‘Blank Cheques’ Thrive in Volatile Market

SPACs are luring investors into fresh opportunities

Stephanie Baum in New York

30 Jan 2008

At least 75 hedge funds are trying to take advantage of corporate acquisition opportunities, left open by the evaporation of debt finance, by investing in special purpose acquisition companies – publicly-quoted “blank cheque” vehicles.

US hedge fund managers Fortress, Och-Ziff Capital, Ospraie Management, Pequot Capital, SAC Capital, Tudor Investment, Wellington and York Capital are among new investors in Spacs.

Spacs have cash with which to make acquisitions. Investors pay an average of $10 each for a combined share and a warrant, which allows buyers to acquire additional shares in return for more cash.

The companies and private equity firms that would normally compete with Spacs for acquisitions rely on loans to finance their purchases and have had to put their plans on hold because of the credit crunch. Meanwhile, market volatility has lowered the price of acquisition targets.

The chief executive of a large US fund manager said: “There are a lot of interesting acquisition opportunities around. Many companies are trading at low price/earnings ratios.”

Steven A. Cohen of SAC Capital

Although Spacs began in 1994 as small scale investment vehicles, the size and scope of deals brought to market has risen sharply in the past four years.

Endeavor Acquisition Corporation and Services Acquisition Corporation each raised about $100m for their 2005 purchases of clothing retailer American Apparel for $384m and smoothie business Jamba Juice for $265m.

Last year Tom Hicks, co-founder of buyout group Hicks, Muse, Tate and Furst, launched a Spac that raised $522m while activist investor Nelson Peltz and billionaire investor Ronald Perelman

followed.

Freedom Acquisition Holdings, which had raised $500m, made a reverse acquisition of UK hedge fund manager GLG Partners, allowing the multi-strategy firm to obtain a listing on the New York Stock Exchange with a valuation of $3.4bn.

Spacs allow investors to vote against acquisitions if they do not like the target. Even if the majority of shareholders decide to pursue the deal, a shareholder at odds with the others may liquidate his or her investment. If the majority is against the acquisition, their investment is returned minus the underwriter’s fee.

These mechanisms mean the transactions take time. Spacs are usually set up to allow managers 24 months to acquire a target company. Even when a target is found, it takes about six months to complete a takeover because of US Securities and Exchange Commission requirements.

Read more >>> original article

Super Bowl SPACulation

Will Heinz Profit From Pats/G-Men Rematch?

Posted Jan 27th 2008 9:40AM by Aaron Katsman

HJ Heinz Co. (NYSE: HNZ) should have really strong sales this week leading up to Sunday's Super Bowl. With more interest this year than in any Super Bowl in recent memory, with the two storylines of the Patriots trying to run the table, and a New York team in the big game, not only should TV ratings skyrocket, but I would expect the number of Super Bowl parties to be up as well. Clearly that will benefit the condiment maker.

Heinz is trading toward the bottom of its 52-week range and sports a yield of over 3%. What makes this even more interesting is that investing guru Nelson Peltz owns a share. About two months ago, Peltz filed a prospectus for the $750 million initial public offering of a special purpose acquisition company (SPAC). Due to the ways SPACs are set up, he will need to make some kind of acquisition, and that deal may just be Heinz.

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Grab a SPAC and a Smile...

Psyop, the New York-based VFX and animation studio responsible for spots like Coca-Cola’s “Happiness Factory” has merged with an Israeli-based acquisitions company for $10 million in cash and $20 million in stock.

Based on the agreement, executive producer Justin Booth-Clibborn becomes CEO of the new venture, which could get an additional $14 million in cash and stock if performance goals are reached over the next three years. Representatives from Psyop declined to comment.

The deal is essentially a merger with a company that’s already public. Fortissimo is a Special Purpose Acquisition Corporation, or SPAC, a company set up so general shareholders can function like private equity firms and offer IPO-like deals to companies of their choosing.

Read more >>> Nmancer's Teklog

SPACs Pick up Slack in Shaky Credit Market

SPACs seen by some as less risky than blind pools

by Julia Neyman

Imagine the following investment scenario: You give a large sum of money to a seasoned principal, who uses it to take a promising company public. The principal, who has spent the last 30 years building his Rolodex on Wall Street, has two years to seal the deal.

If the deal happens, you could get a solid return when the company goes public. If two years pass and a deal hasn't materialized, you get your money back.

It's called a special purpose acquisition company (SPAC), and finance insiders say it's as close to a win-win as they've seen in awhile. They explain a SPAC as a cousin of the traditional blind pool offering, but not as susceptible to fraud.

Investors are safer because 99 percent of their investment is held in a trust until the deal goes. Principals take on more risk, but if they have solid Wall Street contacts, making a SPAC work is just a matter of finding a promising private company and filing all the paperwork to take it public.

