Sep 7, 2017

Axios Pro Rata

Top of the Morning

When new Uber CEO Dara Khosrowshahi last week told the troops not to expect an IPO until at least 18 months from now, it sparked an interesting question: Should Lyft accelerate its own IPO plans, in order to gain a first-mover advantage?

  • The argument here seems to be one of creative destruction. A publicly-traded Lyft could effectively reset Uber's private valuation, thus causing cap table chaos, more board disputes, unhappy employees, etc. Even if it doesn't raise again privately, the public comp could delay Uber's own IPO (i.e., make it wait to grow into its private valuation). Plus, Lyft wouldn't have to go public in the shadow of Uber's much larger numbers (at least not fully-audited ones).
  • A partial comp on that latter point might be Box going out before Dropbox (hey Drew, we're still waiting!). Had the larger Dropbox gone out first and then traded poorly, then it might have made it harder for Box to price. Box going early also let it better dictate its own narrative.
  • But... None of this is terribly compelling. Not even to folks close to Box and Dropbox, who I asked about the Lyft/Uber situation. They all feel that, once both companies are eventually public, the "who went first" issue becomes largely meaningless.
  • Note that this is pure game theory. A Lyft source tells me: "I'm not sure their plans should influence ours — it's not the way we're thinking about it for sure."

• Because nothing matters: The markets were up yesterday, apparently not realizing that President Trump's debt limit deal with the Dems made tax reform (or even vanilla tax cuts) much less likely to pass in 2017.

  • More tax talk: Paul Ryan this morning told the NY Times that "an achievable goal" would be to have a corporate rate in the low-to-mid 20% range, while Axios' Jonathan Swan reports that the House Freedom Caucus wants 16% (which is closer to Trump's 15% ask).
  • Market maker: Remember when the markets briefly sank a few weeks back on rumors that Gary Cohn would resign as White House economic advisor? There was an argument that traders weren't so much concerned about Cohn's departure affecting tax reform, so much as they were about him losing his place in the Fed succession line. But it seems to have really been about taxes, as Trump reportedly has soured on Cohn for Fed chair.

• Growth game: Apax Partners has secured $1 billion in LP commitments for its debut growth equity fund, as first reported by the FT. A source says that the fundraise launched in January with an $800 million target and $1 billion hard cap — not including the GP commit, which will be added on top — with Apax opting for a single close. The group is led by Dan O'Keefe, a onetime Apax associate who rejoined last fall after having been a partner with TCV, and longtime Apax partner Marcelo Gigliani.

• Binary background: A source says that limited partners in Binary Capital's first fund have voted to remove the current general partner, which basically means remaining co-founder Jonathan Teo (who was at Burning Man when the notice was sent). It's unclear who would manage the fund portfolio going forward, or what the timeline is for such a transfer of responsibilities.

For his part, Teo is working on some sort of crypto investment effort (perhaps related to this), but he stressed to me via text that it's not a fund. Instead, he writes, in part:

"The idea of a fund is very antiquated to me if we are facilitating a new world of access instead of the old world of ownership. The models that have allowed funds to propagate a system of accumulation and expand the ever-widening inequality gap is going to give way to new models of governance and cooperative states. Crypto is just one tool in this shift. There are others. And we have a coordinated effort with some of the best people I know to bring about this shift. I'm tired of seeing human beings turned into widget makers instead of being liberated to fulfill our creative purpose."


Toys "R" Us has hired law firm Kirkland & Ellis to work through debt restructuring options that could possibly include a bankruptcy filing, according to multiple media reports. This comes just a couple of months after the specialty retailer disclosed that it had retained Lazard to work on its balance sheet, which includes around $5.05 billion of long-term debt ($400m of which comes due next year). Toys "R" Us is owned by private equity firms Bain Capital and KKR, which took the company private in 2005 for around $6.6 billion (not including debt assumption).

  • Why it's the BFD: An under-reported story from the financial crisis was the relative paucity of large leveraged buyouts that went bust, despite the glut of overpriced take-privates that occurred between 2005 and 2008. But Toys "R" Us might serve as a contradictory coda.
  • Flashback: I interviewed Toys "R" Us CEO Dave Brandon — who has past experience leading PE-backed companies, such as Domino's — at a Fortune conference in July 2016, and asked if the original buyout was a mistake (video here, skip to 14:40). His reply, in part: "I don't think I'm in a real good mood to talk about mistakes my bosses made.... I'm sure they had growth prospects in mind that were steeper than what we've experienced. Typically private equity funds do not want to carry investments for 10, 11, 12 years, so I think it's safe to say that the time horizon of this investment from an IRR standpoint has stretched beyond their original plan."
Venture Capital Deals

🚑 Wuxi NextCode, a Chinese contract genomics company, has raised $165 million in new Series B funding (bringing the round total to $240 million). Sequoia Capital China led the round extension, and was joined by existing backers Temasek, Yunfeng Capital and 3W Partners.

