Axios Pro Rata
July 31, 2019
Wednesday greetings from Martha's Vineyard, where the sun has beaten the sea breeze into submission. All eyes on the Fed decision at 2 p.m. EST, and Elizabeth Warren didn't discuss her private equity plans during last night's debate. Okay, here we go...
Top of the Morning
The Carlyle Group this morning announced that it will become the latest big private equity firm to convert from a publicly-traded partnership into a C-corporation.
- Carlyle converting, on its face, isn't too surprising. Rivals like Apollo, Blackstone and KKR already took the plunge.
- But this particular conversation is different because Carlyle is giving all of its shares equal voting rights, meaning that the firm's 30% outside owners will have a 30% say in the business. Other firms have maintained a dual-class share structure.
Why it matters is that a primary driver of these conversations is to expand shareholder bases, as many institutional investors were barred from holding publicly-traded partnerships. By eliminating the dual-class share structure, Carlyle gets the added benefit of becoming eligible for inclusion in S&P and Russell indexes.
- "We took our time to be thoughtful and deliberate, and landed on a structure that's simple and aligned with our shareholders," Carlyle co-CEO Kewsong Lee tells Axios.
- Co-CEO Youngkin adds that there was no serious consideration of taking Carlyle back private.
It's not surprising that Carlyle was the first of its peer group to equalize shareholder votes, given that it's also the first to have all of its founders pull back from day-to-day management.
- Lee and Youngkin became co-CEOs at the beginning of 2018, succeeding co-founders David Rubenstein and Bill Conway.
- Steve Schwarzman remains CEO of Blackstone, Henry Kravis and George Roberts remain co-CEOs of KKR and Leon Black remains CEO of Apollo.
Carlyle's conversion will officially take place on January 1, 2020, and its shares were up around 5% at this morning's open.
Yesterday we discussed Trump administration scrutiny of big M&A, and today we've got two new developments:
- Roche Holding (Swiss: ROG) has again extended the tender offer of its $4.3 billion takeover for gene therapy company Spark Therapeutics (Nasdaq: ONCE), due to U.S. and U.K. regulatory reviews. The deal was originally announced in February with plans to close by the end of June, but its new end date is September 3.
- Eyewear maker EssilorLuxottica yesterday agreed to pay 7.2 billion for Dutch eyewear retailer GrandVision, which does business in the U.S. under the For Eyes brand. Luxottica is often used as Example A in monopoly explainers — and already has a physical U.S. retail presence via ownership of such outlets as LensCrafters, Pearle Vision, Sunglass Hit and Target Optical — so expect this deal to face stiff regulatory scrutiny.
• ROI: Thoma Bravo yesterday announced a deal to buy J.D. Power, the Delaware-based car ratings company that's ubiquitous in TV and radio ads for new vehicles, from China's XIO Group. No financial terms were disclosed, but Axios has learned the price-tag is $1.875 billion.
- That's a strong return for XIO, which paid $1.1 billion for the company in 2016 and later did a $200 million dividend recap.
• Venture capitalist Sutian Dong announced this morning that she's stepping down as a partner with Female Founders Fund, in order to do "something new." Word is that her next endeavor will be in the fund-of-funds space.
🎧 Pro Rata Podcast digs into which Democratic presidential candidates are getting the most social media engagement, both good and bad. Listen here.
Superplastic, a Burlington, Vt.-based designer toy startup founded by Paul Budnitz (Ello, KidRobot), raised $10 million in Series A funding led by Craft Ventures.
- Why it's the BFD: This coincides with Superplastic trying to turn two of its most popular characters into virtual Instagram stars, a burgeoning niche that could become the next "Some kid won $3 million playing Fortnite?"
- Investors besides Craft Ventures include Global Village, Betaworks, Canaan Partners, Shrug Capital, and angels like Cyan Bannister, Scott Belsky, and Scooter Braun.
