Oct 15, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

🎧 Pro Rata Podcast digs into the backstory of President Trump's decision to pull troops out of Northern Syria. I'm joined by Axios' Jonathan Swan. Listen here.

Top of the Morning

Illustration: Sarah Grillo/Axios

Private equity's newest political headache came last Thursday, when G/O Media shut down Splinter News, a left-wing publication with seven full-time employees.

  • One day later, Elizabeth Warren placed the blame squarely on G/O Media owner Great Hill Partners.
  • She tweeted: "Private equity firms are sucking value out of our companies, putting people out of work, and wiping out newspapers and digital news outlets like @Splinter_News. I have a plan to hold these firms accountable."
  • Warren's does have a plan to change private equity, but it wouldn't directly impact Great Hill Partners' ownership of G/O Media.

Great Hill formed G/O Media this past spring via the purchase of Gizmodo Media Group and The Onion from Univision. Splinter was part of Gizmodo, alongside several other sites that Univision had acquired via the Gawker bankruptcy (Deadspin, Jezebel, Kotaku, etc.). No pricing terms were disclosed, although Great Hill reportedly paid less than the $135 million check Univision had originally cut.

  • Great Hill did disclose that its purchase was all-equity. Managing partner Christopher Gaffney confirmed that with me yesterday, adding that there was no assumed debt, nor had any been put on G/O Media since the purchase.
  • Warren's plan focuses on leverage, making private equity funds liable for portfolio company debt.
  • G/O Media has no debt, thus wouldn't be affected by that primarily plank of Warren's plan.

Gaffney puts the blame for Splinter's failure on the site's audience declines, which he says fell 75% from its Univision-owned peak, rather on than a lack of financial performance. "It had nothing to do with making money, because we co-mingle the audience for ad sales."

  • To be sure, this is where Great Hill obviously does have some strategic culpability, since it hired the executives overseeing Splinter's staff.
  • There also may have been search and social media algorithm changes outside of both of their control.
  • In terms of jobs, G/O told Splinter's seven employees that there were nine open editorial positions within the company, and that it hoped to enable internal transfers. But it's unclear if Splinter's staffers are qualified for those jobs, any more than I'd be qualified to run Axios' healthcare coverage were Pro Rata to be shuttered. Moreover, editors of other G/O sites are said to have final say on hiring, so it's more about job opportunities than actual jobs.
  • Spinter's ex-editor didn't return a request for comment.

Splinter illustrates the fundamental flaw of one-size-fits-all policy prescriptions for private equity, whether from Warren of anyone else. Similar to what we discussed last week in terms of private equity's impact on net employment.

  • Same goes for universal criticisms or plaudits.

The bottom line is that private equity did kill Splinter, in the sense that Great Hill pulled the plug. But it shouldn't bear sole blame for the underlying disease that has spread throughout media, including among both those that do and don't have private equity backing.

Source: Giphy

Barneys New York, the luxury retailer that filed for bankruptcy in August, reportedly is in talks for a $268 million rescue investment from Authentic Brands Group.

  • Why it's the BFD: This could keep at least some of Barneys' seven locations open, while a concurrent licensing deal with Hudson’s Bay Co. (TSX: HBC) would keep the Barneys website afloat and result in Barneys mini-locations being opened inside of Saks Fifth Avenue stores.
  • Authentic Brands is a New York-based brand development group whose portfolio includes Marilyn Monroe, Elvis Presley, Sports Illustrated, and Juicy Couture. Shareholders include BlackRock, Jasper Ridge Partners, and General Atlantic.
  • Bottom line: "Barneys’ weakened financial position has created confusion among shoppers and an opening for rivals. Saks in recent months has been hiring salespeople from Barneys stores, said a person familiar with the matter. And Barneys stores in New York have prominently displayed signs stating that the store wasn’t going out of business." — Suzanne Kapner & Juliet Chung, WSJ
Venture Capital Deals

Paytm, an Indian mobile payments company, is nearing a $2 billion investment at a $16 billion valuation from a group that includes existing backers Ant Financial and SoftBank Group, per Bloomberg. http://axios.link/LrGh

Algolia, a San Francisco-based search-as-a-service startup, raised $110 million in Series C funding. Accel led, and was joined by Salesforce Ventures. http://axios.link/PdS0

Level Home, a smart-lock developer, raised $71 million from Walmart, Hut 8 Ventures, and Lennar. http://axios.link/QKhH

🚲 Wheels, a dockless e-bike rental company, raised $50 million led by DBL Partners. http://axios.link/n5SU

🚑 Cyteir Therapeutics, a Lexington, Mass.-based cancer therapy startup, raised $40.2 million in new Series B funding (round total $75.2m). Novo Holdings led, and was joined by Venrock, DROIA Oncology Ventures, Osage University Partners, Lightstone Ventures and Celgene. www.cyteir.com

Havenly, a Denver-based home interior decorating design and ecommerce company, raised $32 million in Series C funding from Foundry Group, Lerer Hippeau, Kickstart Ventures, and Gingerbread Capital. www.havenly.com

True Balance, a payments app for small cities and towns in India, raised $23 million in Series C funding from NH Investment & Securities, IBK Capital, D3 Jubilee Partners, SB Partners, Shinhan Capital, and return backers IMM Investment and HB Investment. http://axios.link/DTJi

Thimble (fka Verifly), a provider of short-term insurance to small businesses and freelancers, raised $22 million in Series A funding. IAC led, and was joined by seed backers Slow Ventures, AXA Venture Partners, and Open Ocean. http://axios.link/zImU

