May 21, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Lazaro Gamio/Axios

President Trump still wants to end the carried interest tax break, in which certain investment managers pay capital gains rates instead of higher ordinary income rates. But don't expect it to happen anytime soon, if at all.

  • He made the comments to Fox News host Steve Hilton, who noted that Candidate Trump had once referred to the current system as "getting away with murder."

But then things get fuzzy.

  • Trump told Hilton that he used carried interest as a "negotiating chip" during 2017 tax bill negotiations to get corporate rates down to 21%, saying it otherwise would have been "23 or 24%."
  • Gary Cohn, when still Trump's top economic advisor, told Axios that Trump was asking up until the last minute "if we could still get rid of it." So if Trump was using carried interest as a negotiating chip, no one told Trump.
  • Cohn at the time blamed lobbyist-driven GOP House members from blue states for the pushback, but said nothing about a tit-for-tat on corporate rates (which the GOP caucus seemed to be in agreement on). Probably because the math isn't anywhere near comparable, with even Trump telling Fox that the carried interest change wouldn't generate "that much money" in new federal revenue.

The bottom line: The House is now controlled by Democrats, who are generally more supportive of this change than are Republicans. But there's no obvious mechanism for how it would now get passed. Trump had his chance, but "negotiated" it away.


Yesterday we noted with some curiosity that the U.S. Department of Justice didn't join an FCC statement in support of concessions offered by T-Mobile US and Sprint, in order to gain approval for their proposed $26.5 billion mega-merger.

  • Hours later, Bloomberg reported that DoJ was learning toward killing the deal, believing that the consolidation would hurt competition.
  • This was similar to the premise of an earlier WSJ report, which T-Mobile US CEO John Legere tweeted was "simply untrue."
  • Either Bloomberg is also wrong, or Legere lied/was out of the loop. For his sake, and for that of the merger, it had better be the former.
  • Go deeper: Fate of T-Mobile-Sprint deal rests with DoJ

🎧 Pro Rata Podcast digs into how tech is being affected by the U.S.-China trade war, including the recent actions against Huawei. My guest is Sinocism's Bill Bishop. Listen here.

Fed chair Jerome Powell tried pouring some cold water on leveraged loan volume fears, while speaking last night at an Atlanta Fed banking conference.

"The financial system today appears strong enough to handle potential business-sector losses, which was manifestly not the case a decade ago with subprime mortgages.
And there are other differences: Increases in business borrowing are not outsized for such a long expansion, in contrast to the mortgage boom; business credit is not fueled by a dramatic asset price bubble, as mortgage debt was; and CLO structures are much sounder than the structures that were in use during the mortgage credit bubble."

Illustration: Lazaro Gamio/Axios

Merck (NYSE: MRK) agreed to buy Peloton Therapeutics, a Dallas-based developer of oral oncology drugs. The deal is valued at upwards of $2.25 billion, including $1.05 billion upfront in cash.

  • Why it's the BFD: This reflects how big pharma is seeking to bolster oncology pipelines via M&A, including recent mega-deals like BSM/Celgene and Eli Lilly/Loxo Oncology. It also pulls an IPO off the board, as Peloton had been scheduled to list later this week.
  • ROI: Peloton Therapeutics had 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%). Its post recent post-money valuation was around $711 million.
  • Bottom line: "Peloton was due to go public this week and raise $150 million or more to bankroll a late-phase trial of HIF-2α inhibitor in metastatic renal cell carcinoma patients previously treated with at least one checkpoint inhibitor, such as Merck’s Keytruda. But a late offer from Merck has persuaded the biotech to switch lanes, taking a buyout that represents a premium on the IPO terms even before milestones are factored in."— Nick Paul Taylor, FierceBiotech
Venture Capital Deals

Marqeta, an Oakland-based digital payments processor, raised $260 million in Series E funding at around a $2 billion valuation led by Coatue Management. Existing backers include Visa, Goldman Sachs, ICONIQ, 83North and Granite Ventures.

Canva, an Australia-based graphic design platform, raised $70 million at a $2.5 billion valuation. Bond (fka Kleiner Perkins Growth) led, and was jined by return backers Felicis Ventures and Blackbird Capital.

Ivalua, a Redwood City, Calif.-based provider of spend management software, raised $60 million at a valuation north of $1 billion from Tiger Global Management and Ardian Growth.

🚑 Cala Health, a Burlingame, Calif.-based developer of a wearable bioelectronic stimulator for treating hand tremors, raised $50 million in Series C funding. Novartis, Baird Capital, LifeSci Venture Partners and TriVentures were joined by return backers JJDC, Lux Capital, Lightstone Ventures, Action Potential Venture Capital, dRx Capital and GV.

🚑 Reneo Pharma, a San Diego-based developer of therapies for energy-depleting diseases, raised $50 million in Series A funding. NEA led, and was joined by Lundbeckfonden Ventures, Pappas Capital and RiverVest Venture Partners.

🚑 Quell Therapeutics, a London-based developer of Treg cell therapies, raised $35 million in Series A funding. Syncona led, and was joined by UCL Technology Fund.

Sun Basket, a San Francisco-based subscription meal delivery service, raised $30 million in Series E funding. PivotNorth Capital led, and was joined by Sapphire Ventures, August Capital, Founders Circle, Unilever Ventures, Baseline Ventures, Relevance Capital, Accolade Partners and Correlation Ventures.

