Perpetual capital does sound pretty great

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

• A single headline deal and a look at private equity’s interest in bulk annuities

• The deal sheet, plus what many have described as an ill-advised holiday video from Blackstone

1. Apollo in talks with Farfetch over rescue financing.

• Luxury online fashion retailer Farfetch Ltd is reportedly in discussions with Apollo over an emergency funding deal to help avoid a liquidity crunch.

• Terms of the potential deal, including whether funding would be debt, equity, or a mixture, have not been disclosed, and sources close to the matter say that talks are still early. Previous reports suggest Farfetch may require up to $500 million to help plug holes left by runaway cash burn.

• Farfetch has faced difficulties securing inventory from premium luxury brands, who prefer to operate via their own direct-to-consumer channels, bypassing third-party platforms like Farfetch that require them to accept wholesale pricing. Some brands put up with that arrangement through the pandemic (when their own storefronts shuttered), but have now scaled down relationships with third-party retailers.

• That’s driven an incredible fall from peak market value of more than $23 billion to today’s $220 million, fuelling reports that founder and CEO José Neves was considering a management buyout. However, given the rapidly deteriorating financial situation, such a deal may prove challenging.

Apollo, Carlyle, and KKR are all said to be considering bids for UK-based Pension Insurance Corporation (PIC), with bids due this week in a JP Morgan-led process.

Bulk Annuities: More Interesting Than It Sounds?

PIC covers more than 300,000 policyholders and is a leader in a niche corner of the insurance world known as bulk annuities.

Bulk annuity providers work with corporations to take over their defined benefit pension liabilities, either writing a bulk annuity policy for the pension fund or assuming the assets and liabilities of an entire pension scheme.

In both cases, the insurer offers companies an attractive way to shift pension liabilities off of their balance sheets—an easy out for pension plans that, at best, serve as a distraction to the core business, and, at worst, can drive meaningful balance sheet holes with asset-liability mismatches.

Getting out from under a cumbersome pension plan can also free up debt financing capacity or remove a potential roadblock to M&A activity.

In exchange, the bulk annuity provider gets access to a pile of investable assets. These firms are able to deploy capital to higher-returning, illiquid investments like private equity or other alternatives. That’s a significant improvement over pension funds that are typically forced to invest primarily in short-term, liquid assets that provide lower returns (worsening pension funding problems).

Market Shifts

The market for bulk annuity deals is enjoying a resurgence thanks to the current high-rate environment. That’s provided a jump in portfolio returns for pension funds that had previously been staring down large gaps in funding levels, with assets that looked unlikely to meet upcoming liabilities.

Those gaps meant sponsoring companies were often required to make additional contributions, and precluded any buyout from bulk annuity providers, who would only entertain deals for pension schemes without funding shortfalls.

While bulk annuity deals are on the rise globally, the UK, in particular, has emerged as a market leader thanks to its proclivity for corporate pensions relative to other geographies.

Private Equity Interest

Private equity has become infatuated with insurers in recent years, a trend kicked-off by Apollo’s relationship with insurer Athene, co-founded in 2009 and now a wholly-owned part of the firm.

Insurers provide alternative asset managers with a source of perpetual capital, the premiums generated by policies that must be invested to ensure coverage of future claim payouts.

Fund managers take their standard management fees on invested insurance assets, an increasingly large part of management fee hauls for firms employing this strategy—Athene accounts for the majority of Apollo’s earnings, for example.

Alongside Apollo, Carlyle acquired a stake in reinsurer Fortitude Re. in 2018, KKR took a majority stake in Global Atlantic in 2021 (which it said last month it plans to fully acquire), Brookfield launched its reinsurance unit in 2021, and Blackstone has taken minority stakes in four separate insurance businesses, each with deals for the firm to manage their assets.

In the US, private capital now holds around a tenth of the entire life insurance market, managing more than $850 billion in assets—welcome insulation against traditional fundraising difficulties, on top of the earnings potential.

Picking up PIC

PIC is just the latest opportunity for investors to expand their insurance holdings. With £44 billion in invested assets against £39 billion in insurance obligations, that opportunity is sizeable.

It’s a welcome target for the rumored suitors Apollo, Carlyle, and KKR, which are reported to have been eyeing the emerging UK bulk annuity market even before this process, searching for opportunities to secure a foothold. With PIC, the group has a cleanly packaged, scaled business to acquire, rather than the messier alternative of attempting to launch a new entity.

Given the competitiveness of the process and the relative strength of the asset, any deal is expected to come at a premium. Earlier rumors centered around a £5 billion purchase price, above PIC’s book value.

That should mean a successful exit for current owners Reinet (an entity overseen by Richemont Chairman Johann Rupert), HPS Investment Partners, Abu Dhabi Investment Authority, and CVC Capital Partners via its long-term holds strategic opportunities platform.

