Feb 21, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Welcome back from the long weekend. Be sure to visit the Axios stream throughout the day, and to send me feedback and info either via email (just hit reply) or through our tip box (it goes directly to me). Let's get to it...

Top of the Morning

• Coming attractions: Rapper and overall mogul Jay-Z is launching a venture capital firm, according to multiple sources. One of his partners will be Jay Brown, a longtime business partner and president of Roc Nation. The pair also is scouring the venture market for a full-time investment partner. The "Jays" also are partnering with Sherpa Capital, although this won't be a Sherpa-branded effort, and existing Sherpa staff won't be leading investments.

Expect the focus to be on seed-stage tech opportunities, as this is really the institutionalization of Jay-Z and Jay Brown's previous angel investing activities. For example, they both were in Uber's Series B, at a $300m pre-money. No word yet on fund size target, nor any comment from anyone directly involved (due to regulatory restrictions).

• Ügher: By now you've likely read the allegations of sexual harassment and discrimination at Uber, by a former company engineer who is now at Stripe. Pick an adjective: Inexcusable. Revolting. Predictable.

Since then, we've also gotten a statement from Uber CEO Travis Kalanick and the hiring of Eric Holder to conduct an investigation (alongside one of his law partners and some company insiders, including its new HR chief).

To me, the only relevant question is what happens next: The investigation must be swift. It must be transparent. And, if the ex-engineer's accusations are corroborated, there must be severe penalties (which is what Kalanick pledged). Uber can either use this moment to emphatically and explicitly change its corporate culture, or it can pass the buck and wait for next time. Because if these allegations are true and Uber doesn't do the former, then there certainly will be a next time.

• Just thinking aloud: Snap and Box are very different tech companies, in terms of product, target customer and size. But we're starting to see some public perception similarities, in terms of how IPO disclosures can raise all sorts of skeptical questions about "unicorns" that had been almost universally viewed as "red hot" and "can't miss."

• Recommended reading: President Trump regularly rails against U.S. companies that fire domestic workers and then hire abroad, so Axios dug into the numbers. What we found, among the country's 250 largest listed companies, is that very few engage in such behavior. More here.

• Update: The first-ever scoop published in Pro Rata was that MuleSoft, a SaaS integration "unicorn," had filed confidentially for an IPO. On Friday, the company made it official with a public S-1. More details here.

• Update II: Verizon and Yahoo this morning confirmed earlier reports that Verizon will acquire Yahoo's core Internet assets for $350 million less than the original price-tag, following multiple security breach revelations. That brings the overall deal value down to $4.48 billion. Still a big win for Yahoo shareholders, because the alternative was unthinkably disastrous.

• Update III: 3G Capital-backed Kraft Heinz over the weekend pulled its mega-takeover offer for Unilever. Then, this morning, Restaurant Brands International (TSX: QSR) ― also a 3G Capital company ― agreed to buy fast-food chain Popeyes Louisiana Kitchen (Nasdaq: PLKI) for $1.8 billion in cash (we had previously discussed the deal here).

The BFD: Small-cap consolidation

B. Riley Financial (Nasdaq: RILY) has agreed to acquire FBR & Co. (Nasdaq: FBRC), an Arlington, Va.-based small-cap investment banking and brokerage firm, in an all-stock transaction valued at $160.1 million.

• Why it's the BFD: The small-cap investment banking market is unlikely to ever again reach its pre-millennium heydey, but this deal should at least ensure some added stability for companies that are worried about maintaining coverage. There also isn't too much overlap in terms of business units of clients for this pairing, as B. Riley concentrates on research while FBR is more equity transaction-oriented.

