Feb 14, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Illustration: Rebecca Zisser / Axios 

Broadcom CEO Hock Tan today will sit across the table from Qualcomm CEO Steven Mollenkopf, and offer him a $121 billion Valentine's Day gift. And Mollenkopf will smile politely, before uttering the phrase that has broken a million hearts: "That's all you got me?"

  • Broadcom is standing firm on $82 per share being its "best and final offer," and already has included a record $8 billion regulatory reverse termination fee, so it's unclear what other sweeteners Tan might suggest.
  • One possibility is that Tan will go the tough love route, telling Qualcomm that its stock sagged in a bull market due to mismanagement. Moreover, he might echo an argument made in Morning Consult by former FTC policy director David Balto, which is that antitrust regulators will jump at the chance to approve a deal that changes management at one of its perpetual problem children.
  • That said, Tan may be a tad too confident on the regulatory front. Here's what he said to CNBC earlier this week: "I’m a pretty frugal guy. You think I’d put up $8 billion if I thought there was any chance that [regulatory opposition] would happen?” Perhaps he should place a call to AT&T CEO Randall Stephenson, who felt similarly about his 2011 deal for T-Mobile USA (which resulted in a $4 billion payout).
  • Much of the discussion may center on NXP, the Dutch chipmaker that Qualcomm previously agreed to buy for $47 billion. Broadcom wants Qualcomm to finish the deal at that price or walk away. The latter is a more viable option, given that NXP shareholders want more and tax reform removes Qualcomm's incentive to buy a foreign company. But Qualcomm also could up its NXP offer by just a little bit, thus effectively poisoning Broadcom's bid.
  • KKR and CVC Capital Partners recently agreed to join the $6 billion convertible debt portion of Broadcom's $100 billion financing package for Qualcomm, alongside existing Broadcom backer Silver Lake. It's notable not because of the outlay, per se, but rather because both KKR and CVC are now parties to a hostile takeover attempt — something big buyout firms have studiously avoided for more than a decade. The argument this is "management friendly" because they're partnered with Tan is too cute by half.

Direct raise: Norwest Venture Partners today said it has closed its 14th fund with $1.5 billion, up from the $1.2 billion it raised in 2016. Same diversified strategy (including growth equity) and same capital source (all third-party LP commitments from Wells Fargo).

  • NVP managing partner Jeff Crowe, who led the firm's 2015 investment into Spotify, on direct listings:
"I think it’s only appropriate in a specific set of circumstances. You’re not raising any capital, so you either need to be generating cash or have enough already raised. You also aren’t going to have the investment banks bearing the drums nearly to the extent they usually would, so the company has to already have an awful lot of visibility and awareness. Those aren’t issues for a company like Spotify, but they do knock a whole lot of companies out."

• Top talker, via WSJ: Did someone fix the VIX?

Academia: Two new papers — one from researchers at the National Bureau of Economic Research, the other from Stanford/University of Cambridge — conclude that insider trading is alive and well. More from The Economist:

"The papers make imaginative use of pattern analysis from data to find that insider trading is probably pervasive. The approach reflects a new way of analysing conduct in the financial markets. It also raises questions about how to treat behaviour if it is systemic rather than limited to the occasional rogue trader."
The BFD
Source: Giphy

The Blackstone Group yesterday said that real estate investment chief Jon Gray will assume day-to-day management of the firm, becoming its president and COO. He succeeds Tony James, who will transition to an executive vice chairman role and continue his outside efforts to shore up American retirement plans.

  • Why it's the BFD: Because this solidifies Gray as Blackstone's CEO-in-waiting. But it could be a long wait, as birthday boy Steve Schwarzman has given no indication that he wants to spent more time in St. Tropez than in Manhattan.
  • Bottom line: "Blackstone’s marathon to win the president role has shaken out a dealmaker modest in public but whose track record is commanding of one’s attention. Under Gray, Blackstone’s real estate business became the largest owner of property globally, accounting for half of the firm’s pretax profit last year." — Melissa Mittelman, Bloomberg
Venture Capital Deals

Duetto, a San Francisco-based revenue strategy platform, has raised $80 million in Series D funding. Warburg Pincus led, and was joined by return backers Icon Ventures, Accel, Battery Ventures and Spectrum 28.

