Good morning, Term Sheet readers.
AT&T and the U.S. Department of Justice will come head to head in court this week over the telecom company’s $85 billion proposed purchase of Time Warner.
Here’s why this matters:
• The merger fight has broad implications for various industries, specifically media and tech. We’re going to find out how much power the government has to block large-scale corporate consolidation.
• A win for the DOJ would mean the government is reversing decades of generally permissive policy in favor of a more harsh view of vertical mergers.
• A win for AT&T would mean more mega-mergers on the horizon. As the WSJ notes, “most legacy media firms see gaining scale as their only shot against the tech giants. If the government loses its case, they will have a green light to move forward.”
Either way, the decision has the power to re-shape the media & tech landscape as we know it. One decision could curtail future M&A activity but another could clear the wave of vertical mergers without government interference. You better believe Disney and Comcast, which are both bidding for Fox, are watching closely.
As Fortune’s Andrew Nusca wrote in today’s CEO Daily:
Namely: How can large legacy companies compete with the largest tech companies—Alphabet, Amazon, Apple, Facebook , and so forth—if they can’t scale up through M&A? The world’s largest telecom company combining with the No. 3 entertainment company is sure to create an enormous media giant worthy of scrutiny. Indeed, the combined market cap of ATT-TWX is about $300 billion. But how big is too big when you’re competing against companies with market caps well above $500 billion? What would you do if one or more deep-pocketed tech companies came gunning for your industry?
…But of course, nothing is ever black and white: The judge hearing the lawsuit is the same judge who approved the settlement between the DOJ and Comcast over its acquisition of NBCUniversal. The case could change how consumers watch (and pay for) TV shows & movies. AT&T will back off making its political argument in court, but the question of presidential interference looms.
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• How Big Pharma Is Using AI to Make Better Drugs (by Sy Mukherjee)
• What to Know About 2018’s First Big Tech IPO (by Robert Hackett)
• Spindrift, a Newton, Mass.-based sparkling water company, raised $20 million in funding. VMG Partners led the round, and was joined by investors including Prolog Ventures, KarpReilly and RiverPark Ventures.
• Kahoot, a Norway-based education quiz app, raised $17 million in funding at a $100 million valuation, according to TechCrunch. Investors include Datum Invest AS, Northzone, Creandum, and Microsoft Ventures.
• TwoXAR Inc, a Palo Alto, Calif.-based developer of a drug delivery platform, raised $10 million in Series A funding. SoftBank Ventures led the round, and was joined by investors including Andreessen Horowitz Bio Fund and OS Fund.
• Parachute Health, a healthcare tech platform, raised $5.5 million in seed funding. Investors include Greater New York Hospital Association Ventures and Loeb Holding Corporation.
• Detectify, a Sweden-based web security company, raised 5 million euros ($6.1 million) in funding. Insight Venture Partners led the round, and was joined by investors including Paua Ventures and Inventure.
• ZineOne, a Milpitas, Calif.-based operator of a stream processing platform, raised $2.5 million in Series A funding. Omidyar Network led the round.
• Farmstead, an AI-powered digital micro-grocer, raised $2 million in funding. Resolute Ventures and Social Capital co-led the round, and were joined by investors including SV Angel and Y Combinator.
PRIVATE EQUITY DEALS
• Equistone will acquire a majority stake in BOAL Group, a Netherlands-based maker of high-performance aluminium greenhouse roof and side-wall systems for glass and poly greenhouses. Financial terms weren't disclosed.
• ZMC invested in Dynasty Sports and Entertainment, a company that resells tickets for teams on the secondary market. Financial terms weren't disclosed.
• Spectrum Equity invested in Origami Risk, a Glencoe, Ill.-based provider of workflow, reporting, and analysis tools for risk management. Financial terms weren't disclosed.
• Cerberus Capital Management acquired Cyanco Holding Corp, a Pearland, Texas-based producer of sodium cyanide. Financial terms weren't disclosed.
• Claire’s Stores Inc, a Pembroke Pines, Fla.-based retailer of jewelry and accessories, filed for Chapter 11 bankruptcy protection and expects to reduce debt by about $1.9 billion, according to Reuters. Read more.
• Egypt is seeking to raise $5.7 billion, 100 billion pounds, in IPOs of over 20 state-owned companies. The offering will include additional shares in firms such as Eastern Tobacco and Abou Kir Fertilizers & Chemicals. The sales will take place in the next 24 to 30 months. Read more.
