Jul 19, 2017

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Venture capitalists have largely ignored Type 1 diabetes, backing just 7 related U.S. startups since the beginning of 2015 (per PitchBook). Instead they've focused their diabetes dollars on Type II, a metabolic disease whose cause is largely understood, whereas Type 1 is a more complicated autoimmune condition with (relatively) fewer patients.

  • Why it matters: Around 1.25 million Americans suffer from Type 1 diabetes and, at current rates, that figure could hit 5 million by 2050. It currently costs the U.S. healthcare system around $14 billion annually, and costs the typical Type 1 patient 13 years off their life.
  • Dedicated effort: Enter JDRF, the country's largest non-profit focused on Type 1 diabetes. Two years ago it reached out to Bain Capital's Sean Doherty, to see if he'd help put together a business plan to help relevant startups get funded. Doherty had been running JDRF's Boston chapter since 2002, when his young son was diagnosed with Type 1 diabetes, and worked to develop what is now a $50 million venture philanthropy fund that plans to raise another $30 million and back dozens of companies.
  • Doherty: "When my son was diagnosed there were only two active clinical trials. Today there are over 70. We were having a debate over the legality of stem cells. Now Doug Melton has a company that has shown we can produce an infinite supply of insulin-producing cells out of stem cells, which our fund has backed. You also have advancements in areas like immunooncology, and we can apply some of that same learning. What's really needed now is more private investment."
  • Read more about the JDRF TD1 Fund at Axios.

• Crowdfrauding (cont): The online bio of Nin Desai, CEO of Nin Ventures, says that she "Chairs the Harvard Business School Private Equity and Venture Capital Group of Chicago." But there is no such group, per Kathy Ashraf, HBS associate director of alumni clubs and associations.

• Burrito buyout? Yesterday I did a live Cheddar spot where I got asked about Chipotle's stock dive, following the news of what appears to have been a norovirus outbreak at one of its Virginia stores (bringing its market cap south of $11 billion).

  • Thinking aloud: The fast-casual company's financials make me wonder if this could soon become a private equity target. Strong cash-flow in the abstract, but earnings have taken a beating since the first health scares in early 2016 – suggesting that the company perhaps could use an image and operational makeover that includes the old food-service standby of "under new management." And, most importantly for PE investors, Chipotle has absolutely no debt on its balance sheet.

• Copycats: Remember when Silicon Valley was up in arms over the Samwer Brothers, who kept creating European knock-offs of U.S. consumer tech companies like Groupon and Airbnb? Where is the similar outrage toward Facebook aping Snap or what Amazon may be about to do to Blue Apron? Does the acceptability of "fast follow" end at the water's edge?

The BFD

McCormick & Co. (NYSE: MKC) has agreed to acquire the food business of Reckitt Benckiser (LSE: RB) for $4.2 billion, beating out rival bids from companies like Unilever (LSE: ULVR) and Hormel Foods (NYSE: HRL). Included brands are French's Mustard and Frank's Red Hot.

  • Why it's the BFD: This deal would make McCormick the world's third-largest condiment purveyor (behind Unilever and Kraft Heinz), up from 10th place currently. And it's paying through the nose to get there, as recent reports had the Reckitt business selling for closer to $2.4 billion. For more context, the $4.2 billion price-tag represents more than 7x annual sales and 20x EBITDA, compared to Bernstein market averages of 3.3x sales and 16.2x EBITDA (per Reuters).
  • M&A context: McCormick last year pulled a $2.1 billion offer to buy Premier Foods, so this is a bit of a rebound. Reckitt had put the business on the block, in part, to reduce a massive debt-load created by its recent $16.6 billion agreement to purchase Mead Johnson.
  • Bottom line: "While large food manufacturers struggle as consumers shun packaged foods in favor of fresher, more nutritious items, this deal allows McCormick to capitalize on the public's desire to eat better without losing the flavor and taste they covet." – Christopher Doering, FoodDive
Venture Capital Deals

• Brain Corp., a San Diego-based AI startup focused on self-driving technology for robots, has raised $114 million in Series C funding led by SoftBank Vision Fund. Existing investor Qualcomm Ventures also participated. http://tcrn.ch/2u7UT5u

• Shift, a San Francisco-based online used car marketplace, has raised $38 million in Series C funding. BMWi Ventures led the round, and was joined by DCM, G2VP and return backers DFJ, Highland Capital Partners and Goldman Sachs Investment Partners. http://bit.ly/2tG2ztZ

• Lever, a San Francisco-based provider of recruiting software, has raised $30 million in Series C funding. Adams Street Partners led the round, and was joined by return backers Matrix Partners and Scale Venture Partners. http://bit.ly/2u7NG5x

• Rentomojo, an Indian rental company focused on urban living items like home appliances and motorbikes, has raised $10 million in Series B funding. Bain Capital Ventures led the round, and was joined by Renaud LePlanche (ex-LendingClub CEO) and return backers Accel and IDG Capital Partners. http://tcrn.ch/2vhVbXz

• Workato, a Cupertino, Calif.-based workflow automation platform, has raised $10 million in Series A funding. Storm Ventures led the round, and was joined by Salesforce Ventures and Workday Ventures. http://tcrn.ch/2uvIg72

DataRails, an Israel-based spreadsheet management tool, has raised $6 million in Series A funding. Vertex Ventures led the round, and was joined by seed backers Cyrus Angel Fund, Oryzn Capital and Joey Low. http://bit.ly/2uIJFr8

