Sep 4, 2018

Axios Pro Rata

Top of the Morning

Photo by George Rose/Getty Image

During the prolonged economic recovery, we've regularly heard that private equity has disproportionately benefited from the search for yield.

Most of this has been on the debt side, evidenced by the thriving junk bond market, although it also bleeds into private equity fundraising (more cheap debt = larger PE deals = larger PE funds).

On the surface, this correlation seems steady. Rates have begun to rise and PE fundraising has cooled slightly. But many LP sources believe that the search for yield by bond buyers has been overtaken in importance by a broader search for alpha by diversified institutional investors; pointing out that some of those buyout fund commitments appear to have been redirected to growth equity (sometimes with the same managers).

Bottom line: Private equity fundraisers often rely upon past performance, but that's mostly for pitch-deck posterity. It's really more about selling the brass ring, no matter how fast the carousel is spinning. So long as the top quartile stays ahead of the S&P 500, tickets keep selling.

Wall St calendar: No IPOs are expected this week, but Renaissance Capital reports that there are 77 U.S. issuers currently on file (45 of whom have been keeping their filings current):

"This summer has been the busiest since 2014, and we... estimate that 70-90 more U.S. IPOs could raise over $20 billion by year-end."

Capitol Hill calendar: Social media gets grilled by Congress tomorrow, with Twitter CEO Jack Dorsey testifying twice, Facebook COO Sheryl Sandberg testifying once and Google execs testifying... (checks notes)... zero times.

Today in Social Capital: Two more departures to report from the troubled Silicon Valley venture firm. One is investing associate Tejinder Gill, who is heading to Collaborative Fund as a principal. The other is Alex Chee, the MessageMe co-founder who joined early last year as head of product development. No word yet on Chee's future plans.

Reading list: Bethany McLean has a new book out next week on how fracking has changed the world, including an argument that our next financial crisis could be hiding in the private equity-backed oil patch. Particularly given that many fracking companies are valued more on their acreage than on their financials (shares of dotcom-era "eyeball" metrics). Axios' Ben Geman has more.

📣 Pro Rata Podcast: On Sunday night we discussed the U.S.-China trade disputes, and this afternoon's episode will dive into Nike's deal with Colin Kaepernick. Subscribe via Apple, Google Play or other podcast platforms.


Illustration: Sarah Grillo/Axios

The Chinese government is exploring a merger of state-controlled wireless carriers China Telecom (HK: 728) and China Unicom (HK: 762), according to Bloomberg.

  • Why it's the BFD: Because this is all about the race to 5G, and China wanting to ensure it can keep pace with the U.S. on technological innovation.
  • Market reax: Shares of both companies surged on the report, despite saying that they haven't yet been informed of any merger discussions.
  • Bottom line: "5G success is one of the most important goals to China and the merger is the perfect solution to what China wants to achieve... As we head into another step up in the U.S.-China trade war, we believe the State Council would be more eager to think fresh and more radically about how to accelerate 5G rollout." — Edison Lee, analyst with Jefferies Hong Kong, to Bloomberg
Venture Capital Deals

Udaan, an Indian B2B e-commerce platform, raised $225 million in Series C funding co-led by DST Global and Lightspeed Venture Partners.

🚑 Evox Therapeutics, a UK-based exosome therapeutics company, raised £35.5 million in Series B funding. Redmile Group led, and was joined by GV, Cowen Healthcare Investments, Panacea Healthcare Venture, Borealis Ventures and return backers OSI and Oxford University.

Tresorit, a Swiss-Hungarian provider of encrypted enterprise file sync and sharing solutions, raised €11.5 million in Series B funding. 3TS Capital Partners led, and was joined by PortfoLion.

Avrios, a Swiss fleet management startup, raised $14 million from backers like Notion Capital and Lakestar.

Shine, a French “bank” startup for freelance workers, raised €8 million in Series A funding led by XAnge.

🚜 Bear Flag Robotics, a Sunnyvale, Calif.-based developer of autonomous farm tractors, raised $3.5 million in seed funding led by True Ventures.

Arcade, a Dallas-based provider of gamification software for sales teams, raised $1.5 million in seed funding from ATX Seed Ventures and RevTech Ventures.

