Axios Pro Rata

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May 31, 2019

Top of the Morning

Illustration: Rebecca Zisser/Axios

Two big developments in the T-Mobile US/Sprint saga:

  • The companies reportedly are considering wireless spectrum divestitures, in order to gain Department of Justice approval for their mega-merger.
    • Bloomberg suggests they could sell it back to the government, which could then sell it to help establish a fourth national carrier (thus arguably negating some the merger's value proposition of cutting the number of national carriers to three).
    • At some point, T Mobile CEO John Legere will need to answer for this tweet. Best-case defense is ignorance, which still isn't too great for a big company CEO. Worst-case is materially misleading.
  • Amazon has interest in buying Boost Mobile, the prepaid telecom brand that T-Mobile US and Sprint have already agreed to divest, per Reuters.
    • Earlier reports were that Boost could fetch upwards of $3 billion, and the new story says Amazon could also seek to buy any divested spectrum.
    • It's become difficult to judge when Amazon has very serious interest in new business assets like these, and when it's just kicking the tires for the primary sake of gaining knowledge.

• Trade wars: Axios Jonathan Swan has a behind-the-scenes look at last night's threatened tariffs on Mexican goods:

It was an administration-wide scramble. As with many presidential 'announcements,' this once sprang from intense frustration and boiled over quickly with staff rushing to react.

• Uber went public three weeks ago today, and yesterday had its first earnings report as a public company.

  • $3.1 billion in revenue and a $1.01 billion net loss for Q1 2019. Both were in line with what the company had estimated earlier this month, but shares rose around 3% — suggesting either that certain investors didn't quite trust the company's prognostication.
  • Some analysts seemed excited by Uber's argument that its ride-hail pricing war with Lyft was beginning to recede, with the companies instead planning to compete more on "brand." Even taking that argument at face value, it seems a bit softened by the fact that Uber still must compete on price with privately-held, cash-burning companies like DoorDash in the food delivery space (which Uber suggests could someday be bigger than ride-hail).
  • If you're in Uber, it should be as a long-term play based on the belief that unit economics will eventually mature into a standing position. Not as a quarter-to-quarter "earnings" story.

• Recommended read: BuzzFeed digs into the money behind certain facial recognition technologies that have been used by the Chinese government in its detention of over 1 million Uighur Muslims. It's worthy of your time, and raises all sorts of sticky ethical and practical questions for U.S. venture capital and private equity investors (including limited partners). My plan is to discuss it more in depth next week, so email me your thoughts in the interim.

🎧 Pro Rata Podcast digs into how Russian Internet trolls seek to undermine American institutions by spreading disinformation. Not just about politics, but also about healthcare and technology. It was a major point made by Robert Mueller in his public statement, but one that got overshadowed by impeachment talk. Listen here.


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Aramark (NYSE: ARMK), the Philadelphia-based food services giant, may be the target of a leveraged buyout offer led by Mantle Ridge, per Reuters. Aramark shares spiked on the report, giving it a market cap of $8.6 billion and an enterprise value of $15.6 billion.

  • Why it's the BFD: Because it's hard to see how the math works. Did you catch the delta between market cap and enterprise value? Aramark is already a highly-levered company, and Mantle Ridge reportedly is already speaking with lenders and leveraged buyout firms for financing help (no, we have no clue how much capital Mantle Ridge, founded by a former Bill Ackman protégé, has under management).
  • Context: When Aramark last agreed to be taken private in 2006, the $8.3 billion deal value only included $2 billion of assumed debt.
  • Bottom line: "It was not clear if Mantle Ridge has already amassed a stake in Aramark. If the firm does build a stake, it could benefit if its bid does not prevail but another party buys the company." — Greg Roumeliotis, Reuters

Venture Capital Deals

BlueVoyant, a New York-based cyber threat intelligence startup, raised $82.5 million in Series B funding from backers like Fiserv at a valuation north of $430 million.

• Firefly, a startup that lets ride-hail drivers make money from advertising, raised $30 million in Series A funding. GV led, and was joined by NFX.

Swimlane, a Denver-based SOAR vendor, raised $23 million in Series B funding from Energy Impact Partners.

🚑 Pi Therapeutics, an Israeli developer of modulators of protein degradation for cancer , raised $19.7 million in Series B funding. Pontifax led, and was joined by Quark Venture, GF Securities, Arkin Bio Ventures, CBG and RMGP.

Legwork, a Wenatchee, Wash.-based provider of patient engagement and marketing software for dental practices, raised $17 million from Level Equity.

