Jan 2, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Aaaaannnndd... we're back. Please remember that you can drop me feedback and scoop via email, anonymous tip box (http://axios.com/tips) or Telegram/Signal/Confide (DanPrimack). Here we go:

Top of the Morning

That thing where you get a pair of simultaneous surprises:

  • SoftBank succeeded in its tender for Uber shares.
  • Your 7 year-old is soaring on a Costa Rican zip-line without any adult assistance, despite explicit assurances to the contrary.

The latter basically explains why I didn't send out an alert last Thursday about the former, despite my best of intentions (don't worry, E was fine and, eventually, so was my breathing). So a few quick notes now:

  • The tender was oversubscribed by 42%, according to letter SoftBank sent to a source who offered up shares. What this suggests is that, despite the so-called gag order, sellers sensed that it was going to pass and pass big. So if you wanted to sell 25% of your stake, you might have tendered 50% -- and it mostly worked out, after the pro rating.
  • This deal isn't technically closed yet, as it still must jump through some regulatory hoops. Once it does close, however, Benchmark is expected to drop the lawsuit against Travis Kalanick, which currently is in arbitration.
  • It's a huge win for new CEO Dara Khosrowshahi, and really signifies the beginning of his tenure. From here on out: Uber's wins and losses are on him.
  • I obviously got it very wrong, when it came to the tender succeeding at its initial price. In fact, it likely could have cleared at a lower price. It will be easier for me to figure out exactly why after determining exactly who sold (and how much), but my initial take is that the steady drumbeat of bad news prompted many to bake in large gains now and accept less future upside. But, again, more analysis to come. For now, apologies for misreading the crystal ball.

• Trade wars: Axios' Jonathan Swan reports that President Trump "remains hell-bent on tariffs," particularly when it comes to things like Chinese consumer electronics, but that Gary Cohn and Steve Mnuchin have devised a new set of arguments to slow him down. Read more.

• More (kinda sorta) Trumpland: It's been nearly a year since Anthony Scaramucci agreed to sell hedge fund Skybridge Capital to RON Transatlantic and China's HNA Group, but the deal still hasn't closed yet. Scaramucci tells me that the hold-up is related to CFIUS, and that he hopes for resolution by mid-February.

• Big build: Katerra, the Silicon Valley construction-tech company led by ex-Flex CEO Michael Marks, said in an SEC filing that it's raising $30 million in new funding. But Kia has learned that the round is actually expected to garner more than $200 million.

  • Flashback: Katerra's last raise in April 2017 was a BFD.

• Tax talk: The 2.3% excise tax on gross medical device sales — a part of Obamacare that was suspended by Congress for 2016 and 2017 — is back for 2018. Seems it wasn't eliminated via the tax bill, as many had expected.

  • There has been lots of talk about how this tax cuts into funding for medical device startups, but the data isn't supportive of that argument (as I first discussed back in 2013). Between 2007 and 2017, the two strongest years for VC funding of U.S. medical device companies, in terms of both deal count and pre-money valuation, were 2014 and 2015.
The BFD

Mike Cagney, the recently-ousted CEO of SoFi, is seeking up to $25 million for a new fintech startup focused on home equity lines of credit, according to Recode. His co-founder is wife June Ou, SoFi's former CTO.

  • Why it's the BFD: If 2017 was the year in which VCs began to fire controversial execs, 2018 may be the year in which they're forced to decide on quick-turn second acts.
  • Bottom line: "Cagney's outreach is said to be aggressive and extensive — and given his controversial past, it has investors talking. He has not admitted any wrongdoing amid the news stories and lawsuits against SoFi, which helps students refinance student loans... Some of the initial money for the startup will come from Cagney's own pockets, people said. That money will likely be enough to launch the startup." — Teddy Schleifer, Recode
Venture Capital Deals

• Hellobike, a Chinese bike-share company, has raised around $152 million in new Series D funding, bringing the round total just above $500 million. Fosun Group and GGV Capital co-led the new tranche, while existing backers include Ant Financial, WM Motor, Chengwei Capital and Fujita. http://axios.link/JJMg

🚑 Centrexion Therapeutics, a Boston-based developer of non-opiod, non-steroidal therapeutics for chronic pain, has raised $67 million in Series D funding. NEA led, and was joined by Quan Capital, ArrowMark Partners, Clough Capital Partners, InterWest Partners, 6 Dimensions Capital and Efung Capital. www.centrexion.com

🚑 CMAB BioPharm, a Chinese contract development and manufacturing company for pharma, has raised $38 million in Series A funding. C-Bridge Capital and BioBAY co-led, and were joined by Jianqiao Capital and Qianhai Fund of Funds. http://axios.link/GY2l

• Fuyoukache, a Chinese trucking logistics startup, has raised $23 million in new Series C funding led by JD Logistics, a unit of JD.com (Nasdaq: JD). The round total is now $59 million, while Fuyoukache shareholders include Legend Capital, Eastern Bell Venture Capital and Global Logistic Properties. http://axios.link/b3vx

• SuperMeat, an Israeli developer of lab-made "chicken" meat, has raised $3 million in seed funding from Stray Dog Capital, New Crop Capital and PHW. http://axios.link/jhpU

• Preemadonna, a Menlo Park, Calif.-based developer of a robotic device for nail-painting, has raised over $1 million in VC funding from firms like Halogen Ventures, per an SEC filing. www.preemadonna.com

