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Top of the Morning
President Trump yesterday announced his intention to ban all flavored e-cigarette products from the U.S. markets, even if sold online or in smoke shops.
- This creates massive complications for the proposed merger between tobacco giants Altria and Phillip Morris.
Both companies have made major moves into e-cigarettes, which they view as the best way to remain viable in a U.S. market that has moved away from combustible products.
- Altria late last year paid $12.8 billion for a 35% stake in Juul, which also is under new fire from the FDA for its marketing practices.
- This isn't necessarily a death blow for Juul, which didn't have advance warning of the White House event, but it's not a flesh wound either. At the very least, it puts Altria's deal in the same valuation league as SoftBank's last round for WeWork.
- In a statement, Juul said: "We strongly agree with the need for aggressive category-wide action on flavored products. We will fully comply with the final FDA policy when effective."
- Both Altria and Phillip Morris shares were down at the open, but only slightly.
The key issue here is youth vaping, which has been shown to increase the likelihood of transitioning to traditional cigarettes (among kids who never before smoked). Remember that most vape pods contain tons of nicotine.
- Last year the FDA cited a survey on youth tobacco use when deciding to ban fruit-flavored products from retail and convenience store shelves.
- Health officials yesterday said that data from this year's survey showed that the move didn't slow vaping adoption, thus the proposal to ban all flavors (including mint and menthol) from all channels.
- Yes, there continues to be a massive policy disconnect here in that combustible cigarettes (including menthol ones) continue to be sold in the same stores that the FDA says can't adequately police youth purchases of e-cigarettes. It's like closing the gateway but keeping open the side path.
- Trump yesterday said that "people are dying with vaping," apparently referring to a number of lung disease cases, but that's not what's driving FDA action here. Namely because the CDC reports that no e-cigarette product or compound has been formally linked yet to the illnesses, and investigators have said that the culprit may be black-market THC oil pods.
The bottom line is that Altria and Phillip Morris shareholders will be hesitant to ratify a merger agreement with so much uncertainty over what both companies have said is their product path to modernization.
SmileDirectClub, a provider of at-home teeth straightening systems, raised $1.3 billion in its IPO. It priced 58.54 million shares at $23, above $21-$23 range, for an initial market cap of $8.9 billion, and will trade on the Nasdaq (SDC). J.P. Morgan was lead underwriter.
- Why it's the BFD: Because it shows that rule-muddying isn't just for transportation and housing unicorns. SDC has been the subject of numerous safety complaints to state dental boards from orthodontist organizations, which the company pushes back on as more about profits than patients.
- ROI: SDC had raised nearly $400 million in private funding from firms like Clayton, Dubilier & Rice, Spark Capital, Kleiner Perkins Digital Growth, and 3L Capital.
- Bottom line: This is bad news all over for incumbent Align Technology. First, rival SDC now has a giant war chest and capital markets access. Second, Align is effectively out more than $1 billion, after being forced by an arbiter to sell its 19% stake in SDC back to the company at a way below-market rate, after being found to have violated a non-compete agreement.
Venture Capital Deals
• Anduril, the defense-tech startup led by Palmer Luckey, raised new funding from Andreessen Horowitz and return backer Founders Fund at a valuation north of $1 billion, per CNBC. http://axios.link/vx1N
• Trifacta, a San Francisco-based data wrangling startup, raised $100 million from Telstra Ventures, Energy Impact Partners, NTT DOCOMO Ventures, BMW iVentures, and ABN AMRO. http://axios.link/1mfK
• SmartDrive, a San Diego-based provider of video-based telematics, raised $90 million. TPG Sixth Street Partners led, and was joined by return backers Founders Fund, NewView Capital, Oak Investment Partners, and Michelin. http://axios.link/50B8
🚑 Healthy.io, an Israeli provider of smartphone-based urinalysis, raised $60 million in Series C funding. Corner Ventures led, and was joined by Joy Capital, Ansonia Holdings, Aleph, and Samsung NEXT. http://axios.link/SZt4
• Pomelo, a Thai fashion e-commerce company, raised $52 million in Series C funding from Central Group, Provident Growth Fund and InterVest Star SEA Growth Fund. http://axios.link/thJr
• Akeneo, a French provider of product information management services, raised $46 million in Series C funding. Summit Partners led, and was joined by return backers Alven, Partech, Salesforce Ventures, and Stephan Dietrich. http://axios.link/pSv3
• Applied Intuition, a Sunnyvale, Calif.-based simulation platform for autonomous vehicle development, raised $40 million in Series B funding. General Catalyst led, and was joined by Kleiner Perkins, M12, Sozo Ventures, La Famiglia, and return backers Andreessen Horowitz, Lux Capital, and Floodgate. www.applied.co
• Simbe, a San Francisco-based maker of retail inventory robots, raised $26 million in Series A funding. Venrock led, and was joined by Future Shape, Valo Ventures, and Activant Capital. http://axios.link/fE43
• ScyllaDB, a Palo Alto-based bid data database startup, raised $25 million in Series C1 funding. Eight Roads Ventures led, and was joined by return backers Bessemer Venture Partners, Magma Venture Partners, Qualcomm Ventures and TLV Partners. http://axios.link/FmmA