Varsity Tutors, a St. Louis-based platform that connects students and professionals with personalized instruction, has raised $50 million in Series C funding. Learn Capital led, and was joined by the Chan Zuckerberg Initiative and return backer TCV. www.varsitytutors.com

HackerRank, a coding skills-based recruiting platform, has raised $30 million in Series C funding. JMI Equity led, and was joined by return backers Khosla Ventures, Battery Ventures, Randstad and Chartline Capital Partners. http://axios.link/yZNz

Tipalti, an Israel and San Mateo, Calif.-based provider of payments automation solutions, has raised $30 million in Series C funding led by Zeev Ventures. http://axios.link/bvUl

Homesnap, a Rockville, Md.-based real estate intelligence platform, has raised $14 million in Series B funding. Updata Partners led, and was joined by Moderne Ventures. http://axios.link/3bXA

NGD Systems, an Irvine, Calif.-based computational storage startup, has raised $12.4 million in Series B funding. Partech Ventures led, and was joined by Orange Digital Ventures and return backers Alcor Micro and Benhamou Global Ventures. The company also secured a $4 million credit facility from SVB. www.ngdsystems.com

Adikteev, a French ad-tech startup, has raised $12 million in new funding. Ring Capital and BNP Paribas co-led, and were joined by return backers ISAI and Ventech. http://axios.link/7lVa

🚑 Encardia Wellness, a San Francisco-based provider of provider of workplace health and wellness services, has raised $10 million from unidentified investors. www.encardiawellness.com

IdentityMind Global, a Palo Alto, Calif.-based digital identity startup, has raised $10 million in Series C funding. Benhamou Global Ventures and Eastern Link Capital co-led, and were joined by Hanna Ventures, Overstock.com, and Zanadu Capital Partners. www.identitymind.com

Loopio, a Toronto-based provider of RFP response solutions, has raised US$9 million in Series A funding led by OpenView Venture Partners. http://axios.link/Gl15

Overtime, a digital media startup focused on high school sports, has raised $9.5 million in Series A funding. Andreessen Horowitz led, and was joined by Greycroft, Afore Capital, Box Group, TACK Ventures, Fitz Gate Ventures, Imagination Capital, 645 Ventures, Kevin Durant and David Stern. http://axios.link/RprC

Stealth Security, a Mountain View, Calif.-based cybersecurity startup focused on protecting against bots, has raised $8 million in Series A funding led by Shasta Ventures. http://axios.link/7qPq

• Losant, a Cincinnati-based enterprise IoT platform, has raised $5.2 million in Series A funding. CincyTech led, and was joined by Rise of the Rest, TechNexus and Vine Street Ventures. www.losant.com

Mumzworld, an online retailer for mothers, babies and children in the MENA region, has raised an undisclosed amount from Wamda Capital, Swicorp, Tamer Group, Precinct Partners, WSB Holdings, Riverbank Technologies and Saned. http://axios.link/2pAX

🚑 Signallamp Health, a Scranton, Penn.-based provider of remotely-embedded nurse care managers, has raised an undisclosed amount of Series A funding from Sopris Capital. www.signallamphealth.com

Private Equity Deals

Accel-KKR has acquired a majority stake in FastSpring, a Santa Barbara, Calif.-based subscription platform for digital commerce. www.fastspring.com

Bridgepoint has acquired Safety Technology Holdings, a Plymouth, Mich.-based maker of crash-test dummies and other safety test equipment, from Golden Gate Capital. http://axios.link/X4Pd