• Vivendi SE (Paris: VIV), the French digital entertainment company, is considering strategic options that may include a split into three separate businesses.

• Global Payments (NYSE: GPN) has denied it’s considering an acquisition of Shift4 Payments (NYSE: FOUR) despite reports yesterday that it was evaluating a potential deal.

• Clayton Dubilier & Rice agreed to acquire Shearer’s Foods, a contract manufacturer and private label supplier serving the snack industry, from Ontario Teachers’ Pension Plan Board.

• Aldinger, backed by Incline Equity Partners, acquired Seattle-based Instrument Technologies, a provider of instrument calibration services.

• Japan Investment Corp., Dai Nippon Printing, and Mitsui Chemicals are considering a $4.71 billion buyout of Shinko Electric Industries, an advanced chip-packaging business owned by Fujitsu.

• TeamSnap, a provider of sports league management software owned by Waud Capital Partners, has acquired MoJo Sports, a youth sports media platform founded by former Disney executive Ben Sherwood.

• Thoma Bravo invested in BlueMatrix, an investment research distribution platform.

• TowerBrook Capital Partners acquired a majority stake in Demakes Enterprises, a manufacturer of value-added protein products.

• TPG and Investcorp agreed to acquire Outcomes First Group, a U.K.-based special education provider, from Stirling Square Capital Partners.

• ABN Amro Bank (ENXTAM: ABN) agreed to acquire BUX, a European neobroker.

• Abu Dhabi National Oil Co. may be nearing a €5 billion bid for chemical producer OCI.

• Envestnet (NYSE: ENV) announced plans to explore strategic alternatives for Yodlee, its data aggregation and analytics subsidiary purchased for $590 million in 2015.

• Royal Golden Eagle made a $3.35 billion offer to acquire a 52 percent stake in Vinda International, a Hong Kong-listed tissue and diaper maker.

• EQT Corporation (NYSE: EQT) is considering a potential sale of non-operated minority interests in some of its Pennsylvania gas wells in a deal that could fetch more than $3 billion.

• Pembina (TSX: PPL) agreed to acquire Enbridge's (NYSE: ENB) interests in the Alliance Pipeline, Aux Sable and NRGreen joint ventures for $2.3 billion.

• TMX Group (TSX: X) completed the acquisition of VettaFi, an ETF solutions provider, for $1.03 billion.

• Heartwood Partners acquired Bush Brothers Provisions, a meat packing and distribution company.

• RMA Companies, an OceanSound Partners-backed provider of environmental consulting, materials testing, and inspection for infrastructure assets, acquired Rone Engineering, a geotechnical engineering and construction materials firm.

• Webster Financial Corporation (NYSE: WBS) has agreed to acquire Ametros Financial, a custodian and administrator of medical funds from insurance claim settlements, from Long Ridge Equity Partners.

• Campari Group (Milan: CPR) agreed to acquire the Courvoisier Cognac brand from Beam Suntory for more than $1.2 billion.

• DPG Media has agreed to buy Dutch television group RTL Nederland from RTL Group for $1.2 billion.

• Fractyl Health, a biotech focused on treatments for metabolic diseases, filed for a $100 million Nasdaq IPO. Current backers include Mithril, General Catalyst, Bessemer Venture Partners, Domain Associates, and Crown Venture Fund.

• Hg invested in CINC Systems, a provider of software solutions for the community association management industry, joining existing backer Spectrum Equity.

• Udaan, an Indian B2B e-commerce platform, raised $340 million in Series E funding led by M&G PLC. Lightspeed, DST Global, and existing investors also participated.

• Tome Biosciences, a developer of in vivo gene editing technology, raised over $213 million in Series A and B funding. Andreessen Horowitz, ARCH Venture Partners, and GV co-led, with participation from Longwood Fund, Polaris Partners, Bruker Corp., Fujifilm, and Alexandria Venture Investments.

• Line Next, an NFT marketplace formed by messaging business Line Corporation in 2021, raised $140 million from Crescendo Equity Partners.

• Urban Sports Club, a Berlin-based operator of a health and fitness club network, raised €95 million in funding led by Verdane. Existing backers HV Capital, ProSiebenSat1, and other unnamed investors also joined.

• Qogita, a developer of an e-commerce platform for retailers, raised €80 million ($86 million) in Series B funding. Dawn Capital led, with participation from Accel, LocalGlobe, and Bessemer Venture Partners.

• Parse Biosciences, a provider of single-cell sequencing solutions, raised $50 million in new funding across Series C equity and debt. Soleus Capital led the equity round, with participation from Bioeconomy Capital, Janus Henderson Investors, Marshall Wace, Sahsen Ventures, and Saras Capital. Horizon Technology Finance provided the debt financing.

