Shopping the venture clearance rack
Pinegrove Capital dives into the bargain bin
Happy Sunday. Let’s get started:
The past 18 months have been about as bad as it gets for firms like SoftBank and Tiger Global. Rapid deflation in early-stage valuations quickly turned 2020’s venture excess into painful mark-to-market losses, coupled with an M&A slowdown and closed public markets that have made exits few and far between.
But, where there’s volatility, there’s also opportunity.
Here to take full advantage is Pinegrove Capital Partners. It’s a new launch coming out of a partnership between Brookfield and Sequoia Heritage, the high-net-worth asset management firm seeded by Sequoia Capital’s senior partners.
Brookfield and Sequoia, each with a 50 percent stake, have contributed $500 million to the upstart secondaries firm, with plans to target a $2 billion total raise for its first fund.
Pinegrove’s mandate is focused on the purchase of discounted start-up stakes from venture capital, providing liquidity to firms feeling the heat from an absence of exits and LPs that want money back. They’ll also look to purchase stakes in funds from investors seeking an out, as well as provide certain types of lending solutions.
What’s the Strategy Here?
This year’s tepid deal flow, and public markets that have been largely shut to new offerings, have limited available options for VCs looking to exit investments.
That’s a big issue for firms that are nearing the end of their current fund and looking to kick off the next raise. Without meaningful distributions, it could be an uphill battle to convince prospective LPs to back them.
Pinegrove may be betting that the crunch can help them pick up top-tier assets on the cheap, and in a mutually beneficial way. Their involvement could provide an avenue for funds to deliver DPI (distributed to paid-in capital; realized proceeds) to LPs ahead of a new raise, which might be an attractive option even if venture investors are forced to take a discount to what they believe is fair market value.
How Does This Look in Practice?
Deals could include stakes in individual companies, or Pinegrove could purchase a ‘strip’ at the fund level, say a 10% stake in the fund’s total portfolio, with proceeds distributed out pro rata to LPs.
Another potential option includes some flavor of structured financing. Pinegrove could float the fund an upfront cash consideration secured by the NAV from a portion of the fund, not entirely dissimilar from last week’s note on NAV loans. This approach may also offer more flexibility — variations could include PIK interest, shared upside in the collateralized NAV, or other bespoke solutions.
That said, this style of structured transaction can quickly get complicated, and, if you’re not careful, can defeat the purpose. LPs may have final say on any deals involving the fund’s NAV, either torpedoing a transaction or diluting any potential benefit from DPI that they deem overly synthetic or manufactured.
DEALS, DEALS, DEALS | Last week's notable transactions
The rest of the deal sheet…
• Arm, the chipmaking business, is targeting an IPO valuation between $60 and $70 billion.
• Subway is hoping to wrap up its sale by Labor Day, with Roark Capital and TDR Capital the sole bidders remaining following Advent’s departure from the process, per Axios Pro.
• Bain Capital and Cinven are considering their exit strategy for pharmaceutical business Stada, which could include a sale or public offering worth more than €10 billion.
• Ontario Teachers' Pension Plan is looking to exit snacks business Shearer's, which could be worth $3 billion.
• KKR and News Corp. (Nasdaq: NWSA) submitted final bids for publisher Simon & Schuster, whose $2.2 billion sale to Penguin Random House was blocked by U.S. antitrust authorities.
• Francisco Partners and Symphony Technology Group are among a group bidding for Avid Technology (Nasdaq: AVID), an audio/visual editing software developer trading at a $1.2 billion market value.
• Centerbridge and Warburg Pincus are reportedly bidding for Barclays’ German consumer finance division. This follows their partnership on last week’s PacWest/Banc of California tie-up.
• Juul, the e-cigarette business once valued at $38 billion, has brought on Jefferies to assist in a $1 billion financing effort.
• Triller, a video-based social networking platform, filed for a NYSE direct listing under ticker ILLR, targeting a $2.1 billion market value on revenue of $48 million and a $192 million net loss.
