Oct 20, 2020

Axios Pro Rata

🚨 Breaking: The U.S. Department of Justice is expected to file its antitrust case against Google later this morning. A press conference is scheduled for 9:45am ET.

🎧 Axios Re:Cap digs into Joe Biden's pandemic plan, were he to become president. My guest is Rep. Ami Bera (D-Calif.). Listen via Apple Podcasts, Spotify, or Axios.

πŸ–₯️ This morning I'll be doing some Milken Global Conference moderating. First an interview of Steve Case, and then a panel titled "New Entrepreneurs for a New Economy" that includes folks from Mubadala, Thrive Market, La Famiglia VC, and AirAsia Digital.

Top of the Morning

Illustration: AΓ―da Amer/Axios

The SPAC boom is beginning to show its first cracks, as several private equity-sponsored efforts have needed to downsize.

Driving the news: Cerberus yesterday shrunk the anticipated IPO for its telecom-focused SPAC from $400 million to $300 million.

  • Riverstone Holdings' third SPAC yesterday raised $200 million in its IPO, after downsizing from $300 million.
  • H.I.G. Capital filed to raise $450 million for a SPAC in late September, but on Thursday cut the proposed size to $325 million.
  • MPM Capital raised $85 million for its debut SPAC Thursday, after originally filing to raise $100 million.

To be sure, plenty of private equity-sponsored SPACs have continued to hit their targets, and some have even upsized. But the offering glut has let investors become a bit more choosy β€” if only for allocation reasons, given the relatively low upfront risk β€” and private equity is increasingly finding itself on the short end.

  • One banking source suggests that there are concerns that private equity prowess won't always translate to the public markets, particularly when put up against SPACs from hedge fund managers and former CEOs of listed companies.
  • Another adds that private equity investors focus mostly on their "day jobs," whereas the SPACs are viewed as opportunistic second fiddles.
  • Historical performance data on PE-backed SPACs vs. the pack is considered anachronistic, since the SPAC market has never before seen this sort of volume.

The bottom line: The SPAC space is evolving fast, and what's true today could be false tomorrow. But right now there's a flight toward sponsors that don't spend most of their time taking companies private.

The BFD

Illustration: Lazaro Gamio/Axios

Intel (Nasdaq: INTC) agreed to sell its NAND memory chip unit, including a China production factory, to South Korea’s SK Hynix for $9 billion in cash.

  • Why it's the BFD: This would make SK Hynix the world's second-largest NAND chipmaker, behind only Samsung. It also gets Intel (mostly) out of the memory chip market, which is where it got its start.
  • Financials: The business generated around $2.8 billion in revenue for the first half of 2020, whereas Intel's entire memory chip revenue was around $3 billion.
  • The bottom line: "The move marks the latest effort by the U.S. chip giant to divest its non-core businesses, move away from the volatile commodity NAND chip industry and focus on its remaining Optane memory business, which is smaller but more lucrative because it taps more advanced technology." β€” Reuters
Venture Capital Deals

β€’ Perch, a platform that acquired direct-to-consumer products selling on Amazon, raised $123.5 million. Spark Capital led, and was joined by Boston Seed and return backer Tectonic Ventures. http://axios.link/M3jx

β€’ Handshake, a San Francisco-based recruitment platform, raised $80 million. GGV Capital led, and was joined by EQT Ventures, Kleiner Perkins, Lightspeed Venture Partners, Spark Capital and True Ventures, along with the Chan Zuckerberg Initiative, Emerson Collective, and Imaginable Futures. www.joinhandshake.com

β€’ V2food, an Australian mock meat startup, raised A$77 million in Series B funding from Goldman Sachs, Temasek, Esenagro, Huaxing Growth Capital, ABC World Asia, Altitude Partners, and Novel Investments. http://axios.link/Q8Re

β€’ ShopUp, a Bangladesh-based retail digitization startup, raised $22.5 million in Series A funding. Sequoia Capital India and Flourish Ventures co-led, and were joined by Veon Ventures, Speedinvest, and Lonsdale Capital. http://axios.link/Qa7x

β€’ Zest AI, a Los Angeles-based provider of credit underwriting software, raised $15 million from Insight Partners. www.zest.ai

πŸš‘ eVisit, a Mesa, Ariz.-based provider of telehealth enablement SaaS, raised $14 million in Series A funding. TVC Capital led, and was joined by Kickstart Seed Fund and University Growth Fund. www.evisit.com

