Apr 29, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

🌴 Greetings from Beverly Hills, where today I'll moderate a Milken Global Conference panel on the Year of the Unicorns, with reps from SoftBank, Mubadala, General Atlantic, Maveron and Upfront Ventures. Hope to see some of you there...

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Top of the Morning
Source: Giphy

Uber plans to position itself as the next Amazon, when its IPO road-show kicks off later today. Per Mike Isaac of the NY Times:

Just as Amazon began as a modest online bookseller before growing into a digital retailing behemoth, Uber wants people to believe its ride-sharing business is the foundation for a larger “platform” spanning multiple transportation industries.

Let's do some Q&A:

Q: Why did Uber pick Amazon over Google, which expanded far from its search engine roots?

A: Because Amazon was unprofitable when it went public, whereas Google was already printing cash. Plus, Amazon and Uber share a tactile customer delivery experience, whereas Google remains largely digital.

Q. Why pick Amazon over Lyft?

A. Because Lyft's stock is getting hammered in the IPO aftermarket (-20.5%). In fact, it closed trading Friday with a lower market cap than Zoom Video. Plus, Uber does legitimately view itself as a much more diversified business, in terms of both geography and product offering.

Q: Why are investors likely to laugh?

A: Amazon's annual loss was only around $3 million per year on less than $10 million in annual sales. Uber is estimating a $1 billion net loss on around $3 billion in revenue for just the last quarter. It could be tough making a growth comparison between a seedling and a fully-mature tree, which has been a longstanding argument against the "stay private longer" strategy.

  • Amazon was only three years old when it went public, whereas Uber is now in its second decade.

Q: Why are investors likely to stop laughing?

A: Because many of them also didn't believe in Amazon, whose shares took five years to ever hit the $100 mark. The FOMO is strong with this one. Plus, Uber may persuasively argue that the comp is more about long-term investment strategy than about present-day income statements.

  • ICYMI: On Saturday we ran an Axios Deep Dive into the on-demand economy. Check it out here.
Also...

Chief financial officers of PE-backed companies are very optimistic about 2019, according to a survey by executive search firm Vardis Partners.

  • 78% expect improved performance, even though 39% acknowledge that their companies have underperformed the initial investment thesis.
  • 40% consider their companies to be "highly-leveraged," with that figure rising to 70% for those whose companies generate at least $100 million in annual revenue.
  • 70% expect an exit within the next two years, with 41% expecting that buyer to be another private equity firm (+30% from 2016 survey).

Happy trails: Nikunj Jinsi has stepped down as global head of venture capital for the International Finance Corp., where he's overseen a large portfolio of direct and fund investments. Per an email he sent last night to friends and colleagues:

"On this incredible journey, the USD1.5bn invested by IFC (leveraged roughly 10x by other sources of funding) both in direct and VC fund managers, has touched more than 30 mm students, 3mm patients and 12 mm consumers, amongst others. The combined value of our current direct portfolio companies has reached US$20 BN+ and spans key sectors such as health, education, energy, logistics, e-mobility, enterprise technology, space and more."

Word is that IFC has retained a search firm to find a successor, but the process only kicked off last month.

Today in Abraaj: A British judge denied a bail request from Arif Naqvi, the former Abraaj Group CEO who could be extradited to the U.S. on fraud charges, over fears he could flee to Pakistan.

  • Naqvi was carrying two Pakistani passports when arrested (plus two others), and gave police the phone number of Pakistan President Arif Alvi when asked for contacts.
  • Judge Emma Arbuthnot: "That suggests extremely highly placed friends in Pakistan. I am not going to grant him bail."
The BFD
Source: Giphy

Anadarko Petroleum (NYSE: APC) this morning said it will "resume negotiations" with Occidental Petroleum (NYSE: OXY), following a $76 per share takeover offer that bests a $65 per share offer that Anadarko had agreed to with Chevron (NYSE: CVX).

  • Why it's the BFD: Because Anadarko's board might succeed in spite of itself. This is the group that quietly rejected prior bids from Occidental, at least one of which was for a much higher share price than what was later accepted from Chevron. Today's move only comes after Occidental went public with its latest offer — which is 50/50 cash and stock, whereas Chevron is 75% stock — thus putting shareholder pressure on Anadarko's board to at least entertain what some might view as a no-brainer. Even with a $1 billion termination fee owed to Chevron, the board's early resistance to Occidental could result in a much more lucrative deal for its shareholders.
  • Bottom line: "Both Chevron and Occidental are seeking to expand their presence in the Permian, which stretches across western Texas and southeastern New Mexico." — Tom DiChristopher, CNBC
Venture Capital Deals

Tray.io, a San Francisco-based business process automation startup, raised $37 million in Series B funding. Spark Capital led, and was joined by Meritech Capital Partners and return backers GGV Capital, True Ventures and Mosaic Ventures. http://axios.link/APEe

Butternut Box, a London-based fresh dog food startup, raised £15 million. Five Seasons Ventures and White Star Capital co-led, and were joined by return backers Passion Capital and Literacy Capital. www.butternutbox.com

Lattice, a San Francisco-based HR management platform, raised $15 million. Shasta Ventures led, and was joined by Thrive Capital, Khosla Ventures and Y Combinator. http://axios.link/fPEq

Brightback, a San Francisco-based developer of subscription retention and churn management software, raised $11 million led by Index Ventures. http://axios.link/dOe0

Dyndrite, a Seattle-based additive manufacturing startup, raised $10 million in Series A funding. Gradient Ventures led, and was joined by Cota Capital and seed backers like Amplify Ventures and The House Fund. http://axios.link/Snit

