May 17, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

Friday greetings from the home office, where we're waiting for San Jose and St. Louis to get on with it. Remember that I always appreciate feedback and scoop via email ( or anonymous tip ( Or ask for my Signal/Confide/Telegram info via email or Twitter DM. Okay, here we go...

Top of the Morning
Source: Giphy

Women's apparel retailer Chico's FAS yesterday rejected a $3.50 per share takeover offer from private equity firm Sycamore Partners, saying it undervalued the company. Nothing shocking, given that Chico's had previously rejected an offer from Sycamore that was 18.6% higher.

But there are still some big questions about how Sycamore will fare on this non-deal, given that it disclosed a 6.6% stake in Chico's at the same time it announced its $3.50 per share takeover offer. And if that offer, which was bound to be nixed, was designed to recoup some earlier losses.

  • Outsiders are, by definition, not insiders. But that doesn't mean that they can't trade on information that will move a stock.

Before continuing, it's important to note that Sycamore doesn't like to talk to reporters about... well, anything. And it's maintained that same posture this time around, made even more complicated by the fact that its outside PR firm happens to represent Chico's on this particular situation. So what follows is based only on public filings:

  • Sycamore reported on a Form 13D that it had invested $33.4 million to purchase the 7.64 million shares it held as of May 10 (when the revised offer was disclosed). That works out to an average of $4.37 per share.
  • But in an attached exhibit of detailed trading data, Sycamore only shows that it purchased a total of 5.07 million shares for $21 million ($4.14 per share avg), inclusive of 647,000 shares it subsequently sold for $2.57 million ($3.97 avg).
    • In other words, there's an unexplained discrepancy. It seems to work against Sycamore's favor but, if there are undisclosed purchases, perhaps there were also undisclosed sales.
  • Sycamore appeared to buy at market prices, with many of its outlays between April 25 and May 9 coming below the $3.50 per share offer it was about to make. And all purchases in that period were below where the stock spiked after the lowball offer was announced.

This missing math makes it very difficult to figure out Sycamore's performance or intentions, particularly when married to the fact that we have no disclosures (yet) about what Sycamore might have sold subsequent to its press release.

  • Yes, this is small money for a buyout firm investing out of a $4.75 billion fund. And Sycamore could have made a takeover offer without having first purchased any public equity.
  • But, in light of yesterday's discussion of the LTSE, it goes to show how lax public equity transparency rules can help big investors cut their losses.

🎧 Pro Rata Podcast focuses on why the U.S. didn't join over a dozen countries on a plan to curb terrorist and extremist content on social media networks, with the White House instead launching a solo effort to identify instances of political bias by the network operators. Listen here.


Illustration: Sarah Grillo/Axios

Deliveroo, a London-based food delivery company operating in 14 European countries, raised $575 million in Series G funding led by Amazon.

  • Why it's the BFD: Because it means Uber's IPO hasn't scared investors away from food delivery startups, as word is that the round comes at a higher valuation from where Deliveroo last raised in late 2017. And, just to emphasize the point, U.S. rival DoorDash reportedly is in talks to raise new cash at a valuation around 50% higher than where it raised just three months ago.
  • Returning investors included T. Rowe Price, Fidelity and Greenoaks.
  • Bottom line: "This isn’t Amazon’s first foray into the food delivery market. It launched its own takeaway service, Amazon Resturaants, in the US back in 2015, and expanded it to the UK the following year. Just over two years later, however, it shut down the service in the face of stiff competition from the likes of Uber Eats and Deliveroo." — Jon Porter, The Verge
Venture Capital Deals

🚑 Zipline, a drone delivery service for medical supplies, raised $190 million at a $1.2 billion post-money valuation. Investors include Katalyst Ventures, Baillie Gifford, GV, Temasek, Goldman Sachs and The Rise Fund.

🚑 DNA Script, a Paris-based maker of synthetic nucleic acids, raised $38.5 million in Series B funding. LSP and BPIFrance were joined by return backers Sofinnova Partners, Kurma Partners, Idinvest Partners, Illumina Ventures and M Ventures.

Revenue Analytics, an Atlanta-based provider of pricing and revenue management software, raised $11 million in Series A funding. Noro-Moseley Partners led, and was joined by Blue Lagoon Capital.

Retail Zipline, a San Francisco-based retail communication platform, raised $9.6 million in Series A funding. Emergence led, and was joined by Serena Ventures.

