Jul 3, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

🎆 Publishing note: Pro Rata will be off for the rest of the week. Hope you also get some time off, some sun, and some BBQ. We'll chat again on Monday.

Top of the Morning
Source: Giphy

When T-Mobile US and Sprint first announced their $26 billion merger in early 2018, the endgame was to reduce the country's number of major mobile carriers from four to three ⁠— thus letting the new partners better compete with AT&T and Verizon. But that ship appears to have sailed.

  • Multiple reports are that the Department of Justice is insisting on the maintenance of four majors, despite T-Mobile CEO John Legere's still-available tweet about how DOJ doesn't believe the deal needs any restructuring.
  • Enter Dish, which currently is a satellite TV company without any mobile telecom offering. But it does have a bunch of spectrum, which makes it one of few viable partners to get this thing over the finish line.
  • The idea is that T-Mobile/Sprint would make divestitures to ensure Dish could become the fabled fourth player — albeit possibly more as a reseller on the existing network, rather than a new network itself.

It's an elegant solution, but not without its own challenges.

The biggest obstacle may be Dish chairman and former CEO Charlie Ergen, who holds nearly a 37% stake in the company and is known to be a very tough negotiator. What Ergen wants may not ultimately be palatable to T-Mobile, and he appears to have most of the leverage.

  • Plus, it's possible that DOJ won't like the final compromise, assuming there is one.
  • Sprint owner SoftBank recently hired another lobbyist to work on the transaction, per Axios' David McCabe.

The bottom line: When announced, this deal was presented as a much easier regulatory pass than was AT&T-Time Warner, even though it's a very vertical merger. It was wishful thinking.

• Growth: Private equity firm Permira this morning announced that it has raised $1.7 billion for its first-ever fund focused on non-control investments, with expectations that it will mostly buy into tech and tech-enabled services companies. So far the portfolio already includes Minted (graphic design and art marketplace) and Klarna (online payments platform).

  • What it didn't announce: Permira's growth equity effort has quietly formed a partnership with Bryant Stibel, the venture capital firm co-founded by Kobe Bryant.
  • The two groups first got to know each other as co-investors in LegalZoom, and Bryant Stibel has invested in Permira's fund and is expected to co-invest on many of its deals. A source compares it to the ongoing relationship between Hellman & Friedman and JMI Equity.

🎧 Pro Rata Podcast: We dig into why so many political candidates, like Mayor Pete Buttigieg, are taking the risk of letting themselves become the subjects of documentary films. Listen here.

The BFD

Illustration: Aïda Amer/Axios

Broadcom (Nasdaq: AVGO) is in advanced talks to buy Symantec (Nasdaq: SYMC) for more than $15 billion, as first reported by Bloomberg.

  • Why it's the BFD: Symantec is the world's largest provider of cybersecurity software.
  • Investor reax: Symantec shares jumped in early trading, giving it a market cap of nearly $16 billion. No surprise there, as investors often expect a premium to the leaked premium. Broadcom shares are down more than 3%, perhaps over fears that this could be like the last time a chipmaker paid big for a cybersecurity company (i.e., Intel buying McAfee, and then later selling it at a major discount to TPG).
  • Bottom line: Broadcom is using M&A to move deeper into software than into its core competency of chips, after last year being blocked by regulators from buying Qualcomm but permitted to buy CA Technologies.
Venture Capital Deals

• Cubyn, a Paris-based provider of outsourced logistics for ecommerce companies, raised €12 million. DN Capital led, and was joined by Partech Ventures, 360 Capital Partners, BNP Paribas Developpement and BPI France. http://axios.link/rkWe

• Georges, a French provider of accounting automation software for freelancers, raised €10 million in Series A funding. Alven led, and was joined by seed backers Kerala and Fast Forward. http://axios.link/E30J

🎧 Podomo, a Denmark-based podcast subscription network, raised €6 million in seed funding co-led by E.ventures and Heartcore. http://axios.link/MIiS

• Ironhack, a Miami-based coding bootcamp operator, raised $4 million. JME Capital led, and was joined by All Iron Ventures and Brighteye Ventures. http://axios.link/9sYY