• Bottom line: "We've seen a lot of contraction among firms that provide small-cap research, and we were fortunate in that we successfully diversified around some other businesses. Now we're seeing that high ETF valuations have created a real stock-picker's market. The bet we're making isn't that the whole passive investment theme has necessarily run its course, but that it certainly has created a lot of opportunity." ― B. Riley chairman and CEO Bryant Riley, speaking with Axios

Venture Capital Deals

• Kakao, a South Korean messaging service that plans to launch financial services, has raised $200 million in new strategic funding from Ant Financial, an affiliate of Alibaba Group (NYSE: BABA). http://tcrn.ch/2lG8hvN

• Mobike, a Chinese bike-sharing service, has raised an undisclosed amount of new Series D funding from Temasek and Hillhouse Capital. The company has now raised a total of $300 million in 2017, including a $215 million infusion led by Warburg Pincus and an undisclosed amount of subsequent investment from Foxconn. http://bit.ly/2lHhCUk

MobiTV, an Emeryville, Calif.-based provider of video delivery solutions, has raised $21 million in new private funding from Oak Investment Partners and Ally Corporate Finance. www.mobitv.com

• Ms Paris, a Chinese online dress rental platform, has raised $18 million in new VC funding. Northern Light Venture Capital led the round, and was joined by Matrix Partners China and return backers like China Growth Capital. http://bit.ly/2lgeq0G

• UNICAF, an operator of higher education learning centers across Africa, has raised $12 million from CDC Group, University Ventures and Savannah Fund. http://bit.ly/2m6v2GD

• TVSquared, a Scottish TV measurement and optimization startup, has raised $6.5 million in new VC funding. West Coast Capital led the round, and was joined by Scottish Enterprise and unidentified return backers. http://bit.ly/2lD0Nd1

• Utrip, a Seattle-based travel-planning platform, has raised $4 million in Series A funding. Backers include Plug and Play, Tiempo Capital, Acorn Ventures, SWAN Venture Fund and W&W Capital. http://bit.ly/2l0LSWF

• YotaScale, a Menlo Park, Calif.-based enterprise cloud management platform, has raised $3.6 million in new VC funding from Engineering Capital, Pelion Ventures and individual angels. http://tcrn.ch/2lmACap

• Pacifica Labs, a San Francisco-based developer of a mental health management app, has raised an undisclosed amount of new VC funding. LEO Innovation Lab led the round, and was joined by HealthX Ventures and Personal Health Solutions Capital. http://bit.ly/2m6d6fo

• Trillium, a Tokyo-based auto and IoT cybersecurity startup, has raised an undisclosed amount of Series A funding from Global Brain, Mizuho Capital and DBJ Capital. http://bit.ly/2kG2oPJ

• Makeblock Co., a Chinese maker of DIY robotics kits, is raising around $29 million in Series B funding at a $200 million valuation, according to Bloomberg. Existing backers include Sequoia Capital. http://bloom.bg/2lygcek

Private Equity Deals

• EQT Infrastructure has agreed to acquire Lumos Networks (Nasdaq: LMOS), a Waynesboro, Va.-based provider of fiber-based broadband services, for an enterprise value of around $950 million. The $18 per share deal represents an 18.2% premium over Friday's closing price. http://bit.ly/2m7PgzL

• Francisco Partners has acquired myON, a digital literacy company focused on the K-12 market, from educational publishing company Capstone. No financial terms were disclosed, except that Francisco plans to make a "significant growth investment" in myON. www.myon.com

• KKR has agreed to acquire up to a 40% stake in Telxius, the telecom towers business of Spain's Telefonica, for €1.275 billion. http://reut.rs/2l3dXMS

• Lone Star Funds has entered into "concluding" talks to acquire Novo Banco, the bailed-out "good bank" piece of collapsed Banco Espírito Santo, from the Portugal government. http://on.ft.com/2lhSeDI

• Meltwater, a San Francisco-based media intelligence platform backed by Vector Capital and Altor Capital Partners, has acquired Wrapidity, a UK-based AI startup that automates data extraction from unstructured web content. No financial terms were disclosed. http://tcrn.ch/2m3dgaz

• MedPlast, a Tempe, Ariz.-based portfolio company of JLL Partners and Water Street Healthcare Partners, has agreed to acquire the device manufacturing services business of Vention Medical, a Denver-based portfolio company of KRG Capital Partners. No financial terms were disclosed. www.medplast.com

