Greetings from the home office, where I'm a bit bleary-eyed after last night's debacle. Remember to send me scoop via email, Twitter DM, confidential apps (Confide, Telegram, Signal, etc.) or anonymously via http://axios.com/tips. Here we go...
Top of the Morning
CalPERS, the nation's largest public pension, is in early talks to outsource management of its $26 billion private equity investment portfolio to BlackRock. Bloomberg was first with the news, which Axios has since confirmed.
- Why it matters: CalPERS no longer is private equity's 800 lb gorilla in terms of influence, but that $26 billion can still rattle big cages.
- Hold your horses: These talks are early, and have included discussions of BlackRock managing everything from a sliver of the CalPERS portfolio to the whole enchilada.
- Seriously, hold em: Covering CalPERS and private equity sometimes feels like an exercise in mental whiplash. Sometimes it's very hot on outside managers, then it bails on them in favor of building out a large internal investment team. But it also saddles that team with a boss whose anti-fee fervor slows down the new investment pace to a trickle, thus giving these new hires little to do. But then that boss resigns six months ago (still no word on a permanent replacement), and the board begins publicly considering an in-house direct private equity program that mirrors its Canadian peers (which would likely require salaries that would be catnip to Sacramento Bee editors). Oh, and CalPERS spent a fortune on an internal fee reporting system that could have been preempted had someone just bought Excel for Dummies. My neck hurts, and I honestly had to leave a lot out for the sake of space.
- Notable: BlackRock's current alternatives boss is Mark Wiseman, who helped pioneer the Canadian direct model while CEO of Canada Pension Plan Investment Board.
- Data disclosure: CalPERS is about a quarter behind on its publicly-reported data, but here is the private equity portfolio through year-end 2016.
Genstar Capital has agreed to acquire proxy advisory firm Institutional Shareholder Services from Vestar Capital Partners for $720 million. It's a strong return for Vestar, which paid $364 million to buy ISS three years ago in a competitive auction.
- Why it's the BFD: The high sale price masks some secular threats to the central role that ISS and fellow proxy advisor Glass Lewis have played in the M&A market. Not only active fund managers making their own decisions, but also giant index funds relying on ever-growing internal research and corporate governance groups. Perhaps this is why ISS revenue and EBITDA only climbed 3% during the majority of Vestar's ownership, per Moody's.
- Bottom line: "Vestar made its money in traditional LBO-style – by changing ISS's capital structure. The $117 million of equity it injected into its 2014 acquisition, based on Moody's numbers, represented just 32 percent of the purchase price. It also paid itself a $37 million dividend last December financed by debt. Strip out ISS's borrowings and Thursday's headline purchase price of $720 million falls to an equity value of $369 million – just over three times more than Vestar shelled out, and that's not including the dividend." – Antony Currie, BreakingViews
Venture Capital Deals
• OYO, an Indian budget hotel aggregator, has raised $250 million in Series D funding. SoftBank Vision Fund led the round, and was joined by Hero Enterprise and return backers Greenoaks Capital, Lightspeed Venture Partners and Sequoia Capital India. http://axios.link/OYEd
• Airobotics, an Israeli maker of automated industrial drones, has raised $32.5 million in Series C funding. BlueRun Ventures China led the round, and was joined by Microsoft Ventures and OurCrowd. http://tcrn.ch/2j61onK
• Favor, an on-demand delivery service in Texas, has raised $22 million in Series B funding led by return backer S3 Ventures. http://tcrn.ch/2vPgzYa
• Guru, a Philadelphia-based provider of "team knowledge software," has raised $9.3 million in Series A funding. Emergence Capital led the round, and was joined by return backers FirstMark Capital and MSD Capital. http://axios.link/9RiV
🚑 OncoStem Diagnostics, an India-based personalized oncology startup, has raised $6 million in VC funding from Sequoia Capital India. http://axios.link/9ART
• DeepBrain, a Chinese provider of AI and blockchain-based SaaS solutions to IoT hardware makers and app developers, has raised $5 million in Series A funding from GSR Ventures, Gobi Partners and Qianshi Capital. http://axios.link/Hz5L
• Maestro, a Los Angeles-based engagement and analytics platform for enterprise live streamers, has raised $3 million in Series A funding. Hersh Interactive Group led the round, and was joined by Rubicon Venture Capital and the Stanford StartX Fund. http://tcrn.ch/2f72T0h
• ReWork, an Indonesian co-working space operator, has raised $3 million in "pre-Series A" funding. ATM Capital and Convergence Ventures co-led the round, and were joined by Social Capital, UrWork, Fortune Union Investments and ACE Capital. http://tcrn.ch/2vRFj26
• Despegar.com, an Argentina-based online travel booking site, has set its IPO terms to 12.8 million shares being offered at between $23 and $26 per share. It would have a fully-diluted market cap of around $1.6 billion, were it to price in the middle of its range. The company plans to trade on the NYSE under ticker symbol DESP, with Morgan Stanley and Citigroup serving as lead underwriters. It reports around $18 million in net income on $248 million in revenue for the first half of 2017. Shareholders include Tiger Global (57.3% pre-IPO stake), Expedia (16.4%) and General Atlantic (5.4%).
• ZhongAn, a Chinese online insurance company, has secured Hong Kong stock exchange approval for an IPO that could raise more than $1 billion, according to Reuters. http://reut.rs/2xRiAj7
🚑 MTS Health Investors has sold Woodbury Holdings, a Floral Park, N.Y.-based provider of incontinence and catheter products, to ConvaTec Group (LSE: CTEC) for an undisclosed amount. www.woodburyproducts.com
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