Jun 12, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Source: Giphy

We're just hours away from learning if the old M&A rules still stand, or if it's a brave new world where vertical vs horizontal is no longer paramount.

  • The DoJ vs. AT&T ruling is expected at around 4pm. Judge Richard Leon is said to have completed his written opinion, something he previously suggested might not be finished in time. Then AT&T will hold a press conference. Axios' David McCabe will be in the courtroom, although electronic devices must be turned off while inside.
  • Smart money is on a complex ruling, given Leon's relatively unusual decision to summon stakeholders and reporters to the courthouse.
  • If it's a clear win for AT&T, then the deal would close next week. DoJ could appeal, but would face the prospect of unwinding the completed merger. An AT&T victory also means Comcast would immediately formalize its all-cash bid for 21st Century Fox's entertainment asserts (which already have been pledged to Disney).
  • If it's a clear win for DoJ, then AT&T is likely to appeal (despite deal fatigue). If AT&T didn't appeal in this scenario, it would owe Time Warner $500 million.
  • Many legal analysts feel DoJ didn't meet its burden but, as Axios' David McCabe and Sara Fischer write: "All the DOJ needs to prove is that the merger may substantially lessen competition. The DOJ claims the merger could increase TV bills by hundreds of millions of dollars a year by 2021, though that balances out to an increase of less than $1 on a customer's monthly bill. It's up to the judge to determine whether that number is enough consumer harm to stop the deal."

Sidewalk wars: Yesterday I noted how e-scooter company Bird was raising a second tranche on top of the Sequoia-led, $150 million round at a $1 billion pre-money valuation.

Several sources tell Axios that the second tranche is designed to raise around another $200 million at a whopping $2 billion pre-money (FT has a similar report, but puts the aspirational valuation at $1.5b).

  • Bird raised its prior funding round at a $300 million pre-money just three months ago. The entire company was founded last year.
  • Bottom line: I'm just the messenger.

Revamp: Kleiner Perkins spinout G2VP, focused on green-tech, has closed its debut fund with $350 million.

  • Kia has more: Kleiner Perkins’ investments in green tech were famously a bust, but according to partner Dave Mount, G2VP will focus on the areas that did deliver strong financial returns — applications of digital tech to sustainability and heavy industry.

Swamp things: SEC Commissioner Robert Jackson is urging a review of stock buybacks — which are booming, thanks to the tax cuts — after finding that many execs are selling shares in the days after buybacks are announced: "It is troubling because it is yet another piece of evidence that executives are spending more time on short-term stock trading than long-term value creation."

  • Also: The Senate is moving to reverse Trump's $1.4 billion deal to save China's ZTE, via a provision added to a must-pass defense authorization bill.
The BFD
Source: Giphy

Stryker Corp. (NYSE: SYK) has made an unsolicited takeover approach for Boston Scientific (NYSE: BSX), according to the WSJ. Boston Scientific shares climbed 7.4% on the news, pushing its market cap up past $47 billion.

  • Why it's the BFD: Because this would be the medical device sector's largest merger of all-time, topping the 2014 tie-up of Medtronic and Covidien.
  • Bottom line: "A deal would create a company with $21.5 billion in annual sales based on 2017 results, offering a range of medical devices from knee and hip replacements to heart-valves and endoscopes. It would bring together Stryker’s expertise in orthopedics, neurotechnology and spinal procedures with Boston Scientific’s prowess in cardiovascular and so-called rhythm management." — WSJ
Venture Capital Deals

Cohesity, a San Jose, Calif.-based hyperconverged secondary storage startup, raised $250 million in Series D funding. SoftBank Vision Fund led, and was joined by Cisco Investments, HP Enterprise, Morgan Stanley Expansion Capital and return backers like Sequoia Capital. http://axios.link/CPlf

Yitu Technology, a Shanghai-based AI startup whose focus includes machine vision, raised $200 million in new Series C funding from ICBC International, SPDB International and Gaocheng Capital. http://axios.link/emvd

🚑 Humacyte, a Durham, N.C.-based tissue engineering startup focused on blood vessel replacement, has raised $150 million from Germany’s Fresenius Medical, as part of a broader strategic agreement. Humacyte previously raised around $290 million. http://axios.link/ogz7

