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European bankers set sights on Amsterdam as regional Spac capital

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Amsterdam is emerging as Europe’s centre for blank-cheque companies as investors race to emulate the boom in listings that has gripped US markets.

Special-purpose acquisition companies, or Spacs, have surged in popularity over the past year to become Wall Street’s hottest investment product as a flood of capital provides investors with a new and often quicker way to take businesses public.

Already, Brexit has pushed some of London’s share and derivatives trading business to the Dutch capital. Now, bankers and lawyers say executives behind Spacs are enticed by the city’s flexible rules and international reputation.

“[The] Amsterdam stock exchange has developed an expertise in Spacs ahead of all other cities in Europe at this point,” Jean Pierre Mustier told the Financial Times, adding that this capability “and deep volume for European equities were the two reasons we picked Amsterdam”.

Mustier, the former UniCredit chief, and LVMH founder Bernard Arnaulthave joined together in one the highest-profile Spacs to date. The duo picked Amsterdam as the venue for their vehicle that will invest in European financial companies.

Nick Koemtzopoulos, head of Emea equity capital markets at Credit Suisse, said the Spac frenzy was “unquestionably” coming to Europe. “The level of dialogue and interest has gone up substantially. We’re having daily conversations with both issuers and private companies.”

He said that Amsterdam was likely to become the continent’s core listing location because “it’s a flexible, international jurisdiction and relatively straightforward place to list”.

“You have flexibility on the terms of the Spac to be able to replicate the US,” he added. Blank-cheque companies raise money and list on the stock market then hunt for a private company to merge with and take public.

So far this year, 143 Spacs have launched in the US, raising $42.7bn and eclipsing the $24bn raised through traditional IPOs, according to Refinitiv data. 

Meanwhile, Europe has lagged behind. ESG Core Investments raised €250m and floated on Amsterdam’s Euronext exchange on Friday, becoming the region’s first blank-cheque listing this year and only its fourth since the start of 2020.

Bar chart of Number of issues showing US Spac-mania charges ahead of Europe

Other transactions targeting Amsterdam are under consideration. “Spacs are coming to a theatre in Europe very soon,” said Jim Esposito, global co-head of investment banking at Goldman Sachs. “We have a growing list of issuers looking to list a Spac IPO in Europe.”

Tim Stevens, a partner at Allen & Overy, said that at least five deals were in the works. “The Dutch corporate vehicle is very well suited to a Spac,” he said, especially because investors were easily able to exercise their redemption rights and take out their money if they disliked the company chosen for a merger.

The reputation of Euronext Amsterdam as a home to international companies also makes it a more attractive venue than its European rivals. 

“As people think about being a slightly more internationally listed business, Amsterdam is ahead of where Paris or Frankfurt might be today,” said Aloke Gupte, co-head of European equity capital markets at JPMorgan.

Private European companies have so far managed to capitalise on the exuberance by attracting US-listed entities.

UK electric-vehicle group Arrival merged with Nasdaq-listed CIIG Merger Corp last year, while others including NYSE-listed Avanti Acquisition Corp which raised $600m in October, are searching specifically for a European company.

“It’s a uniquely strong time to IPO in the European market because there still is the scarcity value here and you’ll also get access to the US investors,” said Gupte.

Bar chart of Amount raised ($bn) showing European companies are increasingly turning towards the US

In London, the critical issue holding back executives from listing Spacs is listing regulations. A Spac acquisition is considered as a reverse takeover and the shares are suspended. Trading cannot resume until a deal prospectus is published, for which there is no deadline, so investors who are not in favour of the merger and want to sell their shares, can find themselves locked in.

“It’s just a killer,” said Stevens. “The share price around that point in time is critical for the ability to conclude a business combination.” He added that the enthusiasm towards Amsterdam rather than London had little to do with Brexit. “These are some structural constraints.”

Lawyers and bankers are lobbying for changes in listing rules in order to capture some of Europe’s Spac market, with the issue being discussed as part of the UK listing review. 