• Twin Health, a developer of AI-driven metabolic health solutions, raised $50 million in new funding led by Temasek, with participation from existing backers Sofina, ICONIQ Growth, Helena, and Peak XV.

• Andalusia Labs, a provider of blockchain risk management solutions, raised $48 million in Series A funding. Lightspeed Venture Partners led, with participation from Mubadala Capital, Pantera Capital, Framework Ventures, and several existing backers.

• Ecoworks, a climate-tech company focused on developing green manufacturing solutions, raised €40 million in Series A funding. World Fund led the round, with participation from Haniel, Kompas VC, and ISAI.

• Dimensional Energy, a maker of sustainable aviation fuel through carbon utilization tech, raised $20 million in series A funding led by Envisioning Partners, with participation from United Airlines, Microsoft, NYC Ventures, and others.

• PursueCare, a provider of telehealth addiction treatment services, raised $20 million in Series B funding led by T.Rx Capital and Yamaha Motor Ventures.

• Amide Technologies, a provider of complex peptide synthesis solutions, raised $16.5 million from Engine Ventures.

• Meniga, an Iceland-based developer of digital banking tools, raised €15 million in Series D funding from Groupe BPCE, Crédito Agrícola, and Omega ehf.

• Distributional, a platform for AI testing and evaluation, raised $11 million in seed funding from Andreessen Horowitz, Operator Stack, Point72 Ventures, and SV Angel.

• Chalk, a developer of a data platform for machine learning, raised $10 million in seed funding led by General Catalyst, Unusual Ventures, and Xfund.

• Plan-B Net Zero, a green energy business focused on renewable power development, raised €9.2 million in Series A funding led by Yamato Capital AG.

• Lolli, a Bitcoin rewards app, raised $8 million in Series B funding. Bitkraft Ventures led, with participation from Sfermion, Prisma Ventures, Hypersphere Ventures, ZebPay CEO Rahul Pagidipati, Night Media, and Animal Capital.

• Hyperplane, a developer of data intelligence infrastructure for banking, raised $6 million in seed funding. Lachy Groom led, with participation from SV Angel, Clocktower Technology Ventures, Liquid2 Ventures, Soma Capital, Latitud, Atman Capital, and Norte.

• Prevu, a New York-based platform for discounted homebuying, raised $6 million in Series A funding led by Citi, with participation from RiverPark Ventures, Metropolis Ventures, Simplex Ventures, Winklevoss Capital, and Liebenthal Ventures.

• Arbonics, a developer of carbon removal solutions, raised €5.5 million in seed funding led by NordicNinja, Plural, and Tilia Impact Ventures.

• Pave Bank, a digital bank platform facilitating multi-asset transactions, raised $5.2 million in seed funding. 468 Capital led, with participation from Quona Capital, FT Partners, BR Capital, W3.fund, Daedalus, and angel investors.

• Stairs Financial, a mortgage platform focused on first-time home buyers, raised $3.5 million in seed funding. Zigg Capital led, with participation from Y Combinator, Antler, and Exceptional Capital.

• Barnyard Games, a developer of social games intended for Fortnite, raised $3.4 million in seed funding led by Menlo Ventures, with participation from BetaWorks, Alumni Ventures, and Charge VC.

• NeoCarbon, a climate tech company working on carbon capture and removal, raised €3.2 million in seed funding from RAISE Ventures, with participation from Proptech1 Ventures, Speedinvest, and Antler.

• Maka, a social e-commerce platform focused on fashion and beauty products, raised $2.65 million in pre-seed funding led by 4DX Ventures and Janngo, with participation from Palm Drive Capital, Jonathan Shipman, and executives from Wolt.

• Sandbrook Capital raised $1.5 billion for a debut climate-focused infrastructure fund.

• Covalence Investment Partners is targeting $750 million for a new oil fund.

• Atlas Merchant Capital is targeting more than $500 million for regional bank investments.

• Playground Global raised $410 million for its third venture fund.

• Partech Venture raised a new €360 million early-stage fund.

• BoxGroup raised $425 million across a seed-stage fund and an opportunity fund.

• Emerald Bridge is targeting $400 million for its debut energy-focused fund.

1. The latest on 777 Partners’ bid for Everton.

• As it works to line up funding for its Everton approach, 777 is said to be selling off a mortgage business, a portfolio of legal settlement claims, and one of its portfolio company’s Boeing passenger jets. — Everton bidder 777 selling assets to raise cash, Semafor

2. Blackstone and Apollo holiday videos make the rounds.

• After watching both performances, it’s probably fair to say that these teams should stick to investing. — Blackstone’s video and Apollo’s video 

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