🚑 Gritstone Oncology, an Emeryville, Calif.-based personalized cancer immunotherapy startup, has raised $92.7 million in Series B funding. Lilly Asia Ventures led the round, and was joined by GV, Trinitas Capital, Alexandria Venture Investments and return backers Versant Ventures, The Column Group, Clarus Funds and Frazier Healthcare Partners.

• Innoviz Technologies, an Israeli developer of LiDAR technologies, has raised $65 million in Series B funding. New investors include Delphi Automotive, Magna International, 360 Capital Partners, Naver and Glory Ventures.

• Roobo, a Chinese developer of home service robots, has raised around $53 million in Series B funding led by Seven Seas Partners.

• Y123, a Chinese women's clothing rental startup (i.e., China's Rent the Runway), has raised $50 million in Series C funding. Backers include Alibaba Innovation Ventures, Softbank China, Sequoia Capital China, IDG Capital, GSR Ventures and Zhen Fund.

• FiveAi, a UK-based developer of a self-driving taxi fleet, has raised £26.8 million in Series A funding. Lakestar Capital led the round, and was joined by seed backers Amadeus Capital Partners, Notion Capital and Kindred.

• Truveris, a provider of cloud-based data analytics for the prescription benefits markets, has raised $25 million in Series D funding. McKesson Ventures led the round, and was joined by Canaan Partners, New Leaf Venture Partners, Tribeca Venture Partners and New Atlantic Ventures.

• ZipWhip, a Seattle-based service whereby businesses can send and receive text messages via landlines, has raised $22.5 million in Series C funding. OpenView Venture Partners led the round, and was joined by return backers Voyager Capital and Microsoft Ventures.

• Weave Communications, a Lehi, Utah-based unified patient communication technology platform, has raised $17 million in Series B-1 funding. Catalyst Investors led the round, and was joined by return backers Crosslink Capital and Pelion Venture Partners.

• Elastifile, a San Jose, Calif.-based provider of enterprise storage solutions, has raised $16 million in new VC funding led by Western Digital. Existing backers include Battery Ventures and Lightspeed Venture Partners.

🚑 Shanghai Sanyou Medical, a Chinese developer of orthopedic implants, has raised around $14 million from Yingke Private Equity.

🚑 Excision BioTherapeutics, a Philadelphia-based startup that is working on a CRISPER-based HIV treatment, has raised $10 million in seed funding led by Artis Ventures.

🚑 Notable Labs, a San Francisco-based provider of oncology drug testing services, has raised $10 million in Series A funding led by Builders VC.

• Shunwei, a Chinese provider of indoor positioning services, has raised around $7.7 million in Series A funding led by Fosun RZ Capital.

• DivvyCloud, an Arlington, Va.-based provider of cloud infrastructure automation and management solutions, has raised $6 million in Series A funding led by RTP Ventures.

• Axonius, an Israeli enterprise IoT security and management startup, has raised $4 million in seed funding. YL Ventures led the round, and was joined by Emerge Capital and Vertex Ventures.

Private Equity Deals

• Ardian and Caisse de depot et Placement du Quebec have entered into exclusive talks to acquire a stake in Alvest, a French airport ground support services company, from Sagard Private Equity Partners.

• Bain Capital has completed its previously-announced purchase of Diversey Care, the cleaning and chemicals systems unit of Sealed Air Corp. (NYSE: SEE), for $3.2 billion.

⛽ Brigade Energy Services, a Denver-based portfolio company of Turnbridge Capital Partners, has acquired the well servicing unit of GlobeLTR Energy, a Snyder, Texas-based portfolio company of Clearlake Capital Group. No financial terms were disclosed.

• FountainVest Partners has agreed to acquire Bosch Mahle Turbo Systems, a turbochager joint venture of The Bosch Group and the MAHLE Group. No financial terms were disclosed.

• Francisco Partners has acquired NMI, a Roselle, Ill.-based provider of payments enablement technology, from Great Hill Partners (which will retain an equity stake). No financial terms were disclosed.

• Intermedia, a Mountain View, Calif.-based cloud business applications company owned by Madison Dearborn Partners, has acquired substantially all the assets of AnyMeeting, an Irvine, Calif.-based provider of web and video conferencing solutions. No financial terms were disclosed.