• Carlyle is marketing a minority stake in Sedgwick, a claims management company with a reputation for wrongful denials.
• Tom Brady purchased a minority stake in Birmingham City F.C., a soccer club competing in Britain’s second tier. This follows an earlier 45% stake sold to hedge fund manager Tom Wagner.
• CoreWeave, a cloud infrastructure platform, secured a $2.3 billion credit facility from Blackstone and backer Magnetar Capital.
• Fujitsu has invited Apollo, Bain Capital, KKR, and Japan Investment Corp. into the process for a majority stake in chip packaging provider Shinko Electric Industries that could fetch $2.7 billion.
• One Rock Capital Partners reached an agreement to purchase Constantia Flexibles, an Australian packaging business, from Wendel.
• Vocus, backed by Macquarie, offered to acquire certain non-mobile fiber assets from TPG Telecom (ASX: TPG) for A$6.3 billion.
• Strathcona Resources, a Canadian producer owned by Waterous Energy Fund, is set to go public via a reverse merger with competitor Pipestone Energy (TSX: PIPE). The combined business would be Canada’s fifth-largest oil producer, valued at C$8.6 billion.
• Apax Partners is in talks with Fremman Capital over the purchase of a 50% stake in med-tech distributor Palex, with any deal expected at a roughly €1 billion enterprise value.
• Chelsea FC, owned by Todd Boehly and Clearlake, is looking for additional funding and is reportedly in talks with Ares over the sale of a $500 million minority stake. Any deal with Ares would follow the firm’s $75 million investment last week in Inter Miami, plus existing stakes in Atletico Madrid, Crystal Palace, and Olympique Lyonnais.
• Crédit Agricole is in late-stage talks to acquire Belgian wealth management firm Degrood Petercam in a deal that could be worth more than €1 billion.
• AXA agreed to acquire Irish health insurer Laya Healthcare from AIG (NYSE: AIG) €650 million.
• Blackstone is reportedly bidding for a 34% stake in Indian pharmaceutical business Cipla.
• Alexion, a unit of AstraZeneca (LSE: AZN), agreed to buy a rare disease therapeutics portfolio from Pfizer (NYSE: PFE) for up to $1 billion, plus royalties.
• Marathon Health, a primary care platform backed by General Atlantic, acquired Cerner’s Workforce Health Solutions unit.
• Arlington Capital Partners acquired Integrated Data Services, a provider of information systems and support services.
VENTURE & GROWTH | The early stages
• TSG Consumer Partners invested in Trinity Solar, a provider of residential solar solutions.
• Hybar raised $700m in equity and debt funding to build out a sustainable scrap metal recycling steel rebar mill. TPG Rise Climate and Global Principal Partners led the equity raise.
• Micro Connect, a Hong Kong-based small business funding platform, raised a $458 million Series C at a $1.7 billion post-money valuation with participation from Sequoia Capital China, Lenovo Capital, Vectr fintech, Dara Holdings, and Baillie Gifford, per South China Morning Post.
• Nile, a developer of enterprise network solutions, raised $175 million in Series C funding led by March Capital and Sanabil Investments, alongside Prosperity7, Solutions by STC, Liberty Global Ventures, 8VC, Geodesic Capital, FirstU Capital, and Valor Equity Partners.
• Kyverna Therapeutics, a developer of cell therapies for autoimmune diseases, raised $60 million in Series B extension funding, bringing the total round to $145 million. Bain Capital Life Sciences and GordonMD participated, alongside existing backers Gilead, Westlake Village BioPartners, Vida Ventures, Northpond Ventures, RTW Investments, Insight Partners, CAM Capital, LYFE Capital, and jVen Capital.
• CG Oncology, a developer of oncolytic immunotherapies for bladder cancer, raised $105 million in cross-over financing. Foresite Capital and TCGX led, with participation from Avidity Partners, BVF Partners, Janus Henderson, Acorn Bioventures, Ally Bridge Group, Decheng Capital, Longitude Capital, Malin Corp., and RA Capital Management.
• Healthmap Solutions, a kidney population health management business, raised $100 million led by WindRose.