Weights & Biases, a San Francisco-based maker of development tools for machine learning, raised $15 million in second-round funding led by Coatue Management.

BabbleLabs, a San Jose, Calif.-based speech recognition and analytics startup focused on noise and complex environments, raised $14 million in Series A funding co-led by Dell Technologies Capital and Intel Capital.

BigTime Software, a Chicago-based provider of cloud software for professional services firms, raised $14 million. Wavecrest Growth Partners led, and was joined by MassMutual Ventures and Migration Capital.

Abacus Insights, a New York-based healthcare data integration startup, raised $12.7 million in Series A funding. CRV led, and was joined by .406 Ventures and Echo Health Ventures.

ExtraChef, a New York-based provider of restaurant management cloud software, raised $7.5 million in Series A funding. MVP Capital Partners led, and was joined by return backers ValueStream Ventures and Laconia Capital Group.

Pillar, a student loan management and repayment app, raised $5.5 million in seed funding led by Kleiner Perkins.

Soda Says, a curated consumer electronics marketplace, raised $2.5 million led by LocalGlobe.

Private Equity Deals

🚑 CORA Health Services, an outpatient physical therapy company owned by Gryphon Investors, acquired Elite Physical Therapy of St. Louis.

Frontier Communications (Nasdaq: FTR) has agreed to sell its operations in Washington, Oregon, Idaho and Montana for $1.35 billion to WaveDivision Capital and Searchlight Capital Partners.

Gen Cap America agreed to buy Mayflower Sales, a Brooklyn-based distributor of physical security and storefront hardware products.

GoodWest Industries, a Warminster, Penn.-based portfolio company of Palladium Equity Partners, acquired Jordan’s Skinny Mixes, a Clearwater, Fla.-based provider of low-calorie coffee syrups, whipped toppings and beverage mixes.

Public Offerings

🚑 Adaptive Biotech, a Seattle-based developer of immuno-sequencing diagnostics, filed for a $230 million IPO. It plans to trade on the Nasdaq (ADPT) with Goldman Sachs as lead underwriter, and reports a $46 million net loss on $56 million in revenue for 2018. The company had raised over $400 million in VC funding from firms like Viking Global (36% pre-IPO stake), Matrix Capital Management (16.4%), Celgene, Foresite Capital, Casdin Capita,, Tiger Global Management, Alexandria Venture Investments, LabCorp and Tower Equity.

Cambrium Networks, a Rolling Meadows, Ill.-based provider of wireless broadband networking infrastructure, filed for a $75 million IPO. It plans to trade on the Nasdaq (CMBM) with J.P. Morgan as lead underwriter, and reports a $1.5 million net loss on $242 million in revenue for 2018. The company is owned by Vector Capital.

Linx, a Brazilian provider of business management SaaS to Latin American retailers, filed for a $100 million IPO. It plans to trade on the NYSE (LINX) with Goldman Sachs as lead underwriter, and reports $18 million of net income on $176 million in revenue for 2018.

🚑 Morphic Therapeutics, a Waltham, Mass.-based developer of integrin therapeutics, filed for an $86 million IPO. It plans to trade on the Nasdaq (MORF) with Jefferies as lead underwriter, and reports $9 million in collaboration revenue for its most recent fiscal year. The company has raised nearly $140 million in VC funding from firms like Omega Funds, Novo Holdings, Invus, Pfizer, Polaris Partners, S.R. One and EcoR1 Capital.

More M&A

Amazon has interest in buying Boost Mobile, the prepaid telecom brand that T-Mobile US and Sprint have agreed to divest in order to gain regulatory approval for their mega-merger, per Reuters. The price-tag could be around $3 billion.

American Tower (NYSE: AMT) agreed to buy Africa-focused mobile tower owner Eaton Towers for around $1.85 billion (including debt).

Gannett Co. (NYSE: GCI) has held merger talks with rival newspaper publisher GateHouse Media (NYSE: NEWM), per the WSJ.


Northwestern Mutual has committed $150 million to its second VC fund focused on fintech and insurance startups.

Temasek formed ABC World Asia, a new private equity platform focused on impact investing in Southeast Asia.

It's Personnel

Don Gogel at year-end will step down as CEO of Clayton, Dubilier & Rice, 21 years after assuming the role and 30 years after first joining the buyout firm. He will continue to serve as chairman. His successor will be Nate Sleeper, while David Novak and Rick Schnall will be promoted to co-presidents.

PV Wang joined Legend Capital as COO. He previously was co-CIO of Chinese wealth manager Noah Holdings.

Final Numbers

Source: Preqin presentation at SuperReturns China from last month.

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