Jun 19, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

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Top of the Morning
Greg Hardy after his recent victory. Photo by Jeff Bottari/DWTNCS LLC

Former NFL player Greg Hardy recently won his first pro mixed martial arts fight, reportedly earning a "development contract" with the UFC — which was acquired in 2016 for $4 billion by talent agency Endeavor with the help of private equity firms KKR and Silver Lake. It doesn't mean Hardy will necessarily fight for the UFC, but he's on that path if he continues to succeed in showcase matches organized by UFC president Dana White.

Why it matters: 29 year-old Hardy had 40 NFL sacks, but he’s better known for brutally beating his ex-girlfriend and then being convicted of assault. That conviction was later dismissed on appeal, as the victim declined to cooperate after reportedly receiving a settlement from Hardy. But Deadspin unearthed photos, interviews and police reports that leave little doubt as to the horrific nature of his attack.

Dana White once said: “There’s one thing that you never bounce back from and that’s putting your hands on a woman. Been that way in the UFC since we started here.” So much for that.

The big question, therefore, is why neither Endeavor nor its private equity partners are stepping in. WME, for example, once stopped representing Mel Gibson for his anti-semitism and misogyny, but is hands-off here. KKR (which promotes its ESG policies) and Silver Lake would never hire a portfolio company CEO with Hardy's track record, let alone as an employee at their own firms. All three declined comment.

Yes, people can deserve second chances and should be allowed to work. But Hardy has been barely repentant, and this is a public-facing opportunity for him to effectively profit from his notoriety. And, unless they stop looking the other way, a chance for Endeavor, KKR and Silver Lake to profit from it as well.

Editor's note: This post has been updated to correct references to "WME Endeavor" to just "Endeavor."

Also...

Trade wars: The White House last night floated another $200 billion worth of tariffs on Chinese goods, with China issuing a subsequent retaliation threat. Not surprisingly, Chinese stocks tanked and the Dow opened down more than 300 points (which puts it in the red for 2018).

  • As all of this is going on, Forbes has discovered unsettling details about the investment holdings and activities of trade war general Wilbur Ross. Not from while Ross was a private equity tycoon, but from while he's been U.S. Commerce Secretary.
  • Forbes reports, among other things, that Ross didn't divest everything he promised upon confirmation, and also that he shorted a Russian stock just before a report critical of his relationship to the company (which he likely knew was coming). Worthy of your time.

Halfway humbled: Tony Bates (ex-president of GoPro) and vice chairman Marc Mezvinsky (former hedge fund manager and husband of Chelsea Clinton) are both leaving Social Capital, the Silicon Valley investment firm led by former Facebook exec Chamath Palihapitiya, after just about one year on the job. This comes just days after news that early-stage investor Arjun Sethi left, and nine months after two other early-stage managers departed.

  • Bottom line: Chamath felt he could leverage data to build a large, data-driven asset management business with venture capital as its cornerstone. He was wrong, and admits as much in a Medium post.
  • Complications: Bates was hired to raise and manage a $1 billion-targeted growth equity fund, which would back both existing SC portfolio companies (which it had previously done via an "opportunities fund") and later-stage companies new to SC. That fund has already held a first close on an undisclosed amount, but SC doesn't plan to return LP commitments even though the top manager is gone and the strategy has changed (basically back to the "opportunities" model). This is a bit similar to what happened last year with the VC fund.
  • Mezvinsky had been tasked with launching a credit fund. That's not happening anymore. SC is maintaining its public hedge fund, and Bates will still be a director on the unicorn-hunting SPAC that SC raised earlier last year.
  • SC wants to raise a fourth VC fund later this year or early next year (it still has plenty of dry powder in Fund III), although LPs say the original plan was to already have it in market by now.
The BFD

GameStop (NYSE: GME), a Grapevine, Texas-based video game and equipment retailer, is in talks with private equity firms about being acquired, per Reuters. The news sent the company's shares soaring, ending the day with a market cap of around $1.5 billion.

