After a down year in the number of initial public offerings globally, what might 2019 look like?
According to a recent report released by EY, next year might start cautiously due to trade tensions between the U.S., China and the EU, the outcome of Brexit and rising interest rates. But the number of IPO’s may see a lift by the second half.
Global IPO volumes have declined by 21 percent this year over last year to 1,359 issues, EY says. But proceeds are up by 6 percent to $204.8 billion, mostly because of the large number of “unicorns” (start-up companies valued at $1 billion or more) and large companies that went public. The busiest sectors were technology, industrials and health care.
While IPO volumes next year could be below those recorded in 2018, EY says it’s likely that global proceeds could meet or exceed 2018’s high levels – particularly if more unicorns and technology, industrials, consumer products and health care companies come to the public capital markets “as expected,” the firm said.
There are a few Texas issues that could reach the market soon, according to recent reports.
One is Acelity, an Apax-backed wound care company in San Antonio that could be valued at $5 billion. Acelity general counsel John T. Bibb didn’t respond to a request for confirmation.
Another is Goodnight Midstream, a Tailwater-backed water services provider to oil and gas companies in Dallas. It’s also reportedly looking at a possible sale that could fetch $2 billion (a Tailwater spokeswoman wouldn’t comment).
Autry Stephens-owned Endeavor Energy Resources of Midland also is said to be weighing an IPO versus a sale, which could bring in more than $8 billion (Endeavor general counsel Mike Short couldn’t be reached for comment).
In M&A and capital markets action in Texas, there 10 transactions handled by eight Texas law firms and 26 Texas lawyers worth $2.86 billion last week, which was down in terms of volume but up in terms of value over the previous week.
However, the week’s performance was down in both volume and value compared with this time last year. Could it be worries about the sliding stock market?
There were eight M&A, private equity and venture capital deals at a disclosed value of only $264 million (several were announced with undisclosed terms) while there were two capital markets transactions worth $2.6 billion.
Sectors involved included real estate, hospitality, chemicals, energy (midstream infrastructure and oilfield products), industrials and technology.
M&A, PRIVATE EQUITY AND VENTURE CAPITAL DEALS
Invitation Homes sells house portfolio for $214M
Dallas home leasing company Invitation Homes recently revealed that it sold a portfolio of 1,375 homes in five bulk transactions for $214 million.
Lawyers at Jones Day outside of Texas counseled Invitation Homes, whose general counsel is Mark Solls. Associate general counsel Liuba Baban assisted him.
Before joining the company in 2015, the Southern Illinois-trained Solls was general counsel of DentalOne Partners for three years.
Baylor-educated Baban came to the company in 2016. She previously was an associate general counsel at Dex Media, associate/senior associate at Baker McKenzie and counsel at Energy Future Holdings and Vinson & Elkins.
Invitation closed the sale of 147 homes in two transactions in September and 1,228 homes in three transactions in October. The buyers weren’t named.
The sales were part of the company’s efforts to enhance the quality of its portfolio. It plans to use the proceeds for general corporate purposes and to repay debt.
TXV Partners raises $50M for debut fund
Dallas-based TXV Partners has raised $50 million for its debut venture capital fund, which focuses on “millennial-friendly” start-ups in the consumer, fintech and blockchain industries.
Kevin Vela of Vela Wood partner Kevin Vela in Dallas counseled TXV on the fund assisted by senior associate Meaghan Johnston and associate Caroline Fabacher.
TXV is led by Marcus Stroud and Brandon Allen, who met at Princeton University.
After graduating in 2016, Stroud – a former linebacker on the Princeton football team – became a fixed income analyst on Wall Street and later moved to Austin to join alternative asset manager Vida Capital. Allen worked for two years as a consultant.
Founded last year, TXV aims to invest $500,000 to $3 million per company. Its first investment was Matter Music, an Austin-based music streaming company that uses the blockchain technology.
Allen is leading the firm’s Dallas office and Stroud is based in Austin. “Texas has the opportunity to be at the forefront of what the next generation of technology will look like,” Allen told TechCrunch.
