Jan 29, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the home office. Just a reminder that I'll be heading to LA tomorrow for the Upfront Summit, where my on-stage responsibilities include an interview with Tim Geithner. If you'll be there too and want to meet up, drop me an email. Okay, here we go...

Top of the Morning
Source: Giphy

Hamilton Lane is out with a new report on how the recent tax plan will impact private market investors. Top takeaways:

  • Overall it’s a win, given expected increases in earnings and cash flow for U.S. companies (which make up the majority of private market portfolios).
  • The upside will be seriously curtailed for companies with high leverage — particularly once debt approaches 5x EBITDA — but even there Hamilton Lane sees a net increase of 30-50 basis points on IRR. That expands to 140-170 bp for companies with low leverage.
  • Hamilton Lane finds that fewer than 13% of exits in 2016 were for companies held 3 years or less, meaning the slight timing change to carried interest taxation is a "snoozer."
  • “For new deals, GPs are pricing in the impact of tax reform--rather than targeting higher IRRs for new deals, they are willing to pay more for assets to achieve the same returns they were targeting before. The bad news for LPs is that prospective deal returns aren’t any better off than they were before, but the good news is that existing deals and portfolios should benefit from higher valuations immediately.”
  • This dichotomy between existing and future assets is being noticed by secondary buyers, who are more likely right now to seek out portfolios with less dry powder.

Chamath cha-ching: Suyi Kim, head of Asia Pacific for the Canada Pension Plan Investment Board, last week told a Hong Kong conference audience that top general partners in the future will be those that have incorporated technology into their decision-making processes:

"As with any disruptive trend, this may appear a fad at the start, but we will eventually see an exponential rise until it becomes the new normal."

Index-ish: Kia reports that 30 startup have banded together for an ICO that aims to raise $35 million.

  • It's called 22x fund, and all of the startups are from the most recent 500 Startups batch.
  • This is similar to startup accelerator Science Inc.'s recent ICO, but in reverse—the startups are assembled before the fundraising, which means investors know upfront what companies they're backing.
  • Each startup is contributing up to 10% of its equity in the form of common shares, depending on the total amount raised.

The future of Apple: Chatting product and possible M&A with Ina Fried. Video here.

(Re)turning green: Oil companies are returning to renewable energy investments, despite having gotten badly burned the last time around. Among them is BP, whose CEO Bob Dudley talks to Axios about lessons learned and the path forward.

ICYMI: Axios last night scooped that Trump national security officials are considering a federal takeover of the nation’s 5G mobile network to guard against China. Not surprisingly, shares of companies like Verizon, AT&T and Comcast were down in pre-market trading.

Source: Giphy

Keurig Green Mountain, controlled by JAB Holdings, has agreed to acquire Dr Pepper Snapple Group (NYSE: DPS) in a $21 billion transaction. DPS shareholders will receive $103.75 per share in a special cash dividend — compared to Friday's $95.65 closing price — and retain a 13% stake in the combined company.

  • Why it's the BFD: Outside of soon being able to quickly brew a cup of 7-Up Dark Roast? Okay, because this reflects broader trends of beverage industry consolidation and of sugary beverage makers needing to diversify their product offerings. Usually such diversification comes on the buy-side, but selling to a coffee company also works.
  • Bottom line: "The deal vaults JAB into competition with the likes of Coca-Cola Co. and PepsiCo Inc. in soft drinks, moving it beyond fast food and coffee, where the privately held company has acquired Panera Bread, Caribou, Peet’s and other chains." — Bloomberg
Venture Capital Deals

Xiaopeng Motors, a Chinese electric vehicle maker, has raised around $348 million in Series B funding. Alibaba, IDG Capital and Foxconn co-led, and were joined by Yunfeng Capital, Apoletto Asia, CICC and return backers GGV Capital, Matrix Partners China and Morningside Venture Capital. http://axios.link/MFXm

