CBC Group founder backs healthcare-focused SPAC

Fu is honorary chairman and senior advisor of Summit Healthcare Acquisition Corp, as well as one of three owners of the sponsoring entity. The other two owners – and co-CIOs of the SPAC – are Bo Tan and Ken Poon. Tan is a former CEO of Chinese biotech company 3SBio, while Poon runs a boutique advisory firm and previously served as head of Asia Pacific capital markets origination at Citigroup.

The SPAC has no direct ties to CBC and the prospectus notes that Fu’s responsibilities at the private equity firm mean he will have limited time to devote to deal sourcing. CBC – formerly known as C-Bridge Capital – is currently deploying its third healthcare fund, which closed in 2019 at $850 million. The vehicle has an Asia-wide mandate but is most active in China.

Within the healthcare sector, the SPAC will consider businesses across any geography provided there is a strong China nexus. Pharmaceuticals, medical technology, and diagnostics are the primary areas of interest. Targets are likely to be standalone healthcare companies looking to access China, private equity portfolio companies that have suffered from underinvestment, and divisions of corporates.

“We believe the healthcare sector in Asia has historically benefited from the in-licensing of novel or differentiated therapies to address critical unmet medical needs in Greater China and other emerging Asia Pacific markets. Today, we are witnessing the rise of healthcare out-licensing from China, a phenomenon that creates a ‘two-way’ traffic that brings significant benefits to patients in both China and Western countries,” the prospectus states.

Summit Healthcare is looking to raise $200 million through the sale of 20 million units – rising to 23 million if the overallotment option is fully exercised – at $10 apiece. 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 has agreed to acquire $6 million in warrants. 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. This corresponds to a global trend that has seen $101.3 billion raised through 313 SPAC offerings so far this year, according to SPACInsider. This compares to $83.3 billion 248 offerings over the full 12 months of 2020 and $13.6 billion from 59 the year before that.

However, activity has been tempered by several warnings from the US Securities & Exchange Commission (SEC). Since March, it has cautioned that celebrity involvement in SPACs is no guarantee of success, expressed concerns about fees, conflicts and sponsor compensation, and indicated lower legal liability for SPACs versus traditional IPOs should not give sponsors free rein to be overly aggressive in their financial performance projections.

Moreover, the SEC has advised that warrants awarded to SPAC investors should be classified as liabilities rather than equity instruments. This means SPACs must spend more time and money potentially revising their financial statements and changing the way they analyze the value of warrants.

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• Topics
• Healthcare
• Greater China
• IPO
• Fundraising
• Asia
• SPAC
• CBC Group