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Jul 12, 2023

China Steel Website Zhaogang Nears Hong Kong’s First SPAC Merger, Sources Say

(Bloomberg) -- Chinese steel trading website ZG Group has agreed a deal to go public in Hong Kong via a merger with a blank-check company backed by China Merchants Bank Co.’s overseas asset management

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The Shanghai-headquartered company, formerly known as Zhaogang.com, will combine with Hong Kong-listed Aquila Acquisition Corp. according to an exchange filing Thursday confirming a Bloomberg News report. The deal values ZG Group at about HK$10 billion ($1.3 billion).

The agreement comes with a private investment in public equity, or PIPE, with 10 investors including a subsidiary of commodities trading giant Trafigura Group, according to the filing. The proceeds from the PIPE will be HK$605 million.

Shares of Aquila Acquisition were unchanged at HK$8.93 on Thursday, while about HK$18 million worth of stock has changed hands.

A successful merger would see the first so-called de-SPAC by a Hong Kong-listed blank-check company, since the city’s stock exchange announced SPAC rules in 2021 in a bid to chase the $245 billion US fad that flared and fizzled in less than two years.

Read More: The SPAC Fad Is Ending in a Pile of Bankruptcies and Fire Sales

Aquila, the Asian financial hub’s first SPAC, raised about HK$1 billion ($128 million) in an initial public offering in March 2022. The blank-check company planned to search for a target in Asia, with a focus on China, within “new economy” sectors, according to its prospectus. The SPAC’s shares debuted at HK$10 each and closed at HK$8.93 per share on Wednesday.

Aquila shareholders will vote on the merger at an extraordinary general meeting expected to be held in or around early December, the filing shows. Following the de-SPAC merger, the company will adopt a dual-class structure, giving Class A shareholders one vote and Class B shareholders 10 votes.

If all Aquila Class A shareholders choose to keep their shares, Wang Dong and Wang Changhui, founder and co-founder of ZG Group respectively, would collectively have about 65.7% of the voting rights. In that scenario, Aquila shareholders would have around 3.6% of the voting power, the filing shows.

Founded in 2012, Zhaogang has more than 1,200 employees, according to its website. The company filed for a Hong Kong IPO in 2018 and had intended to use a dual-class share structure before dropping the plan.

China Merchants Bank International, HSBC Holdings Plc and UBS Group AG are joint sponsors of the deemed new listing. Moelis & Co. and UBS are financial advisers to ZG Group.

--With assistance from Manuel Baigorri.

(Updates with Aquila Acquisition share moves in fourth paragraph.)

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China Steel Website Zhaogang Nears Hong Kong’s First SPAC Merger, Sources Say