Alternative asset manager Angelo Gordon is the latest entrant into the niche market of special purpose acquisition corporations, or SPACs.
The New York-based firm today registered its plans with the Securities and Exchange Commission to raise $300 million (€189 million) with the initial public offering of Angelo Gordon Acquisition Company. The offering will be underwritten by JPMorgan.
Formed by Angelo Gordon funds, including its fourth private equity fund which is currently raising $700 million, the SPAC will acquire one or more operating businesses, the firm said in a statement. It did not specify an industry or geography the SPAC will target, however in addition to private equity and special situations, the firm has a distressed debt and leveraged loan arm, a real estate arm and employs a number of hedge fund strategies with associated offices in Los Angeles, Chicago, London, Hong Kong, Seoul, and Shanghai.
Angelo Gordon intends to sell 30 million units, consisting of one share of common stock and three-quarters of one warrant, priced at $10 each. The timing of the offering depends on issues including regulatory approvals and market conditions, Angelo Gordon said.
SPACs have been gaining popularity with private equity players past and present, including Robert Greenhill, Tom Hicks, Michael Gross and Nicolas Berggruen. Current market conditions may be fueling some of this interest, Schulte Roth & Zabel attorney Michael Littenberg recently told PERE's sister magazine Private Equity International.
“Given that it’s harder to do traditional private equity deals with leverage, this is now another arrow in the quiver for diversified investment groups to be able to make money, so they’re using it as an adjunct to other strategies,” Littenberg said.
He added that SPACS also offer perks for investors wary of private equity at present, as shares are more liquid and shareholders are typically given voting rights to approve business combinations, with a guarantee to get their money back if the SPAC hasn’t made an acquisition in a set amount of time, usually 24 months.
“SPACs mitigate the downside risk, since the IPO proceeds are placed in a trust, while providing opportunity for substantial potential upside once a deal is announced by the SPAC,” Littenberg said.
Angelo Gordon is raising $700 million for AG Private Equity Partners IV, as well as an additional $200 million for a “reserve fund”, which will be used “to participate in investments greater than $75 million”, the firm said in September 2007.