Jun 5, 2017

Axios Pro Rata

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Top of the Morning

Plane plans: President Trump hits the road this week to change the narrative promote his $1 trillion infrastructure plan. Four things to know:

  1. Broad strokes: There is no $1 trillion infrastructure plan, at least not yet. One reason is that this was supposed to come after healthcare and tax reform, with each building on top of the other in a sequential game of pay-for dominoes. Instead we'll get a set of "principles," including plans to quasi-privatize America's air traffic control system.
  2. Biz lobby: FedEx CEO Fred Smith gave a good overview of the user argument for spinning out ATC, during February congressional testimony on infrastructure (page 5).
  3. What to watch: Will Trump take a position on raising the federal gas tax, which has not been touched in the past 24 years? He's previously said he'd be open to it, but that's a far cry from actual support.
  4. Leverage caveat: The basic conceit behind the $1 trillion figure is $200 million of tax dollars to then be leveraged via private sector efforts like Blackstone Group's $40 billion-targeted infrastructure fund. But a lot of that money, including Blackstone's first $20 billion, comes from foreign governments. Expect there to be some major national security concerns if Saudi Arabia or China is bankrolling things like America's ATC revamp or port operations.

From the mouths of LPs: While at the ILPA event last Friday, I heard some grumbling about how smaller LPs in private equity funds are effectively "subsidizing" due diligence for larger institutional investors who take co-invest positions on larger deals. It's a compelling gripe, even if those co-investments do enable GPs to hit above their capital weight.

Buzz buzz: Palmer Luckey and Peter Thiel, Silicon Valley's only two notable Trump supporters (per Marc Andreessen) have teamed up for "a company that is developing surveillance technology that could be deployed on borders between countries and around military bases," per the NY Times. Luckey (ex-Oculus) is the founder, while Thiel's Founders Fund is expected to invest (although FF partner Trae Stephens may be more intimately involved).

A source familiar with the project tells me:

"The whole defense industrial complex is broken and wasteful...They want to fix it. This is another company in the vein of Palantir and SpaceX, in that regard. It's a next generation defense technology company. Obviously, the Peter + Palmer + virtual wall thing is a great sensationalist clickbait headline, but that's not what this is about."

New firm alert: Anheuser-Busch InBev has launched ZX Ventures, which it refers to as a "global incubator, operator, and venture capital team." The only team member listed on its website is Pedro Earp, who is the broader company's "chief disruptive growth operator," which has to be the only time I've ever seen that job title.


Apple and Amazon are joining forces to support Foxconn's takeover bid for Toshiba Corp.'s semiconductors business, according to a Nikkei interview with Foxconn CEO Terry Gou.

  • Why it's the BFD: First, the target business is is the world's second-largest maker of NAND-type flash memory chips, and could be valued at more than $18 billion. Second, Japan's Toshiba needs the sale proceeds to help cover the massive losses from its U.S. nuclear energy unit (Westinghouse). Third, this would just be an even deeper tie-up for Foxconn, which generates most of its revenue by providing components and manufacturing services for Apple and Amazon devices (e.g., iPhones, iPads, Kindles, Echos, etc.).
  • Gou: "Of course Apple and Amazon are offering money together, but I cannot comment on how much funds each company is putting on the table."
  • Uphill climb: Foxconn is viewed as an underdog in the auction, due to its Chinese government ties, so adding Apple and Amazon might lighten the geopolitical burden a bit. But it's still a long shot, as its rival bidder is led by a Japanese public-private investment partnership (INCJ), which is working with KKR and, possibly, Western Digital (which jointly operates Toshiba's main NAND chips factory). There also is at least one other formal bid, from the pairing of Broadcom and Silver Lake.
Venture Capital Deals

• Zopa, a UK-based P2P lender that is launching a challenger bank, has raised £32 million in new VC funding from backers like Wadhawan Global Capital and Northzone Ventures. http://cnb.cx/2sF9Zxp

• UNTUCKit, a Hoboken, N.J.-based designer and retailer of men's apparel, has raised $30 million in new VC funding from Kleiner Perkins Caufield & Byers. www.untuckit.com

• Lob, a San Francisco-based automated mail-delivery infrastructure platform, has raised $20 million in Series B funding. YC Continuity Fund led the round, and was joined by Polaris Partners, Floodgate, First Round Capital and Initialized Capital. http://bit.ly/2qGjb3p

• AI-Drive, a Chinese autonomous driving startup focused on aerial lift vehicles, has raised $14 million in Series A funding from backers that include Shunwei Capital. http://bit.ly/2rUhbcG

• Evolve Vacation Rental Network, a Denver-based provider of vacation rental property management solutions, has raised $11 million in new VC funding. T. Rowe Price led the round, and was joined by Annox Capital, Allen & Co. and PAR Capital Ventures. http://bit.ly/2rIBGJg

• Krypt.co, a Boston-based cybersecurity startup focused on safely storing SSH private keys, has raised $1.2 million in seed funding. Rough Draft Ventures and General Catalyst co-led the round, and were joined by Slow Ventures, SV Angel and Akamai Labs. www.krypt.io

