May 26, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

A quick announcement: Mike Allen is taunting me, by launching an afternoon newsletter to complement his outstanding Axios AM roundup. It's called Axios PM, and you can sign up for it (and all other Axios newsletters) by going here. Okay, here we go...

Top of the Morning

Penny Pritzker has returned to her job running PSP Capital Partners, after more than three years as U.S. Commerce Secretary under President Obama. Yesterday she and I spoke about her return to the private sector, labor dislocation, her governmental successes/regrets and how an Hyatt heir views Airbnb. The full Q&A is here, but here are some takeaways:

  • PSP Capital Partners continues to have a flexible investment mandate in terms of stage and sector, but Pritzker says her Commerce experience (including frequent Silicon Valley trips) has given her a greater interest in things like AI and big data. Expect that to result in an increased emphasis on growth equity deals for tech companies.
  • She will take portfolio company board seats.
  • Her biggest regret from Commerce is the failure of TPP, which she believes would have also been a de facto renegotiation of NAFTA.
  • She doesn't want to talk about the job performance of her successor, Wilbur Ross, who she hadn't met prior to his confirmation process.
  • Pritzker is fully supporting her brother J.B.'s run for Illinois governor, after decades of family strife.

• Timing is everything: Yesterday we reported on how Ruben King-Shaw was quietly fired as the general partner of his own private equity fund, by limited partners who believed that he'd not adequately met his financial obligations. We also noted that he's continued to portray himself as running the fund, Mansa Capital, via a website and in his bio on a 10-K filing for Cotiviti Holdings (NYSE: COTV), a $3.6 billion provider of payment accuracy solutions for the healthcare market. Just hours after our story posted, Cotiviti shareholders re-elected King-Shaw to the company's board of directors.

• Coming attractions: Last month we broke news on tech investor Brett Rochkind leaving General Atlantic after a 15-year run, in order to join venture firm CRV. Now comes word that CRV is speaking with LPs about raising a pair of new funds: Its 17th flagship vehicle for early-stage opportunities, and its first growth-equity fund, which Rochkind would spearhead. Early target talk on both vehicles is $400 million. No comment from CRV, natch.

• MergerWork: Emily Keeton, a veteran corp dev exec (ex-IAC, Scripps, etc.), has joined WeWork to lead M&A activity, according to the WSJ. WeWork CEO Adam Neumann said during TechCrunch Disrupt that the company expects to make several acquisitions over the next 12 months, and that it has already made several deals that it hasn't yet announced.

• Recommended reading: Legendary tech journalist Walt Mossberg yesterday published his final column, on where tech was (intrusive) and where it's heading (invisible). Here it is. Happy trails, Walt.

• Publishing note: Pro Rata will be off on Monday for the Memorial Day holiday, returning next Tuesday. Have a great long weekend (especially you J, happy birthday!).

The BFD

Payless, the Kansas-based footwear retailer that filed for Chapter 11 bankruptcy protection last month, said in a court filing that it's investigating possible claims against private equity sponsors Golden Gate Capital and Blum Capital Partners. At issue is more than $350 million worth of fees and dividends that the two firms reportedly received from Payless during their five-year ownership periods.

  • Why it's the BFD: If Payless were to prove some sort of sponsor liability related to dividend recaps, it would send a chill through a private equity industry that uses such techniques to juice returns (often without enough regard for the possible consequences).
Venture Capital Deals

• MyDream, a Beiging-based co-working space company, has raised $20 million in Series B funding. Joy Capital led the round, and was joined by Wecash and K2VC. http://bit.ly/2rVQQI3

• FS Card, a Washington, D.C.-based provider of financial credits to subprime borrowers, has raised $8 million in financing from Tricadia Capital. http://bit.ly/2rmxoaj

• Spin, a San Francisco-based dockless bike-sharing startup led by former Lyft exec Derrick Ko, has raised $8 million in Series A funding. Grishin Robotics led the round, and was joined by Exponent.VC, CRM and individual angels like Charlie Cheever. http://tcrn.ch/2s0DjOy

• Rulai, a customer experience chatbot developer with offices in California and China, has raised $6.5 million in VC funding led by GSR Ventures. http://tcrn.ch/2rVMCQG

• Soft Space, a Malaysian payments startup focused on Southeast Asia, has raised $5 million in Series A funding from Transcosmos and Sumitomo Mitsui Card Corp. http://tcrn.ch/2qj4uYt

• Spruce, a New York-based digital title insurance and closing startup founded by early Betterment employees, has raised $4.5 million in Series A funding. Bessemer Venture Partners led the round, and was joined by Omidyar Network, Third Prime Capital and return backers Collaborative Fund and Notation Capital. http://tcrn.ch/2qjnx4S

