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SoftBank Vision Fund is now regularly employing a dual-class stock structure on its investments in big U.S. tech startups, in order to reduce the prospect of national security reviews by the Committee on Foreign Investment in the United States (CFIUS).
Why it matters: SoftBank Vision has always been subject to CFIUS scrutiny, most notably on its Uber investment, but there are new concerns that it could increase substantially if Senate Republicans successfully impose sanctions on Saudi Arabia, which committed around $45 billion of Vision Fund's $100 billion.
Here is how The Information's Alfred Lee described the process, in a piece published just prior to the murder of Jamal Khashoggi:
"SoftBank has split some recent venture capital deals into two parts: an initial component to acquire a voting stake just under the 10% threshold that normally would trigger a regulatory review, and a second component that involves the acquisition of non-voting shares, which tend not to be closely scrutinized by regulators."
Once CFIUS either chooses not to review the deal or does review and grant approval, SoftBank then has the option to convert some or all of its non-voting shares into voting shares, thus giving it the control it really wanted in the first place.
Lee identified this structure being used in Vision Fund deals for Cohesity ($250m), Getaround ($300m) and Light ($121m).
Axios, with the help of Lagniappe Labs, has also found it being used in a similarly-sized deal for robotics software company Automation Anywhere ($300m) and also in a much larger transaction: The $1.1 billion investment in smart windows company View.
• Speaking of SoftBank: We simply do not yet know if the Saudi situation has negatively impacted Vision Fund's ability to do deals. Most of the recently-announced transactions were negotiated prior to the recent controversy, as Vision Fund deals are known to have a pretty long gestation period (in part because Masa usually needs to meet face-to-face with the CEOs).
So we might not really have a quantitative answer until we see (or don't see) announced deal activity early next year.
• Recommended reading: The Washington Post recently published a devastating piece on elder neglect and other violations at a nursing home chain owned until this past summer by The Carlyle Group. Here's the lede:
"To the state inspectors visiting the HCR ManorCare nursing home [in Pottsville, Penn] last year, the signs of neglect were conspicuous. A disabled man who had long, dirty fingernails told them he was tended to “once in a blue moon.” The bedside “call buttons” were so poorly staffed that some residents regularly soiled themselves while waiting for help to the bathroom. A woman dying of uterine cancer was left on a bedpan for so long that she bruised."
HCR ManorCare went bankrupt back in March, and is now owned by a nonprofit.
- The company argued to WaPo that its patient safety record was in line with industry averages but, when the reporters actually looked at the numbers, that claim didn't hold up.
- Carlyle told WaPo that things were going fine for the first several years after its 2007 acquisition, but that finances got strained after October 2011 changes to Medicare reimbursement rules. WaPo, however, points out that while HCR ManorCare did note those changes in its bankruptcy filing, the company's led off the explanation for its financial condition with details of a sale-leaseback transaction in April 2011.
🎧 Podcast: We discuss why the White House dismissed its own massive report on climate change, which warned of catastrophic economic consequences. Listen here.
Altria Group (NYSE: MO) is in talks to acquire a "significant minority stake" in Juul Labs, the vaping startup last valued at around $16 billion by investors like Fidelity. The deal reportedly would come at a valuation discount, based on new FDA rules that prevent Juul from selling many of its flavored "pods" through retailers like convenience stores and gas stations.
- Why it's the BFD: Because while it makes tons of strategic sense for the Marlboro maker to seek diversification, it also would undercut a lot of Juul's marketing message about being a smoking cessation product.
- Bottom line: "A tie-up would represent a major reordering of the cigarette industry, which is being roiled by technological innovation and new government regulations." — Dana Mattioli & Jennifer Maloney, WSJ
Venture Capital Deals
• Venafi, a Salt Lake City-based machine identity protection company, raised $100 million. TCV led, and was joined by return backers QuestMark Partners and NextEquity Partners. www.venafi.com
• Deputy, an Australia-based provider of workforce management software, raised US$81 million in Series B funding. IVP led, and was joined by Square Peg Capital, EVP and OpenView Venture Partners. http://axios.link/TD4S
• Aras, an Andover, Mass.-based provider of product lifecycle management for enterprises, raised $70 million in Series D funding. Goldman Sachs led, and was joined by Silver Lake Kraftwerk. www.aras.com
• Asana, a San Francisco-based work management platform, raised $50 million in Series E funding at a $1.5 billion valuation. Generation Investment Management led, and was joined by Lead Edge Capital, World Innovation Lab and return backers 8VC, Benchmark Capital and Founders Fund. http://axios.link/UF8d
🤖 Roam Robotics, a San Francisco-based developer of robotic exoskeletons, raised $12 million in Series A funding. Yamaha Motors led, and was joined by Boost VC, Heuristics Capital Partners, Menlo Ventures, R7 Partners, Spero Ventures, Valor Equity Partners, and Venture Investment Associates. www.roamrobotics.com
