Last week saw continued momentum in special purpose acquisition company (SPAC) mergers, as KBL Merger KBLM, Acamar Partners Acquisition Corp. ACAM, Panacea Acquisition Corp. PANA and South Mountain Merger Corp. SMMC each announced business combination agreements.
How SPAC Mergers Work: SPACs are shell companies that raise capital in an initial public offering (IPO) in order to acquire an existing company and take it public, thereby helping the existing company circumvent the regulations involved in the IPO process.
When a SPAC goes public, it typically sells units for $10.00 each and stores that capital in a trust while its management looks for an acquisition target. If a SPAC doesn’t acquire a company within a particular time frame — often two years — then its trust is liquidated and returned to its unitholders.
However, if it does complete an acquisition, then unitholders can convert their SPAC units into shares of the newly-combined company.
Between its IPO and its combination or dissolution, a SPAC will typically trade at a small premium or discount to its trust value, reflecting uncertainty about whether the SPAC will complete a deal. After it announces a merger agreement, its price typically trends toward the market’s estimated valuation of the company it intends to acquire.
Four such merger agreements hit headlines last week. Two of those deals involved biotechnology companies, one involved an auto retailer and another involved a financial technology company.
KBL Buys 180 Life Sciences: On Friday, 180 Life Sciences announced that it had agreed to merge with a SPAC called KBL Merger Corp. IV KBLM.
The company is focused on developing treatments for inflammatory conditions and currently has three drug development programs in its pipeline. One of those drugs is currently in Phase II clinical trials with results expected in 2021.
KBL raised $115 million via an IPO in June 2017 with the goal of identifying and acquiring a company with a strong value proposition mainly in the U.S. healthcare industry. It focused on this industry due to its management's deep experience in this large, growing segment of the U.S. economy.
KBL units traded up 36.3% to $11.04 at the time of writing. The stock has a 52-week high of $11.50 and a 52-week low of $8.01. It will hold a special meeting of its unitholders of record as of Sept. 30, 2020 to finalize the merger agreement on Nov. 5, after which the combined entity will list on the NASDAQ under the ticker “ATNF.”
Acamar Partners Acquires Carlotz: The same day, Carlotz announced that it was going public through a merger with SPAC Acamar Partners Acquisition Corp. ACAM.
The used auto retailer allows customers to buy, sell, trade or consign vehicles through online or in-person transactions. Its investors include former General Motors GM CEO Rick Wagoner. It estimates that it will report $110 million in revenue for fiscal 2020, and expects revenue to increase to $356 million and $945 million for fiscal 2021 and 2022, respectively.
Acamar Partners raised $305.6 million in a February 2019 IPO and will be committing up to $311 million — its current trust value — to the merger transaction.
Acamar Partners units traded down -0.10% to $10.18 at the time of writing. The stock has a 52-week high of $10.50 and a 52-week low of $9.50.
The deal is expected to close by the end of the year, after which shares will trade on the NASDAQ exchange under the ticker symbol LOTZ.
Panacea To Purchase Nuvation Bio: On Wednesday, Nuvation Bio announced that it had entered into a definitive business combination agreement with the SPAC Panacea Acquisition Corp. PANA.
Nuvation Bio is an oncology-focused biotech company with a portfolio of six therapeutic candidates.
It “has demonstrated, in preclinical studies, the potential of those candidates to significantly improve outcomes over current standards of care,” according to CEO David Hung, M.D.
Panacea raised $125 million in an IPO in July of this year and will provide up to $144 million in the merger transaction. Panacea units traded down -0.86% to $10.32 at the time of writing. They have a 52-week high of $12.52 and a 52-week low of $9.55.
After the merger closes, the combined company will trade on the New York Stock Exchange (NYSE) under the symbol “NUVB.”
South Mountain Scoops Up Billtrust: On Monday, Billtrust announced an agreement with South Mountain Merger Corp. SMMC.
Billtrust provides cloud-based software and integrated payment processing solutions for business-to-business (B2B) commerce, including order-to-cash solutions.
The pending merger agreement reflects an implied estimated enterprise value at closing of $1.3 billion, representing an 8.0x and 10.5x multiple to 2021 expected GAAP total revenue of $161 million and Non-GAAP net revenue of $123 million, respectively. South Mountain raised $225 million in an IPO last June. Units traded up 1.16% to $11.50 at the time of writing. They have a 52-week high of $12.15 and a 52-week low of $9.25.
Neither company has yet proposed a new ticker symbol to trade under after their merger.
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