MENA region sees surge in SPAC activity

Key trend: MENA-based companies explore alternative routes to a public market listing

BUSINESS REPORTER

MUSCAT, SEPT 17

While the SPAC trend has been dominating international headlines for some time now, 2021 has proven to be the year that this type of capital markets event is making its mark in the MENA region, according to well-known global professional services network EY.

Merging with a listed SPAC could be a viable strategic alternative for IPO-bound companies to go public through the backdoor, even in times of high market volatility and unprecedented uncertainty, EY noted in its latest report.

In addition, while traditionally MENA companies have found it difficult to access US markets through the official IPO route, SPACs have stepped in to ease the accessibility and deepen the capital raising pool for these companies, it said.

SPACs, often referred to as publicly-traded shell companies or “blank-check companies,” are investment vehicles that raise capital from investors through a traditional IPO — the SPAC IPO — to be used later to acquire one or more target companies.

Funds raised via the SPAC IPO and any additional investment secured are held in trust until SPAC management finds a suitable target. SPACs generally have two years to find a target; if they don’t, then the money raised is returned to investors. Shareholders can also redeem their shares if they’re not interested in participating in the proposed merger.

According to EY, the UAE has been particularly at the forefront of the increase in SPAC activities across the region. Earlier in 2021, Anghami, a leading MENA music streaming platform with Lebanese roots and headquarters in Abu Dhabi, announced its intention to go public on Nasdaq by merging with Vistas Media Acquisition Company’s (VMAC) SPAC, at a valuation of $220m. This was followed by an announcement of the Singapore–based Vistas Media Capital (VMC) that it is planning to launch a $150m fund for SPACs targeting key sectors in the MENA region.

SHUAA Capital, a UAE-based asset management firm which is listed on the DFM, led the PIPE investment for Anghami’s SPAC transaction and according to Bloomberg, is considering setting up three SPACS worth $200m each. The SPACs are expected to list in the US in 2021 and will pursue deals in the technology, finance and energy sectors.

Arrow Capital, a Dubai-based financial and investment advisory firm, co-sponsored a $240m technology SPAC in March 2021, which is listed on Nasdaq (Tribe Capital Growth Corp I), in partnership with Silicon Valley-based venture capital firm Tribe Capital.

Sovereign wealth funds in the region, such as Saudi Arabia’s Public Investment Fund (PIF) and Abu Dhabi’s Mubadala, have also participated in notable SPAC transactions on the US markets. Examples of such transactions in 2021 are PIF’s investment into Compute Health which is listed on the NYSE and Blue Whale Acquisition I which was formed by Mubadala Capital and targets media and entertainment businesses. PIF was also an early investor in Lucid Motors, the electric vehicle manufacturer which merged earlier in 2021 with a Nasdaq-listed SPAC (Churchill Capital Corp IV) in a deal valued at $24bn.

The latest SPAC announcement for MENA has minted the region’s third Unicorn, as Swvl Inc. a Dubai-based provider of transformative mass transit and shared mobility solutions, announced its plans to go public through a merger with Queen’s Gambit Growth Capital (GMBT) SPAC, at a valuation of $1.5bn. Trading of Swvl on Nasdaq is expected to start once the transaction is completed in Q4 2021. This will make Swvl the second MENA technology start-up to go public via a SPAC route listing, following the landmark transaction of Anghami that paved the way and illustrated the global ambitions of MENA-based companies.

“There is no question that the unprecedented rise of the SPAC market is transforming and reshaping our capital markets, both internationally and locally. Regardless of market conditions, success is dependent on the understanding of risks and rewards involved in a SPAC merger, regardless of your role in the process. While it’s impossible to predict with certainty how the SPAC appetite will ultimately evolve, the vehicle can offer a viable and expedited path for private companies looking to access growth capital and liquidity via the public markets,” EY added.