Jun 6, 2018

Axios Pro Rata

Dan Primack

D.C. readers: Tomorrow's breakfast conversation is about how innovation is impacting the healthcare market. Agenda and RSVP here.

Top of the Morning
Illustration: Sarah Grillo / Axios

We now have even more reason to blame senior secured lenders to Toys "R" Us for the retailer's epic shutdown, with Bloomberg reporting that buyout firm Sycamore Partners held advanced talks to buy the company and keep half of its U.S. stores in business.

But: "The retailer’s senior creditors calculated they would see a better return if the company were liquidated and its assets sold off."

  • This still doesn't excuse the many mistakes made by private equity firms Bain Capital and KKR .
  • But thousands of jobs could have been saved if not for "B4 lender" intransigence. It's something we've discussed before, and it's only reinforced by the Sycamore revelation.
  • Final inventory, per Bloomberg: "Almost every company asset—cash flows, property, inventory, equity in the international operations—was pledged to a lender, sometimes twice. Toys "R” Us had nothing left to promise."
  • Flashbacks: The Toys "R" Us blame game, and why it wasn't a total loss for Bain and KKR.

New firm alert: Alphabet exec Scott Tierney is launching a new shop called Valo Ventures, with an SEC filing disclosing that he's already secured $175 million of what could be a $250 million debut fund.

  • Tierney was a co-founding partner of what was originally known as Google Capital (now CapitalG). He later moved on to lead strategy and corp dev for Google Fiber, and has spent the past year in a similar role for Nest Labs.
  • Word is that he'll remain with Alphabet for at least a little while longer, but neither Tierney nor an company spox returned requests for comment.

Candidate Schultz: Early last year I wrote that Donald Trump would test CEO President Theory, or the idea that biz leaders are better equipped than politicians to sit in the Oval Office. And the outcome, I argued, could prove "a double-edged sword for someone like Howard Schultz."

  • Schultz has clearly thought about this too, yesterday stressing a distinction that I didn't address: The fiduciary difference between running a public company (i.e., Starbucks) and a private one (i.e., Trump Org). If he runs in 2020, expect to hear a lot more about this.

Recommended read: The WSJ goes behind-the-scenes of the split between Facebook and the co-founders of WhatsApp, which remains the social network's largest-ever acquisition. Or, put another way, what would cause anyone to walk away from $1.3 billion? Worthy of your time.

The BFD
Source: Giphy

Seidler Equity Partners and Major League Baseball agreed to jointly buy Rawlings, a St. Louis-based sporting goods and equipment maker, from Newell Brands (NYSE: NWL) for $395 million.

  • Why it's the BFD: Because MLB is three years into a home run surge that many believe is enabled by juiced baseballs, which are made by Rawlings. MLB has said its testing shows no such alterations, but also has the rhetorical "out" that it isn't the manufacturer. This deal eliminates that arms-length plausible deniability.
  • Box score: Rawlings generated around $330 million in revenue last year. Newell acquired it via the $13 billion purchase of Jarden in 2016, and is divesting as part of a larger debt-reduction plan.
  • Bottom line: "Rawlings, which is credited with introducing the first football shoulder pads, traces its roots to a small store in St. Louis opened by brothers George and Alfred Rawlings. Its gloves have been worn by baseball greats like Roberto Clemente and Mickey Mantle. And Rawlings baseballs have been the official, and exclusive, game balls since 1977." — Maria Armental, WSJ
Venture Capital Deals

• Hellobike, a Chinese bike-sharing startup, raised around $321 million from Alibaba’s Ant Financial unit at a valuation just south of $1.5 billion. http://axios.link/UoBL

🚑 Science 37, a Playa Vista, Calif.-based developer of "site-less" clinical trials, is in talks to raise around $130 million in Series D funding from SoftBank at a $300 million pre-money valuation, per Recode. http://axios.link/dU78

Chezhibao, a Chinese used car auction platform, has raised $125 million in Series D funding. Green Harbor Investment led, and was joined by return backers PAG, Partners and Addor Capital. http://axios.link/W8oJ

