Feb 13, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Source: Giphy

Cerberus Capital Management is finally out of the firearms manufacturing business, a scant five years after it first tried to sell the conglomerate then known as Freedom Group. The only wrinkle is that this particular exit is coming via a prepackaged bankruptcy.

  • We first discussed this possibility last week, based on a Reuters report, but Remington made it official yesterday. Equity-holders get wiped out. First-lien lenders get 82.5% of the reorganized equity, while third-lien holders get the rest. There's also a $5 million set-aside for a litigation trust (the company is in court with some Sandy Hook families).
  • Debtwire reported last month that Cerberus had bought up some of the third-lien notes, but a source close to Cerberus insists the firm is not a current bondholder. Cerberus itself declined to go on the record when asked.
  • Cerberus' basic investment theory was that it would buy up tons of firearms manufacturers, including Marlin, DPMS, AAC, Dakota Arms, S&K and Barnes Bullets. It would then IPO the market leader, providing itself liquidity and the company a way to repay some debt.
  • The IPO was essential. Not only because the conglomerate was now too big to be assumed by another domestic maker (foreign companies would have faced too much regulatory scrutiny), but also because cost-savings were created via tight integrations that made piece-meal sales almost impossible.
  • But the firm's major blind spot — perhaps because Cerberus leader and Trump pal Stephen Feinberg is a recreational shooter — was that one of its weapons could be used in a mass murder, thus scaring off the sorts of large institutional investors needed to pull off that type of public offering.
  • It also missed how the election of a pro-gun president could dampen new product sales.

Coming attractions: Spotify is a giant step closer to going public without engaging in a traditional IPO process, as the SEC has approved a New York Stock Exchange request to modify certain rules related to direct listings.

  • The NYSE application wasn't officially about Spotify, which still needs to go through its own SEC registration process. But, unofficially, it was.

Healthcare M&A frenzy: The WSJ reports that Walgreens Boots Alliance has held talks to buy drug distributor AmerisourceBergen, in which Walgreens already holds a 26% stake.

  • Why it matters: The combined company would have around $276 billion in annual revenue, second only to Walmart among U.S. companies.

Tom vs. term sheets: Tom Brady has launched a digital media startup called The Religion of Sports, alongside Michael Strahan and Gotham Chopra, per TechCrunch, which adds that the trio is seeking $3 million. No doubt they'll be able to get the money — VCs have a habit of sidling up to pro athletes — but also no idea why someone with Brady's bankroll needs an equity partner.

Tech-lash: Bill Gates tells Axios that big tech companies are inviting the type of government intervention that once bedeviled Microsoft.

Building bridges: There doesn't look to be too much in the White House infrastructure plan that wasn't in the leaked draft Axios obtained last month. Lots of focus on public-private partnerships, providing cornerstone capital to projects that would largely be funded by state/local governments and new revenue generation via user fees (including the allowance of interstate highway tolls).

  • Just thinking aloud: There is currently a surfeit of dry powder in private equity infrastructure funds, but this is a long-term proposal that would outlast most current capital pools. Increasing interest rates could reduce the fabled search for yield, which could negatively impact fundraising for infrastructure vehicles (since they generally have lower ROI expectations). Trump's plan is likely DOA but, if it's not, there may be a lack of "private" capital in the latter years.

Political science: Peter Thiel, during a recent on-stage conversation with Reid Hoffman:

“Crypto is decentralizing, AI is centralizing. Or, if you want to frame it more ideologically, crypto is libertarian and AI is communist."
The BFD
Source: Giphy

Outdoorsy, an Airbnb-style service for recreational vehicles, has raised $25 million in Series B funding. Aviva Ventures and Altos Ventures co-led, and were joined by return backers Tandem Capital and Autotech Ventures.

