Finance of America joins SPAC IPO bandwagon

by Candyd Mendoza15 Oct 2020

Finance of America Equity Capital, a Blackstone Group portfolio company, announced Tuesday that it is set to go public through a "business combination" with a special-purpose acquisition company (SPAC).

The consumer-lending platform said a merger with publicly-listed SPAC Replay Acquisition is in place. Blackstone Tactical Opportunities, a subsidiary of Blackstone Group, will own 70% of the combined company, which is valued at $1.9 billion.

In a statement, Brian Libman, chairman and founder of Finance of America, said the goal is to further expand the firm's capabilities "to serve the full range of borrower needs" and "achieve investor goals while continuing to produce sustainable earnings growth."

The companies expect $250 million in funding from institutional investors through private investment in public equity (PIPE) of $10 per share. Cash proceeds for the new company will include the PIPE capital and $288 million of cash in trust from Replay Acquisition.

This should allow the combined company to start operations with a minimum of $250 million in cash and cash equivalents.

Finance of America was initially considering a traditional IPO but shifted course after negotiating with the founders of Replay Acquisition over the summer, The Wall Street Journal reported. The deal is expected to close in the first half of 2021.

"Becoming a public company is an important milestone for Finance of America and provides further access to capital via the public markets over time," said Finance of America CEO Patricia Cook. "We look forward to accelerating our growth across cycles as we increasingly leverage our complementary portfolio of businesses, differentiated technology capabilities, and a capital-light model with fully integrated capabilities."

Last month, another mortgage lender announced plans to go public. United Wholesale Mortgage has decided to merge with Gores Holdings IV, a $425 million special-purpose acquisition company, at a valuation of $16.1 billion – the biggest business combination for a SPAC company to date.