Buyout shops would cash in redesigned blank checks

PropertyGuru

27/08/2024 15:34

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Jeffrey Goldfarb
       NEW YORK, Aug 27 (Reuters Breakingviews) - Fewer blank
checks are being written on Wall Street, but bankers are still
happily cashing them. Even amid sluggish deal markets, money
managers keep tinkering with special-purpose acquisition
companies, ensuring a steady drip of activity. Buyout shops have
good reasons, however, to help them really revive the sullied
model.
    Taking shell companies public on the promise of finding
takeover targets peaked in 2021, when nearly 700 of them raised
more than $165 billion, according to LSEG data. The frenzied
hype broke in large part after higher interest rates curbed risk
appetites for speculative ventures and U.S. securities
regulators blocked wild-eyed projections associated with SPAC
M&A.
    Although volume has slowed, it hasn’t stopped. Through
mid-August, 19 cash-stuffed shells had debuted on U.S. public
markets in 2024, accounting for a quarter of all initial public
offerings by number and 15% of the $20 billion raised. Much of
the issuance is supported by serial SPACsters, like financiers
Stephen Kadenacy and Joe Reece, whose SilverBox Capital just
rolled out its fourth blank-check company.
    Roughly 100 of them are seeking deals, per data outfit SPAC
Research, like the one unveiled on Tuesday by Concord
Acquisition Corp II for specialty software developer Events.com.
Others, which completed mergers earlier, are also increasingly
being bought. All the transactions help feed financial and legal
advisers. Take Bridgetown 2 Holdings, backed by billionaires
Richard Li and Peter Thiel. Its 2021 IPO was led by Citigroup
 C.N  and BTIG. Then, Bank of America’s  BAC.N  Merrill Lynch
advised on its merger with PropertyGuru  PGRU.N . Now, Moelis
 MC.N , Morgan Stanley  MS.N  and JPMorgan  JPM.N  are working
on the Southeast Asian real-estate portal’s $1.1 billion sale to
EQT  EQTAB.ST .
    Further revving up fees probably requires structural
changes, though. One industry, in particular, has reason to push
for them: private equity. Sitting on some $3 trillion of
investments, by research firm Preqin’s count, buyout barons are
hungry for exits. With traditional IPOs frustrating their
ambitions, opening the SPAC route would be useful.
    As things stand, SPACs mainly attract hedge funds eyeing the
safe, and leverageable, yield of cash kept in trust and playing
with warrants. These investors bear little risk because they can
vote on acquisitions and demand their money back either way.
Such ambiguities mean these blank checks are suboptimal
currencies for slow-and-steady private equity businesses. Making
U.S. SPACs more like their British cousins, which entrust deal
approval to boards, might attract different kinds of sponsors
and investors. By devoting some political capital to lobby
Washington for revisions, buyout firms might just generate a
healthy return.  
    Follow @jgfarb on X
    
    
    CONTEXT NEWS
   Events.com, which develops software to sell tickets and
register for conferences and festivals, said on Aug. 27 it had
agreed to be bought by Concord Acquisition Corp II, a special
purpose acquisition company chaired by former Barclays CEO Bob
Diamond. The deal implies an enterprise value of $399 million
and will allow Events.com to go public on the New York Stock
Exchange.
    Investment firm EQT said on Aug. 16 it had agreed to buy
PropertyGuru, an online marketplace for real estate in Southeast
Asia, for $1.1 billion. It is paying $6.70 a share, a 52%
premium to the closing price on May 21, before media reports
first surfaced about a possible deal.
     PropertyGuru, whose major shareholders are buyout firms TPG
and KKR, went public in March 2022 with an equity value of $1.6
billion when it merged with Bridgetown 2 Holdings, a special
purpose acquisition company formed by Richard Li’s Pacific
Century Group and Peter Thiel’s Thiel Capital.

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Graphic: SPACs are back to their pre-pandemic share of IPOs    https://reut.rs/4cwMeNx
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 (Editing by Jonathan Guilford and Sharon Lam)
 ((For previous columns by the author, Reuters customers can
click on  GOLDFARB/ 
jeffrey.goldfarb@thomsonreuters.com))