Private Equity Deals

• Bertram Capital has acquired Mardix, a British provider of switchgear and critical power equipment and services. Mardix will be merged with existing Bertram portfolio company Anord Control Systems to form a new company called Anord-Mardix Group. www.mardix.com

• H.I.G. Capital has agreed to acquire Digital Room, a Van Nuys, Calif.-based online printing company, from Insight Venture Partners, per an FTC filing. www.digitalroom.com

⛽ I Squared Capital has completed its $1.33 billion purchase of the Caribbean and Latin American business of Kindia Energy, a unit of Kenon Holdings (NYSE: KEN). www.kenon-holdings.com

• North Haven Private Equity Asia, a unit of Morgan Stanley, and Chinese company Profex have agreed to acquire Greek natural cosmetics maker Korres for around $58 million. http://axios.link/gofz

Suning Finance, a financial services unit of Shanghai-listed electronics retailer Suning Commerce Group, has raised around $814 million from Yunfeng Capital, Shenzhen Capital Group Co., Macrolink Group, Everbright-IDG Industrial Fund and GP Capital. http://axios.link/llnW

Public Offerings

🚑 ARMO BioSciences, a Redwood City, Calif.-based immuno-oncology company, filed for an $86 million IPO. It plans to trade on the Nasdaq under ticker ARMO, with Jefferies serving as lead underwriter. The pre-revenue company has 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

🚑 Menlo Therapeutics, a Menlo Park, Calif.-based drug developer focused on chronic pruritus and chronic cough, filed for a $97.75 million IPO. It plans to trade on the Nasdaq under ticker MNLO, with Jefferies serving as lead underwriter. The pre-revenue company has raised around $110 million in VC funding from firms like Vivo Capital (24.9% pre-IPO stake), Remeditex (17.8%), Presidio Partners (16.5%), Merck Sharp & Dohme Corp. (8.3%), VenBio (8%), F-Prime Capital (7.5%), Novo Holdings, Rock Springs Capital, Aisling Capital and Bay City Capital. http://axios.link/pmgg

🚑 ResTORbio, a Boston-based developer of therapeutics for age-related diseases, filed for an $85 million IPO. It plans to trade on the Nasdaq under ticker TORC, with BoA Merrill Lynch serving as lead underwriter. The pre-revenue company has raised $65 million in VC funding from firms like OrbiMed (20% pre-IPO stake), Novartis (9.4%), Fidelity, Rock Springs Capital, Quan Capital and Nest Bio. www.restorbio.com

🚑 Solid Biosciences, a Cambridge, Mass.-based drug developer focused on Duchenne muscular dystrophy, filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker SLDB, with J.P. Morgan serving as lead underwriter. The company has raised over $50 million in VC funding, from firms like RA Capital Management, Bain Capital Life Sciences, RTW Investments, Foresite Capital, Cormorant Asset Management, Perceptive Advisors, Janus Capital Management and Biogen. Its last round was a Pro Rata BFD.

More M&A

• IAG (LSE: ICAG), the owner of British Airways, has agreed to acquire insolvent holiday airline Niki from Air Berlin for just £20 million. http://axios.link/bo7L

• Marks & Spencer (LSE: MKS) has sold its Hong Kong and Macau retail business to franchise partner Al-Futtaim. http://axios.link/yNOu

• Rami Levi Chain Stores (TASE: RMLI) has agreed to buy a 20% stake in Israeli coffee shop chain Cofix Group (TASE: CFX) for around $30 million. The deal also includes a two-year option whereby Rami Levi can increase its stake to 50.01%. http://axios.link/Tezw

⛽ Schlumberger (NYSE: SLB) has acquired a North American pressure pumping and well completions business from Weatherford International (NYSE: WFT) for $430 million, ending a planned joint venture. http://axios.link/ksyL

Fundraising

• A18 Ventures, a San Francisco-based VC firm focused on fintech and healthcare startups, is raising up to $50 million for its second fund, per an SEC filing.

• Arsenal is raising up to $150 million for its third growth equity fund, per an SEC filing. www.arsenalgrowth.com

• The Carlyle Group has raised more than $800 million for a new fund that will invest in collateralized loan obligations backed by U.S. and European senior secured corporate loans. www.carlyle.com

⛽ Energy Capital Partners is raising up to $6 billion for its fourth private equity fund, per an SEC filing. www.ecpartners.com

• GIC and Goldman Sachs Asset Management have led a $450 million restructuring of two buyout funds managed by Vector Capital (vintages 1999 and 2005), at what peHUB reports was a price above par. www.vectorcapital.com

• Pioneer Square Labs, a Seattle-based startup studio, is raising its first venture capital fund. http://axios.link/FkNR

Final Numbers

More debt capital markets stats from Thomson Reuters:

  • Global debt capital markets totaled $7.2 trillion for 2017, which was a slight decline from 2016.
  • Global high-yield offerings hit $432.8 billion, a 40% increase over 2016 and the highest total in three years. U.S. issuers accounted for 52%.
  • U.S. investment grade debt hit $1.4 trillion, marking the sixth consecutive year of record offerings.
  • Corporate debt issuance from emerging markets was up 20% over 2016.
  • Debt underwriting fees hit an estimated $29 billion, up 14% from 2016.
Dan Primack