• Klaus, an Estonian “conversation review and QA tool for support teams,” raised $1.9 million in seed funding led by Creandum. http://axios.link/8Kze

Private Equity Deals

🚑 EyeSouth Partners, an Atlanta-based eyecare physician services group owned by Shore Capital Partners, acquired Alabama-based practice Montgomery Eye. www.eyesouthpartners.com

• Fortress Investment Group, owned by SoftBank, is in talks to buy a portfolio of 200 UK stores from Majestic Wine (AIM: WINE), per Sky News. http://axios.link/dlLA

• KKR completed its purchase of Corel, a Canadian virtualization software company, from Vector Capital. http://axios.link/D0OT

• Kohlberg & Co. acquired Nelipak, a Cranston, R.I.-based maker of rigid packaging for the medical device and pharma markets, from Mason Wells. http://axios.link/7u7M

Public Offerings

🚑 Annovis Bio, a Berwyn, Penn.-based developer of drugs that treat neurodegeneration, filed for an $11.5 million IPO. The pre-revenue company plans to trade on the Nasdaq (ANVS) with ThinkEquity as sole underwriter. Shareholders include Ben Franklin Technology Partners. http://axios.link/UlRX

Vista Oil & Gas, a Mexico City-based oil and gas E&P backed by Riverstone Holdings, filed for a $100 million IPO. It plans to trade on the NYSE (VIST) with Citi as lead underwriter. http://axios.link/8fE7

Liquidity Events

The Blackstone Group is in exclusive talks to sell a portfolio of Center Parcs Europe resorts to German real estate firm Aroundtown for approximately $1.1 billion, per Bloomberg. http://axios.link/cNok

More M&A

AT&T (NYSE: T) is considering an auction for four of its regional sports networks, which could fetch nearly $1 billion, per Bloomberg. http://axios.link/QeJw

CBRE Group (NYSE: CRBE) agreed to buy British residential real estate developer Telford Homes (LSE: TELF) for £267 million. http://axios.link/BzHH

• Deutsche Bank has discussed selling parts of its equities business with such rivals as Citigroup and BNP Paribas, per the WSJ. http://axios.link/jsOw

• Exabeam, a San Mateo, Calif.-based provider of security intelligence solutions, acquired Israeli cybersecurity startup SkyFormation. Exabeam last month raised $75 million in Series E funding co-led by Sapphire Ventures and Lightspeed Venture Partners. http://axios.link/8wtc

• Keyfactor, an Independence, Ohio-based cybersecurity company backed by Insight Partners, acquired Redtrust, a Spain-based provider of centralized certificate and digital signature management software. http://axios.link/WFbR

• Synthomer (LSE: SYNTS) agreed to buy Ohio-based specialty chemicals company Omnova Solutions (NYSE: OM) for $824 million, or $10.15 per share in cash (58% premium to yesterday’s closing price). http://axios.link/U5nj

UGI (NYSE: UGI) agreed to buy some Columbia Midstream Group assets from pipeline operator TC Energy (TSC: TRP) for around US$1.28 billion. http://axios.link/zv3y

• Unite (LSE: UTG) and Canada Pension Plan Investment Board agreed to buy Canadian student housing provider Liberty Living Group for £1.4 billion in cash. http://axios.link/0h2n

• Vocus Group (ASX: VOC), an Australian telecom company, plans to split into three groups after failing to find a buyer for the entire company. http://axios.link/W9Dy

• Woolworths Group (ASX: WOW), Australia’s largest supermarkets operator, will merge and then spin off its liquor store and pubs groups. The new company could be valued at around A$10 billion. http://axios.link/b8G8

Fundraising

• The University of Texas Investment Management Co. (UTIMCO) plans to cut its number of private equity relationships by 50%, but maintain its $3 billion annual investment target by reallocating to large buyout funds. http://axios.link/TCLq

• Upfront Ventures of Los Angeles is seeking $250 million for its third growth equity fund, per an SEC filing. http://axios.link/d9rP

It's Personnel

• George Barsness joined mid-market private equity firm Gemspring Capital as a vice president. www.gemspring.com

Final Numbers
Dan Primack

🙏 Thanks for reading Axios Pro Rata. Please invite your friends, colleagues, and Freedom Trail tour guides to sign up here.