7/6/2020
In Bill Ackman's New Megadeal, a Cut for Minority-Owned Wall Street Players
Vanity Fair (07/20) Cohan, William D.
Bill Ackman's Pershing Square Tontine Holdings Ltd., a special purpose acquisition company (SPAC), is set to go public later this week and likely exceed its $3 billion target because of massive investor demand. This marks the largest initial public offering of 2020 and the biggest SPAC ever, but it is also noteworthy because Ackman decided to give seven very small, veteran-, women-, and minority-owned investment banks meaningful roles in the underwriting and distribution of the stock being sold. He is hoping that by sharing the economics of the deal with these less-powerful firms, he will provide them the capital and profits they need to compete more effectively with Wall Street giants. Ackman still chose giant firms Citigroup (C), Jeffries, and UBS (UBS) as the lead underwriters of the SPAC, but the smaller firms will get to share $18 million in fees. Ray McGuire, a vice chairman at Citigroup, said June 23 that the SPAC deal is extraordinary because, in addition to its structure, “[Ackman] had the courage and conviction to include minority firms as co-managers with 20% of the fees. Other issuers have allocated 20 basis points to each firm, which is 'feel-good, check-the-box' but is certainly not material.” Ackman also decided that two of the four independent directors of Tontine should be women. If all goes according to Ackman's plan, he will soon have a huge new unrestricted pool of some $5 billion in equity capital, or more, to make a huge acquisition, plus the publicly traded stock of the SPAC to use as acquisition currency. “We intend to pursue merger opportunities with private, large capitalization, high-quality, growth companies where our ownership in the merged company would generally represent a minority of shares outstanding at the time of the merger,” Ackman wrote in the prospectus.
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