🎧 Pro Rata Podcast returns later today with our first new episode of 2020.
- In the meantime, be sure to check out our final 2019 episode, in which we wrap up the past 10 years in 12 minutes.
Top of the Morning
SoftBank Vision Fund has walked away from investing in several startups, months after submitting term sheets worth hundreds of millions of dollars and promising that closing delays were only temporary, Axios has learned.
- This is highly unusual behavior, even for the idiosyncratic SoftBank, and threatens its ability to invest in highly sought-after companies.
- SoftBank, which has invested record amounts into startups over the past few years, confirmed "regret" over these situations.
"Hurry up and wait" is how numerous sources describe negotiations with SoftBank, saying that the process was time-consuming, expensive, and ultimately fruitless.
The most recent example is Honor, a San Francisco-based home care company for older adults that's raised over $100 million from firms like Andreessen Horowitz, Naspers, and Thrive Capital.
- Sources say it received a term sheet from SoftBank in mid-November, with subsequent reports putting the deal size at around $150 million.
- SoftBank CEO Masayoshi Son gave his blessing during a meeting at his Woodside, Calif. estate with Honor CEO Seth Sternberg.
- Per a source: "SoftBank kept saying it had to run some 'process stuff' before getting the term sheet fully-signed, but said they wanted to get it funded by year-end, so it started confirmatory due diligence—law firms, background checks, EY going through stuff, etc... There was no reason to think there was going to be a problem."
- SoftBank killed the deal one week before Christmas, telling Honor that Son had changed his mind. Son did not personally communicate his decision or rationale to the company.
For more examples, please read my full story here.
SoftBank's reasons for its reversals are unclear.
- Some believe a driving factor is SoftBank's struggle to raise Vision Fund 2. In short, outside money hasn't materialized.
- They also think the WeWork debacle played a role, creating a sort of shell shock in Tokyo.
SoftBank sent Axios the following statement: "Given we’re a fiduciary and investing very large amounts of capital, our investment process is more rigorous than unregulated investors and typical VCs. There have been a few cases where our process took longer than anticipated, which we regret. We’re always upfront with founders about what to expect and we try to keep them informed every step of the way."
The bottom line: Time is one of a startup's most valuable assets, and several startups and their CEOs have been robbed of time by SoftBank's actions.
Constellis, a Reston, Va.-based security contractor owned by Apollo Global Management, is in talks with creditors to restructure its $1 billion of debt or enter a pre-negotiated bankruptcy, per Bloomberg.
- Why it's the BFD: Constellis is partially responsible for security at the U.S. embassy in Baghdad, which came under assault last week — possibly precipitating the U.S. decision to kill Iranian Gen. Qassem Soleimani.
- Backstory: The company missed a principle payment on December 31, but entered into a forbearance agreement so it could continue operations. All of this is a far cry from early 2018, when Apollo was negotiating to sell or IPO Constellis.
- Bottom line: "The company, which bought what was once Blackwater, the private-security firm founded by Erik Prince, has struggled as the U.S. scaled back operations overseas. Domestic work came with lower margins and the
company has been bogged down with start-up costs on new contracts, S&P
Global Ratings said in a report in November as it cut the company’s
credit grades." — Bloomberg
Venture Capital Deals
• Loft, a Brazil-based platform for buying and selling residential properties, raised $175 million in Series C funding. Vulcan Capital and Andreessen Horowitz co-led, and were joined by QED Investors, Fifth Wall Ventures, Thrive Capital, Valor Capital, and Monashees. http://axios.link/dfS2
🚑 Slayback Pharma, a Princeton, N.J.-based generic drugmaker backed by KKR, secured up to $50 million in Series B funding from Everstone. www.slayback-pharma.com
• HomeLane, an Indian interior design and furniture startup, raised $30 million in Series D funding from Evolvence India Fund, Pidilite Group, FJ Labs and return backers Accel, Sequoia Capital, and JSW Ventures. http://axios.link/Ndat
• Quantiphi, an Indian big data startup, raised $20 million in Series A funding from Multiples Alternate Asset Management. http://axios.link/BFrq
Private Equity Deals
• Levine Leichtman Capital Partners acquired Resolution Economics, a Los Angeles-based provider of economic and statistical consulting and expert testimony. www.resecon.com
