Dec 17, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Malaysian prosecutors today filed criminal charges against Goldman Sachs, accusing the bank and one of its former partners of making false and misleading statements while facilitating the sale of international bonds for the country's state investment fund, 1MDB.

  • What's most notable here is that Goldman itself was charged, not just the former partner (Tim Leissner).
  • Leissner already plead guilty earlier this year in the U.S. to bribery and money laundering, related to the 1MDB situation. It's unclear if Malaysia will request extradition and, if so, if the U.S. would comply.
  • Goldman shares are down more than 2% in pre-market trading.
  • Thought bubble, per Axios' Felix Salmon: "GS sources say that they will play the 'rogue employee' defense. Good luck with that."

Seed investor and accelerator 500 Startups has done some layoffs, just in time for the holidays, Axios has learned. Among the departures are chief operating officer Aman Verjee and SF-based managing director Mat Johnson. No comment from the firm, natch.

Canary watch: The recent leveraged loans drought is just the tip of the credit crunch, per the FT:

Not a single company has borrowed money through the $1.2 trillion US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market, according to data providers Informa and Dealogic.

Brexit: The Netherlands has topped the UK for private equity deal value in 2018, the first time that the UK hasn’t led Europe since 2011, according to a new report out this morning from The Centre for Management Buyout Research.

  • The gap between #1 and #2 is larger than the gap between #2 and #3 (France).
  • One British bright spot, per the report, is stability in lower middle-market transactions (£250m and below), as the decline was largely driven by mega-deals.

Some very sad news out of New York over the weekend, where Vine and HQ co-founder Colin Kroll died of a suspected drug overdose. Memories and condolences from HQ host Scott Rogowsky in the app last night.

🎧 Friday's Pro Rata podcast focused on Trump's hush-money headaches, and included an interview with the lawyer for Karen McDougal. Listen here.

The BFD
Source: Giphy

Boeing (NYSE: BA) agreed to buy an 80% stake in the commercial aviation business of Brazil's Embraer at an enterprise value of $5.26 billion.

  • Why it's the BFD: This is nearly an 11% valuation bump from when a preliminary agreement was first announced this past summer, and means Boeing will become a challenger to Airbus and Bombardier in the smaller passenger jet market.
  • Background: The deal comes after a legal injunction was thrown out by a Brazilian appeals court, although it still requires Brazilian regulatory approval.
  • Bottom line: "While Embraer has had a fair amount of success with U.S. regional airlines, that's a limited market that can't come close to filling Embraer's production capacity... Tapping into Boeing's massive customer base and its sales force is the best way for Embraer to land some significant orders from major airlines." — Adam Levine-Weinberg, The Motley Fool
Venture Capital Deals

Byju, an Indian ed-tech company, raised $540 million at a $3.6 billion valuation. Naspers led, and was joined by CPPIB and General Atlantic. http://axios.link/2RE6

Avanan, a New York-based enterprise security startup focused on SaaS-based email and collaboration platforms, raised $25 million in Series B funding from return backers StageOne Ventures, Magma Venture Partners and TPG Growth affiliate Greenfield Partners. www.avanan.com

🚑 K Health, a New York-based primary care platform for patient diagnoses, raised $25 million in Series B funding. 14W, Mangrove Capital Partners and Comcast Ventures were joined by return backers Lerer Hippeau, BoxGroup and Max Ventures. http://axios.link/qF41

Omnivore, a Hayward, Calif.-based POS connectivity platform, raised $10 million in Series A funding co-led by The Coca-Cola Co. and Performance Food Group. http://axios.link/YH7i

🚑 SonarMD, a Chicago-based healthcare management startup focused on “high beta” patients, raised $10 million from BCBS Venture Partners and Arboretum Ventures. www.sonarmd.com

Private Equity Deals

Crestview Partners completed its previously-announced buyout of Elo Touch Solutions, a Milpitas, Calif.-based maker of touchscreens, from The Gores Group. www.elotouch.com

🚑 DRS Imaging Services, a New York-based portfolio company of HiGro, acquired the assets of DocuLynx, an Omaha. Neb.-based provider of document management software and services. N Omaha, www.drsimaging.com

