PE HUB Wire Highlights, 5.15.18

(L-R) Eric Zinterhofer and Luisa Beltran and Jonathan Marino of peHUB. Photo by Marcus Kaiser for Buyouts Texas. Copyright: Thomson Reuters

CalPERS CIO Ted Eliopoulos to step down at year-end; Ardian Infrastructure Fund I raises $800 mln

Happy Tuesday, Hubsters!

The big news today is that sports betting looks as if it will be legal in many states. Yesterday, the Supreme Court struck down a 1992 federal law that effectively banned sports gambling in most states, Forbes said. The decision means that states wanting to offer legal sports betting will soon be able to, the story said. The first state up is likely New Jersey, which has been fighting for six years to allow sports betting. Pennsylvania, Mississippi, West Virginia and New York have already passed sports betting laws, Forbes said.

The rule change appears to be a boon for DraftKings and FanDuel, the daily fantasy sports companies. FanDuel reportedly said yesterday that the Supreme Court decision “creates an enormous opportunity.” DraftKings has also spent several months developing digital products that would enable people to place sports wagers, xconomy says. The Supreme Court decision is also ironic considering that the companies have argued that their main product is not a form of gambling, the story says.

How else will this play out for private equity, Hubsters? Will sports betting become a big sector for private equity or are such companies off limits due to ESG considerations? Email me your thoughts at [email protected]

Franchising: Today, Manna Development Group has acquired 38 Panera Bread cafés in Colorado, bringing its total to over 130. Manna Development, when it was trying to buy the Panera franchises, didn’t want to sell a stake in the deal. Instead, it called in Capital Spring, a lower middle market lender, to came up with a structured financing that allowed Manna to retain control, said Erik Herrmann, a CapitalSpring managing director and head of the restaurant investment group. “The alternative to working with us was to sell a majority to someone, so they came to CapitalSpring,” he said. See our brief here.

CapitalSpring is investing out of its fifth fund, which closed on $725 million in 2017. The lender, which has offices in Nashville, Los Angeles and New York, provides debt financing as well as private equity to all aspects of the restaurant industry including franchises, company-owned chains, real estate and technology platforms. It targets deals with $50 million to $400 million enterprise values.

Restaurant franchises are big business for private equity. There are hundreds of thousands of branded chain restaurants in the U.S., Herrmann said. Consolidation is causing some corporate franchises to get big enough that they are attracting institutional investors, said he said. Franchises also generate a recurring revenue model, he said. “People need to eat three meals a day,” he said…


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