Oct 1, 2018

Axios Pro Rata

Situational awareness: General Electric has fired chairman and CEO John Flannery, after just a year on the job. The big issue seems to be a $23 billion non-cash charge for GE's power business. Don't expect any major changes to the conglomerate's strategic divestment plan.

Top of the Morning

Source: Giphy

Well, that's settled.

On Friday I argued that Elon Musk made a giant mistake in not accepting a settlement offer with the SEC, over his inaccurate tweets related to taking Tesla Motors private. On Suaturday, Musk and Tesla apparently came to the same conclusion.

Per settlement agreements:

  • Musk remains as CEO, but within 45 days must step down as chairman for a period of three years.
  • He also must pay a $20 million penalty, and comply with new company procedures for any public communications related to Tesla, including via his Twitter account.
  • Tesla will be required to pay a $20 million penalty, and add two new independent directors.
  • Musk neither admits nor denies the allegations brought forth by the SEC.

Tesla stock is up big this morning on both the settlement and a subsequent employee memo from Musk, suggesting that the company is "very close" to profitability and meeting its quarterly production goals.

  • One caveat to the sunshine is that the SEC does not preclude the Department of Justice from filing criminal charges, nor does it result in the dismissal of shareholder lawsuits. That said, it does make DOJ action less likely, and may create a higher hurdle for the class action suits.

"Toys" story: Bain Capital and KKR have reached a preliminary agreement to contribute a combined $20 million to a fund for fired Toys "R" Us workers. There are still lots of details to be worked out, including distribution protocols.

  • It will still be months before workers see any cash.
  • Per Carrie Gleason, policy director for a group representing the workers: "The Toys R Us employee fund is a huge step forward and thousands of struggling families who counted these jobs will benefit. That's why Toys R Us workers are fighting for the $75 million they were counting before the liquidation. Now is the time for Vornado and creditors like Solus, Angelo Gordon and others to join and contribute."
  • She adds that some former Toys workers testified at a New Jersey state pension fund meeting last Thursday, urging divestment from Solus.
  • Other private equity firms might not like to hear it, but this is creating industry precedent. Not for bankrupt portfolio companies, but for ones that also get liquidated.

David Solomon officially takes the reins today at Goldman Sachs. More from Vanity Fair's William Cohan:

Love it or hate it, Goldman Sachs has always displayed an uncanny knack for finding the right man at the right time to lead the firm. Sometimes the right man is a banker; sometimes the right man is a trader. The right man has never been a woman...
But Solomon faces a challenge that no Goldman leader before him has been forced to confront. Ever since 2008, when the Federal Reserve took the unprecedented step of making Goldman a bank-holding company and giving it access to its short-term borrowing window following the bankruptcy of Lehman Brothers, Goldman has effectively been subjected to the same financial regulations as big commercial banks. And despite the recent loosening of banking rules under Trump, Solomon doesn’t see much regulatory relief on the horizon.

Source: Giphy

Husky Energy (TSX: HSE) made an unsolicited C$6.4 billion takeover offer for rival Canadian oil and gas producer MEG Energy (TSX: MEG), representing a 37% premium over Friday's close.

  • Why it's the BFD: Because this is China's battle for Canada's oil sands. Husky is controlled by affiliates of Hong Kong billionaire Li Ka-shing, while Cnooc holds a 12% stake in MEG.
  • Bottom line: "The takeover would create an oil producer churning out more than 410,000 barrels of oil equivalent a day and with an almost equal amount of refining capacity." — Kevin Orland, Bloomberg
Venture Capital Deals

🚑 VelosBio, a San Diego-based developer of antibody drug conjugates to treat hematological cancers and solid tumors, raised $58 million in Series A funding. Arix Bioscience (LSE: ARIX) led, and was joined by Pappas Ventures, Chiesi Ventures and return backers Takeda Ventures and Decheng Capital.

🚑 Aohua Endoscopy, a Shanghai-based maker of endoscopy equipment, raised $44 million in Series D funding. Lyfe Capital led, and was joined by return backers Legend Capital and Qiming Venture Partners. http://axios.link/VMGv

Project44, a Chicago-based shipping logistics platform, raised $45 million in VC funding led by Sapphire Ventures at a valuation just south of $500 million. http://axios.link/0t9c

Gremlin, a San Francisco-based “failure-as-a-service” testing platform, raised $18 million in Series B funding led by Redpoint Ventures. http://axios.link/UnhO

Blok.Party, a San Francisco-based social gaming console maker, raised $10 million from JRR Capital. http://axios.link/WWcB

Vahdam Teas, an Indian e-commerce startup focused on fresh teas, raised $2.5 million in Series B funding from existing backer Fireside Ventures. http://axios.link/aIyf

Private Equity Deals

ACV Enviro, a Avenel, N.J.-based portfolio company of Kinderhook Industries, acquired CTR Industries, a Bridgeport, Conn.-based provider of industrial maintenance, emergency response, tank removal, remediation, demolition and transportation and disposal. www.acvenviro.com

