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Broadstone Acquisition Corporation

Broadstone Acquisition Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: Vertical Aerospace

ENTERPRISE VALUE: $1.845 billion
ANTICIPATED SYMBOL: EVTL

Broadstone Acquisition Corporation proposes to combine with Vertical Aerospace.

Vertical Aerospace Group Ltd. (“Vertical”), a leading UK-headquartered engineering and aeronautical business developing electric Vertical Take-Off and Landing (eVTOL) aircraft, has entered into a definitive agreement for a business combination with Broadstone Acquisition Corp. (NYSE: BSN) (“Broadstone”), a special purpose acquisition company. The transaction will result in Vertical becoming a publicly-traded company, with a pro forma equity value of approximately $2.2 billion.

Vertical’s mission is to make air travel personal, on-demand and carbon-free through designing, manufacturing, selling and servicing one of the world’s best eVTOL aircraft, the VA-X4. It will travel at speeds over 200mph, be near silent when in flight, produce zero emissions and at low cost per passenger mile.

The VA-X4 is expected to be certified to the same standards as large commercial airliners and therefore is expected to be 100x safer than a helicopter. Vertical intends to certify the VA-X4 to European Union Aviation Safety Agency (EASA) standards – the most stringent global standards – in order to unlock a large UAM TAM of $1 trillion by 2040, with an upside TAM of $4.4 trillion by 2040[1].

Vertical was founded in 2016 by Stephen Fitzpatrick, an established entrepreneur best known as the founder of the Ovo Group, a leading energy company determined to create a world without carbon and which includes Ovo Energy, the UK’s second-biggest energy retailer with revenues of $6.5 billion. Stephen remains the majority shareholder in this business.

American has agreed to pre-order, subject to certain conditions precedent and future agreed upon milestones, up to 250 aircraft, and an option to order an additional 100 aircraft. Avolon has agreed to pre-order up to 310 aircraft with an option for a further 190, and Virgin Atlantic has an option to purchase between 50 and 150 aircraft.


SUBSEQUENT EVENT – 10/27/21 – LINK

  • Additional Funding
    • Mudrick Capital Management, LP (“Mudrick Capital”), a global investment firm focused on special situation investing, will invest $200 million in Vertical through convertible senior secured notes. In addition, Kouros SA, a firm specializing in investments to decarbonize transport and energy production, will invest $5 million in Vertical’s PIPE alongside American Airlines, Avolon, Honeywell, Microsoft’s M12 and Rolls-Royce.

TRANSACTION

  • The business combination values the combined company at a pro forma enterprise value of approximately $1.8 billion and pro forma equity value of $2.2 billion at the $10.00 per share PIPE price.
    • The ordinary share PIPE includes commitments from institutional investors, 40 North and  Microsoft’s M12 as well as the following strategic investors: American Airlines, Avolon, Rolls-Royce and Honeywell.
  • The boards of directors of both Broadstone and Vertical have approved the proposed transaction, which is expected to be completed in the second half of 2021,
  • The transaction is expected to result in gross proceeds of $394 million.

broadstone trans overview


PIPE

  • $89 million at $10.00 per share.
    • The ordinary share PIPE includes commitments from institutional investors, 40 North and  Microsoft’s M12 as well as the following strategic investors: American Airlines, Avolon, Rolls-Royce and Honeywell.

LOCK-UP

  • At the Share Acquisition Closing
    • (i) the Company Shareholders shall each enter into a lock-up agreement with Pubco (the “Company Shareholder Lock-Up Agreement”)
    • (ii) the Sponsor shall enter into a lock-up agreement with Pubco (the “Sponsor Lock-Up Agreement”)
    • (iii) the shareholders of Avolon e limited (“Avolon” and such shareholders, the “Avolon Warrantholders”) shall enter into a lock-up agreement with Pubco (the “Avolon Lock-Up Agreement”)
    • (iv) American Airlines, Inc. (“American”) shall enter into a lock-up agreement with Pubco (the “American Lock-Up Agreement”)
    • (v) the Loan Note Holders (as such term is defined below) shall each enter into a lock-up agreement with Pubco (the “LNH Lock-Up Agreement”).
  • The Company Shareholder Lock-Up Agreement also contains restrictions on voting rights, pre-emption rights, dividends or other rights as a shareholder of Pubco, over 20% of the Pubco Ordinary Shares held by the Company Shareholders immediately following the Share Acquisition Closing.
    • 50% on the date the sale price of Pubco Ordinary Shares equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period
    • 50% on the date the sale price of Pubco Ordinary Shares equals or exceeds $20.00 per share for any 20 trading days within any 30-trading day period.

NOTABLE CONDITIONS TO CLOSING

  •  Broadstone and Pubco must have at least $240 million of cash before expenses either in or outside of the trust account.

NOTABLE CONDITIONS TO TERMINATION

  •  By written notice by either Broadstone or the Company if any of the conditions to closing set forth in the Business Combination Agreement shall not have been satisfied or waived by December 1, 2021 (the “Outside Date”)

ADVISORS

  • Winston & Strawn LLP is serving as legal advisor to Broadstone.
  • Citi is serving as advisor to Broadstone.
  • Latham & Watkins LLP is serving as legal advisor to Vertical.
  • Barclays is serving as lead financial advisor and lead capital markets advisor to Vertical.
  • Barclays and Citi acted as joint placement agents on the PIPE.