  • Why it's the BFD: Because this is a physical retailer that hasn't so much been hampered by an outside rival like Amazon, so much as by its own vendors making their games downloadable. Plus, any higher-than-expected buyout price could reflect optimism in the growth of VR gaming equipment.
  • Context: The company's CEO resigned in May after just three months, its stock is down more than 30% in the past year and shareholder Tiger Global Management has called for a strategic review.
  • Bottom line: "GameStop stock is cheap and the company is still profitable even in its decline, so any buyer could choose to simply squeeze every last dollar it can out of the chain before the next generation of consoles arrives." — Tom McKay, Gizmodo.
Venture Capital Deals

• ezCater, a Boston-based provider of corporate catering solutions, raised $100 million in new funding at around a $700 million valuation (per TechCrunch). Wellington Management led, and was joined by return backers Iqonic Capital and Insight Venture Partners. http://axios.link/xPeC

🚑 Stealth BioTherapeutics, a Boston-based developer of drugs to treat mitochondrial dysfunction, raised $100 million via a pair of convertible note rounds. Nan Fung Technology led, and was joined by Atlantis Investment Management, BVCF Management, CMBC Capital Holdings, Kingdon Capital, Ocean Equity Partners and Sagamore Investments. www.stealthbt.com

Brex, developer of a corporate credit card for startups, raised $57 million from Ribbit Capital, YC Continuity, Peter Thiel, Max Levchin and Yuri Milner. http://axios.link/KjMt

🚑 Decibel Therapeutics, a Boston-based developer of medicines to treat hearing loss and hearing-related disorders, raised $55 million in Series C funding. Foresite Capital, Bessemer Venture Partners, Schroder Adveq, S-Cubed, Longevity were joined by return backers Third Rock Ventures, GV, SR One and Regeneron Pharmaceuticals. www.decibeltx.com

Viva Republica, the South Korean maker of financial services app Toss, raised $40 million from GIC and Sequoia China. http://axios.link/orPO

Elastic Path, a Vancouver-based provider of commerce and content management software, raised C$43 million in Series B funding. Sageview Capital led, and was joined by return backers Yaletown Partners and BDC Venture Capital.
www.elasticpath.com

🚑 Alpha Biopharm, a Shanghai-based startup whose lead product is a small molecule tyrosine kinase inhibitor, held a $37 million close on a $65 million-targeted Series A round. Qiming Venture Partners led, and was joined by TF Fund and the LYZZ Healthcare Venture Fund. www.alphabiopharma.com.cn

Peek, a reservation booking platform for the activities market, raised $23 million in Series B funding led by Cathay Innovation, and also signed a strategic partnership with Google. http://axios.link/WXsG

Embodied, a Pasadena, Calif.-based robotics platform for care and wellness, raised $22 million in Series A funding. Calibrate Ventures led, and was joined by Jazz Venture Partners and return backers Osage University Partners, Intel Capital and Grishin Robotics. www.embodied.me

Ethos, a San Francisco-based life insurance startup, raised $11.5 million in new equity and debt funding. Sequoia Capital led the equity tranche, while SVB provided the credit facility. http://axios.link/JzZp

Fabric, a New York-based life insurance startup, raised $10 million in Series A funding led by Bessemer Venture Partners. www.meetfabric.com

Veriff, an Estonian online identity verification startup, raised $7.7 million in Series A funding led by Mosaic Ventures. http://axios.link/RFgo

Talentry, a Munich-based social recruitment and marketing platform, raised €6 million in Series A funding led by Nauta Capital. http://axios.link/s6Nv

Photomyne, an Israel-based photo digitization startup, raised $5 million in Series A funding led by Maor. http://axios.link/vbp2

Private Equity Deals

Abu Dhabi Investment Authority has bought a 21% stake in PIC, a British acquiror of pension liabilities, from J.C. Flowers Co. http://axios.link/la7x

Bain Capital has agreed to acquire Varsity Brands, a Memphis-based maker of yearbooks and class rings, from Charlesbank Capital Partners and Partners Group.

