Sponsor group Pegasus Asia, consisting of alternative asset manager Tikehau Capital, Financière Agache — the family office of LVMH Group controlling shareholder Bernard Arnault as well as individuals Diego De Giorgi and Jean-Pierre Mustier, has launched its initial public offering (IPO) and is on track to make a special purpose acquisition company (spac) debut on the Singapore Exchange (SGX) by the end of the month.

The company expects to raise around $128 million by selling 25.6 million units at $5 each, subject to over-allotment. This comprises a placement tranche of 24.6 million units plus one million units for retail investors. Each unit will consist of one share and half of one public warrant.

Pegasus Asia’s independent director and chairman Eleanor Seet believes the timing of the IPO is right. Besides Pegasus Asia, other sponsors confirmed to have impending spac IPOs include Vertex Ventures and Novo Tellus. “The atmosphere is electrifying, coming from a couple of years of a pretty subdued backdrop as well as the latent readiness of the investor base to really embrace this unique access pathway,” says Seet in an interview with The Edge Singapore.

Pegasus Asia CEO Neil Parekh believes the sponsor group’s experience in issuing spacs has given them a key edge over the competition. Last year, the sponsor group raised about 700 million euros ($1.075 billion) via two spacs, namely Pegasus Europe, which was among the largest European spacs with 483.6 million euros raised; as well as Pegasus Entrepreneurs, which raised 210 million euros including an upsized portion of 10 million euros following strong investor demand.

In addition to the at-risk capital, Pegasus Asia is also chipping $22 million into so-called “full consideration founder units” at the offer price of $5 per unit. This means the total investment from the sponsor, consisting of the at-risk capital, direct investment and forward purchase agreement, will amount to about $69 million.

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Parekh believes that other IPO investors as well as the target company will appreciate the fact that the sponsor itself will be one of the largest investors in the spac. “I think this demonstrates significant commitment to ensure sufficient alignment of interests,” he says.

Parekh adds that the company boasts a strong team of all-female independent directors (IDs). Besides Seet, whose day job is president and director as well as head of Asia ex-Japan of Nikko Asset Management Asia, other IDs include Wong Su Yen, chairperson of Singapore Institute of Directors and Nera Telecommunications, as well as Chu Swee Yeok, CEO and president of EDBI. “Aside from bringing positive rigour, the independent directors’ prior experience and expertise will help to navigate the wheat from the chaff,” says Parekh.

Tikehau co-founder Antoine Flamarion calls Singapore the ideal market for its third spac, given the market’s multi-faceted ties with his firm. For one, Temasek Holdings became one of its shareholders in 2016. Also, Tikehau and City Developments are joint owners of IREIT Global’s manager.

Tikehau wants to continue its expansion in North America but also sees Asia as “very strategic”. Via Singapore as its regional operating hub, the firm can develop access to other markets ranging from the rest of Asean to China and India. “It makes sense for us to start in Asia after Europe for our third sponsored spac, instead of the US,” says Flamarion.

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Under SGX’s framework, the de-spac is to be completed within 24 months of the spac’s listing, although extensions of up to 12 months are allowed, subject to approval by the exchange and 75% of the spac shareholders. For now, Parekh is not committing to a target timeline for the de-spac, other than for it to be “as soon as possible”.

Pegasus Asia has limited its de-spac targets to businesses within consumer tech, fintech, proptech, insurtech, healthtech and digital services, primarily in Asia Pacific. In contrast, Pegasus Europe and Pegasus Entrepreneurs have their eyes on financial services companies and high-growth businesses in Europe, respectively.

Pegasus Asia wants its target to have a proven, scalable and disruptive business model, with multiple organic growth opportunities; and be run by experienced founders with a strong management team. And the target must have a potential value yet to be recognised by the market.

“If the target company size is $1 billion to $2 billion, our intention is to grow this into a $7 billion to $8 billion company over time. The only way to do that is by being active investors — we will roll up our sleeves and work with them to grow the company, despite eventually being minority shareholders,” says Parekh.

While some high-growth companies in Asean are too small to qualify as a spac target for now, the region is nevertheless a “fertile ground” as “these companies will grow into excellent de-spac candidates in the years to come”, he adds.

Some of Tikehau’s existing investments in Asia Pacific include Australian unicorn lender Judo Bank and Singapore-based software company Deskera. Last year, Judo Capital Holdings launched its A$657 million ($640 million) IPO at A$2.10 per share, valuing it at A$2.3 billion. Tikehau last year exited from its investment in Singapore-based co-working space provider JustCo, pocketing $27.7 million.

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To be sure, the recent spacs frenzy in the US has started to cool off since the middle of 2021. In 2Q2021, the number of spac IPOs fell 79% q-o-q, with its value dropping by over US$84 billion ($113.5 billion), a decrease of more than 86%, according to Bloomberg Law.

Realistically, Flamarion says it is unlikely for the Asian spac market to replicate the level of activity seen in the US as the capital markets are not as large. However, a strong wave could potentially be seen, especially if the first movers are successful. “I think it is important for us as the pioneers to continue expanding, piece by piece,” he adds.

Parekh believes SGX has put together rules with the right guardrails to protect investors, as well as to create the right incentives for sponsors to do the right deals. “I genuinely believe they will create an environment which is sustainable for the medium and long term, which means creating certain checks and balances to ensure that it remains a healthy and vibrant spac regime,” he says.

Outside of its spac plans, Tikehau also has a pipeline of announcements it will be making this year. For one, it will be announcing the close of its maiden Asian-focused fund, Tikehau Asia Opportunities. Parekh says the fund is close to being fully invested, with the capacity for another three deals. Later in the year, the firm will launch the fund’s successor, Tikehau Asia Opportunities II.

The firm is also looking to launch an Asia-focused energy transition fund. This will be similar to Tikehau’s T2 Energy Transition Fund, one of the largest growth private equity vehicles singularly committed to fighting climate change. The fund raised over one billion euros and has already invested 440 million euros in SMEs focused on clean energy generation, low carbon mobility and energy efficiency as of February 2021.

Photo: Albert Chua/The Edge Singapore

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