Blank-cheque buyers eye corporate spinouts
Acquiring spun-off subsidiaries of public firms seems less risky for Spacs in terms of due diligence, accounting, reporting and governance considerations
— Ivana Naumovska, professor, Insead Business School,
Singapore
Blank-cheque companies, flush with cash and on the hunt for a private business to take public, have started adding corporate carveouts to their list of potential purchases.
The surge in special purpose acquisition companies (Spacs), which have raised more than $137 billion over the past 12 months, has set off a global search for suitable targets-usually startups with little revenue or mature companies sitting in private equity portfolios. Now Spacs are also looking at divisions of public companies, with an eye on those that have the potential to be carved out as standalone businesses.
Publicly traded Irelandbased packager Ardagh Group SA on Tuesday agreed to sell its beveragecan unit to a blank-cheque company backed by financier Alec Gores. The transaction valued the can business at $8.5 billion, including debt, making it the biggest Spac deal involving a corporate carve-out since the surge began, according to data compiled by Bloomberg.
This type of transaction could become popular as more blank-cheque firms move to the deal-making stage of their life cycle, crowding the market with suitors looking for a transaction.
"It's a pretty sizable deal," said Christopher Anthony, a partner at Debevoise & Plimpton LLP. "It'll be interesting whether this gets on people's radar interest for transaction."
US-based Eventbrite Inc's co-founder Kevin Hartz, whose Spac on Wednesday announced a $2.1 billion deal to merge with Markforged Inc, said that a public-company spinout was among the targets it reviewed before choosing the manufacturer of 3D printers.
"Spacs have the ability to offer a path to liquidity not just for standalone-type private companies, but also public companies," Hartz said.
While blank-cheque companies have circled carveouts before, some haven't made it to the finish line. Hartz said it's easier to complete a deal with a private company than a spunout entity, whose financials and accounting functions must be separated from its parent.
Michael Klein's Churchill Capital Corp IV, months before it announced a deal with Lucid Motors Inc, held talks with AT&T Inc about acquiring a part of satellite provider DirecTV.
Some do succeed. Intercontinental Exchange Inc in January and this
stokes type of said it would list its cryptocurrency platform Bakkt Holdings LLC through a Spac in a deal that valued the unit at $2.1 billion. International Business Machines Corp (IBM), which is exploring a sale of its Watson Health business, may consider listing it via a Spac as one option, according to a person familiar with the matter. IBM declined to comment.
There could be benefits for a Spac's management team in buying a company that's already been part of a public entity, said Ivana Naumovska, a professor of entrepreneurship at Insead Business School, based in Singapore.
"Compared to acquiring private targets, acquiring spun-off subsidiaries of public firms seems less risky for Spacs in terms of due diligence, accounting, reporting, and governance considerations," Naumovska, said. "Spun-off entities seem better equipped for the public market."
Spac spinouts particularly appeal to companies that want to get value out of a unit without giving up control.
Jaipur, Feb. Mumbai captain Prithvi Shaw on Thursday became the highest individual scorer in Vijay Hazare Trophy national 50-over championships as he smashed an unbeaten 227 off just 152 balls to help Mumbai beat Puducherry by 233 runs in their Elite Group D game here.
The 21-year-old Shaw, who has played in five Tests and five ODIs, broke the earlier record of the highest individual score held by Sanju Samson (212 not out against Goa in 2019). Puducherry’s decision to put Mumbai in to bat backfired badly as Shaw and Suryakumar Yadav (133 off 58 balls) toyed with their bowling attack at the Sawai Mansingh Stadium and post a mammoth 457/4.
Prashant Solanki (5/48) then picked a five-for as Mumbai bundled out Puducherry for 224 to register
25:
their third win on the trot.
Shaw and Yashasvi Jaiswal (10) added 58 runs for the first wicket to lay the foundation. After Jaiswal was dismissed, Shaw found an able partner in Aditya Tare (56, 7x4) as the duo stitched a 153run stand for the second wicket. Suryakumar, who came in at No. 4, was in his elements, hitting 22 fours and four sixes. He and Shaw added 201 runs for the third wicket stand and helped Mumbai go past the
400 mark. — BRIEF SCORES
■ Mumbai 457/4 in 50 overs (Prithvi Shaw 227 not out, Suryakumar Yadav 133; Pankaj Singh 2/79) beat Puducherry 224 (Damodaran Rohit 63; Prashant Solanki 5/48)
■ Himachal 251/8 (Nikhil Gangta 100 not out, Kulwant Kherjroliya 2/30) lost to Delhi 252/4 (Kshitiz Sharma 67 not out, Lalit Yadav 52 not out).