Jun 4, 2018

Axios Pro Rata

Hey DC: Axios tomorrow kicks off three back-to-back-to-back breakfasts, with a discussion of responsibility in tech. Guests are Sen. Mark Warner, former U.S. CTO Megan Smith and Seattle CPO Ginger Armbruster. RSVP here.

Wednesday we're talking how 5G will change the world, and Thursday is a discussion on healthcare market innovation.

Top of the Morning

Source: Giphy

Many limited partners in private equity are grappling with internal resource constraints, particularly around recruiting high-quality talent, at the very time that competition is heating up for access to popular funds.

That's a major finding of Coller Capital's latest Private Equity Barometer, a bi-annual survey of over 100 global LPs. More results:

  • 62% believe too much money is chasing too few deals in North American buyouts. That figure dips to 50% for Europe and just 26% for Asia-Pacific. For venture capital, those numbers go 54%, 23% and 26%.
  • 39% of respondents plan to increase overall allocations to alt assets over the next 12 months. 51% plan to increase allocations to infrastructure and 40% to private credit, while 16% plan to decrease allocations to hedge funds.
  • 39% of European LPs say ESG is an essential component of investment decisions, whereas only 9% of North American LPs say the same.
  • One-third of respondents either have invested in a GP management company, or would consider doing so.

Naming rights: Bayer expects to close its $62.5 billion takeover of Monsanto this Thursday, at which point it will retire the Monsanto brand.

• Picking winners: Chara Solutions, a Louisville, Ky.-based provider of environmental and maintenance services to coal and nuclear power plants, just set terms for an IPO that is expected to price later this month. At the $17 per share midpoint, it would have an initial market cap of $511 million.

  • One big variable is a pending federal bailout for Charah's target customers, as President Trump on Friday asked DoE to prep an economic aid package for troubled coal-fired and nuclear power plants.
  • Bloomberg says it would "represent an unprecedented intervention into U.S. energy markets."

• Something new: Singapore sovereign wealth fund Temasek is launching a private equity funds bond that has a tranche aimed at retail investors, which is believed to be the first-ever such structure. More from The Straits Times.

Illustration: Lazaro Gamio/Axios

Microsoft has agreed to buy Github, a San Francisco-based software development platform and community, for $7.5 billion in stock. Microsoft exec Nat Friedman (founder of Xamarin) takes over as CEO, while current GitHub CEO Chris Wanstrath becomes a Microsoft technical fellow.

  • Why it's the BFD: This is Microsoft's fourth-largest acquisition, following LinkedIn, Skype and Nokia's phone biz.
  • There was talk about rival interest from companies like Google, but we're getting conflicting accounts on if a formal offer was made. What everyone agrees on is that GitHub received tons of inbound M&A inquiries over the years.
  • GitHub has only raised two rounds of funding, from firms like Andreessen Horowitz, Sequoia Capital, IVP and Thrive Capital. Its last post-money valuation was $2 billion. The $7.5 billion price will not fluctuate with Microsoft stock, as the number of shares will be normalized at the time of closing.
  • Bottom line: "Microsoft, which once saw open source as its enemy, has done a full 180. Its Azure cloud operating system treats Linux as a first class citizen and the company is increasingly trying to appeal to all developers. Buying GitHub would get it even tighter with that crowd." — Axios' Ina Fried. Read more of her deep-dive.
Venture Capital Deals

Hyperchain Technologies, a Chinese enterprise blockchain platform, raised around $234 million in Series B funding from Xinhu Zhongbao and China SDIC Gaoxin Industrial Investment Corp. http://axios.link/IYaB

Babytree, a Chinese pregnancy and new parent e-commerce site, raised around $219 million from Alibaba. http://axios.link/EVjQ

🚑 ENYO Pharma, a French drug startup that mimics virus strategies to modulate host cellular functions, raised €40 million in Series B funding. OrbiMed led, and was joined by Andera Partners, Bpifrance and return backers Sofinnova Private Capital VII, Morningside Venture Investments, InnoBio and Inserm Transfert Initiative. www.enyopharma.com

PlayVS, a Los Angeles-based developer of online and offline infrastructure for high school e-sports, raised $15 million in Series A funding. NEA led, and was joined by Science Inc., CrossCut Venturess, Cross Culture Ventures, funds affiliated with the SF 49ers and individual angels like Nas and Russell Okung. http://axios.link/8xxA

FinCompare, a German comparison platform for SME financing, raised €10 million in Series A funding. ING Ventures led, and was joined by return backers Speedinvest and UNIQA Ventures. http://axios.link/aYgK

Boxbot, an Oakland-based developer of self-driving delivery vehicle, raised $7.5 million in seed funding. Artiman Ventures led, and was joined by Toyota AI Ventures, Afore Capital, Pear Ventures, Ironfire Ventures and The House Fund. www.boxbot.io

Systum, a San Francisco-based digital operating platform for SMEs, raised $7.5 million in Series A funding from Underscore.vc and Hearst Ventures. www.systum.com

Locus, an Indian logistics mapping startup, raised $4 million in new funding from Rocketship.vc, Recruit Strategic Partners, pi Ventures, Blume Ventures, Exfinity Venture Partners, BeeNext and growX. http://axios.link/Hh9N

Chainvine, a London-based provider of white-label platform for enterprise blockchains, raised £2.5 million in Series A funding led by Deepbridge Capital. www.chainvine.com

Private Equity Deals

Accuride, an Indiana-based portfolio company of Crestview Partners, has acquired Wheels, a German provider of steel wheels to the European and Asian markets.

