Sep 18, 2017

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Ever since news first leaked that SoftBank was in talks to acquire a stake in Uber, most of the coverage has revolved around numbers. For example, perhaps the deal would be mostly secondary at a $40 billion valuation with a $1 billion primary slug at $70 billion. Or maybe that secondary price is now up to $50 billion. The reality right now, however, is that dollar details are secondary to governance, per multiple sources familiar with the situation.

  • Leverage: While CEO candidate Meg Whitman tried using the hiring process as a forcing mechanism to change Uber's board composition and voting rights structure, new CEO Dara Khosrowshahi is using the SoftBank deal. It may be a smart strategy, but it's no surer of a bet than was Whitman's gambit.
  • Key issue: A lot of this revolves around three board seats controlled by former CEO Travis Kalanick, which are the same three seats at the middle of an arbitration process between Kalanick and Uber's largest outside shareholder, Benchmark Capital. Particularly given that Uber's board would need to accommodate at least one representative from SoftBank (Masa? Ron Fisher? Marcelo Claure?) and still needs to make room for an independent chair. If Kalanick and Benchmark can't iron out their differences soon, it's possible that Khosrowshahi and SoftBank will be hostage to the arbiter's timeline. And, remember, Benchmark has the votes to block a SoftBank deal.
  • Okay, some numbers: SoftBank has told Uber that it wants a minimum ownership stake of 17.3% and a maximum of 22%.
  • Capital sources: A lot of SoftBank's investment would likely come via its Vision Fund, which has guidelines against doing ride-hail deals. That language, however, was basically inserted to protect the Saudi PIF's massive investment in Uber, so Saudi PIF can effectively waive it (particularly if PIF's Yasir Al-Rumayyan gets that book value primary, which lets him save face back home). It's also worth noting that the 17.3% floor would include investments from both Dragoneer and General Atlantic, with continuing talk that Tencent and Didi Chuxing could also play roles.
  • Would Google Ventures sell? This one depends on who you talk to, particularly in light of Alphabet's talks to plug $1 billion into Lyft. Multiple sources say GV, which made the Uber investment, has little interest in divesting, but this decision might be made a few pay rungs higher.
  • For the record: I was on stage with SoftBank's Deep Nishar on Saturday at HBS, but he didn't really want to talk about any of this (natch). He did, however, take some issue with my framing of SoftBank's transportation investment strategy.
  • Bottom line, via source: "Everyone says they're not selling. GV says it's not selling. Benchmark says it's not selling. Travis says he's not selling. Until governance gets worked out and there is a final price set, it's all posturing."

• Brexit byproduct, per Reuters: "Around 10,000 finance jobs will be shifted out of Britain or created overseas in the next few years if the UK is denied access to Europe's single market, according to a Reuters survey of firms employing the bulk of workers in international finance. Frankfurt was by far the most popular destination for the new roles, the survey showed, with Paris a distant second."

  • Silver lining: These expected losses, which are viewed as a first wave, are actually lower than many earlier estimates — suggesting post-Brexit London would be able to maintain its role as Europe's financial center.

• Where in the World? This Wednesday I'll be in NYC for the Bloomberg Global Business Forum (well, depending on what Jose brings to the 1-95 corridor). Axios is an official media partner of the event, which will include SoftBank's Masa Son, Carlyle Group's David Rubenstein and Alibaba's Jack Ma.


Northrop Grumman (NYSE: NOC) has agreed to acquire Orbital ATK (NUSE: OA), a Dulles, Va.-based rocket and missile maker, for around $7.8 billion in cash (not including $1.4 billion of assumed debt). The $134.50 per share price represents a 22% premium over Friday's closing price.

