Capital A Bhd, the parent company of budget airline AirAsia, on Wednesday said it has finalised a US$1.15 billion deal to list its brand management unit on the Nasdaq via a merger with a SPAC called Aetherium Acquisition Corp.
A SPAC (special purpose acquisition company), or blank-check firm, is a publicly listed shell company that raises funds to merge with a private company.
The listing, first announced last year, will allow the unit, Capital A International (CAPI), to access the world’s most liquid capital markets, enhancing its international credibility and presence, Group Chief Executive Tony Fernandes said in a statement.
“We are optimistic about the potential for our brand business to expand well beyond our origins, particularly in markets where intellectual property and brand value are highly esteemed by consumers and investors,” he said.
The transaction gives CAPI an estimated pro forma enterprise value of US$1.15 billion, the statement read.
The deal sees Capital A joining a growing number of Southeast Asian companies to list in the United States, filling a void left by Chinese companies that have paused U.S. IPOs amid political tensions with Washington.
CAPI, which will be led by Fernandes, hopes to leverage the expansion, management and licensing of the AirAsia brand through brand strategy, creative marketing and intellectual property development.
Fernandes said the listing of CAPI was initially to help Capital A resolve its classification on Malaysia’s stock exchange as financially distressed. However, the company then saw an opportunity to monetise its brand for the benefit of its AirAsia airline business.
“By having a separate platform for building other brands, AirAsia itself becomes bigger,” Fernandes told Reuters in an interview on Monday ahead of the bourse announcement.
Both Capital A and long-haul unit AirAsia X Bhd have undergone restructuring after being classified as financially distressed due to travel restrictions during the COVID-19 pandemic. AirAsia X was removed from the classification in November, after undertaking measures to improve its financial position, and Capital A has said it hopes to present a regularisation plan to the bourse by June, 2024.
Meanwhile, Capital A Bhd’s plan to list brand management unit Capital A International (CAPI) on Nasdaq is expected to help reduce its current large negative equity position.
Hong Leong Investment Bank Bhd (HLIB) said today (Feb 29) Capital A will be able to reduce its current equity position from RM8.4 billion in the third quarter (Q3) 2023 to improve in Q4 2023.
The firm is overall positive on the move saying that CapA will be able to realise the underappreciated value of the group’s business with the listing exercise.
“We expect more of such exercises to be undertaken for investors to fully appreciate the group’s embedded value,” it said in a note.
Meanwhile, HLIB said shareholders of CapA will also benefit through distribution-in-specie, allowing the shareholders to directly own shares in CAPI. It said the valuation of CAPI at RM5.44 billion is already higher than Capital A’s current market capitalisation of RM3 billion.
“We expect a similar exercise to be done for CapA’s aviation business segment with the merging with AAX in the near term, as the next part of CapA’s PN17 regularisation plan.”Maintain Buy on the stock with unchanged target price of RM1.40,” it added.