• Renters Warehouse, a Bloomington, Minn.-based portfolio company of Northern Pacific Capital, has acquired Redneck Property, a property management firm focused on the Tulsa and Oklahoma City markets. No financial terms were disclosed. www.renterswarehouse.com

Liquidity Events

• Cliqz, a German web browser focused on privacy, has acquired the ad-blocking business of Ghostery for an undisclosed amount. Cliqz is owned by Hubert Burda Media, while Mozilla also has a stake. Ghostery, which has raised around $20 million in VC funding from firms like Warburg Pincus, will continue to operate its B2B digital governance business as Evidon. http://bit.ly/2mhzTnY

• Magic Leap, the Florida-based augmented reality company that has raised $1.4 billion in VC fnding, has acquired the 3D unit of Dacuda, a Zurich-based digital image processing company, for an undisclosed amount. Dacuda backers include Wellington Partners. http://tcrn.ch/2kA9YeM

• WayUp, a New York-based online portal that helps students to find jobs and internships, has acquired San Francisco-based rival Looksharp for an undisclosed amount. WayUp has raised around $8 million in VC funding from firms like General Catalyst, Index Ventures, Slow Ventures and Y Combinator. Looksharp backers included Artis Capital, Kapor Capital, Subtraction Capital and Social Leverage. http://tcrn.ch/2m2ZZL1

More M&A

• Apple (Nasdaq: AAPL) has acquired Realface, an Israeli cybersecurity startup that uses facial recognition to authenticate users, according to Calcalist. The deal is believed to be worth a few million dollars. http://bit.ly/2ljKEH4

• MacDonald Dettwiler & Associates (TSX: MDA) is in talks to acquire DigitalGlobe (NYSE: DGI), a Colorado-based earth imaging company, for at least $2 billion, according to Dow Jones. http://on.mktw.net/2m4nymK

• Mediahuis, a Belgian publisher, has raised its offer for Telegraaf Media Group (Amsterdam: TMG) to €273 million, which matches a bid from Dutch billionaire John de Mol. http://reut.rs/2kUxIpa

• Sinochem is considering a sale of its 40% stake in Brazilian offshore oilfield Peregrino, according to Reuters. http://reut.rs/2kUCymq

• UBS Asset Management has agreed to sell its fund administration servicing units in Luxembourg and Switzerland to Northern Trust (Nasdaq: NTRS). No financial terms were disclosed. http://reut.rs/2l3p20v

Fundraising

• Adveq Management is raising up to $250 million for its ninth fund-of-funds aimed at tech-focused growth equity and private equity platforms, per an SEC filing. http://bit.ly/2kUtL3R

• Odyssey Private Equity, an Australian mid-market private equity firm led by George Penlkis (co-founder of Quadrant Private Equity) and three former members of CHAMP Ventures, has closed its debut fund with A$275 million in capital commitments. http://bit.ly/2m3CXYI

It's Personnel

• Bader al-Saad is stepping down as managing director of the Kuwait Investment Authority after 14 years at the helm, effective in April. He will be succeeded by Farouk Bastaki, who leads the sovereign wealth fund's alternative investment business. http://on.ft.com/2kUnxRu

Alan Kerr is stepping down as a senior managing director with GSO Capital Partners, a unit of The Blackstone Group, where he led the firm's European customized credit strategies business. No word yet on his future plans. Kerr was a co-founder of Harbourmaster Capital, which GSO acquired in 2012. http://reut.rs/2mgfnDU

• Edith Young has joined 500 Startups as head of China investments, succeeding Rui Ma. Young previously led marketing for Dolphin Browser. http://bit.ly/2l3Jhem

• Corsair Capital has promoted James Kirk to managing director. www.corsair-capital.com

• Jonathan Roosevelt, who previously led Roosevelt Capital, has joined Industry Ventures as a venture partner. www.industryventures.com

Final Numbers: Healthcare CIO survey
Dan Primack