CITIC Capital targets OBOR deals with blank check company

CITIC Capital Acquisition Corp. is offering 20 million units for $10.00 apiece, with an overallotment option of three million units, according to a filing. Each unit entitles the owner to one class A ordinary share and half a redeemable warrant. One whole warrant converts into one ordinary share at a price of $11.50 per share once the SPAC closes an acquisition.

The sponsor entity, which is controlled by CITIC Capital, has received five million founder shares with a view to giving it a stake of at least 20% for zero fee, which is standard for SPAC structures. The sponsor has also committed to buying six million warrants – rising to 6.6 million if the overallotment option is exercised – for $1 million apiece. Each warrant entitles the sponsor to purchase one ordinary share at $11.50 per share.

The sponsor must cover the listing cost and any expenses incurred during the deal sourcing and execution process. CITIC Capital Acquisition Corp. has 24 months from the closing of the offering to complete an acquisition, which requires support from a majority of shareholders, otherwise the structure is liquidated.

The sponsor’s management team is led by Fanglu Wang, a senior managing director at CITIC Capital primarily responsible for the CITIC Capital Silk Road Fund and the CITIC Kazyna Investment Fund, both of which target deals globally that can benefit from the OBOR agenda. Wang is supported by Eric Chan, CITIC Capital’s CFO, and Henri Arif, founder of Tharsis Capital, an impact investment platform that specializes in the environment and sustainability.

The acquisition target will be a company in the energy efficiency, clean technology or sustainability space that is seen as having growth potential in China and other Asian markets. Past investments of this nature by the CITIC Silk Road Fund and CITIC Kazyna Investment Fund include Organica Water, a US-based wastewater treatment services provider that generates most of its revenue from Asia, and Arctic Green Energy, an Iceland-based geothermal energy developer.

A SPAC represents a fast way to raise money, especially in a bull market, and avoid the wait for a liquidity event. From an investor perspective, it means giving money to a vehicle that has no existing business in the expectation that its sponsor can deliver deals through its networks.

Last year, a SPAC backed by New Frontier Group, an investment firm established by two former China executives with The Blackstone Group, acquired Chinese hospital operator United Family Healthcare from TPG Capital. Baring Private Equity Asia secured a liquidity event through a similar route, selling Clarivate Analytics – an education business acquired from Thomson Reuters in conjunction with Onex Corporation – to a SPAC in return for shares in the entity.

The likes of Sing Wang, ex-head of North Asia at TPG Growth, and Parag Saxena, founder of New Silk Route, have also launched SPACs for investments in China and India, respectively.

Hedge funds are frequent subscribers to these offerings: investments are subject to a fixed timeframe; there is the potential for equity upside if they like the deal; and at a minimum, they can redeem on combination and recover their principal plus interest and some upside on the warrants. This means is that, even if a transaction is approved, there can be substantial turnover in the investor base as hedge funds are replaced by long-only mutual funds.

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• Topics
• Greater China
• IPO
• Cleantech
• Infrastructure
• Buyouts
• China
• One Belt One Road
• CITIC Capital
• buyout