  • Why it's the BFD: Because this is more about millennials than retirees, which blows up all sorts of generational stereotypes. Not only does Outdoorsy say that millennials are responsible for 38% of annual RV rentals, but Winnebago reports that RV sales are at a 50-year high and that millennials comprise 44% of first-time buyers.
  • Bottom line: "RV owners set prices [via Outdoorsy], keeping between 80-94% of the total based on their 'trust' ranking scores on the site and on how many vehicles they are renting. (The more they rent, the more they keep.) Outdoorsy separately keeps at least 10% of the overall rental price, in part to pay for on-demand insurance, along with unlimited roadside assistance." — Connie Loizos, TechCrunch
Venture Capital Deals

XebiaLabs, a Boston-based provider of delivery automation software, has raised $100 million in new funding from backers like Accel and Susquehanna Growth Equity. http://axios.link/EIoW

YapStone, a Walnut Creek, Calif.-based provider of payment services to online marketplaces, has secured $71 million of what could be a $100 million-targeted Series C round. Premji Invest led, and was joined by MasterCard and return backers Accel and Meritech Capital Partners. http://axios.link/5ulk

DataVisor, a Mountain View, Calif.-based provider of fraud detection solutions, has raised $40 million in Series C funding. Sequoia Capital China led, and was joined by return backers NEA and GSR Ventures. http://axios.link/hFDo

InfluxData, a San Francisco-based time series database startup, has raised $35 million in Series C funding. Sapphire Ventures led, and was joined by Harmony Partners and return backers Battery Ventures, Mayfield Fund and Trinity Ventures. http://axios.link/XiMp

🚑 Vascutek, a Scotland-based maker of aortic implants, has raised £33 million in new funding from parent company Terumo Corp. (Tokyo: 4543). http://axios.link/Sdxm

UJet, a San Francisco-based developer of customer support acceleration software, has raised $25 million in Series B funding. GV led, and was joined by Citi Ventures and return backers Kleiner Perkins and DCM Ventures. http://axios.link/kRcn

Spryker Systems, a German provider of customized e-commerce expansion solutions, has raised $22 million in growth equity funding. One Peak Partners led, and was joined by return backer Project A. http://axios.link/ZdiC

Unacast, a Norweigian data location startup, has raised $17.5 million in Series B funding. White Star Capital led, and was joined by Telia, and return backers Open Ocean Capital and Investinor. http://axios.link/gEMS

Ucomune (f.k.a. UrWork), a Chinese co-working space company, has raised $17.4 million at a reported $1.42 billion valuation from existing backer Qianhai Wutong M&A Funds. http://axios.link/3yT6

Templafy, a Danish provider of brand governance and enterprise productivity SaaS, has raised $17.2 million in Series B funding. Insight Venture Partners led, and was joined by return backer SEED Capital. www.templafy.com

👕 Frank and Oak, a Canadian direct-to-consumer menswear brand, has raised $16 million in Series C funding. Caisse de dépôt et placement du Québec led, and was joined by Goodwater Capital and Investissement Québec. http://axios.link/DWKB

Bird, an electric scooter-share startup launched by Travis VanderZanden (ex-Uber/Lyft), has raised $15 million in Series A funding. Craft Ventures led, and was joined by Tusk Ventures, Valor, Lead Edge Capital and Goldcrest Capital. http://axios.link/YJfp

Jobcase, a Boston-based social and knowledge platform for blue-collar job-seekers, has raised $11.5 million in Series A-1 funding led by Providence Equity Partners. www.jobcase.com

HomeCare.com, a McLean, Ca.-based marketplace for caregivers, has raised $11 million in funding from 3TS Capital Partners, Blue Heron Capital, Maryland Venture Fund, and Private Access Network. http://axios.link/Da00

NepFin, an online commercial lending platform for mid-sized U.S. businesses, has raised $10 million in Series A funding led by Sands Capital Ventures. www.nepfin.com

Perception Point, an Israel-based cybersecurity startup focused on early interception, has raised $8 million in Series A funding. Pitango Venture Capital led, and was joined by State of Mind Ventures and Korea Investment Partners. http://axios.link/pt88

Zervant, a Finnish provider of invoicing software for SMEs, has raised €6 million in funding. Tesi led, and was joined by Northzone, NFT Ventures and Conor Venture Partners. http://axios.link/oHd1

Ditto, a UK-based maker of AI bots, has raised £4 million from IP Group and Parkwalk Advisors. http://axios.link/x7rG

Payfone, a New York-based provider of identity authentication solutions for digital channels, has raised an undisclosed amount of funding from Synchrony Ventures. www.payfone.com

Private Equity Deals

Bregal Partners has made a growth equity investment in Ju-Ju-Be, a San Clemente, Calif.-based maker of premium juvenile products like diaper bags and kids’ backpacks. www.ju-ju-be.com

Clayton, Dubilier & Rice has agreed to acquire a 60% stake in Cleveland-based greeting cards maker American Greetings, while the descendants of founder Jacob Sapirstein will retain the other 40%.

