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We have written periodically about this previously very hot segment, and our readers can use the SEARCH function on our Home Page to review our commentary. Suffice to say that great care should be employed while investing within this segment, not only when acquisitions have already been consummated but while the transaction is pending and even at the original IPO. At this point, the bloom is definitely coming off the SPAC rose.  The SPAC index, after rising from just over 500 in early November ’20 to almost 950 by mid-February ’21, has declined to 720 as this has written.

Fortunately, there has not been too much money lost (yet) for investors in the restaurant related SPAC space. There are eight SPAC transactions that have been in play over the last two years, only one of which (OPES/BurgerFi) has consummated a transaction. This means that shareholders who invested in the IPOs still have the opportunity to get their funds back if they don’t like the suggested transaction, and that could yet happen. Should that be the case, the Sponsors would lose their organizational investment, anywhere from a few hundred thousand to a few million dollars, but at least the public will not have been burned.

Of the seven SPACs that have not yet consummated a business combination, one (FST) has proposed an acquisition. Four sponsorship groups have raised their funds and are screening potential acquisitions, and two are trying to complete their IPOS. The following is a brief summary of each current situation, with an equally concise description of the Sponsors and management teams. This discussion is not designed to be exhaustive but rather to remind us who is involved in each situation. I say to the principals of the SPACs described below: please forgive me if I have not, in my attempt to be concise,  completely described your professional credentials. Each of you has accomplished far more than I have, too briefly, referenced below.

It is interesting that two of the six restaurant related SPACs that have been funded, and one of the two yet to be funded, have been spawned by entrepreneurs affiliated with &vest, a brand building group which, among other things, created Washington, DC based &Pizza. Doug Jacob, Steve Salis, Sandy Beall, Michael Lastoria,, seem to have a good instinct for knowing how a great deal of money can be made.

😊 That said, I suspect that all of the Sponsors, as described below, will find that it takes a lot longer to cash out than they might have hoped. It’s one thing to ride the wave. It’s another to get to the beach, put  your feet up and enjoy a beer.

The One Consummated Transaction

BurgerFi (BFI) is the only publicly held restaurant company that has been spawned by a SPAC, OPES Acquisition Corp., when $115M was raised in March ’18 by a Sponsorship group out of Canada. After an acquisition search over two years, the Canadian group passed part of their sponsorship stake and the remaining process to a new Sponsorship group led by Florida based real estate entrepreneur, Ophir Sternberg. By that time, in the course of several time extensions, over half of the originally raised funds had been redeemed. More funds were raised, and the BurgerFi transaction was completed in December, 2020. We have described BFI on this website before, including operational details so far reported by the new Company. Our reports can be accessed with the SEARCH function on this website. BFI has traded above $16/share several times since the closing in December, but is now trading between $10-$11/share. Since there has been little news of note, other than management additions and first quarter, ’21 results, still inhibited in the waning days of Covid-19, we attribute the lackluster price action largely to reduced interest in SPACs in general.

The One Proposed Business Combination that is Pending

FAST Acquisition Corp (FST) raised $200M in August, 2020, with the sale of units consisting of one share and one-half a warrant . The Co-Chief Executive Officers were originally Sandy Beall (of Ruby Tuesday fame) and Doug Jacob (a brand builder and co-founder of &Pizza). Kevin Reddy, a restaurant veteran whose career has included executive positions at McDonald’s & Noodles, among many others, was Chairman.  The transaction proposed, with a preliminary proxy in process with the SEC, is the acquisition of Tilman Fertitta’s hospitality (restaurants, hotels & gaming) empire. This is a very large transaction ($6B of revenues) relative to the original ($200M) IPO, so $1.25B was raised privately (PIPE) to reduce Fertitta’s existing debt. The original Sponsor, Doug Jacob, along with his proposed executive team, have stepped aside in favor of Fertitta’s group. Fertitta will own 59% of the surviving Company, the PIPE shareholders will own 34.6%, the IPO shareholders 5.6% and Doug Jacob a little less than 1%. Jacob has obviously decided that he would rather own a very small sliver of a much bigger situation, handing over the corporate keys to an experienced entrepreneur, rather than having to manage the process himself. The good news is that the restaurant and hospitality industry is opening up as the pandemic runs its course, and the rebound in Las Vegas is especially apparent. Based on Fertitta’s empire returning to 2019 revenue levels, the case is made that profit margins will be improved as a result of efficiencies implemented during the Covid-19 pandemic. FST, post the merger, looks to have substantial upside if EBITDA and profits are generated as suggested. Since the deal was rumored in mid-January, FST has traded from about $10.25 to $12-13/share where it has fluctuated the last couple of months as presentations are made and papers are filed. Though the proxy material is no doubt complex, and the closing could yet take a few months, with FST trading at better than a 20% premium to the IPO price, it appears that shareholders will bless the deal. Considering Fertitta’s deal driven agenda, as demonstrated over thirty years in the public eye, FST will be an interesting situation to follow.

