Feb 15, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

I'm excited to announce that Axios will be hosting the third leg of its Smarter Faster Revolution tour on Monday, February 26 in New York City. The focus will be on entrepreneurship, and I'll be interviewing both Draymond Green of the Golden State Warriors and Susan Lyne of BBG Ventures. Plus a roundtable with Axios' Mike Allen and Jim VandeHei and more to be announced. If you'd like an invite, please email events@axios.com.

Top of the Morning
Photo by Justin Sullivan/Getty Images

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
Source: Giphy

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
Venture Capital Deals

🚑 HeartFlow, a Redwood City, Calif.-based developer of a technology that creates personalized 3D model of the heart, has raised $240 million in Series E funding at a valuation north of $1.5 billion. Wellington Management and Baillie Gifford were joined by return backers like HealthCor. http://axios.link/C4aW

Kakao, a South Korean messaging app maker, said that its gaming unit has raised $130 million in pre-IPO funding from backers like Tencent, Premier Growth, Actozsoft and Bluehole Studio. http://axios.link/wCG2

LimeBike, a dockless bike-share startup, has raised $70 million in new Series B funding (bringing the round total to $132m). New backers include Fifth Wall. http://axios.link/P0pK

Catalyte, a Baltimore-based provider of software development services, has raised $27 million in Series A funding from Rise of the Rest, Cross Culture Ventures, Expon Capital and Palm Drive Capital. It also has acquired Seattle-based developer Surge. http://axios.link/u0uU

Primary, a New York kids clothing startup led by a pair of former Diapers.com execs, has raised nearly $20 million in new venture capital funding, according to an SEC filing. The company previously raised around $8 million from firms like Homebrew and USVP.

🍷 Vivino, a San Francisco-based mobile wine app and online wine marketplace, has raised $20 million in Series C funding. SCP Neptune International led, and was joined by return backers Balderton Capital, Creandum, SEED Capital Denmark and Iconical. http://axios.link/Fmbg

RealWear, a Vancouver, Wash.-based maker of AR headsets for industrial workers, has raised $17 million in Series A funding led by Columbia Ventures Corp. http://axios.link/eafr

SaltStack, a Salt Lake City-based “intelligent automation platform,” has raised $15.5 million in Series A funding. Mercato Partners led, and was joined by return backers Peak Capital, Epic Ventures and Deep Fork Capital. http://axios.link/FKFG

DroneBase, a Los Angeles-based drone operations company, has raised $12 million in Series B funding. Union Square Ventures and Upfront Ventures co-led, and were joined by DJI, Hearst Ventures and Pritzker Group.

DailyPay, a New York-based provider of real-time access to earned wages for employees, has raised $9 million in Series B funding. Intercept Ventures led, and was joined by return backers RPM Ventures, Inspiration Ventures and Draper Frontier. www.dailypay.com

Lumi, a San Francisco-based startup that helps e-commerce companies produce custom packaging, has raised $9 million in Series A funding. Spark Capital led, and was joined by Forerunner Ventures and Homebrew. http://axios.link/okZq

Boost.ai, a Norway-based provider of chatbots and virtual assistants, has secured up to $5 million from Alliance Venture. www.boost.ai

Workast, a Santa Monica, Calif.-based Slack app for team management, has raised $1.85 million in seed funding. Greycroft led, and was joined by Spider Capital, Mucker Capital and Dream Incubator. www.workast.io

Apologies: Yesterday we jumped the embargo gun on Singularity University, a California group that “educates individuals and organizations on navigating accelerating technological change,” raising Series B funding. The $32 million round co-led by WestRiver Group and Boeing, had been slated for today (which I had agreed to).

