SPACs in the UK and their top listings

Highlights

• The UK government announced a new regime to govern the listing of SPACs on LSE from August this year.
• FCA eased rules by waiving off the suspension clause on the occasion of a SPAC raising a minimum of £200 million from an IPO.
• To ensure investor protection, the FCA announced that shareholders would have redemption rights before any planned acquisition as well as shareholder vote.

The UK government announced a new regime to govern the listing of special purpose acquisition companies (SPACs) on the London Stock Exchange, which came into effect from August this year.

In April, the Financial Conduct Authority (FCA) eased rules by waiving off the suspension clause on the occasion of a SPAC raising a minimum of £200 million from an initial public offering (IPO). The FCA announced that the figure was being slashed to £100 million going forward.

New rules

Earlier, once a target company was identified, the shares in SPACs were suspended. It essentially trapped the investors and kept them away from participating in UK’s market. To ensure investor protection, the FCA announced that they would have redemption rights before any planned acquisition as well as shareholder vote. The new rules became effective on 10 August.

Global regulators are becoming more and more cautious of SPACs, but the UK is aiming to attract the majority of it to its markets. These companies have had a dream run on the US market as well as in emerging nations and the European Union.

These companies function as cash shells, which then gets access to funds through listing on the market. The investors’ cash then funds acquisitions that would make the target firm go public. In the last one year as investors crowded the US market, SPACs have raised over $75 billion. In contrast to that, the UK has not been able to attract as much interest.

Existing SPACS

The last wave of SPACs listing seen in the UK was during 2016-17. The formation of SPACs during that period increased significantly, and 15 of them got listed on the London Stock Exchange in 2017. They raised £1.7 billion. In the last five years, more than 50 of these companies were listed in the UK, and since 2017, they have raised more than $2 billion.

J2 Acquisition

This British Virgin Islands investment vehicle was formed by previous employees of US’ consumer products company Jarden. It was listed on the London market in 2017 and raised $1.25 billion in the IPO.

The offering included ordinary shares worth $1.21 billion at $10 each share. Another $40 million was injected as founder-preferred shares.

It was formed by Martin Franklin, Jarden’s co-founder and former Jarden executives James Lillie and Ian Ashken.

Landscape Acquisition

This was a British Virgin Islands company and raised $500 million in gross proceeds from its London IPO in 2017. The company was formed by entities that were associated with Michael Fascitelli, former CEO and president of Vornado Realty Trust, along with Noam Gottesman, previous chairman Man GLG.

The company raised $484 million through ordinary shares worth $10.00 per share. Another $16 million was raised through founder preferred shares that were subscribed by the founders.

Wilmcote Holdings

This was UK chemicals investment company and had a £15 million London IPO in 2017. The company had 12.5 million shares at 120p each share. It raised an initial market capitalisation worth £25 million.

The company was backed by its founder, Marwyn Value Investors, and had the support of other institutional investors. The company’s aim was to make acquisitions in North America, Europe, and the UK.

Ocelot Partners

This was a special purpose acquisition company that was founded by LionTree Partners, Martin Franklin, and Andrew Barron. It had a successful London IPO in 2017 worth $425 million.

The UK Virgin Islands-domiciled company offered 41.76 million in new shares, which were priced at $10 each share. An additional $7.35 million was raised through founder preferred shares. The deal was $75 million more than the target launch at $350 million.

CONCLUSION

SPACs have had a dream run in the USA. However, it is still to be seen whether, with the easing of norms, UK is able to generate a similar buzz.