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Warburg and Barry Sternlich partner on jumbo, 3-way SPAC deal

(Bloomberg) — Buyout firm Warburg Pincus and property billionaire Barry Sternlich are partnering in a rare, three-way, blank-check deal worth nearly $20 billion to take a security services firm public. In another unusual twist, Warburg Pincus already owns Target.

According to people familiar with the matter, three special-purpose acquisition companies — two backed by Warburg Pincus and one backed by Sternlich — are in talks to merge with Allied Universal. Allied Universal is owned by Warburg Pincus, and the transaction will be the first SPAC deal involving more than one investment vehicle.

The deal shows how SPAC’s dealers are getting increasingly creative as merger vehicles begin to fall out of favor after a boom in popularity over the past two years. Many SPAC deals have fallen in recent months, while other companies that went public through blank-check deals have declined in value.

A representative for Warburg Pincus declined to comment. A representative for Sternlich did not immediately respond to a request for comment.

Sternlicht’s family office, a SPAC affiliate of Warburg Pincus Capital Corp IA, Warburg Pincus Capital Corp IB and JAWS Estates Capital LLC, is discussing raising a so-called private investment in public equity, or PIPE, to support the transaction with Allied Universal. are. people said. A deal, which has been negotiated for months, hasn’t been finalized, and terms can change or negotiations break down. People asked not to be identified as the discussion is not public.

The deal will pave the way for Warburg Pincus’ investment in Allied Universal, which describes itself as the largest security force in North America. In 2015, Warburg Pincus agreed to take a majority stake in Universal Services of America, and later merged it with Alliedbarton Security Services.

The pandemic had minimal impact on Allied Universal, Fitch Ratings Inc. said in a report in November. Allied Universal, which on Monday said it forged a strategic partnership with Knightscope Inc., said it has annual revenue of about $20 billion and has more than 800,000 employees worldwide.

Warburg Pincus, one of Wall Street’s oldest and most successful buyout firms, was a bit of a latecomer to SPAC. Last year, it launched two vehicles, its first SPAC, TPG Inc., Apollo Global Management Inc. And introduced other peers including Thoma Bravo in the market. Warburg Pincus said in a filing with the US Securities and Exchange Commission that SPACs may merge with an affiliate of the buyout firm pending a fairness opinion from an independent entity.

Sternlich, chief executive officer of investment firm Starwood Capital Group, has more experience in SPAC, sponsoring blank-check firms that merged with companies such as metal-printing specialist Velo3D Inc. and Canoe Health Inc., a medical provider. Huh.

– With the aid of Nail Porter.

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