Right after Singapore Exchange (SGX) announced the new framework for special purpose acquisition company (spac) listings last September, co-founder and managing partner of Singapore based private equity firm Novo Tellus Capital Partners Loke Wai San was among the first to express interest.
Novo Tellus Alpha Acquisition (NTAA), the spac sponsored by Novo Tellus, lodged its preliminary prospectus on Jan 20. The goal for the latter: To raise $150 million, based on the offer price of $5 and the post-initial public offer (IPO) share capital of 30 million shares.
This comes on the back of Vertex Technologies Acquisition Corp (VTAC) and Pegasus Asia filing their prospectus on Jan 13.
On Jan 19, VTAC announced that its IPO of 600,000 units was 36 times subscribed. Together with the gross proceeds from the issuance of the cornerstone units and sponsor IPO investment units, VTAC raised total gross proceedsof $200 million, representing 40 million units. Shares in VTAC started trading on Jan 20. Pegasus Asia had yet to announce the outcome of its IPO at press time.
Spacs are blank-cheque companies formed by a group of investors — called sponsors — that raise cash through an IPO and then acquire an existing company. Speaking to The Edge Singapore as the executive chairman and CEO of NTAA, Loke says that even though they were not the first to launch, they can do better than the competition — given that their team has about a decade’s worth of experience investing in SGX-listed companies.
“Our investors are investing into our ethos and track record,” he says. “Although track record is no indication of future performance, but we have been doing good so far and I think a lot of what we do comes down to doing the right thing, rather than doing things right.” Loke is also chairman of Mainboard-listed semiconductor test and handling provider AEM Holdings.
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NTAA is pricing each unit at $5. A total of 10 million units are available for subscription, with 9.5 million units in the placement tranche and the remaining 0.5 million units for retail investors. In addition, a group of cornerstone investors are putting in $80 million to take up 16 million units. Novo Tellus — as the sponsor — is investing in four million units, or $20 million.
‘The formula’
Having the mindset of investing into the company by building the people is important, says Loke. This is the “formula” that has worked so far for Novo Tellus, which turned AEM Holdings from a floundering semiconductor test and handling provider in 2011 to a thriving company which then attracted Temasek Holdings to become its largest shareholder. Other SGX companies with Novo Tellus’s investment include engineering company ISDN Holdings and manufacturing solutions and services provider Grand Venture Technology — all of which have seen significant growth in their share prices over the last couple of years.
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Despite their experience in the electronics manufacturing and semiconductor industry, Loke hopes the spac listing will dive into something more than just a technology hardware company as an acquisition target.
NTAA will be looking for targets within the technology industrials sector in the Indo Pacific region, with a focus on investment themes built around “critical technology” and “macro growth shifts with multi-year tailwinds” such as next-generation semiconductors, cloud and edge computing, AI, medical life sciences and supply chain resilience for advanced engineering.
“We want to start a base and build for it to last. So hopefully, the company would still grow even after we exit. At our starting point [with this spac], we want to build a more holistic company,” adds Loke.
Staying nimble
The world of hardware and software are coming together, and just being solely a hardware manufacturer will become increasingly difficult. Loke says: “It’s going to be very hard to compete if you don’t have some level of software capabilities, be it a business-to-business (B2B) software or analytical software.”
He also points to the companies in Novo Tellus’s portfolio, adding that the fund is nudging those firms to explore areas from advanced materials to software solutions. As such, NTAA can then acquire either a software or hardware company and help to build either capabilities before the de-spac.
However, he is also not discounting acquiring both a hardware and software company, and then merging them together.
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Also of importance is how these target companies score on environmental, social and governance (ESG) matters. “ESG matters and we are big proponents of that. We think Southeast Asia has a lot to offer in that resiliency equation,” says Loke, who adds that Novo Tellus has always been investing in companies that meaningfully contributes to the ESG compliance supply chain globally.
“I think that is the kind of profile that we will be looking at [in the industrial and tech space], responsible companies and quality management teams that have the ambition to work with us on a global basis. They have to think about growth organically and inorganically, like we have with most of our companies and partnering with us for the long haul,” adds Loke, while sharing that the spac is zooming in on the Southeast Asia, Australia and New Zealand regions to find its acquisition target.
‘Different management style’
Setting itself apart from its local spac peers, Loke explains that NTAA will operate on a “different management style”. All three spacs may be looking for an acquisition target in the same tech space, but apart from having its experience with SGX-listed companies, NTAA intends to be more focused on the long-term growth and sustainability of the business, rather than just the next earnings report and other common metrics.
He also says it is common for companies to miss targets for a quarter or two, but what matters is the willingness to generate focus and innovation, which he believes goes hand-in-hand with entrepreneurship. “You need to have an entrepreneurial management team that is willing and as a board, you must be able to accept a loss for some small investments. But that is the way an innovative company works. It is not by setting quarterly KPIs and crazily measuring them,” he explains, adding that he does not see a point in a company “suffering” to meet stringent KPIs. Loke is confident in creating a culture for an innovative company to thrive in. “As board members, we believe that you can take three steps forward, one step back and that is okay. You are still moving forward, versus one step forward and two steps back. So, that is really how we want to partner with our companies.”
“Sometimes being the CEO is a lonely place. And I can tell you, when you make a couple of pivots, you don’t have a crystal ball. But you want a partner to say you are on the right track, because of these reasons. I think that that’s what we’re doing [for our partners].”
NTAA has seen a positive response from initial investors, as it has already secured 13 cornerstone investors, including Malaysia-based fund managers Affin Hwang Asset Management and Fortress Capital Asset Management. Local investment managers on board include KSC (S), Maxi-Harvest Group, Target Asset Management and Heritas Capital Management. Meanwhile, Alan Wang of Asdew Acquisitions, Gerald Oh of Intuitive Capital and Yuanta Securities Asia Financial Services chairman Ronald Ooi have been roped in as cornerstone investors. Credit Suisse and DBS are the joint issue managers, joint book runners and joint underwriters while CGS-CIMB is the co-manager.
Photo of Loke Wai San: Albert Chua/The Edge Singapore
