Mar 1, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from North Carolina, where flowers are blooming and venture bankers are gathering. Before getting to the business of business, I'm pleased to announce that soon we'll be launching two new newsletters: Axios Login, focused on tech by Ina Fried, and Axios Generate, focused on energy by Ben Geman. You can sign up by going here.

Top of the Morning

• Supermarket sweep: Instacart is in advanced talks to raise around $400 million in new venture capital funding at a $3 billion valuation, per multiple sources familiar with the situation. The on-demand grocery delivery company previously was valued at around $2 billion, after having raised more than $260 million. Word is that existing shareholder Sequoia Capital will lead the new deal.

This comes shortly after a recent dust-up over altered pay for delivery workers, which one source acknowledges was an unforced error, but not one that investors apparently believe will have negative long-term consequences. Part of that confidence may be that they seem to be valuing Instacart mostly on its tight integration with retailers, rather than on its delivery model (or even its lucrative CPG partnerships). In fact, there is some talk that Instacart could someday cut the company-managed deliveries all together, allowing the retailers or third parties to handle last-mile.

Instacart declined to comment.

• Recommended reading: Uber on Monday asked for, and received, the resignation of an engineering SVP who had joined the company just weeks earlier. The reason: He had left his prior role at Google after "credible" allegations of sexual harassment (which he denies), and Uber says it was unaware of those circumstances until being informed by reporters at Recode.

Most of the coverage on this has focused, understandably, on Uber. But we were curious about Google's role, or the role of any company that effectively enables workplace carousel by alleged harassers. Kia dug in, and basically learned that the law encourages companies to keep their mouths shut, potentially putting workers at risk. Read Kia's piece here.

• Credit quote: Apollo Global Management boss Leon Black was at SuperReturns in Berlin yesterday, and said the following (per WSJ): "The terms on a lot of this debt today are similar to what they were... The Fed will raise rates, there will be more inflation, more growth, but it can only go up so much. It's also being held back by the monetary policies in the rest of the world. It can't be that big an arbitrage that's created between the rates on different continents. I think you will continue to see lower rates here in Europe. Rates will inch up in the U.S., but we may be living with the credit bubble for a while."

• Snap stuff: IPO pricing is expected to come tonight, with bankers telling just about everyone that the offering is oversubscribed and "could" price well above the listed $14-$16 range. Real question for Snap is how it will balance pricing aggression vs. pop value, and if it believes that aftermarket traders are so hungry for a big consumer tech IPO that they'll sidestep financials that don't seem to justify the valuation at $14 per share (let alone the growth cap that Facebook is trying to slap on Snap's head). As we wrote earlier: Too much will be made of tomorrow's closing price, and too little on the July 31 price, which is when most of the lockups should expire.

• BBQ update: Seems we have a lot of Pro Rata readers in Chapel Hill, since a bunch of you wrote to say that Allen & Son is closed on Tuesdays. Ended up at the original Q Shack in Durham. Delicious.

The BFD: Bike boom

Ofo, a Chinese bike-sharing service, has raised $450 million in Series D funding at a valuation north of $1 billion, according to Bloomberg. Backers include DST, Citic Private Equity, Matrix Partners, Coatue Management, Atomico and Macrolink Group.

Why it's the BFD: For starters, because it's not the only Chinese bike-sharing deal announced in the past 24 hours. Smaller rival Bluegogo announced a $58 million round led by Black Hole Capital. And that's all on top of last month's $300 million infusion for Mobike. It's a land grab reminiscent of ride-sharing, except it has driven prices so low that even Uber/Lyft/Didi/Dollar Tree would blush. Per the Bloomberg story, daily rental prices are often just 15 cents, and even that is being waived in some cases.

Bottom line: As an anonymous market tweeter noted, the bicycle in China has gone the symbol of egalitarian communism to the symbol of competitive capitalism.

Venture Capital Deals

• Ofo, a Chinese bike-sharing service, has raised $450 million in Series D funding at a valuation north of $1 billion, according to Bloomberg. Backers include DST, Citic Private Equity, Matrix Partners, Coatue Management, Atomico and Macrolink Group.

• Maihuolang, a Chinese ecommerce platform for agriculture products focused on rural communities, has raised $150 million in Series A funding from Shenzhen New Industry Venture Capital, Shenzhen Weiji Investment Company and Qianhai Great Wall Fund Administration.

• CloudMinds, a Chinese developer of cloud intelligence apps, has raised $100 million in Series A funding. No investors were disclosed, but the company previously raised $31 million in seed funding from groups like SoftBank, Hon Hai Precision Industry, Walden International and Keytone Ventures.

• Atzuche, a Chinese P2P car rental platform, has raised around $58 million in Series C funding. Backers include China Pacific Insurance, ChinaEquity Group, Hangzhou Financial Investment Group, China Securities, Matrix Partners China, Hearst Capital, and Ivy Capital.

• Bluegogo, a Chinese bike-sharing startup, has raised $58 million in new VC funding led by Black Hole Capital.

• Pypestream, a New York-based enterprise mobile messaging platform, has raised $15 million in new VC funding from Rick Braddock (ex-CEO of Priceline), The Chatterjee Group and an unidentified hedge fund.

