Warning: Temasek Opens SF Office

Private Equity just got harder in San Francisco. Rolling into town and establishing an office, is Singapore’s Sovereign Wealth Fund, Temasek. With its people closer to the action, Temasek is better able to source deals for direct investments, such as its recent minority purchase of life science company, Verily.

In addition to billions, Temasek doesn’t have any pesky limited partners as do traditional private equity or venture capital firms; so there is no need to necessarily exit an investment early. Direct investments pose another threat since they bypass private equity and venture capital firms all together. Temasek’s San Francisco office complements its other one located in New York City.



Alphabet’s (Full Year) Annual Report

More info on Alphabet’s recent stock deals is in its 2016 Annual Report filed on Friday. For 2016, Google operated fully under the umbrella that is Alphabet. Alphabet is an operating structure that is supposed to tell us more about the comings and goings of Google’s search cash. 

Here are some of the more notable stock transactions reported:

First. Expect more stock repurchases from Alphabet. In October 2016, the Board approved a $7 billion stock repurchase program of Class C shares, but none were purchased in the final quarter of 2016.

Alphabet did purchase approximately $3.7 billion in stock from investors last year. By returning cash to shareholders through stock buybacks, Alphabet is taking the more tax-efficient route than just issuing cash dividends.

Second. In the last quarter of 2016, Alphabet invested approximately $100 million in private companies; where Alphabet has bought less than twenty percent of a private company.

Alphabet’s invests in private companies through GV and CapitalG. At year-end 2016, the portfolio companies were worth $8.1 billion and had a total unrealized gain of $5.1 billion.

Third. Alphabet reported more on the sale of a minority interest in Verily to Temasek, the Singapore sovereign wealth fund. Alphabet will receive a total of $800 million in three slices; the first slice coming this month and the remaining slices are expected to be paid in the second half of 2017.

As stated before, purchasing less than half of Verily, means that Temasek, values Verily, at most, at $1.6 billion.


Verily’s Expanding Pies

Singapore’s sovereign wealth fund, Temasek, purchased a slice of the Alphabet’s other bet, Verily. This is after Alphabet reportedly put more money into Verily. For its exchange of $800 million, Temasek becames a minority partner and values, at most, Verily, at $1.6 billion. The deal was made possible by Verily’s establishment as a limited liability company, rather than corporation, in August 2015.

In the past year, Verily was the one doing the investing. In August 2016, GSK and Verily form a joint partnership, called Galvani Bioelectronics, by each business contributing intellectual properties and cash over seven years. In this exchange,Verify owns forty-five percent of the joint venture and GSK holds the remainder. Verify, for its part, would be required to contribute $10 million each year as a minority partner.  

Then in September 2016, Verily formed a joint partnership with Sanofi that was valued at $500 million. Sanofi put in a reported $250 million and Verily contributed an unspecified amount. Before all of this, Verily and J & J formed the medical robotics company, Verb Surgical Inc., back in 2015. No financial details were released on the Verb Surgical Inc.

Verily could use Temasek’s $800 million to fund its future commitments to the already formed joint ventures. What does Temasek get in the exchange? Temasek will now gain as it helps Verily expand its pie in Asia and especially, China.

As the majority partner in Verily, Alphabet gives up some of its interest in exchange for reducing risk. It was reported that earlier this month, Alphabet invested in Verily, too; this time, the amount was $1 billion.