PPC Partners completed its previously-announced purchase of Plaskolite, a Columbus, Ohio-based provider of transparent thermoplastic sheet products, from Charlesbank Capital Partners. www.plaskolite.com

• Thoma Bravo is in “early discussions” to buy security software maker McAfee from TPG Capital and Intel, per CNBC. http://axios.link/sI7f

🚑 WellSky, a Lenexa, Kan.-based portfolio company of TPG Capital, acquired Consolo Services Group, a Lexington, Ky.-based provider of health IT solutions for the hospice and palliative markets, from Bluff Point Associates. http://axios.link/FlAQ

Public Offerings

No more companies are expected to price U.S. IPOs in 2019, per Renaissance Capital.

Liquidity Events

GFG Alliance, led by Sanjeev Gupta, offered to buy UK-based steel trader Stemcor for just under $150 million, per the FT. Sellers would include Apollo Global Management. http://axios.link/7yU6

Greybull Capital is seeking a buyer for Monarch Aircraft Engineering, a UK-based aircraft engineering group, per the FT. http://axios.link/dBZB

Upland Software (Nasdaq: UPLD) acquired Adestra, a UK-based provider of email marketing, transaction and automation software, for $60.2 million. Adestra had raised around $7 million in VC funding from firms like Business Growth Fund. http://axios.link/p1DW

More M&A

Illustration: Lazaro Gamio/Axios

The parent companies of T-Mobile U.S. and Sprint, Deutsche Telekom and SoftBank, have agreed to "consider curbing" their use of equipment from Huawei Technologies in order to receive U.S. national security clearance for the telco companies' planned merger, per Reuters.

ABB (Swiss: ABBN) agreed to sell a majority stake in its Power Grids unit to Hitachi (Tokyo: 6501) and return proceeds to shareholders, following activist investor pressure. http://axios.link/nyeU

🚑 Bristol-Myers Squibb (NYSE: BMY) is nearing a $1.6 billion sale of French OTC drugs unit UPSA to Japan’s Taisho Pharmaceutical (Tokyo: 4581), per Bloomberg. http://axios.link/T2ow

Gray Television (NYSE: GTN) will need to divest broadcast stations in nine markets, in order to win U.S. antitrust approval for its $3.65 billion purchase of Alabama-based broadcaster Raycom Media. http://axios.link/GzXI

Oxford Properties Group of Canada completed its A$3.4 billion Australian office owner Investa Office Fund (ASX: IOF), after a long battle with The Blackstone Group, and said it plans to divest three properties valued at around A$1 billion.

Saxo Bank offered to buy listed Dutch online brokerage BinckBank for around €429 million, per Bloomberg. http://axios.link/iLku

Wren House, a unit of Kuwait Investment Authority, is in talks to sell a 40% stake in the North Sea gas infrastructure assets it bought four months ago for 1.3 billion, to J.P. Morgan Asset Management, per the FT. http://axios.link/grH5

Fundraising

Kensington Capital Partners, a Toronto-based VC fund-of-funds and direct tech startup investor, held an C$85 million first close on its second fund. www.kcpl.ca

Goodwater Capital, a Silicon Valley VC firm, is raising $75 million for its first opportunities fund, per an SEC filing. www.goodwatercap.com

L Squared Capital Partners of Newport Beach, Calif. Raised $325 million for its second fund, per an SEC filing. www.lsquaredcap.com

🚑 Versant Ventures closed its seventh flagship healthcare fund with $600 million, plus US$100 million for a Canadian sidecar. www.versantventures.com

It's Personnel

Clayton, Dubilier & Rice promoted Gregory Laï to partner. He has been with the firm since 2007. www.cdr-inc.com

Olympus Partners promoted Matthew Boyd to principal. He joined the firm in 2011. www.olympuspartners.com

Jodi Yang joined European VC firm Balderton Capital as head of investor relations. She previously was a partner with B Capital Group. www.balderton.com

Final Numbers
Expand chart
Data: Hedge Fund Research; Chart: Andrew Witherspoon/Axios

Go deeper: It's the worst time in years to run a hedge fund

Dan Primack