Four SPACs with Funds Raised

Tastemaker Acquisition Corp. (TMKRU) raised $276M on 1/8/21 with the sale of units consisting of one share and one-half a warrant. Tastemaker Sponsor LLC is owned by Pace, Phorzheimer and Golkin, further described as follows. The management team is led by Co-CEOs, Dave Pace and Andy Phorzheimer. Greg Golkin is President and Chris Bradley is CFO. Pace has been Board Chairman of Red Robin (RRGB), CEO of Jamba, Inc.(JMBA) as well as with Bloomin’ Brands (BLMN), Starbucks (SBUX), Yum Brands (YUM) and Pepsico  (PEP). Phorzheimer was co-founder of Barteca Holdings (operator of Bartaco Barcelona Wine Bar), which was sold to Del Frisco’s For $325M in June, 2018. He is currently an independent Board member at brands owned by L. Catterton, Brentwood Associates and Rosser Capital. Golkin has been Managing Partner at Kitchen Fund, an investor in growth restaurant brands, and an investor for many years in a variety of industries. Bradley has been a Managing Director at Mistral Equity Partners since 2008, previously an investment banker at Banc of America Securities. He is also CFO of Haymaker II (HYAC), a SPAC intending to acquire ARKO Holdings, Ltd., a convenience store operator, and previously served as CFO of Haymaker I, which combined with OneSpaWorld Holdings (OSW) in March, 2019. Hal Rosser, Founder and Managing Partner of Rosser Capital Partners, will serve as non-executive Chairman. There are highly qualified Directors, including Rick Federico, Starlette Johnson, and Andy Heyer. There has been no proposed business combination yet. The units trade at $10.00, the same as the issue price.

Bite Acquisition Corp (BITE) raised $200M on 2/12/21 with the sale of units consisting of one share of common stock and one-half a warrant. Bite’s Sponsor is Smart Dine, LLC, which is owned by various executives and directors of BITE, including Gomez, A.A. Gonzalez, Warschawski and J.M. Bernal, described further below. Rafael Felipe de Jesus Aguirre Gomez is Chairman, with over 35 years in food and beverage operations as Chairman of Mexican based Mesa Corporation. Alberto Ardura Gonzalez, CEO, has more than 35 years of experience in finance, with Merrill Lynch Mexico, Deutsche Bank in NYC as head of Latin America Capital Markets and Nomura Securities. CFO of BITE, Axel Warschawski has been in finance and private equity for over 15 years, as a VP for Mesa since 2013. Director nominees include Julia Stewart, Randall Hiatt, Joseph Essa and Juan M. Gonzalez Bernal, all with impressive credentials. No business combination has yet been proposed. BITEU currently trades at $9.88 per unit

USHG Acquisition Corp. (HUGS/U) raised $287M on 2/24/21 with the sale of units consisting of one share and one-third of a warrant.    HUGS’ Sponsor is USHG Investments, LLC,  an affiliate of Union Square Hospitality Group, LLC, which was founded and is still led by the legendary Danny Meyer. Within HUGS, certain of the directors, officers, and their affiliates own a portion of the Sponsor. The management team is led by Chairman, Danny Meyer. The CEO is Adam Sokoloff, who since 2019 has been the Managing Partner of merchant banking firm, Asgard Capital Partners. Prior to that, he spent several decades in investment banking activities, with firms including Bear Stearns, Drexel Burnham, Kidder Peabody and Leonard Green. Tiffany Daniel, CFO at HUGS, was a VP at Cole Haan, before that a VP at Tapestry, before that with other fashion brands as well as with private equity firm, Bruckmann, Rosser, Sherrill & CO. Directors include J. Kristopher Galashan, Lisa Skeete Tatum, Mark Leavitt, Walter Robb, Randy Garutti, Heidi Messer, and Robert K. Steele, all highly credentialed. No business combination has yet been proposed. HUGS/U currently trades at $10.09 per unit.