JumpCrew, a New York-based acquisition marketing platform, raised $7.2 million in Series B funding co-led by Nashville Capital Network and Hinsdale Capital.

MultiVu, a Tel Aviv-based developer of 3D imaging technology that relies on a single sensor, raised $7 million in seed funding from OurCrowd, Cadrumen Capital and Junson Capital.

Private Equity Deals

🚑 42 North Dental, a portfolio company of Audax Private Equity, acquired Massachusetts dental practice Northborough Dental Associates. It’s the 900th acquisition in Audax’s history.

Bain Capital, The Carlyle Group and KKR are among those circling Hitachi’s (Tokyo: 6501) $2.9 billion majority stake in Hitachi Chemical (Tokyo: 4217), per Reuters.

The Blackstone Group took a passive minority stake in mid-market buyout firm Marlin Equity Partners.

H.I.G. Capital agreed to invest in Riveron, a Dallas-based business advisory.

Spruce Finance, a Houston-based owner and operator of distributed generation solar and residential energy asset, raised $50 million in equity funding from HPS Investment Partners.

SugarCRM, a Cupertino, Calif.-based portfolio company of Accel-KKR, acquired Salesfusion, an Atlanta-based marketing automation software company that had raised around $15 million from firms like Hallett Capital and Noro-Mosely.

Public Offerings

Fastly, a San Francisco-based content delivery network, raised $180 million in its IPO. The company priced 11.25 million shares at $16 (high end of range), for an initial market cap of $1.45 billion. It will trade on the NYSE (FSLY) and reports a $31 million net loss on $144 million in revenue for 2018. BAML was lead underwriter. Fastly had raised around $220 million firms like August Capital, Iconiq, Amplify Partners, OATV, Battery Ventures, Deutsche Telekom, Sozo Ventures and Swisscom Ventures.

Fiverr, an Israel-based freelance work marketplace, filed for a $100 million IPO. It plans to trade on the NYSE (FVRR) with JP Morgan as lead underwriter, and reports a $36 million net loss on $75.5 million in revenue for 2018. It had raised around $110 million in VC funding from Bessemer Venture Partners, Accel, Square Peg Capital, Qumra Capital and ION Crossover Partners.

Luckin Coffee, a homegrown rival to Starbucks in China, raised $561 million in its IPO, after increasing its number of offered shares and pricing at the top of its $15-$17 range. It will trade on the Nasdaq (LK), while pre-IPO shareholders include BlackRock and Temasek.

Liquidity Events

BandLab, a Singapore-based social music platform, agreed to buy British music magazines NME and Uncut from TI Media, a London-based portfolio company of Empris.

Reliance Gathering, a Midland, Texas-based crude oil gathering company backed by Metalmark Capital and Monarch Investments, is exploring a sale that could fetch around $500 million, per Bloomberg.

Yorktown Partners is seeking a buyer for Vaquero Midstream, a The Woodlands, Texas-based oil and gas processor that could fetch over $1 billion, per Bloomberg.

More M&A

Air Canada (TSX: AC) is in exclusive talks to buy Montreal-based travel tour operator Transat (TSX: TRZ) for around C$520 million, or C$13 per share (23% premium to Wednesday’s closing price).

Carrefour (Paris: CA), the French retailing giant, is considering the sale of a minority stake in its $1 billion China business, per Reuters.

HP Enterprise (NYSE: HPE) is in “advanced talks” to buy Seattle-based supercomputer maker Cray (Nasdaq: CRAY), which has a market cap of around $1.2 billion, per Bloomberg.

Iamgold (TSX: IMG), a Canadian gold miner with a market cap of C$1.6 billion, is considering a sale of all or part of the company, per Bloomberg.

🚑 Takeda Pharmaceuticals (Tokyo: 4502) is expecting to receive binding offers for its Latin American business by the end of May, with both Patria Investments and Brazilian pharma group EMS said to be likely suitors, per Reuters.

It's Personnel

Zeeshan Ahmedani joined Morrison & Foerster as a Los Angeles-based partner in the law firm’s private funds group. He previously was a partner with White & Case.

Meredith McPherron, a Boston-area angel investor and company advisor, joined Glasswing Ventures as a venture partner.

Final Numbers: U.S. equities
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Data: World Bank; Chart: Axios Visuals
Dan Primack