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Term Sheet — Friday, July 22

Random Ramblings

Greetings from 30,000 feet, as I’m on an early morning flight back to Boston after a week of GOP conventioneering in Cleveland (which was a great host city). Some notes:

• He said what? Last night’s big speech, of course, came from GOP presidential nominee Donald Trump, but Silicon Valley was far more interested in an earlier address by Peter Thiel, an avowed libertarian who had confused a lot of his ideological pals by agreeing to appear at the RNC. In fact, there were more than a few folks who believed Thiel had some sort of ulterior motives, or perhaps even a mischievous plan to endorse Gary Johnson. I had my own silly theory, although it (sadly, so sadly) didn’t come to pass.

Instead, Thiel gave a pretty standard endorsement speech that left no question as to his support for the new Republican standard-bearer.

“My industry has made a lot of progress in computers and in software and it’s made a lot of money. But Silicon Valley is a small place and, if you drive to Sacramento or even across the bridge to Oakland, you won’t see much prosperity. That’s how small it is.”

The only real noteworthy piece was Thiel’s acknowledgement of being a proud gay American ― not any sort of secret to those who know of Thiel, but also not something said before during a prime time RNC address. The remark drew loud cheers, as did other positive mentions of LGBT issues during the convention, from a crowd that perhaps was not aware of its party’s actual platform.

• Townie tangential: In yesterday’s column on Indigo Agriculture, I noted that Charlestown is “known as a setting for such films as Mystic River and Good Will Hunting.” Suffice to say, many Boston readers took issue with both. In my defense, Mystic River was partially filmed in Charlestown (the movie’s actual location is fictional, but Dorchester folks claim it as theirs) and my GWH reference was to the Bunker Hill Community College Scenes (don’t worry — I once worked in Southie and used to eat at dear departed Tasty in Harvard Square). But, as emailers suggested, I should have just cited The Town.

• Update: When General Motors announced in March that it was buying Cruise Automation, we reported that the undisclosed purchase price was just over $1 billion. Yesterday, GM chief financial officer Chuck Stevens said in an earnings call that it only paid out $581 million (split between cash and stock).

In other words, we seem to have a pretty substantial discrepancy.

From what we can tell, the delta here is because GM is being very narrow (and a bit strange) in how it describes the deal value. The $581 million (or $600 million, whichever you prefer) is the cash and stock that actually went out the Detroit doors during GM’s second fiscal quarter. Not included were a variety of other things, including cash still being held in escrow, expected earn-out payments, employee retention packages and other expected employee compensation (particularly for those with unvested shares at the time of acquisition).

This is probably what Stevens was referring to when he said:

“The deal consideration at closing was approximately $600 million with $300 million paid in cash during the quarter and the remaining $300 million paid through the issuance of new common stock. Additionally, we entered into other agreements associated with retention of key employees and performance based awards contingent on continued employment and or reaching certain milestones from a technology and a commercialization perspective.”

After the GM earnings call, I reached back out to my original sources, one of whom asked me to wait while he pulled out the deal documentation to double-check, and they all reiterated the $1 billion purchase price.

A GM spokesman declined to get into specific numbers, but said that any payouts above the $581 million ― including earn-outs related to commercial or technological milestones ― are being considered by the company to be employment costs instead of acquisition costs. Unclear why a tech-based earnout would be an employment cost, but that’s how GM is doing it.

Have a great weekend!


• Goldman Sachs is preparing to begin marketing its seventh private equity fund, targeting anywhere from $5 billion to $8 billion, according to the WSJ. This would be Goldman’s first buyout fund since raising $20 billion in 2007, and also its first since the Volcker Rule restricted the amount of capital Goldman could contribute to its own vehicle. Read more.


• AristaMD, a San Diego-based provider of specialist referral support tools, has raised $11 million in Series A funding. Avalon Ventures led the round, and was joined by Correlation Ventures.

• Kazan Networks Corp., an Auburn, Calif.-based data storage performance startup, has raised $4.5 million in Series A funding. Samsung Ventures led the round, and was joined by Intel Capital and Western Digital Corp.


• Bain Capital and Goldman Sachs have agreed to acquire a majority stake in Carver Korea, a South Korean cosmetics company. No financial terms were disclosed, except that Carver is on a $130 million revenue run rate. This represents Bain Capital’s first-ever investment in Korea.

• Clayton, Dubilier & Rice has completed its previously-announced acquisition of Tranzact, a Fort Lee, N.J.-based provider of direct-to-consumer sales and marketing solutions for U.S. insurance carriers, from shareholders like White Mountains Insurance Group Ltd. (NYSE: WTM). No financial terms were disclosed, although earlier news reports said that Tranzact generates around $50 million in annual EBITDA. Evercore managed the process.

