Aug 31, 2017

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

This morning I spent some time on the phone with Blair Garrou, co-founder of Houston-based venture capital firm Mercury Fund, who is helping to mobilize the area's investment and tech community in response to Harvey. For starters, only one Mercury Fund employee has been flooded out, as most of the team lives on the relative highlands near Rice University. But travel outside of their neighborhoods has been difficult — they don't have boats — so they've "been trying to help from our laptops."

The most immediate need, of course, is money. Garrou and several tech groups yesterday distributed a letter to their networks, suggesting donations be made to the Harvey Relief Fund, set up by Mayor Sylvester Turner specifically to help those without flood insurance (i.e., most Houstonites).

Beyond that, Houston's development community has been working on ways to help. One particularly involved local group has been Sketch City, which holds regular meet-ups focused on civic technology. In fact, it did one about nine months ago on flood response, and this week has developed and rolled out a suite of chatbots whereby Houstinites can text a number and receive information on shelters (including which one is closest, take pets, have grief counselors, etc.). Sketch City and others like co-working space Station Houston are expected to become, in Garrou's words, the "command posts to develop tech solutions for Houston's flood victims, community leaders and first responders."

• Alt out: Norway's largest sovereign wealth fund has spent several years trying to get government approval to diversify into alternative assets like private equity and infrastructure. But now it is giving up the ghost, due largely to AUM approaching $1 trillion. Per CEO Yngve Slyngstad, speaking with Bloomberg: "It would be such a small proportion, and the duration of implementation would be so long, that if it were to have an impact on returns, it would in reality be if the fund was going down in size."

  • Also a factor has been the fund's difficulty in hitting a 5% target for real estate, which was approved in 2010: "Even in real estate, which is a very big asset class, you need to spend many years building a significant proportion. It would be similar for infrastructure and private equity."

• Trumpland: As expected, President Trump's big tax speech yesterday was conspicuously absent of detail except for his repeated (and unrealistic) hope that the corporate rate can be cut down to 15%. He also did his typical conflation of developing market GDP with developed market GDP, and suggested that U.S. GDP this year would average out to at least 3% (which is the newly-revised figure for Q2).

  • Must-see TV: Treasury Secretary Steven Mnuchin will be interviewed on CNBC at 11:30am ET this morning.
  • Elsewhere: Axios' Mike Allen reports that CEOs are preparing a "furious response" to Trump if he opts to end DACA, the Obama-era policy that suspends deportation of some undocumented immigrants who arrived in the U.S. as children. One study suggests that ending DACA could impact 700,000 jobs, as the vast majority of those affected are currently employed.

• As Uber Turns: A Delaware Chancery Court judge yesterday sided with Travis Kalanick, ruling that Benchmark's fraud suit should be submitted to arbitration. That means this whole matter will go behind closed doors, which denies Benchmark the opportunity to make public information that it believes would deprive Kalanick of his remaining allies within Uber (plus lower his standing with incoming CEO Dara Khosrowshahi). Moreover, by rejecting Benchmark's request for a status quo order, the judge effectively permits Kalanick to remain on Uber's board of directors while the arbitration process plays out.

  • On the other coast: Uber formally introduced Khosrowshahi to the troops yesterday, and he said to expect an IPO within 18 to 36 months. Or, put another way, Uber isn't going public in 2018. No one asked if he had read the full Holder Report before accepting the position.

Activist investor Elliott Management said today that it wants Bain Capital and Cinven to pay at least €74.40 per share for its 15.2% fully-diluted stake in Stada, the German generic pharma company that the private equity firms have agreed to buy at an enterprise value of around €5.3 billion, or €66.25 per share.

  • Why it's the BFD: Bain and Cinven right now are paying a lot of money without receiving full control in return. The firms had sweetened their initial offer to win 63% of shareholder approval at the €66.25 per share price, but German law requires 75% for full control. In other words, Elliott has them over a barrel — unless the firms gamble that fewer than half of Stada shareholders show at the next meeting, which would let them hit the 75% mark. If they want to pay Elliott its demanded price within a year of the deal closing, then they'd have to pay the same to everyone else, pushing the total value from €5.3 billion to around €5.7 billion.
  • Bottom line: Expect Bain and Cinven to bite the bullet here, as Stada shares today were trading even higher than Elliott's asking price.
Venture Capital Deals

🚑 ARMO BioSciences, a Redwood City, Calif.-based immuno-oncology company, has raised $67 million in Series C-1 funding. Qiming Venture Partners led the round, and was joined by Decheng Capital, Sequoia Capital, Quan Capital, RTW Investments and return backers Kleiner Perkins, OrbiMed, DAG Ventures, NanoDimension, HBM Healthcare Investments, GV Celgene Corp. and Clough Capital Partners.

• Qadium, a San Francisco-based automated global Internet intelligence platform, has raised $40 million in Series B funding. Institutional Venture Partners led the round, and was joined by TPG Growth and return backers NEA, Founders Fund and Susa Ventures.

• Treebo Hotels, an India-based budget hotel chain, has raised around $34 million in Series C funding. Ward Ferry Management and Karst Capital co-led the round, and were joined by return backers SAIF Partners, Matrix Partners India and Bertelsmann India Investments.

• Appier, a Taiwan-based AI company whose first product was focused on digital marketing, has raised $33 million in Series C funding. Backers include SoftBank, Line Corp., Naver Corp., EDBI and AMTD Group. Existing backers include Temasek and WI Harper.