• Contego Fraud Solutions, a UK-based provider of automated compliance solutions, has raised £3.5 million in VC funding from Maven Capital Partners and NVM Private Equity. http://bit.ly/2toWSFH

• Ironhack, a Madrid-based provider of coding bootcamps, has raised $3 million in VC funding led by JME Venture Capital. http://tcrn.ch/2uF0Ji4

• Protenus, a Baltimore-based provider of patient privacy software, has raised $3 million in new Series A funding. Kaiser Permanente Ventures led the new tranche, with F-Prime Capital Partners and existing backer LionBird Venture Partners also participating. http://bit.ly/2uIoHZN

• VFinance, a Shanghai-based provider of digital financial infrastructure solutions to Chinese businesses, has raised an undisclosed amount of funding from Ant Financial Services (an affiliate of Alibaba Group). http://bit.ly/2u9meWv

Private Equity Deals

• ConvergeOne, an Eagan, Minn.-based portfolio company of Clearlake Capital Partners, has acquired Annese & Associates, a Clifton Park, N.Y.-based provider of enterprise IT services. No financial terms were disclosed. http://bit.ly/2tFsphN

• Gamut Capital Management has agreed to acquire JPW Industries, a La Vergne, Tenn.-based maker of metalworking, woodworking and material handling products, from Tenex Capital Management. No financial terms were disclosed. www.wiltontools.com

• Infogix, a Naperville, Ill.-based portfolio company of Thoma Bravo, has acquired Data Clairvoyance, a Bloomington, Ind.-based data strategy consultancy. No financial terms were disclosed. www.dataclairvoyance.com

⛽ Native Exploration Holdings, an Oklahoma City-based oil and gas company led by ex-Native Oil & Gas execs, has been formed via a $140 million equity commitment from Kayne Anderson Energy Funds. www.kaynecapital.com

• One Equity Partners has acquired a minority equity stake in Intren, a Union, Ill.-based specialty utility contractor, for an undisclosed amount. www.intren.com

• Sciens Building Solutions, a fire detection and security services company owned by Huron Capital Partners, has acquired Sabah International, a Pleasanton, Calif.-based designer and installer of fire detection and suppression systems. No financial terms were disclosed. www.sabahinternationalinc.com

🚑 Vets First Choice, a Portland, Maine-based provider of tech-enabled healthcare services for veterinary medicine, has raised $223 million in new equity funding. Existing investor Clayton, Dubilier & Rice and Hillhouse Capital co-led the round, and were joined by Viking Global Investors, Wellington Management Company, Rock Springs Capital and Sequoia Heritage.

Public Offerings

⛽ BP PLC (LSE: BP) said that it is considering an IPO for its U.S. Midwest and Gulf pipeline assets, which would be branded BP Midstream Partners. The company first considered the idea five years ago, but shelved it due to falling crude oil prices. http://reut.rs/2tFxqXF

Liquidity Events

• Permira is considering a sale process for TeamViewer, a German maker of business collaboration software that could be valued at between €1.5 billion and €2 billion, according to Bloomberg. https://bloom.bg/2uwk7x2

• Zeta Global, a New York-based SaaS marketing automation platform, has acquired Boomtrain, a San Francisco-based marketing platform that leverages machine learning. The deal was valued at between $35 million and $40 million, per TechCrunch. Zetta recently raised $115 million in Series F funding at a $1.3 billion valuation, while Boomtrain had raised around $15 million from firms like Sierra Ventures, Streamlined Ventures, Lerer Hippeau Ventures, Correlation Ventures, Crosslink Capital and TechSquare Labs. http://tcrn.ch/2uyFhdN

More M&A

• Discovery Communications (Nasdaq: DISC.A) reportedly is in talks to acquire Scripps Networks Interactive (Nasdaq: SNI), which has a current market cap of around $8.6 billion. This is the second time the two companies have discussed a tie-up, with 2014 talks falling through. http://on.wsj.com/2vgjqpk

🚑 GlaxoSmithKline (LSE: GSK) is in talks to sell its Horlicks nutritional drink business in the UK, while retaining its larger Horlicks operation in India, according to the BBC. http://bbc.in/2uCbKzw

Fundraising

• Mangrove Capital Partners, a Luxembourg-based VC firm focused on European and Israeli startups, has closed its fifth fund with $170 million in capital commitments. http://tcrn.ch/2vBeiex

• Qumra Capital, an Israeli growth equity firm, has held a $115 million first close on its second fund, which is targeting a total of $150 million. www.qumracapital.com

• Twin Brook Capital Partners, the middle-market direct lending subsidiary of Angelo, Gordon & Co., has closed its second fund with $2.3 billion in capital commitments (including separately managed accounts). www.twincp.com

🚑 WM Partners, a Ft. Lauderdale, Fla.-based middle-market private equity firm focused on the health and wellness sector, has closed its debut fund with $307 million in capital commitments. www.wmplp.com

It's Personnel

• Patrick Gilligan and Xavier Gutierrez have joined private equity firm Clearlake Capital Group as managing directors focused on IR and operations, respectively. Gilligan previously was a managing director with Park Hill Group, while Gutierrez was chief investment officer of Meruelo Group. Clearlake also announced several promotions: Colin Leonard to partner, James Pade to principal and Paul Huber and Nate Mejías to vice presidents. www.clearlake.com

• Oak HC/FT has promoted Matt Streisfeld to principal and Vignesh Chandramouli to vice president. www.oakhcft.com

• Steve Okun is leaving KKR, where he has served as public affairs director for Asia-Pacific. No word yet on his future plans, except that he plans to remain in Singapore. www.kkr.com

Final Numbers
Dan Primack