L Catterton Asia raises SPAC for consumer deals

The sponsor entity for L Catterton Asia Acquisition Corp. is a portfolio company of the firm’s third pan-regional fund, which closed at the end of 2019 with $1.45 billion in commitments. The SPAC’s investment remit is therefore consistent with L Catterton’s general consumer sector strategy, and it will have access to the firm’s full suite of capabilities, relationships, and resources.

The prospectus notes that rising incomes and favorable structural changes are likely to result in Asia accounting for 50% of global GDP and 40% of global consumption by 2040. At the same time, the development of digital ecosystems in the region is prompting different consumption habits.

“While consumers globally are increasingly connecting to brands through digital content, online communities and influencer-driven recommendations, nowhere are we seeing the impact of digitization more markedly than in Asia, where billions of consumers have leapfrogged technologies and innovation has paved the way for consumer-centric and sophisticated digital shopping experiences,” it states.

Some of the companies benefiting from these trends struggle to access public markets. Cluttered capitalization tables leading to contradicting incentives when it comes to pursuing a traditional IPO and local exchanges not being a good fit for fast-growing companies from a regulatory perspective are listed as contributing factors.

L Catterton’s Asia managing partners, Chinta Bhagat and Scott Chen, are co-CEOs of the SPAC. The other directors are Howard Steyn, who leads global initiatives at L Catterton, John Sculley, a former CEO of PepsiCo and Apple who now makes tech and healthcare investments, Frank Newman, co-founder of cybersecurity business PathGuard and formerly CEO of Shenzhen Development Bank, and Anish Melwani, CEO of LVMH in North America.

The SPAC sold 25 million units for $10 apiece, with an overallotment option of 3.75 million units. Each unit comprises one class A common share and one-third of one redeemable warrant. Whole warrants can be converted into common shares at a price of $11.50 per share.

Once a target is identified, a majority of investors must vote in favor of the transaction. On completion, they can exercise their warrants and purchase shares or redeem some or all their shares for cash. If there is no deal within 24 months of the offering, investors get their money back.

The SPAC sponsor purchased $7.5 million in warrants, which convert into common shares at the standard price. In addition, the sponsor and management have subscribed to common shares for a nominal sum that will convert into a 20% stake in the entity on completion of the offering.

A host of Asia-related SPACs have been launched by PE firms – serving as sponsors or designated affiliates of the structures – and by individuals with experience in the industry. They include Ravi Thakran, who previously led L Catterton Asia’s operation and left the firm last year. L Catterton has a minority interest in the SPAC sponsor.

The SPAC raised $240 million towards the end of 2020. In February, it announced a merger with Wheels Up – a US-based aviation business described as Uber for private jets – at a valuation of $2.1 billion. The SPAC will take an 8.8% interest in the merged entity, with the sponsor holding 2.2%. Most of the equity is being rolled over by existing investors in Wheels Up.

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• Topics
• Consumer
• Fundraising
• IPO
• SPAC
• Asia
• L Catterton