Oct 4, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Sarah Grillo/Axios

The Aramco IPO keeps moving forward, despite devastating drone strikes, and this week promised at least $75 billion of dividends through 2024. But Axios' Felix Salmon smells a spill:

  • The Saudi royal family controls Aramco. If it needs to extract money, it can always raise the company's tax rate, or simply expropriate what's needed.
  • Foreign shareholders could be stuck with worthless shares.
  • In countries with robust civil societies, shareholders have significant legally enforceable rights, and those rights underpin the value of their shares.
  • In countries like Saudi Arabia, by contrast, foreign shareholders only win insofar as it behooves the local government to keep them happy.

Varsity blues: Gordon Caplan yesterday was sentenced to one month in prison and fined $50,000, after pleading guilty to paying $75,000 to rig his daughter's college entrance exam.

  • Caplan was a former private equity partner with law firm Wilkie Farr & Gallagher, where he also served as co-chairman.
  • He's the fourth parent sentenced to far in the wide-ranging scam, and said he'll now focus on "doing everything I can to recover some portion my good name."

Swamp stuff: Private equity has been in the national headlines a lot recently, namely because of accusations aimed by President Trump at Hunter Biden.

  • Biden was a co-founding partner of a U.S. private equity firm called Rosemont Seneca, and an unpaid director at a Chinese private equity firm called BHR Partners.
  • Let's focus on BHR, since that's what Trump did yesterday.
  • Securities filings cited by the WSJ show that the firm is 80% controlled by multiple Chinese entities, while Hunter Biden himself eventually held a 10% stake.
  • Trump said yesterday that Hunter Biden "walks out of China with $1.5 billion," before adding that the Chinese should investigate the son of his political rival for corruption.
  • The WSJ reports that the only known source for the $1.5 billion was an old WSJ story about what BHR was seeking to raise in a fund to invest outside of China, but it's unclear if the target was ever reached.
  • BHR invested mostly in Chinese companies, including Didi Chuxing, although it also participated in a few U.S. deals, including a 2015 minority co-investment in the buyout of a Michigan-based auto parts maker.
  • Overall, the WSJ tracked $2.5 billion of BHR investments into companies.

Bottom line: If the $1.5 billion was indeed raised, it would have been for limited partnership interests in an investment fund. Not $1.5 billion into a director's pockets. Somewhere, Mitt Romney is shaking his head and thinking, "Didn't we do all of this already?"

🎧 Pro Rata Podcast focuses on unintended consequences of the trade war on U.S. manufacturing. Listen here.

The BFD

lllustration: Rebecca Zisser / Axios

Bird, a Santa Monica, Calif.-based e-scooter rental company, raised $275 million in Series D funding at a $2.5 billion pre-money valuation. CDPQ and return backer Sequoia Capital co-led the round.

  • Why it's the BFD: Come on, admit it. You figured e-scooter unicorns were a flailing fad, and that the public market performance for Uber/Lyft would snuff out valuation expansion.
  • History: Bird launched in 2017, got a $1 billion post-money price in mid-2018 and then a $2 billion post-money just six months later. This round comes at a sizable premium, albeit at a slower growth rate.
  • Bottom line: E-scooter economics initially cared about market share and regulation arbitrage. The new focus is on sidewalk lifespan, with Bird and its rivals working to develop more durable and tamper-proof vehicles.
Venture Capital Deals

🚑 Icosavax, a Seattle-based developer of a vaccine for respiratory syncytial virus, raised $51 million in Series A funding. Qiming Venture Partners USA led, and was joined by Adams Street Partners, Sanofi Ventures, and NanoDimension. http://axios.link/Xqbl

Dunzo, an Indian hyper-local delivery service, raised $45 million in Series D funding from Google, Lightbox Ventures, STIC, and 3L Capital. http://axios.link/XnR4

Osaro, a San Francisco-based provider of machine learning software for warehouse robots, raised $16 million in Series B funding from King River Capital, Alpha Intelligence Capital, Founders Fund, Pegasus Tech Ventures, and GiTV Fund. http://axios.link/3uqj

Gradient AI, a Cambridge, Mass.-based software startup for commercial insurers, raised $6 million in Series A funding. Forte Ventures and Sandbox Insurtech Ventures co-led, and were joined by return backer MassMutual Ventures. www.gradientai.com

Oneiro, a Boston-based cryptocurrency platform, raised $5 million from Cosimo Ventures. http://axios.link/tpHW