Ripple Foods, an Emeryville, Calif.-based maker of a milk-like drink from peas, has raised $65 million in new funding. Euclidean Capital led, and was joined by Goldman Sachs, Khosla Ventures, Fall Line Capital and S2G Ventures. http://axios.link/qEpL

ContentSquare, a French provider of website and app user interaction analytics, has raised $42 million in Series B funding. Canaan Partners led, and was joined by return backers Highland Europe, Eurazeo and H14. http://axios.link/UaTE

Duco, a London-based provider of self-service data engineering solutions for the financial services sector, has raised $28 million in new VC funding from Insight Venture Partners, NEX Opportunities, Eight Roads Ventures and Cristóbal Conde. http://axios.link/zSVn

Logikcull, a San Francisco-based discovery platform, has raised $25 million in new VC funding. NEA led, and was joined by return backers OpenView Venture Partners and Storm Ventures. www.logikcull.com

BigID, an Israeli private customer data identification startup, has raised $14 million in Series A funding from Comcast Ventures, SAP, ClearSky Security Fund and BoldStart Ventures. http://axios.link/4ukw

🚑 Protenus, a Baltimore-based healthcare data protection startup, has raised $11 million in Series B funding. Kaiser Permanente Ventures and F-Prime Capital Partners co-led, and was joined by return backers Arthur Ventures, Lionbird Venture Capital and Cognosante Ventures. http://axios.link/FU3M

Dominode, a Boca Raton, Fla.-based provider of verified identity solutions for regulated industries, has raised $1.3 million in funding from Blockchange Ventures. www.dominode.com

Private Equity Deals

⛽ Citron Hygiene, a Toronto-based portfolio company of Birch Hill Equity Partners, has acquired Hygiene Solutions, a Chicago-based provider of washroom hygiene services. www.citronhygiene.com

J.F. Lehman & Co. has acquired Waste Control Specialists, an Texas-based waste treatment and storage company, from Valhi (NYSE: VHI). www.jflpartners.com

Leonard Green & Partners is in advanced talks to acquire Pro Mach, a Covington, Ky.-based packaging company currently owned by AEA Investors, according to Reuters. The deal could be valued north of $2.2 billion. http://axios.link/ecfX

Public Offerings

9 companies plan to price IPOs on U.S. exchanges this week: Adial Pharmaceuticals, America Airports, Central Puerto, FTS International, Hudson, MTech Acquisition, One Stop Systems, Sol-Gel and VICI Properties. http://axios.link/qDLR

🚑 ARMO BioSciences, a Redwood City, Calif.-based immuno-oncology company, raised $128 million in its IPO. The company priced 7.5 million shares at $17, compared to plans to offer 6.7 million shares at $14-$16. The pre-revenue company began trading on the Nasdaq under ticker ARMO, while Jefferies served as lead underwriter. It had raised around $167 million in VC funding, from firms like Kleiner Perkins (19.6% pre-IPO stake), OrbiMed (18.9%), DAG Ventures (11.1%), Nanodimension (10.1%), GV (5.6%), Decheng Capital (5.6%), Qiming Venture Partners, Sequoia Capital, Quan Capital, RTW Investments, HBM Healthcare Investments, Celgene Corp. and Clough Capital Partners. www.armobio.com

⛽ Cactus, a Houston-based wellhead and pressure control equipment maker backed by Cadent Energy Partners, set its IPO terms to 21.4 million shares at $16-$19. It plans to trade on the NYSE under ticker WHD, with Citi serving as lead underwriter. The company reports $44 million of net income on $236 million in revenue for the first nine months of 2017. www.cactuswh.com

Cardlytics, an Atlanta-based marketing analytics company, set its IPO terms to 5.4 million shares at $13-$15. It would have a fully-diluted market cap of around $296 million, were it to price in the middle. The company reports a $16 million net loss on $91 million in revenue for the first nine months of 2017, and plans to trade on the Nasdaq under ticker CDLX. BofA Merrill Lynch is serving as lead underwriter. Cardlytics has raised over $180 million in VC funding from firms like Canaan Partners, Polaris Partners, Discovery Capital, TTV Capital, ITC Holdings, Total Technology Ventures and Kinetic Ventures. www.cardlytics.com