• iQiyi, a Beijing-based video streaming service, filed for a $1.5 billion IPO. The company posted revenue of $2.7 billion and earnings of $146.4 million for 2017. Baidu (69.6% pre-offering) and Xiaomi Ventures (8.4%) back the firm. Goldman Sachs, Credit Suisse, and BofA Merrill Lynch are underwriters in the deal. The firm plans to list as on the Nasdaq as “IQ.” Read more.
• Bilibili, a Shanghai-based anime video sharing platform in China, said it plans to raise $483 million in an offering of 42 million ADSs priced between $10.50 to $12.50 apiece. The firm posted $379.4 million in revenue and loss of $28.2 million in 2017. Loyal Valley Capital (9.0%), IDG-Accel China (7.6%), Legend Capital (5.9%) and Tencent (5.2%) back the firm. Morgan Stanley, BofA Merrill Lynch and J.P. Morgan are the joint bookrunners on the deal. The firm plans to list on the NYSE as “BILI.” Read more.
• OneSmart International Education Group, a Shanghai-based K-12 after-school education provider, said it plans to offer 16.3 million ADSs priced between $11 to $13 apiece, raising $195.6 million. The firm posted revenue of $331.3 million in 2017, and earnings of $39.2 million. Carlyle Asia Partners (15.8% pre-offering) and Goldman Sachs (11.4%) back the firm. Morgan Stanley and Deutsche Bank are underwriters in the deal. Read more.
• Homology Medicines, a Bedford, Mass.-based firm treating rare genetics diseases, said it plans to raise $100 million in an IPO of 6.7 million shares priced between $14 to $16 apiece. The firm posted loss of $30 million in 2017. 5AM Ventures (24.8% pre-offering), ARCH Venture (22.4%), Deerfield (14.7%), and Novartis (7.3%), back the firm. BofA Merrill Lynch, Cowen, and Evercore ISI are joint bookrunners in the deal. The firm plans to list on the Nasdaq as “FIXX.” Read more.
• Zuora, a San Mateo, Calif.-based cloud subscription management platform, filed to raise up to $100 million in an IPO. The firm posted revenue of $167.9 million for the 12 months ending Jan. 31, and loss of $46.2 million. Benchmark Capital (11.1% pre-offering), Redpoint Omega (6.5%), Shasta Ventures (8.3%), Tenaya Capital (6.6%), and Wellington Management Company (9.4%) back the firm.. Goldman Sachs, Morgan Stanley, Allen & Company and Jefferies are joint bookrunners in the deal. The firm plans to list on the NYSE as ”ZUO.” Read more.
• Alzheon, a Framingham, Mass.-based biopharmaceutical firm developing Alzheimer’s disease, filed for an IPO of up to $80.5 million. The firm posted loss of $5.5 million in 2017. Ally Bridge Group (17.5%) and Aptus Holdings (5.2%) back the firm. Citigroup and Piper Jaffray are joint bookrunners in the deal. The firm plans to list on the Nasdaq as “”ALZH.” Read more.
• Jumia, an African online shopping platform, is under consideration for an IPO by parent company Rocket Internet, Reuters reports citing sources. Rocket is expected to seek banks soon for such an offering. Read more.
• Rio Tinto, a London-based mining group, hired UBS to explore a potential IPO of smelting arm Pacific Aluminum on the Australian Stock Exchange, Reuters reports citing sources. Read more.
• Lundbeck agreed to acquire Prexton Therapeutics, a Netherlands-based biopharmaceutical company, for 100 million euros ($123 million) and will later pay up to 805 million euros ($989 million) in development and sales milestones. Prexton had raised approximately $41 million in venture funding from investors including Forbion, Seroba Life Sciences, Sunstone Capital and Ysios Capital.
• Pinnacle Asset Management acquired Five Rivers Cattle Feeding, a Greeley, Colo.-based provider of cattle feeding services, for about $200 million. JBS USA was the seller.
FIRMS + FUNDS
• Brightstar Capital Partners, a New York-based private equity firm $710 million for its inaugural fund.
• Katie Roberts joined Arlon Group as a vice president.
• Charlie Denison joined Shorehill Capital as a principal.
• Rob Young has joined OpenGate Capital as a principal.
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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.