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Melody Closes Nearly $2 Billion Digital Infrastructure Fund | Warburg Seeks Secondary Deal for Duravant | SEC Proposal Could Sour Big Deals
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Good day, Pro PE readers! If there’s one thing the past two years of pandemic-inspired remote work has made clear, it’s the importance of a great internet connection, a fact not lost on investors in the digital infrastructure industry. This morning, our own Luis Garcia has news of one such investor, Melody Investment Advisors, which has raised nearly $2 billion for a new digital infrastructure fund. Meanwhile, Preeti Singh has the details of Warburg Pincus’s efforts to raise a continuation fund for its portfolio company Duravant, while our Wall Street Journal colleague Anna Hirtenstein writes of a proposal by the London Stock Exchange that would create a special market for private companies to trade publicly. Finally, Chris Cumming looks at the possible impact on
private equity of a recent Securities and Exchange Commission move to force greater disclosure requirements on private companies.
Read on for more details …
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A cellphone tower against the backdrop of Utah’s Wasatch range. PHOTO: GEORGE FREY / BLOOMBERG NEWS
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Melody Investment Advisors, a New York-based firm focused on digital infrastructure deals, has rounded up nearly $2 billion for a new fund to back investments in cell towers, optical fiber, data centers and other digital infrastructure assets, Luis Garcia reports for WSJ Pro Private Equity. Melody Communications Infrastructure Fund II LP exceeded its $1.5 billion target and is the first fund since founder Omar Jaffrey launched the firm in 2019.
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Growth investor Warburg Pincus LLC is seeking up to $2 billion for Duravant LLC in a single-asset secondary transaction that will give the firm more time and money to manage the company, WSJ Pro Private Equity’s Preeti Singh writes, citing people familiar with the offering. The deal is expected to close in early February, the people said. Warburg acquired Downers Grove, Ill.-based company Duravant in 2017 and agreed to sell a portion of its majority stake to Carlyle in October last year.
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The London Stock Exchange has proposed the creation of a special market for private companies to trade their shares publicly on the exchange on certain days, Anna Hirtenstein writes for The Wall Street Journal, citing a person familiar with the matter and proposals from the LSE to its regulators, the Financial Conduct Authority, and the U.K. Treasury, seen by the Journal. Private-company shares would trade publicly between one and five days in each trading window, once a month or quarter, or every six months. The companies wouldn’t be subject to the same degree of regulatory oversight as a fully listed company, requirements that startup company founders say are deterrents to listing
shares.
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The Take: SEC Proposal Could Sour Huge Private-Equity Deals
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Wall Street’s top regulator is weighing a plan to significantly increase the amount of information that private companies with 2,000 or more shareholders must disclose on their finances and operations, The Wall Street Journal has reported.
The proposal would shed light on the workings of large, privately traded companies—such as the roughly 960 “unicorns,” or private companies valued at $1 billion or more—that currently have far lighter disclosure requirements than publicly traded companies. In October, Securities and Exchange Commissioner Allison Herren Lee said the agency needs more information about the workings of such companies, whose investors and employees are often “in the dark.”
Read more in Cumming’s Take.
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$66.8 Billion
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The value of 234 leveraged buyouts last year in the Asia-Pacific region, up nearly 85% from 2020 and trailing only 2017 in terms of annual deal values, according to Dealogic figures
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A construction site for a NineDot Energy electric-battery storage site in the Pelham Gardens neighborhood of the Bronx. PHOTO: DESIREE RIOS FOR THE WALL STREET JOURNAL
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Carlyle Group Inc. has made two clean-energy investments totaling more than $100 million in community-project developer CertainSolar Inc., which operates as NineDot Energy, and vehicle-charging infrastructure and services provider Fermata LLC, Matt Wirz writes for the Journal. Doing business as Fermata Energy, the Charlottesville, Va., company received a $2.5 million investment from Tepco Ventures Inc. in Tokyo about three years ago to develop its two-way electric-vehicle power systems. Fermata now works with car brands such as Nissan and Ford, according to a release. New York-based NineDot designs and develops battery-storage projects and is working with
Fermata and electric bike and car rental company Revel Transit Inc. in New York on projects to tap vehicle batteries to supply power to the electricity grid during peak demand periods.
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Clinigen Group PLC said Monday that it has agreed an improved and final 1.3 billion pound ($1.78 billion) takeover by Triton Funds, Dow Jones Newswires' Ian Walker writes. Under the deal, accepting shareholders of the U.K. provider of pharmaceutical products and services will get 925 pence in cash for each share held. This compares with 883 pence as agreed last month.
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Imagine Entertainment, the film and TV production company co-founded by Ron Howard and Brian Grazer, is in talks to sell a majority stake to Centricus, a London-based investment firm, Benjamin Mullin and Julie Steinberg write for The Wall Street Journal, citing people familiar with the matter. The talks with Centricus value Imagine, known for hits including “Cinderella Man,” “Apollo 13” and “Inside Man,” at between $600 million and $800 million, the people said. Centricus is in talks to purchase more than 70% of the company, the people said.
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Midmarket firm Lee Equity Partners said it has invested in Therapy Partners Solutions, a Jacsonville, Fla.-based physical therapy services provider that consists of 60 owned and managed care sites across eight states, as well as revenue cycle outsourcing and compliance consulting operations for independent clinics, according to a press release.
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Century Park Capital Partners has backed its third main deal platform in the specialty chemicals sector with the recapitalization of NCP Coatings Inc, a Niles, Mich.-based company that develops and manufactures coatings used for markets that include military, industrial, commercial and forestry.
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Godspeed Capital Management in Palm Beach, Fla,. has acquired information technology company Exceptional Software Strategies Inc., a Linthicum Heights, Md.-based provider to federal defense and intelligence agencies, according to a news release.
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Trinity Hunt Partners in Dallas is backing sports medicine company SpineOne in Lone Tree, Colo., according to a news release. The firm plans to roll up more pain-management businesses through SpineOne.
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Susquehanna Private Capital has invested in youth soccer franchise company Soccer Shots Franchising LLC in Middletown, Pa., according to an emailed news release. The company’s franchise partners operate programs that served more than 400,000 children in 40 states and Canada in 2018, according to its website.
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Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.
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The company has worked closely with AT&T’s Warner Bros. studio on ‘The Matrix’ and other movie franchises. PHOTO: /ASSOCIATED PRESS
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Vine Alternative Investments has had discussions with potential suitors for its film and video finance company Village Roadshow Entertainment Group, Benjamin Mullin and Joe Flint report for The Wall Street Journal, citing people familiar with the matter. The business, which has a deep content library, is exploring strategic options including taking on a significant investment or selling itself, the people said. Vine, which holds a controlling interest in Village Roadshow, is working with investment bank PJT Partners on the process.
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New Enterprise Associates-backed clinical-stage biotechnology company Arcellx Inc. plans to go public, a registration statement filed with the Securities and Exchange Commission shows. The Gaithersburg, Md., company didn’t specify the number of shares it plans to sell or at what price range. New Enterprise owns a roughly 19% stake in the business and Wayne, Pa., firm SR One Capital Management holds a 15% interest, the filing shows. Other investors include venture funds and drugmakers.
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Kohlberg & Co.-backed Spinal Elements Holdings Inc. in Carlsbad, Calif., withdrew its plans for an initial public offering of shares, without giving a reason. The maker of spinal surgical devices and instruments filed plans to sell up to about 8.86 million shares at $13 to $15 each in October 2020, after filing a draft registration statement in May of that year. Mount Kisco, N.Y.-based Kohlberg first backed the company in 2016, according to its website.
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VentureSouth, a venture capital firm that backs startups in the Southeastern U.S., said it has excited Altas Organics, a Spartansburg, S.C.-based composting company that has been acquired by Generate Capital.
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Crypto exchange FTX Trading Ltd. has launched a $2 billion venture fund, one of the largest vehicles to date aiming to tap into the crypto market’s startups, Yuliya Chernova reports for WSJ Pro Venture Capital. The large size of FTX Ventures will allow it to invest flexibly across startup stages, with check sizes that could range from as little as $100,000 to hundreds of millions of dollars, said Amy Wu, the fund’s chief.
