Jul 27, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the home office, where it's good to be back after a middle-seat red eye from San Francisco. In related news, preemptive apologies for any typos this morning — my brain and fingers are bickering. Here we go...

Top of the Morning

• Liquidity Kings: I spent the past few days meeting with Bay Area tech execs and investors, and there was one thing they all wanted to discuss: SoftBank.

  • Context: For the uninitiated, Japan's SoftBank Group has quickly become the Daddy Warbucks of Silicon Valley, investing huge sums into tech companies at dizzying valuations. Much of this is through the firm's new Vision Fund, which so far has closed on around $93 billion of its $100 billion target, although plenty of other deals have come off of SoftBank's regular balance sheet (including the recent financing for Southeast Asia ride-hail company Grab). SoftBank also is a White House favorite, with founder and CEO Masayoshi Son having done the Trump Tower shake-and-snap prior to inauguration day.
  • Cash flow: SoftBank is providing an enormous amount of interim liquidity to VC funds, often stapling secondaries to its primary transactions. Some of this is a bit strong-armed – SoftBank insists on the secondary sales, unlike past DST Group models which usually were structured more as voluntary offers with a dollar cap – but VCs remain grateful for the opportunity, particularly as LPs are begging for cash in the relative absence of IPOs.
  • Reward and risk: SoftBank is often partial to shock-and-awe financings, giving startups a huge balance sheet in order to panic their rivals. It's basically the playbook Uber followed for years. While this can certainly have its desired effect, there also is some concern that it will weaken startup founder discipline, thus becoming a long-term burden.
  • Structure: Multiple sources say that Vision Fund includes an 8% hurdle rate, which means it needs to return 8% to limited partners before SoftBank begins collecting carried interest. It remains unclear if the supposed 1% management fee is consistent across the LP roster (i.e., does Saudi get a discount), and if the management fee is on called capital or on committed capital.
  • The latest: SoftBank is part of a new $500 million funding round for WeWork, aimed at Chinese market expansion. Kia has more.

• Thiel talk: Founders Fund co-founder and partner Luke Nosek is raising up to $100 million for a new effort called Gigafund, alongside Founders Fund venture partner Stephen Oskoui. No word yet on what this means for their affiliation with Founders Fund, if anything, but it's notable that Gigafund appears to have its own website. Hoping to get more info later today.

• Secondary stuff: The WSJ reported earlier this month that Lexington Partners had agreed to what could be a massive stapled secondary with BC Partners, agreeing to purchase up to €1.2 billion in LP stakes in BC Partners IX (at a 114% premium to NAV) and then invest up to €600 million into BC Partners X (which has been in market for quite some time). A few additional notes, per sources familiar:

  • LPs have until August 9 to tell Lexington of their intentions (via broker Campbell Lutyens). The entire deal isn't expected to close until mid-to-late September.
  • BC Partners already has circled on €6 billion of the €7 billion target for Fund X, excluding any possible commitment from Lexington (the final size of which is contingent on the Fund IX secondary).
  • BC Partners IX is fully committed.

• Closed house? On the eve of its IPO, VC-backed real estate company Redfin was slapped with a lawsuit by its co-founder and former CEO. No word yet on what it means for the float, which is supposed to price.

• Uber boss: Bloomberg reports that Meg Whitman is on the short-list for Uber CEO. It's true, but we'll go one step further: She's on top of that list.

• Correction: Yesterday's item on the Snap lock-up expiration misstated the Series F price, in that it didn't take into account an October 2016 dividend that effectively acted as a 2:1 split. That would put the effective price at $15.36 per share (this morning it opened at $13.14).


Discovery Networks (Nasdaq: DISC) reportedly has entered into exclusive negotiations to purchase Scripps Networks (Nasdaq: SNI), owner of Food Network, HGTV and The Travel Channel. Earlier suitor Viacom (Nasdaq: VIAB) is now out of the process. The final deal could be worth more than $12 billion, likely in a mix of cash and stock.

