Blank-check companies backed by buyout firm Warburg Pincus and billionaire real estate investor Barry Sternlicht are in talks to take security services firm Allied Universal public in a $20 billion deal, according to a source familiar with the matter.
The deal will involve three special purpose acquisition companies (SPACs) – Warburg Pincus Capital Corp IA, Warburg Pincus Capital Corp IB and an affiliate of Sternlicht’s JAWS Estates Capital LLC.
The SPACs are currently in talks to raise a so-called private investment in public equity (PIPE), said the source, asking not to be identified as the information was private.
A representative for Warburg declined to comment, while JAWS Estates did not immediately respond to a Reuters request for comment.
Allied Universal’s unique agreement highlights how several SPAC sponsors are trying to come up with new structures and alternative funding sources, as the charm for blank-check deals fade.
Dealmaking in the SPAC market has been stifled by tightening regulatory scrutiny and high investor redemptions. A steep decline in share prices of some companies such as Grab Holdings Ltd and BuzzFeed Inc that went public through SPACs mergers has also soured sentiment.
Recently, a number of companies scrapped their agreements to go public via SPACs, including telecom services firm Syniverse Technologies, 3D printing firm Essentium Inc and travel technology platform HotelPlanner.
The Allied Universal SPAC deal talks were first reported by Bloomberg News on Monday. Allied Universal, owned by private equity giant Warburg, provides integrated security services to help clients secure their businesses.
SPACs are shell companies that raise capital through an initial public offering to merge with a private company, which then becomes publicly traded as a result.
(Reporting by Niket Nishant and Mehnaz Yasmin in Bengaluru and Chibuike Oguh in New York; Editing by Shinjini Ganguli)