Happy Friday. Here’s what we’ve got today…

• A look at KKR’s shareholder lawsuit

• Plus, Callaway reconsiders Topgolf business

KKR sued:

A new lawsuit against KKR is the latest in a string of litigation concerning tax receivable agreements (TRA), a controversial financial structure that’s increasingly drawing scrutiny from shareholders and regulators.

Filed by the Steamfitters Local 449 Pension Fund pension fund in Delaware Chancery Court, the suit alleges that KKR co-founders Henry Kravis and George Roberts engineered a $500 million TRA-related payout for themselves at the expense of KKR shareholders.

As part of KKR’s 2021 reorganization from its Up-C structure into a corporation, Kravis, Roberts, and other KKR unitholders executed a tax-free conversion of their partnership units into shares.

Had that conversion not happened, unitholders could have completed a taxable exchange at some point in the future that would have created contingent tax assets for KKR. In this scenario, the TRA entitled the exchanging unitholders to a portion of the tax offset benefit, usually around 85 percent, with the remainder going to the corporation.

However, this potential tax offset and subsequent TRA benefit would only have occurred if unitholders had decided to liquidate their holdings by exchanging units for shares in a taxable transaction and then selling the shares.

The $500 million “TRA Termination Payment” was provided as compensation to unitholders in exchange for giving up that potential future payment, even though there was neither an immediate benefit to KKR nor any guarantee a taxable exchange would have ever happened at all.

"This case is about two Wall Street titans who wanted to enrich themselves and their fellow private unitholders because their peers had done so," the complaint states. The lawsuit names Kravis and Roberts as defendants alongside current KKR co-CEOs Scott Nuttall and Joseph Bae, other board members, and the company itself.

The KKR suit is part of a growing wave of lawsuits targeting TRA payouts. Already this year, healthcare company Premier agreed to a $71 million settlement in a TRA-related case brought by the same plaintiffs' lawyers, and the Delaware Chancery Court allowed cases to proceed against Carlyle Group over a $344 million founder payout and against GoDaddy for an $850 million TRA buyout that plaintiffs claim vastly exceeded the agreement's book value.

The complaint alleges that, in planning for the reorganization, KKR referenced Carlyle and a similar Apollo agreement as market comps, yet proceeded with the payment even after KKR’s outside advisers cautioned that shareholders at both peers had issued Section 220 demands (the right to inspect corporate records) in response to the payments.

The plaintiffs contend that KKR's advisers subsequently rebranded this payment as compensation for the potential future relinquishment of special controlling shares. This strategy allegedly involved striking through references to "TRA termination payments" in board materials while, all while the payment itself remained unchanged. The suit goes on to specifically mention Evercore’s advisory role, accusing the firm of “aiding and abetting breach of fiduciary duty.”

KKR has called the lawsuit "legally deficient,” with a firm spokeswoman saying it "mischaracterizes the transaction" and that the deal offered substantial benefits to shareholders. The firm plans to file a motion to dismiss.

• Meritage Group has hired Goldman Sachs to lead a sale process for Les Schwab Tire Centers, which could be worth more than $7 billion, per Reuters.

• Harp Bidco Limited, a consortium led by CVC Capital Partners, Nordic Capital, and Abu Dhabi Investment Authority subsidiary Platinum Ivy, agreed to acquire Hargreaves Lansdown (LSE: HL), a Bristol, UK-based investment platform, for £5.4 billion.

• Boston Celtics’ owners have retained JPMorgan Chase and BDT & MSD to lead the sale of the NBA franchise, which Sportico values at $5.12 billion.

• TJC agreed to acquire USALCO, a provider of water treatment solutions, from H.I.G. Capital.

• Pershing Square Capital Management is considering a take-private bid for Howard Hughes Holdings (NYSE: HHH), a real estate developer in which Pershing Square already owns a 37.5 percent stake.

• Thoma Bravo is weighing a potential sale of ABC Fitness Solutions, a software and payment processing provider for health clubs and gyms, which could be valued at around $3 billion.

• Franklin Mountain Energy, a privately held Permian Basin producer, has hired Jefferies to manage its sale, which could fetch around $3 billion, per Bloomberg.

• LS Power agreed to acquire Algonquin Power & Utilities Corp.'s renewable energy business (excluding hydro) for up to $2.5 billion.

• Vedanta Resources has paused the sale of its steel business, potentially worth around $2.5 billion, after a recent share sale plugged a cash shortfall, per Bloomberg, though a company spokesperson denied this report as "factually and completely incorrect."

• Savannah Energy terminated its $1.25 billion acquisition of Petronas' South Sudan oil and gas assets, citing an inability to close on the original terms, but remains in discussions for a potential alternative transaction.

• SkyKnight Capital and Dragoneer Investment Group agreed to acquire a majority stake in Simplicity Group, a financial products distributor, from Lee Equity Partners.

• Topgolf Callaway Brands (NYSE: MODG) is conducting a strategic review of its Topgolf driving range chain following poor same-store sales performance.

• Zimmer Biomet Holdings (NYSE: ZBH) agreed to acquire OrthoGrid Systems, a developer of surgical guidance systems for hip replacements.

• BHP Group (NYSE: BHP) is exploring the sale of its Brazilian copper and gold mines, acquired through its recent buyout of Oz Minerals, and has engaged Banco Santander to advise on the potential sale, per Bloomberg News.

