Feb 15, 2017

Axios Pro Rata

Dan Primack
Top of the Morning

• M&A implosion: Last week, a federal judge effectively killed Anthem's proposed $54 billion acquisition of rival health insurer Cigna, ruling that the deal would be anti-competitive. And now it's getting very ugly.

Yesterday, Cigna said not only that it was terminating the deal (Anthem has considered trying to push through), but also that it would sue Anthem for both the reverse termination fee ($1.85 billion) plus more than $13 billion in "additional damages." And, of course, Anthem this morning counter-sued.

Notes on this merger mess:

  • The merger agreement seems to entitle Cigna to the reverse termination fee, so long as the deal dies for regulatory reasons. It doesn't actually matter which party pulls the trigger.
  • The merger agreement is a bit more ambiguous when it comes to additional damages. In the reverse termination fee section, it says the RTF payment would be Cigna's sole and exclusive financial remedy. Another section, however, appears to allow for uncapped liabilities were Anthem to have willfully breached the merger agreement.
  • Cigna argues the breach relates to Anthem pursuing a "unilateral" merger strategy that "heavily favored the Blue Cross Blue Shield Association" instead of an unspecified "agreed-upon" strategy. The aforementioned judge did say that there was a "fundamental difference of opinion" between the two companies, but this could come down to what was explicitly included in the merger contract and what wasn't.
  • That $13 billion is mostly Cigna's lost premium on the deal, and Delaware courts are very hesitant to award what are known as "expectation damages." One possibility is that Cigna is using the "additional damages" threat as leverage to extract the reverse termination fee before Anthem exhausts all legal remedies to save the merger.
  • For context, Anthem *only* has around $4 billion of cash and short-term equivalents.

• Recommended viewing: Mark Cuban was on Bill O'Reilly's program last night, and their conversation about jobs was an encapsulation of the disconnect between Silicon Valley and Trumpland. Here's the clip.

• Recommended reading: A startup's guerrilla marketing ploy gone awry.

• Less than meets the tweet: Donald Trump's critical tweets about specific companies have not caused lasting damage to those companies' stock prices, despite widespread CEO jitters that they could.

Since first being elected, Trump has hurled 140-character barbs at companies that he believes are being unfair toward him (NY Times), his family (Nordstrom), American workers (GM, Toyota, Rexnord) or American taxpayers (Boeing, Lockheed Martin). We've examined the relevant tweets, and found:

  • Short-term: Shares in five of the seven targeted companies were down in the first 30 minutes of post-tweet trading.
  • Long-term: Shares in six of the seven targeted companies are trading higher today than they were prior to the tweet.

• Quiz Time: Can you name the West Coast "unicorn" that's about to be acquired? Hint: The publicly-traded buyer was once VC-backed itself, and has previously paid more than $1 billion to buy another VC-backed company.

The BFD: SoftBank buys Fortress

SoftBank Group of Japan has agreed to acquire Fortress Investment Group (NYSE: FIG), a New York-based alternative asset manager with around $70 billion in AUM, for $3.3 billion. The $8.08 per share price represents a 39% premium over Monday's closing price. Fortress (the first private equity firm to go public, back in 2007) will continue to operate independently, and with the same management team.

• Why it's the BFD: SoftBank already was a major player in the tech investment market before launching its $100 billion Vision Fund (which isn't being used for this deal), but this suggests that it has far greater alternative asset ambitions. In short, it wants to challenge giants like The Blackstone Group ― both in terms of deals and global fundraising ― given that Fortress has substantial real estate and credit activities in addition to private equity.

