Nov 1, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Eniola Odetunde/Axios

Bernie Sanders last night tweeted support for the Deadspin journalists who resigned en masse, in protest of a management edict that their coverage stick exclusively to sports:

"I stand with the former Deadspin workers who decided not to bow to the greed of private equity vultures... This is the kind of greed that is destroying journalism across the country, and together we are going to take them on."

Three thoughts:

1. Sanders shouldn't mistake incompetence for greed.

All indications are that private equity firm Great Hill Partners either didn't understand what it bought, or believed it bought something more malleable than it really was.

  • It didn't fire the staffers. Instead, Great Hill seemed to think that they'd grumble and then do as told. Now it's left with a ghost ship.

2. Great Hill is hardly the first to flail with this prickly pack of media assets, which were originally part of the Gawker bankruptcy before spending time under the Univision umbrella.

  • But, unlike when Great Hill shut down left-wing news site Splinter last month, this wasn't an intentional game-plan born of cratering traffic. Not surprisingly, it's not returning my calls this time around.

3. Not sure what Sanders means by "take them on."

  • As we noted when Elizabeth Warren criticized the Splinter situation, Great Hill didn't use any debt on what it calls G/O Media. So changing leverage liability rules wouldn't help.
  • And changing carried interest tax treatment, via equalizing capital gains and ordinary income rates, also wouldn't have much impact, given that it's hard to see how profits will be enabled by this mess.

The bottom line, from Axios Sports' Kendall Baker:

"As someone whose job is to highlight the best sports content on the internet, this stinks. Deadspin has played a vital role in the media landscape for years and has published some of the best freelance writing anywhere online. It also stood for something, and you saw that this week, as a bunch of people — many of whom probably can't afford to be unemployed — took down their own publication over perceived journalistic/moral differences with their bosses."

Situational awareness: Google just made it official, agreeing to buy Fitbit for around $2.1 billion.

  • The $7.35 per share price is higher than where Fitbit has traded since late 2016, but a far cry from its post-IPO days in the $40s.
  • Fitbit says: "The company never sells personal information, and Fitbit health and wellness data will not be used for Google ads."
  • What Fitbit doesn't say: "Google sees you when you're sleeping. It knows when you're awake. It knows if you've been bad or good, so be creeped out for goodness sake."

🎧 Pro Rata Podcast digs into Twitter's decision to ban political ads, while poking Facebook in the process. Listen here.


Illustration: Rebecca Zisser/Axios

Marathon Petroleum (NYSE: MPC) yesterday buckled to pressure from activist investor Elliott Management, agreeing to spin off its Speedway gas station unit and find a new CEO.

  • Why it's the BFD: Marathon is the largest U.S. oil refiner by capacity, and Speedway could be valued at between $15 billion and $18 billion.
  • Bottom line: It's yet another case of Elliott mostly getting what it wants. And, like with AT&T earlier this week, not having to agree to a standstill agreement. Elliott began agitating against Marathon three years ago, and reemerged last month with a request for management changes and the company to split up its retail, refinery, and pipeline businesses (two out of three ain't bad).
Venture Capital Deals

Paidy, a Japanese provider of instant credit to consumers, raised $83 million in Series C funding from PayPal Ventures, Soros Capital Management, JS Capital Management and Tybourne Capital Management. The company also secured $60 million in new debt financing.

Casstime, a Chinese auto aftermarket procurement platform, raised $80 million in Series C-1 funding. Sequoia Capital China and Source Code Capital co-led, and were joined by return backer Hua Partners.

📺 OZY Media, a media and entertainment company led by Carlos Watson, raised $35 million in Series C funding. Marc Lasry led, and was joined by Interlock Partners, LionTree, Atinum Investment, GSV Capital, Axel Springer, Emerson Collective, and three partners of Clayton, Dubilier & Rice.

Modus, a Seattle-based provider of home-closing software, raised $12.5 million co-led by NFX and Felicis Ventures.

Mainline, a Houston-based provider of e-sports tournament software, raised $6.8 million in Series A funding led by Work America Capital.

Forecast, a Denmark-based project management software startup, raised $5.5 million. Crane Venture Partners led, and was joined by Seed Capital and Heartcore.

Accusonus, a Greek AI startup that helps video creators improve their audio, raised $3.3 million in Series A funding led by Venture Friends.

Private Equity Deals

🚑 Arsenal Capital Partners acquired the healthcare packaging unit of Swiss chemicals company Clariant (SWX: CLN), and renamed it Airnov.

