Term Sheet — Friday, June 3

June 3, 2016, 2:12 PM UTC

Random Ramblings

Fred Buenrostro once was CEO of the California Public Employees’ Retirement System, the nation’s largest public pension and one of its most influential institutional investors. Now he’s heading to prison for his role in a pay-to-play scheme that funneled pensioner monies into certain private equity funds for the benefit of a friend.

Buenrostro is not one of the financial titans who enabled the financial crisis, but he’s no small fish.

“I’m humiliated, embarrassed and deeply ashamed of my actions,” the former pension executive reportedly told a federal judge, shortly before sentencing. But the judge didn’t go lightly, giving Buenrostro 4 1/2 years in the pen, which was six months longer than the prosecutor had requested.

For those who haven’t followed the saga (i.e. Term Sheet noobies), here’s the nutshell version: Buenrostro was friends with Alfred Villalobos, a onetime CalPERS board member who had gone on to become a “placement agent,” helping private equity firms like Apollo Global Management secure investments for their funds. Villalobos got commissions on such placements, and bribed Buenrostro to provide him with confidential CalPERS information and help steer CalPERS to invest in Villalobos clients. And some of this was pretty explicit, as Villalobos ― who killed himself before going to trial on related charges ― stuffed around $200,000 into shoe boxes and paper bags over a series of three meetings with Buenrostro. Villalobos also paid for Buenrostro’s 2004 wedding and provided all sorts of other financial inducements.

To be clear, there is no evidence that CalPERS suffered financially for the decisions, as many of the Villalobos client funds have generated decent returns. But the breach of trust and fiduciary duty was extreme, and should have been noticed much earlier by other CalPERS executives.

None of the Villalobos clients were ever charged with crimes, apparently employing a successful “see no evil, hear no evil” defense.

“This saga has now come to an end,” said current CalPERS executive Rob Feckner, in a prepared statement. “We are stewards of a sacred trust, and it must never be compromised for personal gain.”

 Just a little bit different: Nant Health, a Culver City, Calif.-based personalized healthcare company led by Patrick Soon-Shiong, priced its IPO on Wednesday night at $14 per share, and closed its first day of trading up 39% to $19.47 per share (it's down a bit in early Friday activity). Or, put another way, a big headline win.

But this was hardly a normal IPO. In its earlier filings, Soon-Shiong and existing investor Celgene Corp. had indicated their intentions to purchase up to $70 million of the $91 million float. That figure later got knocked down to $43 million ― $5 million of which comes from Soon-Shiong ― but that's still an extremely high percentage, even in the context of existing shareholders often buying back into biotech issuers at IPO.

Moreover, NantHealth had sold $150,000 in Series F units on June 20, 2014 to the Kuwait Investment Office, which gave KIO the option of requiring NantHealth to redeem those shares plus 7% accrued interest if the company didn't go public by June 20, 2016 (i.e., later this month).

 Say what? As you might imagine, I received a lot of reader email based on yesterday's column about Uber's $3.5 billion investment from Saudi Arabia (web version is here). Most of it was supportive. Some of it accused me of racism, sexism and/or incoherence. Some of the better critiques dealt with my views on VC/PE firms that take money from the same source, and also Saudi holding so much U.S. debt.

I'll delve into this more next week during mailbag, but my very very very short responses on those points: (1) Yes, tough to make a line of demarcation. But, for me, the board seat and relatively large ownership percentage moves it from passive to active, and that's a significant difference. (2) Governments and companies are apples and oranges. If Uber were to launch an army, we wouldn't say: "Well, that's fine because the government does it."

 Where in the World? I'll be attending (and covering) both the Republican and Democratic conventions this summer for Fortune. If you're planning to be at either one, please let me know. Either for interviews or beers. Or both.

 Have a great weekend...


 Udemy, a San Francisco-based marketplace for online educational courses, has raised $60 million in new VC funding from South Africa’s Naspers Ventures. Read more.


 Glassdoor, a Mill Valley, Calif.-based employer review marketplace, has raised $40 million in new VC funding. T. Rowe Price led the round, and was joined by return backers Battery Ventures, Google Capital, Sutter Hill Ventures and Tiger Global. The company has now raised around $200 million in total VC funding. www.glassdoor.com

 Qumulo, a Seattle-based provider of enterprise data storage solutions, has raised $32.5 million in Series C funding. Allen & Co., Top Tier Capital Partners and Tyche Partners were joined by return backers Kleiner Perkins Caufield & Byers, Madrona Venture Group, Highland Capital Partners and Valhalla Partners. Read more.

 Loot Crate, a Los Angeles-based commerce and community platform for entertainment and pop culture fans, has raised $18.5 million in Series A funding. Upfront Ventures led the round, and was joined by Breakwater Investment Management, Downey Ventures, M13, Sterling.VC and Time Inc. (parent company of Fortune). www.lootcrate.com

 FanXchange, a Toronto-based provider of white-labeled live event ticketing solutions, has raised $5 million in new VC funding. Azure Capital Partners and Plaza Ventures were joined by return backers like Gibraltar & Co. www.b2b.fanxchange.com

 Notion, a Denver-based maker of an IoT home awareness system, has raised $3.2 million in seed funding from Liberty Mutual Strategic Ventures and XL Innovate. www.getnotion.com

 Vium Inc. (f.k.a. Mousera), a “living informatics” platform for preclinical drug discovery and development, emerged from stealth mode yesterday. The company had quietly raised more than $33 million since 2013 from firms like Lux Capital, Data Collective, Founders Fund, Dolby Family Ventures and AME Cloud Ventures. www.vium.com


 Avenger Flight Group, a Ft. Lauderdale, Fla.-based provider of flight simulator training and services to civil aviation clients, has secured an undisclosed amount of growth equity funding from Seacoast Capital and Patriot Capital. www.afgsim.com

 Bain Capital and PAG Asia Capital are considering acquisition offers for Takata Corp., the Japanese auto air-bag manufacturer that already has received takeover interest from KKR, according to Bloomberg. Read more.