Alteri Investors is in advanced talks to buy troubled British retailer Poundworld from TPG Capital, per Sky News. http://axios.link/uB3e

🚑 Gryphon Investors acquired a majority stake in Water’s Edge, a provider of over 30 dermatology clinics in Florida. www.wederm.com

Interior Logic Group, an Atlanta-based portfolio company of Littlejohn & Co., is merging with Interior Specialists, a Carlsbad, Calif.-based portfolio company of Platinum Equity. The companies provide installation services to homebuilders, multifamily owners and big box retailers.

Harvest Partners has acquired Dwyer Group, a Waco, Texas-based provider of commercial and residential restoration and cleaning services., from The Riverside Company. www.dwyergroup.com

🍩 Kohlberg & Co. has agreed to acquire the Sara Lee frozen bakery and Van’s waffle businesses from Tyson Foods (NYSE: TSN). http://axios.link/BVQu

Pacific Equity Partners is in talks to buy Device Technologies, an Australian medical equipment company owned by Pemba Capital, per The Australian. A deal could be valued at around A$700 million. www.device.com.au

Warburg Pincus has agreed to invest in Reorg Research, a New York-based provider of news and analysis on issues affecting the distressed debt, event-driven and leveraged finance markets. www.reorg-research.com

Wheel Pros, a Lakewood, Colo.-based portfolio company of Clearlake Capital, has acquired Amcor Industries (dba Gorilla Auto Products), a Los Angeles-based designer and distributor of branded automotive aftermarket lug nuts and wheel locks. www.gorilla-auto.com

Public Offerings

Two companies plan to IPO this week: M17 Entertainment (Taiwan-based live-streaming) and MeiraGTx (NYC-based gene therapy). http://axios.link/pJc4

⛽ AFG Holdings, a Houston-based provider of pressure pumping and managed pressure drilling systems, has filed for a $100 million IPO. It plans to trade on the NYSE (AFGL) with Goldman Sachs as lead underwriter. Backers include The Carlyle Group, First Reserve and Stellex Capital Partners. The company reports $7.5 million of net income on $170 million in revenue for Q1.

Avalara, a Seattle-based provider of transaction tax compliance software, set IPO terms to 7.5 million shares at $19-$21. It plans to trade on the NYSE (AVLR) with Goldman Sachs as lead underwriter. It reports a $15 million net loss on $61 million in revenue for Q1, and raised nearly $400 million from firms like Sageview (27.1% stake), Warburg Pincus (27.1%) and Battery Ventures (9.9%). www.avalara.com

EverQuote Inc., a Cambridge, Mass.-based insurance marketplace, filed for a $75 million IPO. It plans to trade on the NYSE (EVER), with J.P. Morgan as lead underwriter. The company reports a $1 million net loss on $40 million in revenue for Q1, and has raised over $37 million in VC funding from firms like Link Ventures, Savano Capital, Stratim Capital, Oceanic Partners and T Capital Partners. www.everquote.com

🚑 Forty Seven, a Menlo Park, Calif.-based developer of monoclonal antibodies for cancer, filed for a $115 million IPO. It plans to trade on the Nasdaq (FTSV) with Morgan Stanley as lead underwriter. The pre-revenue company has raised around $150 million in VC funding from firms like Lightspeed Venture Partners (16.8% pre-IPO stake), Sutter Hill Ventures (16.8%), Clarus Ventures (15.8%), Wellington Management (8.8%) and GV (6.7%). http://axios.link/HfEt

Xiaomi expects to sell around 30% of its upcoming $10 billion IPO in mainland China and the remainder in Hong Kong, per Reuters. http://axios.link/4xax

🚑 Translate Bio, a Lexington, Mass.-based developer mRNA therapeutics for cystic fibrosis, filed for a $115 million IPO. It plans to trade on the Nasdaq (TBIO) with Citi as lead underwriter. The pre-revenue company has raised around $140 million from Shire (19.6% pre-IPO stake), Fidelity (14.5%), Baupost Group (13%), Atlas Venture (11.1%), S.R. One (9.7%), Omega Funds (6.9%) and MRL Ventures 5.4%). http://axios.link/8Moq

More M&A

AccorHotels (Paris: ACCP) said that it again is looking at buying a stake in Air France KLM (Paris: AIRF). http://axios.link/HUHS

CYBG (LSE: CYBGC) has increased its all-stock takeover offer for challenger bank Virgin Money (LSE: VM) by 7%, to an enterprise value of around £1.7 billion. http://axios.link/BMYp

Education Realty Trust (NYSE: EDR), a student housing REIT with a $2.9 billion market cap, is exploring a sale, per the WSJ. http://axios.link/1aPg

UniCredit (Milan: CRDI) is exploring a merger with Societe Generale (Paris: SOGN), per the FT. http://axios.link/hZz3


White Star Capital, a London-based VC firm, raised $180 million for its second fund. http://axios.link/0u6m

It's Personnel

Susan Gentile has joined H.I.G. Capital as chief financial and administrative officer, succeeding the retiring Ruth Brophy. Gentile previously was with Oaktree Capital Group. www.higcapital.com

Matt Huang is stepping down as a partner with Sequoia Capital, in order to launch a crypto-focused fund with Coinbase co-founder Fred Ehrsam. http://axios.link/f5ho

Final Numbers
Expand chart
Data: Yahoo Finance; Chart: Axios Visuals

It's been two months since Spotify went public via a direct listing, and its stock price remains above both its reference point price and where it closed its first day of trading.

  • Bottom line: Other private tech companies were closely watching Spotify’s approach, for which price stability was a major test. It passed.

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