Social Capital Hedosophia to Combine with Branson’s Virgin Galactic
Social Capital Hedosophia Holdings Corp. (IPOA) just radioed Major Tom this morning to tell him he “really made the grade”. If you haven’t heard yet, IPOA announced this morning that they have signed a definitive agreement with Richard Branson’s Virgin Galactic (“VG”), to combine and create the first publicly traded company dedicated to human spaceflight.
In connection with the transaction, IPOA intends to make an $800 million commitment with the combined company having an enterprise value of $1.5 billion. Additionally, Social Capital Hedosophia Founder and CEO, Chamath Palihapitiya, will invest an additional $100 million in the transaction at $10.00 per share and will become Chairman of the combined entity.
The selling equity owners of Virgin Galactic will receive $1.3 billion in total consideration, inclusive of $1.0 billion of common stock of the combined company valued at $10.00 per share and up to $300 million in cash consideration. Assuming no redemptions by the public shareholders of IPOA, current Virgin Galactic shareholders and current holders of IPOA will hold approximately 51% and 49% of the combined company, respectively, at closing.
Pro forma enterprise value of the merger is $1.5 billion and represents:
- 1.5x invested capital ($1 billion+ of capital invested to date)
- 2.5x estimated revenue for 2023
- 5.5x estimated EBITDA for 2023
Virgin Galactic already has customer reservations from more than 600 people in 60 countries representing approximately $80 million in total collected deposits and $120 million of potential revenue. Additionally, Virgin Galactic has already been granted its FAA commercial space launch license, and the New Mexico Spaceport has also received its Spaceport license.
Whether you love or hate this transaction, the combined hype beasts of Chamath Palihapitiya and Richard Branson, should generate significant interest in this deal. As a result, the share price should “take a moon shot” today. Interestingly, the advisor to Virgin Galactic was none other than M Klein, the firm of Michael Klein, of Churchill I & II, which clearly has some SPAC experience under the belt. As of yet, there are no details on a forthcoming conference call or any filed documents, but we’ll update as additional information becomes available.
- Credit Suisse acted as capital markets advisor
- Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Social Capital Hedosophia.
- M Klein and Company served as financial advisor to Virgin Galactic and Virgin Group for the merger with Social Capital Hedosophia.
- LionTree Advisors and Perella Weinberg Partners served as financial advisors to the company regarding its capital raising alternatives.
- Latham & Watkins LLP acted as Virgin Galactic and Virgin Group’s legal advisor.