Hony launches China healthcare, consumer SPAC

Hony Capital Acquisition Corp. will consider companies across these two sectors with technology-enabled business models that operate in China or have a China expansion angle. The IPO-ready investment mandate is not dissimilar to that pursued by SPACs with ties to other Chinese GPs, including Ascendent Capital Partners, Primavera Capital Group, and Hopu Investment.

John Zhao, Hony’s chairman and CEO, and Bing Yuan, the firm’s COO, are identified as founders of the SPAC and lead the management team. The sponsor entity – described as an affiliate of the private equity firm – is controlled by Yuan.

Hony’s track record, network, and value creation abilities are cited as competitive advantages in the SPAC prospectus. It notes that the firm has invested $2.6 billion across more than 38 healthcare and consumer deals. Past investments such as CSPC Pharmaceutical, JinJiang Hotels, I-Mab Biopharma, ByteDance, and Perfect Diary-owner Yatsen Global are referenced.

Established in 2003, Hony has approximately $10 billion in assets under management in private equity, and a further $2 billion in real estate, mutual fund, hedge fund, and venture capital strategies. The firm’s most recent flagship PE fund, comprising US dollar and renminbi-denominated tranches closed at $2.7 billion in 2016. A debut venture fund closed on $130 million last year.

In addition to Zhao and Yuan, the management team includes Qiang Jiang, founder and CEO of Yidebang, a Chinese medical technology business that focuses on rural communities, and James Lee, who previously worked for the likes of Li & Fung and POSCO and now runs his own investment and advisory firm. The management team will be supported by the broader Hony investment team, led by Kevin Cheng, Frank Zou and Lindsay Liu.

The SPAC structure conforms to industry standards. Hony Capital Acquisition Corp. is offering 30 million units priced at $10 apiece, with an overallotment option of 4.5 million units. Each unit comprises one class A ordinary share and one-half of one redeemable warrant. Each whole warrant can be converted into a common share 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 will purchase $8 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. It is part of a global SPAC phenomenon emanating from the US public markets. The Hong Kong, Singapore and Indonesian stock exchanges have all announced plans to consider SPAC offerings.

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• Topics
• Greater China
• IPO
• Fundraising
• Healthcare
• Consumer
• China
• Hony Capital
• SPAC