Serial SPAC issuer Michael Klein is taking a UK holding company to the US with the combination of his Churchill Capital VII vehicle and CorpAcq Holdings.
Unusually for a SPAC, the target being acquired is not a single entity but rather a holding company that acquires founder-led small and medium-sized businesses in the UK with 41 in its portfolio.
CorpAcq focuses on well-established businesses with strong asset bases, high barriers to entry, profitable growth, free cashflow generation and experienced management. The average age of its portfolio companies is over 30 years.
The combination with Churchill Capital VII values CorpAcq at a pro forma enterprise value of approximately US$1.58bn. Churchill holds US$592m in trust, down from US$1.2bn at IPO, while redemptions mean the amount that is injected into CorpAcq could be far smaller when the combination is completed.
Churchill Capital VII raised US$1.2bn in February 2021 and traded below the US$10 issue price until 2023, closing at US$10.39 on Wednesday. Churchill said in February that it had signed a letter of intent for a business combination but did not name CorpAcq at the time.
From 2018 to 2022, CorpAcq reported revenue CAGR of 16% and an adjusted Ebitda CAGR of 17%. By the end of 2022, CorpAcq had US$850m revenue and adjusted Ebitda of US$133m, with an additional US$80m of revenue and US$12m of profit from acquisitions completed this year.
Citigroup advised Churchill Capital VII on the combination, having been lead-left on the Churchill VII IPO alongside Bank of America, Goldman Sachs and JP Morgan.
By completing a de-SPAC with a NYSE-listed acquisition vehicle CorpAcq is following in the footsteps of UK used car dealer Cazoo, though it will be hoping that is as far as the comparison goes. The fledgling business came to market with a valuation of US$8.1bn, given credibility by an US$800m PIPE, and has since seen its share price collapse.
Around the time the combination was announced, the SPAC Ajax I's shares traded at US$272 and on Thursday were changing hands at US$1.40, giving a market capitalisation of about US$55m.
In Europe, Rocket Internet has had a mixed experience as a listed holding company in recent years, though its assets were very different as tech and growth companies. Rocket raised €1.4bn in its IPO in October 2014 but de-listed in October 2020.
As an incubator, Rocket listed several companies from its portfolio, including online fashion retailer Zalando (which was up 5.35% at €30.89 on Thursday following a positive Q2 update), HelloFresh, African e-commerce/fintech Jumia, online furniture retailers Westwing and Home24 and Global Fashion Group, down 96% from IPO pricing.
Rocket also floated its own SPAC, Rocket Internet Growth Opportunities, which raised US$250m in the same week in March 2021 that Churchill Capital VII completed, but it was disbanded in March this year after failing to find a business combination. Churchill Capital VII also had 24 months to find an acquisition, with shareholders pulling US$816.3m out of the SPAC at the time of the vote to extend the timeline to February 2024.