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Term Sheet — Friday, June 16

Jun 16, 2017

WHOLE FOODS GETS A BUYER

Good morning. This is Anne VanderMey, filling in for Erin today. Send your feedback to anne_vandermey@fortune.com, or find me on Twitter @vandermy.

AMAZON BUYS WHOLE FOODS: The e-commerce titan this morning said it would acquire Whole Foods in an all-cash deal for $13.7 billion. The move comes as Amazon gets serious about its grocery business, and Whole Foods faces pressure from activist investors.

Some initial takeaways:

• This is by far the Amazon’s largest acquisition ever, leaving its $1.2 billion deal for Zappos in the dust.

• The specialty grocer has been working with Instacart for delivery. This can’t bode well for that partnership.

• Whole Foods has come under fire for years because of the tension between its feel-good mission around health and the environment, and its role as a huge business. (Remember asparagus water?) Fortune’s Beth Kowitt talked to John Mackey in 2015 about some of the company’s past scandals:

“This stuff goes viral,” Mackey tells me, “because people are eager to believe bad things about Whole Foods so it doesn’t disrupt their mental model” of business as selfish and greedy. It’s similar to how people scrutinize his diet. “They want to catch me on stuff,” says Mackey, who is a vegan and abstains from processed food. “They want to prove I’m a hypocrite. I think that’s true for Whole Foods as a whole.”

It will be interesting to see how consumers react when the chain is owned by an even bigger company —with a CEO who eats meat.

MEANWHILE, Walmart, which is in a race to to prevent Amazon from disrupting its entire business, responded with its own M&A deal: a $310 million acquisition of high end apparel startup Bonobos. As some critics pointed out on Twitter, one of these companies is playing chess and one of them is playing checkers. Investors agree: Retail stocks took a dive this morning.

CONGLOMERATES’ NEW CHAPTER: Investors are praying that GE’s new CEO, John Flannery, will start selling off more pieces of his $127 billion company.

The big piece of CEO news from earlier this week—besides the ascension of Uber’s new ruling committee—was the appointment of longtime GE veteran John Flannery to the company’s top spot. He’ll have a tough job.

Aside from Jack Welch’s standout tenure at GE, the 125-year-old company has had a long and storied history of underperforming the market. Fortune’s data guru Scott DeCarlo ran the numbers on the last few CEOs at the company: In the 1970s, under Welch’s predecessor, Reginald H. Jones, GE stock underperformed the S&P 500 by about 30 percentage points. Welch outperformed the market by about 2000 percentage points between 1981 and 2001. And Immelt underperformed by about 150 percentage points.

All that is to say, running a conglomerate like GE is hard. Hulking, diversified corporations, once the height of fashion, are now decidedly out of style on Wall Street. The data bears out the sentiment: According to McKinsey research, between 2002 and 2010, conglomerates’ median total annual return to shareholders was 7.5%, vs. 11.8% for more focused companies.

Which is why investors in GE think (and fervently hope) that Flannery, with his finance and M&A-heavy background, is ready to make some big deals. The actual outcome could have big implications for the future, and possible further decline, of the American conglomerate.

ADDENDUM: I’d be remiss not to point out that plenty of people have compared modern tech companies’ sprawling portfolios of internet businesses with the early days of GE and its electricity businesses. We’ll check back to see how those tech giants are doing 125 years from now.

IT JUST TAKES ONE TRICK: Chinese web giant Tencent is said to be seeking to acquire Angry Birds maker Rovio Entertainment. According to reporting by the Information, Tencent is one of several companies to approach Rovio about a possible purchase,” and the deal could reach $3 billion. Rovio turned a 17.5 million euro profit last year on the strength of its Angry Bird franchise, though some investors have lamented that it relies too heavily on its malcontent fowl. Barron’s notes:

If you assumed Rovio was a one-trick pony, you’d be about right. Founded in 2003, the company’s roster is dominated by titles like ‘Angry Birds Space,’ ‘Angry Birds Star Wars,’ and ‘Angry Birds Transformers.’ Surely ‘Angry Birds: Clash of Clans’ is a shoe-in if this deal happens?

JAW BREAKERS: As Americans attempt to eat healthier and consume less sugar, Nestlé is considering unloading its iconic candy business, which could fetch some $3 billion, the Wall Street Journal reports. It would be the latest in a string of big food mergers that my colleague John Kell flagged in March. One food industry analyst summed up the prevailing sentiment:

“With revenue now in negative territory for a lot of these companies, the sense of urgency to do a deal is going to be higher,” says Credit Suisse analyst Robert Moskow.