• Bottom line: "[Masayoshi] Son sees the private-equity business promising in and of itself, with the potential for strong returns on the $3.3 billion price tag. In addition, Son thinks that Fortress, led by principals Pete Briger, Wes Edens and Nardone, can become a sort of brain trust for SoftBank, helping to track down and analyze investment opportunities around the world." -- Bloomberg

Venture Capital Deals

• Surrozen, a South San Francisco-based developer of drugs that promote the repair and regeneration of human tissues, has raised $33 million in Series A funding led by The Column Group. http://bit.ly/2lh6wF7

BirdEye, a Sunnyvale, Calif.-based business reputation and customer experience platform, has raised $25 million in Series B funding at a reported $100 million pre-money valuation. World Innovation Lab led the round, and was joined by Trinity Ventures. http://tcrn.ch/2lHNYdY

• Top Hat, a Toronto-based cloud teaching platform, has raised US$22.5 million in Series C funding. Union Square Ventures was joined by return backers Emergence Capital, Georgian Partners, iNovia Capital, Golden Venture Partners, Version One Ventures and SoftTech VC. www.tophat.com

• IntSights, an Israel-based cybersecurity startup, has raised $15 million in Series B funding. Vintage Investment Partners led the round, and was joined by return backers Glilot Capital Partners, Blackstone, Blumberg Capital and Wipro Ventures. http://bit.ly/2liWNxM

• ROKT, an Australian digital referral marketing company, has raised $15 million in Series B funding. Moelis Australia Asset Management led the round, and was joned by Time Inc., Square Peg Capital and individuals like Lachlan Murdoch. http://bit.ly/2kSxKBe

• Minute Media, a sports media platform whose brands include 90min and 12up, has raised $15 million in new VC funding. Qumra Capital led the round, and was joined by return backers Battery Ventures, Dawn Capital and ProSieben. www.minutemedia.com

• IOVOX, a London-based call analytics startup, has raised $10 million in Series A equity and debt financing from Octopus Ventures, SF Capital and Silicon Valley Bank. www.iovox.com

• NewsWhip, an Ireland-based provider of social media analytics to publishers and brands, has raised $6.4 million in new VC funding. Backers include The Associated Press, Japan's Asahi Shimbun, Tribal Ventures, Enterprise Ireland, Matter VC, Social Starts, and AIB Seed Capital Fund and certain Cantor Fitzgerald clients. http://tcrn.ch/2lONqDe

• mClinica, a Singapore-based provider of healthcare data via a physical drugstore network, has raised $6.3 million in Series A funding. Unitus Impact led the round, and was joined by Global Innovation Fund, MDI Ventures, Endeavor and return backers 500 Startups, IMJ Investment Partners and Kickstart Ventures. http://tcrn.ch/2liHsxb

• Intuition Robotics, an Israeli developer of social companion technologies for seniors, has raised $6 million in VC funding via OurCrowd and iRobot (Nasdaq: IRBT). http://bit.ly/2kpn4eJ

• SmartUp.io, an Atlanta-based developer of a "gamed-learning app," has raised $5.5 million in new VC funding co-led by Notion Capital and Hong Leong Group. http://tcrn.ch/2lM3xBh

• Gamalon, a Cambridge, Mass.-based developer of AI that writes and rewrites its own Bayesian programs, has raised $4.45 million in seed funding led by Felicis Ventures. http://bit.ly/2kPhrVz

• Wiiv, a maker of 3D-printed shoe insoles, has raised $4 million in Series A funding. http://tcrn.ch/2lGrLAQ

• Orreco, an Ireland-based sports and data science startup, has raised $2 million in Series A funding from True Ventures. http://bit.ly/2ljhx8H

• Perfect Channel, a London-based auction and trading platform for companies operating marketplaces in commodities and financial assets, has raised £2 million in new VC funding from UIL Ltd. and return backer Beringea. http://bit.ly/2kps96H

• Bamba, a Kenyan SMS-based data collection startup, has raised $1.1 million in seed funding from Draper Associates, Foundry Group, Right Side Capital, SVB, Iron Gate Capital and Right Side Capital. http://bit.ly/2l7AN6M

• Conductor, an Oakland, Calif.-based cloud rendering platform, has raised an undisclosed amount of Series A funding. Walden Venture Capital led the round, and was joined by Autodesk. "Rendering" is a step in creating digital visual content. http://bit.ly/2kJl25i

• GluSense, an Israeli developer of an injectable glucose sensor for treatment of Type 1 diabetes, has raised an undisclosed amount of venture funding from JFRF T1D Fund. www.gluesensemedical.com