According to the article, companies in Texas have raised roughly $2.5 billion in venture capital so far this year versus $50 billion in California, citing statistics from PitchBook. However, investments in the state are growing, with Austin startups pulling in $1.4 billion, up from $1.3 billion last year.
Jones Day aids Blackstone on Four Seasons sale to Extell
Jones Day said Dec. 12 it advised Blackstone on its sale of the Four Seasons Resort and Club Dallas at Las Colinas to New York City-based Extell Development for undisclosed terms.
The team included partner Andrew Van Noord and associate Tyler Harris in Dallas.
The Dallas Morning News reported the deal last month, citing deed records.
Blackstone Real Estate Advisors bought the 431-room hotel, conference center and spa in 2014 for a reported $150 million and has since spent $30 million on upgrades. It was built in 1986.
Extell is led by New York real estate magnate Gary Barnett, who New York magazine called “the anti-Trump” for his unassuming nature despite his “ostentatious” real estate developments.
Extell also owns the Four Seasons in Vail, the Intercontinental Hotel in Boston and the Park Hyatt, W Hotel Times Square and the Hyatt Times Square in New York City as well as commercial, residential and mixed use properties.
Jones Day advises Koch on Flint chemical business to Ineos
Jones Day said Dec. 14 it advised Koch Industries Inc. on the sale of Flint Hills Resources’ chemical intermediates business to a unit of Ineos Enterprises for an undisclosed sum.
Partner Troy Lewis and associate Bobby Cardone in Dallas led the deal.
Ineos said Dec. 3 that it had completed the acquisition, which was originally announced in September.
The business makes purified isophthalic acid, trimellitic anhydride and maleic anhydride at its facility in Joliet, Ill. It also has offices and distributions centers elsewhere in the U.S. and in Europe and Asia.
The products are used in coatings, clothing, paints and gasoline additives.
London-based Ineos makes and distributes chemical products from its facilities and offices in Europe, the U.S., Canada and Asia with global sales of more than $1.13 billion.
Ineos CEO Ashley Reed said in a statement that the company has a track record of acquiring businesses that are no longer core to their previous owners.
Flint Hills bought the business from BP in 2004 for $224 million. Three years later, a jury awarded Flint Hills $41.7 million in damages for breach of contract amid claims that the plant had environmental compliance, mechanical integrity and production capacity deficiencies.
Sidley, T&K counsel on EIV investment in Bayou Midstream
Bayou Midstream said Dec. 13 that EIV Capital invested an undisclosed sum in the company.
Sidley Austin represented EIV, including partner Cliff Vrielink, associates Adam Prestidge and Colin Kavanaugh and tax counsel Zackary Pullin in Houston.
Thompson & Knight partner Holt Foster and associate Tony Johnston in Dallas assisted Bayou Midstream.
Founded in Houston earlier this year, Bayou is an independent energy company focused on developing and operating midstream infrastructure assets across the Rockies, including the Powder River Basin and the Bakken. It’s interested in greenfield projects as well as acquisitions.
The company is led by CEO Travis Roby, who previously was a manager at Terra Energy Partners, ARM Energy and Occidental Petroleum; CFO Ross Lairson, who was an associate at Barclays; and chief commercial officer Jared Hamilton, who worked in development at TransCanada and Phillips 66.
EIV is led by managing partner Patti Melcher. Before co-founding the firm in 2009, Melcher ran Allegro Capital Management Inc., an energy private equity firm and consulting firm, and was interim CEO for energy trading firm Petrocom Energy Ltd. She also worked at Sandefer Capital Partners, SCF Partners and Simmons & Co. International.
Winsupply buys MSI for undisclosed sum
GulfStar Group said Dec. 12 that it provided financial advice to MSI Supply Inc. on its sale to Winsupply Inc. for an undisclosed sum.
MSI’s legal counsel on the deal was Glynn Nance at Nance & Simpson.
Brian Lobo led the deal from GulfStar along with Charles Craig and Alex Pette.
Founded in 1999 and based in Houston, MSI is a distributor of pipes, valves, fittings, gaskets and fasteners to industrial customers across the Gulf Coast. It primarily focuses on sourcing materials for emergency situations and ongoing routine maintenance.
