Feb 19, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

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Top of the Morning

Illustration: Lazaro Gamio/Axios

Mike Calvey was an American success story in Moscow. The U.S. citizen and University of Oklahoma alum founded Baring Vostok Capital Partners in 1994, investing nearly $3 billion into local companies — including an early bet in Yandex at a valuation of just $15 million (current market cap on the Nasdaq is $10.3 billion).

Now he's in a Russian jail, as are three of his BVCP partners, on fraud charges related to what Western eyes would view as a civil shareholder dispute. More specifically, Calvey is being quarantined in a solitary cell, reportedly without any money in his "jail account" to even buy basic toiletries.

Per The Moscow Times:

The arrest of Michael Calvey sends two messages to foreign investors: The rules of the Russian business jungle apply even to those who do things by the book – and neither foreign citizenship nor a stellar investment record are grounds for an exemption. The Kremlin appears happy to underline both.

What happened: BVCP in 2010 acquired a Russian consumer bank that soon fell on hard times, eventually merging with a fellow troubled lender led by a local investor known for his government ties.

  • Things soured quickly, with Calvey accusing the investor of asset-stripping his bank prior to the merger — including via a London legal action that's now in arbitration.
  • The Russian investor, via an associate, countered by arguing that BVCP artificially inflated the value of what it contributed to the merger; and it's that accusation that resulted in Calvey's criminal arrest. Seriously.

Calvey and BVCP deny any wrongdoing, and his fellow BVCP partners remain physically in Russia. This includes Elena Ivashentseva, who originally sourced the Yandex investment, and is now co-leading the firm on an interim basis alongside Alexei Kalinin.

The bottom line is that foreign direct investment in Russia had already fallen off a cliff, and this is basically throwing an anvil on top of it. Any outside investor who considered opening the next BVCP, or even a Russian satellite fund, will now wait to see the Calvey situation resolved.

Quiz time: Can you name the well-known Silicon Valley VC who's in advanced talks to switch shops? Hint: He's a former operator who would be leaving a Sand Hill Road-based firm for one in San Francisco.

Check out this lead from today's WSJ:

The two biggest outside investors in the $100 billion Vision Fund are complaining about the high prices the fund’s manager, SoftBank Group Corp., has paid for tech companies and the control wielded by SoftBank CEO Masayoshi Son over investment decisions.

Seriously? You invested in a $100 billion private equity fund and you thought it was going to exhibit price discipline? Did you miss the part about $100 billion? And you didn't realize that Masa is the decision-maker at SoftBank? I understand that certain sovereign wealth funds object to being called "dumb money," but Saudi PIF and Mubadala are just begging for it with this...

🎧 Pro Rata Podcast: We did a special Friday episode on the Amazon/NYC debacle, which you can listen to by going here.

The BFD

Illustration: Rebecca Zisser/Axios

Navient (Nasdaq: NAVI), a Wilmington, Del.-based student loan servicer, rejected a $3.2 billion takeover offer from Canyon Capital and Platinum Equity. The $12.50 per share bid was a 6.6% premium over Friday's closing price, with the WSJ reports that Navient wants more than $15 per share.

  • Why it's the BFD: Because Navient is the subject of an early 2017 CFPB lawsuit claiming that it "illegally cheated" borrowers in a way that pushed them into default, along with other alleged malpractice. The company, of course, denies all of the charges, chalking it up to legal window dressing by the outgoing Obama administration.
  • Activism: Canyon holds a 10.38% stake in Navient (per S&P Capital IQ) and could launch a proxy fight later this month.
  • Bottom line: "One of Navient’s complaints about the offer is that it doesn’t address how to deal with the company’s lawsuits and regulatory matters. The company also said it believes the bidders don’t appear to have a plan for the roughly $10 billion of Navient’s debt that could come due in a change of control."— Cara Lombardo, WSJ
Venture Capital Deals

Ola, an Indian ride-hail company, raised $92 million from Flipkart co-founder Sachin Bansal. http://axios.link/KaMR

GoCardless, a London-based online payments company, raised $75 million in Series A funding from Adams Street Partners, GV, Salesforce Ventures, Accel, Balderton Capital, Notion Capital and Passion Capital. http://axios.link/dTFt

SendBird, a San Mateo, Calif.-based customizable chat and messaging API service, raised $52 million in Series B funding. Iconiq Capital led, and was joined by return backers Shasta Ventures, August Capital, YC and Funders Club. www.sendbird.com

🚑 Alan, a Paris-based digital health insurance startup, raised €40 million in Series B funding from backers like Index Ventures and DST Global. www.alan.eu

nsKnox, an Israeli provider of corporate payment protection solutions, raised $15 million in Series A funding. Viola Ventures and M12 co-led, and were joined by the investment arm of Israel Discount Bank. www.nsknox.com