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Soho House plans to list in New York with $3bn valuation

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Soho House, the private members’ club group, is making plans to list in New York as early as next month in order to capitalise on investor appetite for travel and leisure stocks as the pandemic subsides.

The company intends to join the stock exchange with a valuation of as much as $3bn, despite the closure due to coronavirus restrictions of 11 of its 27 clubs across Europe, Asia and the US, say people familiar with matter.

Speculation that the target price will rise from a $2bn valuation set in a $100m funding round, led by its majority shareholder the US billionaire Ron Burkle in June last year, is based on anticipation of a boom in demand for travel stocks.

The hospitality group, which also owns 20 restaurants, 16 spas and two cinemas, declined to comment on the plans, first reported in The Times.

Shares in the hotel company Marriott are up 26 per cent since February, while Airbnb’s share price has increased more than 40 per cent since it listed in December.

Despite steep drops in revenues as a result of sites being closed, Soho House has managed to retain more than 90 per cent of its paying members during the pandemic. A typical annual membership costs £1,750.

However, Soho House’s recently filed accounts show the company stopped making interest payments on its loan in cash last year, instead choosing to use a “payment in kind” option. This allows companies with limited cash flow to pay lenders with more debt instead.

Permira Debt Managers, the credit arm of the private equity house, originally provided this £350m loan to the private members’ club in 2017, describing the debt deal as its “largest ever direct lending investment” at the time.

The private debt deal came two years after Soho House had to scrap a £200m high-yield bond sale, as investors balked at the company’s high leverage and limited free cash flow.

It is the second time Soho House has mooted a stock market flotation.

It pulled a planned New York listing in 2018, saying it did not need to raise capital as it had Permira’s backing and its owners — who include Burkle, the hospitality entrepreneur Richard Caring and Soho House founder Nick Jones — did not want to sell out.

Jones, who opened his first Soho House in 1995, told the Financial Times last year that the group did not need to consider a listing as “there is a nice lot of demand from people to invest in the company as it is”.

Over the past 26 years, Soho House has grown rapidly, becoming a hotspot for celebrity guests by targeting wealthy urbanites in the creative industries.

According to its 2019 accounts, it made £293m in revenues, 49 per cent of which came from food and drink sales and 20 per cent from members’ subscriptions with the remainder coming from its own-brand range of homewares. It reported a pre-tax loss of £77m.

During the pandemic, the group was forced to lay off 1,000 of its 8,000 employees.



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Should the UK change its listing rules to attract more overseas companies?

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Yes — Free float and dual-class share structures need reform

Late last year, the UK launched a review of its rules for stock exchange listings as part of a broader effort to strengthen London’s “position as a leading global financial centre”, writes Lorna Tilbian.

Brexit and the pandemic make it critical for the UK to seize this chance to reshape our rule book. The listings market must be made more attractive to fast-growing tech and other new economy companies that will create the growth and jobs of the future. 

This would put Britain at the forefront of the fourth industrial revolution, as it was at the first, and cement London’s reputation as a world-class market with high standards of governance, shareholder rights and transparency. 

Here are two key areas where change is needed to make the UK more competitive: the rules on free float and dual-class share structures. The UK requires listed companies to have at least 25 per cent of their shares in public hands, as opposed to insiders. US rules do not preclude free floats as low as 10 per cent. Similarly, the US and Hong Kong allow companies to list with multiple classes of shares with different voting rights, while the UK does not.

These firm rules are major obstacles to the London Stock Exchange’s efforts to attract fast-growth businesses. Many founders worry about retaining control of their businesses after an initial public offering and early investors are concerned the free float requirements will force them to sell shares earlier — and cheaper — than they would like.

Most founders want the higher valuation and liquidity that are seen to be part of a “premium” listing, as well as membership in the FTSE indices. So, it would do little to create another type of listing with looser rules. The dual-class share issue is also a problem for founders who want enhanced voting rights to help guard against a hostile takeover.

