Hudson Executive Investment Corp. Files for $300M IPO


Hudson Executive Investment Corp. Files for $300M IPO

May 22, 2020 INTEL by Kristi Marvin

Hudson Executive Investment Corp. (HECCU), filed for a $300 million IPO last night, bringing the year-to-date potential tally of SPAC IPOs to 33, with 27 already priced. However, Hudson Executive Investment Corp. will be focusing on two seemingly disparate sectors – fintech and healthcare – but its sponsor, Hudson Executive Capital, has a successful history investing in both of those industries.  So naturally, they’ll be applying their expertise in both of those areas for their SPAC.

The team will be lead by Douglas L. Braunstein, as President and Chairman, and Douglas G. Bergeron, as Chief Executive Officer. Mr. Braunstein, who is the Founder and a Managing Partner of Hudson Executive Capital, was previously the CFO of JPMorgan Chase (2010 to 2012) and its Vice Chairman from 2013 to 2015. More importantly, Mr. Braunstein has some very big name transactions listed in his background, including Pfizer Inc. and Wyeth, LLC, and advising JP Morgan on the acquisitions of Bank One, Bear Stearns and Washington Mutual. Clearly he has some credible experience.

Mr. Bergeron, who previously founded DGB Investments, a diversified holding company of technology investments, also has some deal-making experience having led the acquisition of Verifone, in partnership with the private equity firm The Gores Group (SPAC Club strikes again!), from Hewlett Packard for $50 million and was named Verifone’s Chief Executive Officer.

As for structure, this SPAC is a 100% in trust, 24 months SPAC, but interestingly, with a 1/2 warrant included in its unit.  And even more interesting, if you look at the DRS filings, the first of which was filed on February 21st, this SPAC has always intended to have a 1/2 warrant.  If you recall, towards the end of February, SPACs were in the thick of 1/4 warrant deals getting filed and priced.  Normally, you would see a team of Hudson Executive’s caliber try for a 1/3 warrant.  But I suspect this is probably J.P. Morgan (one of the underwriters) protecting one of their own, since Mr. Braunstein is their former CFO and Vice Chairman.  Cantor did something similar when Howard Lutnick, Cantor’s Chairman and CEO, led his own SPAC, CF Finance, which also had generous terms.  Having to amend a SPAC’s terms ahead of pricing is not ideal, so it’s better to go out with something sell-able right from the get-go.

Additionally, a $50 million forward purchase of units, at $10.00, by the Sponsor has been included, which the Sponsor has said they will “commit” to.  This is a little different than some of the other forward purchases where the language is a little squishy and the forward purchaser is given an out if they don’t like the deal.  Hudson Executive’s FPA is committed, but they’ve also stated that if they have plenty of money in trust, post-redemptions, and they don’t need it, the forward purchase can be reduced.  However, it should be noted that “HEC Master’s commitment under the forward purchase agreement will be subject to approval, prior to our entering into a definitive agreement for our initial business combination, of its investment committee.”  So technically, there is still kind of an “out”, but for the most part, the legal language for this commitment is stronger than most forward purchases.  Lastly, HEC Master also has the option to assign $2.5 million of its commitment to members of the management team.

All told, this is another big SPAC and the terms are sellable, so it should be a relatively easy pricing. Look for this IPO to price the second week of June.

Summary of terms below:

Hudson Executive summary of terms 5-21-20