• GoStudent, a tutor marketplace, raised $95 million in equity and debt financing from Deutsche Bank, Left Lane Capital, DN Capital, Tencent, Prosus, DST, Coatue, and Softbank.
• LightForce Orthodontics, a manufacturer of 3D-printed orthodontia, raised an $80 million Series D led by Ally Bridge Group, Transformation Capital, and CareCapital, with participation from Omega Venture Partners, Matter Venture Partners, the American Association of Orthodontics, and insiders Kleiner Perkins, Tyche Partners, and Matrix Partners.
• Endor Labs, a code security platform, raised a $70 million Series A from Lightspeed Venture Partners, Coatue, Dell Technologies Capital, and Section 32.
• Airalo, a provider of eSIM connectivity solutions, raised $60 million in Series B funding at a $280 million post-money led by E& Capital, alongside Antler Elevate, Liberty Global, Rakuten Capital, Singtel Innov8, Surge, Orange, T.Capital, KPN Ventures, Telefónica Ventures, I2BF Global Ventures, GO Ventures, and LG Technology Ventures.
• TytoCare, a virtual home care platform, raised $49 million in a round led by Insight Partners, with participation from MemorialCare, Healthcare of Ontario Pension Plan, and Clal.
• Lula, an insurtech developer, raised $36 million in Series B funding led by NextView Ventures and Khosla Ventures, with participation from Founders Fund, Steve McLaughlin, Steve Pagliuca, and Nextera Energy.
• Octave Bioscience, a developer of multiple sclerosis precision care, raised $30 million in Series B extension funding from Novartis, Hikma Ventures, and Intermountain Ventures, with participation from existing investors The Blue Venture Fund, Echo Health Ventures, Section 32, Northpond Ventures, Deerfield Management, Casdin Capital, and Merck Global Health Innovation Fund.
• Amber Bio, a developer of multi-kilobase gene editing tech, raised $26 million in seed funding led by Playground Global and Andreessen Horowitz, with participation from Eli Lilly, the Retinal Degeneration Fund, Hummingbird Ventures, Pillar VC.
• Socket, developer of a software security scanning tool, raised $20 million in Series A funding led by Andreessen Horowitz, with participation from Abstract Ventures.
• Plotlogic, an Australian developer of ore identification mining tech, raised $28 million in Series B funding. Galvanize Climate Solutions and SE Ventures led, with participation from Main Sequence Ventures and insiders Innovation Endeavors, DCVC, Bentley iTwin Ventures, and Grids Capital.
FUNDRAISING | Buyout, growth, credit & venture
• Glendower Capital, CVC’s secondaries unit, raised $5.8 billion.
• Whitehorse raised $5 billion for a fund focused on private equity portfolio liquidity solutions.
• PGIM Private Capital, Prudential’s investment management business, is targeting $3 billion for a second direct lending fund.
• LS Power is targeting $2.5 billion for its fifth power & utilities fund.
• Greenoaks raised $2.1 billion for its fifth venture fund, above a $1.9 billion target.
• Kimmeridge raised more than $1 billion for its sixth oil & gas fund.
• NATO raised €1 billion from member nations to launch a venture fund focused on defense startups, as well as potential stakes in other venture funds.
• SK Capital Partners raised $800 million for its second Catalyst fund, focused on lower middle market materials and life sciences businesses.
• The Danish government is raising $800 million to invest in waste management businesses.
• Lone View Capital held a $466 million interim close for its debut fund.
• Energize Capital raised $300 million for its second software growth fund.
• Yosemite raised $200 million for its debut fund focused on oncology biotechs. It's led by Reed Jobs, the son of Apple co-founder Steve Jobs and Emerson Collective’s Laurene Powell Jobs.
• NOVA Prime is raising $200 million for its debut venture fund focused on clean energy, digital health, and AI.
• Golding Capital Partners held a €172 million first close for its private equity secondaries fund.
• Precursor Ventures is seeking $120 million for its fifth fund.
THE READOUT | Worth your time
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