SPAC backed by Chinese brokerage CMB International becomes first to file for Hong Kong listing, under new regime for blank-cheque companies

A blank-cheque company formed by the asset management unit of Chinese brokerage CMB International has applied to list its shares
Acquila Acquisition Corp will look to buy companies in the new economy sector, and will sell to professional investors at HK$10 per share

Banking & finance

Georgina Lee

Published: 12:35pm, 18 Jan 2022

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A special purpose acquisition company (SPAC) sponsored by the asset management arm of Chinese brokerage CMB International has applied to float its shares in Hong Kong, becoming the first to test a new listing regime which became effective this month.

Acquila Acquisition Corp will offer shares at HK$10 each (US$1.28), it said in a heavily-redacted draft prospectus filed with the stock exchange on Monday.

Other terms such as the number of shares to be issued and the timetable of the offering were not visible. The minimum lot size on the day of listing will be at least HK$1 million.

Hong Kong is a latecomer to the SPAC frenzy, having only allowed them to list starting from this month.

Unlike other countries such as the US, UK, and Singapore, that allow retail investors to buy SPACs, it will only permit professional investors to buy and trade shares issued by the blank-cheque companies.

The city will only allow large SPACs that raise at least HK$1 billion (US$128 million) to list on its main board, the highest requirement among all exchanges.

Aquila Acquisition Corp is looking to raise funds to buy companies in the “new economy sector”.

“Our objective is to generate attractive returns for the shareholders by selecting a high-quality [acquisition] target,” it said in the prospectus. It warned that the past performance of the sponsor, CMB International Asset Management, cannot determine future returns.

Also known as blank-cheque companies, SPACS have been one of the hottest fundraising trends globally since the beginning of 2020.

They have no existing business but are vehicles created to raise financial war chests through a share sale to investors, using the proceeds to buy assets within a limited period of time.

Investors tend to rely on the ability of the SPAC’s sponsor to identify an acquisition target and negotiate the terms of the transaction that will provide a return.

In Hong Kong such an acquisition must be announced within 24 months of the SPAC’s listing date, and completed within 36 months, failing which the company must liquidate and return the funds to investors.

Aquila Acquisition Corp said the new business acquisition is subject to shareholders’ approval, and that CMB International Asset Management will abstain from voting on the deal, as required by the Hong Kong listing rules.

CMB International Asset Management is also subject to a 12-month lock-up period after the completion of the new business acquisition.

Along with the new shares it will also issue warrants that give investors the right to redeem one share of the company each, which they can exercise 30 days after the completion of the acquisition.

Morgan Stanley and CMB International are the joint global coordinators and bookrunners of the deal. CMB International Asset Management is wholly owned by CMB International, whose parent is China Merchants Bank.

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