Claroty, a New York-based provider of cybersecurity solutions for industrial control networks, raised $60 million in Series B funding. Temasek led, and was joined by Rockwell Automation, Aster Capital, Envision Ventures, Next47, Tekfen Ventures and return backers Team8, Bessemer Venture Partners, Innovation Endeavors and ICV. http://axios.link/B1Fb

🚑 Juvenescence, an anti-aging startup based in the British Isles, says it raised $50 million in Series A funding from undisclosed investors. http://axios.link/raGv

Pharmapacks, an Islandia, N.Y.-based online health and beauty marketplace, raised $32.5 million in new funding. RB (LSE: RB) led, and was joined by McKesson Ventures, Sealed Air and The Emerson Group. www.pharmapacks.com

HipCamp, an online marketplace for privately-held campsites, raised $9.5 million in Series A funding led by Benchmark. http://axios.link/7x10

PolyCera Membranes, a Los Angeles-based developer of membrane tech for industrial wastewater treatment and process separation, raised $9 million in Series A funding. Kairos Ventures led and was joined by existing backers Bluestem Capital and Wolfen Group. www.polyceramembranes.com

Prohbtd, a cannabis-focused digital content startup, raised $8 million in Series A funding from Serruya Private Equity, The Delavaco Group and Cresco Capital. http://axios.link/YJYA

Metaboards, a British developer of wireless charging technology, raised $5 million in VC funding. Oxford Sciences Innovation led, and was joined by RT Capital Management and Woodford Investment Management. http://axios.link/Fqvh

Eventador.io, an Austin-based stream-processing-as-a-service startup, raised $3.8 million in seed funding led by LiveOak Venture Partners. www.eventador.io

Private Equity Deals

CVC Capital Partners is investing around $150 million into Indonesian snack-maker PT GarudaFood Putra Putri Jaya, which is considering an IPO, according to Bloomberg. http://axios.link/3sGH

Deutsche Beteiligungs has agreed to acquire a majority stake in Karl Eugen Fischer, a German maker of cord-cutting machines for the tire industry, from Equistone. www.kefischer.de

🚑 FairWarning, a Clearwater, Fla.-based provider of cross-platform healthcare privacy auditing software, raised $60 million in growth equity funding from Mainsail Partners. http://axios.link/EzQ8

Marlin Equity Partners has acquired and merged BulkTV (Raleigh, NC) and DCI (Syosset, NY), two providers of television and network connectivity solutions to the lodging and institutions industries. http://axios.link/lC0W

Smart Care Equipment Solutions, a St. Paul, Minn.-based portfolio company of Audax Group, has acquired Restaurant Equipment Maintenance Corp., a Pelham, Ala.-based restaurant equipment parts and repair company. www.smartcaresolutions.com

Public Offerings

🚑 Aptinyx, an Evanston, Ill.-based developer of therapeutics for treating neurologic disorders, set IPO terms to 5.3 million shares at $14-$16. It would have a fully diluted market value of $509 million, were it to price in the middle. The company plans to trade on the Nasdaq (APTX) with J.P. Morgan as lead underwriter, and has raised around $135 million in VC funding, from firms like Adams Street Partners (14.85% pre-IPO stake), New Leaf Ventures (11.63%), Longitude Venture Partners (11.63%), Frazier Life Sciences (11.63%), Bain Capital Life Sciences (6.98%) and LVP Life Science Ventures (5.71%). www.aptinyx.com

🚑 Avrobio, a Cambridge, Mass.-based gene therapy company, set IPO terms to 4.4 million shares at $16-$18. It would have a fully diluted market value of $405 million, were it to price in the middle. The pre-revenue company plans to trade on the Nasdaq (AVRO) with Morgan Stanley as lead underwriter, and has raised around $87 million from firms like Atlas Venture (27% pre-IPO stake), Claris Ventures (17%), SV Life Sciences (15%) and Cormorant (8%). www.avrobio.com

i3 Verticals, a Nashville-based provider of payment processing solutions to SMBs, set IPO terms to 6.7 million shares at $11-$14. It would have a fully diluted market value of $307 million, were it to price in the middle. The company plans to trade on the Nasdaq (IIIV), with Cowen & Co. as lead underwriter. Shareholders include First Avenue Partners and Harbert Management. www.i3verticals.com

