Axios Pro Rata
February 15, 2018
Top of the Morning
When CVS agreed to acquire insurer Aetna last fall for $66 billion, we wondered about how the deal would impact CVS customers who have different insurance. Would they have to pay higher prices, be denied service, etc? Worst-case scenario sorts of stuff, but clearly matters that regulators would examine.
Now we've learned about a lawsuit in Florida that, were the allegations borne out, could give those regulators something to dig into.
- The plaintiff is Sentry Data Systems, a portfolio company of private equity firm ABRY Partners, which is largely focused on facilitating a federal program (340B) that requires drugmakers participating in Medicaid to provide discounts on certain outpatient drugs. In short, Sentry is a middle-man between the manufacturers and distribution locations like certain CVS pharmacies.
- Sentry claims that after CVS bought rival 340B company Wellpartner last summer, it told many Sentry customers that Wellpartner would become "the exclusive 340B program administrator for all CVS Health retail and specialty pharmacies."
- Not only does Sentry believe some of its trade secrets were misappropriated by CVS, but also that the exclusivity move is anti-competitive — given how large CVS is within the 340B market. Particularly in how it is tying two separate activities together (i.e, 340B administration and retail drug sales).
- This is a relatively small case (albeit huge for Sentry), but discovery could provide some clues into what would come post CVS/Aetna.
- CVS tells Axios the suit is "without merit," adding: "Despite Sentry being the nation’s largest administrator of 340B plans, it appears threatened by new competition and is trying to use unfounded antitrust allegations to stall the growth of a small competitor, Wellpartner."
• Growth hack: Andrew Chen is stepping down as head of growth at Uber, in order to join venture firm Andreessen Horowitz as a general partner. Four things to know:
- He began his professional career as a Seattle-based analyst at Mohr Davidow Ventures.
- His real claim to fame came from the hundreds of online essays he published, with a focus on go-to-market strategies. Among the terms he popularized was "growth hacker."
- Marc Andreessen and Ben Horowitz reached out to Chen in 2007, when they were still just angel investors:
- Chen comes from Uber and Andreessen Horowitz is an investor in Lyft, but Ben Horowitz tells Axios: "The single most important characteristic for a partner here is integrity. He was very clear that confidential information is just that and I wouldn't hire someone who would share information with a competitor, even after he left."
• U-haul alert: Peter Thiel and his family office are moving to Los Angeles, but Founders Fund will remain parked in San Francisco.
• Top talker: Bloomberg yesterday reported that hedge funds are dodging the new carried interest tax rules — which expand required holding periods — by creating shell LLCs in Delaware.
- Treasury Sec. Mnuchin had routinely promised guard-rails to prevent this sort of thing, but was just as routinely light on details. Now he's promising a quick fix.
- Mnuchin and GOP tax-writers really has no excuse here. I had predicted last April that private equity firms would do this if their carry treatment was changed. And if I could figure it out, then they should have figured it out too. Private equity ultimately skated on carried interest in the tax bill, but the hold period change hits some hedge funds, so it's no surprise they're taking advantage.
The BFD
Platinum Equity Partners has agreed to acquire the European vacation rentals business of Wyndham Worldwide (NYSE: WYN) for around $1.3 billion.
- Why it's the BFD: Because this is about a broader break-up plan for Wyndham, which wants to split into a pair of publicly-traded companies: One focused on hotels and one focused on timeshares. The holiday rentals business didn't really fit into either.
- Bottom line: "Platinum’s interest in Wyndham’s European vacation-rentals business illustrates the buyout industry's appetite for deals in the U.K. hospitality and leisure sector amid expectations that more British vacationers will stay in the U.K. rather than travel abroad because of economic uncertainty linked to Britain’s exit from the European Union." — WSJ
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Final Numbers
- The U.S. cities with the smallest gaps are Deltona (FL), Virginia Beach (VA) and Oxnard (CA).
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