Oct 22, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Aïda Amer/Axios

WeWork's board this morning will vote on whether to accept a rescue package from SoftBank or one arranged by JPMorgan.

  • But, as Axios first reported yesterday, there have been fairer votes in North Korea. Adam Neumann still controls the voting stock and he's got around 200 million reasons to support SoftBank.

SoftBank's package includes a massive bribe... errr, I mean golden parachute... errr, I mean "consulting contract" for Neumann.

In exchange I'm told that he'll support the SoftBank transaction, give up his future voting rights, and step down as chairman. He'll also get a line of credit to help soften his existing liabilities, and get to participate big in a $3 billion tender offer for existing WeWork shares (at $20 a pop).

  • J.P. Morgan and partners like Starwood Capital were willing to really extend themselves, but paying Neumann to go away was a bridge too far. As CNBC's Alex Sherman tweeted, Jamie Dimon will do anything for love, but he won't do that.
    • As an aside: Dimon's personal involvement with WeWork, including in the IPO run-up, likely saves the jobs of underlings who otherwise could have been thrown under the bus.
  • Multiple sources say that WeWork's co-CEOs, Artie Minson and Sebastian Gunningham, will resign. This does not appear to be at the request of SoftBank, which will name Marcelo Claure as executive chairman and then launch a CEO search.
  • Minson and Gunningham did have a massive layoff plan ready to go, but now SoftBank will be in charge of the pink slips.
  • SoftBank's new investment will come off its balance sheet, not from its Vision Fund.

The bull case is that SoftBank offers WeWork its best path to salvation, because it helps reward some long-term employees via the tender and isn't predicated on reviving the IPO for 2020. Plus, SoftBank clearly maintains sincere optimism for the business, or else it wouldn't throw so much good money after bad.

The bear case is that SoftBank enabled Neumann's worst impulses and, from the perspective of many insiders, helped set fire to the company's reputation in the first place. Plus, there's the head-scratching decision late last month to have Claure help identify cost-saving and revenue opportunities at WeWork, even though SoftBank already had two directors on the WeWork board.

The bottom line: You break it, you own it.

Also...

Photo by Jessica Rinaldi/The Boston Globe via Getty Images.

Manuel Henriquez, founder and former CEO of Hercules Growth Technology Capital, and his wife Elizabeth both plead guilty yesterday for their roles in the college admissions cheating scandal.

  • The pair had originally plead not guilty to the charges, which related to accusations that they helped their daughters repeatedly cheat on standardized tests, faked athletic profiles, and bribed a women's tennis coach at Georgetown University.
  • Sentencing comes later. Expect both of them to face prison time.
  • This brings the total number of parents pleading guilty to 19. Expect trials for those maintaining their innocence — including former TPG executive Bill McGlashan — to occur next year.

🎧 Pro Rata Podcast digs into TikTok, including why it might be the future of news. Listen here.

The BFD

Via Getty Images

Howard Hughes (NYSE: HHC), a real estate development firm with a market cap of $5.5 billion, said it will sell around $2 billion of non-core assets, following a strategic review that also resulted in a CEO change and planned headquarters move from Dallas to Houston.

  • Why it's the BFD: There had been widespread expectation that the Bill Ackman-chaired company would seek a buyer for the entire company, possibly as a take-private.
  • The bottom line: "Ackman’s Pershing Square Capital Management is one of the largest holders in Howard Hughes, which was spun out of mall owner General Growth Properties in 2010. The company’s portfolio of 59 properties has retail, office, multifamily and hotel assets throughout the U.S., [and] is known for its six master-planned communities, including Summerlin in Las Vegas." — Bloomberg
Venture Capital Deals

Zoox, a Foster City, Calif.-based self-driving automaker, raised $200 million in convertible note funding that will be folded into a Series C round that's expected to close later this year or at the beginning of 2020. http://axios.link/INRI

Instabase, a San Francisco-based social platform for business data, raised $105 million in Series B funding at a $1 billion post-money valuation. Index Ventures led, and was joined by Spark Capital, Tribe Capital, SC Ventures, Glynn Capital, and return backers Greylock, NEA, and Andreessen Horowitz. www.instabase.com

Benevity, a Canadian provider of corporate social responsibility and employee engagement software, raised C$40 million in Series C funding from General Atlantic and JMI Equity. www.benevity.com

Signal AI, a New York-based business intelligence and media monitoring startup, raised $25 million in Series C funding. Redline Capital led, and was joined by MMC Ventures, GMG Ventures, and Hearst Ventures. http://axios.link/ouNd

Aurora Insight, a Washington, D.C.-based provider of digital signal mapping and analytics, raised $18 million in Series A funding. Alsop Louie Partners and True Ventures co-led, and were joined by Tippet Venture Partners, Rise of the Rest Seed Fund, Promus Ventures, Alumni Ventures Group, ValueStream Ventures, and Intellectus Partners. www.aurorainsight.com

Bayzat, a Dubai-based HR platform, raised $16 million in Series B funding. Point72 Ventures and Mubadala Capital co-led, and were joined by Elm, Greyhound Capital, Endeavor Catalyst, and Tech Invest Com. www.bayzat.com

🚑 Intrepida Bio, a San Diego-based biotech focused on modulating innate immune systems, raised $9.5 million from Sofinnova and Canaan Partners. www.intrepidabio.com

GreenPark Sports, a Calabasas, Calif.-based sports gaming startup, raised $8.5 million in seed funding. SignalFire led, and was joined by Sapphire Sports and Founders Fund. Its founders aree Chad hurley (co-founder of YouTube), Nick Swinmurn (Zappos), and Ken Martin (Blitz). http://axios.link/SQD4

