Jan 30, 2020

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Lazaro Gamio/Axios

In November 2018 we reported that Juul employees were upset about a potential investment by cigarette giant Altria. But the deal went forward, with Altria paying $12.8 billion for a 35% equity stake.

Now, just over a year later, it's Altria's employees (and shareholders) who must be livid, as this is turning into one of the worst strategic investments in memory.

  • Altria this morning took a $4.1 billion impairment charge on its Juul investment, mostly blaming the "increased number of legal cases pending against Juul," which it says have increased more than 80% since last November 2019.
  • Add in an an earlier impairment charge, and Altria now values its Juul stake at $4.2 billion — representing a loss of 67%, or $8.6 billion, in just 14 months.

Altria and Juul also amended certain non-financial parts of their agreement, including giving Altria an option to exit a non-compete agreement if Juul either gets banned from selling e-vaping products in the U.S. for a year, or if Altria writes down the carrying value of its investment to 10% of the original $12.8 billion price.

  • And, just for one last kick in the teeth, the CEO of Philip Morris said on CNBC that the idea of a reconsolidation with Altria "is finished."

If there's any silver lining here for Juul, it's that Altria did also maintain its commitment "to work together" on pre-market tobacco product applications (PMTAs), and to continue giving it regulatory affairs support.

The bottom line: Altria thought its deal for Juul would lift all nicotine-stained boats, kicking off an industry consolidation that would protect all players from changing consumer and retailer tastes. Instead, it might have just blown a $12.8 billion hole in the hull.

Also...

Angelic auction: Yesterday I spoke with two retail-focused buyout execs, from large shops, who say they haven't been contacted by bankers about Victoria's Secret.

  • That's strange for a legacy asset this large.
  • Both execs also had heard about talks with Sycamore Partners (prior to the WSJ report), and also that Advent International had been involved at one point (unclear if it's still interested). Neither Sycamore nor Advent cared to comment.

• Keith Rabois of Founders Fund has said in the past that he wants half of his VC friends to laugh at an investment he makes, highlighting his interest in contrarian bets. I asked during yesterday's on-stage interview at Upfront Summit if he also wants half of his partners to laugh, to which he replied, "No. Maybe 25% of them."

• Josh Kopelman of First Round Capital said in a separate Upfront Summit interview that his firm has looked at data for every company it's ever funded, and learned that the time from first email to term sheet has shrunk from an average of 90 days in 2014 to an average of nine days.

The BFD

Illustration: Aïda Amer/Axios

Stanley Black & Decker (NYSE: SWK) agreed to buy Consolidated Aerospace Manufacturing, a Fullerton-based aerospace parts maker, from private equity firm Tinicum for upwards of $1.5 billion.

  • Why it's the BFD: CAM is a major supplier to Boeing, and around $200 million of the purchase price is contingent on the FAA authorizing the 737 MAX to return to service. That's a pretty unusual sort of deal caveat, particularly given that CAM has no role on either side of the FAA's decision, and highlights how the MAX situation has negative impacts down the supply chain.
  • Bottom line: "Stanley Black & Decker has spent more than $10 billion on acquisitions in the last two decades, including the tools business of Newell Brands and the Craftsman brand of Sears... However, bulking up on tools has increased the company’s exposure to big-box retailers such as Home Depot and Lowe’s, which limits its bargaining power. The CAM deal would help it boost its engineered fastening and infrastructure business." — Joshua Franklin, Reuters
Venture Capital Deals

Policygenius, a New York-based online insurance marketplace, raised $100 million in Series D funding. KKR led, and was joined by return backers Norwest Venture Partners, Revolution Ventures, Susa Ventures, AXA Venture Partners, MassMutual Ventures and Transamerica Ventures. www.policygenius.com

Attentive, a New York-based personalized mobile messaging platform for brands, raised $70 million in Series C funding. Sequoia Capital and IVP co-led, and were joined by fellow return backers Eniac Ventures and NextView Ventures. http://axios.link/QS3k

Verkada, a San Mateo, Calif.-based developer of physical security cameras for the enterprise, raised $80 million in Series C funding at a $1.6 billion post-money valuation. Felicis Ventures led, and was joined by Next47, Sequoia Capital and Meritech Capital. http://axios.link/WKmX

Whip Media Group, maker of the TV Time tracking app for television and film viewing, raised $50 million in Series D funding. Eminence Capital led, and was joined by Raine Ventures. http://axios.link/KdU2

