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Why the world’s toughest activist hedge fund is after SoftBank

February 7, 2020, 3:11 PM UTC

Since public markets rejected WeWork, SoftBank is pushing for profitability across its portfolio companies. 

Now it will be on the flip side of the table: activist investor heavyweight Elliott Management is pushing the telecom giant for shakeups in a bid to boost its valuation.

Elliott, founded by billionaire Paul Singer, has amassed a stake in SoftBank worth over $2.5 billion stake and is calling for corporate governance changes to boost the stock’s price, according to the Wall Street Journal’s reporting Thursday. 

Among other overhauls, including greater transparency into SoftBank’s investing decisions, Elliott is calling for the company to buy back between $10 billion to $20 billion in shares to “help close a yawning gap between the company’s market value and the value of stakes in companies in which it has invested,” per the Journal’s reports.

Shaken by WeWork and other risky bets, investors backed away from the telecom company and pushed its valuation Thursday to $89 billion, a fraction of the $210 billion valuation of its stakes in Alibaba, Sprint and its Japanese telecom business alone.

So Elliott saw an opportunity.

But some background: the name “Elliott Management” can sound like a death knell to CEOs. After becoming the target of an Elliott activist campaign in 2017, then Athenahealth CEO Jonathan Bush began researching the firm online. The results, as he told The New Yorker, felt like “Googling this thing on your arm and it says, ‘You’re going to die.’” Bush was later pushed out of the company.

Elliott has a reputation for being particularly aggressive, even in the intrinsically hardball world of activist investing. When a company’s management fights back, private investigators have been alleged to lurk near the CEO’s home or look for dirt on executives in court documents and social media. The fights can turn public—and ugly. In 2015, Samsung published an illustration of Singer with a vulture beak after the hedge fund initiated a campaign against the company. Elliott has denied specific allegations: “Elliott has always behaved ethically in its disputes with corporate managements and boards.” (For more, read the 2017 dive into the company by Fortune’s Jen Wieczner.)

But so far, talks between SoftBank and Elliott have been…relatively cooperative, according to the two companies.

“Elliott’s substantial investment in SoftBank Group reflects its strong conviction that the market significantly undervalues SoftBank’s portfolio of assets,” an Elliott representative wrote in a statement. “Elliott has engaged privately with SoftBank’s leadership and is working constructively on solutions to help SoftBank materially and sustainably reduce its discount to intrinsic value.”

And from SoftBank: “SoftBank always maintains constructive discussions with shareholders regarding their views on the Company and we are in complete agreement that our shares are deeply undervalued by public investors. SoftBank welcomes feedback from fellow shareholders.”

Elliot’s stake comes at a time when activist investing—once shunned abroad—has grown rapidly in Japan under the encouragement of Japanese Prime Minister Shinzo Abe, who is trying to wake up a sleepy economy.

Third Point began targeting Sony last year. Hong Kong-based Oasis Management has its bow notched at the operator of the Tokyo Dome. Elliott has taken aim at hotel operator Unizo. While activist investing has its problems, Abe is hoping investors will push complacent companies into “unlocking value.”

So far, SoftBank shares are moving in the right direction. Buoyed by positive news that broke around the same time (Uber says it expects to reach EBITDA profitability early, while SoftBank earnings beat), shares are up 11% since Thursday’s open.

Now let’s see if the campaign does unlock long-term value—without unleashing a greater media circus.

Housekeeping: Lucinda here, filing in for the day. Please send new deals to Polina.Marinova@Fortune.com, who returns Monday.

VENTURE DEALS

- Netskope, a Santa Clara-based security cloud provider, raised $340 million in funding valuing the firm at $3 billion. Sequoia Capital Global Equities led the round.

- Tricolor, a Dallas-based firm focused on financing used vehicles, raised $30 million from an unnamed institutional investor.

- Masabi, a London-based firm focused on public transport fares, raised an undisclosed amount from Shell. Masabi previously raised $20 million growth funding round led by Smedvig Capital.

- Paystand, a Scotts Valley, Calif.-based b2b fintech focused on payments, raised $20 million in Series B funding. Investors including DNX and Battery Ventures participated.

- Worlds, a Dallas-based spatial AI company spun out of Hypergiant Sensory Sciences, raised $10 million in Series A funding funding. Align Capital led the round and was joined by investors including Chevron Technology Ventures, PIVA, and Hypergiant Industries.

- Nuurv, a London-based wearables maker, raised $9 million in funding. Hiro Capital led the round.

- SureSale, an Los Angeles-based used vehicles inspection firm, closed $7 million in Series A funding. Upfront Ventures led the round and was joined by investors including Coffin Capital and Ventures.

- Plannuh, a Boston, Mass.-based startup using AI for marketing budgeting and planning, raised $4 million in seed funding. Glasswing Ventures and Gradient Ventures led the round.

- Gebeya, an Ethiopean edtech focused on training software developers, raised $2 million in seed funding. Partech and Orange Digital Ventures led the round, and was joined by Consonance Investment Managers.  

- RevOps, a San Francisco-based sales productivity platform, raised $1.6 million in seed funding. Gradient Ventures led the round and was joined by Caffeinated Capital.

PRIVATE EQUITY DEALS

- Advent International and Crosspoint Capital Partners will acquire Forescout Technologies, Inc. (NASDAQ:FSCT), a San Jose, Calif.-based cybersecurity firm, for $33.00 per common share in an all-cash deal valued at $1.9 billion. 

