Aug 22, 2018

Axios Pro Rata

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

The fight to get severance for thousands of fired Toys "R" Us workers has moved on to a new phase: Attacking the creditors.

  • Talks continue with buyout firms Bain Capital and KKR, which owned Toys "R" Us prior to its bankruptcy. Expectations remain that they'll contribute substantially to what could ultimately be a $75 million pot, although what I'd been told would be an August announcement is now being referred to as a September announcement.
  • The workers group also contacted the creditors who chose liquidation over keeping Toys open with a smaller footprint. So far it has spoken with B-4 lenders like Solus, Angelo Gordon and Oaktree, but hasn't gotten any commitments.
  • There also have been some indirect talks with Vornado, which originally bought Toys with Bain and KKR, but it has also refused to contribute.
  • To further pressure the creditors and Vornado, the workers group is lobbying their public pension limited partners. For example, Toys workers either testified or made their presence known at recent meetings of Texas Teachers, Oregon Investment Council and Ohio Teachers. There also has been communication with officials in New Jersey, the former home of Toys' headquarters and a state that invests in at least on of the B-4 lenders.
  • Bottom line: When a general partner basically ignores you, going to its limited partners is usually an effective method for getting their attention.

• Finally: Uber yesterday filled its long-vacant CFO position, hiring Wall Street vet Nelson Chai. Here's his resume:

  • CFO stints at CIT Group, Merrill Lynch and the NYSE Euronext, plus a recent CEO role with Warranty Group (until acquired earlier this year by Assurant for $2.5 billion).
  • Notable that both CIT and Merrill were led at the time by Uber board member John Thain, who was put there by already-ousted Travis Kalanick, while Warranty was owned by TPG (which also is a big Uber investor with a board seat).
  • Oh, and one would think that Nasdaq's hill to get Uber's IPO just got a bit steeper.

Chai tells me that he's looking forward to "the challenge" of leading finance for what he calls an "iconic and generational" company. As for his role in an IPO, he says:

"The company has made comments about it, but I can't say I'm on board yet with going public next year. I’ve been impressed with the information I’ve seen, but I don’t have enough insight until I really get in there to make sure we have the right processes and controls to be a public company.”

• Unicorn birth: Root, a Columbus, Ohio-based car insurance startup that leverages driver data via mobile apps, raised $100 million in Series D funding led by Tiger Global at a $1 billion post-money valuation.

  • Root co-founder and CEO Alex Timm tells me that the company is experiencing 90% quarter-over-quarter growth, bringing in around $15 million in Q2, with plans to expand quickly from its current 20 states to a national footprint. Root also plans to bring its 140-person workforce closer to 200 by year-end, mostly by hiring more engineers and actuaries.
  • He also adds some surprise that legacy players haven't rushed to compete in terms of using machine learning technology for pricing analytics and driver discounting.

🎧 Pro Rata Podcast: Yesterday's 10-minute show focused on the future of "fake news," which is getting a whole lot more sophisticated. Take a listen via Apple, other podcast platforms or

Source: Giphy

Serta Simmons Bedding, an Atlanta-based portfolio company of Advent International, agreed to acquire Phoenix-based mattress and bedding company Tuft & Needle.

  • Why it's the BFD: Because direct-to-consumer mattress startups like Tuft & Needle are estimated to have taken around a 20% market share from incumbents, which means this deal may be just the first of many. Plus, Tuft & Needle is the rate company in this space to have not taken any venture capital.
  • Reminder: Mattress upstarts like Tuft & Needle, Casper and Leesa use technology to sell product, but they are not technology companies.
  • Bottom line: "Selling out to Big Mattress, as some observers refer to old-line players like Serta Simmons, might seem counterintuitive... But the landscape is changing rapidly as direct-to-consumer mattress brands sign deals with retail stores and old brands try to gain online shoppers." — Amy Feldman, Forbes
Venture Capital Deals

🚑 One Medical, a San Francisco-based provider of concierge medical services, raised $350 million from The Carlyle Group. The round includes a $220 million primary investment and $130 million in secondary liquidity. One Medical previously raised over $180 million from firms like Benchmark, GV, Maverick Capital, Oak Investment Partners, DAG Ventures and Redmile Group.

Boxed, a New York-based provider of bulk-sized grocery delivery, raised $111 million at a reported $600 million valuation. Japan’s Aeon Co. led, and was joined by Alpha Square Group, CDIB Capital and return backers like GGV Capital.

Duiba, a Chinese digital marketing and customer loyalty company, raised $110 million in Series C funding co-led by Orchid Asia Group and TPG.

🚑 TraceLink, a North Reading, Mass.-based provider of pharma tracking and anti-counterfitting software, raised $93 million in Series D funding. Georgian Partners led, and was joined by Vulcan Capital, Willett Advisors and return backers Goldman Sachs, FirstMark Capital, Volition Capital and F-Prime Capital.

