Axios Pro Rata

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May 27, 2022

Top of the Morning

 Illustration of a gun target with bullet holes forming a dollar sign.

Illustration: Shoshana Gordon/Axios

The largest shareholder in America's largest gunmakers isn't a reclusive billionaire or a 2A rabble-rouser with a heavy Reddit presence. It's BlackRock, the investment giant that talks Wall Street's loudest game on social duty.

Why it matters: With great power comes little accountability.

Cap table: BlackRock holds a 16.18% stake in Sturm Ruger (NYSE: RGR), a 15.26% position in Vista Outdoor (NYSE: VSTO) and an 8.3% stake in Smith & Wesson (Nasdaq: SWBI).

  • BlackRock says that none of those shares, valued at a combined $597 million at Thursday's market close, are held in actively managed funds.
  • Instead, they're in passive funds tied to third-party indexes (i.e., BlackRock doesn't choose which stocks to include). BlackRock also offers custom products for clients who don't want exposure to firearms; products created after the 2018 high school massacre in Parkland, Florida.

What they've said: BlackRock regularly stresses the value of ESG and conscious capitalism, including specific comments about how gun manufacturers should do more to prevent their products from being misused. After Parkland, the firm said:

"The recent tragedy in Florida has driven home for BlackRock the terrible toll from gun violence in America. We believe that this event requires response and action from a wide range of entities across both the public and private sectors."

What they've done: Very little. The company did manage to eventually get some gunmaker engagement, but there's no evidence that any of the companies made policy or product changes to reduce gun violence. Nor does BlackRock claim that they did. Instead, the firm just seems content to have had the conversation and then let business continue as usual:

  • In 2020, for example, BlackRock voted to re-elect all seven of Smith & Wesson's directors. In 2021 it voted against one director, vice chairman and ESG board committee chair Michael Golden, saying: "The Company does not meet our expectations for disclosure of material social policies and/or risks."
  • But it supported all of the other Smith & Wesson directors, as if Golden alone was the stumbling block. Opposing the full slate would have been a much stronger statement of disapproval, even if it wouldn't have led to a different outcome (Golden still sailed through). BlackRock also opposed a resolution, brought by Catholic nuns, for Smith & Wesson to adopt a comprehensive human rights policy. It failed after receiving 44% shareholder support, which means BlackRock's vote would have put it over the top.
  • BlackRock voted against two Sturm Ruger directors in 2020 and 2021, but because of "board diversity" issues, rather than for business practices or policy. It also backed all Vista Outdoor directors in each of the past three years.
  • To be clear, BlackRock doesn't hold any shares in Daniel Defense, the privately held Georgia company that made the weapons used this week to murder 19 Texas schoolchildren and two of their teachers.

The bottom line: This isn't about my feelings about firearms manufacturers. Or yours. It's about BlackRock's, and how its actions don't match its rhetoric. And that matters because, as these companies' largest outside shareholder, it could have far more influence than you or I.

The BFD

Illustration of an app-like brain with an alarm icon on it

Illustration: Sarah Grillo/Axios

Mindpath, a behavioral health company owned by Centerbridge Partners and Leonard Green & Partners, approached mental health app Talkspace (Nasdaq: TALK) about an acquisition, as first reported yesterday by Axios Pro.

Why it's the BFD: Talkspace may go down as a poster child for the pandemic era's boom and bust cycle. Its popularity soared alongside other telehealth startups, and was taken public at a $1.4 billion valuation by a SPAC. But shares later fell as low as $1.11 per share, as clients returned to in-person therapy and investors focused on unprofitability and litigation.

The bottom line: Two sources say price talk for the acquisition was around $500 million, while two other sources insist no specific numbers were discussed. All four agree, however, that the merger is now dead.

Venture Capital Deals

Stable, a Chicago-based agricultural commodity financing startup, raised $60m in Series B funding. Acrew led, and was joined by Greycroft, Notion Capital, Syngenta and Continental Grain Co. www.stableprice.com

• Jar, an Indian savings and investment app, is raising $50m in Series B funding at a $350m valuation led by Tiger Global, per TechCrunch. Other backers may include Folius Ventures and Paramark. http://axios.link/TrPM

• Redbud Brands, a developer of “better-for-you” consumer brands, raised $46m. Satori Capital led, and was joined by Sands Capital and VMG Partners. www.redbudbrands.com

Hyperpay, a Saudi payment processing startup, raised roughly $40m led by Mastercard. www.hyperpay.com

Manta, a Prague-based enterprise data lineage platform, raised $35m in Series B funding. Forestay Capital led, and was joined by Bessemer Venture Partners, SAP, Senovo, Credo Ventures, ERBD and Dan Fougere. http://axios.link/gEyZ

Gametime, an SF-based event ticketing app, raised $30m in Series C funding, as first reported yesterday by Axios Pro. Nimble Ventures led, and was joined by Maven Ventures, Accel, GV, Jeff Mallett, Palapa Ventures, Bolt Ventures, Tenere Capital, Blitzscaling Ventures, Next Play Capital, Alumni Ventures and University Growth Fund. http://axios.link/0lpM

Joywell Foods, a Davis, Calif.-based sweet proteins startup, raised $25m in Series B funding. Piva Capital led, and was joined by B37 Ventures, Global Brain Corporation and insiders Khosla Ventures, Evolv Ventures, SOSV’s IndieBio and Alumni Ventures. http://axios.link/xHE1

🌎 Converge, a London-based construction materials decarbonization startup, raised over £15m. OGCI Climate Investments led, and was joined by TO Ventures. www.converge.io

• Marvin, a Brazilian B2B payments startup, raised $15m in Series A funding. Canaan Partners led, and was joined by Canary and Maúa Capital. http://axios.link/05Ce

