US SEC gives nod to mega $8 billion ReNew Power SPAC deal; firm’s shares may soon begin trading on Nasdaq

The US Securities Exchange Commission or SEC (the equivalent of India’s market regulator SEBI) has given the crucial regulatory nod to the mega $8 billion SPAC transaction between top clean energy player ReNew Power and RMG Acquisition Corporation II, multiple industry sources in the know told Moneycontrol.

This is a landmark transaction as it represents the biggest overseas listing of an Indian company via the SPAC (special purpose acquisition company) route, which has been a smash hit on Wall Street over a major part of the last 18 months.

“The key nod from the SEC has come in recently and the next step would be to get the approval from the shareholders to consummate the merger,” one of the individuals above told Moneycontrol.

Two other individuals confirmed the same.

“Post the voting results, there will be a set of closing steps and the based on current timelines, the firm’s shares are likely to begin trading on the Nasdaq by the end of this month (i.e August),” a fourth individual told Moneycontrol.

Upon closing of the transaction, the combined company would be named ReNew Energy Global PLC and would be publicly listed under the symbol “RNW”.

All the four individuals above spoke to Moneycontrol on the condition of anonymity. ReNew Power could not be contacted for an immediate comment on this story.

A SPAC or special purpose acquisition vehicle is a shell company and its sole aim is to raise capital via an IPO (initial public offering) to acquire a private business at a later date and then take it public without going through the traditional route of IPOs. In the above transaction, RMG Acquisition Corporation II is one such shell company.

SPAC structure deals are not entirely new to Indian companies. For instance, in 2015, Silver Eagle Acquisition, a SPAC acquired a 30 percent stake in Videocon d2h for around 200 million. In 2016, Yatra Online, the parent company of Yatra India, listed on NASDAQ, by way of a reverse-merger with another US-based SPAC, Terrapin 3 Acquisition.

Moneycontrol had demystified the theme of SPAC’s in an explainer dated February 7, 2021.

According to the official announcement of the SPAC transaction on February 24, 2021, the pro forma consolidated and fully diluted market capitalisation of the combined company would be approximately $4.4 billion at the $10 per share PIPE (private investment in public equity) subscription price, assuming no RMG II shareholders exercise their redemption rights. Gross cash proceeds are estimated to be approximately $1.2 billion, comprised of $855 million from the PIPE and approximately $345 million of cash held in trust by RMG II, before any adjustments due to potential redemptions by RMG II shareholders.

The transaction would further strengthen ReNew’s position in solar and wind energy generation for the Indian market, by funding medium-term growth opportunities. The proceeds would be used to support ReNew’s growth strategy, including the buildout of its contracted, utility-scale renewable power generation capacity, as well as to reduce debt.

ReNew’s leadership will remain intact, with Sumant Sinha as Chairman & Chief Executive Officer of the combined company, overseeing its strategic growth initiatives and expansion.

As part of the deal, ReNew’s management, and its shareholders, including Goldman Sachs, the Canada Pension Plan Investment Board (CPP Investments), Abu Dhabi Investment Authority, and JERA Co., Inc. (JERA), among others would roll a majority of their equity into the new company, and are expected to represent approximately 70% of the effective company ownership upon transaction close.

Famed Sillicon Valley Investor Chamath Palihapitiya, who has led the SPAC wave in the US market is part of the investors backing this deal. Other than Chamath Palihapitiya, the upsized PIPE was anchored by marquee institutional investors including funds and accounts managed by BlackRock, BNP Paribas Energy Transition Fund, Sylebra Capital, TT International Asset Management Ltd, TT Environmental Solutions Fund and Zimmer Partners

According to the official announcement, Goldman Sachs and Morgan Stanley are serving as financial advisors to ReNew in connection with the business combination. Morgan Stanley & Co. LLC is acting as joint placement agent to RMG II on the PIPE. Latham & Watkins LLP, Nishith Desai & Associates and Cyril Amarchand Mangladas are serving as legal advisors to ReNew.

BofA Securities is serving as exclusive financial advisor to RMG II, and also acting as lead placement agent on the PIPE. Khaitan & Co LLP is serving as legal advisor to RMG II on Indian legal aspects, the announcement added.

Recently, Sebi chairman Ajay Tyagi had said the market regulator is discussing ways to create and develop a SPAC (special purpose acquisition company) market in India.