Apr 19, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Chicago readers: You're invited to an Axios event next Monday morning, which will include Mike Allen interviewing Mayor Rahm Emanuel about the impact of automation on cities. RSVP here.

Top of the Morning

Some venture capitalists last month asked the SEC to effectively exempt digital token investments from securities laws, arguing that these are about utility rather than investment, per the WSJ.

And I'm so glad they did, because it's been a long week and I needed a good laugh.

As Kia points out, VC firms often participate in ICO pre-sales whose primary advantage over public sales is a pricing discount. Seems like the sort of thing most interesting to investors, including ones that invest in ICO's out of capital pools that are legally constructed as investment funds.

  • But seriously folks: One very legitimate issue I'm told the VCs did raise, however, is the need for a regulatory path from security to commodity. In other words, what happens when a token evolves from an investment instrument into central infrastructure for software (e.g., ethereum). It's something the SEC and other regulators need to figure out, and quick.

Dealer in/Dealer out: Uber is in advanced talks to offer its CFO role to Zane Rowe, who currently holds the same position at VMWare, according to Bloomberg. It would be an important move for Uber's IPO prep, but could complicate VMWare's ongoing talks with Dell Technologies about a reverse merger.

Earnings season: Blackstone this morning announced a 20% drop in Q1 earnings, but that still beat analyst estimates. Its corporate private equity carrying value increased 6.4% during the quarter. Blackstone president Jon Gray told me during a media call that the White House's failure to move on infrastructure "is not having an impact" on the firm's infrastructure fundraising efforts.

Just saying: The NY Post yesterday reported that Gannett plans to "sit out" the bidding for Tronc. Maybe that's how it plays out, but I'm also hearing that it's in financing talks with a deep-pocketed firm. You might recall that financing troubles are what felled Gannett's efforts to buy the business (then still known as Tribune) back in late 2016.

DoJ vs. AT&T: Time Warner CEO Jeff Bewkes yesterday testified that the government's argument is "ridiculous," while AT&T exec John Stankey insisted that the company wouldn't work with rivals like Comcast to restrict their content from digital-only rivals.

The BFD
Source: Giphy

Procter & Gamble (NYSE: PG) has agreed to buy the consumer health business of Merck KGaA, which includes Seven Seas and Neurobion vitamins, for €3.4 billion. It is P&G's first major acquisition since activist investor Nelson Peltz won a seat on the company's board of directors.

  • Why it's the BFD: Because this means there is now one less bidder for Pfizer's consumer health business. It also gives P&G additional exposure in Asia and Latin America, plus an OTC vitamins business to compliment a portfolio that already includes such brands as Crest, Oral-B, Pepto-Bismol and Vicks.
  • Bonus: The deal caused P&G to push up its Q1 earnings release from tomorrow to today.
  • Bottom line: "Morgan Stanley analyst Vincent Meunier said the price implied a valuation of 4.7x sales and around 19x EBITDA for the business, at the high end of recent deals in the sector." — Ludwig Berger, Reuters
Venture Capital Deals

Huitongda, a Chinese e-commerce platform for rural customers, raised around $717 million in funding from Alibaba. http://axios.link/YOGw

Basis, a Hoboken, N.J.-based developer of a “price-stable” cryptocurrency, raised $133 million in new funding from Bain Capital Ventures, GV, Lightspeed Venture Partners, Foundation Capital, Andreessen Horowitz, WingVC, NFX Ventures, Valor Capital, Zhenfund, Ceyuan, Sky9 Capital, Digital Currency Group, Stan Druckenmiller and Kevin Warsh. http://axios.link/OHCm

🚑 BenevolentAI, a London-based AI startup focused on drug development, raised $115 million at a $2 billion pre-money valuation. The only disclosed backer was Woodford Investment Management. http://axios.link/pXSD

RealSelf, a Seattle-based online cosmetic treatments marketplace, raised $40 million in new funding led by Elephant. http://axios.link/MOnu

Coverfox, an India-based online insurance platform, raised $22 million in Series C funding. IFC and return backer Transamerica co-led, and were joined by Accel, SAIF Partners and Catamaran Ventures. http://axios.link/BvxB

RubiconMD, a platform that connects primary care physicians to specialists, raised $13.8 million in Series B funding co-led by HLM Venture Partners and Optum Ventures. http://axios.link/0GZZ

Wonolo, a San Francisco-based on-demand platform for temp workers, raised $13 million in new funding. Sequoia Capital led, and was joined by Base10 and return backers CrunchFund and PivotNorth. http://axios.link/AO1k

Open Cosmos, a UK-based “satellite democratization” startup, raised $7 million in Series A funding. BGF Ventures led, and was joined by LocalGlobe, Entrepreneur First and individual angels. http://axios.link/iMIF

Squarefoot, a platform for locating mid-sized office spaces, raised $7 million in new funding. Rosecliff Ventures led, and was joined by RRE Ventures, Triangle Peak Partners and Armory Square Ventures. http://axios.link/WdLI

