Sep 4, 2019

Axios Pro Rata

Top of the Morning

Illustration: Sarah Grillo/Axios

The National Basketball Association is considering the creation of an investment fund that would buy small equity stakes in a portfolio of teams, as first reported yesterday by Bloomberg. The NBA isn't commenting.

Why now? NBA owners are concerned that skyrocketing team prices mean that there's a limited number of individuals who could buy the next teams put up for sale. Or, as one league source put it: "There are only so many Steve Ballmers and Joe Tsais."

  • This fund could, in theory, help expand the principal buyer pool by assuming some of the new purchase prices. Particularly by introducing institutional investors that have, historically, been shunned by the NBA and other pro sports leagues.
  • It also would become a way for existing minority owners to exit, if desired. Plus perhaps set more of a market price, as opposed to the current model of "last price + 20%."

Why the NBA? Because private equity sources say basketball is generally viewed as a better investment opportunity than baseball (shrinking attendance), hockey (geographically limited), and football (liabilities). International soccer is the best comp, although the NBA is still viewed as superior because it has capped player costs.

  • I'm also told that the NBA's plan would be a formalization of an ad hoc process that investment bank Allen & Co. often does for Major League Baseball. I'm still trying to suss out more details of that relationship.

The bottom line: Being a passive sports team owner is really being the person who pays the most for good seats. But owning a portfolio could be appealing for long-term money, and it's only a matter of time before we get a league-managed or third-party fund/marketplace for these interests.


• Step in the right direction: WeWork CEO Adam Neumann has returned around $5.9 million worth of stock to the company, which he had originally received in exchange for the "we" trademarks, according to an amended IPO registration.

  • The payment was widely criticized, including in this space, and was playing into a pre-IPO narrative that WeWork's corporate governance was broken.
  • WeWork also disclosed that it's added Frances Frei, a Harvard Business School professor and former Uber executive, to its board.
  • WeWork did not disclosed any new IPO details. Expectations are that we should get proposed pricing terms early next week.

🍕 Patrick Doyle, who stepped down as CEO of Domino's Pizza in June 2018, has joined The Carlyle Group. This is a full-time "executive partner" position, in which he'll work to identity and invest in retail and consumer brands in need of "tech transformation." Enterprise values of up to $10 billion.

  • Don't be surprised to see Doyle join portfolio company boards, perhaps in chairman roles.

🙋‍♂️ Former U.S. Defense Secretary Jim Mattis is making the media rounds this week, promoting a new book. I know it's not of primary importance, but I do wish at least one interviewer would ask about his time on the Theranos board of directors. (If I missed it, please let me know.)

📰 Also on Axios: Mike Allen and I write about how the media is over-correcting for past mistakes, both in terms of the economy and elections. Dion Rabouin gives the markets bull case.

🎧 Pro Rata Podcast digs into how Trump allies are raising money to discredit reporters, editors, and social media platforms. Listen here.


Source: Giphy

Starboard Value, an activist investor, disclosed a 7.5% stake in Box (NYSE: BOX), making it the cloud content management company's third-largest shareholder.

  • Why it's the BFD: Because Box had become a Silicon Valley poster child for "good" corporate governance, last year eliminating the dual-class stock structure it had gone public with in 2015. But now Box is facing the exact scenario that dual-class structures were designed to protect against.
  • Market reax: Box shares was up 8.2% at today's market open, increasing its market cap to $2.3 billion.
  • Bottom line: "Starboard tends to agitate for changes at companies, waging proxy battles if necessary." — Avi Salzman, Barron's
Venture Capital Deals

Clio, a Vancouver-based provider of legal practice management and CRM software, raised US$250 million in Series D funding co-led by TCV and JMI Equity.

🚑 Achilles Therapeutics, a British developer of personalized cancer immunotherapies, raised £100 million in Series B funding. RA Capital Management led, and was joined by Forbion, Invus Capital, Perceptive Advisors, Redmile Group and Syncona Investment Management.

Culture Amp, a San Francisco-based HR platform, raised $82 million in Series E funding. Sequoia Capital China led, and was joined by Global Founders Capital and TDM Growth Partners and return backers Sapphire Ventures, Felicis Ventures, Index Ventures, Blackbird Ventures, Hostplus, Skip Capital, and Grok Ventures.

🚑 Ginger, a behavioral health analytics platform, raised $35 million in Series C funding. WP Global Partners led, and was joined by City Light Capital, Nimble Ventures, LinkedIn CEO Jeff Weiner, Khosla Ventures, Kaiser Permanente Ventures, and Kapor Capital.

Elliptic, a London-based provider of crypto-asset risk management solutions, raised $23 million in Series B funding. SBI Group led, and was joined by AlbionVC and return backers SignalFire, Octopus Ventures, and Santander Innoventures.

Kasisto, a New York-based digital experience platform for financial services, raised $15 million in new Series B funding. Rho Capital Partners led, and was joined by return backers Oak HC/FT, Propel Venture Partners, Two Sigma Ventures, Commerce Ventures, and the Partnership Fund for New York City.

