Raising Money for the Turnaround Ahead

Tuesday, March 18, 2008 2:25 p.m. EDT

Blank-check companies — corporations formed with no particular business except to buy other businesses on the cheap — are multiplying, seeking everything from sports teams to commercial real estate.
Known as special purpose acquisition companies (SPACs), these peculiar form of public company are replacing private equity and debt-financing options that have all but disappeared in the credit crunch.

Blank-check companies raised more than $12 billion last year, compared to $2.6 billion in 2006.

Out of the first 11 IPOs this year, seven were blank check companies, according to investment advisor America’s Growth Capital. Both the NYSE and Nasdaq plan to list the companies, now sold only on the American Stock Exchange.

With acquisition targets priced cheaply and their war chests growing, this could be the year for SPAC takeovers. Private equity firms and others who rely on debt for such acquisitions are practically out of the running.
So what is a SPAC investor buying? Pretty much, faith in the company’s management team.

Since investors have little or no idea what the company will be buying, it’s key that well-known names lead them.

For example, three former top executives at Apple, including co-founder Steve Wozniak, formed Acquicor Technology, which hopes to raise $150 million for tech and multimedia business acquisitions.

Nelson Peltz, CEO of Triarc, owner of Arby’s and other food franchises, formed a SPAC to raise $750 million to buy and turn around mismanaged businesses. Tom Hicks, owner of the Texas Rangers and the Dallas Stars hockey team, raised $550 million last year for the same kinds of targets.

Jack Kemp, a former NFL quarterback, congressman and 1996 Republican vice presidential candidate, leads Sports Properties Acquisition. It intends to buy sports teams, stadiums and other entertainment companies. Directors include former New York Governor Mario Cuomo and baseball slugger Hank Aaron.

"The more I looked at it, the more I realized that the potential for sports properties and entertainment in a global economy is huge,â€