Huami, a Chinese maker of wearable devices, set its IPO terms to 10 million shares at $10-$12. It would have a fully-diluted market value of around $662 million, if it prices in the middle. The company plans to trade on the Nasdaq under ticker HMI, with Credit Suisse as lead underwriter. Huami reports around $14 million of net income on $195 million in revenue for the first nine months of 2017, while shareholders include Banyan Capital. www.huami-usa.com

TFI TAB Food Investments, a franchisor for Burger King and other quick-service restaurants in Turkey and China, set its IPO terms to 22 million shares at $9-$11. It would have a fully-diluted market value of around $1.2 billion, if it prices in the middle. The company plans to trade on the Nasdaq under ticker TFIG, with Morgan Stanley as lead underwriter. It reports $2.9 billion in revenue for the first nine months of 2017.

⛽ TMK, Russia's largest oil and gas pipe-maker, plans to raise upwards of $535 million in a U.S. IPO. http://axios.link/QRQS

Liquidity Events

Avaya (NYSE: AVYA) has agreed to acquire Spoken Communications, a Seattle-based “contact center as-a-service” company that had raised over $65 million in VC funding from firms like Ignition Partners and Riverwood Capital. www.spoken.com

Relx (LSE: REL) has agreed to acquire ThreatMetrix, a San Jose, Calif.-based digital identity company, for around $830 million. The company had raised nearly $54m in VC funding, most recently in 2014 at a post-money valuation of around $240 million, from firms like USVP, August Capital, Tenaya Capital, In-Q-Tel, CM Capital and Talu Ventures. http://axios.link/RZNC (corrected spelling of ThreatMetrix, purchase amount, VC funding raised and added USVP as investor.)

More M&A

⛽ Mitsui & Co. (Tokyo: 8031) has offered to acquire Australian gas field operator AWE Ltd. (ASX: AWE) for around US$481 million. http://axios.link/H6Ae

PJT Partners has been hired as financial advisor to a group of Steinhoff (JSE: SNH) creditors, in case of a potential debt restructuring. http://axios.link/8orq

Rakuten (Tokyo: 4755) has agreed to acquire Japanese property and casualty insurer Asahi Fire & Marine Insurance from Nomura for $415 million. http://axios.link/hcXy

🚑 Sanofi (Paris: SAN) has agreed to buy listed Belgian biotech Ablynx for around $4.8 billion, beating out Novo Nordisk (whih says it does not plan to make a superior offer). http://axios.link/9APe

Schmolz + Bickenbach (Swiss: STLN) has won a court auction to buy troubled French steelmaker Ascometal. http://axios.link/oKlQ


Blue Point Capital Partners has closed its fourth private equity fund with $700 million in capital commitments. www.bluepointcapital.com

• Bonfire Ventures has raised $60 million for a debut fund focused on SoCal startups. Its team includes Jim Andelman (ex-Rincon Venture Partners), Mark Mullen (ex-Double M Partners) and Leah Volger (ex-Google). http://axios.link/cQOP

Comvest Partners has closed its fourth credit fund with $836 million in capital commitments. www.comvest.com

Sentinel Capital Partners has closed its sixth fund with $2.15 billion in capital commitments. It also raised $460 million for its first junior capital fund. www.sentinelpartners.com

It's Personnel

Jacques Veyrat, former CEO of Louis Dreyfus Group and current head of Impala SAS, has joined KKR as a senior advisor in France. www.kkr.com

Final Numbers
Figures through January 25. Source: Thomson Reuters.

More year-over-year data from Thomson Reuters:

  • Global private equity dollars down 14%, but up 6% in the U.S.
  • Global healthcare M&A dollars up 28%.
  • Global IPO dollars up 68%.
  • Global corporate debt down 16%.
  • J.P. Morgan atop the M&A advisor league table, followed by Morgan Stanley and Credit Suisse.
Dan Primack