Margin Edge, a Fairfax, Va.-based provider of restaurant management software, raised $5 million in Series A funding. Osage Venture Partners led, and was joined by In Good Company. www.marginedge.com

Private Equity Deals

Anacapa Partners invested in I4Pro, a provider of ERP software for the Brazilian insurance market. www.i4pro.com.br

Inmar, a Winston-Salem, N.C.-based portfolio company of OMERS Capital Partners, acquired OwnerIQ, a Boston-based provider of self-support product information for consumers. OwnerIQ’s venture backers included Converge Venture Partners and Kepha Partners. www.owneriq.com

Lee Equity Partners acquired Cosmetic Solutions, a Pompano Beach, Fla.-based contract manufacturer for skincare brands. www.naturalskincare.com

Periscope Equity invested in Mobile Solutions, a Centennial, Colo.-based SaaS mobile mobility management platform. www.mobilesolutions.net

Power Digital, a San Diego-based portfolio company of Periscope Equity, acquired Factorial Digital, a growth marketing and SEO agency. www.factorialdigital.com

🚑 SkyKnight Capital invested in AeroCare Holdings, an Orlando, Fla.-based provider of home healthcare solutions for patients with chronic respiratory conditions. Existing backers include Peloton Equity, SV Health Investors, and Morgan Stanley. www.aerocareusa.com

🚑 Sverica invested in In Vitro Sciences, a U.S. network of fertility clinics that is being spun out of Sverica-owned Women’s Health USA. www.invitrosciences.com

Tender, a Littleton, N.H.-based portfolio company of Victor Capital Partners, acquired RapidPure, a Lakeland, Minn.-based maker of water purification systems. www.tendercorp.com

Thyssenkrupp moved at least 10 strategic and private equity bidders to the second-round of an auction for its elevators unit, per Reuters. They include Brookfield, CVC Capital Partners, Blackstone/Carlyle, and Advent International/Cinven/ADIA. http://axios.link/borr

Public Offerings

👞 Cole Hann, a Greenland, N.H.-based premium shoemaker owned by Apax Partners, confidentially filed for an IPO, per Bloomberg. http://axios.link/H1EK

Liquidity Events

NextEra Energy Partners (NYSE: NEP) agreed to buy Meade Pipeline, co-owner of the Central Penn Line in Pennsylvania, for $1.37 billion. Sellers include Ares Management (22.5% stake). http://axios.link/Dsvz

🚑 Permira hired Goldman Sachs to find a buyer for Althea Group, an Italy-based medical equipment services company that could fetch around €800 million, per Reuters. Possible suitors reportedly include BC Partners and EQT Partners. http://axios.link/JXaM

More M&A

ADT (NYSE: ADT) bought I-View Now, a Las Vegas-based video alarm verification service. www.i-viewnow.com

Alarm.com (Nasdaq: ALRM) acquired a majority stake in OpenEye, a provider of cloud-based video surveillance solutions for the commercial market. www.openeye.com

Banco Santander (Madrid: SAN) agreed to sell its Puerto Rico business to FirstBank Puerto Rico for $1.1 billion. http://axios.link/AoFS

Coty (NYSE: COTY) is seeking buyers for a portfolio of hair and nail brands products, including Clairol, which generates around $1.8 billion in sales. http://axios.link/4v0e

Destination Maternity (Nasdaq: DEST), a Moorestown, N.J.-based retailer of maternity clothes, filed for Chapter 11 bankruptcy protection. http://axios.link/oW17

🚑 Harbin Pharmaceutical Group of China is considering a takeover offer for Pittsburgh-based nutritional supplements company GNC Holdings (NYSE: GNC), per Bloomberg. http://axios.link/TOhq

Howard Hughes (NYSE: HHC) said it will sell around $2 billion of non-core assets, following a strategic review. There had been some talk that the real estate development firm, where activist investor Bill Ackman is chairman, would seek to go private. http://axios.link/zTH0

🚑 Knight Therapeutics (TSX: GUD) agreed to buy Biotoscana Investments, a Brazil-listed pharma company, for C$281 million. http://axios.link/XfpE

Sports Direct (LSE: SPD) dropped its takeover offer for UK-based Goals Soccer Centers, after failing to get board cooperation. http://axios.link/B3VR

Travis Perkins (LSE: TPK) paused plans to sell its plumbing and heating business, due to an “unprecedented level” of market uncertainty. http://axios.link/oM7Y

Fundraising

AirTree Ventures of Australia raised A$275 million for its third fund. http://axios.link/BhQL

Headway Capital Partners, a UK-based private equity secondaries firm, raised €372 million for its fourth fund. www.headwaycap.com

• Luge Capital, a Canadian VC firm focused on fintech and AI startups, raised C$85 million for its debut fund. It’s led by David Nault (ex-iNovia Capital) and Karim Gillani (ex-Xoom corp dev). http://axios.link/P085

• TPG Sixth Street Partners raised $2.2 billion for its debut Capital Solutions fund, which will make non-control investments in growth companies. http://capitalsolutions.tssp.com

• Vista Equity has closed on $700 million for its $2 billion-targeted third credit fund, per PE Hub.

It's Personnel

• Scott Abramowitz joined Ropes & Gray as a New York-based partner in the law firm’s private equity practice. He previously was with Kramer Levin. www.ropesgray.com

• Don Callahan joined Bridge Growth Partners as an executive partner. He previously was Citigroup’s global head of tech, operations, and shared services. www.bridgegrowthpartners.com

• Zaz Floreani joined Next Coast Ventures as a principal. She previously was VP of corp dev at Dropoff. www.nextcoastventures.com

• Industry Ventures promoted Jonathan Roosevelt to managing director. www.industryventures.com

Final Numbers
Source: Report from EY and the American Investment Council. Data: EY and PitchBook.
Dan Primack

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