Aug 18, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the home office. Quick reminder that Pro Rata won't be published next week, as I'm taking a little time off to recharge. But the Axios Biz Stream will be active, and you can always shoot news over to Kia@axios.com. Here we go...

Top of the Morning

• As Uber turns: Travis Kalanick late last night filed his reply to Benchmark's fraud lawsuit, including a rhetorical slam that Benchmark "executed its plan at the most shameful of times: immediately after Kalanick experienced a horrible personal tragedy." You can read more highlights and the full document by going here. Two additional notes, as I search for decent hotels in Delaware:

  • Earlier this week we suggested that Benchmark might have originally supported Kalanick receiving the extra board seats as a sort of quid pro quo for Kalanick's support of a massive investment from Saudi Arabia that included the Saudis receiving a newly-created board seat. Kalanick's suit asserts the same.
  • Kalanick is effectively arguing that Benchmark bungled the resignation letter process, allowing him to sign what amounts to an unenforceable half-contract. That's why he alleges that Benchmark is claiming fraud in addition to breach of contract, since there was no valid contract to breach when it came to voting rights.

• "Founder friendly" persists: Axios has obtained a proposed term sheet offered up by WeWork for a $40 million Series B investment in a fellow New York-based startup (albeit a much younger one, which has not yet agreed to the transaction). What's particularly remarkable here is that WeWork is: (a) Offering each of the two founders a $10 million secondary (i.e., only $20m is primary) at a substantial valuation boost, but then topping off founder equity to pre-deal levels; (b) Offering each of the founders a $250,000 "advisor cash award." Both clauses are highly unusual, and suggest that investors will still bend their terms over backwards to get the deals they want.

• Everyone out of the pool: The White House yesterday said it won't continue the formation of an infrastructure advisory council that reportedly would have included such private equity bigs as Josh Harris (Apollo) and Bill Ford (General Atlantic). Just as a reminder: The council is being iced because of comments Trump made at a press conference that was supposed to be about improving America's infrastructure.

• Another canary: Financial institutions have begun to cut compliance headcount for the first time since the economic crisis, according to Bloomberg. The real question now is if the decrease is more due to automation or an expected enforcement reduction under Trump's SEC — for example he supports a House bill that would end PE registration, thus making fraud extremely difficult to uncover. Chances are it's a bit of both...

• Exit complicates entry: Politico's Mark Scott reports that Brexit is causing problems for British venture capital firms:

"Since the country gave notice it was leaving the European Union in March, a growing list of British venture capital funds has been told they will not receive financial support from the European Investment Fund, an EU agency that provides almost half of the money for the region's venture capital industry, according to several fund managers who held discussions with the body."

• Quiz time: Can you name the U.S. buyout boss who is (finally) forming a family office?

• Have a great weekend. Sox to sweep Yanks. Pro Rata will return — rested and ready — on August 28.

The BFD

Energy Capital Partners has agreed to acquire Houston-based power generation Calpine (NYSE: CPN) for $5.6 billion, or $17 billion including debt. The deal comes with a 45-day "go-shop" provision and works out to $15.25 per share, which represents a 51% premium to price before first media reports of a possible transaction. Also participating on the buy-side are Access Industries and Canada Pension Plan Investment Board.

  • Why it's the BFD: Calpine claims to be the country's largest producers of electricity from natural gas and geothermal energy, and one of its largest electricity retailers. But it's also gotten hammered by low natural gas prices and competition from renewables, which helped cause a $29 million net loss in Q2 2016 to balloon to a $219 million net loss in Q2 2017.
  • Data point: Global energy and power M&A is up 28% over year-to-date figures for 2016, per Thomson Reuters.
  • Bottom line: Deals are not yet done in this sector, nor even deals involving Energy Capital Partners. The New Jersey-based private equity firm is the largest outside holder in Calpine rival Dynegy (NYSE: DYN), which reportedly received a takeover offer from Vistra (NYSE: VST).
Venture Capital Deals

• ThoughtSpot, a Palo Alto, Calif.-based provider of search-driven enterprise data analytics, has raised $60 million in new Series C funding from Lightspeed Venture Partners and Capital One Growth Ventures. http://axios.link/jDq0

• Huochebang, a Chinese on-demand trucking startup, has raised $56 million in new Series B funding led by All-Stars Investment. http://axios.link/bTdW

🚑 Unity Biotechnology, a San Francisco-based developer of anti-aging therapeutics, has raised $35 million in new Series B funding from INVUS Opportunities, Three Lakes Partners, Cycad Group, COM Investments and Pivotal Alpha. Existing backers include ARCH Venture Partners, Baillie Gifford, Fidelity Management and Research Company, Partner Fund Management, and Venrock. Other investors include Bezos Expeditions, Vulcan Capital, Founders Fund, WuXi PharmaTech and Mayo Clinic Ventures. www.unitybiotechnology.com