Mon Ami, an app that connects college students with socially-isolated seniors, raised $3.4 million in seed funding co-led by Freestyle Capital and Cowboy Ventures. http://axios.link/GIfN

Strigo, an Israeli customer training management startup, raised $2.5 million in seed funding. Hanaco Ventures led, and was joined by Greycroft. www.strigo.io

Private Equity Deals

Apollo Global Management and The Carlyle Group are the two remaining bidders for Arriva, the European transport business being sold by Deutsche Bahn for around €3 billion, per Bloomberg. http://axios.link/jC3M

Capstone Logistics, a Peachtree Corners, Ga.-based portfolio company of The Jordan Co., agreed to buy the assets of MileZero, a defunct provider of last-mile delivery logistics software. www.capstonelogistics.com

CVC Capital Partners said it will invest over $400 million for a minority stake in Israeli ad-tech company IronSource. An earlier report suggested it would invest $450 million for a 25% stake. http://axios.link/u0Oi

Highview Capital acquired Gold Star Foods, an Ontario, Calif.-based distributor of food to K-12 child nutrition programs. Gold Star will be merged with existing Highview portfolio company Good Source. www.goldstarfoods.com

Insignia Capital Group invested in Netrush, a Vancouver, Wash.-based third-party retail agency focused on Amazon marketplaces. www.netrush.com

Kronos, a Chemlsford, Mass.-based portfolio company of Hellman & Friedman and The Blackstone Group, acquired Optimum Solutions, a Nashville-based provider of HCM software. www.kronos.com

🍿 NexPhase Capital invested in Popcornopolis, a Vernon, Calif.-based maker of ready-to-eat popcorn. www.popcornopolis.com

Silver Lake agreed to buy Australian event ticketing company Ticketek for A$1.3 billion. http://axios.link/484M

TorQuest Partners invested in Joriki, a Canadian contract manufacturer of food and beverage products. http://axios.link/gkqM

Public Offerings

Global Blue, a Swiss shopping tax refund company, is prepping a €1 billion Amsterdam IPO, per Reuters. http://axios.link/XRJZ

Verallia, a French glass bottle maker owned by Apollo Global Management, priced its Paris IPO at the low end of its range, for an initial market cap of €3.2 billion. It is the largest French IPO since 2017. http://axios.link/tlbB

Liquidity Events

Crescent Capital Partners is seeking a buyer for Australian water pipeline manufacturer Steel Mains, per Reuters. http://axios.link/W6H0

Nautic Partners sold Custom Window Systems, an Ocala, Fla.-based maker of windows and doors for the residential and multifamily markets, to Iowa’s Pella Corp. www.cws.cc

Thomson Reuters (NYSE: TRI) acquired FC Business Intelligence, a London-based B2B events firm, from LDC. http://axios.link/wm36

More M&A

Abu Dhabi National Oil is seeking a buyer for its natural gas pipelines, which could fetch around $5 billion, per Bloomberg. http://axios.link/nyf5

Clariant, a Swiss chemicals company, is in talks to sell its Masterbatches plastic adhesives unit to Ohio-based PolyOne Corp. (NYSE: POL) for around $1.5 billion, per Bloomberg. http://axios.link/PtyW

RingCentral (NYSE: RNG) will invest $125 million into telecom equipment company Avaya (NYSE: AVYA), via a preferred equity investment that could result in a 6% stake upon conversion to common stock. This is part of a larger strategic partnership, and comes after Avaya had been considering sale or merger options. http://axios.link/CdK5

Fundraising

TA Associates is raising $1 billion for a fund that will buy minority stakes in select companies being sold by its flagship buyout fund, per PE International. http://axios.link/732f

• Winslow Capital is raising $400 million for its second growth equity fund, per an SEC filing.

Final Numbers: Jobs report
Expand chart
Data: Bureau of Labor Statistics; Chart: Axios Visuals
  • Jobs: +136k
    • Expectations were +145k
    • 114k of the new jobs were private sector
  • Unemployment rate fell from 3.7% to 3.5%.
    • Strongest number since December 1969
  • Avg hourly earnings mostly flat, and +2.9% year-over-year.
    • Lowest y-o-y increase since July 2018.
  • Per Axios' Courtenay Brown: "The number may calm recession fears after a week that saw a deterioration in manufacturing data and softening on services."
Dan Primack

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