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Axios Pro Rata

By Dan Primack
Dan Primack

🎧 Axios Re:Cap talks with Ohio Secretary of State Frank LaRose, a Republican, who tells us he's confident in vote-by-mail but that it could take weeks to know results from his state. Listen via Apple or via Axios.

🏈 Situational awareness: RedBird Capital Partners just announced that it's partnered with Dwayne "The Rock" Johnson and Dany Garcia to buy The XFL for $15 million. This basically reads like an option on the IP, with the buyers' first priority to work out media deals.

Top of the Morning

Illustration: Aïda Amer/Axios

While its Big Tech rivals were testifying in front of a congressional antitrust committee last week, Microsoft was negotiating what could be the largest — and most politically perilous — tech acquisition of 2020.

Here's what happened since we last published:

  • Reports emerged that Microsoft was in talks to buy the U.S. operations of TikTok from ByteDance, possibly with ByteDance retaining a minority stake.
  • President Trump said he planned to ban TikTok for (still unspecified) national security concerns.
  • We reported Saturday morning that Trump had a proposal "on his desk" whereby Microsoft would buy 100% of TikTok U.S.
  • White House sources said internal factions were still battling out what Trump should do.
  • Trump and Microsoft CEO Satya Nadella spoke yesterday, and Microsoft issued a fairly detailed statement of the deal parameters. Trump himself hasn't yet commented (that could change any moment), but Reuters reports that he's given ByteDance 45 days to strike a formal agreement.

Before continuing: Yes, it is abnormal for a U.S. president to dictate the timeline (and maybe terms) of a U.S. company-led acquisition. It also remains unclear what mechanism Trump planned to use to block TikTok.

  • This is not playing very well on Chinese social media, where ByteDance's CEO has been accused betraying his country.
  • “It’s less about this particular app and more about what this app can be used to leverage in the future,” meaning new apps and possibly the collection of more sensitive data, a source familiar with the CFIUS process tells Axios' Ashley Gold.

What comes next? Negotiation, and lots of it.

  • Microsoft and ByteDance have not yet agreed on a price, per a source familiar with the situation.
  • Microsoft said in its statement that its plans would be to own and operate TikTok in the U.S., Canada, Australia, and New Zealand. Either that list will expand, or Microsoft and ByteDance will need to work out content sharing between the Microsoft-owned version of TikTok and whoever ends up owning the rest (particularly places like the U.K. and Japan). And obviously this would impact price.
  • Microsoft will still need to prove to U.S. regulators (and to ByteDance) that it can basically reengineer the TikTok code, since the White House effectively wants new software in addition to a new mailing address.
  • Microsoft also said it may invite other U.S. investors into the deal “on a minority basis.” Unclear if this would involve letting existing ByteDance backers like General Atlantic roll over their shares, but it does seem to indicate that Microsoft may plan to operate TikTok as an independent entity that can eventually go public on its own.

Wildcard: Amazon.

  • I’ve got no intel that Amazon wants to buy TikTok, but I’d be surprised if it’s not at least kicking the tires. It’s the only other U.S. company with the cash, tech capacity, and lack of obvious antitrust issues that could get it done.
  • Plus it has an obvious interest in social content, as evidenced by its Twitch purchase, and its involvement could help at least bid up the price for Microsoft.

Bottom line: Microsoft’s market cap is up around $60 billion in early trading, which means it might have already “paid off” this deal.

🎧 Bonus: We'll talk TikTok on this afternoon's Axios Re:Cap podcast with White House trade and economic adviser Peter Navarro.

The BFD

Illustration: Rebecca Zisser/Axios

Siemens Healthineers, a medical tech affiliate of Siemens, agreed to buy Palo Alto-based cancer therapy company Varian Medical Systems (NYSE: VAR) for $16.4 billion in cash.