• Ripcord, a Hayward, Calif.-based robotic digitization company focused on "paperless workplaces," has raised $25 million in Series B funding. Icon Ventures led the round, and was joined by Kleiner Perkins Caufield & Byers and Lux Capital. Silicon Valley Bank provided $15 million in debt financing. http://axios.link/9D48

• ZingBox, a Mountain View, Calif.-based provider of IoT security solutions, has raised $22 million in Series B funding co-led by Dell Technologies Capital and Triventures. http://axios.link/PwAp

• TuSimple, a Chinese autonomous trucking startup, has raised $20 million in new VC funding. Sina led the round, and was joined by Nvidia. http://tcrn.ch/2uQU6Wa

• Immersv, a Castro Valley, Calif.-based mobile 360 VR ad network, has raised $10.5 million in Series A funding. Rogers Venture Partners led the round, and was joined by Foundation Capital, The Venture Reality Fund, Initial Capital, East Ventures, HTC Vive, MCJ Co., GREE, i-mobile and Metaps. http://tcrn.ch/2uOs6qa

• Monstar Lab, a Japanese developer of consumer and enterprise mobile apps, has raised $6.3 million in new VC funding from YJ Capital, Shinsei Corporate Investment, San-In Chuo Television Broadcasting Co., Ltd., Fenox Venture Capital and Tanabe Corp. www.monster-lab.com

Private Equity Deals

• Artemis Capital Partners has acquired StanChem, an East Berlin, Conn.-based maker of specialty polymers and flame retardant products. No financial terms were disclosed. www.stanchem-inc.com

• The Blackstone Group has agreed to acquire Harvest Fund Advisors, an investment management firm focused on U.S. midstream energy assets. No financial terms were disclosed, except that Harvest has around $10 billion in assets under management. http://axios.link/XUgw

• ConvergeOne, an Eagan, Minn.-based portfolio company of Clearlake Capital Partners, has acquired Strategic Products and Services, a Parsippany, N.J.-based managed service provider. No financial terms were disclosed. www.spscom.com

• Encore Consumer Capital has invested in Veggie Noodle Co., an Austin, Texas-based food brand. No financial terms were disclosed. http://axios.link/YsYQ

• Kellermeyer Bergensons Services, a Maumee, Ohio-based property services company owned by GI Partners, has acquired Varsity Facility Services, a Salt Lake City-based facility services provider. No financial terms were disclosed. www.varsityfs.com

Public Offerings

• Sigma Alimentos, a Mexican meat and dairy unit of listed conglomerate Alfa, has filed initial IPO documents with the Mexico bourse. http://reut.rs/2uOnKzr

Liquidity Events

• The Carlyle Group and Southern Capital Group are seeking a buyer for their majority stake in Solusi Tunas Pratama, an Indonesian telecom towers operator, for around $1 billion, according to Reuters. http://reut.rs/2v7JYrf

• Hellman & Friedman is exploring the sale of an equity stake in HUB International, a Chicago-based insurance brokerage it purchased in 2013 for $4.4 billion, according to Reuters. The hoped-for deal, which likely would be just a partial exit, could value HUB at upwards of $7 billion (including debt). http://reut.rs/2xawKM6

More M&A

🚑 Arcus Biosciences, a Hayward, Calif.-based cancer immunotherapy startup, has licensed a PD-1 inhibitor from listed Chinese company WuXi Pharmaceuticals, for development and commercialization in Europe, North America and Japan. The deal includes an $18.5 million upfront payment, and nearly $800 million in earn-outs. Arcus last year raised $70 million in Series B funding from firms like Google Ventures, Stanford University, Column Group, Foresite Capital, Celgene and Novartis. http://axios.link/bXLk

• Brazil's government is considering the sale of state-owned minority stakes in four airports, which could raise upwards of $2.5 billion. http://reut.rs/2wmKLcd

⛽ CEFC China Energy is in talks to purchase a stake in Russian state oil giant Rosneft, according to Reuters. http://reut.rs/2wVYO6E

• MassMutual has agreed to sell its MassMutual Asia unit to an investor group led by Hong Kong-listed Yunfeng Financial Group, for around $1.69 billion in cash ($1.01b) and stock. http://axios.link/7Llp

It's Personnel

• Vadim Balashov has joined Viaduct Ventures as a managing director, per his LinkedIn account. He is a former partner with Ersnt & Young. www.viaduct.ventures

• Mike Ghaffary has joined Social Capital as a partner. He is a onetime Summit Partners investor who most recently was CEO of Eat 24, which Yelp is selling to GrubHub. http://tcrn.ch/2v53QeW

• Lydia Hao has joined Neuberger Berman to focus on Asia private equity investments, after having spent seven years with Canada Pension Plan Investment Board in Hong Kong, according to Private Equity International. http://axios.link/vi37

Dan Primack