It’s A SPAC-tacular Time For HFs

Date: Wednesday, January 30, 2008
Author: Hedge Fund Daily

Hedge funds are moving into a territory previously dominated by private equity firms: special purpose acquisition vehicles, or SPACs. Financial News reports that these so-called “blank check” vehicles are growing in popularity in this volatile market as the cash-rich hedge funds are making acquisitions for which PE firms in the past have relied on loans for financing, but are having a difficult time obtaining now. At the same time, says FN, target prices are dropping in the volatile market, and many companies are trading at low price/earning ratios. Some 75 hedge funds now are investing in SPACs, with the largest of them, according to figures from the Securities and Exchange Commission, the $900 million Liberty and the $850 million Sapphire Industrials. One of the most notable hedge fund/SPAC tie-in was the reverse acquisition of GLG Partners by Freedom Acquisitions Holdings last year, whereby GLG went public. Among those hedge funds new to the field, reports FN, are Fortress Investment Group, Och-Ziff Capital Management, Ospraie Management, Pequot Capital, SAC Capital and Tudor Investment. Hedge funds  are also enjoying an expansion in SPAC offerings. According to FN, there are currently 24 SPACs with more than $200 million listed and looking for targets, with more than 140 SPACS with some $11 billion assets in the first quarter of this year. “There are a lot of interesting acquisition opportunities around, a CEO of a large U.S. fund manager told FN.