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A New Take On SPACs
While blank check acquirers are expected to provide additional competition in the acquisition market place, they’re also expected to serve as an exit avenue.
June 17, 2008
If ever there were any questions about whether special purpose acquisition companies would wind up providing deal flow to the private equity community, those doubts should have been dispelled yesterday.
That’s when public acquisition company Polaris Acquisition Corp. agreed to acquire automotive GPS device supplier Hughes Telematics, a portfolio company of New York private equity firm Apollo Management, for $700 million in a stock-swap transaction. Apollo will retain its existing stake in Hughes, which amounts to $90 million, and has agreed to help support Atlanta-based Hughes for the next two years (the founders of Polaris have agreed to a one-year lockup as an illustration of confidence in the transaction).
Hughes contracted customers include Mercedes-Benz and Chrysler.
The transaction is noteworthy since it mirrors chatter in the deal market about SPAC entities interest in private equity portfolio companies. While blank check acquirers are expected to provide additional competition in the acquisition market place, they’re also expected to serve as an exit avenue.
But, Apollo’s agreement to maintain its position in Hughes, rather than selling its holding outright, also raises another notion: SPACs may do more than just help private equity firms realize liquidity. At a time when financing options are limited, blank check companies may just turn out to be the new partner du jour in the transaction business.
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