Business

Boutique investment group works with family offices for a European SPAC

Investment bankers Michael and Yoel Zaoui who are connected to some of Europe’s wealthiest family offices are seeking to raise 300 million euros for a SPAC planning to list on the Euronext exchange in Amsterdam.

The Zaoui brothers were rainmakers at Morgan Stanley and Goldman Sachs. They now run their own boutique, Zaoui & Co, from a discreet office in London’s Mayfair, latterly advising Softbank on plans to sell Arm Holdings to Nvidia and the Peugeot family in the merger of PSA and Fiat-Chrysler.

Their SPAC, Odyssey Acquisition, wants to invest in healthcare or technology using advice from Michel Combes of SoftBank International and Olivier Brandicourt, former head of Sanofi.

The launch illustrates a growth of interest in SPACs in Europe among family offices and other investors. Equally important, a growing number of technology venture groups in Europe are becoming mature and keen to explore ways to secure a stock market listing.

In April, LVMH chief executive Bernard Arnault raised 500 million euros for a SPAC with Jean Pierre Mustier, former chief executive of UniCredit. Its backers are led by the Arnault family’s Financre Agache. Elsewhere, telecom billionaire Xavier Niel raised 300 million euros for 2MX Organic, planning to invest in organic food opportunities.

Venture capital group Lakestar has raised 275 million euros, for a SPAC listed in Frankfurt. Former Credit Suisse CEO Tidjane Thiam has secured 300 million euros. Travel billionaire Manfredi Lefebvri d’Ovidio of Heritage Group has secured 300 million euros. Rocket Internet of Germany has raised 250 million euros. Veteran SPAC promoter Betsy Cohen has also indicated her growing interest in European deals.

Until very recently, SPACs were massive in the US. They offer a fast route to market for companies with light requirements for due diligence. Family offices have backed SPACs, and endured the related publicity, after hearing of investors securing capital gains as high as 800% from SPAC shares and warrants. Investors have also locked into high cash returns by supplying acquisition finance through Private Investment in Public Equity (PIPE) arrangements.

But, as explained by Family Capital in April, US regulators are fretting over the way sponsors have profited from SPACs due to few limits on fees, unsuitable acquisitions and insufficient regard to long-term corporate prospects. The SEC has threatened to toughen its rules. The availability of PIPE finance has fallen back.  Initial post-acquisition share price premia when SPAC mergers are complete have shrunk to little, or nothing. 

The SPAC proposing to buy space company Momentus has cut the value of its offer in half, as a result of security concerns. Some SPACs are desperately looking for an opportunity given they need to return money to investors if they fail to find a deal in two years. Jim Chanos of hedge fund Kynikos is a renowned short seller, who describes many SPACs as “castles in the air.”

It is worth adding that many deals are in progress, including the purchase of BuzzFeed, scooter outfit Bird, Pear Therapeutics and biotech firm Ginkgo Bioworks, backed by Bill Gates. And Jim Chanos has a long position in several SPACs.

But it pays to watch the price. In some cases, deals are being proposed at levels that are below the valuation based on previous VC funding rounds. A few deals have been deferred or abandoned: according to Sky, a Softbank SPAC is looking for a new opportunity, following the termination of a deal with software provider Mapbox. 

Europe has experienced a slow start for SPAC mergers.  But a SPAC promoted by Alexander Kudlich’s 468 Capital of Germany is negotiating the $1.2 billion purchase of Boxine, a children audio specialist.  And few would doubt the ability of the Zaoui brothers to pull off a deal, with a little help from their friends. 

 

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