• Macquarie Infrastructure is the front-runner to buy Australian data center operator AirTrunk for more than A$3 billion from Goldman Sachs and TPG Sixth Street Partners, per Bloomberg. http://axios.link/ivo4
• One Equity Partners acquired CDI, a New York-based provider of IT infrastructure hardware and software, consulting, and managed services. www.cdillc.com
• Lixiang Automotive, a Chinese electric vehicle maker, filed confidential paperwork for a U.S. IPO that aims to raise at least $500 million, per Reuters. Lixiang has raised over $1 billion from firms like Matrix Partners China and Bytedance. http://axios.link/LobM
• Carrefour (Paris: CA) acquired Dejbox, a French employee catering startup backed by Leap Ventures. http://axios.link/BO2Q
• Cellnex Telecom of Spain will pay €800 million to buy OMTEL, a portfolio of Portuguese mobile towers owned by Altice Europe, Morgan Stanley Infrastructure Partners, and Horizon Equity Partners. http://axios.link/OTc
• LLR Partners is seeking a buyer for CompoSecure, a Somerset, N.J.-based luxury credit card maker that could fetch around $1.5 billion, per Barron’s. http://axios.link/W0PY
🚲 Town Sports International (Nasdaq: CLUB), owner of New York Sports Clubs, is expected to buy the studios of spin class operator Flywheel Sports, per Bloomberg. The seller would be Kennedy Lewis Investment Management, a Flywheel lender which last year converted its debt into a majority equity stake. http://axios.link/7ADY
• Värde Partners agreed to sell a portfolio of eight European luxury hotels to Covivio (Paris: COV) for €573 million. http://axios.link/Iybv
• Avon Rubber (LSE: AVON) bought the ballistic protection unit of 3M (NYSE: MMM) for upwards of $116 million ($91m upfront). http://axios.link/FOZb
• Bed Bath & Beyond (Nasdaq: BBBY) signed a $250 million sale-leaseback deal with Oak Street Real Estate Capital for around half of its real estate, including its Union, N.J. headquarters, per the WSJ. http://axios.link/XEgZ
• ChemChina and Sinochem are merging their agricultural assets into a new holdings company. http://axios.link/P7eo
• Hudson’s Bay (TSX: HBC), owner of Saks Fifth Avenue, agreed to be taken private by a group led by executive chairman Richard Baker for a sweetened C$11 per share. http://axios.link/rdOE
🚑 Illumina (Nasdaq: ILMN) abandoned plans to buy smaller gene sequencing company Pacific Biosciences of California (Nasdaq: PACB) for $1.2 billion in cash, following a U.S. antitrust complaint. http://axios.link/Dcqm
• Tremor International (AIM: TRMR) agreed to buy Unruly, a programmatic video marketplace, from News Corp. (Nasdaq: NWS) for around £15 million in stock. http://axios.link/U9SO
• Veolia (Paris: VIE) agreed to buy an Arkansas-based hazardous waste treatment business from Alcoa USA (NYSE: AA) for $250 million. http://axios.link/1FmH
• Xerox (NYSE: XRX) announced that it's secured $24 billion in binding financial commitments for its attempted takeover of HP (NYSE: HPQ). http://axios.link/7xn2
⛽ New firm alert: Energy Capital Ventures quietly launched as a Chicago-based VC firm focused on the power and utility industry." Its principals are Vic Pascucci (ex-managing partner of Lightbank) and Ray O'Connor (ex-managing director of Samuel A. Ramirez & Co.).
• Antler, a “global startup generator,” raised $50 million for its funds. New backers include Credit Saison and Eduardo Saverin. http://axios.link/qRSM
🚑 G Square, a London-based private equity firm focused on European healthcare companies, raised €500 million for its third fund. www.gsquarecapital.com
• H.I.G. WhiteHorse, the credit affiliate of H.I.G. Capital, raised $1.1 billion for a new senior secured financing fund. www.whitehorse.com
• Royal Street Ventures, a Kansas City-based seed-stage firm, raised $16.4 million for its third fund, per an SEC filing. http://axios.link/3GGf
• VIG Partners, a South Korean private equity firm, raised $810 million for its fourth fund. http://axios.link/Gm4p
• Ara Partners, a Houston-based private equity firm focused on decarbonization, promoted Johanna Schmidtke to managing director. www.arapartners.com
• Robert Haile joined Stifel Financial as a managing director, per his LinkedIn profile. He previously led food and beverage investment banking for BB&T Capital Markets.
• Spectrum Equity promoted John Connolly and Leah Palmerto managing directors, Carolina Picazo to chief administrative officer, Cameron Ghorbani to VP and Jamie Mitchell and Sam Todd to senior associates.
• Philip Viergutz joined private equity secondaries firm Montana Capital Partners as a partner, per his LinkedIn page. He previously spent 11 years with AlpInvest, most recently as head of biz dev and investor relations. www.montana-capital-partners.eu
• Roslyn Zhang stepped down as head of hedge fund investments for sovereign wealth fund China Investment Corp., per Bloomberg. http://axios.link/ouZn