(Bloomberg) -- Billionaire investor Bill Ackman is officially on the lookout for a mega-merger after his new blank-check company raised $4 billion in an initial public offering and rose in its trading debut.
“We’re in a unicorn mating dance and we want to marry a very attractive unicorn on the other side that meets our characteristics,” he said in a Bloomberg TV interview Wednesday. “And we’ve designed ourselves to be a very attractive partner.”
Ackman said there are 150 private companies valued at more than $10 billion in value and that the top third meet his quality thresholds.
“We’re looking for a simple, predictable free cash flow-generative company, very high barriers to entry with minimal exposure to what we call risks, extrinsic risks we can’t control,” Ackman said. “We’re looking for the super durable great growth business that we can own for the next decade.”
Pershing Square Tontine Holdings Ltd., the largest-ever special purpose acquisition company, or SPAC, is now officially on the hunt for what it has called a “mature unicorn” as a merger candidate. Units of the blank-check company, which sold in the IPO for $20 each Tuesday, closed their first day of trading up 6.5% to $21.30.
The units include one share and a warrant for one-ninth of a share, plus a warrant that comes with special restrictions that Ackman says will encourage investors to hold on to the stock.
Unicorns are typically defined as private companies valued at $1 billion or more, though Pershing Square Tontine Holdings has said it could look at businesses worth $10 billion or more.
Airbnb, Elon Musk
Ackman said he isn’t looking for energy companies that are bankrupt but “will certainly look at” businesses that will survive the coronavirus pandemic and become a strong player like Airbnb Inc., which has been in talks to go public.
“We don’t require the company today to be cash-flow positive on an overall basis,” he said.
Secretive Silicon Valley firm Palantir Technologies Inc., which said it has filed confidentially for a public listing, and Elon Musk’s space travel company SpaceX are also on Ackman’s radar.
“We have a lot of admiration for Elon Musk and what he has accomplished,” Ackman said.
Funds associated with Ackman’s investment firm, Pershing Square Capital Management, are expected to deploy at least $1 billion and as much as $3 billion more to the vehicle, possibly bringing the total funding to $7 billion, according to filings with the U.S. Securities and Exchange Commission.
SPAC No. 2
Pershing Tontine isn’t Ackman’s first blank-check company. Justice Holdings Ltd., which raised $1.44 billion in a 2011 listing in London, merged with Burger King Worldwide Inc. in 2012 and, in a deal with 3G Capital Inc. Burger King later merged with Tim Hortons Inc., creating Restaurant Brands International Inc.
SPAC listings have reached an all-time high this year, with more than $18 billion raised in the U.S. as of Wednesday, topping last year’s record of $13.6 billion for the entire year, according to data compiled by Bloomberg. This month there have been 14 filings for SPACs in the U.S., the data show. Just since Friday, that’s included one each backed by Bow Capital Management’s Vivek Ranadive, Ron Burkle of Yucaipa Cos., Gores Group founder Alec Gores and telecommunications pioneer Craig McCaw.
The sheer size of Pershing’s SPAC puts it in a separate league from the wave of new blank-check companies jockeying for deals with smaller targets, Ackman said. With $5 billion, it’s the only such pool looking to invest in a minority common-stock interest, he said.
Ackman said his pitch to target companies will emphasize the relative ease of going public through a merger with Pershing’s SPAC, compared to the risk and headaches of an IPO, direct listing or sale to a private equity firm. Completing a deal could take only two weeks, he said.
He isn’t going to do all the chasing, though. He expects some potential targets to come knocking on his door.
“If you’re an investment banker today, you’re going to call your favorite $10 billion company and say, ‘Isn’t this an interesting way to go public,’” Ackman said. “We welcome the inbound call.”
(Updates with structure of offering in sixth paragraph)
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