Private Equity Deals

The Hut Group, a cosmetics e-commerce company backed by KKR, bought British skincare products maker Acheson & Acheson.

PAI Partners has ended its takeover pursuit of Belgian diaper maker Ontex Group, after having a sweetened $2.7 billion offer rejected.

Public Offerings

Club Med, the vacation business owned by Fosun International, is prepping a $700 million Hong Kong IPO, per Reuters.

Funding Circle, a British P2P lender, is prepping a London IPO. Backers include Rocket Internet, Index Ventures and Baillie Gifford.

Line, a Japanese messaging app, is raising up to $1.33 billion via a convertible note offering, per Reuters.

Liulishuo, a Shanghai-based English language learning app, filed for a $100 million IPO. It plans to trade on the NYSE (LAIX), with Morgan Stanley as lead underwriter. The company reports a $28 million net loss on $35 million in revenue for H1 2018, while shareholders include IDG (13.4% pre-IPO stake), Trustbridge Partners (13.4%) and GGV Capital (11.7%).

Maoyan Weying, a Chinese movie ticket selling platform, has filed for a Hong Kong IPO that Reuters reports could target between $500 million and $1 billion.

Liquidity Events

🚑 H.I.G. Capital sold AMPAC Fine Chemicals, a Rancho Cordova, Calif.-based maker of pharma ingredients, to SK Holdings.

• Ipsy, a San Mateo, Calif.-based cosmetics subscription service, has launched a dual-track exit process, per Bloomberg, which adds that the company could fetch $2 billion in a sale. Ipsy backers include TPG Growth and Sherpa Capital.

📓 KKR and Bregal Investments agreed to sell Cognita, a UK-based education group with 68 schools in eight countries, to Switzerland’s Jacobs Holding for a reported £2 billion.

🚑 Principia Biopharma, a South San Francisco-based oncology drug developer, set IPO terms to 4.7 million shares at $15-$17 per share. It would have an initial market cap of around $339 million, were it to price in the middle. The company plans to trade on the Nasdaq (PRNB) with BoA Merrill Lynch as lead underwriter, and raised just over $100 million from Morgenthaler Ventures (16.81% pre-IPO stake), OrbiMed (16.81%), SR One (16.81%), New Leaf Ventures (16.81%), Baker Brothers (12.3%) and Sofinnova Ventures (12.3%).

• Royal Mail (LSE: RMG) agreed to buy parcel delivery company Dicom Canada from Wind Point Partners for C$360 million.

• Munich Re agreed to buy Relayr, a Berlin-based IoT middlewear platform, for $300 million. Relayr raised over $90 million from Munich Re, Deutsche Telekom, Kleiner Perkins, B37 Ventures, Purple Arch Ventures, Strawberry Creek Ventures and Rembrandt Venture Partners.

More M&A

• Abu Dhabi is considering a merger of there banks, in order to create the Gulf region’s fifth-largest lender, per Bloomberg.

🚑 Smiths Group (LSE: SMIN) rejected a sweetened £2.8 billion offer for its medical unit from ICU Medical (Nasdaq: ICUI), per Sky News.

⛽ Transocean (NYSE: RIG) agreed to buy offshore drilling contractor Ocean Rig (Nasdaq: ORIG) for $2.7 billion in cash and stock.

• Transurban Group (ASX: TCL) led a buyout of a 51% stake in Sydney’s WestConnex toll road for A$9.26 billion.

• VTB, Russia’s second largest bank, sold its New York-based business to the unit’s executives. It will be renamed Xtellus Capital Partners and continue to provide brokerage services to VTB.


Brand Foundry Ventures is raising $50 million for its third early-stage fund and up to $100 million for its first opportunities fund, per SEC filings.

It's Personnel

Daan Knottenbelt joined KKR to Palamon Capital Partners to lead coverage of EMEA financial services deals and the overall Benelux region. He previously was a partner with Palamon Capital Partners.

Emmanuel Laillier left Eurazeo to joined Paris-based Tikehau Capital as head of private equity.

Final Map

Thanks for reading. If this was forwarded to you, please subscribe at