Fullbay, a Phoenix-based provider of business management software for the heavy-duty truck repair market, raised $23 million from Mainsail Partners.

Tachyus, a Houston-based provider of production optimization software for the oil and gas industry, raised $15 million in Series B funding led by Cottonwood Venture Partners.

Amastan Technologies, a North Andover, Mass.-based provider of plasma-based advanced materials, raised $11 million in Series B2 funding. Anzu Partners led, and was joined by return backers Launch Capital, Material Impact and RKS Ventures.

Artis Composites, a Berkeley, Calif.-based developer of carbon fiber composites, raised $10 million in Series A funding led by NEA.

Tyffon, a Santa Monica, Calif.-based developer of immersive entertainment apps, raised $7.8 million in Series A funding. Tokyo Broadcasting System led, and was joined by return backers like SEGA and Walt Disney Co.

Folio Photonics, a Salon, Ohio-based developer of optical solutions for data storage, raised $8 million in seed funding. Refinery Ventures led, and was joined by Pavey Investments and Capital One. www.foliophotonicscom

Sonarworks, a Latvian developer of sound calibration and personalization solutions for consumer electronics, raised €5 million in Series A funding co-led by Karma Ventures and Practica Capital., an Israeli developer of tech to autonomously inspect vehicles for damage, raised $4 million in seed funding. Pico Venture Partners led, and was joined by Shell Ventures.

Daisie, a creative talent discovery app co-founded by GOT star Maisie Williams, raised $2.5 million in seed funding. Founders Fund led, and was joined by 8VC, Kleiner Perkins and Shrug Capital.

Private Equity Deals

🚑 AnaCap Financial Partners acquired a majority stake in SundhedsGruppe, a Danish provider of health insurance and services.

The Blackstone Group is among those expressing interest in a takeover of QEP Resources (NYSE: QEP), a Denver-based oil and gas E&P that’s been under pressure from activist investor Elliott Management, per Bloomberg. Other suitors reportedly include Whiting Petroleum (NYSE: WLL) and Callon Petroleum (NYSE: CPE).

KKR is partnering with Western Natural Resources to acquire producing and undeveloped oil and gas assets in the Williston Basin.

The Riverside Co. has sponsored a merger between HR technology companies Montage (Delafield, Wis.) and Shaker International (Cleveland). Riverside originally invested in Shaker two years ago.

Public Offerings

Slack increased its direct public listing size to $196 million, and changed its proposed NYSE ticker symbol from SK to WORK.

Liquidity Events

Charme Capital Partners agreed to sell its majority stake in ATOP, an Italian-based maker of machines and automatic lines for electric motor production, to IMA Group at an enterprise value of €380 million.

Pivotal Acquisition Corp. (NYSE: PVT), a blank check acquisition company led by New York Islanders owner Jon Ledecky, agreed to buy KLDiscovery, a McLean, Va.-based e-discovery software company backed by The Carlyle Group and Revolution Growth. The deal is valued at $344.5 million in stock, with Carlyle and Revolution agreeing to a lock-up.

Spectrum Equity Partners sold Ethoca, a Toronto-based anti-fraud collaboration platform for card issuers and merchants, to Mastercard (NYSE: MC).

🦓 Zebra Technologies (Nasdaq: ZBRA) bought Profitect, a Burlington, Mass.-based provider of analytics to the retail and CPG markets. Profitect had raised around $22 million from Cedar Fund, Benhamou Global Ventures, Grayhawk Capital and Vertical Venture Partners.

More M&A

Crane (NYSE: CR) has offered to buy Circor International (NYSE: CIR) for approximately $1.7 billion in cash, or $45 per share (47% premium over yesterday’s closing price).

🍷 LVMH agreed to buy French winemaker Le Chateau du Galoupet.

• Marvell Technology Group (Nasdaq: MRVL) agreed to buy the Avera Semiconductor chip-design unit from Globalfoundries for $650 million in cash.


Generation Investment Management, a social impact private equity firm co-founded by Al Gore, raised $1 billion for its third fund.

Idinvest Partners raised €340 million for a private equity fund focused on the “modernization of production tools for European SMEs in the industrial sector.”

Jackson Square Ventures of San Francisco is seeking upwards of $150 million for its third fund, per an SEC filing.

Noro-Moseley Partners, an Atlanta-based VC firm, raised $180 million for its eighth fund, per an SEC filing.

🚑 Sofinnova Partners of Paris raised €48 million for its third “medtech acceleration” fund.

It's Personnel

Gil Ahrens has left Wells Fargo Securities to join Deutsche Bank as head of VC and emerging growth company coverage. Deutsche also hired Tracy Mehr as a New York-based managing director of leveraged finance, covering software. He previously was co-head of TMT leveraged finance at Jefferies.

Will Copeland joined Equistone as a Birmingham, England-based investment manager. He previously was with BGF. Equistone also promoted London-based Ed Baker to investment director.

Mehdi Khodadad joined Sidley Austin as a partner in the law firm’s private equity practice. He previously spent over 14 years with Cooley.

Maarten Meurs joined William Blair as a managing director in the investment bank’s financial sponsors group. He previously was with ABN AMRO.

Brian O’Reilly left CVC Credit Partners to joined Graycliff Partners as a managing director.

Y Combinator promoted Geoff Ralston to president, and said that Sam Altman will step down as chairman but remain an advisor.

Final Numbers
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Data: Axios research; Chart: Naema Ahmed/Axios
Dan Primack