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Xavier Niel’s organic food Spac rallies in Paris debut

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A blank-cheque company founded by telecoms billionaire Xavier Niel and two other prominent French businessmen jumped on its first day of trading after raising €300m in the largest public offering on the Paris market this year.

2MX Organic aims to acquire companies involved in the fast-growing sectors of organic food and sustainable consumer goods.

The successful listing shows that the booming investor appetite for special purpose acquisition companies (Spacs) is no longer limited to the US, and that European entrepreneurs are getting into the game.

The trio behind 2MX Organic also includes Centerview investment banker Matthieu Pigasse and retail entrepreneur Moez-Alexandre Zouari, who has built his fortune as the franchise partner of supermarket chain Casino.

They told the Financial Times that their goal was to “build a European champion in organic food” and aimed to do their first acquisition next year. Like other Spacs, they raised cash from investors on the basis that managers will buy a company or return the money after a certain date if they are unable to complete a purchase within two years.

Shares in 2MX Organic rose about 30 per cent at opening before trimming back gains to trade 6 per cent higher by midday in Paris on Wednesday.

The trio is betting that they will be able to consolidate a still-fragmented organic food market in Europe by acquiring both food producers or brands, as well as retail outlets.

Demand for organic food in Europe has more than doubled on
average across the continent since 2010, according to the
company’s IPO prospectus. French consumers have been among the most avid buyers.

“There is a revolution under way in organic food, and there are no leaders in the market,” said Mr Pigasse. “Investors were attracted to our thesis, as well as the team and the fact two of us have done a Spac before.”

He said about 45 per cent of those who bought shares were from France, 20 per cent from the US and the rest mostly from the UK.

Messrs Pigasse and Niel created France’s first Spac in 2015 with the aim of consolidating the television production industry. Their company, Mediawan, has since bought roughly 30 businesses to become a leader in scripted drama in Europe.

Deutsche Bank was global co-ordinator on the 2MX Organic listing, and Société Générale was the bookrunner.

After the listing, Mr Zouari owned 11.5 per cent of the shares, while Mr Niel and Mr Pigasse each owned 6.7 per cent, leaving a free float of 75 per cent.



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Spac boom under threat as deal funding dries up

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A crucial source of funding for blank-cheque company deals is drying up, pointing to a slowdown for one of Wall Street’s hottest products after a record-breaking quarter. 

Advisers to special purpose acquisition companies, which float on the stock market and then go hunting for a company to buy, say they are struggling to find so-called Pipe financing to complete their planned acquisitions. Pipe is short for private investment in public equity.

Institutional investors such as Fidelity and Wellington Management have ploughed billions of dollars into Pipe deals since the Spac boom emerged last year, providing a route to the public markets for businesses ranging from established software and entertainment companies to speculative developers of flying taxis and electric vehicle technology. 

But people involved in arranging the deals say Pipe investors are overwhelmed by the sheer volume of transactions and put off by rising valuations. 

“There is a lot of indigestion,” said one senior bank executive. “The pendulum has swung to where if you’re in the market with a Pipe right now, it’s going to be really hard and painful. A Spac goes back into the ocean if you can’t get a Pipe done.”

Spacs raise money when they first list on the stock market but they typically require more capital to fund their acquisition. Large institutional investors also act as a form of validation of the target company’s business prospects and its valuation.

There have been 117 deals announced this year, but the growing backlog in Pipes could prove to be a big roadblock for the 497 blank-cheque companies that are still looking for a deal, according to Refinitiv data.

Only about 25 per cent of Spacs listed since 2019 have completed deals so far. Sponsors typically have two years to complete a merger, otherwise they have to return the capital they raised to investors.

Several market participants said the slowdown would lead to a “flight to quality” and put downward pressure on the valuations of acquisition targets, which have skyrocketed in recent months.

Almost all of the executives the Financial Times interviewed said they were seeing Spac deals recut to offer more favourable terms to Pipe investors. One said: “It’s called the buy side for a reason.” 

Because Pipe investments are considered illiquid — the money is tied up at least until the deal closes and there may be a lock-up period after that — investors can usually get favourable terms. They can see the deal before it has been announced to the public and are almost always able to buy in at the Spac listing price of $10.

But earlier this year, Pipe investors were clamouring to get in on Spac deals. The group of institutions that backed Churchill Capital IV’s acquisition of electric carmaker Lucid paid a 50 per cent premium to the Spac listing price to get a stake, almost unheard of at the time.

The recent reversal has Pipe investors negotiating lower valuations for businesses, giving them larger stakes for the same amount of money, and better pricing terms.

“There’s only so much illiquid exposure investors are going to want to take,” said another bank executive who has worked on numerous Spac deals.

The Pipe slowdown is bad news for banks, which are unable to collect on advisory fees if they cannot sell a deal to investors.

It is also starting to affect the pipeline of Spac launches, lawyers and bankers said. In the first seven days of this month, only four blank cheque companies have gone public. That compares with 41 during the first week of March and 28 in February, Refinitiv data shows. 

“Where we had been at a crazy, mad, rush pace in January and February, we’re kind of at a standstill right now on the IPO side,” said Ari Edelman, partner in Reed Smith’s corporate practice.

For those that already went public and are looking for a target, he added, “the hope is this is just a bump in the road. And then ultimately the deal gets done.”