🚑 Grid Therapeutics, a Durham, N.C.-based developer of targeted immunotherapies for cancer, raised $5 million in Series B funding led by Milestone Holdings. http://axios.link/1ND9

Play by Play Sports Broadcasting Camps, an operator of sports media summer camps for kids, raised an undisclosed amount of funding from SeventySix Capital. www.playbyplaycamps.com

Private Equity Deals

Apax Digital has agreed to acquire a majority stake in Solita, a Finnish digital transformation company, from Vaaka Partners. www.solita.fi

Athora Holding, a Bermuda-based portfolio company of Apollo Global Management, has agreed to acquire the Belgian business of Italian insurer Generali (Milan: GASI) for €540 million. http://axios.link/8pvp

CVC Capital Partners is nearing an agreement to buy Malaysian snack food maker Munchy Group for around $283 million, per DealStreetAsia. http://axios.link/0GgE

JLL Partners and Water Street Healthcare Partners have jointly agreed to acquire Triplefin, a Cincinnati-based provider of pharma hub services. www.triplefin.com

Kohlberg & Co. has agreed to acquire Cadence, a Staunton, Va.-based maker of complex components and finished devices for surgical and specialty industrial applications. www.cadenceinc.com

Madison Dearborn Partners has acquired RDX, a Warrendale, Penn.-based provider of remote database administration and cloud managed services. www.rdx.com

The Riverside Co. has invested in Spirion, a New York-based provider of enterprise audit and protection software. www.spirion.com

Public Offerings

GrafTech International, a Brooklyn Heights, Ohio-based maker of graphite electrodes for use in steelmaking, raised $525 million in its IPO. It priced 35 million shares at $15, which was well below plans to offer more han 37 million shares at $21-$24. The Brookfield Capital-owned company will trade on the NYSE under ticker EAF, while J.P. Morgan served as lead underwriter.

🚑 MorphoSys, a German antibodies developer, raised $208 million in its U.S. IPO. The company priced 8.3 million shares at $250.04, which was a slight discount to where its stock trades in Frankfurt (but which still gave it a $3.1 billion initial market cap). The company will trade on the Nasdaq under ticker MOR, while Goldman Sachs was lead underwriter.

Vivendi (Paris: VIV) is considering an IPO for wholly-owned music unit Universal Music, according to comments from Vivendi’s CEO. http://axios.link/tREX

Liquidity Events

Weir Group (LSE: WEIR) has agreed to acquire Portland, Ore.-based mining tools maker ESCO for $1.05 billion. Sellers would include Endeavour Capital. http://axios.link/KmYl

More M&A

General Motors (NYSE: GM) said that its South Korean unit will file for bankruptcy if its labor union doesn’t agree to a cost-cutting deal by tomorrow. http://axios.link/5gzI

🚑 Shire (LSE: SHP) has rebuffed a $60 billion takeover offer from Takeda Pharma (Tokyo: 4502), but the two sides continue conversations. http://axios.link/0GkW

SunPower (Nasdaq: SPWR) has agreed to acquire SolarWorld Americas, an Oregon-based solar panel maker owned by Germany’s SolarWorld. http://axios.link/Xl6D

Fundraising

Costanoa Ventures is raising $75 million for an "opportunities fund," per an SEC filing. www.costanoavc.com

It's Personnel

Cerberus Capital Management announced several top management changes: Matt Zames, the former COO of J.P. Morgan Chase, has joined as president; Frank Bruno has been promoted to co-CEO; and Lee Millstein has been promoted to president of international operations.

Blue Wolf Capital Partners has promoted Jeremy Kogler from principal to partner. www.bluewolfcapital.com

Stephen DeFalco, former CEO of Crane & Co., has joined Lindsey Goldberg as a partner. www.lindsaygoldbergllc.com

Kim Hammonds is stepping down as COO of Deutsche Bank, which also will lose IR chief John Andrews, per the WSJ. http://axios.link/slhZ

Mike Mossholder has joined Vision Venture Partners as chief business officer. He previously was EVP of marketing partnerships for the UFC. www.vvpllc.com

Kevin Sin has joined GlaxoSmithKline to lead its experimental drug acquisition efforts. He previously led oncology deal-making for Genentech. http://axios.link/nE8p

In Memoriam

Shawn Kelly, founder and managing partner of private equity firm Teakwood Capital, has died from a self-inflicted gunshot wound. Prior to forming Dallas-based Teakwood in 2004, he had been with Austin Ventures.

Per a statement on Teakwood's website:

We at Teakwood Capital are deeply saddened and shocked to report the unexpected death of Shawn Kelly. Our hearts are breaking for Shawn’s wife Roni and family as well as his large network of friends. There are more questions than answers for the family, and we are not aware of any funeral arrangements for Shawn. At the moment, the family has asked for privacy, but we all stand ready to support them.
Final Numbers
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Data: Money.net; Chart: Axios Visuals
Dan Primack