Dec 13, 2017

Axios Pro Rata

Top of the Morning

The Walt Disney Co. is expected to announce within the next few days that it will buy the entertainment assets of 21st Century Fox for roughly $60 billion. Included would be Fox's movie studio and television networks like FX and Nat Geo TV.

  • Bottom line: The deal would give Disney the scale to take on Netflix, but first it would need to convince regulators that this merger doesn't pose the same sort of monopoly risk as AT&T's proposed purchase of Time Warner. Key to that argument should be Disney's relative lack of direct-to-consumer distribution technology (a.k.a. "pipes"), although it would have to answer questions about Hulu (in which it would hold a majority stake, following the merger). Plus, as the DoJ's break with horizontal vs. vertical M&A norms shows, there isn't necessarily a reliable playbook for companies to follow right now.
  • Go deeper: Sara Fischer and I have more.

• SV swamp: Venture capitalist Ron Conway cautioned the Hillary Clinton campaign against hosting a 2016 fundraiser at Shervin Pishevar's San Francisco home, according to Forbes. Clinton spokesman Nick Merrill told Forbes that no one from the campaign recalled Conway's emails:

"The behavior we are all learning about is abhorrent and intolerable. The women that have come forward have shown real courage. That needs to continue. As to these claims of warnings after the fact, if people knew of behavior like this, they shouldn't have gossiped about it, they should have stopped it."

On the one hand, Merrill's statement is an obvious dodge. But that last part is a sentiment I've heard more than a few times of late. As Kia puts it: "There is a frustration that men don't risk their own positions of power to stop alleged harassers, even when they know, and that it's still the job of women to risk their own careers in coming forward."

• Beyond CVS/Aetna: Axios' Bob Herman digs into the healthcare M&A arms race.

  • Why now: Medicare and Medicaid are covering more people, as Baby Boomers get older and more low-income people qualify for Medicaid through Obamacare. Those programs pay less than commercial insurance. Getting bigger ultimately gives healthcare systems the upper hand in price negotiations with insurers, to compensate for taking on more publicly-funded care.
  • What's next: Layoffs.

Apple (Nasdaq: AAPL) has signed a $390 million agreement with optical components maker Finisar Corp. (Nasdaq: FNSR). Proceeds would be used to refurbish and reopen a manufacturing facility in Sherman, Texas, which in the middle of next year would begin making optical components called VCSELs (i.e., the wafers that power such new iPhone features as Face ID and Animoji.

  • Why it's the BFD: Because even though the money is coming from Apple's $1 billion Advanced Manufacturing Fund — and despite many headlines to the contrary — Axios has learned that this is not an equity investment. That's why Apple's own press release refers to it as an "award," and reflects how AMF is much more of a strategic platform than a financial one.
  • Ticker tape: Finisar shares were up more than 25% at market open.
  • Bottom line: This is about Apple helping to create supply to meet its own demand. For context, it expects to buy 10 times more VCSELs in Q4 2017 than were made globally in Q4 2016.
Venture Capital Deals

Kingsoft Cloud, a Chinese cloud storage and distribution company, has raised $300 million in Series D funding from Liyue Investment, China Minsheng Investment and controlling shareholder Kingsoft (HK: 3888).

🚑 Pionyr Immunotherapeutics, a San Francisco-based developer of immunotherapies targeting the tumor microenvironment, has raised $62 million in Series B funding. NEA led, and was joined by Sofinnova Ventures, Vida Ventures and return backers OrbiMed, SV Health Investors, Osage University Partners and Mission Bay Ventures.

• 36Kr Media, a Chinese tech news group being spin off from 36Kr, has raised around $45 million in Series A funding. Gobi Partners and China Prosperity Capital co-led, and were joined by Focus Media Information Technology, Hangzhou Finance Investment Group Co., Ltd. and Baidu Video.

• iZettle, a Swedish provider of mobile point-of-sale solutions, has raised €40 million in fifth-round funding at a reported valuation of nearly $950 million. Return backer Dawn Capital led the round, and was joined by new investor Fourth Swedish National Pension Fund.

• Dreamscape Immersive, a location-based VR startup, has raised $30 million in Series B funding. AMC Entertainment led, and was joined by Nickelodeon, Majid Al Futtaim, VRSense Solutions, Image Nation Abu Dhabi and return backers Bold Capital Partners, 21st Century Fox and Warner Bros.

• MindTickle, a Sunnyvale, Calif.-based sales team training startup, has raised $27 million in Series B funding. Canaan Partners led, and was joined by return backers Accel, NEA and Qualcomm Ventures.

🚑 NorthSea Therapeutics, a Dutch developer of an oral treatment for non-alcoholic steatohepatitis, has raised €25 million in new VC funding. Forbion and BGV co-led, and were joined by New Science Ventures.

• Skillz, a San Francisco-based mobile e-sports startup, has raised $25 million in Series C funding. Telstra and Liberty Global co-led, and were joined by Andy Miller and return backers Accomplice and Wildcat Capital.

