Abu Dhabi sovereign fund Mubadala prepares to launch two Spacs

Investor mania for special purpose acquisition companies is accelerating in the oil-rich Gulf, where Abu Dhabi sovereign fund Mubadala is poised to launch two Spacs and a Dubai-based asset manager is raising $200m to target mergers with companies in the Middle East.

Regional financiers have for months been planning an expansion into the booming market for Spacs, or blank-cheque companies, which first list on a stock market before searching for a company with which to merge.

Mubadala Investment Company had been approaching potential investors for two Spacs focusing on technology and healthcare, said people briefed on the meetings.

The roadshow comes as Mubadala, which had record profits and growth through 2020, reorients its core areas of investment away from petrochemicals and manufacturing towards new industries, such as technology, healthcare and infrastructure. Mubadala declined to comment.

Interest in Spacs has slowed in recent months after some disappointing share price performances and increasing regulatory scrutiny in the US.

In the Gulf, however, investors have worried about missing out on gains. Sovereign funds and family offices are also keen to use the sector to boost their investment in technology and other “new economy” businesses that have thrived through the pandemic.

“Spacs are, all of a sudden, the flavour of the month here,” said one Dubai-based financier. “There is a niche in the Middle East, as well as Africa and south Asia — no one is looking at these markets.”

FIM Partners, a Dubai-based frontier asset management firm backed by Egyptian investment bank EFG-Hermes, has been pitching to investors this week as it seeks to raise $200m in an initial public offering of Frontier Investment Corp on Nasdaq, which could be announced as early as Thursday, people with knowledge of the transaction said.

The company, advised by JPMorgan, intends to merge with a target working in technology, digital media, ecommerce or fintech in the Middle East, Africa, south Asia or south-east Asia, they added. FIM was not available for comment and JPMorgan declined to comment.

Anghami, a regional music streaming service, said in March that it aimed to list on Nasdaq at a value of $220m through a merger with a Singapore-based Spac.

Global Spac Partners in April raised $160m on the Nasdaq to seek acquisitions in the Middle East, south Asia and south-east Asia. The vehicle’s chief executive, Bryant Edwards, had previously worked on another Spac that in 2019 merged with a UAE-based oil services firm, Brooge Energy.

Saudi Arabia’s sovereign Public Investment Fund has also made investments in global Spacs and remains the largest shareholder in electric vehicle start-up Lucid Motors, which is targeting a valuation of $24bn via a merger with a blank cheque company controlled by veteran dealmaker Michael Klein.

Spacs targeting the Middle East faced challenges in identifying potential merger candidates, said the Dubai-based financier, but bankers are nonetheless eyeing five to 10 potential targets.

Others are sceptical of the region’s ability to sustain the Spac model, saying there is a likelihood that most deals will fail.

“Anyone can form a Spac . . . but it’s all in the implementation” said one investor. “The target needs to be in a sexy sector, with good growth plans and done at the right valuation — it’s complicated.” 

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