• Owl's Brew, a New York-based developer of tea-based cocktail mixers, has raised an undisclosed amount of Series A funding from Cambridge Companies SPG and Anheuser-Busch InBev's ZX Ventures. http://bit.ly/2qOxwvm

Private Equity Deals

🚑 Avista Capital Partners has acquired National Spine & Pain Centers, a Rockville, Md.-based service provider to interventional pain management physicians, from Sentinel Capital Partners. No financial terms were disclosed. www.treatingpain.com

• The Blackstone Group has offered to acquire listed Finnish real estate investment company Sponda for around €1.8 billion, or €5.19 per share (21% premium over Friday's closing price). http://reut.rs/2s8Gyaq

• Convergint Technologies, a Schaumberg, Ill.-based portfolio company of KRG Capital Partners, has completed its previously-announced purchase of Post Browning, a Cincinnati-based systems integrator of security and transaction solutions for financial institutions. No financial terms were disclosed. www.convergint.com

• GTCR has acquired Sage Payment Solutions, a Reston, Va.-based provider of payment processing and merchant acquiring solutions, for $260 million from The Sage Group (LSE: SGE). http://bit.ly/2qOsT4l

• Royal Adhesives & Sealants, a South Bend, Ind.-based portfolio company of American Securities, has acquired the Ball Ground aircraft sealant repackaging business from Graco Supply, a portfolio company of CM Equity Partners. No financial terms were disclosed. www.gracosupply.com

• Unison Capital of Japan has acquired local restaurant chain Dinamix for an undisclosed amount. http://bit.ly/2svRJYi

Public Offerings

• The U.S. IPO market is expecting two small listings this week: ShotSpotter and Plymouth Industrial REIT. http://bit.ly/2qTcxvp

🚑 Aileron Therapeutics Inc., a Cambridge, Mass.-based developer of cancer drugs based on a stapled peptide platform, has filed for a $69 million IPO. It plans to trade on the Nasdaq under ticker symbol ALRN, with BofA Merrill Lynch and Jefferies serving as lead underwriters. Apple Tree Partners, Excel Venture Management, Lilly Ventures, Novartis Venture Funds, Roche Venture Fund and SR One. The pre-revenue company has raised over $140 million in VC funding, from firms like Apple Tree Partners (22.4% pre-IPO stake), Novartis BioVentures (20.8%), S.R. One (10.6%), Excel Venture Management (8.7%), Lilly Ventures (7.7%) and Roche (5.3%). http://bit.ly/2qTdsMr

⛽ Akon Lighting Africa, a developer and installer of small-scale solar energy projects that was founded by rapper Akon, is considering an IPO to support geographic expansion beyond Africa, according to Bloomberg. https://bloom.bg/2s8xRg9

🚑 Athenex, a Buffalo, N.Y.-based developer of cancer therapeutics, has set its IPO terms to 6 million shares being offered at between $11 and $13 per share. It would have a fully-diluted market value of around $720 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol ATNX, with Credit Suisse listed as left lead underwriter. www.athenex.com

🚑 Dova Pharmaceuticals, a Durham, N.C.-based drug developer focused on treatments for thrombocytopenia, has filed for a $74.75 million IPO. It plans to trade on the Nasdaq under ticker symbol DOVA, with J.P. Morgan listed as left lead underwriter. Shareholders include PBM Capital Investments (84.8% pre-IPO stake) and Perceptive Life Sciences (5.4%). http://bit.ly/2qTdsMr

• Societe Generale said that it will sell up to 23% of its car leasing business, ALD Automotive, in a Paris IPO later this month. The offering could generate upwards of €1.6 billion. http://reut.rs/2rJRpqM

More M&A

• D.R. Horton (NYSE: DHI) has offered to acquire a 75% stake in Forestar Group (NYSE: FOR), an Austin, Texas-based real estate development company, for $16.25 per share. The offer represents a 14% premium to the bid Forestar already had agreed to from Starwood Capital Group. http://on.mktw.net/2qPmaHA

🚑 Grail Inc., an Illumina (Nasdaq: ILMN) spinout focused on early cancer detection, has agreed to merge with China's Cirina. No financial terms were disclosed. http://bit.ly/2qXfnKX

⛽ Shenhua Group, China's largest coal miner, is in merger talks with China Guodian, a Chinese operator of coal-fired power plants, according to Bloomberg. The companies have combined assets of nearly $267 billion. https://bloom.bg/2qT6Ptr


🚑 Lightstone Ventures, a Boston-based life sciences VC firm, is raising up to $200 million for its second fund, per an SEC filing. www.lightstonevc.com

• Rucker Park, a new VC firm led by Marissa Campise (ex-SoftBank, Greycroft, Venrock) is raising $50 million for a new early-stage VC fund under the Rucker Park brand, per Fortune.

• World Innovation Lab has secured $236 million for its $600 million-targeted second VC fund, per an SEC filing. www.wilab.com

It's Personnel

• Tom Amster has joined Macquarie Capital as head of U.S. financial sponsors. He previously led San Francisco investment banking and West Coast financial sponsors for Morgan Stanley. www.macquarie.com/us

• Benjamin Shriner has joined EdgeLine Capital Partners, a Los Angeles-based fund placement firm, as a partner. He previously was head of IR for Zelnick Media Capital. www.edgelinecapital.com