OpsRamp, a startup that helps IT teams automate and manage hybrid environments, raised $37.5 million. Morgan Stanley Expansion Capital led, and was joined by HPE and return backer Sapphire Ventures. http://axios.link/A3qE

SimScale, a German developer of engineering simulation SaaS, raised €27 million in Series C funding. Insight Partners led, and was joined by return backers Earlybird, USV, June Fund, Vito Ventures, Bayern Kapital, and High-Tech Gründerfonds. http://axios.link/mq6S

Gabi, a San Francisco-based startup aimed at helping consumers save money on home and auto insurance, raised $27 million in Series B funding. Mubadala Capital led, and was joined by return backer Canvas Ventures. http://axios.link/ms44

Codality, a London-based platform for hiring engineers, raised $22 million in Series A funding co-led by Oxx and Kennet Partners. http://axios.link/KsJY

SeaLights, an Arlington, Va.-based quality intelligence platform, raised $8.6 million. Cisco led, and was joined by Wipro Ventures. http://axios.link/AGb6

Concentric, a San Jose, Calif.-based cybersecurity startup focused on protecting enterprise data, raised $7.5 million from Clear Ventures, Engineering Capital, Homebrew, and Core Ventures. www.concentric.ai

CloudTrucks, a “business in a box” startup for small trucking companies, raised $6.1 million. Craft Ventures led, and was joined by Khosla Ventures, Kindred Ventures, and Abstract Ventures. www.cloudtrucks.com

Thistle, a San Francisco-based plant-centric meal delivery startup, raised $5.65 million in Series A funding led by PowerPlant Ventures. http://axios.link/6FoN

Coda, a London-based publishing platform for mobile games, raised $4 million in seed funding led by London Venture Partners. http://axios.link/HIoa

Vero Leasing, a New York-based developer of residential leasing software, raised $3.2 million in seed funding from Builders VC, Bienville Capital, and Cogito Ventures. www.sayvero.com

Maze, a London-based developer of user testing solutions, raised $2 million. Amplify Partners led, and was joined by return backers Seedcamp and Partech. http://axios.link/5JPa

Private Equity Deals

FullSpeed Automotive, a Greenwood Village, Colo.-based portfolio company of CenterOak Partners, acquired American LubeFast, a Lawrenceville, Ga.-based operator of 50 quick-lube service shops. www.greasemonkeyintl.com

Triton Partners is the frontrunner to buy industrial machinery company Renk from Volkswagen, per Bloomberg. EQT also submitted a bid. http://axios.link/fTrt

Liquidity Events

The Blackstone Group is considering a sale process for Guidon Energy, a Permian-focused oil E&P company that could fetch more than $2.5 billion (including debt), per Reuters. http://axios.link/kOvi

Qorvo (Nasdaq: QRVO) paid around $400 million to acquire Irish chipmaker Decawave, which had raised $52 million from VC firms like Atlantic Bridge Capital, ACT VC, CIC, Enterprise Ireland, and ZZ Ventures. http://axios.link/azIf

More M&A

ACEK, a Spanish industrial holding company, is seeking a buyer for wind power company Elawan Energy, which could fetch $2 billion, per Reuters. http://axios.link/hQPR

GoDaddy (NYSE: GDDY) agreed to buy Over, a South African app that helps brands create online visual content for social media. http://axios.link/bMRr

Fundraising

The Blackstone Group plans to launch fundraising later this year for its second Asia-focused private equity fund, per comments during an earnings call.

Kleiner Perkins is in market with its 19th early-stage fund, just one year after raising $600 million for Fund XVIII, per TechCrunch. http://axios.link/IIHV

• Intermediate Capital Group raised $2.4 billion for its third fund focused on GP-led private equity secondary transactions. www.icgam.com

Prime Movers Lab of Wyoming raised $100 million for its first seed-stage fund to focus on “breakthrough scientific startups.” www.primemoverlabs.com

Ribbit Capital, a Palo Alto-based VC firm focused on fintech, is raising $420 million for its sixth flagship fund, per an SEC filing. It's also raising $500 million for something it called "Bullfrog Capital."

It's Personnel

Littlejohn & Co. promoted Jordan Tongalson to managing director of biz dev, Robert Creighton and Bart Stout to principal, Aaron Wasserman and Jack Wigdale to VP, and Kaitlyn Marcinek to controller. www.littlejohnllc.com

Final Numbers
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Data: Bureau of Economic Analysis; Chart: Andrew Witherspoon/Axios
Dan Primack

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