Irish-led Spac deal vote delayed amid market turmoil

An Irish-led “blank cheque” company listed in New York has postponed shareholder meetings twice in recent weeks to vote on a $1.74 billion (€1.63 billion) merger, amid heightened volatility in financial markets.

North Atlantic Acquisition Corporation (NAAC), founded by Irish packaging industry veteran Patrick Doran and corporate financier Gary Quin, raised $380 million in an initial public offering (IPO) in January 2021. The so-called special purpose acquisition company (Spac) agreed last December to merge with TeleSign, a digital identity verification company.

NAAC moved on the eve of a planned May 18th extraordinary general meeting (egm) to push the shareholder vote on the deal out to June 1st, saying that some of the closing conditions had yet to be met, even though there was sufficient investor support for the merger. It decided on Wednesday, the rescheduled date, to postpone the egm until a time to be “announced in due course”.

While it is said that some technical conditions have yet to be finalised and that both sides remain committed to the deal, the delays come at a time when Wall Street’s recent love affair with Spacs is faltering amid declining equity markets. A spokesman for NAAC declined to comment, while representatives for Proximus did not respond to a request for comment.

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This week alone has seen financial media giant Forbes and online ticketing platform SeatGeek abandon deals to go public via combinations with Spacs.

“Blank cheque” or “cash shell” companies have been a periodic feature of international stock markets for more than three decades. Spacs, the latest incarnation, became a hotspot of IPO activity in the US and, to a lesser extent, Europe in 2020 and 2021, amid ultra-low interest rates and surging equity markets. Spac IPOs face fewer regulatory hurdles than those of trading businesses, making a merger with such entities a popular backdoor way for companies to go public.

However, shares in companies that reversed into Spacs through mergers in 2021 had subsequently fallen by an average of almost 60 per cent as of the middle of last week, according to an analysis by University of Florida researchers, cited by the Wall Street Journal. By contrast, the S&P 500 has declined almost 14 per cent from a record high in January, while the Nasdaq has fallen nearly 29 per cent from its November peak.

About 600 Spacs that went public since mid-2020 are still trying to complete deals, according to financial data group Dealogic. Many of these will not find targets before 24-month windows close and Spacs have to return cash to their own investors.

TeleSign, whose technology is used from logging into TikTok to resetting passwords for Alibaba, has forecast that its revenue will soar from $391 million last year to $1.1 billion in 2026. The merger deal envisages TeleSign’s parent, Belgian mobile phone group Proximus, retaining a 66 per cent stake, with the original “sponsors” of NAAC, mainly made up of Mr Doran and his family, set to retain a 4.9 per cent stake, valued at $85 million, according to figures in presentations relating to the transaction.

The so-called sponsors paid only $25,000 for their shares. However, they are worthless if the Spac does not complete a merger by January 26th, 2023.

Mr Doran sold his Dublin-based packaging company Americk to Spanish group Saica in 2016 for an undisclosed sum. He is founder and chief executive of Woodberry Capital, a private investment company that has put money to work in sectors including logistics, technology and construction.

Mr Quin was vice-chairman of Credit Suisse’s investment banking division in Europe from 2010 to December 2019, and was involved in IPOs of Hibernia Reit, Irish Residential Properties Reit, Cairn Homes and Glenveagh Properties.

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