ThinkHR, a Pleasanton, Calif.-based provider of HR knowledge software, raised $67.5 million from Guidepost Growth Equity.

Nylas, a San Francisco-based maker of an email content API tool, raised $16 million in Series B funding led by Spark Capital.

Braavo Capital, a New York-based provider of on-demand financing for mobile apps and games, raised $6 million in Series A funding. led, and was joined by SWS Venture Capital and Shipt CEO Bill Smith.

Canvass Analytics, a Toronto-based provider of predictive analytics for IoT, raised US$5 million led by Google’s Gradient Ventures. Bedrock Industries, Viaduct Ventures, Real Ventures and Barney Pell also participated.

TomboyX, a gender-neutral underwear upstart, raised $4.3 million in Series A funding from TAU, Redbadge Pacific and SBI Investments Korea.

EveryAction, a Washington, D.C.-based provider of software for nonprofits and campaigns, raised an undisclosed amount of funding from Insight Venture Partners.

Private Equity Deals

⛽ Candor Midstream, a Houston-based midstream energy infrastructure company, has been formed via a $200 million equity commitment from EnCap Flatrock.

Conterra Networks, a Charlotte-based portfolio company of Court Square Capital, agreed to buy Network Communications, a Longview, Texas-based provider of regional fiberoptic telecom services.

Dunn Paper, a Port Huron, Mich.-based portfolio company of Arbor Investments, has acquired a paper-making facility in Ladysmith, Wis. from Clearwater Paper (NYSE: CLW) for $72 million.

H.I.G. Capital bought Buck, benefits consulting and administration organization, from Conduent (NYSE: CNDT).

⛽ Morgan Stanley Energy Partners acquired a majority stake in Catalyst Energy Services, a Midland, Texas-based provider of pressure pumping to upstream oil and gas producers.

🚑 New Water Capital acquired Trillium Health Care Products, a Canadian contract manufacturer of OTC pharma products.

OMERS agreed to pay $1.44 billion for a 50% stake in BridgeTex Pipeline, owner of a Texas oil pipeline, from Plains All American Pipeline (NYSE: PAA) and Magellan Midstream Partners (NYSE: MMP).

Ridgemont Equity Partners acquired a majority stake in Amerit, a Walnut Creek, Calif.-based provider of fleet maintenance and repair services. Sellers include Seacoast Capital.

Turnspire Capital Partners invested in LaserMasters, a Phoenix-based maker, distributor and recycler of replacement toner cartridges and remanufactured printers.

Washington Equity acquired Accu-Tube, an Englewood, Colo.-based maker of engineered small-diameter stainless steel tubing.

West Street Infrastructure Partners, an affiliate of Goldman Sachs, agreed to buy Restaurant Technologies, a Mendota Heights, Minn.-based edible oil management company, from Aurora Capital. An earlier Bloomberg report suggested the deal could be worth over $750 million.

Liquidity Events

⛽ Santos (ASX: STO) agreed to buy Australian oil and gas firm Quadrant Energy for around $2.15 billion. Sellers would include Macquarie and Brookfield Asset Management.

More M&A

Air Canada (TSX: AC) agreed to buy the Aeroplan loyalty program from Aimia (TSX: AIM) for C$450 million (plus the assumption of C$1.9b in debt).

🚑 GlaxoSmithKline (LSE: GSK) expects bids next month for India-focused health nutrition business Horlicks, which could be valued north of $4 billion, per Reuters. Initial reports of the auction came back in March.

Hartford Financial (NYSE: HIG) agreed to buy insurer Navigators Group (Nasdaq: NAVG) for $2.1 billion in cash.

• Volkswagen is open to sale or alliance options for Italian motorcycle maker Ducati, per comments yesterday by CEO Herbert Diess.


Bain Capital is seeking $500 million for a new CLO fund, per Private Debt Investor.

⛽ Capital Dynamics raised $1.2 billion for its seventh private equity fund focused on clean energy infrastructure. Limited partners include CalSTRS, APG and ADIA.

Sequoia Capital raised $695 million for its sixth India-focused VC fund, and also confirmed that managing director Abhay Pandey has left.

It's Personnel

Michelle Caruso-Cabrera is stepping down as CNBC's chief international correspondent and co-anchor of “Power Lunch,” in order to join the boad of Beneficient, a Dallas-based financial services company focused on private equity products. She'll remain as a contributor and guest host at CNBC, but I'm told that she's also in talks to join other corporate boards.

Final Numbers
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Data: Yahoo Finance and S&P Dow Jones Indices; Chart: Harry Stevens/Axios
Dan Primack

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