MSI will continue to be led by President Chad Smith, who bought the company in 2011 with Joshua Mayes.
Headquartered in Dayton, Ohio, Winsupply is a supplier of residential and commercial construction and industrial supplies and equipment. The privately held company has nearly 600 wholesaling locations in 45 states.
GulfStar’s Smith said MSI’s new partnership with Winsupply will allow the company and its customers to benefit from Winsupply’s scale and geographic reach while helping Winsupply further establish its presence in the Gulf Coast industrial market.
Carlyle Group, Quad invest in Accelerate Learnings
The Carlyle Group and Quad Partners invested an undisclosed sum in Accelerate Learning, a Houston provider of PreK-12 education products and services in science, technology, engineering and mathematics.
DLA Piper advised Accelerate, including partner Samer (Sam) Zabaneh, counsel Brooke Goodlett and associates Anna Denton, Brent Bernell and Paige Elberger in Austin.
Latham & Watkins lawyers outside of Texas counseled Carlyle, which tapped Ernst & Young for financial advice. Jefferies assisted Accelerate.
Rice Management Co., which initially invested in Accelerate in 2013, Owl Ventures and Accelerate’s management team will remain investors with Carlyle becoming the majority owner.
The transaction is expected to close this quarter.
Accelerate’s STEMscopes product combines a digital curriculum, supplemental print materials and exploration kits with a professional development portal. STEMscopes can be implemented in traditional, blended and one-on-one classrooms as a core or supplementary science curriculum.
The company cities independent studies showing that schools using STEMscopes can achieve double-digit increases in student passing rates on science assessments.
Accelerate claims its products are used by more than 4 million students and 200,000 teachers across more than 2,380 districts in every state in the U.S. Accelerate CEO Vernon Johnson said in a statement that company plans to expand further thanks to the investment.
Will Darman led the deal from Carlyle while Lincoln Frank did so from Quad. Jaime Aguirre is investment director for private equity and venture capital at Rice Management.
Equity for the investment came from Carlyle’s U.S. Equity Opportunity Fund II, which is focused on middle market investments, and Quad Partners V, a dedicated education-focused fund.
Accelerate was incubated at Rice University, expanding from the STEMscopes product to a variety of curriculum and professional development solutions for PreK-12 that support early learning, Next Generation Science Standards and state-aligned curriculum.
Carlyle had $212 billion of assets under management across 339 investment vehicles as of Sept. 30. Quad was founded in 2000 by Frank and Daniel Neuwirth and has managed $800 million and invested in more than 60 companies since its inception.
Rice Management provides fiduciary oversight of Rice University’s endowment, which was valued at more than $6.27 billion as of June 30.
Enbridge buys interest in Phillips 66 Partners pipeline
Canadian pipeline operator Enbridge exercised its option to buy a 26.25 percent stake in the Gray Oak Pipeline, a 900,000 barrel-per-day pipeline being developed by Phillips 66 Partners to move crude oil from the Permian Basin and Eagle Ford Shale to different points along the Texas Gulf Coast.
Bracewell partner Alan Rafte in Houston represented Phillips 66 Partners on the deal. Sidley partner Glenn Pinkerton, also of Houston, represented Enbridge.
The Gray Oak Pipeline was originally announced as a joint project between Phillips 66 Partners and San Antonio refiner Andeavor in December, with Phillips 66 having 75 percent and Andeavor 25 percent. Andeavor was later acquired by Marathon Petroleum for $23.3 billion.
The transaction cuts Phillips 66 Partners’ stake to 48.75 percent. Midland oil and gas explorer Diamondback Energy still holds the rights to buy an interest that would take Phillips 66 Partners’ ownership to 42.25 percent.
The pipeline is expected to be completed by the end of 2019.
CAPITAL MARKETS TRANSACTIONS
Bracewell aids lender in $2.6B in credit facilities for EnLink
Bracewell said Dec. 14 it represented the lead lender in $2.6 billion in term and revolving credit facilities for EnLink Midstream affiliates.
The team included partner Kate H. Day and Scott C. Sanders and associate Shannon I. Lindamood, all of Houston.