⛽ LineStar Integrity Services, a Pasadena, Texas-based pipeline maintenance and repair company owned by First Reserve, has acquired NuGen Automation, a Houston-based provider of automation solutions to the upstream energy market. www.emsenergysolutions.com

Mercer Advisors, a Santa Barbara, Calif.-based registered investment advisor backed by Genstar Capital, has acquired GFS Private Wealth, a Clearwater, Fla.-based RIA that manages approximately $364 million. www.merceradvisors.com

NorthEdge Capital has invested in Platinum Stairlifts, a UK-based maker of stairlift products. www.platinumstairlifts.com

Spectrum Plastics Group, an Alpharetta, Ga.-based portfolio company of AEA Investors, has acquired Apex Resource Technologies, a Pittsfield, Mass.-based design, tooling, and injection molding group focused on specialty plastics for the medical device industry. www.spectrumplastics.com

Thoma Bravo has acquired a majority stake in Nintex, a provider of intelligent process automation solutions. http://axios.link/YCRR

Public Offerings

🚑 BioXcel Therapeutics, a Branford, Conn.-based startup that uses AI to develop neurological and immune-oncology drugs, has filed for a $69 million IPO. The pre-revenue company plans to trade on the Nasdaq under ticker BTAI, with UBS and BMO Capital Markets serving as lead underwriters.

More M&A

Fosun (HK: 0656) has agreed to acquire a majority stake in French couture label Lanvin, according to Reuters. http://axios.link/eyUl

🍔 Jollibee Foods (Philippines: JFC) has acquired an additional 45% stake in Denver-based burger chain Smashburger for $100 million, bringing Jollibee’s overall position to 85%. Smashburger was originally launched in 2007 with funding from Consumer Capital Partners. http://axios.link/ULJM

Fundraising

Brown Advisory has acquired Washington, D.C.-based venture firm NextGen Venture Partners.

Everwhere Partners, a new VC fund from ex-Austin Ventures vets John Thornton and Chris Pacitti, is raising $100 million for its debut fund, per an SEC filing.

Homebrew, a San Francisco-based seed-stage firm, has raised $90 million for its third fund. http://axios.link/Un31

Jerusalem Venture Partners is raising up to $160 million for its third fund, per an SEC filing.

Omnivore has held a $46 million first close for its second fund, which is focused on Indian tech startups focused on the food, agriculture and rural markets. The total fund target is $75 million. http://axios.link/dECe

⛽ Orion Energy Partners has raised $816 million for its second fund focused on middle-market energy infrastructure companies. www.orionenergypartners.com

Vynn Capital, a Kuala Lumpur-based VC firm led by Victor Chua (ex-Gobi Ventures) and Darren Chua (ex-IE Singapore), is raising $40 million for its debut fund. http://axios.link/1EBN

Waverly Capital, a media/entertainment-focused VC effort launched last year by Edgar Bronfman Jr. and Daniel Leff, is raising $100 million for its debut fund, per an SEC filing.

It's Personnel

Elizabeth Klein has joined Valar Ventures as general counsel. She previously was an M&A associate with Skadden, Arps, Slate, Meagher & Flom. www.valar.com

Kyle Madan has stepped down as a managing director with American Discovery Capital, in order to become VP of finance and strategy at JetSmarter.

Trilantic North America has promoted Grant Palmer to partner. www.trilanticnorthamerica.com

Final Numbers
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Reproduced from GE Global Innovation Barometer 2018; Chart: Axios Visuals
Dan Primack