Feb 27, 2017

Axios Pro Rata

Top of the Morning

• Office manager: Silver Lake is in talks to move its global headquarters from 9 West 57th St. to the new Hudson Yards project, Axios has learned. No contracts have yet been signed, nor is it clear if Silver Lake would actually pack up its offices before its current lease expires in two years.

This may sound like a minor piece of housekeeping, but 9 West 57th has been private equity and hedge fund central for years, serving as global HQ to such firms as Silver Lake, Apollo, KKR, Och-Ziff, Tiger Global and more. It is to NYC private equity what Sand Hill Road is to Silicon Valley venture capital (or what Bay Colony used to be to Boston venture capital).

KKR already signaled in late 2015 that it planned to leave for Hudson Yards, and Silver Lake's departure would begin to look like something of a trend. Moreover, while the Silver Lake discussions with Hudson Yards began before last November's election, word is that traffic and security issues related to nearby Trump Tower have only served to make them more intense. No comment from Silver Lake.

• Capital student: Social Finance (SoFi) on Friday confirmed earlier media reports that it has raised $500 million in new funding led by private equity firm Silver Lake. Others participants include asset management firm GPI Capital and Japan's SoftBank, which had invested $1 billion into SoFi in September 2015. Three notes, based on a conversation with CEO Mike Cagney:

  • The $500 million is primary equity, but the deal also included a $250 million secondary for early shareholders and employees.
  • Silver Lake didn't buy any SoFi loans (despite earlier reporting to that effect), but already has begun introducing SoFi to Silver Lake LPs with debt-buying functions.
  • SoFi does want to go public. "We don't have the Palantir view."
  • Will SoFi expand into biz lending? "That's a very active dialog we have here, particularly with the Zenbanx acquisition that's synergistic to the business side. I think we'll decide that soon... One thing we are going to do first is launch a practice loan for doctors and dentists where they can borrow money to start their own businesses."

• Speaking of massive secondaries: CNBC reports that SoftBank's ongoing talks to invest in WeWork includes a $2 billion primary tranche and a $1 billion secondary that could grow to $2 billion. Gotta wonder how prospective Vision Fund LPs feel about that...

• Deadpool: Ciris Energy, a Colorado-based company that had been developing technology to biochemically convert coal to methane, quietly shut down late last year. It had raised around $63 million in VC funding (last post-money was around $230m), from firms like Braemar Energy Ventures, Rho Ventures, Khosla Ventures, Asia Pacific Capital and Energy Technology Partners. An ex-employee blames Ciris Energy's demise on an inability to raise capital in 2015, leading to "the classic biotech death spiral."

• PE WH: Philip Bilden over the weekend pulled himself as Trump's nominee for U.S. Navy Secretary, after deciding he couldn't adequately separate from his business interests "without undue disruption and materially adverse divestment of my family's private financial interests." Bilden is a former managing director with HarbourVest Partners who had launched the Boston-based private equity firm's Asia operations in 1996. Unclear if this was about HarbourVest not being willing to buy out Bilden, or Bilden not wanting to sell at what he perceived to be a discount to future value.

The BFD: Third time ≠ charm

The London Stock Exchange said that it is unlikely to receive regulatory approval for its merger with Deutsche Boerse, due to European antitrust requirements that LSE sell electronic fixed-income trading platform MTS. That likely means that the proposed $31 billion deal is dead.

Why it's the BFD: This merger would have combined stock exchanges in the UK, Germany and Italy, plus many of Europe's largest clearinghouses. But now it appears that the deal is dead, which also scuttles a €510 million sale by LSE of LCH Clearnet's French arm to Euronext (which was contingent on LSE/DB going through). This had been the third time that the two exchanges have tried to tie the knot since 2000.

Bottom line: "When the London Stock Exchange trumpeted its merger with Deutsche Boerse last year, the chairman, Donald Brydon, was remarkably relaxed about the Brexit vote. He and his German counterparts said the deal would go ahead regardless of the outcome. What they didn't know was that it would eventually fall foul of another aspect of the single market - Brussels' control of competition laws." ― Dominic O'Connell

Venture Capital Deals

• Cherwell Software, a Colorado Springs, Colo.-based provider of IT service management solutions, has raised $50 million in growth equity funding from KKR. http://bit.ly/2lY14ar

• Arrakis Therapeutics, a Waltham, Mass.-based developer of RNA-targeting drugs, has raised $38 million in Series A funding. Canaan Partners led the round, and was joined by Advent Life Sciences, Pfizer, Celgene Corporation, Osage University Partners and Henri Termeer.

• Xenex Disinfection Services, a San Antonio-based maker of a UV room disinfection system for healthcare facilities, has raised $38 million in new VC funding. Essex Woodlands led the round, and was joined by Piper Jaffray Merchant Banking and return backers Malin Corp. and Tectonic Ventures. http://bit.ly/2loKr4j

• Pharma Two B, an Israeli developer of treatments for Parkinson's disease, has raised $30 million in third-round funding. Israel Biotech Fund led the round, andwas joined by aMoon, JVC and return backers JK&B and Generali Financial. http://bit.ly/2m2c4nB

• Layer, a San Francisco-based mobile communications platform for business, has raised $15 million in Series B funding. Greycroft Partners led the round, and was joined by Microsoft Ventures and Salesforce Ventures. The company also has acquired messaging startup Cola for an undisclosed amount. http://tcrn.ch/2mteNDa

• Congenica, a UK-based provider of clinical genome analysis technology, has raised £8 million in Series B funding. Parkwalk Advisors was joined by return backers Cambridge Innovation Capital and Amadeus Capital Partners. www.congenica.com

