Jan 25, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the home office. Thanks for reading, and please me sure to send me scoop and feedback at dan@axios.com, or via my anonymous tip box at http://axios.com/tips. Here we go...

Top of the Morning

Illustration: Rebecca Zisser/Axios

U.S. energy production has surged thanks to the fracking boom, but that isn't necessarily translating into windfalls for private equity firms that plunged late into shale patches. In short, there may be too many privately-held drillers and new cash constraints on publicly-held drillers, thus depressing exit opportunities.

  • That was the message this week at a conference in Houston, where Bloomberg reports that investors are "holding [shale assets] for longer, lowering their expectations for returns and seeking mergers for their portfolio companies because of a lack of cash buyers."
  • Or, as Kayne Anderson managing partner Chuck Yates put it: “How many versions of ‘crap’ can we come up with to talk about the [acquisitions and divestitures] market? It’s just horrible. It’s terrible out there.”
  • Continental Resources’ Harold Hamm adds that 2019 shale growth could be cut in half, year-over-year.
  • Caveats, per Axios energy reporter Ben Geman: "Behemoths like Exxon and BP have increased their shale holdings, so it’s less privately held than it once was. Plus, large-scale, multi-billion dollar M&A activity was pretty robust last year, with deals like Diamondback/Energen, Concho/RSP Permian and EQT/Rice Energy."

Friday morning QB: Snap closed trading yesterday with a market cap just below $8 billion. Quick reminder that CEO Evan Spiegel turned down a $3 billion takeover offer from Facebook in 2013, but also around a $30 billion takeover approach from Google in late 2016/early 2017.

  • The IPO price was $17 per share. Yesterday's closing price was $6.18, although that's off its all-time low of $4.99 (set last month).

Toy story: Some ex-Toys "R" Us execs, including its former chief merchandiser, are planning a possible brand revival, per the NY Post's Lisa Fickenscher. They already got ownership rights to the Toys "R" Us and Babies "R" Us brands, plus the retailer's Geoffrey the Giraffe mascot, via bankruptcy auctions, and are working out of the company's old Wayne, N.J. headquarters (which wasn't sold).

Burning bankruptcy: PG&E was cleared yesterday in the 2017 Tubbs fire that killed 22 people, but Axios' Courtenay Brown reports that the California utility giant still plans to file for bankruptcy protection next week.

Eat the rich: The Democratic presidential primaries may turn on tax policy and, in particular, the notion of taxing wealth.

  • Elizabeth Warren yesterday proposed a 2% tax surcharge on Americans with more than $50 million in total assets, and 3% on those with over $1 billion, although the plan isn't yet publicly fleshed-out.
  • Left-leaning economist Greg Leiserson provides a bit of a blueprint for how this might work, and told me via phone that one way to handle cash-poor "paper millionaires" could be to create a tax deferral system that isn't triggered until securities become liquid.
  • Oh, and the tax treatment of carried interest will certainly come back into focus.

🎧 Pro Rata Podcast: Our new episode focuses on the recently-arrested Rui Pinto, who has become known as the Edward Snowden of global soccer. Hacker or whistle-blower? Listen here.

The BFD
Source: Giphy

Japanese brewer Asahi Group (Tokyo: 2502) agreed to buy the British beer business of Fuller, Smith & Turner (LSE: FSTA) for approximately $327 million.

  • Why it's the BFD: Because it comes just two weeks after Japanese Prime Minister Shinzo Abe warned that a "no-deal" Brexit would severely disrupt business, and the British Parliament's subsequent move in that direction.
  • Bottom line: "Asahi’s push to expand in the U.K. runs counter to the trend among some other Japanese companies like Panasonic or Toyota, which have been shifting operations out of the U.K. or threatening to scale back if the country crashes out of the European Union without a deal." — Thomas Mulier, Bloomberg
Venture Capital Deals

Go-Jek, an Indonesia-based ride-hail company, raised $290 million of what it hopes to be a $2 billion round at a $9.5 billion valuation, per TechCrunch. Return backers include Google, Tencent and JD.com. http://axios.link/V4hN

