One Equity Partners is finally independent, around one year after news first broke that the private equity group was being spun out of J.P. Morgan Chase & Co.
J.P. Morgan had been the only investor in One Equity Partners since the group was founded in 2001, helping to back deals for such companies as Polaroid, Mandiant, TV Guide and Pirelli Tires. Last year it launched a process to sell its entire position in the group, plus a package of investments in third-party private equity funds, in order to scale back its private equity exposure.
What the bank failed to appreciate, however, was that the private equity secondary market simply couldn’t handle such a large transaction. OEP’s portfolio most recently was valued at around $4.5 billion, but even the largest secondary funds only have around $10 billion in committed capital. That would have meant several secondary firms teaming up (which is rare) and then highly-leveraging an LBO portfolio (which is even rarer).
So JPM instead began selling the third-party stakes piecemeal, and worked to sell as much of the OEP portfolio as it could. The result was today’s deal, in which Lexington Partners (lead) and AlpInvest Partners agreed to acquire JPM’s stakes in around half of the OEP portfolio companies for just under $2 billion (a price first reported by the WSJ, and confirmed by Fortune). It’s important to note that this sort of structure is different than Lexington and AlpInvest buying a 50% stake in the entire portfolio. No specifics one which portfolio companies were involved, but chances are that it was many of the stronger ones.
It also is worth noting that the OEP portfolio had already shrunk a bit from the time it was valued at $4.5 billion, via liquidity events. For example, the firm today has just 30 portfolio companies, down from 34 when we first reported on Lexington’s involvement back in May.
“This really was a negotiated deal because the original process didn’t yield a solution,” explains a source familiar with the situation.
J.P. Morgan said that the deal is not expected to have a material impact on its earnings. OEP is now considered an independent entity, with both Lexington and AlpInvest believed to have made additional commitments so that the firm can make new investments.
• Perplexed: I still don't understand why Buzzfeed's existing investors didn't participate in the new $50 million financing (assuming they had pro rata rights). This is an almost-guaranteed winner for the early-stage backers, and many of them seem to have plenty of available capital for such a deal (particularly NEA)...
• One for all: A tricky part of producing Term Sheet is trying to balance the amount of content that’s relevant to the venture capital industry with the amount that’s relevant to the private equity industry. So here’s some deal scoop that applies to both (phew):
Axial, an online platform for private equity financings, has raised $11 million in Series B funding. Comcast Ventures led the round, and was joined by return backers Redpoint Ventures and First Round Capital. New York-based Axial previously had raised $9 million.
For those unfamiliar with Axial, it’s a little bit like LinkedIn for private companies and funding sources. But it also adds valuation and transactional functionality on top, and currently has 17,000 members that represent nearly $38 billion in revenue. Chief executive Peter Lehrman says the new money will be used to further grow Axial’s network, plus also to further reduce frictions when members complete transactions with one another. He also isn’t concerned about a possible M&A slowdown after today’s banner year:
“The reality is that there are certain portion of the M&A market that are influenced heavily by macro trends, and those often are the really big deals. When you look at the lower middle-market, where we’re focused, there is a very active and robust market for those businesses being bought and sold in both up and down markets – particularly since many of them are owned by Baby Boomers… Even in really dark times like during the financial crisis, there were still tens of thousands of transactions occurring.”
• Sharing is caring: One benefit of our new layout is that you now can share each day's Term Sheet on Twitter, Facebook, LinkedIn and (for some reason) Google Plus. Just click the appropriate button that appears below the final news section.
THE BIG DEAL
• Telstra (ASX: TLS) has agreed to acquire an additional 65% stake in Ooyala, a Mountain View, Calif.–based provider of video streaming and analytics, for $270 million. This brings Telstra’s ownership stake to 98%, having previously invested $61 million. Ooyala had raised over $120 million in VC funding from Telstra, Google Ventures, Rembrandt Venture Partners, CID Group and Sierra Ventures. www.ooyala.com
VENTURE CAPITAL DEALS
• Bravo Wellness LLC, a Cleveland-based developer of outcomes-based wellness incentive programs for companies and organizations, has raised $22 million in Series A minority funding from ABS Capital Partners. The company was founded in 2008. www.bravowell.com
• 360fly, a Pittsburgh-based single-lens camera and software platform, has raised $17.8 million in Series B funding. Backers include Qualcomm Ventures, Catterton Partners, Voxx International and Steve Altman. www.360fly.com
• Everstring, a Mountain View, Calif.-based real-time business intelligence platform for market research firms, has raised $15 million in Series A funding. Lightspeed Venture Partners led the round, and was joined by seed backers Sequoia Capital and IDG Ventures. In other Everstring news, co-founder and former Summit Partners managing director J.J. Kardwell has joined fulltime as company president. www.everstring.com
• Athos, a Redwood City, Calif.-based maker of wearable sensors and performance apparel, has raised $12.2 million in Series B funding. DCM led the round, and was joined by True Ventures, Joe Jacob, Jermaine O’Neal and return backer The Social+Capital Partnership. www.liveathos.com