JD.com (Nasdaq: JD) has agreed to sell a $2.5 billion stake in its logistics unit to an investor group that includes Hillhouse Capital, Tencent, China Merchants Group, Sequoia Capital China and China Life. http://axios.link/DtE2

Public Offerings

Baidu (Nasdaq: BIDU) said that it has submitted a "draft registration" for an IPO of video streaming unit iQiyi, a Netflix-style service in China that could be valued at upwards of $10 billion. http://axios.link/Aidv

Farfetch, a London-based online luxury fashion marketplace is about to begin interviewing IPO bankers, per CNBC. The company has raised around $360 million in VC funding from firms like Index Ventures and JD.com. http://axios.link/Mx8H

Liquidity Events

🚑 Charles River Labs (NYSE: CRL) has agreed to buy MPI Research, a Mattawan, Mich.-based contract research organization, from Avista Capital Partners for around $800 million in cash. http://axios.link/JkzQ

🚑 Fitbit (NYSE: FIT) has agreed to buy Twine Health, a Boston-based startup that helps people manage chronic diseases such as diabetes and hypertension. Twine had raised over $8 million in VC funding from firms like Qiming Venture Partners, Khosla Ventures, Provenance Venture Forum, Tower Capital Partners, Neoteny Labs and Raptor Group. http://axios.link/rKVu

KKR is in talks to sell MMI, a Singapore-based maker of hard-drive components, to a Chinese investor group for around $700 million (including $400m of debt), per Bloomberg. KKR first bought MMI 11 years ago. http://axios.link/JUxl

More M&A

⚽ Dalian Wanda Group has sold a 17% stake in Spanish soccer club Atletico Madrid to Israeli billionaire Idan Oferr. http://axios.link/lVLc

Danone (Paris: DANO) says that it plans to sell a $1.9 billion position (14% stake) in Japanese yogurt maker Yakult (Tokyo: 2267). http://axios.link/ZfUW

🚑 Harbin Pharmaceutical Group, a state-owned Chinese drugmaker, has agreed to acquire around a 40% stake in GNC Holdings (NYSE: GNC) for $300 million. http://axios.link/e4QB

Kemper Corp. (NYSE: KMPR) has agreed to acquire rival insurer Infinity Property and Casualty Corp. (Nasdaq: IPCC) for around $1.3 billion in cash and stock, or around $121 per share (26% premium to Monday’s closing price). http://axios.link/rLtH

Thyssenkrupp of Germany yesterday denied market rumors that it is in talks to sell its elevator business to Finland’s Kone. http://axios.link/yPXx

Fundraising

Hillhouse Capital, a Chinese buyout firm, is raising up to $6 billion for its next flagship fund, per Bloomberg. http://axios.link/TgSX

True Wealth Ventures, an Austin, Texas-based firm focused on women-led startups, has closed its debut fund with $19.1 million in capital commitments. www.truewealthvc.com

It's Personnel

Michael Cho has stepped down as CEO of Hong Kong-listed private equity firm ZZ Capital, “owing to relocation due to illness in the family.” http://axios.link/Rhnt

Robin Fleming, former SVP of tech for Angie’s List, has joined Indianapolis venture studio High Alpha as an entrepreneur-in-residence. www.highalpha.com

Wallace Henderson and Sebastien Sherman have joined Blackstone Infrastructure Partners as senior managing directors. Henderson (ex-EIG Global Energy Partners) will lead midstream infrastructure investments, while Sherman (ex-OMERS Infrastructure) will oversee the utility, renewables and transportation sectors. www.blackstone.com

Norwest Venture Partners has promoted growth equity head Jon Kossow to managing partner. It also promoted Lisa Wu, who focuses on consumer Internet investments, to partner. www.nvp.com

Final Numbers
Via KKR report on aging's impact on investments. Data as at June 23, 2017. Source: United Nations, Haver Analytics.
Dan Primack