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OPINIONFinancing

Investor behind Papa John’s comeback forms a SPAC

Starboard Value, which also overhauled the board at Darden Restaurants, has filed for a $300 million blank-check company, says RB’s The Bottom Line.
Photograph: Shutterstock

The Bottom Line

If you haven’t created a SPAC in 2020, do you even exist?

The latest special purpose acquisition company, or SPAC, comes from Starboard Value, the hedge fund known for overhauling the board of directors at Darden and then investing in Papa John’s, deals that have worked out swimmingly for the firm.

Starboard’s company, Starboard Value Acquisition Corp., or SVAC, filed registration statements for its initial public offering on Tuesday. Among the industry advisers listed in the registration statement is Nigel Travis, the former CEO at Dunkin’ Brands. The firm is seeking to raise $300 million.

A SPAC is also known as a blank-check company. It’s a shell company that sells stock to investors and uses those funds to make an acquisition. The SPAC merges with the company it acquires, taking it public in the process. The most notable restaurant companies to go public this way include Del Taco and Burger King, which later merged with Tim Hortons to become Restaurant Brands International.

Blank-check companies have become far more common lately, as investors have warmed to the possibility of the investments. And the SPACs themselves have targeted larger and more sophisticated companies.

Already, 73 SPACs have had initial public offerings this year, which is more than the 59 that happened all of last year, according to the website SPAC Research. The average size, meanwhile, is also up over last year. The typical SPAC has raised $391.8 million, up over $230.5 million last year.

Just four years ago, only 13 SPACs went public.

Such companies raise funds in part through the reputation of the people behind them. Starboard has become one of the most well-known hedge funds on Wall Street in recent years thanks in part to the firm’s activism. But it has also taken on some remarkably strong investments.

The stock price for Papa John’s, for instance, has more than doubled since Starboard made its initial, $200 million investment in the company.

Starboard also gets considerable credit for its work with Darden Restaurants. The investor engineered a rare overhaul of the full board in 2014, and the company’s stock rose 30% by the time Starboard began selling its shares. By the time the pandemic started Darden’s stock had risen 140%.

It’s uncertain exactly what kind of company the Starboard will take public in a proposed acquisition. The hedge fund is casting a wide net, targeting technology, healthcare, consumer, industrials and hospitality and entertainment. That will align “with the background and experience” of its sponsors.

Travis’ presence with the SPAC, however, suggests that restaurants could be a target. Travis was an executive with Burger King and then Blockbuster before he became the CEO of Papa John’s until 2008, when he jumped to Dunkin’, where he served through 2018.

SVAC has four industry advisors, whose job is to help with evaluating and executing deals and working with the business after the merger. Other advisors include Anthony Sanfilippo, a longtime gaming company executive, along with tech company executive Gregory Waters and healthcare investor Erin Russell.

UBS Investment Bank, Stifel and Cowen are the joint book-running managers for the SVAC initial public offering.

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