Disco, an Austin, Texas-based legal software startup, raised $83 million in equity and debt funding. Georgian Partners led, and was joined by Bessemer Venture Partners, LiveOak Venture Partners, The Stephens Group and Comerica. http://axios.link/aq7V

The Predictive Index, a Boston-based talent optimization startup, raised $50 million from General Catalyst. www.predictiveindex.com

Jyve, a San Francisco-based platform for in-store labor, raised $35 million from SignalFire, Crosscut Ventures, Ridge Ventures and NEA. www.jyve.com

Kustomer, a New York-based customer management platform, raised $35 million in Series C funding led by Battery Ventures. http://axios.link/t33f

Memebox, a San Francisco-based K-beauty brand, raised $35 million in Series D funding led by Johnson & Johnson Development Corp. http://axios.link/Jhc8

Fernish, a subscription-based furniture rental startup, raised $30 million from RET Ventures, Techstars Investments, Jeff Wilke (Amazon) and Scott Cook (Intuit founder). http://axios.link/Ns10

Swarm Technologies, a Palo Alto-based developer of a satellite communication network, raised $25 million in Series A funding. Craft Ventures and Sky Dayton co-led, and were joined by Social Capital, 4DX Ventures and NJF Capital. http://axios.link/2XTv

Essentium, a College Station, Texas-based provider of 3D printing for industrial additive manufacturing, raised $22.2 million in Series A funding. BASF VC led, and was joined by Materialise and Genesis Park. http://axios.link/PEMT

Orchestra Software, a Portland, Ore.-based provider of EPR software to the regulated craft beverage industry, raised $14 million from Radian Capital. www.orchestrasoftware.com

7shifts, a Canadian labor management platform for restaurants, raised US$10 million in Series A funding. Napier Park led, and was joined by Teamworthy Ventures and Relay Ventures. http://axios.link/R5yH

FoodMaven, a Colorado Springs-based food-sourcing startup, raised $10 million led by Tao Capital Partners. http://axios.link/84AG

Vangst, an HR platform for the legal cannabis market, raised $10 million in Series A funding. Casa Verde Capital led, and was joined by Lerer Hippeau. http://axios.link/TGO3

Private Equity Deals

Berkshire Partners acquired a stake in Teraco, Africa's largest data center operator. http://axios.link/UZuQ

The Carlyle Group agreed to acquire a minority stake in Grupo Maduro, a casual and fast-casual restaurant operator in Brazil.

EverZinc, a Belgian portfolio company of OpenGate Capital, acquired GHC, a Canadian maker and exporter of French Process zinc oxide products. www.zincchemicals.com

Petrobras, the Brazilian energy giant, rejected the latest bid for a pair of shallow-water oil clusters from EIG Global Energy Partners, per Reuters. A deal ultimately could be worth around $1 billion. http://axios.link/Iwj0

Sentry Energy Solutions, a The Woodlands, Texas-based portfolio company of Intervale Capital, acquired Himarc, a provider of natural gas engine emissions testing and gas leak detection services. www.sentryes.com

Public Offerings
Source: Giphy
More M&A

America Movil agreed to buy Telefonica’s Guatemala business for $333 million and its El Salvador business for $315 million. http://axios.link/oeNK

Evergrande Health Industry Group (HK: 708) agreed to pay $156 million for a 58% stake in Chinese auto battery maker Shanghai CENAT New Energy Co. from Shenzhen Clou Electronics (SZSE: 002121). http://axios.link/UD0T

Mastercard (NYSE: MA) made a 233 million offer for British payments firm Earthport (AIM: EPO), which is 10% higher than an earlier bid from Visa (NYSE: V). http://axios.link/8QTS

Fundraising

Horizon Capital closed its third Ukraine-focused private equity fund with $200 million. http://axios.link/sTRS

March Capital Partners, a Santa Monica, Calif.-based VC firm, closed its second fund with $300 million. www.marchcp.com

It's Personnel

Lightyear Capital promoted Boris Rapoport and Natalie Ings to managing directors, Doug Chiciak to chief compliance officer and Jason Erlich to principal. www.lycap.com

Rory Stirling joined London-based Connect Ventures as a partner. He spent the past three years as a partner with BGF Ventures. www.connectventures.co

Final Numbers: ROI
Dan Primack