  • Why it's the BFD: Because this is the M&A version of never letting a good (or horrifying) crisis go to waste. Northrop hadn't made a major acquisition in 15 years, instead directing its cash toward things like share buybacks, but rising nuclear tensions and related federal expenditures prompted this exception. It also could be viewed as the second domino in defense industry consolidation, following United Technologies' recent $30 billion deal for Rockwell Collins.
  • Bottom line: "The Orbital acquisition expands Northrop's product line-up in areas such as rocket propulsion, composites and munitions. The contractor is competing with Boeing Co. to develop the next ground-based intercontinental ballistic missile defense system in the U.S., a program that could be worth as much as $85 billion." — Rick Clough & Julie Johnsson, Bloomberg
Venture Capital Deals

• Slack, a San Francisco-based provider of team communication and collaboration software, has raised $250 million in new Series G funding led by SoftBank Vision Fund, at a post-money valuation of around $5.1 billion. This is an extension to a round that previously tallied $591 million, with some participation by existing backers like Accel. All of the new capital is primary.

• Federated Wireless, an Arlington, Va.-based provider of wireless broadband network management solutions, has raised $42 million in Series B funding from Charter Communications, American Tower, Arris International and GIC.

• HouseCanary, a San Francisco-based data analytics and valuation platform for real estate professionals, has raised $31 million in Series B funding. PSP Growth led the round, and was joined by return backer Alpha Edison.

• AppGuard, a Chantilly, Va.-based provider of endpoint cybersecurity solutions, has raised $30 million in Series B funding led by Japan's JTB Corp.

• Sixgill, a Santa Monica, Calif.-based provider of sensor data services for governing IoE, has raised $27.9 million in new VC funding led by DRW Venture Capital.

• Swrve, an Ireland-based provider of mobile marketing automation solutions, has raised $25 million in Series D funding led by Summit Bridge Capital.

• KeyMe, a New York-based provider of key-making kiosks, has raised $15 million in Series C funding. QuestMark Partners led the round, and was joined by return backers Comcast Ventures, Battery Ventures, White Star Capital, 7-Eleven, Ravin Gandhi and the Polsky Family Office.

• Piper, a San Francisco-based provider of DIY computer kids for kids, has raised $7.6 million in Series A funding led by Owl Ventures.

• ExecThread, a New York-based job-sharing network for executive-level jobs, has raised $6.5 million in new VC funding. Canaan Partners and Javelin Venture Partners co-led the round, and were joined by Corazon Capital, CoVenture and NextView Ventures.

• YayPay, a San Francisco-based provider of corporate finance workflow optimization solutions, has raised $5.3 million in VC funding from QED Investors, Birchmere, Fifth Third Capital, 500 Fintech Fund, Aspect Ventures, Gaingels, Techstars and Zelkova.

• Augment, a San Francisco-based AI platform that assists customer service agents, has raised $5 million in VC funding from Silicon Valley Data Capital and Jazz Venture Partners.

• Furhat Robotics, a Swedish developer of "social robots," has raised $2.5 million in seed funding from Balderton Capital and LocalGlobe.

• Birdies, a luxury slipper startup, has raised $2 million in seed funding. Forerunner Ventures led the round, and was joined by Slow Ventures, Graph Ventures and Social Capital.

• The Moms Co., an India-based mom and baby care consumer goods startup, has raised $1 million in Series A funding co-led by DSG Consumer Partners and Saama Capital.

• Dharma Platform, a Washington, D.C.-based provider of a data analytics SaaS platform, has raised an undisclosed amount of seed funding led by The Rise Fund.

Private Equity Deals

• Arsenal Capital Partners has completed its previously-announced take-private acquisition of Cyalume Technologies, a Fort Lauderdale, Fla.-based maker of chemiluminescent products. The deal is valued at $45 million.

• Brandon Stranzl, executive chairman of Sears Canada, is working on a rescue deal for the retailer that would involve equity "sourced by" Vadim Perelman, the founder of Baker Street Capital Management, according to the WSJ. It also would include debt, result in closures of around half of Sears Canada stores and value the business north of C$650 million.

