Alignvest 11: a new SPAC, with a twist
Marketing process gets underway
It’s a first of its kind and for those who thought that special- purpose acquisition companies, at least in the Canadian context, would be one and done, a little rethink is required.
On Monday, the marketing process for Alignvest Acquisition 11 Corp. started. Alignvest 11 is from the same stable as the original Alignvest SPAC, an offering that closed in the summer of 2015 with $ 259 million in proceeds. In February, the original SPAC completed its so- called qualifying transaction when it acquitted Trilogy International Partners, a private telecommunications company that had operations in New Zealand.
Alignvest is one of the four SPACs to successfully complete a qualifying transaction. ( Acasta, Gibraltar and Kew Media are the other three. The original Alignvest is now called Trilogy International Partners.) Two others (Dundee and INFOR) raised capital in an initial public offering but were unable to complete a qualifying transaction.
And now Alignvest is back with its latest variant. The backers either believe they have brand recognition — hence the continuance of the Alignvest name – or they don’t believe in paying the costs associated with finding a new name.
In the marketing materials, Alignvest said it is “leveraging” its previous experience “by raising Alignvest Acquisition II Corporation, a new TSX- listed SPAC that combines the best practices of Alignvest with an enhanced investment structure.”
If nothing else Alignvest II is thinking on broader terms than with the initial iteration. For starters, it is seeking at least $ 250 million via the sale of units with each unit consisting of a share plus half a share purchase warrant. On its first offering it was after a more modest $125 million.
And the hoped- for- larger sized offering means that Alignvest 11 is seeking larger potential targets. For the original deal, Alignvest intended “to focus on acquiring companies with an estimated enterprise value of between $ 250 million and $1.25 billion.” Now with a larger offering the target range has been moved to companies with an enterprise value of $ 500 million to $2.5 billion.
Aside from a plan to be as twice as big as last time, Alignvest has also been innovative this time round.
Given that certainty of capital is the biggest risk with a SPAC – shareholders have the right to vote when the qualifying transaction is announced but also to request of their capital at the same time — the issuer has decided to tackle that issue up front.
It has raised $ 113 million from a group of so-called anchor investors.
That capital is committed and will be invested into the issuer with the only condition being that a qualifying transaction is presented and closes. The issuer has the standard two years to find a target.
But unlike the public investors, who can decide not to be a shareholder in the resulting company when the qualifying transaction is announced, the providers of the committed capital have no such option.
That plan is both riskaverse and a way of solving a potential problem down the road: It was felt best to lock up capital ahead of time rather than scramble around and seek more later on.
And ensuring certainty of capital has presented problems with at least two SPACs. In the case of Acasta, holders of about 70 per cent of what was raised in the IPO, wanted out, which meant that the sponsors had to do a quick round near the end. While Acasta didn’t replace all that was lost, it meant a less than perfect start.
At Dundee, the situation was even more desperate with holders of almost 100 per cent of the equity wanting out.
ALIGNVEST HAS ALSO BEEN INNOVATIVE THIS TIME ROUND.