Qumulo, a Seattle-based provider of scale-out storage solutions, raised $93 million in Series D funding. BlackRock Private Equity Partners led, and was joined by Goldman Sachs, Western Digital and return backers Highland Capital Partners, Kleiner Perkins, Madrona and Valhalla Partners. http://axios.link/HpLm

Ritual, an order-ahead meal app, raised $70 million. Georgian Partners led, and was joined by return backers Greylock, Insight Venture Partners and Mistral Venture Partners. http://axios.link/NOdq

Avi Networks, a developer of intent-based application services, raised $60 million from Cisco, DAG Ventures, Greylock Partners, Lightspeed Venture Partners and Menlo Ventures. www.avinetworks.com

🚑 Vetsource, a Portland, Ore.-based provider of veterinary practice management software, raised $50 million in Series D funding led by Bain Capital Ventures. http://axios.link/C5NS

Marqeta, an Oakland-based open API platform for prepaid debit and credit cards, raised $45 million in new funding. Iconiq Capital led, and was joined by Goldman Sachs and return backers. http://axios.link/62qL

🚑 Cytrellis Biosystems, a Woburn, Mass.-based developer of dermatologic aesthetic devices for the reduction of skin laxity, raised $28.5 million in Series B funding from Partner Fund Management, BioMatics Capital and return backers ARCH Venture Partners and the Merz Venture Initiative. www.cytrellis.com

OneLogin, a San Francisco-based unified access management startup, raised $22.5 million in Series C funding. Existing backers include CRV, Social Capital and Scale Venture Partners. http://axios.link/opEq

Caroobi, a Berlin-based platform that connects auto mechanics with consumers and parts suppliers, raised $20 million in Series B funding led by NGP Capital. http://axios.link/FQdm

Verity Studios, a Swiss developer of indoor drones, raised $18 million in Series A funding. Fontinalis Partners led, and was joined by Airbus Ventures, Sony Innovation Fund and Kitty Hawk. http://axios.link/ftuE

Hailo, an Israeli developer of deep learning chips for embedded devices, raised $12 million from OurCrowd, Maniv Mobility, Next Gear and individual angels. http://axios.link/cgiG

Panorays, an Israeli startup that automates third-party security management, raised $5 million led by Aleph. http://axios.link/Yh9F

• Packlane, a Louisville, Ky.-based custom packaging startup, raised $4 million in Series A funding from Breakout Capital and seed backer Draper Associates. www.packlane.com

MoloFinance, a London-based developer of “fully digital” mortgage solutions, raised £3.7 million in seed funding led by Ubon Partners. http://axios.link/eGCf

Private Equity Deals

🚑 The Blackstone Group and Royal Dutch Shell submitted a joint bid for BHP Billiton’s (ASX: BHP) U.S. shale portfolio, which could be valued at upwards of $9 billion, per Bloomberg. Other suitors include BP and Chevron, with others like Apollo Global Management bidding on smaller slices of the shale portfolio. http://axios.link/W5UF

Carousel Capital has sponsored a recap of Huseby, a Charlotte-based court reporting agency. www.huseby.com

Core Equity of Belgium has dropped its €1 billion takeover of Dutch retailer Hema from Lion Capital, with Reuters reporting a disagreement between Core Equity and Hema franchisees over e-commerce revenue splits. http://axios.link/Jllt

🚑 Global Infrastructure Partners has agreed to acquire stakes in EnLink Midstream Partners (NYSE: ENLK) and EnLink Midstream LLC (NYSE: ENLC) from Devon Energy (NYSE: DVN) for $3.13 billion. http://axios.link/jBzn

🚑 Recordati (Milan: RECI), an Italian drugmaker, is receiving buyout interest from Bain Capital and Cinven, according to Bloomberg. CVC Capital Partners recently suspended takeover talks due to pricing and regulatory concerns. http://axios.link/Vidv

The Jordan Co. has agreed to acquire GlobalTranz, a Scottsdale, Ariz.-based provider of freight management services for shippers. Sellers include Providence Strategic Growth, Susquehanna Growth Equity, Volition Capital and Savano Capital Partners. www.globaltranz.com