Radius Networks, a Washington, D.C.-based provider of physical customer traffic analytics, raised $15 million in Series A funding from Contour Venture Partners and Core Capital Partners. http://axios.link/JRd0

Mathpresso, a Seoul-based math homework app, raised $14.5 million in Series B funding from Legend Capital, InterVest, NP Investments, and Mirae Asset Venture Investment. http://axios.link/7jQ9

🚑 Azitra, a Farmington, Conn.-based medical dermatology startup, raised $14 million in Series A funding. KdT Ventures and Bios Partners co-led, and were joined by Connecticut Innovations and Godfrey Capital. www.azitrainc.com

🚑 Abalos Therapeutics, a German developer of oncologic immuno-virotherapies, raised €12 million in Series A financing co-led by BIVF and Gruenderfonds Ruhr. http://axios.link/Qks1

Cashforce, a Belgian cash forecasting and working capital management startup, raised €5 million in Series A funding. INKEF Capital and Citi Ventures co-led, and were joined by Pamica and Volta Ventures. www.cashforce.com

Relative Insight, a UK-based market research tool that began by helping law enforcement monitor social platforms, raised $5 million from Maven Capital Partners. www.relativeinsight.com

ZitSticka, a New York-based skincare breand, raised $5 million in Series A funding led by BFG Ventures. www.zitsticka.com

Rho Business, a New York-based digital banking platform for high-growth startups, raised $4.9 million in seed funding led by Inspired Capital. www.rho.co

Private Equity Deals

Apollo Global Management and The Blackstone Group each made first-round bids for Hilton Grand Vacations (NYSE: HGV), per Bloomberg. A deal could value the HGV at over $5 billion (including assumed debt). http://axios.link/S9ib

The Blackstone Group plans to launch a tender offer for Japanese hotelier Unizo Holdings (Tokyo: 3258), after having two takeover bids rejected. http://axios.link/OPzf

Blue Wolf Capital Partners acquired Kirlin Design Build, a Rockville, Md.-based engineering and construction company focused on large government and private-sector projects. www.kirlingroup.com

🚑 KKR is leading a $685 million to buy Metro Pacific Hospitals Holdings, the Philippines’ largest hospital chain. http://axios.link/pGJV

Lee Equity Partners acquired a majority stake in The Living Co., a Dallas-based provider of furniture to off-campus student housing properties. www.livingcompany.com

Lincolnshire Management acquired Powerhouse, a Crowley, Texas-based construction and facilities maintenance company. www.powerhousenow.com

Sun Capital Partners is in pole position to buy Vetrerie Riunite, an Italian maker of home appliance door glass, per Reuters. http://axios.link/gcnJ

Wendel, a French investment firm, agreed to buy Crisis Prevention Institute, a Milwaukee-based provider of behavioral management and violence prevention training services, from FFL Partners for $910 million. http://axios.link/SCfG

Public Offerings

Latitude Financial, an Australian lender, canceled what would have been Australia’s largest IPO of the year, reportedly because too much share demand was coming from short-term investors. Latitude backers include KKR, Deutsche Bank, and Varde Partners. http://axios.link/B7iH

PT Champ Resto, an Indonesian restaurant chain operator backed by Capsquare Asia Partners, is considering an IPO that could raise around $150 million, per Bloomberg. http://axios.link/Pmle

Liquidity Events

Ardian is seeking a buyer for DRT, a French maker of chemicals for use in food, fragrances, and adhesives, per Reuters. A deal could fetch upwards of €2 billion. http://axios.link/461D

🚑 Blue Sea Capital and CITIC Capital are seeking a buyer for DDS Lab, a Tampa, Fla.-based dental labs company, per PE Hub. http://axios.link/FpdQ

The Carlyle Group is seeking to sell British minicab company Addison Lee by early next year, in order to avoid a debt restructure or extension, per the FT. Earlier reports were that Carlyle was considering a U.S. IPO. http://axios.link/fyPw

More M&A

Massimo Zanetti (Milan: MZB) agreed to buy Brazilian coffee brand Cafe Pacaembu. http://axios.link/l1WF

Parsley Energy (NYSE: PE) agreed to buy smaller rival shale producer Jagged Peak Energy ( NYSE: JAG) for $1.62 billion in stock. http://axios.link/iwBY

Sempra Energy (NYSE: SRE) agreed to sell its Chile business to China’s State Grid International Development for $2.23 billion in cash. http://axios.link/2bQj

THP, a Vietnamese beverage maker that once turned down a $2.5 billion takeover offer from Coca-Cola, is seeking a $3 billion strategic investment, per Bloomberg. http://axios.link/pFcB

Whiting Petroleum (NYSE: WLL) of Denver is in talks to merger with San Antonio-based Abraxas Petroleum (Nasdaq: AXAS), per Reuters. http://axios.link/Sdts


M13, a Los Angeles-based VC firm, raised $175 million for its second fund. www.m13.co

It's Personnel

Eric de Montgolfier was named CEO of private capital trade associate Invest Europe. He previously was a partner with GIMV. www.investeurope.eu

Varsity Healthcare Partners, a healthcare-focused private equity firm, promoted Michael Fisher to partner. www.varsityhealtyhcarepartners.com

Final Numbers
Source: EY’s Capital Confidence Barometer, survey of 2,900 senior U.S. executives.
Dan Primack

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