US-based VC-backed companies raised close to $100bn in 2018, says new report

BY Fraser Tennant

US-based venture capital (VC)-backed companies raised close to $100bn across 5536 transactions in 2018 – the highest annual funding level since 2000 – according to PwC’s and CB Insight’s MoneyTree report  published this week.

While deal activity in 2018 was at its lowest level since 2013, the report reveals that US companies still raised a record number of mega-rounds in 2018, with 184 $100m-plus funding rounds. In addition, there was a record number of new unicorns in 2018, as 53 US VC-backed companies saw their valuation rise to over $1bn.

“2018 was a phenomenal year for US venture capital, with $99.5bn invested, a record-breaking 55 unicorn births, 184 mega-rounds and funding levels at $119.6bn, their highest level since 2000,” said Tom Ciccolella, PwC’s US venture capital leader. “There certainly continues to be a healthy availability of funds and appetite for investment, while the trend of fewer, bigger deals persists.”

Key highlights in the Q4 MoneyTree report include: (i) US deals and funding slipped in Q4, dropping from a record funding level of $28bn across 1325 deals in Q3 2018 to $25bn across 1211 deals in Q4 2018; (ii) seed-stage activity rose slightly to 23 percent of all deals, although this was still well below levels from a year prior; (iii) expansion-stage deal activity was up slightly, at 24 percent of all deals, compared to 20 percent a year prior; and (iv) median deal sizes were up across the board, with later-stage median deal size rising to $37.5m in Q4 2018, up from $32.4m from the previous quarter.

Regionally, San Francisco, Silicon Valley, New York, New England and Los Angeles all saw increases in funding levels in 2018. In San Francisco, funding jumped 55 percent, rising to $28bn. In New England, funding activity increased for the second straight year, to $11bn. Silicon Valley and New York saw an uptick in funding in 2018, increasing to $18bn and $13bn, respectively. Funding for Los Angeles-area companies increased slightly to $6bn.

“While this year saw the lowest level of deals since 2013, median deal sizes are up and $100m plus mega-deals are becoming standard," said Anand Sanwal, chief executive co-founder of CB Insights. "US companies raised a record 184 mega-rounds, a 53 percent increase compared to last year's record. While mid- and late-stage start-ups are winners in the current environment, the early stage is getting pinched with seed activity.  There does not appear to be a near-term catalyst to get seed activity growing again."

In terms of global VC funding, last year saw $207bn of VC funding raised globally across 14,247 transactions – a 10 percent increase in deal activity. Furthermore, 2018 came close to the funding record of 2000, a 21 percent jump compared to 2017. 

Report: Q4 2018 MoneyTree Report

Bristol-Myers and Celgene agree record deal

BY Richard Summerfield

Bristol-Myer Squibb is to acquire Celgene Corp for $74bn in a cash and stock deal which combines two of the biggest pharmaceutical companies in the world.

The deal will see Celgene shareholders receive one Bristol-Myers Squibb share and $50 in cash for each share held, or $102.43 per share, a premium of 53.7 percent to Celgene’s closing price on the day before the deal was announced. The boards of directors of both companies have approved the deal, which is expected to close in the third quarter of 2019.

“Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases,” said Giovanni Caforio, chairman and chief executive of Bristol-Myers Squibb. “As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation. We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches. Our new company will continue the strong patient focus that is core to both companies’ missions, creating a shared organisation with a goal of discovering, developing and delivering innovative medicines for patients with serious diseases. We are confident we will drive value for shareholders and create opportunities for employees.”

“For more than 30 years, Celgene’s commitment to leading innovation has allowed us to deliver life-changing treatments to patients in areas of high unmet need,” said Mark J. Alles, chairman and chief executive of Celgene. “Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company. Our employees should be incredibly proud of what we have accomplished together and excited for the opportunities ahead of us as we join with Bristol-Myers Squibb, where we can further advance our mission for patients. We look forward to working with the Bristol-Myers Squibb team as we bring our two companies together.”

The Celgene/Bristol-Meyer deal is the second notable merger to be announced in the pharmaceutical sector recently, following news of the $8bn merger between Eli Lilly & Co and Loxo Oncology announced on Monday.

News: Bristol-Myers to buy Celgene for $74 billion in largest biopharma deal

Vinci gets Gatwick

BY Richard Summerfield

Vinci Airports has agreed to acquire a majority stake in Gatwick Airport Limited, the UK’s second-busiest airport, for $3.7bn.

By acquiring a 50.01 percent stake in Gatwick, Vinci now operates 46 airports across 12 countries. Gatwick will be the largest airport in the French company’s portfolio, having handled nearly 46 million passengers in 2018, up from 32 million at the time of its previous sale a decade ago. The airport expects passenger numbers to grow to 60 million in the coming years.

The remaining 49.99 percent share in the company will be held by private equity firm Global Infrastructure Partners (GIP). The deal is expected to complete in the first half of 2019.

“Creating synergies and sharing best practices being at the core of our values, the whole Vinci Airports network will benefit from Gatwick Airport’s world-class management and operational excellence, which has allowed it to deliver strong and steady growth in a very constrained environment,” said Nicolas Notebaert, president of Vinci Airports, in a statement. “As Gatwick’s new industrial partner, Vinci Airports will support and encourage growth of traffic, operational efficiency and leverage its international expertise in the development of commercial activities to further improve passenger satisfaction and experience.”

