Arnault/Mustier Spac: winging it


Hopefully, any takeover featuring Bernard Arnault and Jean Pierre Mustier will be as smart as their suits. The French billionaire — via family office Financière Agache — and the former UniCredit boss are joining forces for that most fashionable of financings, a special purpose acquisition vehicle. These give ex-chief executives the chance to capitalise on fame gained from running big banks without so many restrictions.

Tidjane Thiam, Sergio Ermotti and Martin Blessing, formerly of Credit Suisse, UBS and Commerzbank, have similar plans. The question is whether the new Spac pack can find compelling targets in European financial services. The sector they know best — fragmented, politicised and beset by low rates — looks less buzzy than the US hunting grounds of Wall Street originators.

Spacs are a top-of-the market phenomenon. Investors who buy into the initial public offerings back the reputed deal-doing prowess of Spac co-founders. There is no operating business to scrutinise until a takeover target is identified. Rewards are potentially huge. Spac founders often receive 20 per cent of the listing’s shares for a nominal fee.

What was a backwater within US equity markets a decade ago has become a mainstay for IPO lead managers. Spacs made up 49 per cent of all US listings by value last year, according to Dealogic.

Pegasus Europe, named after the mythical flying horse, aims to thaw European reserve towards Spacs. Issuance has averaged just 2 per cent of all European IPOs in the past decade. Only about five are launched annually — an eighth of the US average.

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Pegasus is the vehicle of Arnault, Mustier, former UniCredit executive, Diego De Giorgi and Tikehau Capital. It will list in Amsterdam, the post Brexit market of choice. The partners correctly perceive a lack of European growth capital outside highly-leveraged private equity. This impedes businesses whose cash flow growth lags behind sales or innovation. Piquantly, Amsterdam-listed Tikehau is itself active in private equity.

However, Pegasus’s happy hunting grounds look pretty heavily picked over: asset management, insurance and diversified financials. There is plenty room for consolidation — and to overpay as well. Private equity funds have $2.5tn in so-called dry powder.

In the UK, the most prominent Spac-type deals of recent years involved well-known financier Nat Rothschild. His heavily-hyped natural resources groups Bumi and Genel were fraught with problems. The new breed of European Spac specialists needs to dispel that memory with deals that do better.

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