Private Equity Deals

• AdTheorent, a New York-based provider of predictive solutions for digital advertising, has secured an undisclosed amount of growth equity funding from H.I.G. Growth Partners. www.adtheorent.com

• AirTrunk, a Singapore-based data center operator, has secured $400 million in new financing co-led by Goldman Sachs and TPG Capital. http://bit.ly/2kS3UwF

• Gaw Capital Partners is leading a consortium that is looking to buy the Four Seasons Resort in Bora Bora from Thierry Barbion, according to Basis Point. The group, which includes Tencent founder Pony Ma, is seeking a €100 million loan to finance the bid. http://reut.rs/2lOWyIS

• Grit Oil & Gas Partners, a Houston-based acquisition and exploitation strategy focused initially on the Ark-La-Tex region, has secured an equity commitment from Carnelian Energy Capital Management. No financial terms were disclosed. www.gritog.com

• Kinderhook Industries has acquired PMI, the performance motorsports parts business of Dover Corp. (NYSE: DOV). No financial terms were disclosed. www.kinderhook.com

• Vkidz, a Fort Lauderdale, Fla.-based online curriculum subscription service, has secured an undisclosed amount of growth equity funding from Veronis Suhler Stevenson. www.vkidz.com

Public Offerings

• Liberty Oilfield Services, a Denver-based provider of hydraulic fracturing services, has filed for a $50 million IPO. It plans to trade on the NYSE under ticker symbol BDFC, with Morgan Stanley and Goldman Sachs serving as lead underwriters. Shareholders include Riverstone Holdings.

Liquidity Events

• CVC Capital Partners and Leonard Green are prepping an IPO or sale process for joint portfolio company BJ's Wholesale Club, according to the WSJ. The Westborough, Mass.-based retailer generates around $11 billion in annual sales. http://on.wsj.com/2l5jCTE

More M&A

• NBCUniversal, a unit of Comcast Corp., reportedly is in talks to acquire a 25% stake in European broadcaster Euronews. The deal could be valued at around $30 million. http://reut.rs/2lh5WHt

• PayPal (Nasdaq: PYPL) has agreed to acquire TIO Networks (TSX: TNC), a Canadian bill payment processing and receivables management company, for approximately C$304 million, or C$3.35 per share. http://zd.net/2kIdLTm

• Pfeiffer Vacuum, a listed German maker of vacuum pumps, has rejected a takeover offer from rival Busch. http://reut.rs/2kx0VGr

• Slovenia's government reportedly is seeking to sell a 75% in the country's largest bank, state-owned NLB, for at least €1 billion. http://reut.rs/2kSfAQ0

Fundraising

• Fika Ventures has closed its debut fund with $40 million in capital commitments. The Los Angeles-based seed-stage firm is led by Eva Ho (ex-Susa Ventures) and TX Zhou (ex-Karlin Ventures).

• Veritas Capital has closed its sixth private equity fund with $3.55 billion in capital commitments. www.veritascapital.com

• Michele Toscani and Graig Fantuzzi each are leaving Harvard Management Co., where they had been fixed income portfolio managers, in order to launch a hedge fund, per Bloomberg. Sanjiv Bhatia, an emerging markets portfolio manager, also plans to launch his own firm. All of this comes as part of HMC's previously-announced plan to slash in-house active managers. http://bloom.bg/2lLi3Kh

It's Personnel

• Fred Wang has agreed to join Adams Street Partners as a Menlo Park-based partner, focused on direct VC and growth equity investments, effective April 1. He currently is a managing partner at Trinity Ventures. http://bit.ly/2l7IQke

• BlackArch, a Charlotte, N.C.-based M&A advisory firm, has promoted Adam Tindel to director and both Josh Ollek and Ryan Popp to VP. www.blackarch.com

• Linda Chaffin has joined NXT Capital as head of institutional marketing. She previously was with Pathway Capital Management. www.nxtcapital.com

Final numbers
Dan Primack