Read more >>> original article

Sporty SPAC Scores on IPO Completion

Sports Properties Acquisition Corp. Announces Completion of Its Initial Public Offering

Thursday, January 24, 2008; Posted: 12:36 PM

NEW YORK, Jan 24, 2008 (BUSINESS WIRE) -- HMR/U | news | PowerRating | PR Charts -- Sports Properties Acquisition Corp. (AMEX: HMR.U), announced today that it had completed its initial public offering. Sports Properties is a special purpose acquisition company, also known as a SPAC. The initial public offering of units was sold at an offering price of $10 per unit resulting in gross proceeds of $200,000,000. Each unit issued in the initial public offering consists of one share of Sports Properties's common stock, and one warrant to purchase one share of common stock, at an exercise price of $7 per share. Initially, the units will be the only security trading.

Andrew Murstein, Vice-Chairman of Sports Properties stated, "The entire team is very excited to start looking at investment opportunities. We believe there are many exciting opportunities for us to look at in the sports, leisure and entertainment industries, and we very much look forward to starting the process."

The President and CEO of Sports Properties is Tony Tavares. Mr. Tavares is the former CEO and President of SMG, a premier management company engaged in the private management of stadiums, arenas, theaters and convention facilities in the U.S., Europe and Pacific Rim. He has served as president of several Major League Baseball franchises, most recently the Montreal Expos and Washington Nationals.

Mr. Tavares previously served as the President and CEO of Disney Sports Enterprises, successfully launching and operating the Mighty Ducks of Anaheim, an NHL expansion franchise, and leading negotiations for the acquisition of the California Angels.

The board of Sports Properties consists of:

Jack Kemp, Chairman, was the Republican Vice-Presidential candidate in 1996. He played 13 years as a quarterback in the American Football League and National Football League, followed by election to the United States House of Representatives for 18 years before serving as Secretary of Housing and Urban Development ("HUD") from 1989 to 1993. Mr. Kemp currently serves on the boards of several companies including Six Flags, Inc. and Oracle Corp.

Andrew Murstein, Vice Chairman, has served as the President and a director of Medallion Financial Corp., a publicly traded investment company, since its founding and IPO in 1996. He is also one of its largest stockholders. Under Mr. Murstein's guidance, Medallion has acquired several companies and invested over $3 billion in various companies and industries.

Henry Aaron, Director, has an unmatched reputation as one of the world's most respected sports ambassadors. A member of Major League Baseball's Hall of Fame, he held the title of Major League Baseball's all-time leader in home runs for 33 years and currently is the all-time leader in total bases and RBIs. He is currently an executive with the Atlanta Braves and a recipient of the Presidential Medal of Honor, which was bestowed on him by President George W. Bush.

Mario Cuomo, Director, is a former three-term Governor of the State of New York. He has extensive relationships within and working knowledge of government and public / private partnerships, and as Governor oversaw annual state budgets in excess of $10 billion.

Read more >>> Press Release

Related >>> Grand Slam Acquisition

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Blank Checks Cashing in During Decline

January 23rd, 2008 by Lilla Zuill

While traditional initial public offerings on U.S. stock exchanges have floundered, the once-obscure “blank check” arena has only gained traction so far this year, becoming a kind of safe playground for investors, and a retreat for some private equity players finding it tougher to raise debt now that credit terms have tightened.

Four weeks into 2008, 5 IPOs by so-called blank check companies– also called special purpose acquisition companies, or SPACs – have tapped investors for about $4 billion. The latest, activist Nelson Peltz’s Trian Acquisition I Corp, was expected to raise $750 million on Wednesday.

In stark comparison, only one mainstream IPO has managed to stir up enough interest — Williams Pipeline Partners which raised $325 million last week – to actually make it to market, and has disappointed since its debut.

Blank check companies, which are formed to acquire other businesses and are little more than a shell until an acquisition is made, took off in 2007, accounting for roughly every fourth new U.S. listing, raising nearly $12 billion.

Read more >>> original article

'Blank Check' Companies Having Day In The Sun

The first five IPOs of 2008 have priced, and four of them have some curious things in common: no revenue, no history and no operations.

That's because they're special purpose acquisition companies, or SPACs. Sometimes called "blank-check" companies, SPACs are corporate shells formed in order to make buyouts. Although they don't reveal their buyout targets at the time of the offering, they do have to put the candidates up for the approval of at least 70% of shareholders. If the buyout doesn't go through, shareholders get a refund.

This unique investment model has grown explosively in the past few years. According to Renaissance Capital, in 2003 just one SPAC came public. But last year 65 of them hit the boards, raising $11.7 billion. The 2008 pipeline already is looking to beat that.

One important SPAC player is Mark Klein, former chief of Ladenburg Thalmann LTS and current CEO of Alternative Asset Management Acquisition (AMEX:AMV) AMV, which came public on Aug. 1. In an interview with IBD, he explained the SPAC concept and why it has become so popular.

IBD: SPACs are often called "blank-check" companies, but apparently they're a little different from traditional blank-check companies. Can you explain that?

Klein: There's obviously been an evolution of the product.

Read more >>> original article.