FAST Acquisition Corp. II (FZT/U) raised $230M on 3/15/21. Doug Jacob had so much fun taking FAST I public, he followed it up with another, in fact a couple of others. While Jacob is the founder of FAST II, Garrett Schreiber is the Sponsor and CFO of FAST II. We note that Mr. Schreiber, at the ripe old age of thirty, was CFO of FST (above), is also CFO of Velocity Acquisition Corp (referred to below), joined RBC Capital Markets as an investment banking analyst in 2014 (obviously at the age of about 23), so is obviously very talented.  Jacob and Schreiber are joined once again by Sandy Beall (as CEO), Eugene Remm (as Chief Brand Officer), Michael Lastoria (CEO of &Pizza) and Steve Kassin, all principals of &vest, which is referred to as a “hybrid investment fund sponsor/creative agency”. Separately, we note that this group has a third SPAC, selling $230M in February, 2021 in technology oriented Velocity Acquisition Corp. In addition, Kevin Reddy follows his involvement at FAST by being Chairman of the Board for FAST II. There are quite a few other individuals brought in by Jacob, all proven Brand builders in their previous affiliations. The acquisition search is aimed at hospitality in general (i.e. restaurants, hotels, entertainment, consumer brands) and associated technology, differentiated products and/or services with high revenue growth and at least $40 million of EBITDA. Again, the above description of the people and the strategy is just scratching the surface. We will all learn more over time. The IPO units (FZT/U) is trading at $9.98.

Two SPACS Not Yet Funded

Sizzle Acquisition Corp (SZZLU) – Filed on March 11, 2021 a registration statement to raise $143M, by way of the sale of units, consisting of one share of common stock and one-half a warrant. The Sponsor is VO Sponsor, LLC, owned by Steve Salis and Jamie Karson, described further below. Chairman and CEO is Steve Salis, with extensive experience in restaurants and hospitality in Washington, DC. Among other things, Salis was co-founder of &pizza in July 2011 and was CEO from 7/11 to 3/15. Jamie Karson is Non-Executive Vice Chairman and has worked closely with Salis in recent years. From ’01 to ’08 he was CEO and Chairman of the Board of Steve Madden, prior to that CEO and COO of Think Pink, which operated 5 Pinkberry restaurants in Connecticut. Grace Park, CFO, joined Salis Holdings in July 2020, having been Corporate Controller at Five Guys from 2016 to 2020. Prior to that she was with KPMG and Nestle.  Once SZZLU is funded, Daniel Lee will become Head of Business and Corporate Development. Mr. Lee has worked with Steve Salis, since 2018, before that in business planning and finance at a variety of firms. Also following the SZZLU funding, Karen Kelley, Warren Thompson, and David Perlin will become directors, all with high quality credentials. In addition: Carolyn Trabuco, Geovannie Concepcion, and Rick Camac will serve as strategic advisors. We have no knowledge of the currently anticipated funding date.

Do It Again Corp (DOITU) – Filed on March 2, 2021 a registration statement to raise $143M, by way of the sale of units, consisting of one share of common tock and one-third of a warrant. The Sponsor is Do It Again Sponsor LLC, of which Clifford Hudson is currently the sole owner. CEO and Chairman is Hudson, with Kathy Taylor as President and Scott McKinney as CFO. Cliff Hudson spent 35 years building Sonic Corp., selling SONC to Inspire Brands for $2.3B in December, 2018. Kathy Taylor was EVP and General Counsel at Thrifty Car Rental, leading to its sale to Chrysler Corporation. At that point, she and others purchased National Car Rental from General Motors, which was sold to Auto Nation. She has been involved in ownership and operation of a variety of other successful business, and is the former mayor of Tulsa, Oklahoma. Scott McKinney began his career as an investment banking analyst at AG Edwards & Sons and has completed over $20B of transactions in the retail space, working within firms including Barclays Capital and Lehman Brothers. Director Nominees include Sid Feltenstein, a very highly regarded veteran of restaurant operations and franchising, Kate Lavelle, also with extensive restaurant experience, and Scott McLain, with over 25 years of restaurant experience, including his stint as CFO at Sonic Corp.

CONCLUSION: Provided at the beginning of this article

Roger Lipton