Axios Pro Rata
November 04, 2020
🗳️ Where we're at: Democrats will likely keep the House (albeit with a smaller margin). Republicans will likely keep the Senate (also with a smaller margin). The White House remains up for grabs. Gig economy companies appear to win their California ballot question on how to classify workers.
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Top of the Morning
Jack Ma is brilliant. He's innovative. He's one of the world's richest men, and even has a lovely singing voice.
- He also made one of the weightiest unforced errors in the history of global business, scuttling what was expected to be a $35 billion IPO for Chinese financial services company Ant Group.
What happened: Ma recently gave a speech he didn't need to give, at least not one he needed to give yet. He compared Chinese banks to "pawn shops," in terms of collateral required for business borrowers, and denigrated the character and convictions of financial regulators.
- The regulators this week fought back, because that's what you do when someone spits in your face. They issued draft rules for online microlending and stricter capital requirements, effectively forcing Ant back to the IPO drawing board.
- Even more crackdowns could be on the way, with Bloomberg reporting that China's top banking regulator "plans to discourage lenders from using Ant’s platforms."
- Ma is not formally affiliated with Ant Group, but he's the controlling shareholder and former executive chairman of Alibaba Group, which spun out Ant and retains a one-third stake.
What happens next: A source close to Ant tells me that the company still wants to go public, preferably before the Chinese New Year in early February, but admits that the company is reeling from its reversal of fortune.
- Ant may be forced to sell its microlending business. It may get treated as a depository institution, even though it argues it's just the software-enabled middleman. It may need to answer tough questions about its leverage ratio, particularly without that incoming $35 billion of new equity.
Axios' Felix Salmon writes that Ant "is one of the most systemically important financial institutions in the world, and at the moment it's barely regulated."
- "All banks are tech companies, but tech can break. It's okay if a single computer crashes; it's not okay if a country's entire financial system goes down. If a technology company is also a systemically important financial institution, then it needs to be regulated just as assiduously as any other financial-services giant," he adds.
Market forces: This episode creates unexpected challenges for Shanghai's new STAR Market, which had positioned Ant as its Pied Piper for other Chinese tech unicorns.
- It's possible that companies like Didi Chuxing will give STAR a mulligan, believing the Ant situation to be specific to fintech, but it also may take a fresh look at New York.
The bottom line: Ma's misstep could ultimately be rewarded if Ant and Chinese regulators come to a meeting of the minds, and restructure the company in a way that ensures post-IPO compliance for decades to come. But, at the moment, it appears that he fumbled at the goal line.
Crown Holdings (NYSE: CCK) is considering a sale of its food can manufacturing unit, which could fetch around $2 billion, per Bloomberg.
- Why it's the BFD: Crown is the world's largest maker of food cans, whether they be round, shaped, or bowls. It's also a profitable business, generating around $200 million in EBITDA, which is likely to attract private equity.
- The bottom line: "Crown, which traces its origins to 1892, has more than 200 manufacturing plants globally and the majority of its revenue comes from outside the U.S. The company’s principal competitors include Ball Corp, which merged with Rexam Plc in 2016, and Ardagh Group." — Bloomberg
Venture Capital Deals
🚑 CARsgen Therapeutics, a Chinese developer of CAR-T cell therapeutics, raised $186 million in Series C funding. Loyal Valley Capital led, and was joined by Lilly Asia Ventures, Shiyu Capital, Summer Capital, and return backer South China VC. http://axios.link/Qjdb
• Flock Safety, an Atlanta-based developer of local surveillance systems, raised $47 million in Series C funding. Meritech Capital Partners led, and was joined by Julia and Kevin Hartz (Eventbrite), Zac Bookman (OpenGov) and return backers Initialized Capital, Axon, Bedrock Capital, Matrix Partners, Founders Fund, and YC. http://axios.link/lZNA