• Tock, a Chicago-based restaurant and winery reservation platform, raised $9.5 million in Series A funding. Valor Equity Partners led, and was joined by return backer Origin Ventures. www.exploretock.com
• Blue J Legal, a Toronto-based provider of tax law research tools, raised US$7 million in Series A funding. Relay Ventures led, and was joined by LDV Partners and return backers Mistral Venture Partners and BDC Capital. www.bluejlegal.com
🚑 TeleClinic, a German digital health information platform, raised €7 million in Series A funding led by Idinvest Partners. http://axios.link/Nkea
• Easyship, a Hong Kong-based e-commerce shipping integration startup, raised $4 million in Series A funding. Lazada founder Maximilian Bittner led, and was joined by Lamivoie Capital Partners and funds Rubicon Venture Capital, One Way Ventures, Kima Ventures and Picus Capital. http://axios.link/n8FI
• Phiar, a Palo Alto-based developer of a computer vision navigation app for smartphones, raised $3 million co-led by the Venture Reality Fund and Norwest Venture Partners. http://axios.link/5NLY
Private Equity Deals
• Apollo Global Management and Cerberus Capital Management were among those that submitted binding bids for a stake in German lender NordLB, which is seeking to raise around €3 billion, according to Reuters. First-round bidders Advent International, Commerzbank and Helaba did not submit binding offers. http://axios.link/sZPp
• The Emerson Collective acquired Pop-Up Magazine Productions, a San Francisco-based producer of “live magazine events” and publisher of California Sunday Magazine. http://axios.link/sKbB
• Madera Group, a West Hollywood-based restaurant group focused on Mexican dining concepts, raised nearly $21 million from Breakwater Management. http://axios.link/0fOE
• Marlin Equity Partners acquired Shift Media, a Los Angeles-based provider of media-specific collaboration and digital asset management software. www.shift.io
• Sterling Partners invested in Big Blue Marble Academy, a Gilbert, S.C.-based operator of 28 early-education schools in five states. www.bbmacademy.com
• Swander Pace Capital acquired Nutritional Medicinals, a Wilmington, Ohio-based maker of meal replacement products. www.functionalformularies.com
• Vantage Specialty Chemicals, a Chicago-based portfolio company of H.I.G. Capital, agreed to buy LEUNA-Tenside, a German maker of specialty surfactants. www.vantagespecialties.com
• BC Partners is seeking a buyer for Acuris, the UK-based financial news and data business formerly known as MergerMarket, per Reuters. The deal could top £1 billion. http://axios.link/WV6m
⛽ CIVC Partners sold its equity stake in Equipment Transport, a Carlisle, Penn.-based provider of fluids and waste transportation solutions for oil and has companies, to Pilot Flying J. www.pilottravelcenters.com
☕ Lone Star Funds hired Deutsche Bank to find a buyer for Evoca, an Italian maker of vending and coffee machines, per Reuters. A deal could be valued at around €1.5 billion. http://axios.link/56Wa
• Red Hat (NYSE: RHT) acquired NooBaa, an Israeli hybrid cloud data management company that had been seeded by firms like JVP and OurCrowd. http://axios.link/oCpX
⛽ WhiteWater Midstream, an Austin, Texas-based pipeline operator in the Permian Basin, is considering a sale that could fetch $2 billion (including assumed debt), per Reuters. The company was formed in 2016, with backing from Denham Capital Management and Ridgemont Equity Partners. http://axios.link/nqqK
🚑 CVS (NYSE: CVS) completed its $70 billion acquisition of health insurer Aetna. http://axios.link/FCPe
• Eaton Corp. (NYSE: ETN) is in talks to buy Ulusoy Elektrik, a listed Turkish maker of switchgears, for around $300 million, per Reuters. http://axios.link/rDRr
• Mitsui & Co. acquired a 16% stake in Malaysia-listed hospital operator company IHH Healthcare from Malaysian sovereign wealth fund Khazanah Nasional for around $2 billion. http://axios.link/lFxw
• Uber recently bid less than $2 billion to buy UK-based food delivery platform Deliveroo, which is around where the company last raised funding, per the FT. That’s just half of what Deliveroo believes it is worth in a sale, with the Daily Telegraph adding that it might instead seek to raise at least $500 million in new private capital. http://axios.link/xC5c
⛽ Williams Cos. (NYSE: WMB) Is seeking a buyer for its 50% stake in Wyoming pipeline operator Jackalope Gas Gathering Services, which could fetch more than $500 million, per Bloomberg. http://axios.link/scn2
• Crescent Capital Group raised $1.6 billion for its second direct lending fund. www.crescentcap.com
🚑 H.I.G. Capital is raising $300 million for its third healthcare-focused fund, per an SEC filing.
• Owl Ventures, an education-based VC firm, is raising $20 million for a new fund, per an SEC filing. www.owlvc.com
• ParkerGale of Chicago raised $375 million for its second tech buyout fund. www.parkergale.com
• Qualcomm Ventures formed a $100 million fund focused on AI startups. http://axios.link/3TZ3
• Michael Broderick joined middle-market lender Varagon Capital Partners as managing director of healthcare originations. He previously was with Capital One. www.varagon.com
• Tadhg Flood is joining the Centerview Partners as a London-based partner in its financial services practice. He previously was global co-head of financial sponsors at Deutsche Bank. www.centerviewpartners.com
🚑 Carlo Incerti is stepping down as chief medical officer and head of global medical affairs at Sanofi Genzyme, and will join European life sciences VC firm Forbion as an operating partner. www.forbion.com
• Jay Teevan joined Commonfund Capital as managing director of consultant relations. He previously was with Artisan Partners. www.commonfund.org