🐶 PetSmart is spinning off a 20% equity stake in Chewy, the e-commerce site it acquired for $3 billion last year, to PetSmart majority owner BC Partners. The move clears the way for a possible Chewy IPO. http://axios.link/I6TO

Sunlight Financial, a Teaneck, N.J.-based provider of residential solar system financing solutions, raised $50 million from FTV Capital. www.sunlightfinancial.com

TPG is acquiring a minority stake in the management company of NewQuest Capital Partners, a Hong Kong-based private equity secondaries firm. http://axios.link/PgRy

TZP Group has acquired Dwellworks, a Cleveland-based provider of relocation management solutions, from Summer Street Capital Partners. www.dwellworks.com

Vora Ventures has acquired ShakeDeal, an Indian B2B industrial bulk sourcing marketplace. www.shakedeal.com

Warburg Pincus is acquiring Self Bank, a UK-based online wealth management company, from a unit of Societe Generale.

Public Offerings

Cornerstone Management, a Chinese private equity firm, filed for a $70 million IPO. It plans to trade on the Nasdaq (CSCA), with ViewTrade as sole underwriter.

🚑 ElectroCore, a Baskin Ridge, N.J.-based maker of non-invasive nerve stimulation devices for treating migraines, set IPO terms to 4.3 million shares at $14-$16. It would have a fully diluted market value of $419 million, were it to price in the middle. The company plans to trade on the Nasdaq (ECOR) with Piper Jaffray as lead underwriter. Shareholders include Core Ventures and Merck Global Health Innovation Fund. www.electrocore.com

Marley Spoon, a Berlin-based meal kit company that operates globally, has filed for an Australian IPO that could give it a market cap of around US$152 million. It has raised over $40 million from firms like Quasar Discovery Ventures, Lakestar, Kreos Capital, WestTech Ventures and TA Ventures. http://axios.link/Fx7F

More M&A

Bungie, a Bellevue, Wash.-based gaming company, has raised $100 million from NetEase (Nasdaq: NTES) as part of a broader strategic partnership. http://axios.link/JvzB

International Paper (NYSE: IP) has dropped its takeover attempt for Smurfit Kappa (Ireland: SKG), citing a lack of engagement by Smurfit management. http://axios.link/2FCr

Northrop Grumman (NYSE: NOC) received U.S. antitrust approval for its $7.8 billion acquisition of rocket and missile maker Orbital ATK (NUSE: OA). http://axios.link/Bs2Z

Fundraising

Innovation Endeavors has closed its latest fund with $333 million and promoted venture partner Harpi Singh to partner. This is the first time that IE has taken outside money, having previously been funded solely by Eric Schmidt.

NextGen Growth Partners, a Chicago-based private equity firm, closed its debut fund with over $50 million. www.nextgengp.com

Target Global, a Berlin-based VC firm, has launched a new fund dedicated to mobility and transportation, which will be led by new partner Ben Kaminski (ex-Goldman Sachs). www.targetglobal.vc

It's Personnel

Thomas Affolter has joined CIT Group’s sponsor finance group as a managing director of originations. He previously was with Goldman Sachs. www.cit.com

Katerina Crews has joined SNH Capital Partners as a managing director and head of its in-house portfolio ops group. She previously was with McKinsey & Co. www.snhcapitalpartners.com

Crystal Huang is stepping down as a principal with GGV Capital in order to take a similar role at NEA, Axios has learned. www.nea.com

David Kerr has joined Indianapolis-based venture firm Allos Ventures as a managing director. He previously was CEO of Allos portfolio company Octiv. www.allosventures.com

Emily Sharko has joined private equity firm Pine Brook as COO. She previously was chief administrative officer for Blackstone’s tactical opportunities group. www.pinebrookpartners.com

UBS named Solon Kentas has joined UBS as head of U.S. consumer and retail M&A. He previously was with Deutsche Bank. http://axios.link/xGPU

Final Numbers: Impact investing
Source: Global Impact Investing Network's 2018 survey
Dan Primack

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