- Bottom line: "Superplastic wants to continue to make money with toy sales, but Butnitz said that the expansion into digital media was also opening up additional revenue opportunities. This includes licensing its characters, and also brand endorsement deals similar to those of Instagram influencers." — Janko Rottgers, Variety
Venture Capital Deals
• Lightricks, maker of the Facetune photo editing app, raised $135 million in Series C funding at a post-money valuation north of $1 billion. Backers include Goldman Sachs, Insight Partners and ClalTech. http://axios.link/7wPx
🚑 Alizé Pharma 3, a French drug startup focused on rare endocrine and metabolic diseases, raised €67 million in Series A funding. LSP led, and was joined by Novo Ventures, Kurma Partners, Orbimed, Pontifax, Partners Innovation Fund, Bpifrance, Sham Innovation Santé/Turenne Capital, Crédit Agricole, and TAB Consulting. http://axios.link/VMUN
• Solana, a speed-focused blockchain startup, raised $20 million in Series A funding. Multicoin Capital led, and was joined by Distributed Global, Blocktower Capital, Foundation Capital, Blockchange VC, Slow Ventures, NEO Global Capital, Passport Capital, and Rockaway Ventures. http://axios.link/Y2jE
• Catalyst, a New York-based “customer success platform,” raised $15 million in Series A funding. Accel led, and was joined by seed backers Work-Bench and True Ventures. http://axios.link/wfCx
• Truework, a San Francisco-based consumer verification startup (i.e., Equifax rival), raised $12 million in Series A funding. Sequoia Capital led, and was joined by Stanford University and return backers Khosla Ventures, Menlo Ventures, and Founder Collective. http://axios.link/ddx3
• Jobble, as Boston-based on-demand worker community, raised $11 million. Vestigo Ventures and AXA Venture Partners co-led, and were joined by Guardian Strategic Ventures and Harlem Capital Partners. http://axios.link/3Awk
• Prevailion, a Columbia, Md.-based cybersecurity startup, raised $10 million in Series A funding. AllegisCyber led, and was joined by return backer DataTribe. www.prevalian.com
• Socio, an Indianapolis-based live event management platform, raised $6 million in Series A funding. High Alpha Capital led, and was joined by Greenspring Associates. www.socio.events
• NakedPoppy, a San Francisco-based natural makeup startup, raised $4 million in seed funding from Cowboy Ventures, Felicis Ventures, Khosla Ventures, Maveron, Polaris Ventures, and Slow Ventures. http://axios.link/cU37
• MYbank, a Chinese online lending offshoot of Alibaba’s Ant Financial, is seeking to raise $871 million in its first outside funding round, per Reuters. http://axios.link/UFxD
Private Equity Deals
🚑 Arsenal Capital agreed to acquire and merge Caprion Biosciences, previously owned by GHO Capital, and HistoGeneX, previously owned by Waterland Private Equity, into a single company focused on immune monitoring, protein characterization, and tissue pathology solutions. www.caprion.com
• The Blackstone Group, Comcast and James Murdoch’s Lupa Systems have offered to buy a 51% stake in Zee Entertainment, India’s largest private broadcaster, for around $2.8 billion, per Bloomberg. http://axios.link/SUPb
🚑 Bridgepoint is considering a sale or IPO for Sweden-based dialysis clinic operator Diaverum, which could be worth upwards of €2 billion, per Reuters. http://axios.link/SxNR
• Equistone agreed to acquire a majority stake in Bulgin, a UK-based maker of environmentally-sealed connectors, from Elektron Technology (AIM: EKT) for £105 million. www.bulgin.com
• Mega Broadband Investments, an affiliate of GTCR, agreed to acquire Vyve Broadband, a Shawnee, Okla.-based broadband services provider, from BBH Capital Partners. http://axios.link/SwU2
• TA Associates bought Wealth Enhancement Group, a Minneapolis-based wealth management firm with $11.8 billion in client brokerage and advisory assets. www.wealthenhancement.com
• Willis Towers Watson (NASDAQ: WLTW) completed its purchase of Tranzact, a Fort Lee, N.J.-based provider of digital marketing and sales solutions for health insurers, from Clayton, Dubilier & Rice.
• BDO USA acquired Loughlin Management Partners, a New York-based business advisory focused on turnarounds and restructurings. www.lmcopartners.com
🚑 Cantel Medical (NYSE: CMD) agreed to buy Hu-Friedy Manufacturing, a Chicago-based maker of dental instruments and reprocessing equipment, for $775 million ($725m upfront). http://axios.link/9rUx
• Ford Motor (NYSE: F) agreed to buy Journey, a developer of app-based vehicle tracking software for public transportation. http://axios.link/pCpw
• Lloyds Banking Group (LSE: LLOY) is in exclusive talks to buy a £3.7 billion mortgage portfolio from the banking arm of British grocer Tesco (LSE: TSCO), per Sky News. http://axios.link/aP0b
• PMK-BNC and Rogers & Cowan, both Hollywood PR agencies, agreed to merge. http://axios.link/9Bzy
• SoftBank Group bought an undisclosed number of newly-issued shares in listed Brazilian digital banking company Banco Inter, per Bloomberg. http://axios.link/Eugn
• Turvo, a Sunnyvale, Calif.-based collaborative logistics platform, acquired ODYN, a Somerville, Mass.-based “AI-enabled visibility platform.” Turvo has raised over $80 million in VC funding from Mudabala, G2VP, and Next47, while ODYN was seeded by NewDo Ventures and Dynamo VC. www.turvo.com
• Jonathan Kaplan joined Austin-based VC firm Next Coast Ventures as COO. He previously was chief legal officer of RetailMeNot. www.nextcoastvc.com
⛽ Piper Jaffray named three co-heads of energy investment banking: Spencer Rippstein, Andrew Schroeder, and Sanjiv Shah.
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