Railsbank, a London-based open banking and compliance platform, raised $10 million in Series A funding. Moneta Capital led, and was joined by CreditEase, Clocktower Technology Ventures, Singapore Life, and Firestartr.

Edly, a New York-based income share agreement marketplace, raised an undisclosed amount of seed funding led by Mistral Venture Partners.

Private Equity Deals

AMS of Australia made a €4.3 billion counteroffer for German lighting group Osram, which is around 10% higher than a bid from Bain Capital and The Carlyle Group.

Construction Supply Group, a Houston-based construction supplies distribution company owned by The Sterling Company, acquired both Holdfast (Medway, Ohio) and Concrete Accessories & Rentals (Bozeman, Montana).

Core Industrial Partners acquired Fleco Industries, a Carrollton, Texas-based provider of lighting solutions.

🚑 Great Hill Partners invested over $80 million to acquire Pareto Health, a Philadelphia-based employee benefit group.

KKR and Vivid Seats (backed by GTCR and Vista Equity) are among likely suitors for StubHub, the ticket resale business being sold by eBay (Nasdaq: EBAY), according to Bloomberg. That tracks exactly to our reporting from five weeks ago.

🚑 Lindsay Goldberg agreed to buy Swiss pharma packaging company Bilcare Research for between €250 million and €300 million, per Reuters.

Permira agreed to acquire a majority stake in Topcast Aviation Supplies, a Hong Kong-based aircraft parts distributor.

Public Offerings

La Perla, an Italian luxury lingerie brand, plans to go public in Paris this week with a hoped-for market cap of around $520 million.

🚑 Metro Pacific Hospitals Holdings, the Philippines’ largest hospital chain, filed for an IPO.

🚑 Vir Biotechnology, a San Francisco-based developer of immunologic therapies for infectious diseases, filed for a $100 million IPO. It plans to trade on the Nasdaq (VIR) with Goldman Sachs as lead underwriter, and had raised over $560 million from firms like Arch Venture Partners (27% pre-IPO stake), SoftBank Vision Fund (21.2%), Baillie Gifford, and Alta Partners.

VkusVill, a Russian supermarket chain backed by Baring Vostok Capital Partners, is planning a U.S. IPO, per Reuters.

Liquidity Events

Antin Infrastructure Partners hired BAML and Citi to find a buyer for CATS, one of Britain’s largest gas pipelines, per Reuters. It could fetch around $1.5 billion.

Chegg (NYSE: CHGG) acquired online coding school Thinkful for $80 million in cash. Thinkful had raised around $15 million from Owl Ventures, Tribeca Venture Partners, Peter Thiel and RRE Ventures.

Navis Capital Partners is in talks to sell its stake in Singapore-based logistics firm Eng Hong Holdings to another Asia-based private equity firm, per DealStreetAsia.

More M&A

Air Canada (TSX: AC) is challenging Onex Corp’s proposed C$3.5 billion takeover of WestJet (TSX: WJA), claiming it may run afoul of Canadian ownership rules.

Ford Motor Co. (NYSE: F) reached a tentative agreement to sell its plant in Sao Bernardo do Campo to Brazilian automaker CAOA.

Premier Asset Management (LSE: PAM) agreed to an all-stock merger with rival British asset manager Miton (AIM: MGR). The combined company would have £11.5 billion in AUM.

Thomas Sullivan, founder of Lumber Liquidators (NYSE: LL), is working on a takeover bid for the company, per Bloomberg.


Atlantic Street Capital, a Stamford, Conn.-based private equity firm, raised $500 million for its fourth fund.

Ford Financial, a private equity firm focused on community banks, raised over $1 billion for its third fund.

Freeman Spogli & Co., a mid-market private equity firm, raised $1.85 billion for its eight fund.

Middleground Capital, a Kentucky-based private equity firm focused on B2B industrial and specialty distribution companies, raised $460 million for its debut fund.

It's Personnel

Adam Marchick joined Emory University’s $7 billion endowment, where he will focus on private equity and VC investments. He’s a former Bain Capital Ventures investor who later co-founded two startups and served as an executive-in-residence with The Chernin Group.

Jamie McGurk joined Coatue Management as a managing partner for private investments, per his LinkedIn page. He had spent the past seven years at Andreessen Horowitz, where he led the corporate development operating team.

Malik Nabulsi joined H.I.G. Capital as a Chicago-based vice president, per his LinkedIn page, after recently receiving his MBA from U Chicago Booth.

Michiel von Saher joined Angelo Gordon as a managing director on the firm’s European performing credit team. He previously was with PGIM Fixed Income.

Final Numbers
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Reproduced from a Wall Street Journal chart; Data: Euromonitor International; Chart: Axios Visuals

Philip Morris and Altria sharee prices have slumped since announcing merger plans last week, but Axios Markets editor Dion Rabouin says that it's not because traders are bearish on cigarettes. Instead, it's because the companies don't really play in China, where almost all of the cigarettes made and sold come from China National Tobacco, or CNTC.

  • China is the world’s largest tobacco market by far, outselling just about every other market on the planet combined, according to data from Euromonitor International.

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