The UK has an interest in strengthening founders’ rights as well, as it would make listed companies less vulnerable to acquisition early in life by a foreign company. Such purchases impoverish the British ecosystem of tech companies and listed companies more broadly. Not all dual-class shareholder systems are alike, and a balanced conversation about types and limits is welcome.

Many UK founders would like a home listing, to be famous here and give back, but they feel pulled to the US, where tech founders are feted on Wall Street, Main Street and in the media and can obtain higher valuations.

Indeed, valuation is London’s overarching challenge. For most companies contemplating an IPO, the major goal is to achieve the highest price, to reward employees and investors, and facilitate future growth. Until the UK has a critical mass of businesses with attractive valuations, we will need rules that actively draw them here.

We need an ecosystem and potentially new FTSE sectors to attract entrepreneurs, bankers, analysts and investors. The media sector was created after the early 1990s recession by merging agencies with broadcasting and publishing, plucked out of other sectors. This helped spawn a dozen FTSE 100 media companies by 2000, including Sky and WPP.

The debate over listing rules is often framed as high regulation versus cutting rules to win IPOs, but it is really about striking the right balance. The dilution of shareholder rights should be minimised, but anything that deters listings will be a pyrrhic victory.

UK public markets must embrace founder-led businesses and celebrate fast-growth companies that represent jobs and the future of an independent Britain. The US’s Nasdaq must not remain the natural destination for aspirational tech companies and London must stave off increasing competition from European exchanges.

If we miss this opportunity, the UK’s pipeline of growth companies could go to the US or be sold to private equity or competitors. London already has a time and language advantage; we must create a regulatory advantage to attract these IPOs before it is too late.

The writer chairs Dowgate Capital

No — Britain’s high standards must not be sacrificed

Re-energising the UK’s capital markets has never been more important, but it requires more than reassessing the listing rules, writes Chris Cummings. We need a wider look at the capital market ecosystem for fast-growing companies. Only then will we boost our reputation as an attractive centre for companies to list and investors to do business.

The Covid-19 pandemic has highlighted the importance of public markets and the role investment can play in delivering benefits for the economy, society, and the planet. By attracting high-growth companies of the future to list, a healthy public market which embraces innovation will deliver the long-term returns that savers and investment managers need. We want these companies to list and locate their operations here, bringing new jobs and much-needed tax revenue.

But success is not just about increasing the number of initial public offerings. We must be confident in the quality of companies looking to list and their ability to provide long-term value. The UK’s ambition to be a global leader in stewardship and sustainability must also be reflected in the listing requirements and they must give shareholders sufficient ability to hold companies to account. If we make any changes to attract high-growth, innovative companies, we must keep the rules sufficiently robust to protect savers’ money.

For the “premium” segment, which has the highest standards, this is particularly important, as tracker funds must buy shares in these companies to replicate the FTSE index. With more than £250bn invested in these funds, it is paramount that investors have the powers they need to oversee these companies and confidence in their governance.

A 25 per cent free float requirement protects investors by guaranteeing liquidity and ensuring there are enough minority shareholders to raise concerns with the management. There is an argument for reducing the free float if the company’s market capitalisation is sufficiently large, but such flexibility would need to include voting safeguards for independent shareholders.

The current listing regime offers flexibility for companies that want multiple classes of shareholders in the “standard” segment, but it is perceived to be a poor relation. By rebranding it, we can increase its appeal to entrepreneurs. Founders could maintain voting control, while at the same time using a standard listing as a springboard to a premium listing.

Attracting more companies to this segment and making it easier for groups to move between segments will increase the UK’s appeal as a place to list. More work also needs to be done to promote the flexibility offered by the current system and categories — done well this can be a selling point for the UK. There should be a proactive unit which brings resources from within government and the regulators to help achieve this.