• TVision, a New York-based provider of TV performance metrics, raised $16 million. SIG Asia Investments led, and was joined by return backers Accomplice, Golden Ventures, and Jump Capital. http://axios.link/SFqa
🚑 One Health, a Palo Alto-based developer of precision medicines for dogs, raised $10 million. Polaris Partners and Borealis Ventures co-led, and were joined by return backers Andreessen Horowitz, Lerer Hippeau, YC, and Tau Ventures. http://axios.link/RzAy
Private Equity Deals
• AE Industrial Partners agreed to acquire and merge Linkware, an Alexandria, Va.-based provider of custom software to federal government clients, and Pangiam, a security and travel consulting services company led by Kevin McAleenan (former acting Sec. of Homeland Security). www.linkwaregroup.com
• Apollo Global Management is among several private equity firms in talks with AT&T (NYSE: T) to buy a “significant minority stake” in the telco’s DirecTV, AT&T Now, and U-Verse pay TV units, per CNBC. http://axios.link/ySY5
• Battery Ventures agreed to acquire Cimatron and GibbsCAM from 3D Systems (NYSE: DDD), and will merge them with existing Battery portfolio company SigmaTEK Systems, a Cincinnati-based provider of CAD/CAM software. www.sigmanest.com
• Coretelligent, a Westwood, Mass.-based portfolio company of VSS, acquired Soundshore Technology Group, a Mantua, Ohio-based provider of managed IT services. www.soundshore.net
• Nordic Capital agreed to buy the regulatory tech unit of Dutch management consultancy BearingPoint. http://axios.link/Ieer
⛽ Waterous Energy Fund agreed to buy a 40% stake in Canada’s Osum Oil Sands for C$126 million, thus boosting its position to 85%. http://axios.link/VzUR
• Ivi, a Russian video streaming service, picked banks for a U.S. IPO, per Reuters. Goldman Sachs, JPM, VTB, and Alfabank will work on the offering. http://axios.link/Qgmo
• Benessere Capital Acquisition, a mid-market tech-focused SPAC, filed for a $100 million IPO. http://axios.link/LlDs
• Intel (Nasdaq: INTC) acquired Cnvrg.io, an Israeli data science platform, per TechCrunch. Cnvrg.io had raised $8 million from Hanaco VC and JVP. http://axios.link/sRRl
⛽ Baker Hughes (NYSE: BKR) agreed to buy Dutch carbon capture company Compact Carbon Capture. http://axios.link/lckN
• Cellnex Telecom (Madrid: CLNX) is closing in on a €10 billion deal for the European telecom tower business of Hong Kong-listed CK Hutchinson, per Bloomberg. http://axios.link/eJYi
• Ferguson (LSE: FERG), a plumbing supplies provider, is seeking a buyer for its U.K. business (Wolseley), which could fetch around £500 million, per Bloomberg. http://axios.link/8277
• G4S (LSE: GFS), a British security firm, rejected a £3.3 billion takeover offer from U.S.-based Allied Universal, saying it undervalues the business. G4S also recently spurned a hostile approach from Canada’s GardaWorld. http://axios.link/4MFz
• Reynolds American, a unit of British American Tobacco (LSE: BATS), agreed to buy the nicotine-pouch business of Moorpark, Calif.-based Dryft Sciences. http://axios.link/XPZl
🚑 Stryker (NYSE: SYK) received U.S. antitrust approval for its $4 billion all-cash purchase of rival medical device maker Wright Medical Group (Nasdaq: WMGI). http://axios.link/UsFL
⛽ Total (Paris: TOTF) is seeking to sell stakes in several Angolan oilfields, per Reuters. http://axios.link/2FES
• 645 Ventures, a New York-based early-stage firm, raised $160 million for its third fund. www.645ventures.com
• Bronze VC is raising $50 million for its second fund, per an SEC filing. www.bronze.vc
• CIVC Partners, a Chicago-based private equity firm, is raising $525 million for its sixth fund, per an SEC filing. www.civc.com
• LGT Capital Partners is targeting $3.7 billion for a special opportunities fund for GP-led private equity secondaries. http://axios.link/A9Ub
• True Beauty Ventures, a Florida-based VC firm focused on new beauty brands, has closed on $15 million for its $30 million-targeted debut fund, per an SEC filing. http://axios.link/fvMc
• Karan Mehandru joined Steadfast Financial as a managing director and head of venture capital. He previously was a general partner with Trinity Ventures. www.steadfast.com
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