Consumer-lending platform and Blackstone portfolio company Finance of America Equity Capital is set to go public with a valuation of $1.9bn through a blank-check merger, this year’s hottest way to list shares, according to people familiar with the matter.

Finance of America is set to merge with the special-purpose acquisition company, or SPAC, Replay Acquisition, the people said. In conjunction with the merger, institutional investors will also make a private investment of $250m in the company. In all, the deal will leave the consumer lender’s founder and funds managed by Blackstone with a 70% ownership stake.

SPACs are all the rage in 2020, quickly having become a favored way for companies to go public in a year when initial public offerings are hotter than ever. Their popularity is a sign that there is more demand for newly listed companies than there are companies going public. So far this year, companies have raised more than $109bn going public in the US, surpassing every other full year on record, according to Dealogic, whose data go back to 1995. SPACs have accounted for almost half of that total.

The sole purpose of SPACs, which are also known as blank-check companies, is to raise money to acquire a private target and take it public. Founders of these shell companies pitch their names or expertise in certain industries; once they have raised a certain amount of money they have a specific amount of time, typically two years, to identify a target. Announced deals are subject to shareholder approval.

Finance of America’s services include traditional mortgages, reverse mortgages, commercial-real-estate loans and fixed-income investing. It has grown via a series of acquisitions and over the past roughly five years as a portfolio company of Blackstone’s Tactical Opportunities business, which can invest across any asset class, industry, sector, security type or geography.

The move is the latest in a recent spate of financial dealmaking. This summer, Quicken Loans parent Rocket Cos. went public through a traditional IPO. Last month, wholesale mortgage originator United Wholesale Mortgage said it intended to go public via a SPAC, and Caliber Home Loans is also prepping an IPO. Morgan Stanley recently struck a deal to buy fund manager Eaton Vance, and activist investor Nelson Peltz invested in Invesco and Janus Henderson Group, planning to agitate for a deal.

The new listings come as the mortgage market has held up surprisingly well in the face of the coronavirus pandemic, with the Mortgage Bankers Association expecting mortgage originations to hit recent highs in 2020. Record-low interest rates are also driving refinancings, with the Mortgage Bankers Association expecting mortgage originations to hit recent highs in 2020. Record-low interest rates are also driving refinancings.

Finance of America had been considering a traditional IPO but then earlier this summer began speaking with the founders of Replay Acquisition, one of the people said. Though the money raised in the deal goes to current owners, the person said becoming a publicly traded company allow the consumer-lending platform to raise additional capital more easily going forward.

Source: Wall Street Journal

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