🚑 Covera Health, a New York-based radiology diagnostics startup, raised $8.5 million in Series A funding led by Sam Zell’s Equity Group Investments. http://axios.link/fDMP

Signaturit, a Barcelona-based electronic signature startup, raised €7 million in Series A funding. 360 Capital led, and was joined by Bonsai Partners, Banco Sabadell, Faraday Venture Partners, Nero Ventures, and Bbooster Ventures. http://axios.link/9ZF4

Rowdy Mermaid Kombucha, a Boulder, Colo.-based kombucha maker, raised $3.5 million in Series A funding led by KarpReilly. www.rowdymermaid.com

HiHello, a Palo Alto-based app for digitizing business cards, raised $2.5 million in seed funding from August Capital, K9 Ventures and TenOneTen Ventures. http://axios.link/GP85

Private Equity Deals

Mercer Advisors, a portfolio company of Genstar Capital, acquired Arbor Asset Management, an Ann Arbor, Mich.-based wealth management firm with around $350 million in AUM. www.merceradvisors.com

Pearson (LSE: PSON) agreed to sell its U.S. text book unit to Nexus Capital Management for upwards of $250 million (including $25m upfront). http://axios.link/92gk

Targa Resources (NYSE: TRGP) agreed to sell a 45% stake in its North Dakota assets to GSO Capital Partners and Blackstone Tactical Opportunities for $1.6 billion. http://axios.link/Jv2Y

Public Offerings

Alight Solutions, a Lincolnshire, Ill.-based benefits administration software company owned by The Blackstone Group, filed for a $100 million IPO (Renaissance Capital estimates it will seek to raise around $750 million). The company plans to trade on the Nasdaq (ALIT) with BAML as lead underwriter, and reports a $39 million net loss on $1.73 billion in revenue for the nine months ending Sept. 30, 2018. http://axios.link/jwC7

🚑 Stealth BioTherapeutics, a Boston-based developer of drugs to treat mitochondrial dysfunction, raised $78 million in its IPO. The company priced 6.5 million shares at $12 (low end of range, and trades on the Nasdaq (MITO). Jefferies was lead underwriter. Morningside Ventures held a 98.3% pre-IPO stake.

Liquidity Events

Apple agreed to buy Pullstring, a VC-backed startup that enables the design and publishing of voice apps, Axios has learned from multiple sources. http://axios.link/ZPWX

Sorenson Capital agreed to sell Axiom Materials, a Santa Ana, Calif.-based manufacturer of composite materials, to Kordsa, a subsidiary of Turkish conglomerate Sabanci Holding. www.axiommaterials.com

More M&A

Fosun International of China offered to buy listed German clothing retailer Tom Tailor at a €96 million valuation. http://axios.link/chBn

• HNA Group of China is considering a sale process for Swiss aircraft maintenance firm SR Technics, which could be valued at between $700 million and $1 billion, per Bloomberg. http://axios.link/M0rR

Fundraising

212 held a $30 million first close for a new fund focused on VC investments in Turkish and Eastern European startups. http://axios.link/iXOH

FSI, a spinout from Italian sovereign wealth fund Fondo Strategico Italiano, raised 1.4 billion for an Italy-focused private equity fund. LPs include Temasek, Kuwait Investment Authority and Tikehau Capital. http://axios.link/OGl3

Future Ventures, the new VC firm led by Steve Jurvetson, raised $200 million for its debut fund. www.future.ventures

Growth Catalyst Partners, a Chicago-based PE firm focused on the marketing, media and biz services sectors, is raising $200 million for its debut fund, per an SEC filing. GCP was formed in 2017 by Jim TenBroek (ex-Wind Point Partners) and Scott Peters (ex-JEGI). www.growthcatalystpartners.com

Inovia Capital, a Canadian VC firm, raised US$400 million for a new growth equity fund and US$200 million for its fourth early-stage fund. www.inovia.vc

New Science Ventures of New York is raising $150 million for an opportunities fund, per an SEC filing. www.newscienceventures.com

It's Personnel

Kevin Arquit, an antitrust attorney who once worked for the FTC, is leaving Weil, Gotshal & Manges to lead the antitrust practice of Kasowitz, Benson Torres, per the NYT.

Ken Hitchner is retiring as chairman and CEO of Goldman Sachs Asia Pacific (ex-Japan), per Bloomberg. http://axios.link/abOY

Final Numbers: Corporate VC
Source: CB Insights report on corporate VC
Dan Primack