Axios Pro Rata

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November 10, 2017

Top of the Morning

We spent a lot of time over the summer talking about changing views toward antitrust policy, and how rules written to handle railroads and steel-makers may not adequately apply in the Internet Age. This anachronism came up a lot during yesterday's DealBook conference, particularly in regards to the pending AT&T-Time Warner merger. In short: AT&T doesn't believe the deal will make it an unbeatable behemoth, so much as it hopes it will help it compete with new, larger-scale rivals like Amazon and Facebook.

  • Mark Cuban said Facebook had approached him to participate in a new program, and used "an audience of two billion" as a selling point.
  • There were reports yesterday about renewed talks between Disney and 21st Century Fox, but it's hard to imagine the two sides can strike an agreement before knowing what happens between AT&T and the DoJ.
  • AT&T CEO Randall Stephenson reiterated to conference attendees that he never offered to sell CNN as a condition for Time Warner deal approval, nor was he asked. He declined to comment on a similar question about DirecTV, nor did he explicitly say whether or not regulators asked him to divest Turner (although he said he wouldn't do it). Full roundup of Stephenson's comments.

• Tax talk: Senate Republicans kinda-sorta released their tax plan yesterday, with a giant white paper rather than actual legislative text. Highlights:

  • There is no mention of carried interest, although expectations are it will be dealt with in an amendment (as happened in the House).
  • One-year phase-in of the 20% corporate rate (i.e., 2018 statutory rates would remain unchanged).
  • Limit on corporate interest deductibility to 30% of adjusted taxable income (similar to House plan, minus real estate and small biz carve-outs). Unlike House plan, companies could indefinitely carry forward interest not allowed as a deduction.
  • Accumulated offshore earnings of multinationals would be taxed at 10% for cash holdings and 5% for non-cash holdings (lower than House proposals of 14% and 7%).
  • No new rules on municipal bonds to finance stadiums and other facilities used by pro sports teams.

• Moving on: Jeremy Conrad, co-founder of hardware-focused VC firm Lemnos, is stepping down as a general partner to launch a robotics company with a former Apple iPad engineer. Kia has details.

• All hail breaks loose: Also on the DealBook program yesterday was new Uber CEO Dara Khosrowshahi, who said the SoftBank transaction "hasn't happened yet but it will."

  • Bottom line: Dara hit it out of the ballpark, satisfying both the conference audience and the various constituencies back home (plus in the room, as Benchmark's Bill Gurley was in attendance). Measured, confident and steadfast in the mission. Roundup of his comments here.
  • But... that was before a British tribunal ruled that Uber's drivers should be treated as employees.

• Where in the world? Next Tuesday I'll be interviewing Kim Posnett, global head of Internet banking at Goldman Sachs, at the Virtuous Circle Summit in San Francisco. Her recent deals have included the CarGurus IPO and some under-the-radar transaction between Amazon and Whole Foods. Hope to see you there.

• Have a great weekend and Veterans Day. Go Pats!


Toutiao, a Chinese personalized news app, has agreed to acquire lip-sync app No financial terms were disclosed, but word is the price-tag was between $800 million and $1 billion, via a mixture of cash and stock.

  • Why it's the BFD: Beyond the fact that a VC-backed company is paying unicorn prices for another VC-backed company that has a demographic shelf life? Okay, how about because this deal was actually competitive, and helps Toutiao play offense against the Chinese tech trinity — Alibaba, Baidu and Tencent — that is trying to eat into its core business.
  • Cap tables: had raised around $116 million from GGV Capital, Qiming Venture Partners, Greylock and DCM Ventures. The most recent round, in May 2016, put the post-money valuation at around $500 million. On the buy-side, Toutiao reportedly is raising new funding at around $20 billion valuation. Existing backers include Sequoia Capital China and CCB International.
  • Bottom line: "Think of [] as a mixture of Vine, Snapchat, and Dubsmash — users, or "musers" as they're called, can record 15-second music videos of their favorite songs, and share them in a totally new social space. When editing, musers can play with the speed of the video, add filters, and elect to play the video backwards." — Kate Dwyer, Teen Vogue

Venture Capital Deals

🚑 Welkin Health, a San Francisco-based digital platform for medical case management, has raised $8 million in Series A funding led by Thrive Capital.

• ScaleFactor, an Austin, Texas-based business finance and accounting platform, has raised $2.5 million in seed funding from Next Coast Ventures, Techstars Ventures, Firebrand Ventures, Matchstick Ventures, Edison Factory and Flyover Capital.

• Milk Bar, a New York-based bakery and dessert brand, has raised an undisclosed amount of Series A funding from RSE Ventures.

• ScoreStream, a Del Mar, Calif.-based crowdsourcing platform for capturing and syndicating local sports content, has raised an undisclosed amount of funding from Intel Capital, Avalon Ventures, Sinclair Broadcasting, R/GA and Verizon Ventures.

Private Equity Deals

• The Blackstone Group has agreed to buy Chinese cosmetics packaging company ShyaHsin Packaging for between $800 million and $900 million, according to Reuters.