πŸš‘ Neuromod, an Irish medical device startup focused on tinnitus, raised €10.5 million in Series B equity and debt funding. Fountain Healthcare Partners led, and was joined by Moffett Investment Holdings, Medical Device Resources, Kreos Capital, and SVB. http://axios.link/QDb8

β€’ Wayflyer, an ecommerce revenue analytics platform, raised $10.2 million in seed funding. QED Investors led, and was joined by Middlegame Ventures, Speedinvest, and FGFE. http://axios.link/HCXR

β€’ Fabric, a headless commerce platform, raised $9.5 million in seed funding led by Redpoint Ventures. www.fabric.inc

β€’ Vectary, a Redwood City, Calif.-based design platform for 3D and AR, raised $7.3 million. EQT Ventures led, and was joined by return backer BlueYard. http://axios.link/5ibr

β€’ Welcome, an online home building, customization, and purchasing platform, raised $5.4 million in seed funding led by Global Founders Capital. www.welcomehomes.com

β€’ Polymarket, a blockchain-based information markets platform for debated topics like the election, raised $4 million. Polychain Capital led, and was joined by Naval Ravikant, Balaji Srinivasan, and Meltem Demirors. http://axios.link/1lIz

β€’ Decentriq, a Swiss enterprise data security startup, raised $3.8 million in seed funding. Btov Partners led, and was joined by Paladin Capital Group and Atlantic Labs. http://axios.link/FagF

β€’ Jam, an β€œin-the-flow” collaboration startup, raised $3.5 million in seed funding. Union Square Ventures led, and was joined by Version One Ventures, BoxGroup, and Village Global. www.jam.dev

β€’ Quake, a subscription podcast company, raised $2.5 million in seed funding led by Wndrco. http://axios.link/O7Jf

Private Equity Deals

β€’ Brook & Whittle, a Guilford, Conn.-based portfolio company of Snow Phipps Group, acquired Tri Print, a Huntington Beach, Calif.-based packaging solutions company. www.brookandwhittle.com

β€’ CapVest agreed to buy Datasite, a Minneapolis-based provider of M&A SaaS. http://axios.link/gnL1

β€’ FDH, an El Segundo, Calif.-based portfolio company of Audax Private Equity, acquired Societe AHE, a Canadian aerospace hardware distributor focused on the rotorcraft market. www.fdhaero.com

πŸš‘ H.I.G. Capital agreed to buy St. Croix Hospice, an Oakdale, Minn.-based provider of end-of-life care in six states, from The Vistria Group. PE Hub puts the price tag at $580 million. http://axios.link/eCxH

β›½ Kleinfelder, a San Diego-based portfolio company of Wind Point Partners, acquired Gas Transmission Systems, a Walnut Creek, Calif.-based provider of pipeline engineering and consulting services to gas utilities and pipeline operators. www.kleinfelder.com

β€’ LearnUpon, an Ireland-based provider of corporate e-learning solutions, raised $56 million from Summit Partners. http://axios.link/4Sx6

β€’ PlanHub, a West Palm Beach, Fla.-based project bid marketplace for commercial construction, raised $41 million from Mainsail Partners. www.planhub.com

β€’ Eat Just, a San Francisco-based maker of plant-based eggs and mayo, said it will build a plant protein production facility in Singapore, funded by $20 million from the company and $100 million in new funding led by Proterra Asia. http://axios.link/brwd

πŸš‘ Ridgemont Equity Partners acquired Anne Arundel Dermatology Management, an operator of 74 clinics in the Mid-Atlantic and Southeastern U.S. www.aadermatology.com

Public Offerings

πŸš‘ Compass Therapeutics, a Cambridge, Mass.-based immuno-oncology company, filed for a $50 million IPO. The pre-revenue company plans to list on the Nasdaq (CMPX) and raised over $130 million from firms like OrbiMed (24.4% pre-IPO stake), Cowen Healthcare (6.1%), Borealis Ventures (5.3%), and F-Prime (5.3%). http://axios.link/MKv0

β€’ Didi Chuxing, China’s largest ride-hail company, has decided to go public in Hong Kong instead of in New York, per Reuters. The IPO could come next year at a targeted valuation of $60 billion. http://axios.link/TB9s

