Nov 7, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Source: Giphy

"It would be very, very hard to make the math work."

  • That was my gut reaction after seeing news that Walgreens Boots was in reported talks to be acquired by private equity, in what would be the largest leveraged buyout in history.

And I wasn't alone. Blackstone Group CEO Steve Schwarzman said at a Reuters event that it's a "huge stretch doing things over $50 billion," and a Walgreens Boots deal would be closer to $70 billion (not even including assumed debt).

  • But, but, but: When private equity really wants a deal, it almost never lets size get in the way.
  • If equity is the problem, firms will club up and solicit massive co-investments from limited partners, non-traditional financial sponsors and/or strategics. Maybe they'll create a publicly-listed stub. It would be tough to find $20-$30 billion, but not impossible.
  • If debt is the problem... Well, let's be honest: Debt is never really the problem. Leveraged lenders look wobbly from time to time, but it's always temporary. Remember, even WeWork had $6 billion of committed debt (albeit tied to its ill-fated IPO). And count me among those who didn't think Dell could find new credit to buy EMC, until Silver Lake figured it out.

None of this means that a Walgreens Boots takeover is a sure bet, particularly given the political and pricing threats to pharmacies. But capital availability shouldn't be the deciding factor.

• Trade war: China this morning said that it and the U.S. have agreed to simultaneously lift some existing import tariffs, at equal levels. But no actual deal has been signed yet, so take it with an optimistic grain of salt.

  • Peloton CEO John Foley tells me that trade tensions were one reason why his company just paid nearly $50 million to purchase Tonic Fitness, one of its two bike manufacturing partners in Taiwan.
  • Foley: "We aren't in China meaningfully, and are very comfortable with Taiwan, but this gives us more transparency into our upstream supply chain... So we have more optionality if we find ourselves in the position of considering stateside manufacturing."

Copy that: CNBC's David Faber just reported additional details on Xerox's takeover bid for HP: $22 per share, broken out 77/23 between cash and stock.

Just asking: If SoftBank is reconsidering its "growth at all costs" strategy for portfolio companies, then why does it still want to raise $100 billion for Vision Fund 2? Wasn't the purpose of that bankroll to help portfolio companies outspend rivals, using capital as a cudgel? If $500 million rounds become $200 million rounds, then maybe SoftBank could lower its target — much like we saw across the VC market after the dotcom bust...

Source: Giphy

Nielsen (NYSE: NLSN), the media research firm with a $7 billion market cap, said it will spin off its retail analytics unit into a separate, publicly-traded company.

  • Why it's the BFD: Because this splits two businesses that didn't really have many synergies, despite both being in the "measurement" business. Plus, it's yet another example of Elliott Management agitation resulting in a major strategic change.
  • Bottom line: "Despite criticism that its TV measurement tactics are outdated, Nielsen's media arm has been outperforming its retail counterpart, which measures consumer sales and sentiment. That division has been negatively impacted by the decline in traditional retail and increased competition. Meanwhile, competitors to Nielsen's media business, like Comscore, have struggled." — Sara Fischer, Axios
Venture Capital Deals

CloudKitchens, the new startup from former Uber CEO Travis Kalanick, raised $400 million from Saudi Arabia's sovereign wealth fund, which is Uber's fifth-largest outside shareholder, per the WSJ.

🚑 eGenesis, a Cambridge, Mass.-based xenotransplantation startup, raised $100 million in Series B funding. Fresenius Medical Care led, and was joined by Wellington Partners, Bayer, and return backers Arch Venture Partners, Biomatics Capital, Alta Partners, and Khosla Ventures.

Reonomy, a New York-based commercial real estate data and analytics platform, raised $60 million in Series D funding. Georgian Partners led, and was joined by Wells Fargo, Citi Ventures, Untitled Investments, and return backers Sapphire Ventures, Bain Capital, and Primary Venture Partners.

Immersive Labs, a UK-based cybersecurity skills platform, raised $40 million in Series B funding. Summit Partners led, and was joined by Goldman Sachs.

🚑 AiCure, a New York-based visual recognition platform for monitoring patient progress in clinical trials, raised $24.5 million in Series C funding. Palisades Growth Capital led, and was joined by Innov8, Asahi Kasei, Accelmed Growth Partners, SpringRock Ventures, and return backers Baird Capital, New Leaf Venture Partners, Pritzker Group, Biomatics Capital, Tribeca Venture Partners, SVB.

🚑 FirstVet, a Swedish on-demand veterinary service, raised €18.5 million in Series B funding led by OMERS Ventures.

Neural Magic, a Somerville, Mass.-based machine learning startup that leverages commodity CPUs, raised $15 million in seed funding. Comcast Ventures led, and was joined by NEA, Andreessen Horowitz, Pillar VC, and Amdocs.

DEV, a Brooklyn-based social network for developers, raised $11.5 million in Series A funding. Mayfield led, and was joined by return backers OSS Capital and Charge VC.

