Indian Economy News

Byju's aims for SPAC merger agreement within a month

According to people familiar with the situation, India's most valuable startup, online education provider Byju's, is in talks with at least three special-purpose acquisition companies and expects to announce plans to go public via a merger with one of them in three to four weeks.

Michael Klein's Churchill Capital and Michael Dell's MSD Acquisition Corp. are among the SPACs, as reported by Bloomberg News. According to the people, who asked not to be identified because the conversations are private, another contender is Harry Sloan, a long-time Hollywood executive who has subsequently become a prolific SPAC investor. According to the people, a fourth firm, Altimeter Capital Management, is undertaking due diligence ahead of any prospective bid.

According to the people, Byju's, which was last valued at $21 billion, is considering a SPAC merger rather than a standard IPO because it sees value in having U.S. investors and strategic partners. It is currently illegal for unlisted Indian companies to go public on foreign stock exchanges.

Byju's is also looking into raising a pre-IPO investment round of $750 million to $1 billion. According to the sources, Goldman Sachs Group Inc. is advising the startup on funding and SPAC conversations, while Morgan Stanley is assisting in the evaluation of SPAC options.

Goldman Sachs and Byju's both declined to comment. Morgan Stanley and Sloan's Screaming Eagle Acquisition Corp. did not respond to requests for comment through email.

India's government is a wild card. Narendra Modi's government will announce its budget in New Delhi on Tuesday morning, and local media claimed that some businesses have advocated for a loosening of laws that prevent domestic firms like Byju's from listing on overseas markets directly. If the restrictions are modified, Byju's will re-evaluate its SPAC merger plans and pursue an initial public offering, maybe with a dual listing in the United States and India.

Byju's is still planning to list in mid-2022 if the SPAC purchase goes through as planned. However, several circumstances, including severe falls in IT stocks in India and the United States, could influence the timing. If the market volatility worsens, it is probable that Byju's intentions to go public would be postponed or perhaps abandoned.

According to Bloomberg News, Byju's plans to fund $4 billion and seek a valuation of $48 billion under preliminary parameters outlined in December. While SPAC suitors have continued to negotiate similar parameters, market volatility has made any exact goal much more unpredictable.

One of the persons said Klein and the Churchill Capital team presented their offer to Byju's board of directors this month and met with Byju's negotiators in Dubai. Laurene Powell Jobs, the late Apple Inc. co-founder Steve Jobs's widow, was a virtual participant in the discussion and may support Klein's quest, according to the source. She has a long history of involvement in education, having started an after-school programme to help impoverished high school students prepare for college 25 years ago.

Klein has volunteered to invest $500 million in the SPAC's PIPE, or private investment in public equity, alongside investments from Y Combinator's Sam Altman and Khan Academy's Sal Khan. If Byju's teams up with Churchill, there have also been discussions about creating distribution agreements in the United States with Apple and Microsoft Corp.

SPACs that compete with each other have been aggressive. MSD is offering a valuation of $45 billion to $52 billion, with a 36-month lock-in on promoter shares. During last week's talks, the Sloan team stated that they would equal or exceed other offers.

SPACs are shell companies set up by their sponsors to look for and purchase firms in order to consolidate them and bring them public. They have recently come under pressure from US regulators, which has slowed the pace of fundraising.

Byju's envisions a publicly traded stock in the United States as a key currency for speeding up its acquisition plan. As a result of the Covid-19 restrictions, the company sees an opportunity in the industry as demand for online education rises, but China-based competitors face government restrictions.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.