Public Offerings

• Seven companies are expected to price IPOs on U.S. exchanges this week: Best, Celcuity,, Krystal Biotech, Secoo, Oasis Midstream Partners and Zai Lab.

🚑 Restoration Robotics Inc., a Mountain View, Calif.-based developer of medical devices for hair transplantation, has set its IPO terms to 3.125 million shares being offered at between $7 and $9 per share. It plans to trade on the Nasdaq under ticker symbol HAIR, with National Securities Corp. serving as lead underwriter. The company reports just over $11 million in revenue for the first half of 2017, and has raised over $120 million in VC funding from firms like Clarus Ventures, Sutter Hill Ventures, Alloy Ventures and Interwest Partners.

• Roku, a Los Gatos, Calif.-based over-the-top (OTT) streaming player service, has set its IPO terms to 15.67 million shares being offered at between $12 and $14 per share. It would have a fully-diluted market cap of around $1.8 billion, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol ROKU, with Morgan Stanley listed as left lead underwriter. It reports a $24.2 million net loss on nearly $200 million in revenue for the first half of 2017. Roku has raised over $200 million in VC funding, from firms like Menlo Ventures (35.3% pre-IPO stake), Fidelity (12.9%), 21st Century Fox (7%), Globespan Capital Partners (6.1%) and Netflix.

Liquidity Events

• The Carlyle Group is seeking a buyer for Manna Pro, a Chesterfield, Mo.-based animal feeds maker, according to Dow Jones.

💎 Francisco Partners has sold the Israeli parent company of online jewelry retailer and Segoma Imaging Technologies to Signet Jewelers (NYSE: SIG) for $328 million.

🚑 Shanghai Fosun Pharmaceutical has agreed to acquire a 74% stake in Gland Pharma, an Indian maker of generic injectable drugs, for $1.1 billion, from shareholders like KKR. Fosun had previously tried to purchase an 86% stake, but that deal was blocked by Indian government regulators. The law was later changed to permit foreign companies to purchase up to 74% in Indian pharma companies without government approval.

More M&A

• AT&T (NYSE: T) is considering a sale process for its Latin America pay TV business, which could be valued at more than $8 billion, according to Reuters.

• Ford Motor Co. (NYSE: F) has signed a strategic agreement of intent with Indian automaker Mahindra, to possibly work together on such areas as product development and distribution.

• Wenner Media has hired Methuselah Advisors to explore strategic options for its remaining 51% stake in Rolling Stone magazine.


• 8C Capital, a new British buyout firm led by former KKR partner Dominic Murphy, is raising €1 billion for a debut fund that will focus on the healthcare and consumer markets, according to the FT.

• Longford Capital Management has closed its second commercial finance litigation fund with $500 million in capital commitments.

It's Personnel

• Russell Cassella has joined Denver-based private equity firm Revelstoke Capital Partners as a partner. He previously was a partner with GCM Grosvenor.

• Graeme Gunn has left SL Capital Partners, where he was a partner and head of investment monitoring. Per an email, he says that after 19 years at SLCP he is "taking a break to see if the grass is indeed greener on the other side of the fence."

• Stephen Hickey has stepped down as managing partner of CVC Credit Partners, which he joined in 2012 from Goldman Sachs. No explanation was provided by CVC, which adds that Hamish Buckland (ex-Triton Private Equity, J.P. Morgan) is joining as chairman.

• Ken Joseph is stepping down as the SEC's head of investment advisor/company examination for the New York Regional Office, after 21 years with the Agency.

• Jennifer Li, CEO of Baidu Capital, is stepping down as chief financial officer of (Nasdaq: BIDU). She will be succeeded by former Weibo Corp. CFO Herman Yu, while retaining her Baidu Capital role.

• Cici Zheng has joined ParkerGale Capital as a principal. She previously was a case team leader with Bain & Co.

• Canvas Ventures has promoted Sarah Catanzaro to data partner and Jennifer Kaehms to associate.

Final Numbers
Dan Primack