β€’ Grupo BIG Brasil, a Brazilian supermarket chain owned by Advent International, filed for a Sao Paulo IPO. This is the business that Advent bought from Walmart, and then rebranded, in 2018. http://axios.link/zJup

β€’ Root, a Columbus, Ohio-based auto insurer, set IPO terms to 24.16 million shares at $22-$25. It would have an initial market cap of $5.87 billion, were it to price in the middle, and plans to list on the Nasdaq (ROOT) with Goldman Sachs and Morgan Stanley as lead underwriters. Root reports a $145 million net loss on $245 million in revenue for the first half of 2020, and raised around $520 million in VC funding from firms like Drive Capital (26.6% pre-IPO stake), Ribbit Capital (16.5%), Tiger Global (10.3%), SVB (7.9%), and Redpoint Ventures (7.4%). http://axios.link/JlzM

β€’ Southeastern Grocers, operator of Winn-Dixie grocery stores, filed for an IPO that Renaissance Capital estimates could raise $500 million. It plans to list on the NYSE (SEGR) with BofA and Goldman Sachs as lead underwriters. The company went bankrupt in 2018, but seems to have gotten a bit of a pandemic boost β€” with revenue climbing from $4.5 billion to $5.3 billion year over year for the 28 weeks ending July 8, and a $62 million net loss flipping to a $206 million profit over the same period. http://axios.link/FmlP

SPAC Stuff

β€’ Horizon Acquisition II, a media/entertainment-focused SPAC led by Todd Boehly (Eldridge Industries), raised $500 million in its IPO. http://axios.link/7ond

β€’ Tekkorp Digital Acquisition, a media/leisure-focused SPAC formed by Tekkorp Capital, cut its proposed IPO size from $300 million to $250 million. http://axios.link/RkQM

Liquidity Events

β€’ Juniper Networks (NYSE: JNPR) agreed to buy 128 Technology, a Burlington, Mass.-based SD-WAN networking company, for $450 million. 128 had raised around $150 million in VC funding from firms like G20 Ventures and Montlake Capital. http://axios.link/HioG

β€’ TA Associates hired Arma Partners to find a buyer for ThinkProject, a German construction software firm that could fetch around €700 million, per Reuters. http://axios.link/e1EO

More M&A

πŸš‘ Sanofi (Paris: SAN) is considering a sale process for some of its anti-inflammation products, which could fetch up to €200 million, per Bloomberg. http://axios.link/fDWa

β€’ SiriusXM (Nasdaq: SIRI) completed its $325 million purchase of podcast player Stitcher from E.W. Scripps (Nasdaq: SSP). http://axios.link/8iIk

Fundraising

πŸš‘ Ascend Partners, a health care-focused private equity firm co-led by In Seon Hwang (ex-Warburg Pincus) and Richard Park (ex-CityMD CEO), is raising $300 million for its debut fund. www.ascendpartners.com

β€’ SAIF Partners raised $400 million for its latest India-focused VC fund, and rebranded as Elevation Partners. http://axios.link/9K6S

β€’ Secha Capital raised $30 million for a Southern Africa-focused impact private equity fund. www.sechacapital.com

It's Personnel

β€’ Antares Capital named Anthony Diaz as head of loan syndication, sales, and trading. He succeeds Peter Nolan, who is retiring. www.antares.com

β€’ Isaac Lahuerta joined Iberian private equity firm Sherpa Capital as an investment director focused on special situations. He previously was with BTC. www.sherpacapital.es

β€’ Dan Seideman joined Endicott Growth Equity Partners as a principal, per his LinkedIn page. He previously was a managing director of strategy and corp dev for S&P Global Market Intelligence. www.endiottgp.com

Final Numbers
Data: Wood Mackenzie; Chart: Axios Visuals

For all the heated political rhetoric over whether or not to frack, the shale industry has been getting hammered by decreased demand. And that's leading to consolidation.

  • ConocoPhillips yesterday agreed to pay $9.7 billion for Concho Resources, whose share price had been cut in half in 2020.
  • The WSJ reports the Pioneer is in talks to buy Parsley Energy, whose stock also has been halved in 2020. Parsley closed yesterday with a $3.8 billion market cap and $3.2 billion in debt.

Go deeper: Subscribe to our daily energy sector newsletter, Axios Generate.

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