Nov 22, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Wednesday greetings for the 34 of you not already stuck in traffic. Here we go...

Top of the Morning

Bankrupt retailer Toys "R" Us disclosed in court papers that it paid CEO David Brandon a $2.8 million retention bonus just before filing for Chapter 11 protection in September. Moreover, it's now asking court approval to approve up to another $12 million in incentive bonuses for Brandon, who already receives a base salary of $3.7 million. The New Jersey-based company also is seeking up to another $20 million in incentive pay for 16 other top executives.

  • Toys "R" Us statement: "This type of plan is standard practice for a company involved in a restructuring and in this case rewards team members at all levels of the company."

Oh, really? At all levels? Brandon could receive nearly $15 million that is literally related to a bankruptcy that it was his job to prevent from happening in the first place. Other senior execs could get over $1 million a piece. The other 3,805 employees get to share from what would be a $60 million pot, per court approval, which works out to less than $16,000 per head. Guess which group will be manning cash registers at 5pm on Thanksgiving Day, and which will be home with their families?

  • Note: I like Brandon personally, and he did a remarkable job in a prior CEO role with Domino's. But he should be sticking around to fix Toys "R" Us out of a sense of obligation, not because he's being bribed.

Among those who will receive absolutely nothing are limited partners in the private equity funds that owned Toys "R" Us (minus what they pulled out earlier via fees). But perhaps that's appropriate, given that the retailer's struggles are due as much to over-leveraging as to competition from the likes of Amazon and Walmart.

• Silicon swamp: Binary Capital is pushing back on a lawsuit filed in June by former employee Ann Lai, who had claimed that the scandal-plagued VC firm had threatened her if she were to discuss her work experiences. Kia has more.

• 85 billion cents: Former FCC chairman Julius Genakowski, now a partner with The Carlyle Group, is troubled by the U.S. Department of Justice's efforts to block AT&T from buying Time Warner. He tells Axios that Monday's lawsuit creates "unprecedented uncertainty for media companies" and that AT&T may be coerced into a divestiture that would be "unfair and potentially chilling."

  • Genakowski was at FCC when it approved the Comcast-NBC Universal deal that is now being used by both DoJ and AT&T to justify their positions. His full statement here.
The BFD

Dutch paints maker AkzoNobel and Philadelphia-based rival Axalta Coating Systems (NYSE: AXTA) said that they have ended talks for a merger that would have created a paints and coatings company worth around $30 billion. According to the WSJ, Axalta bailed after receiving an all-cash takeover offer from Japan's Nippon Paint, although the two sides have not yet agreed on terms.

  • Why it's the BFD: AkzoNobel was hoping to buy Axalta as a way to defend itself from takeover attempts by Pittsburgh-based PPG Industries, believing that $30 billion (plus a premium) would be too large for PPG to swallow. That unsolicited pursuit now could be revived.
  • Bottom line: "As in other industries in Japan, paint makers are seeking overseas expansion as they try to escape shrinking domestic markets, boost growth and take advantage of ultra-low borrowing rates. Nippon Paint and smaller rival Kansai Paint have both stated a desire to secure a stronger place in the global coatings business." — Financial Times
Venture Capital Deals

• Divergent 3D, a Los Angeles-based developer of 3D printing technology for auto manufacturing, has raised more than $65 million in funding with an additional $40 million investor option. O Luxe Holdings (Hong Kong) led, and was joined by Horizons Ventures, Shanghai Alliance Investment Ltd. and Altran Technologies. http://axios.link/bFJo

🚑 Candid, a teeth-straightening startup, has raised $15 million in Series A funding from Greycroft Partners, Bessemer Venture Partners and e.ventures. http://axios.link/BVih

🚑 Step Pharma, a Paris-based developer of CTPS1 inhibitors for autoimmune disorders, has raised €14.5 million in Series A funding. Kurma Partners led, and was joined by Bpifrance, Inserm Transfert Initiative, Idinvest, Sygnature Discovery and the Imagine Institute. http://axios.link/VUvW

• HopSkipDrive, a Los Angeles-based ride-hail service for kids, has raised $7.4 million in funding led by Student Transportation (Nasdaq: STB). http://axios.link/akPR

• Buildup, a Palo Alto, Calif.-based mobile collaboration and task management platform for construction job sites, has raised $7 million in Series A funding from TLV Partners, UpWest Labs, 01 Ventures and Abstract Ventures. www.buildup.co

• Kona Deep, a Hawaii-based bottled water company, has raised $5.5 million from the venture arm of Danone and Grand Crossing Capital. www.konadeep.com

• Overclock Labs, a San Francisco-based startup focused on automating cloud infrastructure orchestration, has raised $1.3 million in seed funding from CrunchFund and individual angels. http://axios.link/REtH

Private Equity Deals

• Actis is in advanced talks to purchase Standard Chartered's (LSE: STAN) real estate principal finance business, which is worth around $700 million, according to Reuters. http://axios.link/9tQE

• IK Investment Partners has agreed to acquire Studienkreis, a German provider of tutoring services for primary and secondary school students, from Aurelius. www.studienkreis.de

• Leeds Equity Partners has invested in Fusion Education Group, a Grand Rapids, Mich.-based operator of 43 personalized learning schools in eight states. www.fusionacademy.com

• Penta Investments and China's CEFC have offered to acquire Time Warner-controlled Central European Media Enterprises (Nasdaq: CETV) business, which would be worth around $588 million, according to Reuters. http://axios.link/Dxow

Public Offerings

• Cirsa, a Spanish operator of gaming halls, has hired Lazard to explore a possible IPO, per Reuters. http://axios.link/mTIB

⛽ Gulf Energy Development, a Thai power generation company, is planning to raise up to $733 million in its IPO. If successful, it would be the largest corporate listing in Thailand this year. http://axios.link/E0JI

Liquidity Events

Apple (Nasdaq: AAPL) has acquired Canadian VR headset maker Vrvana for about $30 million, according to TechCrunch. Vrvana had been seeded by Real Ventures. http://axios.link/8x5o

• Ion Investment Group has agreed to acquire a control stake in Dealogic, a UK-based provider of financial content and analytics, from Euromoney Institutional Investor (LSE: ERM) and The Carlyle Group (which will retain a minority stake). http://axios.link/Z2Zm

More M&A

⛽ BP PLC (LSE: BP) has agreed to sell minority stakes in three North Sea oil fields to Serica Energy (AIM: SQZ) for around £500 million. http://axios.link/LH0U

• Rockwell Automation (NYSE: ROK) has rejected the latest takeover offer from Emerson Electric (NYSE: EMR), which would have valued Rockwell at around $29 billion.

Fundraising

• Seedcamp has closed its latest pan-European seed fund with £41 million in capital commitments. http://axios.link/JmvT

Thank You

A giant note of thanks to you for opening these missives each morning, as Pro Rata fast approaches its 1-year anniversary. Have a delicious break, and we'll chat again on Monday.

Dan Primack