• FreightHub, a Berlin-based digital freight forwarder, has raised $20 million in Series A funding. Northzone Ventures led, and was joined by return backers Global Founders Capital, Cherry Ventures, Cavalry Ventures and La Famiglia.

• Digital House, an operator of tech training schools in Latin America, has raised $20 million from The Rise Fund.

• Mindspace, an Israel-based co-working startup that is expanding into the U.S., has raised $20 million from British investment firm Crossroads.

🚑 Virtual Incision, a Lincoln, Neb.-based maker of a miniaturized robotically-assisted surgical device, has raised $18 million in Series B funding. Sinopharm Capital led, and was joined by PrairieGold Venture Partners and return backer Bluestem Capital.

• Friss, a Dutch provider of fraud, risk and compliance analytics software for personal and casualty insurers, has raised €15 million in Series A funding co-led by Aquiline Technology Growth and Blackfin Capital Partners.

• Manticore Games, a San Mateo, Calif.-based multiplayer gaming startup founded by ex-EA and Zynga execs, has raised $15 million from Benchmark.

• Eight Sleep, a New York-based smart mattress maker, has raised $10.5 million in new VC funding led by Khosla Ventures, per an SEC filing.

• Clubhouse, a software project management startup, has raised $10 million in Series A funding from Battery Ventures.

• Upstream Security, an Israeli provider of connected car security solutions, has raised $9 million in Series A funding. CRV led, and was joined by Gilot Capital Partners and Maniv Mobility.

• Gremlin, an app stress-testing startup, has raised $7.5 million in Series A funding. Index Ventures led, and was joined by Amplify Partners.

• GenXComm, an Austin, Texas-based developer of wireless network performance and capacity solutions, has raised $7 million in Series A funding. Intel Capital led, and was joined by Azure Capital Partners, Bandgap Ventures, Capital Factory, FAM Capital Partners, Lip-Bu Tan, UT Horizon Fund and WS Investment Co.

Private Equity Deals

🚑 Care Advantage, a Richmond, Va.-based home healthcare services company owned by BelHealth Investment Partners, has acquired Care Solutions, a Hampton, Va.-based provider of non-skilled personal care services in the home for private pay patients.

• Core Industrial Partners has acquired Prototek, a Contoocook, N.H.-based rapid prototyping service provider of machined and sheet metal parts and components.

• Evolution Research Group, a Watchung, N.J.-based portfolio company of DFW Capital Partners, has acquired Endeavor Clinical Trials, a San Antonio, Texas-based clinical trial operator.

⛽ KKR has provided additional capital to portfolio company Joulon, a Dubai-based provider of asset management services to the energy industry. Some of the proceeds were used to acquire Harris Pye Group, a UK-based provider of engineering and project management services to the marine, offshore and industrial sectors.

• Rogue Wave Software, a Boulder, Colo.-based portfolio company of Audax Private Equity, has acquired ZeroTurnaround, an Estonia-based provider of software tools for Java developers.

• TPG Growth has acquired fitness class company StretchLab. It will be rolled into a new platform called Xponential Fitness, which also includes existing portfolio companies Club Pilates and CycleBar.

Public Offerings

• CIBC (TSX: CM) is planning to float its $2 billion Caribbean unit, FirstCaribbean, in New York, according to Reuters.

More M&A

• Carillion (LSE: CLLN), a troubled British construction firm, has agreed to sell a portfolio of healthcare facilities management contracts to Serco (LSE: SRP) for around $63.5 million.


• Anzu Partners, a VC fund focused on industrial tech startups, has raised $128.4 million for its debut fund.

• Hanaco Venture Capital, a new early-stage venture firm formed by Alon Lifshitz (ex-Blumberg Capital), is raising $120 million for its debut fund, per Calcalist. It already has secured around $80 million.

• Insight Venture Partners in June held a $4.6 billion close on its tenth flagship fund, which is targeting $5 billion with a $5.5 billion hard cap, per a Pennsylvania pension document.

• NSI Ventures, a Singapore-based venture firm focused on Southeast Asia, has closed on $75 million for its $125 million-targeted second fund.

• Techstars plans to launch its first accelerator effort in Asia, partnering with Japan's Rakuten and chat app Viber to launch a three-month program in Singapore next summer.

It's Personnel

• Clairvest, a Toronto-listed private equity firm, announced that co-CEO Jeffrey Parr will transition to a vice chairman role, leaving Kenneth Rotman as sole CEO. It also said that managing director Michael Wagman will add the title of president, and join the group's board of directors.

• General Atlantic said that managing director David Hodgson has been named vice chairman. He joined the growth equity firm in 1982 as its third investment professional.

• Jeff Slobotski, co-founder of Silicon Prairie News and Big Omaha, has joined venture studio High Alpha as an Omaha-based entrepreneur-in-residence.