Aug 22, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Sarah Grillo/Axios

Apollo Global Management, one of the world's largest buyout firms, believes there's more than just a puff left on the local TV cigar, despite widespread conventional wisdom that the value has been snuffed out.

  • Apollo is in talks to buy select broadcast assets from Tegna, after being rebuffed in a February takeover attempt.
  • Earlier this year it agreed to buy a portfolio of local stations from Cox Media Group, and another portfolio from Northwest Broadcasting Group.
  • It also bid, but lost, on a divestiture by Nexstar. But some of that ultimately went to Tegna, so could still wind up in Apollo's hands.

A source familiar with the situation says Apollo views this all as a "coupon-clipping" consolidation play.

  • It believes the price discounts have been artificially deepened by attention given to cord-cutting. Internally, it references the continued strength of RedBox, which has managed to survive the streaming service onslaught.
  • It also sees no reason for a near-term reversal in retransmission fee growth, which it believes can offset subscriber loss for at least the next several years.

Apollo views local TV as a distinct business from local radio and, certainly, from local newspapers. But it clearly has a thematic affinity for all three.

  • The Cox deal included some radio stations, and Apollo's credit arm just provided a massive loan for the GateHouse-Gannett merger (after first kicking the tires on Gannett itself). Plus, several years back, Apollo tried to buy Digital First Media.

The bottom line: Apollo is poised to become one of America's most influential news broadcasters, even though few Americans know its name.

Also...

Kia attended YC Demo Day earlier this week. Her takeaway was that while the famed accelerator tried some new things, like interviewing local applicants in India, the top-line trends were in line with recent years.

  • Investors still bemoan, but capitulate, to the high valuations YC founders demand.
  • Many of the startups raise before Demo Day even begins, thus turning it as much into a social event as a pitch event.

She also says that almost every VC she spoke with had read The Information’s story from last week about freelancing platform Toptal, whose CEO still owns all its stock because it hasn’t sold equity since raising via convertible notes years ago. The investor consensus: That’s wild—and they all really, really hope it never happens to them.

🎧 Pro Rata Podcast talked with Ran Harnevo, co-founder and CEO of immigrant-focused social networking app HomeIn (which was yesterday's BFD). Listen here.

The BFD
Source: Giphy

AE Industrial Partners acquired Columbia Helicopters, an Aurora, Ore.-based provider of commercial heavy-lift helicopters.

  • Why it's the BFD: Because AEI had to overcome major hesitation from Columbia's family sellers, who had just experienced the collapse of an announced $560 million sale to rival Bristow Group, after Bristow disclosed financial irregularities that led to its bankruptcy. Plus, this could set the stage for future rotor-craft sector consolidation, including UAVs.
  • Bottom line: "Founded in 1957, Columbia operates heavy-lift Chinook helicopters used in defense, firefighting and natural resource explorations. It had 850 employees last fall, about half of them in Oregon." — Mike Rogoway, The Oregonian
Venture Capital Deals

Knotel, a New York-based flexible office space operator, raised $400 million at a valuation north of $1.3 billion. Wafra led, and was joined by Mori Trust, Itochu, Mercuria and return backers Norwest Venture Partners, Newmark Knight Frank, Bloomberg Beta, and Rocket Internet. http://axios.link/anIg

ThredUp, a San Francisco-based clothing resale marketplace, raised $100 million from Park West Asset Management, Irving Investors and return backers Goldman Sachs, Upfront Ventures, Highland Capital Partners, and Redpoint Ventures. http://axios.link/9Cdm

🚑 Chinook Therapeutics, a Canadian drug startup focused on kidney disease, raised US$65 million in Series A funding. Versant Ventures led, and was joined by Apple Tree Partners and Samsara BioCapital. www.chinooktx.com

Drop, a Toronto-based mobile rewards app, raised C$44 million in Series B funding. HOF Capital led, and was joined by RBC. http://axios.link/19EP

Remediant, a provider of privileged account management software, raised $15 million in Series A funding co-led by Dell Technologies Capital and ForgePoint Capital. http://axios.link/k0YI

CropX, a provider of in-soil agricultural analytics, raised $10 million from Sumitomo, Armada Capital, TaL Capital and return backers Finistere Ventures, Germin8 Ventures, GreenSoil Investments, Innovation Endeavors and OurCrowd. www.cropx.com

TapClicks, a San Jose, Calif.-based predictive marketing analytics startup, raised $10 million from Boathouse Capital. www.tapclicks.com

JRNI (fka BookingBug), a Boston-based customer engagement platform, raised $6 million in new Series C funding. PeakSpan Capital led, and was joined by Downing Ventures and Somerston Group. www.jrni.com

🚑 Aperiomics, an Ashburn, Va.-based developer of precision pathogen tests, raised $1.8 million in Series A funding led by VentureSouth. www.aperiomics.com