🌎 Planet FWD, an SF-based carbon management platform for consumer brands, raised $10m in Series A funding. Acre Venture Partners and Congruent Ventures co-led, and were joined by BBG Ventures, Precursor, Concrete Rose, January Ventures, Elemental Excelerator, Cleo Capital and Rethink Food. http://axios.link/zqc1

Bold Metrics, an SF-based maker of body-sizing software, raised $8m in Series A funding, per Axios Pro. Bessemer Venture Partners led, and was joined by Lytical Ventures, ValueStream Ventures and Nanban Ventures. http://axios.link/IwzI

Jupiter Exchange, an alt asset exchange using fractional NFTs, raised $5m in seed funding led by White Hilt Capital. www.jupiterexchange.com

Learnfully, a Redwood City, Calif.-based personalized learning platform, raised $2m in seed funding from Learn Capital, Goodwater Capital, Divergent Investments, Incite.org and Figure 8 Investments. www.learnfully.com

Private Equity Deals

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Source: Giphy

Justin Timberlake sold his song catalog to Hipgnosis, backed by Blackstone, for just over $100m, per the WSJ. http://axios.link/4hhX

Battery Ventures offered to buy Australian auto software provider Infomedia (ASX: IFM) for A$577m, topping a $639m bid from TA Associates. http://axios.link/qfkH

Copley Equity Partners invested in San Diego-based management consultancy FMG Leading. www.fmgleading.com

🚑 Goldman Sachs agreed to buy a control stake in Dutch pharma firm Norgine from its founding family at a reported €1.9b enterprise value. http://axios.link/JUiG

Prospect Hill Growth Partners acquired MOTIS Brands, a Germantown, Md.-based online seller of ramps, lifts and other hauling products, from Rotunda Capital Partners. www.motisbrands.com

🌎 Summit Carbon Solutions, developer of a carbon capture and storage project in the Midwest, raised $1b in equity funding from Tiger Infrastructure, Summit Agricultural Group, TPG Rise Climate, Continental Resources and SK E&S. www.summitcarbonsolutions.com

🚑 Virtus Health (ASX: VRT), an Australian fertility services provider, now is recommending a sweetened takeover offer from BGH Capital, after having previously agreed to a A$705m bid from CapVest Partners. http://axios.link/pbQ4

SPAC Stuff

United Gear & Assembly, a Hudson, Wis.-based maker of precision gears for EVs, agreed to go public via Aesther Healthcare Acquisition Corp. (Nasdaq: AEHA). http://axios.link/ElGq

ESH Acquisition, an entertainment, sports and hospitality SPAC, filed for a $300m IPO. It’s led by James Francis (ex-CEO of Chesapeake Lodging Trust) and Allen Weiss (ex-Disney), while Magic Johnson is vice chair http://axios.link/Q3i4

Mars Acquisition, a tech SPAC led by Karl Brenza (ex-Paulson Investment Co.), filed for a $75m IPO. http://axios.link/AAEP

Liquidity Events

Hot Dog Ketchup GIF by ADWEEK - Find & Share on GIPHY
Source: Giphy

3G Capital said it plans to distribute around a 7% stake in Kraft Heinz (Nasdaq: KHC) to limited partners, while retaining an 8% position. Brazil’s 3G teamed with Berkshire Hathaway to buy Heinz in 2013, and in 2015 merged it with Kraft Foods. http://axios.link/qlkS

More M&A

Ernst & Young is considering a split of its global audit and advisory businesses, per multiple reports. http://axios.link/SckB

Johnson Matthey (LSE: JMAT) agreed to sell a majority of its battery materials unit to Australia’s EV Metals Group for £50m in cash. http://axios.link/a1JT

PPL (NYSE:PPL) completed its $3.8b acquisition of The Narragansett Electric Co., Rhode Island’s primary electric and gas utility, from National Grid (LSE: NG). http://axios.link/dBoD

Saint-Gobain (Paris: SGOB), under pressure from an activist investor, agreed to sell its glass processing businesses in Germany and Austria to Aequita. http://axios.link/ZVVk

Fundraising

1Sharpe Ventures, a prop-tech VC firm co-led by Roofstock co-founder Gregor Watson, raised $90m for its debut fund. http://axios.link/baXY

Energy Capital Partners is raising nearly $1.6b for a single-asset fund that would let it extend its hold time of Houston-based power company Calpine, per the WSJ. http://axios.link/B7jM

• Halogen Ventures, a Santa Monica, Calif.-based VC firm led by Jesse Draper, is raising its third fund, per an SEC filing.

• LFX Venture Partners, an LA-based firm led by Fung Capital vets John Seung and Janie Yu, is raising $200m for its debut fund, per an SEC filing. www.lfxvp.com

• Martis Capital, an SF-based healthcare PE firm, is raising $700m for its fourth fund, per Buyouts. http://axios.link/vxpU

🌎 Sandbrook, a climate and energy tech PE firm co-founded by Riverstone vets, is raising its debut fund, per SEC filings. www.sandbrook.com

• SFW Capital Partners, a Rye, N.Y.-based PE firm focused on the life sciences tech and industrial sectors, is raising $300m for its third fund, per SEC filings. www.sfwcap.com

It's Personnel

Audax Group hired both Kumber Husain and Daniel Green from DWS, to build out a secondary PE practice, per the WSJ. http://axios.link/hbv

🌎 Elsa Palanza is joining ICG as a managing director and global head of sustainability and ESG. She previously was with Barclays. www.icgam.com

Joan Touchstone joined venture firm IVP as head of communications. She previously was with DKC. www.ivp.com

Final Numbers

Data: Yahoo Finance; Chart: Thomas Oide/Axios

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