Brookfield Asset Management has restarted takeover talks with Forest City Realty Trust (NYSE: FCEa), a Cleveland-based REIT with a market cap of nearly $5.5 billion. http://axios.link/tOnm

Core & Main, a St. Louis-based portfolio company of Clayton Dubilier & Rice, has acquired St. Louis Fabrication & Supply, a fire protection product fabricator and distributor. www.coreandmain.com

• EQT Partners and PSP Investments have agreed to buy Azelis, a Belgium-based specialty chemicals and food ingredients distributor, from Apax Partners. www.azelis.com

⛽ Genstar Capital has agreed to acquire Drilling Info, an Austin, Texas-based data and analytics platform for the energy market, from Insight Venture Partners. www.drillinginfo.com

• KKR is in advanced talks to acquire a minority stake in the telecom towers unit of France’s Altice, per Reuters. Other bidders had included Blackstone and Allianz. http://axios.link/mQ4d

Public Offerings

BrightView, a Plymouth Meeting, Penn.-based provider of commercial landscaping services, set IPO terms to 21.3 million shares at $22-$25. It would have a fully diluted market value of $2.4 billion, were it to price in the middle. The company plans to trade on the NYSE (BV) with Goldman Sachs as lead underwriter, and reports a $2.7 million net loss on $1.14 billion in revenue for the six months ending March 31. Shareholders include KKR (75.8% stake) and MSD Capital (17.7%).

SurveyMonkey has filed confidentially for an IPO, with J.P. Morgan as lead underwriter. http://axios.link/WFSh

Liquidity Events

The British government has blocked Better Capital’s £44 million deal to sell aircraft parts maker Northern Aerospace to China’s Gardner Aerospace, on national security grounds. http://axios.link/22Hg

Cisco (Nasdaq: CSCO) has agreed to acquire July Systems, a Burlingame, Calif.-based location services and mobile experience platform that has raised nearly $60 million from firms like US Venture Partners, Sequoia Capital and Intel Capital. www.julysystems.com

Eurazeo has hired Rothschild to find a buyer for its 22% stake in French private credit business Capzanine, per PE News. http://axios.link/DPBt

Microsoft (Nasdaq: MSFT) acquired Flipgrid, a Minneapolis-based social education app that had raised around $17 million from Brightstone Venture Capital, Arthur Ventures and StarTec Investments. http://axios.link/0KdS

🚑 Roche (Swiss: ROG) has agreed to pay $2.4 billion to acquire the 43% stake it doesn’t already hold in Cambridge, Mass.-based genomic profiling group Foundation Medicine (Nasdaq: FMI). The $137 per share deal represents a 29% premium over yesterday’s closing price. http://axios.link/Rbi1

Tron, a blockchain media startup led by Justin Sun, has agreed to acquire BitTorrent for $140 million in cash. BitTorrent has raised around $60 million, but its last known VC round came in 2008 from firms like DAG Ventures and Accel. http://axios.link/98EB

More M&A

⛽ Baytex Energy (TSX: BTE) has agreed to buy rival Canadian oil and gas producer Raging River Exploration (TSX: RRX) for C$2.8 billion. http://axios.link/T4xV

Ceconomy, a German-listed consumer electronics company, is in talks to sell its Russian business to Samfar and acquire a 15% stake in Samfar’s M.Video unit, per Reuters. http://axios.link/F8pB

🚑 Evotec of Germany has agreed to acquire the infectious disease business of Sanofi (Paris: SAN), with deal terms including a €60 million upfront payment. http://axios.link/b0Yz

🐄 Karan Beef, South Africa’s largest cattle feedlot, is considering a $450 million management buyout, per Bloomberg. http://axios.link/uriJ

Kraft Heinz (NYSE: KHC) is considering the sale of Complan, a children’s milk drink brand in India that could fetch around $1 billion, according to Bloomberg. http://axios.link/vAqB

W.P. Carey (NYSE: WPC) has agreed to acquire net lease REIT Corporate Property Associates 17– Global for $6 billion. http://axios.link/s5c8

It's Personnel

Edith Cooper (former head of HR for Goldman Sachs) and Virgis Colbert (former Miller Brewing and Chrysler exec) have joined private equity firm Grain Management as senior advisors. www.graingp.com

Goldman Sachs named Pete Lyon as head of TMT investment banking. He previously was co-head of financing for the Americas. www.gs.com

Standish Management, an outsourced private equity fund administrator, has promoted Susan Gillick to president. www.standishmanagement.com

Final Numbers
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Reproduced from Edelman Trust Barometer, Special Report: Brands and Social Media, 2018; Chart: Axios Visuals
Dan Primack

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