  • Why it's the BFD: It would be the health care sector's largest merger so far in 2020.
  • Details: The deal values Varian shares at $177.50, a 24% premium to Friday's closing price and a 42% premium to its 30-day weighted average.
  • The bottom line: "It’s a play for a very profitable cancer device/machine company, and a bet that not even the pandemic will slow down the demand for new cancer technologies." — Bob Herman, Axios
Venture Capital Deals

Grab, the Southeast Asia-focused ride-hail and finance tech giant, is raising $200 million from South Korea’s Stic Investments, per Bloomberg. http://axios.link/2AyN

🚑 PMV Pharma, a Cranbury, N.J.-based precision oncology startup targeting p53 mutations, raised $70 million in Series D funding from Avoro Capital, RA Capital Management, Wellington Management, and return backers OrbiMed, Nextech Invest, Viking Global Investors, and Boxer Capital. www.pmvpharma.com

🚑 Lemonaid Health, a San Francisco-based online-demand platform for accessing online health care, raised $33 million in Series B funding. Olive Tree Ventures led, and was joined by Artis Ventures, Correlation Ventures, Hikma Ventures, and Sierra Ventures. http://axios.link/HgaG

Ecoplant, an Israeli industrial IoT startup focused on compressed air systems, raised $8 million in Series A funding led by Ecolab. http://axios.link/v1wx

Private Equity Deals

🚂 The Blackstone Group and Global Infrastructure Partners are trying to line up financing for what would be a $21 billion-plus bid to buy railroad operator Kansas City Southern (NYSE: KSU), per the WSJ. http://axios.link/piSn

Aareal Bank of Germany has shortlisted at least five private equity firms for a stake in its Aareon software unit, which could fetch upwards of $1 billion, per Bloomberg. Suitors include CVC Capital Partners, Bain Capital, HgCapital, Advent International, and EQT. http://axios.link/1Ddq

Bain Capital upped its takeover offer for listed Japanese nursing home company NichiiGakkan from $1 billion to $1.2 billion. It also secured support from Effissimo Capital Management, an activist investor that holds a 12.46% stake in NichiiGakkan. http://axios.link/STga

Empris agreed to buy a portfolio of more than 140 U.K. restaurants, including the Café Rouge brand, from KKR-owned Casual Restaurant Group. http://axios.link/w1qF

Lord & Taylor, the country’s oldest department store operator, filed for Chapter 11 bankruptcy protection. Also filing was Le Tote, the private equity-backed clothing rental company that bought Lord & Taylor last year for around $100 million. http://axios.link/F6tJ

Public Offerings

🚑 Checkmate Pharma, a Cambridge, Mass.-based developer of cancer immunotherapies, set IPO terms to 5 million shares at $14–$16. It would have an initial market cap of $322 million, were it to price in the middle, and plans to list on the Nasdaq (CMPI) with BOA as lead underwriter. The company raised around $175 million in VC funding from Sofinnova Ventures (21.1% pre-IPO strake), VenBio (21.1%), Novo Holdings (10.2%), Longitude Venture Partners (8.9%), Decheng Capita (7.5%), F-Prime Capital (5.6%), Meidixi (5.1%), and Omega Fund (5.1%). http://axios.link/dkJD

🚑 GoodRx, a Santa Monica, Calif.-based prescription drug price comparison engine, filed confidential IPO papers with the SEC, per Reuters. Backers include Francisco Partners, Spectrum Equity, and Silver Lake. http://axios.link/iDBR

Kakao Games, a gaming unit of listed South Korean mobile messaging company Kakao, said it plans to raise $322 million in an IPO. http://axios.link/OwKN

🚑 Kymera Therapeutics, a Watertown, Mass.-based biotech focused on protein degredation, filed for a $100 million IPO. It plans to trade on the Nasdaq with Morgan Stanley as lead underwriter, and raised over $200 million in VC funding from Atlas Venture (26.7% pre-IPO stake), Vertex Pharma (7.3%), Lilly Ventures (6.5%), Pfizer (5.2%), 6 Dimensions (5.2%), Bessemer Venture Partners (5.2%), Redmile Group, Bain Capital Life Sciences, Wellington Management, Janus Henderson, BlackRock, and Rock Springs Capital. http://axios.link/7E00