🚑 QTC Care, a Beijing-based out-of-hospital patient health management platform for cancer patients, raised $7 million in Series A funding led by Tencent. http://axios.link/sE0k

🚑 Babel Health, a Pittsburgh-based provider of risk adjustment software for health plans, raised $5 million in Series A funding from investors like Draper Triangle Ventures. www.babelhealth.com

Private Equity Deals

Apollo Global Management and Bain Capital remain in the running to buy Kantar, the data and market research unit of WPP (LSE: WPP) that could fetch upwards of $4.5 billion, per Bloomberg. Apax Partners and CVC Capital Partners reportedly have dropped out. http://axios.link/o8zc

Ensign Natural Resources, a portfolio company of Warburg Pincus, is in advanced talks to buy Pioneer Natural Resources’ (NYSE: PXD) Eagle Ford acreage in South Texas, per Reuters. http://axios.link/E24A

Public Offerings

Arabian Centres, a Saudi Arabian shopping mall operator, plans to raise up to $836 million in what could be the country’s largest IPO in five years. http://axios.link/RHg1

🚑 Bicycle Therapeutics, a British developer of cancer therapeutics based on bicyclic peptides, filed for an $86 million IPO. It plans to trade on the Nasdaq (BCYC), with Goldman Sachs as lead underwriter. The company raised around $93 million from firms like Tybourne Capital, Vertex Ventures, Cambridge Innovation Capital, Longwood Fund, Novartis, SR One, SVLS and Atlas Venture. www.bicycletherapeutics.com

🚑 IDEAYA Biosciences, a South San Francisco-based developer of synthetic lethality medicines and immuno-oncology therapies, filed for a $70 million IPO. The pre-revenue company plans to trade on the Nasdaq (IDYA) with J.P. Morgan as lead underwriter, and raised around $140 million from firms like 5AM Ventures (18.7% pre-IPO stake), Canaan Partners (15.6%), Celgene (7.8%), BVF Partners (7.3%), WuXi Healthcare Ventures (7.3%), Perceptive Life Sciences (6.5%), Nextech Invest (6.2%) and GV (5.2%). www.ideayabio.com

🚑 Peloton Therapeutics, a Dallas-based developer of small molecule cancer therapies, filed for a $115 million IPO. The pre-revenue company plans to trade on the Nasdaq (PLTX) with J.P. Morgan as lead underwriter, and has raised around $270 million from firms like The Column Group (19.6% pre-IPO stake), Remeditex Ventures (14.7%), Topspin Partners (11.3%), RA Capital (7.5%), UC Regents (6.9%) and Nextech Invest (5.8%). www.pelotontherapeutics.com

Liquidity Events

🚑 The Carlyle Group and Hellman & Friedman are negotiating to launch a $1.35 billion dividend recap for Pharmaceutical Product Development, a Wilmington, Del.-based contract research organization, per Bloomberg. http://axios.link/Mii2

CVC Capital Partners is in talks to sell French soups and sauces business Continental Foods for upwards of €1 billion, per Reuters. Interested suitors include Spain’s Agrolimen and Poland’s Maspex. http://axios.link/cHuR

• CVC Capital Partners and HPEF are seeking to sell their stakes in Executive Centre, a Hong Kong-based co-working space, at a value north of $750 million. http://axios.link/wHqp

• Jaguar Land Rover reportedly is considering a takeover offer for British minicab company Addison Lee, which is being sold for between £300m and £500 million by The Carlyle Group. http://axios.link/JNot

Macquarie Infrastructure Partners will seek a buyer for Leaf River Energy Center, a Smith County, Miss.-based gas storage business that could fetch over $300 million, per Bloomberg. http://axios.link/n3F3

• Sycamore Partners is seeking a buyer for shoe retailer Kurt Geiger, which could fetch over 450 million, per The Sunday Telegraph. http://axios.link/G74X

More M&A

• Apple (Nasdaq: AAPL) held talks to buy some of Intel’s (Nasdaq: INTC) model-chip business, per the WSJ. http://axios.link/O7cv

Delek Group of Israel offered to buy Chevron’s (NYSE: CVX) oil and gas fields in the British North Sea. http://axios.link/dRbd

🚑 Elanco Animal Health (NYSE: ELAN) agreed to buy Aratana Therapeutics (Nasdaq: PETX), a Leawood, Kansas-based developer of a treatment for osteoarthritis in dogs and cats. http://axios.link/av7J

• Gardner Denver (NYSE: GDI) is nearing a deal to merge with a unit of Ingersoll-Rand (NYSE: IR) via a Reverse Morris Trust, creating a combined maker of compressors and pumps that could have an enterprise value of around $15 billion, per the WSJ. KKR holds a 35% stake in Gardner Denver. http://axios.link/2SCF

• Parker Hannifin (NYSE: PH) agreed to buy Lord Corp., a Cary, N.C.-based adhesives and coatings maker, for $3.68 billion in cash. http://axios.link/kJRT

Schlumberger (NYSE: SLB) agreed to sell its Middle East onshore drilling rigs unit for $415 million to Arabian Drilling Co., a drilling subsidiary of TAQA. http://axios.link/MLQd

• Spotify (NYSE: SPOT) disclosed that it paid €50 million to buy Parcast, a storytelling-driven podcast studio.

• WorleyParsons (ASX: WOR), an Australian engineering firm, completed its previously-announced $3.3 billion deal to buy the energy, chemicals and resources unit of Dallas-based Jacobs Engineering Group (NYSE: JEC). http://axios.link/kNfQ

Final Numbers
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Data: Nash Information Services; Chart: Axios Visuals
Dan Primack