• Standard Chartered invested in United Fintech Group, a London-based digital transformation platform for capital markets, joining existing investors Citi, BNP Paribas, and Danske Bank.

• Enverus, backed by Hellman & Friedman and Genstar Capital, acquired BidOut, an AI-powered procurement platform for the energy industry.

• Houlihan Lokey (NYSE: HLI) agreed to acquire Waller Helms Advisors, a Chicago-based investment banking firm.

• Consello Capital acquired EHE Health, a provider of preventive healthcare services to employers.

• TBAuctions acquired Surplex, a Düsseldorf-based industrial auction house for used machines and factory equipment.

• Box (NYSE: BOX) acquired Alphamoon, a Polish intelligent document processing startup.

• Sendsprint acquired Nobel Financial, a US-based remittance services provider.

• Meaningful Partners acquired Fitness Ventures, the second-largest Crunch Fitness franchisee with 47 locations.

• Wynnchurch Capital acquired ORS Nasco, a wholesaler of industrial MRO supplies, from One Equity Partners.

• Avista Healthcare Partners acquired Trillium Health Care Products, a CDMO for over-the-counter products, from New Water Capital.

• Addtronics, backed by Kaho Partners, acquired Colanar, a provider of aseptic fill and finish automation systems for the pharmaceutical industry.

• Aceable, backed by HGGC, acquired Real Estate Institute, an online professional licensing education provider.

• Hugging Face acquired XetHub, a collaborative development platform for machine learning.

• OPSWAT, backed by Brighton Park Capital, acquired InQuest, a cybersecurity firm.

• HPS/PayMedix acquired TempoPay, a healthcare payments solution for employees, from Redesign Health.

Tech, Vertical SaaS, & Misc. Enterprise

• FLYR Labs, a revenue optimization platform for airlines and hotels, raised $295 million via a combination of $70 million in debt financing and $225 million in Series D funding led by WestCap, with participation from BlackRock, Streamlined Ventures, Abu Dhabi Investment Authority, and Avianca.

• Rewst, an automation platform for managed service providers, raised $45 million in new funding led by Sapphire Ventures, with participation from Meritech Capital and OpenView.

• Cents, a business management platform for garment care SMBs, raised $40 million in Series B funding led by Camber Creek, with participation from Bessemer Venture Partners, Tiger Global, Tech Pioneer Fund, RXR, Derive Ventures, and Alumni Ventures.

• Anjuna Security, a confidential computing startup, raised $25 million in Series B2 funding led by M Ventures, SineWave Ventures, and AI Capital Partners, with participation from Founder Collective, Insight Partners, Playground Global, and Uncorrelated.

• Levitate, a Raleigh-based SaaS for relationship-based businesses, raised $15 million in Series D funding led by Harbert Growth Partners, Northwestern Mutual Future Ventures, and Bull City Venture Partners.

• Datch, an AI technology provider for frontline manufacturing, energy, and utility sectors, raised $15 million in Series A funding led by Third Prime, with participation from Blackhorn Ventures, Blue Bear Capital, and Susquehanna Investment Group. 

• Napkin, a text-to-presentation startup, raised $10 million in seed funding led by Accel and CRV.

Fintech

• Stori, a Mexican fintech offering credit cards to underserved populations, raised $212 million in new funding, including $105 million in equity led by Notable Capital and BAI Capital, and $107 million in debt led by Goldman Sachs and Davidson Kempner Capital Management.

• CloudPay, a payroll and payment solutions provider, raised $120 million in new funding led by Blue Owl Capital, with participation from Rho Capital Partners, The Olayan Group, and Hollyport Capital.

• Octane, a fintech focused on recreational purchases, raised $50 million in Series E funding led by Valar Ventures, with participation from Upper90.

• Aidatify, an on-chain AI aggregator for DeFi data analysis, raised $17.5 million in Series A funding led by SM Capital.

• Lingo, a community rewards token platform, raised $15 million in seed funding at a $150 million valuation led by Morningstar Ventures.

• Chariot, a processor for donor-advised fund payments, raised $11 million in Series A funding led by Maveron, with participation from Spark Capital, SV Angel, and Y Combinator.

Consumer & Media

• Plonts, a plant-based cheese startup developing fermentation technology, raised $12 million in seed funding led by Lowercarbon Capital, with participation from Litani Ventures, Accelr8, Pillar, and Ponderosa Ventures.

Healthcare

• Freshpaint, a healthcare privacy platform, raised $30.7 million in Series B funding led by Threshold, with participation from SignalFire, Intel Capital, Y Combinator, and Zero Prime.

• Clare&me, a mental health chatbot, raised €3.7 million in seed funding.

Industrials, Greentech, & Other

• SYSO, a market operator for renewable energy and battery storage assets, raised $14.5 million in Series B funding led by Kimmeridge, with participation from Lacuna Sustainable Investments.

• VSParticle, a Dutch supplier of nanoparticle synthesis tools, raised €6.5 million in Series A2 extension funding led by NordicNinja and Plural, with participation from Hermann Hauser Investment.

• Cocoon, a London-based steel and concrete decarbonization startup, raised $5.4 million in pre-seed funding led by Wireframe Ventures, with participation from Celsius Industries, Gigascale Capital, and SOSV.

• Lobby Capital, founded by former August Capital partners David Hornick and Eric Carlborg, is raising $300 million for its second fund.

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