Oct 12, 2018

Axios Pro Rata

Dan Primack
Top of the Morning

Illustration: Sarah Grillo/Axios

On Monday we wrote that the disappearance of Jamal Khashoggi could complicate Saudi Arabia's business dealings with the West, and that we'd get a better gauge by who does, and doesn't, attend the Saudi government's Future Investment Conference in Riyadh later this month.

It turns out we didn't need to wait that long. In the past 24 hours:

  • Several of the conference's media partners have bailed, including The New York Times, CNBC, and CNN.
  • Some big-name conference participants are also out, including Steve Case, Dara Khosrowshahi, and World Bank president Jim Yong Kim.
  • Y Combinator's Sam Altman and IDEO's Tim Brown dropped off the advisory board for a Saudi mega-city project called NEOM.
  • Richard Branson suspended talks about a $1 billion Saudi investment in Virgin's space companies, plus also pulled back from joint work on a pair of planned tourism projects.

Expect this list to keep growing, unless Khashoggi is found alive or Saudi can credibly exculpate itself (on that latter point, some breaking intrigue from Axios' Jonathan Swan).

But there is also a counter-argument, expressed to me this week by two U.S. business bigs who aren't separating themselves from Saudi, either financially or rhetorically. Here it is, paraphrased (neither would go on the record):

Almost all governments, including America's, do awful things. Saudi has done awful things for years. Where do you draw the line? What we're seeing now is little more than virtue signaling for approval from journalists who are particularly upset because one of their own was the target this time.

Yes, there is a possible slippery slope here. And, to be sure, Saudi has acted terribly in the past, and far too many U.S. business interests and media organizations have looked the other way. Were the NY Times or CNN or Richard Branson unaware of the regime's repressive policies toward women, for example? Or of its role in exacerbating the Yemen famine?

  • It's a point I made when Uber took big money from Saudi's government in 2016.
  • And one I made again this past summer during an on-stage interview with two investors for SoftBank Vision Fund (video here, go to 20:21). "Emphatically no" was the reply to the question of if any potential portfolio companies had expressed reservations about taking money from a Saudi-backed fund.

All of that said, this time is different.

Saudi Crown Prince Mohammed Bin Salman believes the key to his country's long-term financial viability is diversification, rather than Saudi's historical reliance on oil revenue. That's why it invested in Vision Fund. And too a 5% stake in Tesla. And committed up to $20 billion for Blackstone's global infrastructure fund. And why it's holding these annual, Davos-esque conferences.

That means Western business and investors have an unusual ability to leverage their relationship with MBS, in a way they haven't before — either in Saudi Arabia or in most other counties.

  • By rallying around Khashoggi, they can hold MBS to his social and political liberalization promises.
  • Or, at the very least, scare him off of (allegedly) ordering more extrajudicial murders of political critics.

Is there hypocrisy at play this week? Sure. But if the cause is just, who cares?


Source: Giphy

Alibaba Group (NYSE: BABA) is merging its Ele.me food delivery business with local food and commerce platform Koubei. The newly-combined business does not yet have an English-language name.

  • Why it's the BFD: Because it reflects Alibaba's escalating rivalry with Meituan Dianping, which went public in Hong Kong last month. Plus, the newly-combined business will be massive, with around 3.5 million participating merchants operating in 676 cities.
  • Bottom line: "Alibaba and Meituan are engaged in a price subsidy war in China’s on-demand market, providing everything from food delivery to restaurant reviews and even massage services, with profitability relegated to the back seat in the short term." — Iris Deng, South China Morning Post
Venture Capital Deals

G2 Crowd, a Chicago-based platform for crowdsourcing enterprise software reviews, raised $55 million in Series C funding at a valuation reported to be just south of $500 million. IVP led, and was joined by Emergence Capital and return backer Accel. http://axios.link/F4qC

Coord, a New York-based real-time local transportation data platform that spun out of Alphabet’s Sidewalk Labs, raised $5 million. Alliance Ventures led, and was joined by Trucks, Urban.Us and DB Digital Ventures. http://axios.link/YqFS

Private Equity Deals

• The Blackstone Group is in talks to buy British live events business NEC Group for over 800 million, per Sky News. http://axios.link/vOeW

Centerbridge Partners is prepping a bid for the European tissue unit of Kimberly-Clark (NYSE: KMB), which could fetch upwards of €2 billion, per Bloomberg. There also could be a joint offer from PAI Partners and Goldman Sachs. http://axios.link/syE9

KKR agreed to buy Minnesota Rubber and Plastics, a provider of elastomer and thermoplastic solutions, from Norwest Equity Partners.

🚑 KKR completed its $9.9 billion take-private acquisition of Envision Healthcare, a Nashville-based physician staffing and services company. http://axios.link/F7Ng

🚑 MBF Healthcare Partners agreed to buy Affinity Hospice, a Birmingham, Ala.-based provider of hospice care in Alabama and Georgia. www.affinityhospice.com

Polycor, a Quebec City-based natural stone producer owned by TorWest Partners, acquired Bloomington, Ind.-based Indiana Limestone from Wynnchurch Capital. www.polycor.com

🚑 PWP Growth Equity invested in SkinSpirit, a Palo Alto-based medical spa chain. www.skinspirit.com

TPG Growth is the highest bidder to buy a 30% stake in Indian non-bank lender Ess Kay, per The Economic Times. http://axios.link/i3z1

Public Offerings

SoftBank picked give banks to lead an upcoming IPO for its mobile phones unit, per Reuters: Nomura, Goldman Sachs, Mizuho, Deutsche Bank and SMBC Nikko Securities. http://axios.link/f3QZ

Liquidity Events

ANGI Homeservices (Nasdaq: ANGI), the parent company of Angie's List's and HomeAdvisor, is acquiring Handy, a New York-based home services marketplace that had raised over $110 million from firms like Fidelity, TPG Growth, Revolution, Highland Capital Partners and General Catalyst. http://axios.link/nbVu

Roblox, a San Mateo, Calif.-based kids gaming platform that just raised $150 million, agreed to buy PacketZoom, a San Mateo-based mobile content delivery network that had raised around $12 million from firms like Baseline Ventures, First Round Capital, Tandem Capital and Arafura Ventures. http://axios.link/UBBq

More M&A

ArcelorMittal agreed to sell its steel-making facilities in the Czech Republic, Romania, Macedonia and Italy to Liberty House. http://axios.link/GKxa

Karen Millen has purchased some assets of rival British fashion retailer Coast, which went into administration this week. http://axios.link/QE0W

L Brands (NYSE: LB) said it is pursuing strategic options for money-losing lingerie brand La Senza, which it bought for $700 million eleven years ago. http://axios.link/Qnvv

🚑 MedMen has acquired medical marijuana dispensary chain PharmaCann for $682 million in stock. http://axios.link/Vdjq

New Relic (NYSE: NEWR) acquired CoScale, a Belgian provider of monitoring solutions for containers and microservices. http://axios.link/Ook0


Morningside Venture Capital of China raised over $1 billion for a new fund. http://axios.link/2Ioa

It's Personnel

Greg Guyett (ex-JPMorgan) is joining HSBC as co-head of investment banking. http://axios.link/tIXT

Rebecca John stepped down as head of investor relations at Lexington Partners, which she first joined in 2001, per Bloomberg. http://axios.link/Q9pj

Final Numbers
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Data: FactSet; Chart: Andrew Witherspoon/Axios
Dan Primack