By Douglas Busvine and Abhinav Ramnarayan
BERLIN/LONDON (Reuters) - German venture capitalist Klaus Hommels launched a blank cheque company in Frankfurt on Wednesday through his firm Lakestar, offering a route to the stock market for European tech startups that does not entail crossing the Atlantic.
The early investor in Spotify (NYSE:SPOT) is seeking to raise up to 275 million euros ($331 million) for a Special Purpose Acquisition Company, or SPAC, that would then take over a firm worth between 750 million and 4 billion euros.
A SPAC is a shell company that raises money via a stock market listing, and then seeks to merge within two years with a privately held company that becomes publicly traded as a result.
Hommels, 54, is the latest to embrace a trend that began in the United States and has spread to Europe, with former UniCredit boss Jean-Pierre Mustier teaming up with French tycoon Bernard Arnault to launch a SPAC in Amsterdam.
The founders of Berlin e-commerce pioneer Rocket Internet and meal kit company Hellofresh also plan SPACs. Unlike Hommels, however, they plan to do so in the United States.
The promoters of Lakestar SPAC 1 SE are seeking backing from institutions via a private placement prior to listing on the Frankfurt Stock Exchange.
Books are expected to close on Thursday on the sale of 27.5 million shares priced at 10 euros, each with a third of a warrant attached, Lakestar SPAC 1 said in a statement. A warrant confers the right to buy a share at a set price at a later date.
EUROPEAN AGENDA
In designing Frankfurt's first SPAC, Hommels worked closely with exchange operator Deutsche Boerse (DE:DB1Gn) on a design that supports his wider agenda - to help companies keep a European identity and attract backing from European investors.
"If we don't have the product, the U.S. will create products for European companies," Hommels told Reuters in an interview.
"Then you would have a structural sellout of European companies. They lose their European centre of gravity, their tax substance - they lose everything."
Hommels said the SPAC, headed by Lakestar adviser Stefan Winners, did not rule out buying a company in the group's own portfolio but declined to be more specific.
The Swiss-based investor has invested in Berlin freight tech company Sennder and travel firms GetYourGuide and Omio. Lakestar has also backed UK fintech Revolut and was instrumental in Spotify's innovative U.S. direct listing.
ALIGNED INTERESTS
As the SPAC mania trickles into Europe, Amsterdam is widely expected to be the venue of choice thanks to its favourable regulatory environment.
Two major SPACs -- one backed by ex-Commerzbank chief executive Martin Blessing and the other by Mustier and Arnault -- are both listing in the Dutch capital.
But Deutsche Boerse executives are confident Frankfurt will win business as well.
"The requirements for SPAC transactions in Germany are similar to other jurisdictions," said Renata Bandov, head of capital markets at Deutsche Boerse. "We expect a small number of transactions in the medium term – a lot depends on how the first ones are received by the wider market," she added.
Hommels said the team running the Lakestar SPAC would be primarily rewarded through so-called earn-out payments triggered when its investors achieve returns of 20% and, later, 40%.
That contrasts with U.S. SPACs that typically compensate their promoters when a takeover deal is done.
"The biggest litmus test is if you have deferred compensation," said Hommels. "And I'm happy to do this test."
JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS) and Deutsche Bank (DE:DBKGn) advised on the deal.
($1 = 0.8308 euros)