MANAGEMENT & BOARD


Executive Officers

Marc Jonas, 51
Chief Executive Officer and Director

Mr. Jonas is a co-founder of Sun Capital Partners and has been a director of SunCap Ltd. since July 2017, Clarendon Park Farms since August 2006 and Auro Property Advisors since November 2014. Mr. Jonas had previously served as Chairman of Pearl Group’s Asset/Liabilities Investment Management Committee and co-founded Wellington Pub Company in 1997 (where he was Managing Director) and Punch Group in 1997 and Mr. Jonas was Executive Chairman of Punch Taverns’ tenanted business prior to its flotation and served as a non-executive director until 2004. Mr. Jonas is a director of Carnegie Capital Estates, a real estate developer in the UK, and also holds several other directorships, including Apex2100, Clarendon Park Estate, Zeta Shares and Carnegie Capital Estates. Mr. Jonas sits on the Investment Committee as a non executive at Marylebone Partners and is on the Advisory Board of Delancey, a real estate company. He studied Politics, Philosophy and Economics at The University of Oxford.


Edward Hawkes, 43
Chief Financial Officer and Director

Mr. Hawkes is the co-founder of Sun Capital Partners and has been a director of SunCap Ltd. since July 2017. In addition, Mr. Hawkes has served on the board of directors of Keepmoat Group and its shareholding entity KM Baker Street since August 2014. Mr. Hawkes co-founded Pearl Group in 2005 and co-led its acquisition of Resolution Plc in 2008 and its reverse merger into Liberty Acquisitions Holdings (International) Company in 2009. Mr. Hawkes holds multiple directorships, including Heron Farms, Mudlark Hotels and Various Eateries. He studied Economics and Management at The University of Oxford.


 

Board of Directors

Hugh Osmond, 58
Chairman and Director

Mr. Osmond is the co-founder of Sun Capital Partners and Osmond Capital Ltd., where he has served as a director since July 2017. Additionally, Mr. Osmond has been a director of Various Eateries Limited since January 2015 and holds multiple other directorships, including Coppa Club, Strada Trading, Apex2100, Mudlark Hotels, Xercise2, Devonshire Place Holdings and Well Barn Farm. Mr. Osmond co-founded Pearl Group in 2005 and Punch Group in 1997, where he served as Executive Chairman, and, in 1993, he led the acquisition of Pizza Express and was a member of its Executive Board until 2001. He studied Medicine at The University of Oxford.


Ian Cormack, 72
Director Nominee

Mr. Cormack has been a non-executive director at the Royal Bank of Scotland, Natwest Holdings Ltd., National Westminster Bank Plc and Ulster Bank Ltd since May 2018 and at Just Group Plc since April 2016. Mr. Cormack had also served as the chairman of Maven Income & Growth VCT4 Plc from 2004 to 2019 and had previously been a senior independent director of Phoenix Group Holdings Plc (2009 to 2018), Xchanging Plc (2013 to 2016), Partnership Plc (2013 to 2016) and Bloomsbury Publishing Plc (2011 to 2015) and a non-executive director of Qatar Financial Centre Authority (2006 to 2012). Mr. Cormack has also served as the chairman of CHAPS (UK clearing system) and as a non-executive director of Aspen Insurance Holdings Ltd. and Hastings Group Holdings Plc. Mr. Cormack was the chief executive officer of AIG Europe Inc. from 2000 to 2002 and had spent over 30 years at Citibank until 2000, where he was UK Country Head and the Co-head of the Global Financial Institutions Group. Mr. Cormack studied Philosophy, Politics and Economics at the University of Oxford.


Rory Cullinan, 60
Director Nominee

Mr. Cullinan has been a Non-Executive Director of Cia Cervecerias Unidas S.A. (representing Heineken) since May 2018. Mr. Cullinan was also a Non-Executive Director of J2 Acquisition Limited from September 2016 to October 2019. He previously spent 10 years at the Royal Bank of Scotland (2009 to 2015 and 2001 to 2005), where his positions included Executive Chairman, CIB & Capital Resolutions, CEO of the Capital Resolution Group, CEO of the Non-Core Division and Head of Equity Finance. In 2015, Mr.  Cullinan was the Co-Managing Partner of Renaissance Partners in Moscow and a Group Board Member Group Board and Exco. Prior to that he was head of financial services at Permira from 2005 to 2006. In 1992, Mr. Cullinan founded Verdoso Investments, and he was the COO and CFO of Pembridge Investments/DRG Plc from 1989 to 1992. Prior to that Mr. Cullinan worked for Citibank in South Africa, London and New York.


Philip Bassett, 54
Director Nominee

Mr. Bassett founded Brightwell Partners Limited in July 2015 and currently serves as its managing director (since November 2018). In addition, Mr. Bassett is a designated member of Brightwell Equity Partners LLP (since December 2014) and Oxwich Coal House Ltd. (since August 2012). Prior to founding Brightwell, Mr. Bassett spent over 20 years at Permira Advisers LLP, where he was a partner from January 2004 to June 2015 and served as the head of investor relations and fundraising. Mr. Bassett became a member of the Institute of Chartered Accountants in England and Wales in 1992 and studied Classics at the University of Oxford.