Europe set for SPAC with deals in pipeline

SPACs are shell companies that use the proceeds from going public to buy another company

After watching from the sidelines as a boom in the listing of special purpose acquisition companies (SPACs) reshaped U.S. capital markets, Europe is preparing to play catch up next year with around 10 such deals said to already be in the pipeline.

SPACs are shell companies that use the proceeds from going public to buy another company, not yet identified at the time of listing. The resulting merger with a target company, often a start-up in a high-growth sector, offers it a faster and lower cost way to market than a traditional initial public offering (IPO).

Boosting the profile of a previously niche product, notable U.S. deals this year have included April's merger between online sports betting company DraftKings and Diamond Eagle Acquisition, and June's merger between electric truck maker Nikola and VectoIQ Acquisition Corp.

While $63 billion has been raised through 190 SPAC listings in the United States this year, according to Refinitiv data, by investors including Bill Ackman and Michael Klein, it has been slim pickings in Europe. Small cash shells priced in London and Amsterdam but the only attempt at a major deal -- Martin Franklin's $750 million The Harvester Holdings -- was cancelled due to a lack of demand.

There was a glimmer of hope this week though when French telecoms magnate Xavier Niel and banker Matthieu Pigasse said they were looking to raise at least 250 million euros ($299.65 million) via a SPAC that will scour for sustainable and organic food companies that source locally.

Three banking sources working on potential SPAC deals told Reuters that a successful transaction could trigger a spate of issuance, with up to 10 SPACs in line to raise about $300 million on average.

They said listings destined for Europe tended to be focused on the healthcare, technology and consumer sectors, with Euronext's exchanges in France, the Netherlands and Southern Europe set to see the most activity.

Saadi Soudavar, co-head of equity capital markets (ECM) at Deutsche Bank in EMEA said a "decent" pipeline of European SPAC deals was building for next year, without giving further details.

He added that a successful merger, or so-called "de-SPAC-ing", phase in the United States would likely free up additional capital and give further confidence to U.S. and European investors that such vehicles are a viable alternative to traditional IPOs.