Billionaire financier and mine builder Robert Friedland is aiming to raise as much as US$230-million to acquire a green energy company as he doubles down on efforts to make money from the global transition away from fossil fuels to a low emissions future.
Last week, Ivanhoe Capital Acquisition Corp. filed paperwork to raise money for a special purpose acquisition company (SPAC) that will trade on the New York Stock Exchange. The blank-cheque shell company will have 24 months to find an asset to acquire. If it is unable to do a deal, the proceeds raised must be given back to shareholders. Mr. Friedland will serve as the company’s chairman and chief executive officer.
The past few years has seen a surge in the number of blank-cheque companies coming to market in the United States. Last year, there were US$83-billion worth of SPAC offerings in the U.S. – more than six times higher than the year before.
“We intend to seek a target in industries related to the paradigm shift away from fossil fuels towards the electrification of industry and society,” Ivanhoe Capital said in the filing.
“Our targets may include any company in the supply chain from mine site to the end user of electrification products and services, including in the transportation, e-mobility, electric propulsion, battery technology and storage sectors.”
Globally, there is a huge push to reduce emissions as countries aim to meet stricter emissions standards. Under the 2015 Paris accord, signatories, which include Canada, have vowed to keep the global temperature rise to 1.5 C from preindustrial levels and meet emissions reduction targets by 2030.
As part of the paradigm shift, alternative energy companies are seeing a big influx of capital, with investors embracing a wide range of minerals used in green energy, including lithium for lithium ion batteries, palladium for emission-reducing catalytic converters and traditional metals such as copper and nickel, which are used in electric cars.
While historically known as a financier of base metal mines, Mr. Friedland has increased his exposure to companies that help mitigate environmental damage. Since 2016, Mr. Friedland has served as co-chairman of Australian company Clean TeQ Holdings Ltd., which purifies and recycles waste water from mining.
Ivanhoe Capital Acquisition will face competition from private equity companies and other large corporate buyers looking to make acquisitions.
Alan Lever, managing partner with Toronto-based AnnexPark Capital, has come up against SPACs as competition for assets on several occasions. He says SPACs are often hobbled in such situations because they can’t move as nimbly as a strategic buyer or a private equity company when competition for an asset is fierce, as they need to get approval from their shareholders before a deal can pass.
“It’s pretty easy to compete against SPACs in an auction because we have committed capital and they don’t,” he said.
“If I’m an M&A banker and I’m trying to evaluate the certainty of close of a transaction, clearly the guys that have to go back to another entity to get approval [are at a disadvantage].”
U.S. SPACs have generally fared better than those set up in Canada, added Mr. Lever, because they tend to assemble management teams that have expertise in one specific area, as opposed to a hodgepodge of generalists.
Several Canadian SPACs have disappointed over the years. One of the most notable flameouts was Acasta Enterprises Inc., which was put together by former Onex Corp. partner Anthony Melman. Despite raising more than $400-million and having star founders on board, including former Royal Bank of Canada CEO Gord Nixon, Acasta overpaid for acquisitions, took on too much debt and was ultimately forced to sell key assets at a deep discount.
Mr. Friedland is currently executive co-chairman of Ivanhoe Mines Ltd., which is building a large copper mine in the Democratic Republic of Congo. He is perhaps best known for discovering and developing the massive Voisey’s Bay nickel deposit in Labrador in the 1990s, then selling it to Sudbury’s Inco Ltd. for $4.3-billion in 1996.
In the 2000s, he was part of a team that discovered the Oyu Tolgoi copper deposit in Mongolia, which global mining firm Rio Tinto subsequently developed. The mine now operates under the name Turquoise Hill Resources Ltd., but it has not gone smoothly, with Oyu Tolgoi incurring multibillion dollar cost overruns.
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