THE LATEST FROM FORTUNE...

•  Dow Chemical and DuPont have won U.S. antitrust approval to merge.

• Why Yahoo’s Alibaba stock is a bad deal for investors.

• The great evolution of the American corporate logo.

• The U.S. acts to seize a Picasso given to Leonardo DiCaprio amid Malaysian fund intrigue.

• Facing billions in liabilities for airbag defects, Takata is facing bankruptcy.

…AND ELSEWHERE

The secret to Liberty Media’s utter dominance. Jeff Bezos is still trying to figure out how to spend even more of his money. Why the Supreme Court may have given a big gift to private-equity managers.

VENTURE DEALS

Mobike, a Shanghai-based on-demand bike rental company, raised $600 million in Series E funding, according to TechCrunch. Tencent led the round, and was joined by Sequoia, TPG, and Hillhouse Capital, BOCOM International, ICBC International, and Farallon Capital. Read more.

Slack, a San Francisco-based team communication platform, is raising $500 million in funding at a $5 billion post-money valuation, according a report in Recode. Read more.

Scopely, a Los Angeles developer of mobile games, raised $60 million in a Series C funding. Revolution Growth led the round, and was joined by Greenspring Associates, Sands Capital Ventures, Cross Creek Advisors, and Pritzker Group Venture Capital.

Conviva, a Foster City, Calif. Intelligence control platform, raised $40 million in funding at a roughly $300 million valuation, according to TechCrunch. Investors include Australia’s sovereign wealth fund Future Fund, NEA, Foundation Capital, and Time Warner Investments. Read more.

Entelo, a San Francisco cloud-based software company,  raised $20 million in Series C funding. U.S. Venture Partners led the round, and was joined by Battery Ventures, Shasta Ventures, and Correlation Ventures.

Ridibooks, a Seoul e-book store, raised a $20 million in Series C funding, according to TechCrunch. Investors include Praxis Capital Partners, ShinHan Finance Investment, and Company K Partners. Read more.

Dispatch, a Boston enterprise technology company, raised $12 million in Series A funding. Grandbanks Capital and ServiceMaster led the round, with participation from Assurant, Liberty Mutual Strategic Ventures, Promus Ventures, Recruit Strategic Partners, Salesforce Ventures, Huff Capital, and Ray Lane.

Atrium LTS, a legal services startup founded by Justin Kan, raised $10.5 million in funding, according to TechCrunch. Read more.

Common Networks, a San Francisco wireless internet service provider, raised $7 million in Series A funding from Eclipse Ventures and Lux Capital.

Goodera, a Bengaluru, India-based company that connects businesses with nonprofits, raised $5.5 million in Series A funding. Investors include Nexus Venture Partners and Omidyar Network.

Covr Financial Technologies, a Boise, Idaho  digital personal insurance platform, raised $5 million in funding from Nyca Partners, Commerce Ventures, Connectivity Capital Partners, and Contour Venture Partners.

ZineOne, a Milpitas, Calif. operator of an event driven interactions platform, raised $2.5 million in funding. Golden Seeds Angels and Hyderabad Angels led the round.

Voiceitt, an Israeli developer of apps for people with speech impairments, raised $2 million in funding. Investors include Cahn Capital, Amit Technion, Israel’s Institute of Technology, Quake Capital Partners, Dreamit Ventures, and Buffalo Angels.

Codota, an Israeli provider of workflow services for developers, raised $2 million in seed funding from Khosla Ventures, according to TechCrunch. Read more.

HEALTH AND LIFE SCIENCES DEALS

Checkmate Pharmaceuticals, a Cambridge, Mass. clinical-stage biopharmaceutical company focused on cancer immunotherapy, raised $27 million in Series B funding. F-Prime Capital Partners led the round, and was joined by Sofinnova and venBio Partners.

LabConnect, a Seattle provider of laboratory and support services to biopharmaceutical, medical device, and contract research organizations, raised $24.5 million in Series A funding. Investors include ABS Capital Partners, Pablo Capital, and BroadOak Capital.

Mindstrong Health, a Palo Alto, Calif. developer of mobile-based cognitive function diagnostic tests, raised $14 million in Series A funding. Foresite Capital and ARCH Venture Partners led the round, with participation from Optum Ventures, Berggruen Holdings, and the One Mind Brain Health Impact Fund.

