Apr 30, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Sunrise greetings from Los Angeles, where I'm in town for the Milken Global Conference. Here we go...

Top of the Morning
Illustration: Sarah Grillo / Axios

Merger Monday is back with a vengeance, even if some of it was actually announced on Sunday. Here's the rundown:

  • T-Mobile and Sprint agreed to a $26 billion tie-up, which would create America's second-largest wireless carrier (leapfrogging Verizon, still behind AT&T).
  • Marathon Petroleum agreed to buy Andeavor for $23.3 billion, which would create the largest U.S. oil refiner by capacity (overtaking Valero Energy).
  • Marriott Vacations Worldwide agreed to buy ILG for $4.7 billion, which Bloomberg says creates "the largest luxury brand for timeshare vacation resorts."
  • Prologis agreed to acquire DCT Industrial Trust for $8.4 billion in stock, putting even more distance between Prologis and lesser rivals in the global warehouse and distribution center market (a market that's surging in the world of Amazon and broader e-commerce).
  • Sainsbury's agreed to merge with Walmart's Asda in a $10 billion tie-up that would create Britain's largest supermarket operator.

It's official: Healthcare hedge fund and venture capital titan Sam Isaly is done at OrbiMed. (Flashback: The story that took him down).

Cryptography: SEC Commissioner Robert Jackson this morning on CNBC concurred with SEC chair Jay Clayton, in saying he has yet to see an initial coin offering (ICO) that isn't a security.

  • He also talked about how IPO underwriting fees for mid-market companies have remained static at around 7% for the past three decades, although wouldn't bite when asked to agree that it was the result of Wall Street collusion.

On the docket: Closing arguments kick off today in the AT&T-Time Warner case.

  • Don't be surprised if AT&T made some last-minute edits to include the T-Mobile/Sprint merger. Different markets, but a similar pro-merger argument around how these companies are now competing with non-traditional players.
  • Axios' Kim Hart digs deeper into the interplay between the two mega-mergers.

Trade wars: President Trump has less than 24 hours to make a big decision on steel and aluminum tariffs for countries that got temporary exemptions, and Axios' Jonathan Swan reports that senior WH officials haven't reached consensus.

• Tumblr founder David Karp has a new job. Well, at least a part-time one. He's become a board advisor to Future Now, a left-leaning political advocacy group focused on midterm elections in state legislatures.

  • Per Future Now co-founder Adam Pritzker: "Our big challenges are how do you tell a compelling story around this agenda and how do you get that story upstream. That's the sort of thing that David understands better than anyone... He's really at the office a lot, helping us with ideas and even technical development for projects we're considering. Much more involved than I expected, and it's great for us."

Today's big number is 408. That's what the Dow would need to gain by market close for it to be break-even through the first four months of 2018 (it was up over 1,100 points for the first four months of 2017).

Source: Giphy

Let's do a bit more on T-Mobile and Sprint, albeit in a different format than usual. Three quick thoughts:

1. This is being called a merger, but it's really an acquisition. T-Mobile owner Deutsche Telekom gets more of the combined company than Sprint owner SoftBank, with DT being able to further consolidate its stake as time goes on. Plus, T-Mobile CEO John Legere will run the combined company which will be called... T-Mobile.

2. SoftBank didn't strike an earlier deal because it wanted more control, but waiting actually cost it more in that very area. Per a tweet from the FT's Sujeet Indap: "Painful consequence of Sprint waiting to sell now instead of in 2017: exchange ratio today of 0.10256x is 20% to 40% worse which is pure loss of Softbank ownership in NewCo."

3. If federal regulators (FCC, DoJ and CFIUS) don't challenge this deal, the AT&T braintrust is going to have a collective aneurysm. Either the competitive landscape has changed in terms of non-traditional entrants (i.e., DoJ shouldn't be suing on Time Warner) or it hasn't (i.e., FCC's concerns over AT&T-T-Mobile should stand).