• Medisafe, a Boston-based personalized medication management platform, has raised $14.5 million in Series B funding. Octopus Ventures led the round, and was joined by M Ventures and return backers Pitango Venture Capital, 7wire ventures, Lool Ventures, TriVentures and Qualcomm Ventures.

• Incorta, a San Mateo, Calif.-based developer of big data organization and storage solutions, has raised $10 million in new VC funding led by Google Ventures.

• WorkJam, a Montreal-based provider of hourly workforce communications software, has raised $12 million in new VC funding from Lerer Hippeau Ventures, Blumberg Capital, Founder Collective and NovelTMT.

• Belong, an India-based predictive outbound hiring platform, has raised $10 million in Series B funding. Sequoia Capital India led the round, and was joined by return backer Matrix Partners India.

• Insilico Medicine, a Baltimore-based bioinformatics company, has raised $10 million in new VC funding, per an SEC filing.

Private Equity Deals

• Apposite Capital has agreed to acquire the home healthcare brands business of Mitie (LSE: MTO) for just £2 (that's not £2 million, just £2).

• The Carlyle Group, CVC Capital Partners and KKR are among the first-round bidders for USI Insurance Services, a Valhalla, N.Y.-based insurer that is being sold by Onex Corp. for more than $4 billion, per Bloomberg.

• D's Naturals, a Denver-based developer of low-sugar protein bars and nut butters, has secured an undisclosed amount of equity funding from 2x Partners and 301 INC.

• The Hilb Group, a Richmond, Va.-based portfolio company of ABRY Partners, has acquired Charlotte, N.C.-based Charlotte Insurance and the group benefits division of Newton, Mass.-based Sapers & Wallack.

• Hygiena, a Camarillo, Calif.-based portfolio company of Warburg Pincus, has acquired DuPont Diagnostics, a provider of global food safety diagnostics, from DuPont (NYSE: DD). No financial terms were disclosed.

• KKR has completed its previously-announced purchase of 74.9% stake in the defense electronics business of Airbus (Paris: AIR) for approximately €1.1 billion. The assets are mostly based in Germany.

• Metasource, a Bristol, Penn.-based portfolio company of LaSalle Capital, has acquired Orion Financial Group, a Dallas-based provider of real estate document recording services. No financial terms were disclosed.

• Ocean Management has completed its previously-announced acquisition of Chinese online travel company Qunar, which also has delisted from the Nasdaq. The deal was valued at around $4.44 billion.

• OBI4wan, a Dutch portfolio company of Main Capital, has acquired Buzzcapture, an Amsterdam-based SaaS reputation management agency. No financial terms were disclosed.

• PAG Asia Capital has agreed to acquire a 42.1% stake in Yingde Gases (HK: 2168), a Chinese industrial gasses companies, from three Yingde co-founders for $616 million.

• Rock Hill Capital Group has sponsored a recapitalization of Patriot Construction, a provider of construction site preparation services to industrial and commercial customers along the Gulf Coast. No financial terms were disclosed.

• Sound United, a unit of Charlesbank Capital Partners portfolio company DEI Holdings, has acquired D&M Group, a Mahwah, N.J.-based supplier of audio/video receivers and wireless multi-room audio solutions. No financial terms were disclosed.

• Technology Crossover Ventures has acquired Retail Merchant Services, a British provider of payment services to small businesses. No financial terms were disclosed.

Veritas Capital has agreed to acquire the capital services business of CB&I (NYSE: CBI) for $755 million.

Public offerings

• Gardner Denver, a Milwaukee-based maker of industrial machinery owned by KKR, has filed for a $100 million IPO. That is likely a placeholder figure, and the filing does not include any underwriters besides KKR nor does it say where company shares would list. Gardner Denver reports a $31 million net loss on around $1.9 billion in revenue for 2016, compared to a $352 million net loss on $1.13 billion in 2015.

Liquidity Events

• Comcast (Nasdaq: CMCSA) has agreed to acquire the 49% stake it does not already own in Japanese theme park operator Universal Studios Japan for $2.27 billion from shareholders like MBK Partners and Goldman Sachs.

• Related Cos. has invested $80 million into Ladder Corp. (NYSE: LADR), a New York-based real estate investment trust, from pre-IPO shareholders like TowerBrook Capital Partners and GI Partners.

More M&A

Iberiabank (Nasdaq: IBKC) of Louisiana has agreed to buy Miami, Fla.-based Sabadell United Bank from Spain's Banco de Sabadell for around $1.03 billion.

• Sinclair Broadcast Group (Nasdaq: SBGI) has approached (slightly) smaller broadcast rival Tribune Media (NYSE: TRCO) about a possible merger, according to Reuters.


• Venture Investment Associates has raised $150 million for its eighth VC fund-of-funds, and $80 million for its third seed fund-of-funds.

It's Personnel

• Andrew Joy has joined Hidden Harbor Capital Partners as a principal. He previously was a VP with Cerberus Capital Management.

• Ray LaSoya has joining Cooley as a Los Angeles-based partner in the law firm's M&A practice. He previously was chair of the private equity practice at Stroock & Stroock & Lavan.

Final numbers: Global infrastructure needs
Dan Primack