Tim Hortons’ China unit to merge with US-listed blank cheque company, opening a new path for Chinese firms to list in New York

Tim Hortons’ China venture will merge with Silver Crest Acquisition, with plans for a Nasdaq listing, valuing the company at US$1.7 billion
Existing shareholders, including Tencent Holdings and Sequoia Capital, will own 80 per cent of the shares after the merger

Banking & finance

Chad Bray

Published: 2:00pm, 17 Aug 2021

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The operator of the Canadian doughnut-and-coffee chain Tim Hortons will list its China joint venture in New York via a merger with a special purpose acquisition company (SPAC), as the so-called blank cheque companies become the latest route to the capital markets following regulatory crackdowns and tighter rules by the United States and China.

Tim Hortons China, known simply as Tims in the mainland market, will merge with Silver Crest Acquisition, a so-called blank cheque company backed by the private equity firm Ascendent Capital Partners, for a listing that values the two-year-old venture at US$1.7 billion, according to a regulatory filing. The transaction is expected to complete in the fourth quarter.

Tims is operated as a venture between the private equity firm Cartesian Capital Group and Restaurant Brands International, which owns Tim Hortons as well as the franchises for Burger King and Popeyes. Sequoia Capital China and Tencent Holdings are also investors. The existing shareholders will own about 80 per cent of Tims after the merger with Silver Crest, according to the filings.

“[Tim Hortons China] is a unique opportunity to tap into the phenomenal growth that we’re seeing in the Chinese coffee market,” Ascendent’s chairman and chief executive Leon Meng said on a call with investors.

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The deal follows the sweeping measures to overhaul overseas listings announced last month by China, adding a new layer of cybersecurity oversight to the listing plan by any company with access to the data of more than 1 million Chinese consumers. Two weeks after the hurdles came down on technology companies, online education providers and after-hour tuition schools were banned from raising funds from the capital markets.

Amid China’s tighter scrutiny, the Securities and Exchanges Commission (SEC) chairman Gary Gensler also raised the barrier for Chinese companies seeking to raise capital in New York, citing risks and uncertainties about their operations. Chinese companies should “disclose more of the information we need to make informed investment decisions,” Gensler said in a Twitter post on Monday, asking SEC staff to “take a pause for now” in giving approval to listings by Chinese companies who use shell companies to go public on American bourses.

Tims is the latest overseas brand to follow Starbucks and KFC in seeking growth in China’s rapidly expanding urban middle class. The venture, which reported 206 million yuan (US$32.8 million) in revenue last year since commencing operations in 2019, is aiming to expand to 400 locations by the end of this year, with more than 2,700 outlets in five years.

Tims would transfer the control and possession of its China customers’ data to a new, locally owned company onshore before its Nasdaq listing. That company would be subject to the general audit and data security rules by Chinese regulators, and would not be part of or owned by the listed company, according to the filings.

“The creation and operation of NewCo addresses [the Cyberspace Administration of China’s] valid concerns under the new rules,” Tims said.

The deal marks a rare transaction between a Chinese company and a US-listed SPAC. These takeover vehicles do not have any existing business, but are created purely to raise financial war chests and buy assets within a specified period of time, usually 18 months to two years.

They have been seen as an easier path for some companies, particularly pre-profit emerging technology firms, to go public and are primarily listed in the United States.

They have been one of the hottest fundraising trends since early 2020, raising more than US$121 billion this year alone, according to SPAC Analytics, a research firm focused on the industry segment.

SPAC sponsors have increasingly targeted Asia for potential deals, but heightened oversight of overseas listings have some sponsors steering clear of China for deals, preferring instead to target Southeast Asia unicorns.

This article appeared in the South China Morning Post print edition as: Tim Hortons’ China unit eyes US listing

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