• Cordial, a San Diego-based provider of automated email marketing solutions, has raised $6 million in Series A funding led by Upfront Ventures. http://tcrn.ch/2m209pI

• Bigscreen, a social VR startup, has raised $3 million in new VC funding led by Andreessen Horowitz. http://on.wsj.com/2lVmcy0

Private Equity Deals

• Abraaj Group has acquired the Dubai campus of Middlesex University for an undisclosed amount. http://reut.rs/2mAzKvO

• BCBG Max Azria Group, a Vernon, Calif.-based fashion house backed by Guggenheim Partners, is preparing to file for bankruptcy as early as next this week, according to Reuters. http://reut.rs/2lgjSxj

• Clearlake Capital Group has acquired and merged two oilfield services providers in the Permian Basin: Globe Energy Services and Light Tower Rentals. No financial terms were disclosed. www.clearlake.com

• Gambol Pet Group, a Chinese pet food maker, has raised an undisclosed amount of private equity funding from KKR. www.kkr.com

• MBK Partners has acquired Daesung Industrial Gases, a South Korean maker of industrial gasses, from shareholders like Goldman Sachs for a reported $2 billion. http://reut.rs/2lKGl7H

• Stada, a listed German drugmaker, has opened its books to takeover bidders Advent International, Bain Capital and Cinven. Current high offers are in the €3.6 billion range. http://on.ft.com/2mjFRsy

Public Offerings

Alteryx Inc., an Irvine, Calif.-based provider of data blending and analytics solutions, has filed for a $75 million IPO. It plans to trade on the NYSE under ticker symbol AYX, with Goldman Sachs and J.P. Morgan serving as lead underwriters. The company reports a $24 million net loss in 2016 on around $85 million in revenue. Shareholders include Insight Venture Partners (27% pre-IPO stake), Sapphire Ventures (13%), Thomson Reuters (13%), Toba Capital (6%) and Iconiq Capital (5.6%). http://bit.ly/2lKk5wg

• Gardner Denver, a Milwaukee-based maker of industrial machinery, is prepping an IPO that could value the company at between $6 billion and $7 billion (including debt), according to Reuters. KKR bought Gardner Denver in 2013 for $3.9 billion. http://reut.rs/2mkyZLg

• J . Jill, a Quincy, Mass.-based women's apparel retailer acquired less than two years ago by TowerBrook Capital Partners, has set its IPO terms to 11.67 million shares being offered at between $14 and $16 per share. It would have an initial market cap of approximately $656 million, were it to price in the middle of its range. The company plans to trade on the NYSE under ticker symbol JILL, with BofA Merrill Lynch serving as lead underwriter. http://bit.ly/2lHGXuy

• Presidio, a New York-based IT services provider owned by Apollo Global Management, has set its IPO terms to 16.67 million shares being offered at between $14 and $16 per share. It would have an initial market cap of approximately $1.33 billion, were it to price in the middle of its range. The company will trade on the Nasdaq under ticker symbol PSDO, with J.P. Morgan and Citigroup serving as lead underwriters. www.presidio.com

Liquidity Events

Bain Capital has sold a 17% stake in Australian accounting software company MYOB (ASX: MYO) for around US$273 million. It still holds a 40% position. http://bit.ly/2lfOtLH

• Terra Firma Capital Partners has hired Barclays and KeyBanc to find a buyer for EverPower Wind Holdings, a Pittsburgh-based wind energy business that could be valued at around $1.5 billion (including debt), according to the WSJ. http://on.wsj.com/2lRT4Ih

More M&A

• 8X8 (Nasdaq: EGHT), a San Jose, Calif.-based provider of business communications technology, has hired Morgan Stanley to find it a buyer, according to Reuters. The company has a market cap just south of $1.5 billion. http://reut.rs/2l1o4px

• DWS (ASX: DWS) has agreed to acquire rival Australian IT services group SMS Management & Technology (ASX: SMX) for approximately A$124 million. http://bit.ly/2mkFT33

• ESI Group (Paris: ESI) has acquired Scilab, a Norway-based provider of open source software for analytical numerical solutions. No financial terms were disclosed. www.scilabtech.com

• F.N.B. Corp. (NYSE: FNB) has received Federal Reserve approval for its $1.4 billion purchase of Raleigh, N.C.-based commercial bank Yadkin Financial (NYSE: YDKN). http://reut.rs/2loWKO6

• Pfeiffer Vacuum, a listed German maker of vacuum pumps, is asking shareholders to reject a $1 billion takeover offer from rival Busch. http://reut.rs/2l36eCK


• Aliter Capital, a new British buyout firm focused on the business services sector, has closed its debut fund with £90 million in capital commitments. http://bit.ly/2m26nWP

• Telecom Infrastructure Project, an effort launched by Facebook last year, said today that it will commit $170 million to invest in startups working on telecom infrastructure solutions. TIP backers include Atlantic Bridge, Downing Ventures, Oxford Sciences Innovation and Touchstone Innovations. http://tcrn.ch/2l30o4e

• Vanedge Capital Partners, a Vancouver-based venture capital firm, has closed its second fund with C$161 million in capital commitments. https://tgam.ca/2l1i7ZQ

It's Personnel

• Edward Beckley has joined TPG Capital to focus on global infrastructure opportunities, according to Private Equity International. He previously led the European infrastructure fund management unit of Macquarie.

• Renata Hesse, former head of antitrust at the U.S. Department of Justice, has agreed to joined law firm Sullivan & Cromwell as a Washington, D.C.-based partner. http://on.wsj.com/2lWkts0

• Ding Xuedong reportedly has stepped down as chairman of $800 billion sovereign wealth fund China Investment Corp. http://bit.ly/2lgxc5E

Final numbers: PE mgmt co mergers (since 2005)