  • Why it's the BFD: For starters, that massive price-tag. Second, Axios media reporter Sarah Fischer the added scale would live Discovery much more leverage to negotiate better distribution deals with the broadband giants.
  • Bottom line: "The Scripps channels are a near-perfect fit with Discovery, which includes Animal Planet, OWN, TLC and, of course, its namesake Discovery Channel. At the very least, a combined Discovery-Scripps could have more pricing power with cable TV providers, and some analysts see the merged company offering a skinny bundle of its channels." — Paul Bond, Hollywood Reporter
Venture Capital Deals

Liulishuo, a Beijing-based language learning company, has raised $100 million in Series C funding. China Media Capital and Wu Capital co-led the round, and were joined by return backers Trustbridge Partners, IDG Capital, GGV Capital, Cherubic Ventures and Hearst Ventures. http://bit.ly/2u1v3yh

🚑 PreciThera, a Montreal-based precision medicine startup focused on orphan bone diseeases, has raised C$36 million in Series A funding from Sanderling Ventures, Arix Bioscience, Fonds de solidarité FTQ, CTI Life Sciences and Emerillon Capital. www.precithera.com

• Callsign, a London-based authentication platform for enterprise access control, has raised $35 million in Series A funding. Accel Partners and PTB Ventures co-led the round, and were joined by Allegis Capital and NetDragon Security. http://tcrn.ch/2eQsGg5

• Casa2 Stays (d.b.a. FabHotels.com), an Indian budget hotel brand, has raised $25 million in Series B funding. Goldman Sachs Investment Partners led the round, and was joined by return backer Accel Partners. http://bit.ly/2tJVxJF

• IonQ, a College Park, Md.-based developer of quantum computing solutions for commercial applications, has raised $20 million in Series B funding co-led by NEA and Google Ventures. http://on.wsj.com/2h5IX1j

• Rebagg, a New York-based online resale site for used luxury handbags and related goods, has raised $15.5 million in Series B funding. Novator and General Catalyst co-led the round, and were joined by FJ Labs, Crosslink Capital, Big Sur Ventures-Necotium, Kloof Capital and U-Start. http://bit.ly/2tJUCZK

• Kuaile Zhihui, a Beijing-based developer of education robots for kids, has raised nearly $10 million in Series A funding. Qiming Venture Partners led the round, and was joined by return backers GGV Capital and China Elite Capital. http://bit.ly/2ePKyru

• Aiqudo, a San Jose, Calif.-based provider of voice control solutions for smartphone apps, has raised $5.2 million in new VC funding from Atlantic Bridge Capital. http://bit.ly/2h2I2i5

• Shelf, a Stamford, Conn.-based provider of company content organization software, has raised $2.2 million in seed funding from Seedinvest, CT Innovations and NY Angels. http://bit.ly/2w0F7ZM

• Cool Cousin, a London-based social recommendation app for places, has raised $2 million in seed funding led by Elevator Fund. http://tcrn.ch/2w2xZft

• Signal Vine, an Alexandria, Va.-based text messaging platform for higher education institutions to communicate with students, has raised $2 million in Series A funding led by New Markets Venture Partners. http://bit.ly/2u12h11

Private Equity Deals

⛽ Energy Capital Partners is in talks to purchase Houston-based power generation Calpine (NYSE: CPN), according to Bloomberg. ECP already is the largest shareholder in Calpine rival Dynegy. https://bloom.bg/2ePQ9y3

• Inspired, an independent school group with 19,000 students in Europe, Africa, Latin America and Australia, has raised an undisclosed amount of growth equity funding from TA Associates. www.inspirededu.co.uk

• KKR and South Korea's LS Group have partnered to form LS Automotive, an electric auto parts maker that will acquire an LS Group affiliate's copper foil and flexible copper clad laminate business. The combined investment would value LS Automotive at around $924 billion, with KKR holding a 47% voting stake. http://reut.rs/2tFaZ5P

• Hanson McClain Advisors, a Sacramento, Calif.-based financial advisory firm, has secured an undisclosed amount of equity funding from Parthenon Capital Partners. www.hansonmcclain.com

