Europe’s biggest Spac to be wound up

The biggest blank cheque company in Europe, backed by LVMH founder Bernard Arnault and former UniCredit chief Jean Pierre Mustier, is set to be wound up after failing to find a target in the financial services sector.

Pegasus Europe has announced that it will cease operations and is preparing to return capital to its investors at the beginning of May, subject to approval by shareholders.

“The company will not conclude a business combination ahead of the deadline of May 3 2023 [and therefore] the co-CEOs of the company have recommended . . . that the dissolution and liquidation of the Company will be proposed during its annual meeting,” Pegasus said in a statement on its website.

Blank cheque, or special purpose acquisition companies — which raise cash by listing on a stock market before looking for a private company to merge with — took off in the US in 2020 at the start of the pandemic.

Yet many did not find businesses to buy and are now having to return funds as they hit deadlines for acquiring target companies. US Spac investors have received tens of billions of dollars of redemptions in recent months.

Pegasus Europe went public at the height of the wave of European Spac launches in 2021, raising a record €484mn.

As well as backing from Mustier and Arnault’s holding company Financière Agache, Pegasus Europe was sponsored by French investment group Tikehau Capital and former Bank of America dealmaker Diego De Giorgi, with the four jointly investing €55mn. Agache and Tikehau had pledged another €100mn that could be used if a target was found.

Other European Spacs launched around this time also attracted high-profile names, including former Credit Suisse chief Tidjane Thiam and François Pinault, the billionaire founder of luxury group Kering.

Pegasus Europe targeted the European financial services sector, considering it ripe for consolidation and disruption by tech-savvy start-ups after decades of low interest rates and tighter regulation.

But it struggled to find high-quality targets at the right price, according to three people close to the company, particularly after central banks began raising rates last year.

The vehicle’s backers looked at dozens of potential targets, in wealth management, payments and fintech, the people said, and made offers for between five and 10 of them, but struggled to agree on a price.

“It was a phase in which sellers were not ready to see the reality of the market,” one of the people said, adding that large falls in share prices last year, particularly in the tech sector, meant investments were more likely to be lossmaking.

A handful of Spacs in Europe did find businesses to buy, including in digital music and the food sector.

Pegasus Entrepreneurs — another Spac backed by the same sponsors as Pegasus Europe, including Mustier and Agache — succeeded in entertainment. In May last year, it made a deal with French entrepreneur Stéphane Courbit to merge with Banijay, the television company that produces MasterChef, and his online gambling company Betclic.

Pegasus Europe estimates that ordinary shareholders will receive about 10 euros per share — the price at which the Spac was listed in Amsterdam — with any final payments expected to be made in July, according to its statement.