Top 3 SPAC Targets – Beyond the Infrastructure Bill


Top 3 SPAC Targets – Beyond the Infrastructure Bill

SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among companies poised to take big leaps while the Biden infrastructure deal is paying out on upgrading the US. We look at why they are compelling and why each could be a fit for a blank-check merger.

After months of hooting and hollering, the Biden infrastructure bill has finally been passed and the president is expected to sign the legislation on Monday. We’ve discussed the sorts of companies that would stand to benefit from this kind of broad-sector stimulus before, but, now that the final text is set, it feels like a worthwhile time to revisit which beneficiaries might make good SPAC targets.

For one, the $1.2 trillion package is set to be disbursed over the next five years, which is practically an economy unto itself in the near term. Over the longer term, infrastructure assets built during this time are likely to be money-makers for their owners and operators for some time. But, even those simply commissioned for a slice of the work may see now as their time to make an aggressive move to stick above the competition.

Tensar International

A perhaps obvious beneficiary of this kind of federal largesse is a company like Tensar International. The single largest expenditure category for the bill is in upgrading or refurbishing roads, bridges and other big pieces of hard infrastructure.

This work, combined with general railway improvements, account for at least $176 billion of the bill’s spending in the near term. Tensar International stands out among the the construction firms held by private equity that are poised to snap up a slice of that work.

Tensar attempted an IPO in 2009, but ultimately was among a raft of companies that veered away from the public markets as the financial crisis set in. Instead, like many construction firms, it has used debt as a major driver of projects and was taken over by private equity firm Castle Harlan in 2014.

In the intervening years, Tensar has worked to build a platform still capable of doing all the dirty work on projects while figuring out cleaner approaches to this activity and deploying software tools to help customers optimize. It claims its software allows customers to save up to 50% in aggregate spending on dig sites, and their proprietary geogrid nets allow builders to hold earthworks in place faster and more reliably. Given the timing, this could be the moment for an industrials-focused SPACs to claim a winner.

Onyx I (NASDAQ:ONYX), which just listed on November 3, has a team that is likely to see the opportunity with Tensar. It is headed by noted real estate developer Michael Stern who is also the founder and CEO of JDS Development, the firm behind recognizable Manhattan towers like the American Copper buildings.

ICON Technology

But, that’s a more or less traditional builder.

The changing times are going to see more and more opportunities for new building technologies come to the fore, and what better opportunity than when billions in federal funding is up for grabs? ICON has been working to prove it can 3D-print whole communities either on the Earth’s surface or Mars.

On Earth, it has developed techniques for what it calls House Zero – a sustainable 3D-printed home, which it first demonstrated in Austin, Texas. ICON’s efforts have so far been focused on homebuilding, but government contracts to apply its methods to larger projects could help it mainstream its way to broader business.

ICON has raised $258 million to date through five rounds since 2017, and has already brushed against SPACs in its fundraising. Real estate investment firm Fifth Wall is already an investor in the company and has a vehicle – Fifth Wall III (NASDAQ:FWAC) – actively searching for a target.

Excitement in ICON could go well beyond the book of business that is set to be cooked up in the Biden bill, however. ICON’s broader mission is to build a 3D-building construction platform that could draw on existing resources on the Moon and Mars to build bases with its automated technology. That puts the company with one foot in the Earth-bound construction boom to come and another foot in initiatives that retail investors may want to ride to Moon and beyond.

SILA Nanotechnologies

But that also doesn’t mean that the EV-side of infrastructure is fully played out either. For sure, there has already been a SPAC feeding frenzy on next-generation battery technology. But, there are still players that are set to see their near-term business increase as the infrastructure package invests in grids and sustainability.

Among them is Sila Nanotechnologies, which just raised a $590 million round in August that drew frequent SPAC-backer T. Rowe Price and brought the company to a $3.3 billion valuation, according to Pitchbook. It has been less targeted at the automotive market than many other battery players and instead has developed both micro solutions for wearables-makers like Whoop and grid-scale batteries to maintain charge between cycles of renewable energy production.

There had always been a certain amount of uncertainty with the US as to how its own EV-infrastructure was going to develop as compared to European and Asian markets that are already ahead on infrastructure. The Biden bill shows that there is hay in the barn for North America with at least $7.5 billion going towards charging infrastructure, but more importantly – at least $65 billion for grid improvements.

This is an instance where a SPAC deal could bring far more than capital for the moment. There are fewer defense-focused SPACs searching at the current moment than in quarters past, but NightDragon (NASDAQ:NDAC) sports US government-connections through its cybersecurity work and could help it navigate to those contracts in addition to providing it more capital to develop.