CI Capital Partners acquired WTS International, a Rockville, Md.-based spa design and management firm.

CVC Capital Partners completed its purchase of Ontic, a Chatsworth, Calif.-based provider of OEM-licensed parts for aerospace platforms, from BBA Aviation (LSE: BBA).

Eurazeo invested $60 million for a minority stake in Herschel, a Canadian backpack maker, alongside co-investors Alliance Consumer Growth and Healthcare of Ontario Pension Plan.

NGL Energy Partners acquired Hillstone, a provider of water pipeline and disposal infrastructure solutions to the oil and gas industry, from Golden Gate Capital for $600 million.

Source Code, a Waltham, Mass.-based portfolio company of JMC Capital Partners, acquired Broadberry, a London-based provider of storage server solutions.

Public Offerings

Ehang, a Chinese maker of commercial drones, filed for a $100 million IPO. It plans to trade on the Nasdaq (EH) with Morgan Stanley and Credit Suisse as lead underwriters. The company reports a $5.5 million net loss on $4.7 million in revenue for the first half of 2019, and raised over $50 million in VC funding from firms like GGV Capital (10.8% pre-IPO stake) and Zhen Partners (7.6%).

🚑 Oyster Point Pharma, a San Francisco-based developer of dry eye therapies, raised $80 million in its IPO. The pre-revenue company priced 5 million shares at $16 (low end of range), for an initial market cap of $330 million. It will trade on the Nasdaq (OYST), used JPMorgan as lead underwriter, and had raised around $120 million in VC funding from firms like NEA (32% pre-IPO stake), Versant Ventures (30%), and Invus (11.8%).

🚑 RAPT Therapeutics, a South San Francisco-based developer of cancer and inflammatory disease therapies, raised $36 million in its IPO. The pre-revenue company priced 3 million shares at $12 (low end of range), for a fully-diluted market value of $262 million, and will trade on the Nasdaq (RAPT) with BAML as lead underwriter. It had raised around $175 million in VC funding from firms like The Column Group (33.4% pre-IPO stake), Kleiner Perkins (19.3%), Topspin (11.7%), and UC Regents (7.3%).

Steinhoff International (JSE: SNH) is considering an IPO for Pepco Group, which could value the European retailer north of €4 billion, per Bloomberg.

Liquidity Events

Bain Capital and Vista Equity are considering a sale process for Vertafore, a Denver-based insurance software company that could fetch around $5 billion, per Bloomberg.

Bain Capital hired Financoto to find a buyer for Los Angeles-based Toms Shoes, which has a $290 million leveraged loan coming due next October, per Bloomberg.

More M&A

🚑 AmGen (Nasdaq: AMGN) agreed to acquire a 20.5% stake in Chinese drugmaker BeiGene (HK: 6160), for around $2.7 billion in cash.

China Investment Corp. is considering a sale of all or part of its 15% stake in German highway rest-stop chain Autobahn Tank & Rast, which could have an enterprise value of around €5 billion, per Bloomberg.

Ladenburg Thalmann (AMEX: LTS), a Miami-based wealth management firm with a market cap of around $340 million, hired Jefferies to explore takeover offers, per Barron’s.

Taste Holdings (JSE: TASJ) of South Africa said it would exit the food business to focus exclusively on luxury retail. Its already sold its 13 Starbucks stores, and now will seek to sell its Domino’s franchises.


🚑 Foresite Capital, a life sciences-focused VC firm, launched an incubator for startups at the intersection of healthcare and data science.

Peak Ventures, a Utah-based early-stage VC firm, has rebranded as Album VC and raised $75 million for its third fund.

It's Personnel

Kirsten Lapham joined law firm Proskauer as a London-based partner in its private equity funds practice, focused on regulation. She previously was with Ropes & Gray.

Final Numbers
Expand chart
Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. economy added 128k jobs in October, topping analyst estimates.

  • Expectations were lower, in part, because of the General Motors strike.
  • August and September revisions added 95k jobs.
  • Unemployment rose from 3.5% to 3.6%.
  • Labor force participation at 63.3%.
  • Average hourly earnings up 0.1%. Year-over-year is +3%.
  • Food and beverage added the most employees (48k). The biggest losses were in manufacturing (-36k), in part due to GM strike, and federal government (-17k), due to temp census workers ending their tasks.
Dan Primack

🙏 Thanks for reading Axios Pro Rata! Please ask your friends, colleagues, and gas jockeys to sign up.