- CompassMSP, a portfolio company of Route 2 Capital Partners, acquired Western Digitech, a Miami, Fla.-based IT services provider. Financial terms weren't disclosed.

- An affiliate of J.F. Lehman & Company acquired Integrated Global Services, a Richmond, Va.-babsed, provider of surface protection solutions and technologies for energy, power generation and other industrial markets. Financial terms weren't disclosed.

- MPE Partners recapped Teel Plastics, a Baraboo, Wisconsin-based firm specializing in plastic extrusion and injection molding capabilities. Financial terms weren't disclosed.

- AE Industrial Partners acquired American Pacific Corporation, a Cedar City, Utah-based manufacturer of critical chemicals military and space programs, from Huntsman Family Investments. Financial terms weren't disclosed.

- Industrial Opportunity Partners acquired COMP Cams, a Memphis-based maker of automotive aftermarket products. Financial terms weren't disclosed.

- Africa Capitalworks Management acquired a significant minority equity shareholding in Gaselia Industries Group, a West African beverages group. Financial terms weren't disclosed.

- FTV Capital and True Wind Capital invested in Sysnet Global Solutions, a Dublin-based provider of cyber security and compliance solutions. Financial terms weren't disclosed.

OTHER DEALS

- Endeavor Group Holdings acquired a minority stake in SailGP, a London-based sailing event organizer backed by Oracle’s Larry Ellison, giving it a $200 million valuation.

- Kyocera Document Solutions America acquired Quality Digital Office Technology, a York ,Penn.-based firm focused on office technology. Financial terms weren't disclosed.

- Sovos acquired Booke Seminars, a Winston-Salem, N.C.-based provider of educational accounting seminars to employees of insurance companies. Financial terms weren't disclosed.

- SAIC (NYSE:SAIC) agreed to acquire the U.S. Federal business of Unisys Corp. (NYSE: UIS), a Blue Bell, Penn.-based tech services firm, for $1.2 billion.

- Green Street Advisors agreed to acquire Real Estate Alert, Commercial Mortgage Alert, Hedge Fund Alert, and Asset-Backed Alert, four publications in the commercial real estate and financial industries, from Harrison Scott Publications. Financial terms weren't disclosed.

IPOs

- PPD Inc., a Wilmington, N.C.-based drug development and laboratory management service for biopharmaceuticals, raised $1.6 billion in an offering of 60 million shares at $27, the high end of the $24 to $27 range.The firm posted revenue of $3.8 billion and income of $96.3 million in 2018. Hellman & Friedman Capital Partners (56.7% pre-offering), Carlyle (23.8%), the Abu Dhabi Investment Authority (9.2%), and the Government of Singapore (9.2%) back the firm. It plans to list on the NYSE as “PPD.” “Read more.”

- Warner Music Group, New York-based record label, filed for an $100 million IPO. The firm posted revenues of $4.5 billion in the year ending Sept. 2019, and net income of $256 million. Len Blavatnik backs the firm. The firm has yet to select an exchange and ticker. Read more.

- Schrodinger Inc., a New York-based predictive molecule-discovery software platform maker for biopharmaceuticals, raised $202 million in an offering of 11.9 million shares priced at $17, above its $14 to $16 range. The firm posted revenue of $66.7 million and loss of $28.4 million in 2018. The Bill & Melinda Gates Foundation and David E. Shaw back the firm. It plans to list on the Nasdaq as “SDGR.” “Read more.”

Beam Therapeutics, a Cambridge, Mass.-based biotech focused on gene editing technologies, raised $180 million in an offering of 10.6 million shares priced at $17, within its $15 to $17 range. The firm has yet to post a revenue and posted losses of $116.7 million in 2018. ARCH Ventures (21.1% pre-offering) and F-Prime Capital Partners (17.8%) back the firm. It plans to list on the Nasdaq as “BEAM.” “Read more.”

- Professional Holding Corp., a Coral Gables, Fla.-based bank, raised $57 million in an IPO of 3.1 million shares priced at $18.50, below its $19 to $21 range. The firm posted total interest income of $28.2 million and net income of $6.8 million in 2018. BayBoston Capital, EJF Capital, and Emerald Advisers back the firm. It plans to list on the Nasdaq as “PFHD.” Read more.

EXITS

- Salesforce acquired Evergage, a Somerville, Mass.-based firm customer data platform. Arrowroot Capital backed the firm.

- Apollo Global Management agreed to acquire Covis Pharma, a Baarn, Netherlands-based pharmaceutical company, from Cerberus Capital Management. Financial terms weren't disclosed.

- Gridiron Capital completed its sale of Dent Wizard, a Bridgeton, Mo.-based provider of automotive reconditioning services and vehicle protection products, to Bain Capital-backed Dealer Tire. Gridiron is also making a significant investment in the combined company. Financial terms weren't disclosed.

- Hg Capital acquired a stake in smartTrade Technologies, a french hosted software provider for trading desks, from Keensight Capital and Pléiade Venture.

FIRMS + FUNDS

- Brookfield Infrastructure Fund IV raised $20 billion in equity commitments, above a target of $17 billion. 

- Mercer closed its fifth private investment fund at $2.7 billion. 

- Sweat Equity Ventures launched with a $30 million fund. 

- August Equity raised $392.6 million for its fifth venture capital fund, per the SEC.

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