Oct 9, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Situational awareness: HBO today will announce that our new limited series, Axios, begins airing on Sunday, Nov. 4 at 6:30pm ET with a replay at 11:30pm. Be sure to tune in... Also, thanks to CNBC for including Axios in its new Upstart 100 list.

Top of the Morning
Source: Giphy

Venture capitalists invested $27.9 billion into U.S. companies in the third quarter, bringing the year-to-date figure up to a whopping $84.3 billion, according to new data released this morning by PitchBook and the National Venture Capital Association. Four things to know:

  • 2018 is on pace to hit an all-time record for U.S. venture disbursements. It's already at a decade high, with a full quarter to go.
  • This is being driven by larger deals, rather than by more deals. For example, the 2018 dollar total is already higher than the entire 2017 dollar total, but with nearly 2,700 fewer deals. Plus, the majority of Q3 funding came from deals worth $50 million or more.
  • The deal size growth isn't just at the growth stage, as the average early-stage deal size grew from $5.6 million in 2017 to $7 million in 2018.
  • You can decide which is the tail and which is the dog, but median and average VC fund sizes are also on the rise.

Secondary stuff: In May we discussed how venture capital firm NEA was planning to sell up to $1 billion of portfolio assets to a new direct secondaries firm being launched by longtime NEA partner Ravi Viswanathan.

  • The deal still isn't done, but we've confirmed a peHUB report that Goldman Sachs has agreed to lead the deal. Word is that its commitment is in the range of around $400 million, with Viswanathan continuing to seek new co-investors.
  • Quiz time: Can you name the veteran buyout firm that just launched a secondary sale of its own? Hint: Boston-based.

One to watch: Apollo Global Management and Bain Capital had until end-of-business yesterday to make takeover bids for British packaging company RPC, but instead received an extension to November 5 from UK regulators.

What's the hold-up on a deal that could top $4 billion? I'll let WSJ's Paul J. Davies explain:

The company, 8% of whose shares are on loan to short sellers, faces big questions about its accounting, strategy and performance... This is the puzzle for private equity. If RPC struggles to generate cash, it won't be able to service the debt a buyout typically involves. And in terms of valuation, while RPC trades at a discount to peers on a forward price-to-earnings basis, it is at a premium if price is compared with free cash flow.

Just saying: Elon Musk didn't have "funding secured" when he first tweeted about a Tesla takeover at $420 per share, but he did subsequently receive financing interest from such groups as Silver Lake.

  • Obviously a lot of water has gone under this particular bridge since Musk pulled the plug, but shares closed yesterday at around $250.
  • A 20% premium on that would come out to $300 per share.
  • If you had interest at $420, is $300 not at least a little tempting?
The BFD

Microsoft agreed to invest in Southeast Asian ride-hail giant Grab, as part of a broader strategic partnership.

  • Why it's the BFD: Because third is Microsoft's third dip into the connected carpool, following earlier deals with Uber and Volkswagen. Plus, it reflects how it's willing to strike creative structures to lock in large, scalable customers for Azure, as it gets more aggressive in competing with Amazon Web Services.
  • More: This is part of a larger round for Grab, including a $1 billion investment earlier this year from Toyota at a valuation north of $10 billion. No specifics on how much Microsoft invested, although a source says it was "materially lower" than a $200 million figure cited by the FT.
  • Bottom line: "Microsoft has been pushing forward the idea of the 'intelligent edge,' and cars are an excellent example of the unique demands of edge computing, with enough capacity to handle a significant amount of computing power yet often encumbered by slow or spotty Internet connections." —Taylor Soper, GeekWire
Venture Capital Deals

Nubank, a Brazilian digital credit card company, raised $180 million in seventh-round funding at a $4 billion valuation from Tencent. Around half is primary, while the remainder buys shares from existing holders. http://axios.link/kdjX

🏠 Divvy Homes, a rent-to-own platform for homes, raised $30 million in Series A equity and debt funding. Andreessen Horowitz led, and was joined by Caffeinated Capital, Scifi Ventures and DFJ. http://axios.link/3lp4

Pitch, a Berlin-based platform for content collaboration and presentations, raised $19 million in Series A funding. Index Ventures led, and was joined by BlueYard. www.pitch.com

YourMechanic, a Mountain View-based mobile car repair network, raised $10.1 million in Series B1 funding from RBC, SoftBank Capital, Verizon Ventures, American Family Ventures, Data Point Capital and former GM CEO Rick Wagoner. www.yourmechanic.com