⛽ Ara Partners acquired a majority stake in Centric Gas Services, a Magnolia, Texas-based gas distribution platform, from the founding Barnwell family. www.txgas.net

Saba Software, a Redwood Shores, Calif.-based portfolio company of Vector Capital, agreed to buy Lumesse, a UK-based provider of talent acquisition and management, from HgCapital. www.saba.com

Public Offerings

🚑 Abacus Medicine, a Denmark-based pharma parallel trade company, said it’s prepping a Frankfurt IPO that would raise around €40 million. http://axios.link/83i4

Anaplan, a San Francisco-based provider of business planning and performance management software, set IPO terms to 15.5 million shares at $13-$15 per share. It would have an initial market cap of $1.7 billion, were it to price in the middle. The company reports $47 million of net loss on $109 million in revenue for the first half of 2018, and raised around $300 million in VC funding from firms like Shasta Ventures (12.8% stake), Granite Ventures (12.1%), Meritech Capital (7.6%) and Premji Invest (7.4%). http://axios.link/QUfh

🚑 NGM Biopharmaceuticals, a South San Francisco-based developer of obesity and diabetes drugs, filed for a $75 million IPO. It plans to trade on the Nasdaq (NGM) with Goldman Sachs as lead underwriter. The company raised around $390 million VC funding from Column Group (25.1% stake), Merck (16.3%), Prospect Venture Partners (9.1%), Topspin Fund (8.9%), Rho Ventures (7%) and Tichenor Ventures. www.ngmbio.com

Samoyed, a Chinese online lending platform for credit card balance transfers, raised $80 million in an IPO. It plans to trade on the NYSE (SMY) with Morgan Stanley as lead underwriter. The company reports $3.8 million of net income on $35 million in revenue for the first half of 2018. Backers include CITIC Capital. http://axios.link/9ACv

Revolve, a Cerritos, Calif.-based online fashion retailer backed by TSG Consumer Partners, filed for a $100 million IPO. It plans to trade on the NYSE (RVLV) with Morgan Stanley as lead underwriter. http://axios.link/p5Mg

Upwork, a Mountain View, Calif.-based online marketplace for freelancers, increased its IPO price range from $10-$12 to $12-$14. It still plans to offer around 12.3 million shares and trade on the Nasdaq (UPWK) with Citigroup as lead underwriter. The company reports a $7 million net loss on $122 million in revenue for H1 2018, and lists shareholders like Benchmark (15% pre-IPO stake), Sigma Partners (14.2%), Globespan Capital Partners (12.9%), T. Rowe price (10.6%), FirstMark Capita,l (5.7%) and SG Growth Partners (5.5%). http://axios.link/CUD2

YETI Holdings Inc., an Austin, Texas-based maker of branded coolers and other outdoor and recreational products, refiled for a $100 million IPO (it had pulled an IPO filing back in March). The company plans to trade on the NYSE (YETI) with BofA Merrill Lynch as lead underwriter, and is owned by Cortec Group. http://axios.link/l5Sz

Liquidity Events

Century Equity Partners sold Priority Care Solutions, a Tampa, Fla.-based provider of managed care services to the workers’ comp market, to Genex Services. www.prioritycaresolutions.com

HIG Capital completed its sale of Lexmark Carpet Mills, a Dalton, Ga.-based maker of broadloom carpets, to Tarkett (Paris: TKTT). http://axios.link/ktUx

🚑 Hologic (Nasdaq: HOLX) agreed to buy Focal Therapeutics, an Aliso Viejo, Calif.-based developer of tissue-marking devices for use in surgeries, for $125 million in cash. Focal had raised around $15 million from firms like Okapi Venture Capital and Emergent Medical Partners. http://axios.link/q4CV

Honeywell (NYSE: HON) agreed to buy Transorm, a German warehouse automation company, for around €425 million, from IK Investment Partners. http://axios.link/vIuK

Lone Star Funds is considering a sale of Evoca Group, an Italian coffee machine maker that could fetch around $1.5 billion, per Bloomberg. http://axios.link/Pv4T

More M&A

🐔 Bojangles (Nasdaq: BOJA), a Charlotte-based fried chicken fast-food chain, is considering a possible sale, according to Reuters. Its market cap is around $580 million. http://axios.link/uMql

Richemont (SWX: CFR), the owner of Cartier, is considering a takeover offer for Buccellati, an Italian jeweler acquired last year by China’s Ganu Gangtai, per Reuters. http://axios.link/9beb


Burst Capital,, an early-stage VC firm led by former Yelp COO Geoff Donaker, is raising $35 million for its debut fund, per an SEC filing.

🚑 Forbion raised €360 million for its fourth European life sciences VC fund. http://axios.link/O6nk

It's Personnel

Kara Helander joined The Carlyle Group as chief diversity officer. She previously led diversity and inclusion at BlackRock. www.carlyle.com

Final Numbers
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Data: FactSet, data through 8am this morning; Chart: Harry Stevens/Axios