• Gixo, a live-streamed exercise class app, has raised $3.7 million in VC funding led by Greylock (partner Reid Hoffman will take a board seat). http://bit.ly/2qmq0Yx

• Rentulations, a Chicago-based online real estate rental platform for landlords and tenants, has raised $2 million in VC funding led by Cultivation Capital. http://trib.in/2rFJH1m

• Paragon One, a New York-based online career coaching service and mentor marketplace, has raised $1.9 million in seed funding from backers like Y Combinator, Foundation Capital, Learn Capital, University Ventures, Li Yuan Ventures and Altair Ventures. http://tcrn.ch/2qhesJY

• LeSports, a sports content group owned by Chinese tech conglomerate LeEco, said that it has raised an undisclosed amount of new funding at a $3.5 billion valuation. Last year the company raised $1.2 billion in a round led by HNA Capital. http://reut.rs/2rXBHG7

Private Equity Deals

• Good Sportsman Marketing, a Dallas-based portfolio company of Huron Capital, has made two acquisitions: Scent Web, maker of a delivery mechanism for dispensing deer scent attractants, from Michigan's A-Way Hunting Products; and Oregon-based Bullseye Camera Solutions, a maker of shooting camera systems. No financial terms were disclosed. http://bit.ly/2rEyoGG

• GSR Capital of China is in advanced talks to acquire Nissan Motor Co.'s stake in a lithium-ion auto battery joint venture with NEC Corp. for around $1 billion, according to Bloomberg. https://bloom.bg/2r2iJOK

• Staples (Nasdaq: SPLS) has rejected a takeover offer from Cerberus Capital Management, according to Bloomberg. Sycamore Partners also has an offer on the table for the office supplies retailer, which has a market cap just south of $6 billion. http://bit.ly/2qqYf0d

• Web.com (Nasdaq: WEB), a Jacksonville, Fla.-based Internet domain name registrar, is in talks with several private equity firms after receiving takeover approaches, according to Reuters. The company has a current market cap of around $980 million. http://reut.rs/2s2u4xm

Liquidity Events

🚑 Bioverativ (Nasdaq: BIVV) has agreed to acquire True North Therapeutics, a South San Francisco-based developer of drugs for complement-mediated diseases. The deal is valued at upwards of $825 million, including $400 million upfront. True North has raised around $140 million in VC funding, from firms like HBM Partners, Redmile Group, Franklin Templeton Investments and Perceptive Advisors. http://bit.ly/2rNwuAO

• BV Investment Partners has agreed to sell TriCore Solutions, a Norwell, Mass.-based provider of application and infrastructure managed services, to San Antonio, Texas-based Rackspace. No financial terms were disclosed. http://bit.ly/2rmBJdO

• Irving Place Capital has agreed to sell Chromalox, a Pittsburgh-based maker of steam traps and pumps, to UK-based Spirax-Sarco Engineering (LSE: SPX) for $415 million. http://reut.rs/2rG8na5

More M&A

⛽ Origin Energy (ASX: ORG) has received interest from Fosun International and at least four other potential bidders for around A$1.5 billion of oil and gas assets Australia and New Zealand that it wants to spin off, according to Reuters. http://reut.rs/2rXU11Z

• Sainsbury's (LSE: SBRY), Britain's second-largest supermarket chain, is considering a takeover bid for tobacco distributor Palmer & Harvey McLane, according to Sky News. http://reut.rs/2rGqyfC

Fundraising

• Creative Artists Agency has teamed with Chinese film company Bona Film Group to launch a $150 million film production investment fund. http://bit.ly/2qVCl8O

• The New Jersey State Investment Council, a $74 billion pension system with nearly an 11% exposure to private equity, plans to slow down its allocation to the asset class due to "record levels of fundraising and dry powder [that] offsets the long-term favorable profile" of private equity. http://bit.ly/2qmGQGw

• Star Mountain Capital, a New York-based lower middle-market debt investor, has closed its second fund with $300 million in capital commitments. www.starmountaincapital.com

It's Personnel

🚑 Kevin Chen has stepped down as a partner with Sequoia Capital China in order to launch his own healthcare-focused VC funding, according to China Money Network. He had joined Sequoia in 2014. http://bit.ly/2rXy43a

• The Sterling Group, a Houston-based middle-market private equity firm, has promoted Brad Staller to partner. He sits on the boards of portfolio companies Time Manufacturing, ProcessBarron and Specified Air Solutions. www.sterling-group.com

Final Numbers
Dan Primack