• Elite SEM, a New York-based digital marketing agency owned by Mountaingate Capital, has acquired Boston-based social advertising agency OrionCKB.

• Eurazeo and Primavera Capital Group have agreed to invest in WorldStrides, a Charlottesville, Va.-based student travel company.

• Blue Sea Capital has acquired RESA Power, a Houston-based provider of electrical life extension products and services, from Audax Private Equity.

• Standard Chartered Private Equity has made a non-binding offer to buy shares in Singapore-based crane supplier Tat Hong Holdings (SI: TAT), at a 9% premium to Thursday's closing share price.

• Silver Lake and LinkedIn are investing a combined $300 million into talent management software company Cornerstone OnDemand (Nasdaq: CSOD), via convertible notes that have a $42 per share conversion price (compared to $37.60 closing price on Wednesday).

Public Offerings

🚑 Apellis Pharmaceuticals, a Crestwood, Ky.-based, raised $150 million in its IPO. The pre-revenue company priced 10.7 million shares at $14 (middle of range), for a fully-diluted market cap of around $750 million. It will trade on the Nasdaq under ticker APLS, while Citi served as lead underwriter. Shareholders include Morningside Ventures (28% pre-IPO stake) and VenBio (9%).

🚑 Entera Bio, an Israeli developer of oral drugs for treating a thyroid condition and osteoporosis, has filed for a $50 million IPO. The pre-revenue company plans to trade on the Nasdaq under ticker symbol ENTX, with Oppenheim & Co. serving as lead underwriter. Shareholders include Pontifax Venture Capital (8.9% pre-IPO stake) amd David Bonderman.

• Luther Burbank, a Santa Rosa, Calif.-based commercial bank focused on residential loans, has filed for a $150 million IPO. It plans to trade on the Nasdaq under ticker symbol LBC, with Keefe, Bruyette & Woodsaqnd Sandler O'Neill serving as lead underwriters.

🚑 Quanterix, a Lexington, Mass.-based company that digitizes biomarker analysis, has filed for a $57.5 million IPO. It plans to trade on the Nasdaq under ticker symbol QTRX, with J.P. Morgan and Leerink Partners serving as lead underwriters. The company reports $16 million in revenue for the first nine months of 2017, and has raised nearly $100 million from firms like Arch Venture Partners (21.8% pre-IPO stake), Bain Capital Ventures (12.7%), BioMerieux (12.2%), Flagship Ventures (12.1%), Cormorant (5%) and T. Rowe Price.

Liquidity Events

🚑 The Carlyle Group is exploring a sale or IPO of Ortho-Clinical Diagnostics, a Raritan, N.J.-based diagnostics company that could be valued north of $7 billion (including debt), according to Reuters.

• Continental AG of Germany has agreed to acquire Argus Cyber Security, an Israeli developer of technology to prevent connected cars from being hacked. No financial terms were disclosed, but earlier reports but the price-tag at around $400 million. Argus had raised around $30 million in VC funding from firms like Magma Venture Partners, Vertex Ventures Israel, SBI Holdings and Allianz Ventures.

🚑 Sanofi (Paris: SAN) has committed up to $805 million (including $40m upfront) to license a multiple sclerosis drug from Principia Biopharma, a South San Francisco-based startup that has raised around $100 million from firms like New Leaf Venture Partners, OrbiMed, SR One and Mission Bay Capital.

More M&A

• Shandong Ruyi International Fashion of China has agreed to acquire over a 51% equity stake in menswear company Trinity Ltd. (HK: 0891) for around $285 million.

• SIX Group, the Swiss stock exchange operator, says that it would listen to offers for a majority stake in its card payments unit, which could be worth upwards of $2 billion.


• 1984 Ventures, a San Francisco-based VC effort led by founder Ramy Adeeb, is raising $75 million for its debut fund, per an SEC filing.

• Baring Private Equity Asia is targeting $6 billion for its seventh fund, according to Reuters.

• Nazir Razak, chairman of Malaysian bank CIMB Group and brother of Malaysia's prime minister, is raising up to $1 billion for a new regional private equity fund, according to Bloomberg.

🚑 Partners HealthCare System, has raised $171 million for a VC fund focused on early-stage life science companies. Limited partners include Eli Lilly, Astellas Pharma, ShangPharma and Simcere Pharmaceutical.

It's Personnel

• John Bernstein is stepping down as co-head of General Atlantic's operations for EMEA, but will remain with the private equity firm, according to Private Equity News.

• Winnie Wutte has left KKR, where she was a member of the firm's European fundraising team (which is gearing up for a new effort), according to Private Equity News. She had been with KKR since 2008.

Final Numbers

QE2Much? No, you're not reading that wrong. The size of Bank of Japan's assets under management is fast approaching Japan's GDP, as BoJ has spent more than a year buying up government debt (primarily to meet a 2% inflation target).

We don't yet have Q3 GDP numbers, but BoJ assets continued to grow between July and September — causing local economists to worry about what happens when long-term interest rates eventually begin to rise, lowering the value of the central bank's holdings but spiking its interest rate payments.