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Midmarket firm GTCR has hired Andrew Johnson as its head of marketing and communications, a newly created position. Mr. Johnson joins the firm from strategic communications advisor Finsbury Glover Hering, where he was a managing director, according to a press release.
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GPI Capital, a growth and structured equity firm, has promoted Philip Lo to partner of investor relations and business development, Chris Kim and Liam Burrell to principals and John Reising to vice president, according to an emailed press release.
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Flagship Pioneering founder Noubar Afeyan, a co-founder and backer of Covid-19 vaccine maker Moderna Inc., said he contracted the Omicrom variant late last year. In his first annual letter, the entrepreneur and venture capitalist said the pandemic is bound to reshape the biotech industry along with the way societies deal with illness and disease. He is non-executive chairman of Cambridge, Mass.-based Moderna.
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The recent decline in tech stocks has provided a window of opportunity for distressed-debt investors.
PHOTO: JOHANNES EISELE/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Distressed-debt funds have been purchasing discounted convertible bonds issued by technology companies after a broad sector selloff, sometimes reaping double-digit yields in an otherwise benign credit market characterized by low defaults and accommodative lenders, Alexander Saeedy reports for WSJ Pro Bankruptcy. High-yielding convertible debt from former unicorn startups like Beyond Meat Inc., SmileDirectClub Inc. and Vroom Inc. have been pitched as buys by investment banks to distressed-debt investors in recent weeks, people familiar with the matter said.
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BlackRock Inc. posted a higher quarterly profit, as market gains and new client money lifted the investment firm’s assets under management above $10 trillion for the first time, Justin Baer writes for The Wall Street Journal. The money manager reported net income of $1.64 billion, or $10.63 a share, in the fourth quarter, up 6% from $1.55 billion, or $10.02, in the same period a year earlier. Analysts polled by S&P Global Market Intelligence had predicted a per-share profit of $10.22.
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The U.S. venture capital industry invested $329.9 billion across about 17,054 deals last year, a record number of transactions and roughly double the high for deal value set in 2020, PitchBook Data Inc. and the National Venture Capital Association report. On the fundraising front, the industry collected a record $128.3 billion last year. And exits generated about $774.1 billion, including $681 billion raised through initial public offerings.
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Private equity has penetrated the life insurance industry far enough and some practices should be banned, according to industry critic Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington. In report last week, Ms. Appelbaum said 24 firms controlled 9.6% of the life industry’s $4.9 trillion in assets in 2020, or $471 billion. The report urges a ban on private-equity firms investing insurers' assets in debt or buyout funds they control, capping fees paid by insurers to PE firms and setting national standards for investment loss reserves.
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While supply chain issues and Covid-19 continue to dent earnings, labor costs and shortages have become the biggest drag on earnings, according to research from FactSet. Citing transcripts of fourth-quarter earnings calls held by 20 S&P 500 Index members, the researcher said 60% mentioned labor costs as having a negative impact on their bottom line. But FactSet also said the companies reported an aggregate earnings increase of almost 28% for the period compared with a year earlier.
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In acquiring private-equity placement agent Capstone Partners LP by Mizuho Americas, a unit of Japanese giant Mizuho Financial Group, will provide a gateway for Capstone in Asia, especially Japan, where Mizuho has an advantage, according to Shuji Matsuura, Mizuho’s chairman and chief executive. “We can connect those institutional investors as well as high-net-worth individuals” to Capstone and its clients, Mr. Matsuura said. “That’s going to create another edge in the [Capstone] strategy.” Mizuho has built out its products and services for sponsors in the past decade and Capstone “fills a gap” that will provide the investment bank with opportunities to “enhance our relationships with financial sponsors,” according to Jerry Rizzieri, president and CEO of Mizuho Securities USA.
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For those keeping count, last year was indeed among the busiest ever for private-equity and venture-capital dealmaking, according to the latest data from S&P Global Market Intelligence. In all, there were 24,722 such transactions last year, up 40% from 2020, with an aggregate value of about $1.2 trillion, more than double the 2020 total and 2.4 times the $498.64 billion reached in pre-pandemic 2019.
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