Ken Moelis Follows Jetsons Dream in United-Backed SPAC Deal

(Bloomberg) -- United Airlines Holdings Inc. is teaming up with investment banker Ken Moelis in a blank-check deal that will take flying taxi company Archer public this year.

United said it would invest $20 million in Archer and may eventually buy as many as 200 of the company’s small flying taxis to whisk customers to the airport in crowded cities.

Archer agreed to merge with a special purpose acquisition company backed by Moelis in a $3.8 billion transaction that’s expected to generate about $1.1 billion in gross proceeds.

If finalized, the aircraft purchase would be valued at $1 billion, Archer, the developer of the vehicles, said in a statement Wednesday. In addition, United is taking options for another $500 million of the taxis, which would take off and land vertically and be able to fly as far as 60 miles (96 kilometers). Archer plans to start production in 2023, with consumer flights in 2024.

For United, the deal represents a potential step toward more environmentally sustainable flight. For Archer, it’s a seal of approval from one of the world’s biggest airlines.

Shares in the special purpose acquisition company, Atlas Crest Investment Corp., soared 22% to $13.78 and United climbed 1% to $43.71 at 10:42 a.m. in New York.

Ken Moelis, chairman of the blank-check company Atlas Crest and chief executive officer of Moelis & Co., said in an interview that he expects SPACs to become the preferred way to go public.

“We think that’s the future of the market,” Moelis said in an interview. “We’re not trying to buy a company. We are a vehicle to escort you to an IPO very fast.”

SPACs raised over $40 billion this year in the U.S., close to half of last year’s record volume.

“Before any of you were born, there was a show called the Jetsons,” Moelis said. “The minute I met a company that could make electric vehicle takeoff and landing real, it seemed to me we had a big view into the future.”

‘Emerging Technologies’

The carrier will contribute expertise in airspace management as Palo Alto, California-based Archer develops its battery-powered aircraft, which would fly as fast as 150 miles per hour.

The goal of the emerging electric air-taxi industry is to be able to ferry small groups of passengers far above automobile traffic in congested cities such as Beijing, Sao Paulo and Los Angeles, while slashing carbon emissions.

Archer’s taxi could reduce carbon dioxide emissions by 47% per passenger on a trip between Hollywood and Los Angeles International Airport, United said.

“Part of how United will combat global warming is embracing emerging technologies that decarbonize air travel,” Chief Executive Officer Scott Kirby said in the statement. “With the right technology, we can curb the impact aircraft have on the planet, but we have to identify the next generation of companies who will make this a reality early and find ways to help them get off the ground.”

SPAC Investors

One of the airline’s regional partners, Mesa Air Group Inc., will invest another $5 million in Archer, a United spokeswoman said.

The proceeds from Archer’s SPAC deal include about $500 million in cash held in trust and a $600 million private investment in public equity. In addition to United and Moelis, participants in the PIPE offering include Putnam Investments, Mubadala Capital and Stellantis NV.

Last month, Archer announced a collaboration with Fiat Chrysler before the automaker merged with Peugeot maker PSA Group to form Stellantis. The automobile giant will offer its production expertise to help Archer lower its assembly costs.

After the deal closes, the combined company is expected to trade on the New York Stock Exchange under the symbol ACHR.

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