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UK-backed vaccine maker warns of export restrictions in IPO filing

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Valneva, the French Covid-19 vaccine maker backed by the UK government, has filed for a US initial public offering seeking to take advantage of investor appetite for biotechnology during the pandemic. 

The Paris-listed company, with a market cap of more than €1bn, filed to raise $100m in American Depositary Shares, the day after Vaccitech, the Oxford spinout that owns the platform behind the AstraZeneca vaccine, published its filing

Valneva has a deal worth up to €1.4bn to supply Covid-19 vaccines to the UK, manufacturing the doses in a Scottish factory expanded with government funds. The UK has already agreed to buy 100m shots and has an option to purchase 90m more by 2025. Valneva has already received almost £100m from the government. 

But in its filing, Valneva warned that any restrictions on importing or exporting vaccines out of the EU could have a “substantial” risk to its operation. The vaccine is due to be manufactured in the UK but put into vials and packaged in the EU, it said. 

Shortfalls in supply of vaccines to the EU have led to tensions between the UK and the EU over importing shots and raw materials for the current approved jabs from Oxford/AstraZeneca and BioNTech/Pfizer.

Valneva’s filing comes after it announced positive early stage trial results for its Covid-19 earlier this week, planning to launch a later stage study this month and apply for a UK approval in the autumn.

The phase 1 and 2 study showed the shot elicited more antibodies in the participants receiving the highest dose than are usually seen in recovered Covid-19 patients, with over 90 per cent producing significant levels of antibodies. The jab also induced a response from another key part of the immune system, the T-cells. 

The vaccine, which uses a whole inactivated virus, a more traditional approach than the currently approved shots, could be used as a booster for the vaccinated or to tackle variants of the virus.

Valneva said even though it would be approved much later, it could have a competitive advantage against its rivals. 

“We believe that, if approved, our vaccine, as an inactivated virus vaccine, could offer benefits in terms of safety, cost, ease of manufacture and distribution compared to currently approved vaccines and could be adapted to offer protection against mutations of the virus,” it said in the filing. 

But it also said that it did not yet have the rights to use the strain of virus in the vaccine on the commercial market. It is in the process of negotiating a commercial agreement with the World Health Organisation and the Italian National Institute for Infectious Diseases. 

Valneva is also developing vaccines for Lyme Disease and chikungunya, a virus transmitted by mosquitoes. Total revenue was €110m in 2020, down from €126m in 2019, as sales of its travel vaccines were hit by restrictions on travel during the pandemic. 

It made a loss of €0.71 per share last year, after it had to make a €7.4m writedown, partly because of the limited shelf life of the products. Valneva also had to renegotiate a debt financing agreement last year as it was at risk of not meeting the minimum revenue covenant.



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Vaccitech warns of blood clot risk in IPO filing

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Vaccitech, the start-up that owns the technology behind the AstraZeneca vaccine, has warned that concerns about the rare blood clotting side-effect could hit royalties and affect the reputation of products in its pipeline. 

The Oxford university spinout on Friday published its prospectus for an initial public offering of at least $100m on Nasdaq, at the end of the week in which the UK and several EU countries recommended against giving the vaccine to younger people. 

The filing revealed how much the start-up stands to receive from vaccine sales. If and when AstraZeneca starts selling the shot for a profit after the pandemic — which according to their contract could be as early as July 2021 — Oxford will give about a quarter of the royalties it receives from the vaccine to Vaccitech, approximately 1.4 per cent of total net sales.

The company received a one-off payment of $2.5m when it transferred the technology behind the Oxford/AstraZeneca vaccine last year. 

Vaccitech is developing vaccines for other infectious diseases, including the virus behind shingles and Mers, another coronavirus, as well as using the same vector technology in treatments for cancer and chronic hepatitis. 

The pandemic has helped the company prove its technology works in millions of people, when many biotechs go public with little or no data from clinical studies. The rapid development and manufacturing of the AstraZeneca vaccine has also helped prove that Vaccitech’s technology can be scaled speedily. 

But while the Oxford/AstraZeneca vaccine, known as AZD1222, has been shown to be safe and effective, recent concerns about a very rare side-effect are now weighing on public perception of the shot. 

“There can be no assurance that the vaccine is not associated with an increase in the overall risk of thromboembolic events,” the company wrote in the filing. 

Vaccitech also warned that studies showing the AstraZeneca vaccine was less effective against the variant first identified in South Africa could impact sales.

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“Any association of AZD1222 with adverse events, or the perception of such association, or any findings that AZD1222 is less effective against certain variants of Covid-19, may reduce sales of AZD1222 and therefore the potential payments that we may receive from net sales of the vaccine, and may otherwise adversely impact the development of, and our ability to commercialise, any of our product candidates,” it said. 

Vaccitech’s decision to list in New York is a disappointment for the UK, which is hoping to lure more investment in life sciences. The UK Treasury has a stake in the company, according to people close to the situation. 

The largest investor is Oxford Sciences Innovation, an early stage venture capital firm focused on commercialising intellectual property from the university, with a 29 per cent stake before the offering. Other large shareholders include insurer Prudential, with a 13 per cent stake, and entities affiliated with Google Ventures, which hold 6 per cent. 



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