• Hireology Inc., a Chicago-based HR software startup, has raised $10 million in new VC funding led by Bain Capital Ventures. www.hireology.com
• Weddington Way, a San Francisco-based collaborative shopping site for weddings, has raised $9 million in Series A funding. Javelin Venture Partners led the round, and was joined by return backers Battery Ventures, Felicis Ventures and Trinity Ventures. www.weddingtonway.com
• Agworld, an Australian provider of IT management and cloud collaboration software for the agricultural industry, has raised A$6 million in Series C funding. Reed Elsevier Ventures led the round, and was joined by return backer Yuuwa Capital. www.agworld.com.au
• Dolls Kill, a girl-focused ecommerce fashion brand, has raised $5 million in VC funding led by Maveron. www.dollskill.com
• JoyTunes Ltd., an Israeli developer of musical instrument-learning apps , has raised $5 million in Series A funding. Aleph VC led the round, and was joined by Formation8 and return backer Genesis Partners. www.joytunes.com
• Push Technology, a UK-based provider of data distribution solutions, has raised more than $5 million in Series A funding led by Leopard Rock Capital. www.pushtechnology.com
• Chairish Inc., a San Francisco–based online marketplace for used furniture, has raised $4 million in Series A funding co-led by Azure Capital and OATV. www.chairish.com
• FAAH Pharma Inc., a Montreal-based developer of a treatment for neuropathic pain, has raised an undisclosed amount of VC funding from TVM Life Science Ventures. The company’s lead compound was originally discovered and developed by Infinity Pharmaceuticals. www.faahpharma.com
• Platform9, a Sunnyvale, Calif.-based private cloud management startup, has raised an undisclosed amount of Series A funding from Redpoint Ventures. www.platform9.com
PRIVATE EQUITY DEALS
• Apax Partners has agreed to acquire Answers Corp., a St. Louis–based provider of cloud-based solutions for enhancing customer acquisition and brand engagement, from Summit Partners and TA Associates. No financial terms were disclosed. www.answers.com
• The Carlyle Group has acquired a minority stake in Ganji.com, an operator of online and mobile-based classifieds in China. No financial terms were disclosed. www.carlyle.com
• EverVest has agreed to acquire HighMount Exploration & Production LLC, a Houston-based oil and gas exploration and production company, from Lowes Corp. (NYSE: L) for approximately $4 billion. Read more.
• Graycliff Partners has acquired a control stake in Fairway Building Products, a Mount Joy, Penn.-based maker of vinyl, aluminum and composite railing systems, from Argosy Private Equity. No financial terms were disclosed. www.graycliffpartners.com
• LuLu’s Fashion Lounge, an online fashion boutique, has raised an undisclosed amount of funding from H.I.G. Growth Partners. www.lulus.com
• Acciona SA (Madrid: ANA) has hired J.P. Morgan and Goldman Sachs to manage a U.S. float for its international renewable-energy assets (Acciona Energía International) which could be valued at upwards of $2 billion, according to the WSJ. KKR recently agreed to acquire a one-third stake in the business, although the deal has not yet closed. Read more.
• Adama Agricultural Solutions, an Israel-based crop protection solutions company, has filed for a $300 million IPO. Goldman Sachs and BofA Merrill Lynch are serving as co-lead underwriters. The company reports $230 million in operating income on $1.78 billion in revenue for the first half of 2014. Shareholders include the China National Agrochemical Corp. (60% pre-IPO stake) and Koor Industries Ltd. (40%). www.ma-industries.com
• Tokai Pharmaceuticals Inc., a Cambridge, Mass.-based developer of prostate cancer drugs, has filed for a $75 million IPO. It plans to trade on the Nasdaq under ticker symbol TKAI, with BMO Capital Markets, Stifel and William Blair serving as lead underwriters. Shareholders in the pre-revenue company include Apple Tree Partners (49.15% pre-IPO stake) and Novartis Ventures (28.12%). www.tokaipharmaceuticals.com
• China Investment Corp. is in talks to acquire Avolon, a Dublin-based aircraft leasing company for between $4 billion and $5 billion, according to Reuters. Avolon currently is owned by a private equity consortium that includes Cinven, CVC Capital Partners, Oak Hill Capital Partners and Temasek Holdings. Read more.
• Demand Media Inc. (NYSE: DMD) has acquired online art gallery Saatchi Online for $17 million in cash and stock. Saatchi had raised over $11 million in VC funding from Project A Ventures and Balderton Ventures. In related news, Demand announced that Sean Moriarty, CEO of Saatchi Art and former CEO of Ticketmaster, will take over as Demand Media’s CEO. www.demandmedia.com
• Incline Equity Partners has sold its stake in Apex Analytix, a Greensboro, N.C.–based provider of tech-enabled recovery audit services to global retailers and Fortune 1000 companies. No additional terms were disclosed. www.inclineequity.com
• Thinking Phone Networks, a Cambridge, Mass.-based provider of unified communications as a service, has acquired Portsmouth, N.H.-based Whaleback Managed Services for an undisclosed amount. Thinking Phone has raised over $30 million in VC funding from Bessemer Venture Partners and Advanced Technology Ventures. www.thinkingphones.com
• ValueAct Capital, the hedge fund led by Jeffrey Ubben, has taken around a $1 billion stake in 21st Century Fox Inc. (Nasdaq: FOXA). Read more.
FIRMS & FUNDS
• Operative Capital is raising $50 million for its debut fund, according to a regulatory filing. The Sausalito, Calif.-based firm is led by Drew Sievers (co-founder and former CEO of mFoundry) and Kelly Rodriques (CEO of Pensco Trust Co.).
MOVING IN, UP, ON & OUT
• Dean Collins has joined Dechert LLP as managing partner of a new Singapore office, which initially will focus on investment fund formation. He previously was a partner with O'Melveny and Myers. www.dechert.com