Private Equity Deals

Cache Creek Industries and Rockmont Capital Partners agreed to buy Brandywine, a Tustin, Calif.-based maker of time and frequency devices for the military and infrastructure markets. www.brandywinecomm.com

EMEX Holdings, a Houston-based portfolio company of O2 Investment Partners, acquired Bluefin, a Greenwood Village, Colo.-based provider of facility asset management solutions. www.bluefinlllc.com

New Mountain Capital acquired Ontario Systems, a Muncie, Ind.-based provider of workflow automation and revenue recovery software, from Arlington Capital Partners. www.ontariosystems.com

New State Capital Partners acquired CDS, an Eatontown, N.J.-based provider of data center third-party maintenance. www.cds.net

PLZ Aeroscience, a St. Clair, Mo.-based portfolio company of Pritzker Group Private Equity, acquired Precise Packaging, a Fall River, Mass.-based maker of small-format aerosol and liquid products, from Trive Capital. www.plzaeroscience.com

PMC Capital bought Styrochem Canada, a Montreal-based maker of expandable polystyrene, from WinCup.

Quorum Software, a Houston-based portfolio company of Thoma Bravo, acquired OGsys, a Fort Worth, Texas-based provider of oil and gas accounting software for SMEs. www.quorumsoftware.com

🚑 Sheridan Capital Partners invested in Oral Surgery Partners, an oral surgery practice management company.

Sigma, a Garner, N.C.-based portfolio company of Argand Partners, acquired Avalon, a Cleveland-based maker of investment casting products. www.sigmaelectric.com

Stack Sports, a Frisco, Texas-based portfolio company of Genstar Capital, acquired sports industry software companies Affinity Sports and Blue Sombrero from Dick’s Sporting Goods (NYSE: DKS). www.stacksports.com

Liquidity Events

Goldman Sachs is prepping an auction for Safe-Guard, an Atlanta-based auto warranty company that could fetch over $1 billion, per Reuters. http://axios.link/02Mu

Splunk (Nasdaq: SPLK) agreed to buy SignalFx, a San Mateo, Calif.-based provider of enterprise cloud monitoring solutions, for $1.05 billion in cash and stock (60/40 split). SignalFx recently raised $75 million at a $500 million post-money valuation led by Tiger Global, and previously raised around $100 million from firms like Andreessen Horowitz, CRV, and General Catalyst. http://axios.link/uV9D

More M&A

🚑 Fosun (HK: 0656) is backing one of two bids to acquire a 40% stake in UAE-focused healthcare services group NMC Health (LSE: NMC), which could be worth around $1.9 billion, per Reuters. The seller is the chairman of Abu Dhabi-based KBBO Group. http://axios.link/qGTJ

Kinder Morgan (NYSE: KMI) agreed to sell its Canada unit and the U.S. portion of the Chochin Pipeline to Pembina Pipeline (TSX: PPL) for around US$3.3 billion. http://axios.link/a1CN

Mail.ru Group and Proxima Capital acquired a control stake in Moscow-based car-share company YouDrive. http://axios.link/VxhM

Royal Dutch Shell offered A$617 million to buy ERM Power (Nasdaq: EPW), an Australian corporate energy retailer. http://axios.link/4lnz

Simply Good Foods (NYSE: SMPL) agreed to buy Quest Nutrition, an El Segundo-based maker of protein bars, for $1 billion in cash. Sellers include VMG Partners and Montage Capital. http://axios.link/QrEm

• Volkswagen has interest in acquiring a stake in Tesla Motors (Nasdaq: TSLA), per German business publication Manager Magazin. http://axios.link/T4HB

Wesfarmers (ASX: WES) ended its A$1.1 billion acquisition pursuit of Australian rare earths miner Lynas. http://axios.link/mAHY

Fundraising

East Ventures, a Jakarta-based VC firm focused on Southeast Asia startups, raised $75 million for its sixth fund. http://axios.link/i4mh

🚑 Novalis LifeSciences, a Hampton, N.H.-based venture firm led by former Bayer CEO Marjin Dekkers, raised $85 million for its debut fund. www.novalislifessciences.com

It's Personnel

• Stuart Bowers, who most recently helped run Tesla's Autopilot division, has joined venture capital firm Greylock Partners as an executive-in-residence. http://axios.link/vk19

Final Numbers
Expand chart
Data: Xtract Research; Chart: Axios Visuals

Vista Equity Partners is the most aggressive private equity firm when it comes to lending terms, according to an analysis by Xtract Research. Per its new report:

"We reviewed the covenant scores for loans of sponsors that brought at least four loans to market over the last 18 months... 10 indicates an agreement that is the most protective of lenders while 0 indicates one that is the least protective...
All sponsors may allow for expanded investment capacity in unrestricted subsidiaries, but some will go the extra mile and create an investment basket that threatens to swallow the collateral whole."
Dan Primack

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