Late Friday afternoon, we had a new IPO filing with BI Acquisition Corp. (BIACU), a $200 million metals, mining and natural resources focused SPAC being sponsored by Bedrock Industries.  BI will be led by Alan Kestenbaum, as Executive Chairman of the Board, and David Cheney, as CEO and Director.

By way of background on the team, Alan Kestenbaum, who is currently the Executive Chairman of Stelco (TSX:STLC), co-founded Bedrock Industries, LP, a privately-held metals, mining and natural resources company, which bought Stelco in 2016.  Fun fact: Mr. Kestenbaum also became a minority owner and limited partner of the Atlanta Falcons in 2019.

David Cheney (presumably, no relation to Dick), has been with Bedrock since its formation in 2015, serving most recently as its President. He has also been Stelco’s CEO since February 2019. Additionally, prior to joining Bedrock, Mr. Cheney was an investment banker at Wells Fargo Securities and was responsible for their metals and mining practice from 2012 to 2015.

So, why metals and mining?  It’s not a very common sector-focus for SPACs. In fact, the only other SPAC with a similar sector is AMCI Acquisition Corp. (AMCI).  Well, per the prospectus…

“We believe that the metals, mining and natural resources sector is an attractive sector in which to seek business combination opportunities. Specifically, many companies in the sector tend to be cash-generative businesses. The sector is fragmented and contains a large number of privately-held businesses that we believe could benefit from our capital and experience. In addition to such businesses, we believe many larger companies in the sector are in the process of evaluating their portfolios and reviewing candidates for potential divestitures, which we believe may also prove to be attractive initial business combination targets.” 

Seems reasonable enough. However, while this team has a ton of experience in their stated sector, they are a first time SPAC team and they are asking for very, very tier-1 level terms.  That is, 1/3 warrant, 24 months, and warrant call for shares at $10.00.  These terms are the “gold-standard” for an experienced, proven, top-notch team.  The Gores team has those terms as well as the Churchill team, both of which have proven, winning deals under their belt.  The Haymaker team, which has one of this year’s most successful combinations (OSW), does NOT have the warrant call for shares terms. Haymaker’s terms could be considered below BI’s.  In fact, both Churchill I and Haymaker I, debuted their first SPACs with only a 1/2 warrant, not 1/3 of a warrant.  However, the BI team is asking for terms on par with Gores, Churchill and Haymaker, without ever having completed a successful SPAC.  And, we’re in a tightening terms environment.

This is a very similar situation to the recently priced Experience Investment Corp. (EXPCU), which was also underwritten by Deutsche Bank. EXPCU got done, but it did not trade well since there wasn’t much demand for their terms.  BI should be a repeat scenario, but with additional pushback this time around since investors have seen this movie before.  However, it’s entirely possible that BI will be able to bring in enough investors outside of traditional SPAC investors in order to get this deal priced, but if the book needs to be rounded out with traditional SPAC investors, it’s going to be difficult to get them excited at these terms.  Having said that, Deutsche Bank. Does. Not. Change. Terms.

Look for this one to price mid-October.

Summary of terms below: