Breakingviews - Look out Europe: a SPAC craze is around the corner

Xavier Niel, founder and majority-owner of French broadband Internet provider Iliad attends the company's 2017 annual results presentation in Paris, France, March 13, 2018.

LONDON (Reuters Breakingviews) - American cultural imports are often regarded with froideur in France. Recently, telecoms mogul Xavier Niel and banker Matthieu Pigasse received a warmer reception for their U.S.-style special purpose acquisition company focused on consumer goods. Despite the product’s poor track record in Europe, look for the SPAC craze to infect the continent’s rainmaker class.

These vehicles, set up by financiers to raise funds for unspecified deals, are rare in Europe. Prior to December, just 19 listed over the past six years, according to Refinitiv, raising $3.4 billion. In 2020 alone, bold-faced names on Wall Street like Pershing Square’s Bill Ackman raised $66 billion worth.

SPACs are often controversial because they hand outsized rewards to founders and allow companies to skirt listing rules when going public. In Europe similar vehicles have a sketchy past. Vallar, the London-listed shell which raised $1.1 billion in 2010 for mining deals off banking scion Nat Rothschild’s contacts, foundered amid corporate governance problems.

Iliad co-founder Niel and Centerview Partners Paris chief Pigasse, have broken the drought before. They launched Mediawan in 2016, which bought European media businesses. Their new venture, 2MX Organic, comes as the volume of initial public offerings has declined for the last three years. Just $17.2 billion was raised in 2020, down 20%. European investors are hungry for new ways to put capital to work.

The Frenchmen won’t be alone. The continent is chockful of dealmakers and bankers who, like their American cousins, have the track records needed to win investor backing. Consider former bank chief executives like Jean Pierre Mustier of UniCredit and Tidjane Thiam of Credit Suisse. Or ex-UBS investment bank head Andrea Orcel.

Similarly, notable M&A grandees like Erik Maris in France or Claudio Costamagna in Italy may find a role model in former Citigroup executive-turned-rainmaker Michael Klein’s four U.S. SPACs. Gallic tech entrepreneur Marc Simoncini or Germany’s Samwer brothers, founders of Rocket Internet, could be in the mix. Even blank-cheque mining vehicles may stage a comeback: Imagine Glencore’s departing CEO Ivan Glasenberg buying his former company’s coal assets.

At least 10 European SPAC deals are in the pipeline, Reuters reports, set to raise some $3 billion. True, that’s small compared to the United States. But like other cultural imports, good and bad, what happens in America eventually makes its way across the pond.

- This is a Breakingviews prediction for 2021. To see more of our predictions, click here


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