• Clubessential LLC, a Cincinnati-based provider of software for golf and yacht clubs, has raised an undisclosed amount of growth equity funding from Battery Ventures.

• First Reserve has agreed to acquire Morrison Utility Services, a British utility infrastructure company, from Bregal Capital and Motion Equity Partners. No financial terms were disclosed, except that Morrison generates over £600 million in annual revenue.

• Genesys, a French provider of omnichannel customer experience and contact center solutions, has raised around $900 million in equity funding from Hellman & Friedman at a $3.8 billion valuation.

• L Capital Asia, an investment unit of French luxury goods company LVMH) (Paris: LVMH), has acquired a minority stake in South Korea-based CLIO Cosmetics for an undisclosed amount. Reuters reports that the investment was $50 million for a 7% stake. Read more.

• LifeAID Beverage Co., a Santa Cruz, Calif.-based manufacturer of “premium nutritional products for active lifestyles,” has raised an undisclosed amount of private equity funding from KarpReilly LLC.


• Patheon, a Dutch provider of outsourced contract drug manufacturing solutions, raised $625 million in its IPO. The company priced 29.8 million shares at $21 per share (middle of $19-$22 range), and will trade on the NYSE under ticker symbol PTHN. J.P. Morgan served as lead underwriter. The company used to trade on the TSX before being acquired by JLL Partners and DSM (Amsterdam: DSM) for $1.4 billion in 2013.

• TPI Composites Inc., a Scottsdale, Ariz.-based manufacturer of composite wind blades, raised $69 million in its IPO. The company priced 6.3 million shares at $11 per share, compared to original plans to offer 7.3 million shares at between $15 and $17 per share. It will trade on the Nasdaq under ticker symbol TPIC, while J.P. Morgan and Morgan Stanley served as co-lead underwriters. The company reports $1.7 million of net income on $176 million in revenue for Q1 2016, compared to a $5.7 million net loss on around $96.6 million in revenue for the year-earlier period. Shareholders include Element Partners (32.2% pre-IPO stake), Landmark Partners (20.9%), Angeleno Group (18.5%), NGP Energy Technology Partners (14.8%) and GE Ventures (11%).


• Caesars Acquisition Co. (Nasdaq: CACQ), whose shareholders include Apollo Global Management, is in talks to sell the online games business of Caesars Interactive Entertainment Inc. to a Chinese investor consortium that includes Giant Interactive Group, according to Reuters. The deal could be valued at $4.2 billion, with the Chinese group reportedly beating out rival bids from Hasbro (Nasdaq: HAS) and South Korea-based Netmarble Games. Read more.

• China Resources Group and Macquarie Group have agreed to acquire a majority stake in GenesisCare Ltd., an Australian provider of cancer and cardiac care services, for an undisclosed amount. Sellers will include KKR, which currently holds a 45% stake. Read more.

• Monotype (Nasdaq: TYPE) has agreed to acquire Olapic, a New York-based visual commerce platform for crowd-sourced photos and videos. The deal is valued at $149 million, including $130 million up-front. Olapic had raised around $22 million in VC funding from firms like Unilever Ventures, Fung Capital USA, Longworth Venture Partners and Felix Capital. Read more.


• ExxonMobil (NYSE: XOM) has agreed to acquire InterOil (NYSE: IOC) for $25 billion. Read more.

• Komatsu (Tokyo: 6301) has agreed to acquire Joy Global (NYSE: JOY), a Milwaukee-based mining equipment maker, for $3.75 billion (including $845m of assumed debt). The $28.30 per share sale price represents a 20% premium to Joy Global’s previous closing share price. Read more.

• Pandora Media (NYSE: P) has rejected a $3.4 billion buyout offer from Liberty Media (Nasdaq: LBTY), according to the WSJ. Read more.

• Takeda Pharmaceutical Co. (Tokyo: 4502) is considering the sale of its majority stake in chemicals business Wako Pure Chemical Industries Ltd., according to Bloomberg. The deal could be worth more than $1 billion. Read more.


• Goldman Sachs is preparing to begin marketing its seventh private equity fund, targeting anywhere from $5 billion to $8 billion, according to the WSJ. This would be Goldman’s first buyout fund since raising $20 billion in 2007, and also its first since the Volcker Rule restricted the amount of capital Goldman could contribute to its own vehicle. Read more.



• Ron Bloom is stepping down as a top restructuring banker with Lazard, in order to join Brookfield Asset Management. Read more.

• Andrew Géczy has agreed to join Terra Firma Capital Partners as CEO, effective in September. He previously was CEO of international and institutional investment banking at Australia & New Zealand Banking Group. He succeeds Tim Pryce, who left Terra Firma back in March. Read more.

• Gavin Manson has been named chief financial officer of UK-based Electra Private Equity. He currently serves as finance director for tour operations and hotels at Thomas Cook Group.

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