  • Singularity's Carin Watson tells me the proceeds will go toward expanding digital learning solutions (it's mostly been an in-person biz) and international expansion
Private Equity Deals

⛽ Apollo Global Management has invested in Tidewater Logistics, a Fort Worth, Texas-based provider of frac sand supply chain solutions. www.tidewater-logisticscom

Grey Mountain Partners has completed its previously-announced purchase of CHEP Recycled, a whitewood pallet recycler with 73 locations in North America, from Australia’s Brambles (ASX: BXB) for US$115 million. http://axios.link/1i1M

TPG Capital has completed its previously-announced $737 million take-private acquisition of Exactech, a Gainesville, Fla.-based maker of orthopedic implant devices and surgical instrumentation for extremities and large joints.

Veritas Capital has agreed to acquire the US Sector business of PricewaterhouseCoopers. http://axios.link/Jqkf

🚑 WebPT, a Phoenix-based rehab therapy software company owned by Battery Ventures, has acquired BMS Practice Solutions, an Upland, Calif.-based billing and collections company for the rehab therapy market. www.bmsreimbursement.com

Xactly, a San Jose, Calif.-based portfolio company of Vista Equity, has acquired Obero, a Canadian provider of sales performance management software. http://axios.link/Mr3U

Xebec, a McLean, Va.- based portfolio company of Arlington Capital Partners, has acquired Integrity Applications, a Chantilly, Va.-based provider of systems engineering and other tech solutions to the intelligence and defense communities. www.xebecglobal.com

Public Offerings

99 Designs, a crowd-sourced design marketplace that has raised over $40 million in VC funding from firms like Accel, is prepping an Australia IPO, according to TechCrunch. The company was founded in Australia before relocating to the Bay Area, but has since returned its headquarters to Melbourne. http://axios.link/H0Me

Liquidity Events

OpenText (Nasdaq: OTEX) has acquired Hightail (f.k.a.YouSendIt), a Campbell, Calif.-based file storage company that had raised over $100 million from firms like Western Digital, Accolade Partners, Alloy Ventures, Emergence Capital Partners, Adams Street Partners, Sigma Partners and Sevin Rosen Funds. http://axios.link/W19T

More M&A

🚑 Astellas (Tokyo: 4503) has agreed to acquire Universal Cells, a Seattle-based biotech focused on stem cell therapies, for $102.5 million. http://axios.link/TRTz

Carbonite (Nasdaq: CARB) has acquired Mozy, a Seattle-based provider of enterprise backup and recovery solutions, from Dell Technologies for $145.8 million. http://axios.link/VhCP

Wells Fargo (NYSE: WFC) has agreed to sell its Puerto Rico auto finance business to a unit of Popular Inc. (Nasdaq: BPOP) for around $1.7 billion in cash (including $1.5b in retail loans and $340m in commercial loans). http://axios.link/fdTX

Fundraising

🚑 1315 Capital, a Philadelphia-based healthcare growth equity firm, has raised $300 million for its second fund, per an SEC filing. www.1315capital.com

Activant Capital Group, a Connecticut-based growth-stage venture firm focused on commerce infrastructure and IoT startups, has closed its second fund with $129 million. www.activantcapital.com

🚑 MTS Health Investors, a New York-based private equity firm, has rebranded as WindRose Health Investors. www.windrose.com

Mucker Capital, a Los Angeles-based pre-seed and seed-stage firm, is raising $90 million for a pair of new funds, per an SEC filing. www.muckercapital.com

It's Personnel

Adam Levin has joined Bain Capital Ventures as a Boston-based partner focused on growth-stage investing. He previously was with Kayne Anderson Capital Advisors. www.baincapitalventures.com

Goldman Sachs has named Dusty Philip as co-head of global M&A. He previously was co-head of global industrials, a spot that will be filled by Matt McClure. www.gs.com

TSG Consumer Partners has promoted Adam Hemmer to vice president. www.tsgconsumer.com

Final Numbers

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Data: Brookings; Chart: Chris Canipe / Axios
  • The U.S. cities with the smallest gaps are Deltona (FL), Virginia Beach (VA) and Oxnard (CA).
  • Go deeper at Axios
Dan Primack