The facilities include a $850 million unsecured term loan for EnLink Midstream Partners, or ENLK, and a $1.75 billion unsecured revolving credit facility for EnLink Midstream LLC, or ENLC.
In October, the two publicly traded midstream service providers announced a plan for ENLC to acquire the units it didn’t own of ENLK to simplify their corporate structure.
The term loan closed and funded on Dec. 11 and the revolver will become available once the simplification is consummated in the first quarter to refinance their two revolvers, the parties said.
EnLink provides integrated midstream services across natural gas, crude oil, condensate and NGL commodities in top U.S. basins with a focus on the Permian’s Midland and Delaware Basins, Oklahoma’s Midcontinent and Louisiana’s Gulf Coast.
GulfStar helps SupplyKick secure Encina senior credit facility
GulfStar said Dec. 13 it helped SupplyKick secure a new senior credit facility with Encina Business Credit LLC to refinance its existing senior debt and provide capital for growth.
GulfStar managing directors Brian Lobo and Roshan Gummattira advised SupplyKick, whose counsel was Philip Dunlap at BoyarMiller in Houston.
Founded in 2014 and headquartered in Indianapolis, SupplyKick is an eCommerce retailer, working with more than 50 brands to manage and optimize sales on Amazon and other eCommerce sites such as eBay and Walmart. The company is led by CEO Josh Owens.
Encina is an independent asset-based lending platform targeting middle-market borrowers in the U.S. and Canada. The firm provides revolving lines of credit and term loans from $5 million to $100 million and secured by accounts receivable, inventory, machinery and equipment and real estate.
Lobo said the partnership with Encina will allow SupplyKick to establish new relationships with high growth brands while capitalizing on growth initiatives within its existing manufacturing partners.
PREVIOUSLY ANNOUNCED DEALS
Hunton Andrews Kurth said Dec. 11 that it represented LongPoint Minerals II on its $846 million capital raise, which closed Oct. 2. The team included Mike O’Leary, Courtney Butler, Allison Mantor and Erin Juvenal.
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Jones Day said Dec. 12 it advised Mill Creek Residential on its $47.45 million acquisition last month of the Modern Miami apartment building from Waterton Associates as part of a joint venture with Rockwood Capital. The team included Susan C. Cox and Michael K. Ording. Mill Creek and Rockwood financed the deal with a $31 million loan from CIT Bank.
BANKRUPTCY
Texas lawyers are involved in last week’s bankruptcy filing of Houston-based Parker Drilling.
Kirkland & Ellis is advising Parker Drilling, including partner Brian E. Schartz, who offices in Houston and New York, and Anna G. Rotman in Houston.
Jackson Walker is counseling affiliates Parker Drilling Co. North, including Elizabeth Carol Freeman; Parker Drilling of South America, including partner Matthew D. Cavenaugh; and Parker Drilling Co. of Oklahoma, including senior counsel Kristhy M. Peguero in Houston.
Akin Gump Strauss Hauer & Feld is representing the consenting shareholders with lawyers in Washington, D.C. and New York.
The company’s equity holders include Saba Capital Management, Brigade Capital Management, Dimension Fund Advisors and Whitebox Advisors.
Moelis & Co. is Parker Drilling’s investment banker and Alvarez & Marsal is its financial advisor. Houlihan Lokey Inc. is advising the consulting stakeholders.
Parker Drilling filed for bankruptcy on Dec. 12 in Houston after reaching an agreement with senior bondholders that would reduce debt by two-thirds and raise $95 million in equity capital through a backstopped rights offering.
The company provides rigs and equipment to oil and gas explorers and producers. It listed assets of $937.2 million and debt of $695.5 million, $585 million of which is owed to unsecured bondholders.
The company expects to emerge from Chapter 11 early next year with the same management team, including chairman and CEO Gary Rich.
Parker Drilling said its cash flow and liquidity should be enough to sustain it through the bankruptcy but it also will have access to a $50 million debtor-in-possession loan and $50 million in bankruptcy exit financing. It also anticipates issuing a new $210 million junior term loan upon exiting to satisfy its bond obligations.