• TravelBank, a San Francisco-based travel expense and reward app, has raised just over $25 million in Series B funding. DCM Ventures led the round, and was joined by Propel Venture Partners, Danhua Capital, NEA, Accel and Silicon Valley Bank.

🚑 BrainScope, a Bethesda, Md.-based maker of medical devices for assessment of traumatic brain injury, has raised $16 million in equity funding. DBL Partners led the round, and was joined by return backers Revolution, ZG Ventures and Maryland Venture Fund.

• BitPesa, a blockchain payments platform for Africa, has raised around $7.5 million in new Series A funding led by Greycroft, with Plug and Play Ventures also participating.

• SportLogiQ, a Montreal-based, has raised C$5 million in Series A funding. Rho Canada Ventures and Anges Quebec Capital co-led the round, and were joined by Mark Cuban and TandemLaunch.

• Dwelo, a Provo, Utah-based provider of smart home solutions for those living in rental apartments, has raised $4.9 million in new VC funding led by Peterson Ventures.

• AdWerx, a Durham, N.C.-based advertising and retargeting network for real estate agents, has raised $4.3 million in new VC funding. Grotech Ventures led the round, and was joined by Bull City Venture Partners and Alerion Ventures.

• Elium, a French enterprise collaboration platform, has raised €4 million in Series A funding. Serena Capital led the round, and was joined by return backer SRIW.

• Domuso, a Santa Monica, Calif.-based property management platform and payment portal for delinquent tenants, has raised $3.1 million in new VC funding.

• Ideal, a Toronto-based provider of AI solutions for recruiting, has raised C$3 million in new VC funding from backers like the MaRS Investment Accelerator Fund.

• Fengxiansheng, a Chinese intra-city logistics company, has raised "tens of millions" of dollars in Series C funding from Daosheng Capital and Jolly Information Technology Co.

Private Equity Deals

• ArbiterSports, a Sandy, Utah-based provider of sports management solutions to the youth and school sports market, has secured an undisclosed amount of private equity funding from Serent Capital.

🌞Greencoat Capital has agreed to acquire two solar energy projects in the UK from ReneSola (NYSE: SOL) for an undisclosed amount.

• The Jordan Co. has agreed to acquire a majority stake in Danbury, Conn.-based logistics company Odyssey Logistics & Technology for an undisclosed amount.

🚑 Pouschine Cook Capital Management has acquired Southern Dental Alliance, a dental services organization with 32 practices in Georgia, Tennessee and South Carolina. No financial terms were disclosed.

• ProAct Services, a Ludington, Mich.-based environmental treatment solutions provider owned by Hammond, Kennedy, Whitney & Co., has acquired Themtech, a Waukesha, Wisconsin-based heat treatment company. No financial terms were disclosed.

• TPG Growth and QRG Enterprises have made a minority investment in Campus Activewear, an Indian casual sports and footwear brand. No financial terms were disclosed.

• Warburg Pincus has acquired a majority stake in Canada's SCM Insurance Services for an undisclosed amount. Existing SCM backer TorQuest Partners will retain a position.

• ZeroChaos, an Orlando, Fla.-based workforce management company that was acquired earlier this month by The Carlyle Group, has purchased Loki Management Systems, a Canadian provider of workforce management software for companies with complex staff scheduling and payroll requirements. No financial terms were disclosed.

Public Offerings

• RYB Education, a Chinese provider of early childhood education services, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol RYB, with Credit Suisse and Morgan Stanley serving as lead underwriters. The company reports nearly $5 million in net income on $64 million in revenue for the first half of 2017.

Liquidity Events

• Accel-KKR has sold HighJump Software, a Minneapolis-based provider of supply chain software, to Germany's Körber for an undisclosed amount.

• CenterView Partners is seeking a buyer for Richelieu Foods, a Braintree, Mass.-based private-label food product provider, according to Dow Jones.

• Cinven has launched a sale process for German industrial ceramics company Ceramtec, which could be valued at upwards of $2.9 billion, according to Reuters. First-round bids are expected on Sept. 12, with both financial and strategic suitors expected to participate.

More M&A

🌽 Albaugh, an Ankeny, Iowa-based maker of crop protection chemicals, has hired J.P. Morgan to explore a sale that could value the family-controlled company north of $1.5 billion (including debt), according to Reuters.

• BBVA, a Spanish lender, is in talks to sell its Chilean retail bank business, which has a market cap of around $1.4 billion. Bank of Nova Scotia has expressed interest.

• BroadSoft (Nasdaq: BSFT),a Gaithersburg, Md.-based enterprise cloud communications company with a current market cap just over $1.4 billion, is considering a possible sale, according to Reuters.

• Galeries Lafayette, a French luxury department store operator, has agreed to acquire a 51% stake in La Redoute, a French online and catalog retailer that generates around €750 million in annual revenue. No financial terms were disclosed.

🚑 Mazor Robotics (Tel Aviv: MZOR) has received $40 million in new equity funding from Medtronic (NYSE: MDT), via an earnout to a robotic surgery collaboration agreement signed last year.

It's Personnel

• Katherine Hume has joined ff Venture Capital as a Toronto-based venture partner. She will continue to serve as VP of product and strategy at startup

Final Numbers

  • Related: Toshiba was supposed to pick a winner for its $18 billion memory chip business by today, but instead announced that it missed its self-imposed deadline and will continue to negotiate with three groups. It's a remarkable failure, given that every passing day increases the chances the deal won't gain regulatory approval by the end of its fiscal year, thus putting Toshiba at risk of being delisted from the Tokyo Stock Exchange.
Dan Primack