The pandemic has also highlighted areas where the UK should look to reduce more onerous listing requirements. Between March and the end of November, 73 members of the FTSE All-Share index raised more than £22bn of additional capital using mainly trading updates rather than full prospectuses. This suggests that prospectus and record requirements can and should be cut, making it easier for companies to list and raise additional capital.

There are also lessons to be learnt from wider trends. The number of IPOs globally dropped in the 2010s as more companies opted to stay private and is only beginning to recover. For public markets to flourish, we need to tailor our listing regime to support companies in different phases of growth, restructuring and into maturity.

The listing rules are not the only barrier on companies’ appetite to list in the UK. Companies also consider the wider ecosystem. The UK needs to grow the pool of specialist tech-focused lawyers and advisers who can support the high-growth companies we wish to attract.

The listing review is important, but we need to consider it in the context of much wider issues and not sacrifice the high standards for which the UK is known. The prize — wider access to capital for UK and international businesses, more high-growth companies operating in the UK and robust governance delivering long-term returns for British savers and the wider economy — is one we can all agree is worth striving for.

The writer is chief executive of the Investment Association



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Vegan milk maker Oatly targets $10bn IPO

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Oatly, the Blackstone-backed Swedish vegan milk maker, is eyeing a valuation as high as $10bn in a US listing that would tap into both the IPO boom and consumers’ growing thirst for plant-based alternatives to animal products.

The Malmo-based group said on Tuesday that it had submitted a confidential filing for an initial public offering with the US Securities and Exchange Commission, less than a year after a funding round led by Blackstone also brought in Oprah Winfrey and Jay-Z’s Roc Nation company as investors, valuing Oatly at about $2bn.

Two people briefed on the situation said it was looking at a New York listing with a valuation as high as $10bn. Oatly declined to comment.

The offering is expected to take place following the SEC’s review, subject to market conditions, Oatly said.

The main aim of the float would be to raise money to fund growth, said one of the people, but a listing would offer a chance to cash in for investors who range from Blackstone to the Hollywood actor Natalie Portman and the Belgian family investment group Verlinvest, which bought a majority stake in Oatly five years ago.

Oatly had revenues of about $200m in 2019, roughly double the previous year, and had aimed to double sales again in 2020, though no figures have been made public.

The oat milk specialist, which also makes plant-based ice cream and yoghurt, has tapped into growing demand for plant-based equivalents to dairy, fuelled by environmental concerns — especially around emissions from cattle — and a perception of such foods as healthy.

In the US, total retail sales of non-dairy milks rose 23 per cent to an estimated $2.2bn in 2020, according to market researchers SPINS.

That was dominated by almond milk, which accounted for $1.3bn. But consumers have embraced a growing range of plant-based dairy ingredients including seeds, legumes, pulses, grains and nuts. Sales of oat-based dairy products tripled in the US in 2020, to $288m, overtaking soyamilk as the number two plant-based milk. 

Oatly’s signature oat milk was especially successful ahead of the pandemic with a “barista edition” used in cafés that produces a froth similar to that of cows’ milk for cappuccinos and macchiatos. 

Rival Chobani, a New York-based company that built its reputation on plant-based yoghurts, has also reportedly been considering a listing, while Oatly competes with companies such as France’s Danone, which has branched out from a history in dairy to produce plant-based alternatives such as the Alpro brand.

Oatly faced a customer backlash on social media over its decision to accept funding from Blackstone last year, with consumers criticising the private equity group’s sustainability credentials and a history of support for Donald Trump by its chief executive Stephen Schwarzman.

Oatly said at the time: “Our bet is that when Blackstone’s investment in our oat-based sustainability movement brings them larger returns than they would have been able to get elsewhere . . . a powerful message will be sent to the global private equity markets, one written in the only language our critics claim they will listen to: profit.”

Companies have been rushing to list in recent months and take advantage of an equity market rally that has bolstered IPOs such as that of Blackstone-backed dating app Bumble, which raised $2.15bn in a Nasdaq listing this month, and Israeli mobile games company Playtika, which raised $2.2bn in January.



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