🚑 Xeris Pharma, a Chicago-based developer of injectable hypoglycemia treatments, set IPO terms to 5 million shares at $14-$16. It would have a fully diluted market value of $315 million, were it to price in the middle. The pre-revenue company plans to trade on the Nasdaq (XERS) with Jefferies as lead underwriter, and has raised $145 million from firms like Palmetto Partners (13.88% pre-IPO stake), Deerfield Management (12.32%), Redmile Group (12.3%) and Mérieux (6.18%). www.xerispharma.com

Liquidity Events

Blue Sage Capital sold MAC, a Maryville, Tenn.-based maker of custom tower and canvas products for the marine market, to Patrick Industries (Nasdaq: PATK). www.marine-accessories.com

Smart Global (Nasdaq: SGH) has agreed to acquire Penguin Computing, a Fremont, Calif.-based provider of specialty compute and storage solutions, for up to $85 million. Penguin had raised over $50 million in VC funding from firms like Signal Peak Ventures, San Francisco Equity Partners, Weber Capital Management, Partners for Growth and Convergence Partners. www.penguincomputing.com

• Warburg Pincus agreed to sell FacilitySource, a Columbus, Ohio-based provider of procurement and facilities management solutions, to CBRE (NYDSE: CBRE) for $290 million in cash.

More M&A

Gebr Knauf of Germany has agreed to acquire Chicago-based sheetrock maker USG Corp. (NYSE: USG) for $7 billion in cash, or $44 per share. Sellers will include Berkshire Hathaway (31% stake). http://axios.link/uAFJ

Neuberger Berman is in talks to invest $100 million for a 25% stake in Brazilian distance learning company Uniasselvi, per Reuters. http://axios.link/mrfD

Rockwell Automation (NYSE: ROK) is paying $1 billion for an 8.4% stake in manufacturing software company PTC (Nasdaq: PTC). http://axios.link/LNKs

Weatherford International (NYSE: WFT) is considering a sale process for its lab business, per Bloomberg. http://axios.link/8jsy

Xiamen Unigroup Xue, Shenzhen-listed education services company controlled by Tsinghua University, has agreed to buy Chinese aluminum smelter Tianshan Aluminum for around $3.7 billion. http://axios.link/SZl6

Fundraising

Foundry.ai, a Washington, D.C.-based firm led by Jim Manzi (ex-Applied Predictive Technologies) and Edward Brody (ex-Yahoo), raised around $68 million for its debut fund, per an SEC filing.

Otherwise Fund, a new venture firm led by Terrence Rohan (ex-head of Index Ventures’ seed program), is raising $90 million for its debut fund, per an SEC filing.

TPG is raising $1.5 billion for a fund that would buy up direct secondaries in unicorn-type startups from early employees and shareholders, per Bloomberg. http://axios.link/Kcrl

It's Personnel

Eduardo Cepeda, J.P. Morgan’s head of Mexico investment banking, is the subject of a Mexican arrest warrant related to alleged loan fraud. http://axios.link/wE2u

John Adam Kanas, chairman of BankUnited, has joined The Carlyle Group as a senior advisor and vice chair of the firm’s financial services private equity group. www.carlyle.com

⛽ Mark Sooby and Harris Ghozali are joining Lazard as managing directors focused on oil and gas sector investment banking. They previously were with Deutsche Bank. www.lazard.com

🚑 Robert Steininger has stepped down as RBC’s head of healthcare investment banking, per Bloomberg. http://axios.link/xUut

Final Numbers: World Cup equities
  • World Cup host nation equities usually outperform in the run-up to the tourney, but then slip once things kick off, according to an analysis by HSBC.
  • More from HSBC: "Russian equities appear to be following the usual pattern, outperforming 15% in local currency terms over the past 12 months, but fading recently on rising geopolitical risk and broader EM concern."
Dan Primack

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