India’s most valuable startup, online education provider Byju’s, is in talks with at least three special-purpose acquisition firms and aims to unveil plans to go public via a merger with one of them in three to four weeks, according to people familiar with the matter.
SPACs include Michael Klein’s Churchill Capital and Michael Dell’s MSD Acquisition, names Bloomberg News has previously reported. An additional candidate is Harry Sloan, a longtime Hollywood executive who has since become a prolific SPAC investor, the people said, asking not to be identified because the talks are confidential. A fourth, Altimeter Capital Management, is carrying out due diligence before any potential offers, the sources said.
Byju’s, last valued at $21 billion, is leaning toward a SPAC merger instead of a traditional initial public offering because it sees value in having U.S. investors and strategic partners, the people said. Unlisted Indian companies are currently prohibited from listing directly on foreign stock exchanges.
Additionally, Byju’s is exploring raising a pre-IPO funding round of around $750 million to $1 billion, the people said. Goldman Sachs is advising the startup on fundraising and SPAC talks, while Morgan Stanley is helping weigh SPAC options, the people said.
Byju’s and Goldman Sachs declined to comment. Representatives for Morgan Stanley and Sloan’s Screaming Eagle Acquisition did not respond to emails seeking comment.
A wild card is the Indian government. Narendra Modi’s administration will present its budget on Tuesday morning in New Delhi, and local media reported that some companies have been pushing for an easing of regulations that prohibit domestic firms like Byju’s from listing directly in overseas markets. . If these rules are changed, Byju will reconsider SPAC merger plans and revisit the idea of an IPO, possibly with a dual listing in the US and India.
If it proceeds with a SPAC deal as planned, Byju’s is still eyeing a mid-2022 listing, the people said. However, several factors could affect this timing, including the sharp decline in tech stocks in India and the United States. It is possible that Byju will delay or even reverse its plans to go public if the market turmoil gathers pace.
Bloomberg News reported in December that Byju’s, based on preliminary terms discussed, would raise around $4 billion and seek a valuation of around $48 billion. As SPAC contenders continued to discuss similar terms, market volatility added to the uncertainty of any specific target.
Klein and the Churchill Capital team presented their offer to the Byju board this month and met with Byju dealmakers in Dubai, one of the people said. Laurene Powell Jobs, wife of late Apple co-founder Steve Jobs, was a virtual attendee at the meeting and could join Klein’s bid, the person said. She has a long-standing interest in education and 25 years ago founded an after-school program to prepare underprivileged high school students for college.
Klein reportedly offered to invest $500 million in SPAC’s PIPE, or private equity investment, alongside investments from Y Combinator’s Sam Altman and Khan Academy’s Sal Khan, the person said. . There have also been conversations about establishing US distribution relationships with Apple and Microsoft if Byju’s partners with Churchill.
Competing SPACs have been aggressive. MSD offers a valuation of $45 billion to $52 billion, with a 36-month lock-in on the developer’s shares, the person said. Sloan’s team said it would match or exceed other offers in discussions last week.
SPACs are shell companies created by their sponsors to seek out and acquire businesses and take them public through a merger. They have recently come under fire from US regulators for tempering the speed of fundraising.
Byju’s views US-traded stocks as a valuable currency to accelerate its acquisition strategy. The company sees market opening as Covid-19 restrictions boost demand for online education while China-based rivals have been hit by government crackdowns.
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