Immo, a London-based residential real estate management platform, raised €11 million in Series A funding co-led by Talis Capital and HV Holtzbrinck Ventures.

Digits, a “counting” startup from the founders of Crashlytics (sold to Twitter), raised $10.5 million in Series A funding led by Benchmark.

Whim, a Helsinki-based subscription app for urban public and private transportation, raised €10 million from BP.

🚑 Acticor Biotech, a Paris-based biotech focused on thrombotic diseases, raised €7 million in new Series B funding (round total €22.3m). Go Capital led, and was joined by return backers Newton BioCapital, CapDecisif Management, and Anaxago.

Techspace, a London-based flexible workspace provider for tech startups, raised £5 million from The Noé Group.

Private Equity Deals

AMS of Austria launched a new $5 billion takeover bid for listed German automotive lighting company Osram, following an earnings miss that caused a Bain Capital-led to leave the process.

Emerging Capital Partners and Madagascar’s Axian Group agreed to buy a majority stake in Togo’s state telecom company at an enterprise value of over $353 million.

Macquarie Asset Management was picked over KKR as the preferred bidder for an IT services group being sold for around $865 million by South Korean conglomerate LG Corp.

Greenridge Investment Partners acquired GrowthZone, a Nisswa, Minn.-based provider of association management software.

Spectrum Equity invested in Kajabi, an Irvine, Calif.-based platform that helps SMBs and individuals create and monetize online courses and training materials.

🐄 TPG Rise Fund acquired a 34% stake in Pearl Dairy Farms, Uganda’s largest dairy processor.

United Group, a portfolio company of BC Partners, agreed to buy Vivacom, Bulgaria’s largest telecom operator.

Public Offerings

FDJ, France’s state-owned lottery operator, said it will seek a valuation north of €3 billion in its IPO.

🚑 Galera Therapeutics, a Malvern, Penn.-based developer of drugs for reducing inflammatory side effects of radiation therapy, raised $60 million in its IPO. The pre-revenue company priced 5 million shares at $12 (below $14-$16 range), for a fully-diluted market value of $317 million. It will trade on the Nasdaq (GRTX) with BAML as lead underwriter, and had raised $143 million in VC funding from firms like NEA (20.4% pre-IPO stake), Novartis (17%), Novo Holdings (15%), Sofinnova Venture Partners (12.1%), and Blackstone (7.4%).

Liquidity Events

Minute Media, a New York-based sports media company that’s raised over $100 million in VC funding, reportedly is in talks to buy Players’ Tribune, the Derek Jeter-founded sports media site that’s raised nearly $60 million in VC funding from backers like NEA, GV, IVP, Thomas Tull, and GenTrust.

RealPage (Nasdaq: RP) agreed to buy Buildium, a Boston-based provider of real estate property management SaaS, for $580 million from Sumeru Equity Partners.

Shiseido (Tokyo: 4911) completed its $845 million purchase of Austin, Texas-based skincare brand Drunk Elephant from shareholders like VMG Partners.

Varde Partners agreed to sell a portfolio of European luxury hotels from Covivio Hotels (Paris: CVO).

More M&A

Allianz paid around $1 billion for Goldman Sachs’ 4% stake in Chinese insurer Taikang Life, per Bloomberg.

🥩 Bloomin’ Brands (Nasdaq: BLMN), the Outback Steakhouse owner under pressure from activist investor Jana Partners, said it would explore strategic options that could include a sale. The news sent its market cap past $2 billion.

Bovis Homes (LSE: BVS), a British homebuilder, agreed to buy the housing unit of Galliford Try (LSE: GFRD) for around £975 million (not including £100m of assumed debt).

eToro, an Israeli trading platform that’s raised over $120 million in VC funding, acquired crypto portfolio tracker app Delta for a reported $5 million.

Praesadium Investment Management is pushing Salt Lake City-based education software company Instructure (NYSE: INST) to explore a sale.

Wilbur-Ellis Co. of San Francisco acquired the assets of Rangen, a Buhl, Idaho-based aquaculture and general feed production company.


Finch Capital, a Dutch VC firm, is raising $75 million for a fund that would back early-stage startups in Southeast Asia, per DealStreetAsia.

KKR will target $15 billion for its next Asia-focused buyout fund, per Reuters.

Modus Capital, a VC firm with offices in New York and Egypt, raised $75 million for a fund focused on MENA-based tech companies.

🥃 Tembusu Partners of Singapore formed a $285 million fund to invest in Chinese liquor companies.

It's Personnel

Terry Evans Jr. joined Verizon Ventures as a principal. He previously led M&A for the commercial unit of United Technologies.

Olga Kosters joined Tikehau Capital as head of private equity debt secondaries. She previously was with StepStone.

NEA promoted Rick Yang to general partner and head of consumer tech investing. The VC firm also promoted Danielle Lay, Luke Pappas, and Jai Sajnani to principal.

Investcorp and China Everbright will merge their investment teams focused on the Chinese tech sector.

Final Numbers
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Data: Yahoo; Chart: Axios Visuals
Dan Primack

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