Spacman Strikes a Deal

The Daily Dish (6/04/21)

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Bill Ackman’s twisty not-exactly-a-SPAC deal

Hold onto your shorts, because it’s certainly no typical SPAC deal.

Confirming earlier reports from the Wall Street Journal, Pershing Square Tontine-the SPAC backed by Ackman’s Pershing Square hedge fund-confirmed it was in discussions to acquire a 10% stake in Universal Music Group, the giant music company that co-owns the publishing rights to songs by the likes of Taylor Swift and Lady Gaga, for $4 billion.

The news comes amid a gold rush of deals around artist catalogs, while UMG itself has seen a boost in revenues from consumers streaming music from home.

Those trends have helped justify valuing UMG at about $42 billion in the potential deal, which would also crown the listing as the largest company to go public via merger with a SPAC…right? Except that’s not exactly what’s happening, and here’s where it gets twisty: Unlike in a typical SPAC deal, Bill Ackman’s Pershing Square Tontine would not merge with UMG, and it is not taking the company public. Vivendi, which owns 80% of the business, plans to list it as planned in Amsterdam in the third quarter of 2021. Only after that has happened will shares be given directly to Pershing Square Tontine’s shareholders.

And here’s the really wild thing: The spectacle will continue. After investing in UMG, the Tontine will have $1.5 billion left over (that investors could add more to) in a vehicle aptly named PTSH Remainco, that will go toward acquiring another business. In total, the new Remainco vehicle could have $10.6 billion to make an acquisition, per the press release.

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eToro Submits Draft for SPAC

Israeli brokerage firm eToro filed a draft with the SEC for its planned merger with SPAC FinTech Acquisition Corp. The company will operate as eToro Group ltd with an implied valuation of $9.6 billion. 

eToro has grown into one of the largest brokerage platforms with regulated operations across many countries around the world.

Established as a social trading platform, the broker offers trading services with all popular asset classes including stocks and cryptocurrencies.

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Babylon Health Goes Public 

Kinnevik’s portfolio company Babylon Health has entered into a definitive merger agreement with SPAC Alkuri Global Acquisition Corp.  The merged company will operate as Babylon Health and is expected to trade on Nasdaq under the new ticker “BBLN”. 

The merger is expected to close in second half of 2021 and is subject to the approval of shareholders. The transaction values Babylon Health at a value of $3.6 billion and will provide the company with $575 million in additional capital to support the company’s continued growth. 

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SPAC’s Are Back

Scrutiny from the Securities and Exchange Commission slowed down SPAC activity in the Spring. The recent uptick in activity follows a surge in the SPAC market over the past few years.

In 2020, approximately 250 SPAC’s were raised and about 430 SPAC’s are actively looking for a deal. 

Dynamics within  private equity could play a role in the future of SPAC’s. Funds are under pressure to exit their portfolio companies and can a higher return and continue to sell to each other. SPAC’s provide an alternative to this.