Paul Ryan, the consummate Washington negotiator, is trying his hand at another kind of deal making, jumping into the rush on Wall Street toward blank-check acquisition companies.
The former House speaker will serve as chairman of a vehicle known as Executive Network Partnering Corp., which will seek to raise roughly $300 million in an initial public offering, people familiar with the deal said. That figure is subject to change based on demand.
Mr. Ryan, a Wisconsin Republican who chose not to run for re-election and was succeeded by Nancy Pelosi as House speaker in 2019, is one of the boldest names yet to join a surge this year in the creation of blank-check companies. Mr. Ryan was mitt romney's vice-presidential running mate in 2012 and before taking over as House speaker, served for years as chairman of the House Budget Committee.
He is a director of Fox Corp., which shares common ownership with Wall Street Journal parent News Corp.
Also known as special-purpose acquisition companies, they turn the traditional IPO model on its head by going public before acquiring a business. They have gained popularity as deal makers look to take advantage of the economic dislocation caused by the coronavirus pandemic.
So far in 2020, new listings of 75 SPACs have raised $29.9 billion, according to Dealogic. That is more than double what was raised during all of 2019, the highest-volume year on record for SPACs. These vehicles account for roughly 43% of IPO volume in 2020, a near-record year for public offerings.
Among other notables launching SPACs, billionaire William Ackman recently raised $4 billion for the largest one in history through his Pershing square Capital Management LP. Last month, health-care-services provider MultiPlan inc. said it was merging with a blank-check company run by veteran Wall Street deal maker Michael Klein in an $11 billion takeover that marks the largest such transaction ever.
ENPC, which will serve as the new vehicle's ticker symbol, will be a twist on the traditional SPAC, with longer-term incentives for its backers and potentially slimmer fees for underwriters, the people said.
Its founders won't be able to sell any of their shares for three years after any merger closes; typically, SPAC founders can either sell a year after a merger closes or as soon as the shares trade above a certain level.
In documents set to be filed with the Securities and Exchange Commission in the next few days, ENPC will outline its structure, the people said. It will be called CAPS, an acronym for “capital which aligns and partners with a sponsor”—or SPAC in reverse.
Because of the geyser of blank checks looking for companies to buy, SPAC sponsors have been looking for ways to reduce their so-called promote, or cut of the overall deal.
Typically, SPAC founders are awarded shares equivalent to roughly 25% of what is raised in the initial IPO at the time the subsequent merger closes. That sets them up for a sizable payday—in some cases even if the shares slump. The founders of Mr. Ryan's SPAC will have the right to buy roughly 5% of the shares and then reap another 20% of the stock appreciation if it goes up by more than 10%.
As part of the deal, fees to Wall Street banks will be slashed. Evercore Inc., the sole underwriter of the blank-check fund, will be paid 1% of the size of the vehicle compared with 2% upfront in a typical SPAC. When a merger deal is struck, typically the same underwriters get paid another 3.5% for their work—and often additional advisory fees. In this case, Evercore isn't guaranteed to get the second fee, but will get a separate, smaller advisory payment. ENPC could work with other advisers on any subsequent merger deal.
Mr. Ackman's SPAC has also taken steps to align the interests of Pershing Square's investors with those of other shareholders. The investors will only receive the option to buy shares three years later if the company trades more than 20% over its merger price.
Alex Dunn, the former president of security company Vivint Smart Home Inc., will serve as chief executive of the new SPAC. Solamere Capital, run by Sen. Romney's son Taggart, will be the main sponsor.
Source: The Wall Street Journal – Former House Speaker Paul Ryan Starts Blank-Check Company