Machinify, a Palo Alto-based analytics service platform, raised $10 million in Series A funding. Battery Ventures led, and was joined by GV and Matrix Partners. http://axios.link/hfes

Frontify, a Swiss brand management platform, raised $8.3 million in Series A funding led by Blossom Capital. http://axios.link/NeuE

Artomatix, an Irish maker of an art tool for computer graphics, raised $3.1 million led by Suit Valley Ventures. http://axios.link/oxiT

Private Equity Deals

Align Capital Partners acquired IPU, a Wayland, Mass.-based business process outsourcing company for the promotional products industry. www.ipromoteu.com

Bain Capital agreed to acquire a majority stake in Rocket Software, a Waltham, Mass.-based provider of enterprise modernization and optimization software, at an enterprise value of around $2 billion. Sellers include Court Square Capital Partners. http://axios.link/SBWO

🚑 Bristol-Myers Squibb (NYSE: BMY) has received multiple indicative bids for its French OTC drugs business, which could fetch around €1 billion, per Reuters. Suitors reportedly include BC Partners, CVC Capital Partners, PAI Partners and Stada (controlled by Bain Capital and Cinven). http://axios.link/pboU

ETech, a West Chester, Ohio-based portfolio company of Falfurrias Capital Partners, acquired Glenmount Global Solutions, an Austin, Texas-based provider of control and automation solutions to both process and discrete manufacturing, from Palisade Capital Management. www.glenmountglobal.com

Generation Investment Management and CDPQ agreed to buy a majority stake in FNZ, a British provider of fintech solutions to financial institutions and wealth managers, for £1.6 billion. Sellers include General Atlantic and HIG Capital. http://axios.link/a30i

Rock Hill acquired a majority stake in TMCo, a Houston-based maker of orifice fittings used in natural gas measurement. www.tmco-usa.com

• The Rohatyn Group acquired pet supply companies Animax (Romania) and MIMAJA (Slovenia).

🚑 Strand Life Sciences, a Bangalore-based company whose shareholders include Quadria Capital, agreed to buy the India medical diagnostics unit of Quest Diagnostics (NYSE: DGX). http://axios.link/Dnln

U.S. Lumber Group, a Duluth, Ga.-based portfolio company of Madison Dearborn Partners, acquired Alexandria Moulding, a Moxee, Wash.-based provider of wood and wood composite moldings, from Industrial Opportunity Partners. www.alexandriamoulding.com

🚑 Warburg Pincus invested in Jinxin Fertility, a Chinese fertility services provider. http://axios.link/5eJk

Liquidity Events

Allstate (NYSE: ALL) paid $525 million to buy InfoArmor, a Scottsdale, Ariz.-based provider of employee protection and cyber intelligence solutions, from Summit Partners. www.infoarmor.com

Microsoft (Nasdaq: MSFT) is expected to receive unconditional EU antitrust approval for its $7.5 billion purchase of coding site Github, per Reuters. http://axios.link/z3Yl

More M&A

Epic Games, the Cary, N.C.-based maker of Fortnite, acquired Kamu, a Finnish developer of anti-cheat software. http://axios.link/QGr2

Ensco (NYE: ESV) agreed to buy rival offshore driller Rowan Cos (NYSE: RDC) for $2.38 billion in stock. http://axios.link/HI43

Nestle (SWX: NESN) agreed to sell its Malaysia chilled dairy business for $40 million to France’s Lactalis. http://axios.link/yGtn

🍕 Trian Fund Management, a major shareholder in Wendy’s, is considering a takeover bid for Papa John’s (Nasdaq: PZZA), per the WSJ (which in July reported talks between Wendy's and Papa John's). http://axios.link/5dye

Fundraising

Commonfund Capital raised $432 million for its 12th venture capital fund-of-funds. www.commonfund.org

It's Personnel

Brian Conklin (ex-USAA) and Christin Tinsworth Baker (ex-Ford Motor Co.) have joined the Washington D.C. office of SoftBank as VP of U.S. government affairs and government and policy communications manager, respectively.

Ahn Hyo-joon, ex-president of Seoul-based BNK Financial Group, has been named chief investment officer for South Korea’s $567 billion National Pension Service. http://axios.link/WwT8

Dan Robinson joined CIFC as chief investment officer for Europe. He previously led European liquid credit for Apollo Global Management.

Final Numbers
Dan Primack