• Hawk Capital Partners has acquired LifeShield, a Langhorne, Penn.-based self-installed home security company, from DirecTV for an undisclosed amount. www.lifeshield.com

• LeverPoint Management, a Clifton Park, N.Y.-based fund administration firm backed by Graycliff Partners and Hamilton Lane, has acquired Davis, Calif.-based Lamplighter Financial for an undisclosed amount. www.lamplighterfinancial.com

Public Offerings

Oreva Capital is planning to bring marijuana magazine High Times public, via a sale to a listed special purpose acquisition vehicle also sponsored by Oreva, according to Reuters. http://reut.rs/2uATer6

• RBB Bancorp, a Los Angeles-based commercial bank focused on first-generation Asian immigrants, raised $66 million in its IPO. The company priced 2.9 million shares at $23 per share, and will trade on the Nasdaq under ticker symbol RBB. Sandler O'Neill was left lead underwriter. www.royalbusinessbankusa.com

🚑 Sienna Biopharmaceuticals, a Westlake Village-based medical dermatology and aesthetics startup, raised $65 million in its IPO. The pre-revenue company priced 4.3 million shares at $15 per share (middle of range), for a fully-diluted market value of around $317 million. It will trade on the Nasdaq under ticker symbol SNNA, while J.P. Morgan was listed as left lead underwriter. Shareholders include Arch Venture Partners, Venvest Capital, Partner Fund Management, Altitude Life Science Ventures, Fidelity, Clough Capital Partners and Omega Fund Management. www.siennabio.com

Liquidity Events

• The Sage Group (LSE: SGE) has completed its previously-announced $850 million cash purchase of Intacct Corp., a San Jose, Calif-based provider of cloud financial management and accounting solutions. Intacct shareholders included Split Rock Partners, Costanoa VC, Jackson Square Partners, Emergence Capital Partners, Bessemer Venture Partners and Battery Ventures. http://tcrn.ch/2h0Kw0H

More M&A

• Daiwa Securities Group (Tkyo: 8601) has agreed to acquire boutique U.S. investment banks Sagent Advisors and Signal Hill for an undisclosed amount. Daiwa already held an equity interest in Sagent Advisors. https://bloom.bg/2uDxdq6

• iRobot (Nasdaq: IRBT) has acquired France-based Robopolis, the largest European distributor of iRobot products, for $141 million in cash. http://tcrn.ch/2vIfTjx

• Mitel (Nasdaq: NITL) has agreed to acquire fellow business communications company ShoreTel (Nasdaq: SHOR) for $430 million in cash, or $7.50 per share (28% premium to yesterday's closing price). http://tcrn.ch/2tMqVHi

• Schneider Electric (Paris: SU) has agreed to acquire Asco Power, a Florham Park, N.J.-based provider of automatic transfer switches, for $1.25 billion. http://nyti.ms/2h4WSVo


• Deutsche Asset Management has closed its second private equity fund focused on unlisted European infrastructure investments, with around €1.8 billion in capital commitments (plus another €800 million in possible co-investment commitments). http://bit.ly/2uAR8Hw

• Northern Light Venture Capital (Hong Kong) is raising up to $390 million for its fifth fund, per an SEC filing. www.nlvc.com

• Partners Group has closed a new direct private equity fund with €6 billion in capital commitments. www.partnersgroup.com

• Yellow Wood Partners, a Boston-based private equity firm focused on consumer brands, has closed its second fund with $370 million in capital commitments. www.yellowwoodpartners.com

It's Personnel

• Michael Carus, a former general partner with Jerusalem Venture Partners, has joined VC-backed app testing platform Perfecto as chief financial officer. www.perfectomobile.com

• Citi Private Bank has promoted David Bailin to global head of investments. He previously was global head of managed investments. www.citi.com

• Lazard made several personnel announcements: Evan Russo, co-head of capital markets, will become CFO; current CFO Matthieu Bucaille will become CEO of Lazard International, Compagnie Financière Lazard Frères and Lazard Frères Banque; and Scott Hoffman, general counsel, also will assume the role of chief administrative officer. www.lazard.com

Final Numbers
Dan Primack