 The Blackstone Group and The Carlyle Group have bailed on the auction for Canadian drugmaker Concordia Healthcare Corp. (TSX: CXR), sending the company’s stock down by as much as 21% in trading yesterday. Read more.

 CST Brands Inc. (NYSE: CST), a San Antonio, Texas-based convenience store chain with a $3.4 billion market cap, has received first-round takeover bids from Seven & I Holdings (the Japanese parent company of 7-Eleven), Canada’s Couche-Tard Inc. (TSX: ATD) and a private equity pairing of Apollo Global Management with The Blackstone Group, according to Reuters. Read more.

 Distribution International Inc., a Houston, Texas-based distributor and fabricator in the mechanical insulation market, has acquired certain assets of Spokane, Wash.-based Johnson Insulation LLC. No financial terms were disclosed. Distribution International is a portfolio company of Advent International. www.distributioninternational.com

 Equistone has acquired ChartCo Ltd., a London-based provider of digital navigation and voyage compliance services to the marine industry, from ECI Partners at an enterprise value of £55 million. www.chartco.com

 Providence Equity Partners has agreed to acquire a majority equity stake in OEConnection LLC, a Richfield, Ohio-based provider of auto parts technology for OEM distribution networks. No financial terms were disclosed. Existing OEConnection shareholders Ford Motor Co. and General Motors each will retain 15% minority stakes. www.oeconnection.com

 Riverstone Holdings has agreed to acquire Talen Energy (NYSE: TLN), an Allentown, Penn.-based power generation company, in which it already held a 35% stake. Talen was spun off by PPL Corp. (NYSE: PPL) just a year ago, and is being valued by this deal at $5.2 billion (including debt), with Riverstone paying $14 per share (56% premium to March 31 price, after which reports of a possible deal surfaced). Read more.

 Sun Capital Partners has completed a dividend recap for portfolio company Spectralink, a Boulder, Colo.-based provider of on-site enterprise wireless communications devices. Financing was provided by The Private Bank & Trust Co., although specific details were not disclosed. Sun Capital acquired Spectralink back in May 2012. www.spectralink.com

 Thoma Bravo has agreed to acquire Qlik Technologies Inc. (Nasdaq: QLIK), a Radnor, Penn.-based provider of business intelligence software, for approximately $3 billion, or $30.50 per share. Other early suitors had included Bain Capital and Permira. Read more. Read more.


 Blue Coat Systems Inc., a Sunnyvale, Calif.-based security software company owned by Bain Capital, has filed for a $100 million IPO (although earlier news reports suggest it plans to raise up to $500 million). The company plans to trade on the NYSE under ticker symbol BLCT, with Morgan Stanley and J.P. Morgan serving as co-lead underwriters. The company reports a $232 million net loss for the approximately 12 months ending April 30, 2016. Read more.

 Cleopatra Hospital Co., an Egyptian hospital group owned by Abraaj Group, raised around US$40.5 million via an IPO on the Egyptian Exchange. Read more.

 Impinj Inc., a Seattle-based provider of UHF RFID solutions, has filed for a $60 million IPO. It plans to trade on the Nasdaq under ticker symbol PI, with RBC Capital Markets, Pacific Crest Securities and Piper Jaffray serving as lead underwriters. It reports $900,000 in net income on $78.5 million in revenue for 2015. Impinj has raised around $138 million in VC funding since its 2000 inception, from firms like Arch Venture Partners (10.7% pre-IPO stake), Polaris Partners (9.9%), Madrona Venture Group (9.4%), Mobius Venture Capital (9.2%), Intel Capital (8.1%), GF Private Equity (7%) and AllianceBernstein (5.8%). The company previously attempted to go public in 2012. www.impinj.com


 Exar Corp. (NYSE: EXAR) has agreed to sell Integrated Memory Logic Ltd., a San Jose, Calif.-based provider of power management and color calibration solutions for the flat-panel display and LED lighting markets, to an investor group that includes E-Town Capital and Chinese semiconductor company Chipone. The deal is valued at $136 million (net of cash acquired). www.iml-inc.com

ClickDealer, an online ad network, has acquired the assets of Fiksu, a Boston-based mobile marketing technology company. No financial terms were disclosed. Fiksu had raised over $16 million in VC funding from firms like CRV and Qualcomm Ventures, plus another $15 million in venture debt. www.clickdealer.com


 Pentair (NYSE: PNR) has hired Citigroup to find a buyer for its valves and control business, according to the WSJ. The deal could be valued at more than $2 billion. Read more.


 Moneta Ventures, a Folsom, Calif.-based micro-VC firm, has held a $25 million first close on its second fund ($30m target). Read more.

 Transom Capital Group, a Los Angeles-based private equity firm focused on the lower middle-markets, has closed its second fund with $133 million in capital commitments. www.transomcap.com


Stuart Brown has joined BV Investment Partners, a Boston-based mid-market private equity firm, as a partner. He previously was with investment bank MHT Midspan. www.bvlp.com

Stephen Marquardt, former CEO of British private equity firm Doughty Hanson, has joined private equity secondaries firm Coller Capital as co-head of investor relations. He will work alongside existing Coller IR chief Susan Flynn, who plans to leave the firm next year. Read more.

Robert Smith, co-founder of Vista Equity Partners, has been named chairman of Carnegie Hall’s board of trustees. Read more.

Share today's Term Sheet:

Read More

CryptocurrencyInvestingBanksReal Estate