SPACs
Source: Giphy

Lordstown Motors, an Ohio-based electric truck maker, plans to go public via a reverse merger with DiamondPeak Holdings Corp. (Nasdaq: DPHC), a SPAC sponsored by the principals of Silver Peak. It would include a $500 million PIPE from General Motors ($75m), Fidelity, Wellington Management, BlackRock, and Federated Hermes Kaufmann Small Cap Fund. http://axios.link/EWj2

Porch, a Seattle-based home improvement marketplace, agreed to go public via a reverse merger with PropTech Acquisition Corp. (Nasdaq: PTACU) at an implied value of $523 million. Porch had raised around $120 million from backers like Moderne Ventures and Valor Equity Partners. http://axios.link/BpN9

🚑 BCTG Acquisition, a biotech-focused SPAC formed by Boxer Capital, filed for a $125 million IPO. http://axios.link/lGgM

Burgundy Technology Acquisition, a SPAC led by ex-HP CEO Leo Apotheker, filed for a $400 million IPO. http://axios.link/sPQo

CSR Acquisition, a SPAC led by Cliff Robbins (CEO of Blue Harbour, ex-General Atlantic), filed for a $300 million IPO. http://axios.link/AftX

Star Peak Energy Transition, an energy-focused SPAC formed by Magnetar Capital and Triangle Peak Partners co-founder Michael Morgan, filed for a $350 million IPO. http://axios.link/qr69

More M&A

Google (Nasdaq: GOOG) is investing $450 million for a 6.6% stake in home security company ADT (NYSE: ADT). http://axios.link/kRNr

Marathon Petroleum (NYSE: MPC) agreed to sell its Speedway gas station chain for $21 billion to 7-Eleven owner Seven & i Holdings (Tokyo: 3382). http://axios.link/AOte

Metro Bank (LSE: MTRO) agreed to buy British P2P lender RateSetter for just £2.5 million. RateSetter had raised over $70 million in VC funding from firms like Moulsford Capital, RLC Ventures, and Artemis Ventures. http://axios.link/1hcA

Royal Dutch Shell Australia agreed to buy Australian environmental services firm Select Carbon. http://axios.link/xcGC

Tailored Brands (NYSE: TLDR), the Houston-based owner of Men’s Wearhouse and Jos. A. Bank, filed for Chapter 11 bankruptcy protection. http://axios.link/jzlT

Fundraising

Turnout Capital has launched as a Chicago-based, small-cap private equity firm by former High Street Capital principals Rob France and Andrew Simmons, per their LinkedIn pages.

It's Personnel

Christine Feng stepped down as a director of corporate development for Amazon Web Services, in order to become a senior managing director with The Blackstone Group, where she’ll work across the tactical opportunities and credit units. http://axios.link/DB3t

Oneal Bhambani joined Kabbage as CFO, per his LinkedIn profile. He previously was with Flywheel Software (acquired by CabConnect), and before that was an investor with both The TCW Group and Riverwood Capital. www.kabbage.com

Brian DeFee joined Top Tier Capital Partners as director of EMEA corporate development, per his LinkedIn Page. He previously was an advisor to Capstone Partners. www.ttcp.com

James Howe joined the M&A practice of law firm Simpson Thatcher as a London-based partner. He previously was with Gibson Dunn. www.simpsonthatcher.com

Vinay Iyengar joined Two Sigma Ventures as a San Francisco-based investor. He previously was with Bessemer Venture Partners. www.twosigmaventures.com

George Robson, a Revolut product lead, joined Sequoia Capital as a London-based investor. http://axios.link/BT8O

Steve Meli joined law firm Foley & Lardner as a Boston-based fund formation and investment management partner. He previously spent 11 years with Proskauer Rose. www.foley.com

Final Numbers
Source: Refinitiv Deals Intelligence. Data through July 30, 2020.
Dan Primack

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