Adebayo Ogunlesi, GIP chairman and managing partner, said: “We welcome Vinci Airports, one of the world’s most respected airport operators, as a partner in Gatwick airport. We look forward to building on the Gatwick success story together.”

“This partnership is focused on continuing the transformation at the airport over the last decade,” said Michael McGhee, a partner at GIP. “We are pleased Vinci Airports shares our vision of Gatwick’s future. We expect the transaction to be completed by the middle of next year, with the senior leadership team remaining in place. Their focus, along with everyone at Gatwick, obviously remains on doing their very best for customers over the busy holiday period after the challenges of recent days.”

Announcement of the deal was delayed by the chaos caused by three days of drone sightings at Gatwick in the run-up to Christmas. The drone sightings closed the airport’s runway, disrupting flights for 140,000 passengers. In response to the disruption, Gatwick has invested £5m in anti-drone technology.

News: France's Vinci in $3.7 billion swoop on UK's Gatwick airport

GSK to split as Pfizer deal struck

BY Richard Summerfield

Following years of investor pressure, and despite repeated refusals, GlaxoSmithKline (GSK) has announced plans to split its existing businesses in half, while forming a new joint venture with rival Pfizer’s consumer health division.

The joint venture will have a market share of 7.3 percent, well ahead of its nearest rivals Johnson & Johnson, Bayer and Sanofi, all of which have around a 4 percent share, and combined sales of approximately $12.7bn. The new venture will combine GSK’s Sensodyne, Voltaren and Panadol brands with Pfizer’s Advil, Centrum and Caltrate. GSK has confirmed that the Horlicks brand will not be included in the joint venture as it is being sold to Unilever.

GSK will have a majority controlling equity interest of 68 percent and Pfizer will have an equity interest of 32 percent, the firms confirmed in a statement. The merger will generate cost savings of £500m by 2022, according to GSK.

“Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders,” said Emma Walmsley, chief executive of GSK. “At the same time, incremental cashflows and visibility of the intended separation will help support GSK’s future capital planning and further investment in our pharmaceuticals pipeline. With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global Pharmaceuticals/Vaccines company, with an R&D approach focused on science related to the immune system, use of genetics and advanced technologies, and a new world-leading Consumer Healthcare company.

“Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers,” she added.

Within three years of the joint venture closing, GSK has committed to demerging and floating its consumer health business, splitting the company into two distinct businesses: one focused on consumer, the other on pharmaceuticals and vaccines.

“We are pleased to announce this new joint venture for Pfizer Consumer Healthcare, delivering on our commitment to complete the strategic review for this business in 2018,” said Ian Read, chairman and current chief executive of Pfizer. “Pfizer and GSK have an excellent track record of creating successful collaborations, and we look forward to working together again to unlock the potential of our combined consumer healthcare businesses.”

News: Drugmaker GSK to split after striking Pfizer consumer health deal

Parker Drilling announces RSA and Chapter 11 to reduce debt and obtain capital

BY Fraser Tennant

Another victim of the ongoing volatility across the sector, oilfield services provider Parker Drilling Company has entered into a restructuring support agreement (RSA) in a bid to reduce its spiralling debt and obtain access to capital commitments.

To implement the terms of the RSA, Parker has voluntarily filed for Chapter 11 protection. The company’s non-US subsidiaries and certain US subsidiaries are excluded from the filing and will not be affected by the process. Furthermore, Parker intends to seek confirmation of a prearranged plan of reorganisation, for which consenting stakeholders have indicated their support.

Parker’s proposed plan, which is subject to court approval, reduces approximately two-thirds of funded debt and injects $95m of new, fully committed equity capital through a backstopped rights offering. It also contemplates the issuance of a new $210m loan.

In addition, Parker anticipates that its cash flow and existing liquidity will be sufficient to support global operations during the bankruptcy and restructuring process, and has further augmented liquidity with access to $50m in debtor-in-possession (DIP) financing. The lenders under the DIP financing have also committed to fund an exit facility of $50m.

“The steps we are announcing will ensure that we have the appropriate capital structure to take advantage of these opportunities to strategically grow our assets, our global footprint, and our suite of products and services," said Gary Rich, chairman, president and chief executive of Parker Drilling. "We are confident that by resolving our legacy balance sheet issues, we will be able to continue executing a strategy to build greater scale in core markets and expand strategic offerings, while strengthening our drilling and rental tools businesses.”

Parker’s existing customer and vendor contracts are expected to remain in place and be serviced in the ordinary course of business during the bankruptcy and restructuring process. Employee wages and benefits, as well as trade creditors, will be paid in full in the ordinary course of business.

A provider of drilling services and rental tools to the energy industry, Parker serves operators in the inland waters of the US Gulf of Mexico and in select US and international markets.

Mr Rich concluded: “I am confident that the strength of our complementary business lines, combined with a solid financial platform, will position Parker to lead the industry as market conditions improve."

The company has stated that it expects to emerge from bankruptcy protection early in 2019.

News: Parker Drilling files for pre-arranged Chapter 11 reorganization