Evasc Neurovascular Enterprises, a Vancouver, Canada medical device company, raised C$10 million ($7.6 million) in Series A funding. Yonghua Capital led the round.

Regroup Therapy, a Chicago provider of virtual staffing of psychiatrists and mental health professionals to health entities, raised $6 million in Series A funding. OSF Ventures led the round, and was joined by Hyde Park Angels, OCA Ventures, HLM Venture Partners, Furthur Fund, and Impact Engine.

Spry Health, a Palo Alto, Calif.  Provider of health management technologies and remote patient monitoring, raised $5.5 million in Series A funding. Grove Ventures led the round, and was joined by Stanford-StartX Fund, OVO Fund, and Think+.

HLTH, a New York City healthcare company focused on reducing costs, raised $5 million in funding. Primary Venture Partners and Launch Capital led the round.

Osso VR, a Palo Alto, Calif. virtual reality surgical training technology company, raised $2 million in seed funding. SignalFire led the round, with participation from Anorak Ventures.

FraudScope, an Atlanta enterprise SaaS platform aimed at reducing healthcare billing claims fraud, raised $1.5 million in seed funding. Investors include Spider Capital,  GRA Venture Fund, TechSquare Labs, and Mosley Ventures.

PRIVATE EQUITY DEALS

• Liberty Hall Capital Partners acquired Dunlop Aircraft Tyres, a Birmingham, U.K. aircraft tires manufacturer, for $135 million. [This item has been updated to include the name of the acquirer.]

• Warburg Pincus will acquire a 43% stake in Tata Technologies, a Pune, India-based engineering outsourcing provider, for $360 million, according to Reuters. Sellers include Tata Motors and Tata Capital. Read more.

OTHER DEALS

• Amazon (Nasdaq:AMZN) agreed to acquire Whole Foods (NasdaqGS:WFM) for $13.7 billion, according to Bloomberg. Read more.

Nestle (SWX:NESN) is considering selling its confectionery business, which generates over $920 million in annual sales and includes popular brands such as Butterfinger and SkinnyCow. Read more at Fortune.

• DuPont (NYSE:DD) and Dow Chemical’s (NYSE:DOW) planned all-stock merger, valued at $130 billion, has received U.S. antitrust approval, provided the companies divest a number of assets, including certain crop protection products. Read more at Fortune.

IPOs

Rovio, the Finnish mobile gaming studio and maker of the Angry Birds game, is reportedly considering an IPO, according to news site The Information. According to sources cited by the news site, Chinese internet giant Tencent is also weighing to possibility of buying Rovio for about $3 billion. The company is 70% owned by venture capitalist Kaj Hed, who is also co-founder Niklas Hed’s uncle. Read more at Fortune.

• Lotte Chemical Titan Holdings Sdn Bhd, a Malaysian company owned by South Korea’s Lotte Chemical Corp, said its attracted five cornerstone investors ahead of its $1.4 billion initial public offering in July, Reuters reports. Those investors include Permodalan Nasional Bhd and Eastspring Investment Bhd. Read more.

EXITS

• Walmart (NYSE:WMT) has agreed to acquire Bonobos, a New York-based men’s retailer,  for $310 million, according to Reuters. Bonobos raised more than $127 million in venture funding from backers including Coppel Capital, Accel Partners, Accel Partners, and Lightspeed Venture Partners. Read more.

• Generational Equity sold Cubed Group, a Miami provider of cybersecurity services, to Bilgola Capital-backed CompassMSP.

• Warburg Pincus agreed to acquire Duravant, a Downers Grove, Ill.-based automation and engineered equipment company serving the food processing, packaging and material handling sectors, from Odyssey Investment Partners. Terms weren’t disclosed.

FIRMS + FUNDS

• Medicxi Ventures, a London-based early-stage venture capital firm, raised $300 million for its latest fund, Medicxi Growth 1 (MG1).

PEOPLE

• Anisha Malhotra has joined GPB Capital as a managing director and head of capital markets.

• Preston McKenzie, the former CEO of Newscycle Solutions, and Eric Spiegel, the former president and CEO of Siemens USA, have joined General Atlantic as special advisors.

• Christopher Koenig has joined Gordon Brothers as a director in the firm’s commercial and industrial division.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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