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Reuters: 14 December, 2007
By
Lilla Zuill
Blank-check IPOs end 2007 on record note
The once-obscure market for blank-check initial public offerings has ended 2007 on a record note as investors see these acquisition vehicles as an alternative to the slowing private-equity sector.
IPOs for blank-check companies, which are also known as special-purpose acquisition vehicles, raised more than $12 billion this year, more than four times the record $2.6 billion from 2006, according to research firm Dealogic. More than half the gains came in the current quarter.
Blank-check companies are formed solely to acquire other businesses, with the funds coming from a public offering. The first blank-check offerings were in 2002.
While $12 billion in proceeds is only a fraction of the roughly $1 trillion that private equity firms have in their pockets, more and more investors are considering blank-check transactions as a way to put money to work.
"It has created tremendous competition," said Donn Beloff, a Fort Lauderdale, Florida-based principal of Greenberg Traurig. The law firm was involved in the record $1 billion IPO by Liberty Acquisition Holdings LIA_u.A, which closed on Wednesday.
One reason investors might prefer a blank-check deal over putting money in a private-equity fund is greater flexibility when it comes time for shareholders to get paid.
"It gives shareholders the option to take cash or publicly traded securities," Beloff said.
Greenberg Traurig estimated it had been involved in one in every five blank-check deals this year, either as counsel to the company or an underwriter. It is currently involved in an offering by Greenhill & Co's (GHL.N: Quote <http://www.reuters.com/stocks/quote?symbol=GHL.N> , Profile <http://www.reuters.com/stocks/companyProfile?symbol=GHL.N> , Research <http://www.reuters.com/stocks/researchReports?symbol=GHL.N> ) blank-check vehicle, GHL Acquisition Corp.
Deep Pockets for Blind Pools
Liberty's $1 billion in proceeds stands in stark contrast to the $50 million to $100 million that most of these deals raised before this year. Sponsors Berggruen Acquisition Holdings and Marlin Equities II brought Liberty to market less than a year after closing the $500 million offering for blank-check company Freedom Acquisition Holdings.
Freedom went on to strike a $3.5 billion reverse-merger deal with European hedge fund GLG Partners, which had more than $20 billion under management. The combined entity, GLG GLG.N, recently began trading on the New York Stock Exchange.
"There is a lot more confidence" in blank-check deals now than a few years ago, said Alan Annex, a New York-based principal with Greenberg Traurig. Annex said better-known management teams have buoyed investor confidence in the transactions, which boil down to making an investment in a shell company that promises to acquire operations within a specific period of time, or return the funds.
"Most (managers) have tremendous experience outside of the (blank-check) world," Annex said.
In addition, he said, major underwriters, such as Citigroup (C.N: Quote <http://www.reuters.com/stocks/quote?symbol=C.N> , Profile <http://www.reuters.com/stocks/companyProfile?symbol=C.N> , Research <http://www.reuters.com/stocks/researchReports?symbol=C.N> ) and Lehman Brothers (LEH.N: Quote <http://www.reuters.com/stocks/quote?symbol=LEH.N> , Profile <http://www.reuters.com/stocks/companyProfile?symbol=LEH.N> , Research <http://www.reuters.com/stocks/researchReports?symbol=LEH.N> ), are now leading the deals.
Last month, Third Wave Acquisition Corp, a blank-check company headed by Starwood Hotels and Resorts (HOT.N: Quote <http://www.reuters.com/stocks/quote?symbol=HOT.N> , Profile <http://www.reuters.com/stocks/companyProfile?symbol=HOT.N> , Research <http://www.reuters.com/stocks/researchReports?symbol=HOT.N> ) founder Barry Sternlicht, filed with the U.S. Securities and Exchange Commission to raise up to $350 million with an IPO.
The Greenwich, Connecticut-based company said it intended to acquire a controlling stake in one or more entities with significant growth prospects, but will steer clear of industries that its principals invest in, or have ties to.
Other blank-check offerings include one from billionaire investor activist Nelson Peltz's Trian Acquisition I Corp, which filed to raise up to $750 million. And Texas sports tycoon Tom Hicks' Hicks Acquisition (TOH.A: Quote <http://www.reuters.com/stocks/quote?symbol=TOH.A> , Profile <http://www.reuters.com/stocks/companyProfile?symbol=TOH.A> , Research <http://www.reuters.com/stocks/researchReports?symbol=TOH.A> ) closed a $550 million offering earlier this year.
As long as blank-check companies can quickly identify acquisition targets and move swiftly to close deals, Beloff said, 2008 should be an even bigger year.
"There is a wider pool of more sophisticated investors" to back the deals, he said.
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