The special purpose acquisition company (SPAC) phenomenon is heading to Europe, with Bernard Arnault and Jean-Pierre Mustier the latest big names to join the fray. They have announced the launch of the Pegasus SPAC, which will take European financial companies public.
Arnault is France’s richest man and founder of luxury goods company LVMH [MC], a group which includes the Louis Vuitton, Dior, Givenchy and Veuve Clicquot brands. He is combining forces with Mustier, the ex-chief of UniCredit and Societe Generale’s investment banking arm, to create the new Pegasus SPAC. They are joined in the venture by French investment firm, Tikehau Capital, and former UniCredit and Bank of America “dealmaker” Diego De Giorgi.
Arnault’s personal holding company Financière Agache, Mustier, De Giorgi and Tikehau Capital will buy at least 10% of the Pegasus IPO between them, reports the Financial Times.
The Pegasus SPAC will focus on fintech, fund management, insurance and other diversified financial services across Europe, because these sectors have been identified as “ripe for consolidation because ultra-low interest rates, new regulations and technological advances have disrupted their business models”, as reported by the FT.
Will the Pegasus SPAC be the first of many?
SPACs are fast becoming a popular alternative to the traditional IPO path for private companies, especially in the US. Part of the appeal is that there is a lot less regulation, as well as “more certainty over the valuation that will be attained and funds raised”, according to Reuters’ Sudip Kar-Gupta.
Pegasus may herald increased popularity in so-called “blank-cheque companies” that focus on financial firms, with the FT noting that a spate of current and former European bank CEOs are in the process of launching SPACs. Those announced so far include “former Credit Suisse chief executive, Tidjane Thiam, ... former UBS chief Sergio Ermotti, ex-Commerzbank boss Martin Blessing and Barclays investment banker Makram Azar”.
Europe’s SPAC capital
Pegasus is amongst the first of an expected wave of SPACs to launch in Europe, and in Amsterdam more specifically.
Mustier certainly sees the appeal, telling the FT: "Europe needs more growth capital to support companies and the SPAC can be the missing instrument between a traditional IPO and private equity financing."
The latest data from SPAC Research shows that 166 SPACs in the US have raised $52.1bn already in 2021 (as of 23 February). This is already more than half the number and value of SPACs in 2020 as a whole. Kar-Gupta reports that “concerns over a saturation of [the US] market [also] helped fuel the decision to list in Europe instead.”
Why Amsterdam?
The city is “emerging as the European capital for blank cheque companies”, according to the FT, as it benefits from a “shift of euro-denominated equity trading away from London since Brexit.”
Regulations in the Netherlands are also closest to the US, where “protections for SPAC investors are better than in many jurisdictions. For example, Dutch regulations allow investors to redeem their investment if the target eventually identified is not to their liking”, reports Reuters.
There are further reasons for selecting Amsterdam. Reuters reported a source close to the deal as saying: “We thought our proposal was differentiated by taking it to Europe, particularly when we are looking to target European companies … but we have looked to replicate a US structure so global investors understand it, and Amsterdam seemed best suited for that. … Amsterdam has taken over London in terms of [stock market] flows.”
With the Pegasus SPAC apparently the first of many, investors will be watching developments from this group of high-profile financiers with interest.
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