereford Welding Supply (Texas). No financial terms were disclosed. www.techair.com

IPOs

• Blue Coat Systems Inc., a Sunnyvale, Calif.-based security software company owned by Bain Capital, is planning to raise upwards of $500 million in an IPO at some point in 2016, according to Bloomberg. Read more.

McGraw-Hill Education Inc., a New York-based educational publisher owned by Apollo Global Management, is pushing back its IPO plans to the second half of 2016 due to poor stock performance of listed rivals, according to Bloomberg. The company originally filed its IPO papers in September 2015. Read more.

EXITS

• Sinclair Broadcasting (Nasdaq: SBGI) has agreed to acquire The Tennis Channel for $350 million. Sellers include Battery Ventures and Columbia Capital. Read more.

• Stripes Group has hired Jefferies & Co. to explore a sale of portfolio company eMarketer Inc., a New York-based digital research and analytics company that has between $16 million and $20 million of EBITDA, according to Dow Jones. www.emarketer.com

OTHER DEALS

• Mitsui & Co., Canon and Konica Minolta each have interest in acquiring a control stake in the healthcare device unit of Toshiba Corp. (Tokyo: 6502), according to the Nikkei daily. The business generated around $3.35 billion in 2014 revenue. www.toshiba.com

FIRMS & FUNDS

• Corstone has closed a South Korea-focused growth equity and buyout fund with $124.5 million in capital commitments. Limited partners include the Korea Development Bank and the Korean Teacher’s Pension Fund. www.corstone.com

• Rakuten (Tokyo: 4755) has launched an $84 million venture capital firm focused exclusively on Japan-based tech startups.

• Steamboat Ventures is raising upwards of $100 million for its sixth fund, according to a regulatory filing. www.steamboatvc.com

• TC Growth Partners, a Palo Alto, Calif.-based growth equity spinout from Trident Capital, has closed its first fund with $300 million in capital commitments, according to a regulatory filing. www.tcgrowth.com

Moving In, On & Up

• Frank Quattrone is stepping down as CEO of Qatalyst Group, the M&A advisory firm he launched in 2008. He will now become executive chairman, while longtime lieutenant George Boutros becomes CEO. Read more.

• Todd Arden has joined Black Diamond Capital Management as a senior managing director and co-credit officer. He previously was chief investment officer of the credit opportunities unit of CCMP Capital. www.bdcm.com

• Anthony Draye has joined Frazier Healthcare Partners as an executive partner in its growth buyout group. He previously was director of applications for TridentUSA Health Services. www.frazierhealthcare.com

• Michael Heller, president of alternative credit bureau FactorTrust, has joined Oak HC/FT as a venture partner. www.oakhcft.com

• Highland Capital has promoted Manish Patel to general partner and head of the VC firm’s consumer Internet practice in Silicon Valley. He had joined the firm in 2010 from Google, and serves on the boards of HCP portfolio companies Shift and Scopely. HCP also has promoted Jessica Pelletier to chief financial officer. www.hcp.com

• Siraj Khaliq, co-founder of The Climate Corp. (acquired by Monsanto), has joined European venture firm Atomico as a partner. www.atomico.com

• Michael Pao has joined Greylock Partners as an entrepreneur-in-residence. He previously spent four years at Uber, originally helping to launch its Boston market and, more recently, as head of product for its growth team. www.greylock.com

• Rainer Traugott has joined Latham & Watkins LLP as a Munich-based partner in its corporate practice, with a particular focus on private equity and M&A transactions. He previously was with Linklaters. www.lw.com

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