Abu Dhabi deal could bolster ‘blank cheque’ companies

• ADC is Abu Dhabi’s first SPAC
• Its first purchase is printer UPP
• Deal could stimulate local markets

The first so-called “blank-cheque” company to list in the Middle East this week signed a deal with United Printing & Publishing, an Abu Dhabi state investment fund business.

Special purpose acquisition companies (SPACs) raise money through an initial public offering and then use the proceeds to acquire other companies.

ADC Acquisition Corporation is the UAE’s first SPAC, chaired by Sheikh Tahnoon bin Zayed Al Nahyan, brother of the UAE president. Together with Chimera Investments – part of Royal Group, Sheikh Tahnoon’s private investment conglomerate – it has agreed to acquire UPP.

The deal implies an enterprise value for UPP of AED623 million ($170 million).

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UPP prints a range of products, from newspapers and magazines to identification cards and passports.

According to a statement it will merge with ADC, and the combined entity will become a publicly listed company on the Abu Dhabi Securities Exchange.

The agreement could signal a fresh influx of blank-cheque SPACs in Abu Dhabi. These shot to prominence in 2021 but have since faced regulatory scrutiny along with pushback from investors.

They are generally formed to allow private companies to raise fresh funds to grow and list directly without having to go through the costly and time-consuming IPO process themselves.

“The successful completion of this deal could stimulate regional financial markets, encouraging more companies to consider SPACs as a viable option for listing and raising funds,” Robert Hahm, head of asset management at Mashreq Capital, told AGBI.

Further investment

At the same time, ADC has revealed plans to pursue private investment in public equity (PIPE) fundraising of up to AED734 million.

PIPE involves buying shares of publicly traded stock at a price below the current market value.

The transaction and the PIPE fundraising will provide UPP with AED1 billion of new cash “to pursue organic and inorganic growth avenues”, the company statement added.

“UPP’s high revenue visibility provides a robust foundation for future growth, which can be accelerated with funds which will be raised from the PIPE,” Seif Fikry, CEO of ADC, said.

ADC Acquisition Corp raised AED367 million in an IPO, listing on Abu Dhabi’s bourse last May.

SPACs had proved hugely popular, especially as a means to acquire ascendant tech companies, but disappointing returns and rising interest rates have dulled their lustre for investors.

In the US, SPACs’ acquisitions totalled almost $60 billion in 2022, down from $368 billion a year earlier, according to law firm White & Case. The number of deals fell by nearly half over the same period.

In April 2021 Abu Dhabi-based Anghami became the first home-grown Middle East tech company to list on the New York stock exchange after merging with SPAC Vistas Media Acquisition Company. The deal valued the music streaming service at $220 million.

Abu Dhabi Securities Exchange last year became the first Gulf bourse to introduce rules permitting the listing of SPACs.