Moelis SPAC Holders Advised by ISS to Vote Down Archer Deal
(Bloomberg) -- Investors in Ken Moelis’s Atlas Crest Investment Corp. should vote against a merger with a Archer Aviation Inc. and instead redeem their holdings in the blank-check company for cash, an influential shareholder adviser said in a report.
The proposed merger with Archer, a developer of vertical take-off and landing electric aircraft that is mired in a legal battle over trade secrets, poses risk without the prospect of material gains for Atlas investors, Institutional Shareholder Services Inc. said in its report. The combined company will be valued at about $1.7 billion, a reduction of $1 billion from its enterprise value when the deal was announced in February, ISS said.
“Shareholders appear to be better off if they choose to forgo the deal, face no operational risk, and select the relatively riskless redemption option that will deliver $10 in cash per share,” ISS said.
Atlas and Archer are still in discussions with ISS, a spokeswoman for Archer said. The company responded to concerns about reducing the number of shares, she said, referring to a revised proxy statement in which Atlas said it would cut Class A Common Stock shares from 1 billion to 700 million.
A representative for Moelis & Co. declined to comment.
The Atlas-Archer tie up isn’t the only SPAC to fail to win approval from ISS. It’s also come out against several similar deals including Reinvent Technology Partners’ merger with Joby Aero, as well as Qell Acquisition Corp.’s merger with Lililum GmbH, according to ISS documents reviewed by Bloomberg News.
The Reinvent deal ended up passing while the Qell one is still pending.
Representatives for Reinvent and Qell couldn’t immediately be reached for comment.
Moelis has capitalized on the past year’s wave of special purposed acquisition companies, creating three of the SPACs in a single day.
Atlas Crest Investment raised $575 million in an initial public offering in October, selling share units for $10 each. The units, which traded for as much as $20.91 after the Archer deal was announced, closed Tuesday at $10.44 in New York trading.
At the time it was agreed to, Archer’s merger with the SPAC in a $3.8 billion transaction was expected to generate about $1.1 billion in gross proceeds. With the deal, United Airlines Holdings Inc. planned to invest $20 million in Archer and possibly buy as many as 200 of the company’s small flying taxis to whisk customers to the airport in crowded cities.
Archer later became locked in a legal battle with Wisk Aero LLC, a flying-taxi venture backed by Boeing Co. and Google co-founder Larry Page’s Kitty Hawk Corp. Wisk accused Archer of trade-secret theft in a lawsuit filed in a California federal court in May.
In July, a judge denied Wisk’s request for a preliminary injunction against rival Archer. Then last month, a judge denied Archer’s request to toss out more than 50 of Wisk’s trade-secret claims as the case continues. A spokesperson for Archer has previously called Wisk’s suit “baseless.”
The revised deal announced in July includes a private investment in public equity, or PIPE, backed by United Airlines, Baron Capital Group, Mubadala Capital and Access Industries, among others.
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