⛽ OneCor Services (d.b.a. Jerry's Services), a Williston, N.D.-based provider of environmental services and acid blending to the oil and gas industry, has secured an undisclosed amount of private equity funding from Ranch Creek Partners and Hillstar Capital. True West Capital Partners also participated with both equity and debt capital.

🚑 Resilience Capital Partners has acquired three medical device service and manufacturing businesses that will be merged under a new platform called Innovatus Imaging Corp. They are: Bayer Radiology's multi-vendor services unit, Westco Inc. and MD MedTech. No financial terms were disclosed. Resilience also announced an agreement to purchase the European operations of Pittsburgh's MVS (Netherlands).

• Rhone Capital is in talks to acquire a 75% stake in Santillana, a Spanish educational publisher, from Spanish media company Prisa for around €1.4 billion.

• Tower Three Partners has acquired Parterre Flooring & Surface Systems, a Wilmington, Mass.-based designer and marketer of commercial luxury vinyl tile and plank products. No financial terms were disclosed, except that Monroe Capital arranged debt financing.

• Vista Equity Partners has completed its previously-announced sale of the communities and sports divisions of Active Network to Global Payments (NYSE: GPN), for approximately $1.2 billion in cash and stock (50/50 split). Vista will retain Active's outdoor division.

Public Offerings

• Best, a Chinese logistics company backed by Alibaba Group, has set its IPO terms to 62.1 million shares being offered at between $13 and $15. It would have a fully-diluted market cap of around $5.6 billion, were it to price in the middle of its range. The company plans to list on the NYSE under ticker symbol BSTI with Citigroup listed as left-lead underwriter. Alibaba holds a 23.4% pre-IPO stake, while IDG-Accel China has a 6.2% position.

• Loma Negra, an Argentine cement producer, has filed for a $100 million IPO. It plans to trade on the NYSE and the BYMA under ticker symbol LOMA, with BofA Merrill Lynch listed as left lead underwriter.

Liquidity Events

• Deere & Co. (NYSE: DE) has agreed to acquire Blue River Technology, a Sunnyvale, Calif.-based provider of "see and spray" robots that attach to tractors, for $305 million. Blue River has raised around $30 million in VC funding from backers like Data Collective, Pontifax AgTech, Khosla Ventures, Innovation Endeavors and Monsanto.

• Littlejohn & Co. has agreed to sell Newgistics, an Austin, Texas-based provider of parcel logistics to the e-commerce and direct-to-consumer retail industry, to Pitney Bowes (NYSE: PBI) for approximately $475 million.

More M&A

• Eicher Motors of India is preparing to make a bid of between $1.8 billion and $2 billion for Italian motorcycle maker Ducati, which is currently owned by Volkswagen, according to The Economic Times.

• Nestle has agreed to buy Sweet Earth, a Moss Landing, Calif.-based maker of meatless frozen foods. No financial terms were disclosed.

• Rxbar, a Chicago-based protein bar maker, has hired Piper Jaffray to explore a possible sale of the company, according to the WSJ. Rxbar reportedly generated around $7 million of EBITDA in 2016 and is on track to more than double that in 2017.

• Unilever has acquired Pukka, a British maker of organic herbal teas. No financial terms were disclosed.

It's Personnel

• Joseph Lloyd has joined the Trivedi Family Office as director of investments. He previously was a VP with BlackRock.

• Chris Puscasiu has joined San Francisco-based buyout firm Presidio Investors as co-managing partner. He previously was co-head of direct private equity for Caisse de depot et placement du Quebec.

• Kendra Ragatz has joined Aspect Ventures as a general partner and COO. She previously was a venture partner with DAG Ventures.

• The Teachers' Retirement System of Texas has promoted Jase Auby to deputy chief investment officer.

• Nate Williams has joined Kleiner Perkins Caufield & Byers as an entrepreneur-in-residence, per his LinkedIn profile. He previously was chief revenue officer for August Home.

In Memoriam

Bob Segal, a Boston private equity fixture for the past 25 years, passed away unexpectedly yesterday morning.

Bob had been managing director of Park Street Capital, a private equity fund-of-funds manager with $3.2 billion in assets under management. He had co-founded the firm's predecessor organization in 1997 as a joint venture with Tucker Anthony, which Segal had originally joined in 1972. Below is a note Park Street Capital sent out to firm investors and friends:

It is with profound sorrow we announce the unexpected passing of our long-time leader and friend Robert ("Bob") Segal earlier today. Bob was instrumental in the growth and success of Park Street Capital and those who were fortunate to work with him will remember his unwavering commitment to the firm and its clients. Bob approached every opportunity and every challenge with passion and vigor, and held himself and Park Street Capital to the highest standards. We will deeply miss his wisdom, his wit and his friendship.

Final Numbers