• Swiftly, a Seattle-based provider of customer-facing software for supermarkets, raised $15.6 million in seed funding from Novel Private Equity, Mendacre and Ron Burkle. http://axios.link/g8FR
• Neighborhood Goods, a Dallas-based operator of physical department stores selling direct-to-consumer brands, raised $11 million. Global Founders Capital led, and was joined by insiders Forerunner Ventures, Serena Ventures, NextGen Venture Partners, Allen Exploration, and Capital Factory. http://axios.link/cnPy
• CMDTY, a physical commodities supply chain startup led by AppNexus founder and former CEO Brian O’Kelley, raised $10 million in Series A funding from Venrock and Rucker Park. http://axios.link/oR69
• GiGstreem, a Tysons Corner, Va.-based provider of broadband service to the multifamily real estate industry, raised $10 million in Series B funding. RET Ventures led, and was joined by LNC Partners. www.gigstreem.com
• Redefine Meat, an Israeli maker of alt-meat 3D printers, raised $6 million in seed funding. CPT Capital led, and was joined by Hanaco Ventures and The PHW Group. http://axios.link/3xmW
• Truman’s, a direct-to-consumer cleaning products company, raised $5 million in seed funding from Henkel, Uncommon Denominator, Starting Line and BFG Partners. www.trumans.com
Private Equity Deals
• AMS of Austria says it has a list of likely strategic buyers for the digital business of German automotive lighting company Osram, if AMS beats out Bain Capital/The Carlyle Group for the larger deal. http://axios.link/7eHy
• The Blackstone Group is in talks to invest around $209 million to launch a joint venture to build warehouses in India, alongside Allcargo Logistics, per Bloomberg. http://axios.link/gvch
• Execu-Search Group, a New York-based portfolio company of New Heritage Capital, acquired TechLink, a Mahwah, N.J.-based provider of temp tech staffing solutions. www.execu-search.com
• Fresh Direct Produce, an Canadian portfolio company of HKW, acquired Island West Manufacturing, a wholesaler of produce, processed fruits, dried spices, and fresh-cut vegetables. www.freshdirectproduce.com
🚑 H/2 Capital Partners, a Connecticut-based hedge fund, agreed to take over British home-care chain Four Seasons for around £400 million. http://axios.link/FlPR
• Peak6 acquired Electronic Transaction Clearing, a Los Angeles-based custodian and clearing provider. www.apexclearing.com
🚑 Vision Innovation Partners, an ophthalmology acquisition platform sponsored by Centre Partners, acquired Washington, D.C.-based practice Washington Eye Specialists.
🚑 10x Genomics, a Pleasanton, Calif.-based genomics company, raised $390 million in its IPO. The company priced 9 million shares at $39 (above range), for an fully-diluted market cap of $4.2 billion. It will trade on the Nasdaq (TXG), used JPMorgan as lead underwriter, and reports a $14.5 million net loss on $109 million in first half 2019 revenue. 10x had raised $320 million in VC funding from firms like Foresite Capital (18.1% pre-IPO stake), Venrock (16.3%), Paladin Capital (11.5%), Fidelity (11.3%), Meritech Capital Partners, and SoftBank.
🍺 Anheuser-Busch InBev is reviving IPO plans for its Asia operations, after shelving a Hong Kong float in July, per Reuters. The new offering would be designed to raise around $5 billion. http://axios.link/H9E1
⛽ Neptune Energy, a London-based oil and gas company, expects to be ready to IPO by next April, per comments by its CFO. http://axios.link/ZJW7
• TeamViewer, a German business collaboration software company owned by Permira, will seek to raise upwards of €2.31 billion in its Frankfurt IPO, which would be Germany’s largest tech listing since 2000. http://axios.link/lBnv
• Spotify (NYSE: SPOT) acquired SoundBetter, a Brooklyn-based audio production and collaboration marketplace that had been seeded by 500 Startups and Foundry Group. www.soundbetter.com
• Stellex Capital Management agreed to sell Morbark, a Winn, Mich.-based maker of equipment for the forestry and biomass markets, to Alamo Group (NYSE: ALG) for $352 million. www.morbark.com
⛽ ArcelorMittal (AM: MT) is seeking a buyer for its downstream construction business, which could fetch between €700-800 million, per Bloomberg. http://axios.link/JKGq
⛽ General Electric (NYSE: GE) said it plans to raise $2.7 billion by cutting its stake in oilfield services company Baker Hughes (NYSE: BHGE) from 50.4% to 38.4%. http://axios.link/3w5B
• Yahoo Japan (Tokyo: 4689) offered to buy Japanese online fashion retailer Zozo (Tokyo: 3092) for around $3.7 billion (representing 21% premium to yesterday’s closing price). http://axios.link/zvQh
• Melior Equity Partners, a spin-out of The Carlyle Group’s Ireland team, is raising €200 million for its debut fund, per PE International. http://axios.link/ewck
• Gordon Bajnai, Hungary’s former prime minister, joined placement agent Campbell Lutyens as a partner and head of global infrastructure. He’s been on the firm’s advisory board since 2011. www.campbell-lutyens.com
• Craig Hoffman joined Shadow Ventures as a venture partner, and head of the Atlanta-based firm’s digital entertainment and media tech group, per his LinkedIn page. He previously was COO and CFO of Monarch Private Capital.
• Ben Rubin, former CEO of Houseparty (acquired by Epic Games), joined Benchmark as an entrepreneur-in-residence.
• Amy Saper, a former product marketing lead at Stripe, joined Accel to make early-stage investments. http://axios.link/osyk
• Gayatri Sarkar joined Hype Capital, an Israeli VC firm focused on sports-tech, as a U.S.-based partner. She previously was a venture partner with NextGen Venture Partners. http://axios.link/DItF
• David Stewart joined LiveOak Venture Partners as a venture partner. He previously was an entrepreneur-in-residence with Trinity Ventures and, before that COO of startup Turo. www.liveoakvp.com
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