Venture Capital Deals

Knowbox, a Chinese homework help platform for K-12, raised $100 million in Series C funding. Yunfeng Capital led and was joined by return backer TAL Education Group. http://axios.link/lcnH

🚑 Datavant, a Cleveland-based healthcare data company, raised $40.5 million in new funding co-led by Roivant Sciences and Travis May. It also acquired Universal Patient Key, a provider of HIPAA-compliant de-identification services for healthcare data. www.datavant.com

Minim, a Boston-based IoT platform for in-home cybersecurity, raised $2.5 million in seed funding co-led by Flybridge Capital Partners and Founder Collective. www.minim.co

Private Equity Deals

Baidu (Nasdaq: BIDU) has spun off its financial services arm via a $1.9 billion financing led by TPG Capital. Other participants included The Carlyle Group and Taikang Group. http://axios.link/WQxX

• CVC Capital Partners has expressed interest in buying Kanta, the data and market research unit of WPP (LSE: WPP) that could be valued at £3.5 billion, per the FT. http://axios.link/yiXY

H.I.G. Capital has agreed to acquire Elekeiroz, a listed Brazilian chemicals manufacturer, from Itaúsa.

Littlejohn & Co. has invested in Motion Recruitment Partners, a Boston-based recruitment firm. www.motionrp.com

Patricia Industries, owned by Investor AB, has acquired Swedish industrial automation company Piab Group for $802 million from EQT Partners. http://axios.link/px1F

Public Offerings

8 companies are expected to price IPOs on U.S. exchanges this week: Carbon Black, Construction Partners, PermRock Royalty Trust, Aslan Pharmaceuticals, Inspire Medical Systems, Unity Biotechnology, Baycom and Spirit of Texas Bancshares. http://axios.link/gUBS

🚑 Alzheon, a Framingham, Mass.-based developer of small-molecule therapies for Alzheimer's disease, withdrew registration for an $81 million IPO. The pre-revenue company raised around $27 million in VC funding from firms like Ally Bridge Group. http://axios.link/JydT

GreenSky, an Atlanta-based digital lending platform, filed for a $100 million IPO that Renaissance Capital estimates could ultimately raise $1 billion. It plans to trade under ticker GSKY, with Goldman Sachs leading. The company reports $139 million of net income on $326 million in revenue for 2017, and has raised over $600 million from firms like TPG Growth, Pimco, DST Global, ICONIQ Capital, QED Invewstors and Wellington Management. www.greenskycredit.com

🚑 Kiniksa Pharmaceutical, a Lexington, Mass.-based biotech company focused on inflammatory disease, filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker KNSA, with Goldman Sachs as lead underwriter. The pre-revenue company has raised $320 in VC funding from firms like Baker Brothers and Arrowpoint Funds. www.kiniska.com

🚑 Scholar Rock, a Cambridge, Mass.-based developer of drugs that target suprecellular activation of growth factors, filed for a $75 million IPO. It plans to trade on the Nasdaq under ticker SRRK, with Jefferies as lead underwriter. The company has raised around $100 million in VC funding from firms like Fidelity (14.94% pre-IPO stake), Polaris Partners (14.1%), Arch Venture Partners (13.82%), Astal International (10.2%) and EcoRI Capital (5.22%). www.scholarrock.com

More M&A

AccorHotels (Paris: ACCP) is buying Movenpick Hotels and Resorts from Kingdom Holdings for $567 million. http://axios.link/z4Qj

Amer Sports (Helsinki: AMEAS) has agreed to acquire Swedish sports apparel company Peak Performance from IC Group (Copenhagen: IC) for around €255 million. http://axios.link/NqIk

BlaBlaCar, a French carpooling platform, has agreed to acquire Less, a smaller rival that focuses on in-city rides. http://axios.link/JrQA

Boeing (NYSE: B) reportedly is in advanced talks to to acquire KLX (Nasdaq: KLXI), a Florida-based aerospace parts and services company valued north of $4 billion. http://axios.link/mwk5

⛽ ExxonMobil (NYSE: XOM) has agreed to acquire PT Federal Karyatama, an Indonesian motorcycle lubricant maker for $436 million from PT Mitra Pinasthika Mustika (KK: MPMX). http://axios.link/JbTP

Mothercare (LSE: MTC), a troubled British retailer focused on new mothers, has hired Rothschild to help it find outside financing, per The Telegraph. http://axios.link/W87q


Microsoft Ventures has rebranded as M12. www.m12.vc

Sky9 Capital has closed its third China-focused VC fund with $200 million. http://axios.link/hvKC

It's Personnel

Jonathan Faerber has quietly stepped down as CFO at Google Ventures, in order to take the same position with Section32 (the firm founded by ex-GV CEO Bill Maris).

Joel Holsinger has stepped down as a managing director with Fortress Investment Group, Axios has learned.

Final Numbers
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Data: Companies' end of 2017 SEC filings; Chart: Andrew Witherspoon/Axios
Dan Primack