Singapore-based private equity firm Novo Tellus Capital Partners is looking to list a special purpose acquisition company (SPAC) in the city-state by early next year, its co-founder and managing partner Loke Wai San told DealStreetAsia.
The SPAC will be part of the PE firm’s Southeast Asia-focused Novo Tellus PE Fund 2, which closed earlier this year at $250 million.
SPACs, also known as blank-cheque companies, raise capital from a traditional initial public offering (IPO) for the purpose of acquiring a privately held company. A merger with the publicly traded SPAC provides a private company with a cheap and fast listing route.
The proposed Novo Tellus SPAC will seek to raise around S$200 million ($148.7 million at current exchange rates) in its IPO on the Singapore stock exchange, Loke said.
The PE firm’s decision comes after Singapore allowed the listing of SPACs on the local bourse starting Sept 3. Under the SGX framework, a SPAC must have a minimum size of S$150 million. A smaller-sized offering caters to a broader range of companies, observers say, particularly given that larger companies would likely be headed for bigger capital markets such as in the US.
In Loke’s view, the assets that are suitable for a SPAC merger would include family-owned businesses, particularly companies that are facing succession challenges.
These companies typically have the option of an initial public offering or being privatised by a private equity firm. A SPAC transaction would allow the company’s founders to take money off the table, while still having the option of running the business.
“It is an interesting angle for a SPAC to help the family meet its needs in terms of wealth distribution,” Loke said.
Such businesses may choose to be listed in Singapore, instead of heading to markets such as the US, for better visibility among investors, he explained.
“Even if your company [has a market capitalisation] of $3 billion you’re still somewhat a small-cap, so you’d get lost in the noise of analyst coverage,” Loke said.
Still, the Singapore stock market is better known for stable income-generating real estate investment trusts, rather than high-growth companies that SPACs are targeted at. There are concerns that liquidity and valuations in the Singapore market are lower compared to the US for instance.
“We do think this is an opportunity to have the market here re-rated for tech,” Loke said.
Other potential SPAC sponsors said to be launching vehicles in Singapore include French alternative asset manager Tikehau Capital; Turmeric Capital, led by former L Catterton executive Ravi Thakran; and Vertex Holdings, the venture capital arm of Temasek.
“You want sponsors who set the tone, who are long-term stewards, and invested in our economy and our exchange,” Loke said.
Novo Tellus targets mid-market opportunities in industrial tech in Southeast Asia. Its portfolio companies include Singapore-headquartered industrial manufacturers Grand Venture Holdings, Sunningdale Tech, and ISDN Holdings.
In April, it invested $40 million in Indian engineering services company Tessolve Semiconductor.
“We’re benefiting from quite a few macro trends,” Loke said, pointing to the portfolio companies’ alignment with growing demand for semiconductors and automation. Importantly, the firm’s portfolio companies are also benefiting from the reconfiguring of supply chains away from China, he added.