Blackstone Vet to Launch Largest ‘Blank Check’ IPO Since Financial Crisis

March 24, 2016, 2:13 AM UTC
Five Years After Start Of Financial Crisis, Wall Street Continues To Hum
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Chinh Chu, the veteran dealmaker who ended a 25-year career at Blackstone Group (BX) last year, is preparing to launch an acquisition company that could raise up to $1 billion in a U.S. initial public offering, people familiar with the matter said.

If successful, the offering would be the largest by a so-called special purpose acquisition company (SPAC) since the 2008 financial crisis. SPACs are companies with no assets that raise money in an IPO which they then use, often alongside debt, to buy other companies.

Chu has teamed up with William Foley, chairman of the board of U.S. title insurance services provider Fidelity National Financial Inc, on the SPAC, which has already been registered confidentially with the U.S. Securities and Exchange Commission, the people said on Wednesday.

Chu and Foley are working on the offering with investment banks that include Citigroup (C), Bank of America (BAC) and Credit Suisse, the people added.

In meetings with investment banks, Chu and Foley have been referring to their new venture as a permanent capital vehicle that will improve on some structural issues that SPACs have historically suffered from, the people said.

For example, the SPAC will launch with some cornerstone investors committing not to redeem their money if they disapprove of a proposed acquisition, giving it more financing certainty to be able to go after the companies it wants, the people said.

The SPAC will focus on four main areas of investment: financial technology and technology more broadly, financial companies and business services, the sources said.

The sources asked not to be identified because the upcoming offering is not yet public. Foley, Chu, Blackstone, Citigroup, Bank of America and Credit Suisse declined to comment.

Overall, U.S. IPO volumes are down 93% year-to-date, totaling $317 million, as stock market volatility has prevented many companies from going public. SPAC IPO volumes, however, are up 26% over the same period to $619 million, according to data compiled by Thomson Reuters.

SPAC IPOs are less vulnerable to market jitters since they have no existing business to fret over. Investors can speculate about the companies SPACs will buy, but initially SPACs are only worth the money they raise.

Chu, who fled his native country Vietnam with his family in 1975 at the age of eight, worked on some of Blackstone’s biggest and most successful leveraged buyouts.

Some of his past deals include the $11.3 billion leveraged buyout of U.S. software company SunGard Data Systems, and the purchase of Celanese, a German chemical company, for $3.8 billion. He continues to offer Blackstone counsel as a senior advisor to the private equity firm. Prior to joining Blackstone in 1990, Chu worked in the mergers and acquisitions division of investment bank Salomon Brothers.

Foley has helped steer Fidelity National Financial through several acquisitions, including of mortgage technology and service provider Lender Processing Services for $2.9 billion in 2014.

The only SPAC to raise more than $1 billion was Liberty Acquisition Holdings Corp in 2007, led by American and German financier Nicolas Berggruen and Jarden Corp founder, Martin E. Franklin. The company acquired Promotora de Informaciones, S.A in 2010.

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