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Inside Great Hill’s and Charlesbank’s investment in Wayfair, PE-backed businesses fear layoffs without access to government funds, Blackstone makes up to $2bn life sciences investment

PE-backed mid-market companies fear layoffs without government funds and Blackstone invests up to $2 billion in Alnylam.


We have an interesting piece this morning on the recent $535 million investment by Great Hill Partners and Charlesbank Capital Partners in online home goods company Wayfair.

Wayfair struggled with revenues over the past year as it spent a lot of money to expand its business. Its share price had been tanking until the outbreak of covid-19, which led to governments locking down populations to slow the spread of the virus.

In this environment, apparently lots of locked-down people are working on home projects (I have this on good anecdotal authority!)

And since shoppers can’t really go to actual retail stores to buy supplies or furniture, Wayfair has been a beneficiary of this lock-down creativity and energy.

“We didn’t focus so much on the quarterly and annual factors,” Michael Choe, managing director and CEO of Charlesbank, told Karishma Vanjani of PE Hub. “We focused on the underlying business model and we have conviction in its growth,” he said, emphasizing Wayfair’s repeat sales from existing customers.
From the article: In connection with the transaction, the $535 million senior credit note will bear interest at an annual rate of 2.5 percent and feature a $72.50 conversion price, representing a 46 percent premium to the average closing price of Wayfair’s common stock.

The convertible senior credit notes give the PE firms downside protection should the company’s stock tumble, as well as a way to participate in the upside of the business.

Simply put, if the traded share price of Wayfair rises above the $72.50 conversion price, the PE firms will be able to buy the stock at a lower conversion price instead of the market rate – thereby earning a premium. Read it here on PE Hub.

Layoffs: Lower to middle-market companies are worried they will be facing mass layoffs if they don’t get help from the federal government, in the form of forgivable loans through the $2 trillion CARES Act. Private equity-backed middle-market businesses so far face exclusion from the program if they have more than 500 employees, a threshold that is easier for PE-backed companies to breach as all employees in a PE firm’s portfolio are counted as aggregated under the rules.

Conversations are underway in Congress between Democratic and Republican leaders about including an additional $250 billion in the program, which PE firms are hoping to be part of, writes Teddy Grant on Buyouts. Read it here.

Top Scoops
CalPERS’s proposed 2020-2021 budget includes a boost in estimated fees it pays to external managers in its Opportunistic Strategies portfolio, which among other things invests into market dislocation, writes Justin Mitchell on Buyouts. CalPERS launched its opportunistic portfolio in 2017 to “access investment opportunities outside of the existing asset classes,” the system said on its website.

Fees on the opportunistic portfolio rose to $5.4 million from $1.5 million for 2019-2020. The boost in fees for this program will come as overall external investment fees fall, a result of the system’s reduction in external management contracts, according to pension documents. Read the full story here.

Blackstone Group agreed to provide up to $2 billion to Alnylam Pharmaceuticals, a RNAi therapeutics company. The investment will support the company’s advancement of RNA interference medicines for patients suffering from a range of diseases. The financing is coming from Blackstone Life Sciences and GSO Capital. Blackstone will buy 50 percent of the royalties owed to Alnylam on global sales of inclisiran, an investigational medicine for treatment of hypercholesterolemia, under review by the FDA. Read more.

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