May 22, 2018 / 4:57 PM / 2 months ago

Third Point to raise $400 million for SPAC, Farley to run it

NEW YORK (Reuters) - Daniel Loeb’s hedge fund Third Point LLC plans to raise $400 million for a “blank check” company which will be run by outgoing stock market operator NYSE Group President Thomas Farley, according to a regulatory filing made on Tuesday.

The new company, referred to on Wall Street as a special purpose acquisition company (SPAC), will be called Far Point Acquisition Corp and plans to target companies in the financial technology sector, the filing said.

Farley and Loeb, who founded $18 billion Third Point in 1995, have known each other for years, and sources said that Farley brought the idea to create a SPAC to the hedge fund. Farley will be the SPAC’s chief executive officer, president and chairman of the board. Reuters first reported Third Point’s plans earlier this month. Far Point plans to make a purchase within 24 months.

But the SPAC is also bracing for competition from private investors and other blank check companies for attractive targets and is not required to put the money to work.

A SPAC uses proceeds from its initial public offering, together with borrowed funds, to acquire companies that are usually privately held. Investors in the IPO do not know in advance which company a SPAC will buy.

Third Point’s decision to create a SPAC is a low-risk way to add to its revenue stream, which has been largely generated by large, long-term activist campaigns including bets on Sotheby’s (BID.N) Dow Chemical Co and Nestle SA (NESN.S) over the last years.

Third Point is in the black for 2018 and has long generated some of the hedge fund industry’s highest returns, delivering an average 18.5 percent return per year over its lifetime.

The firm’s activist plays at large publicly traded companies can be time-consuming and difficult. But buying a privately held company might make for a simpler way to create strong returns.

David Bonanno, who has worked for Third Point since 2008, will become the SPAC’s chief financial officer and will spend time researching potential targets.

Retired U.S. Army general Stanley McChrystal, attorney and board director Nicole Seligman and former chief financial officer at home sharing company Airbnb Laurence Tosi will become board members at the SPAC.

Before sponsoring its own SPAC, Third Point invested in Nomad Foods Limited, a SPAC launched by consumer industry veterans Martin Franklin and Noam Gottesman in 2014. Hedge funds are often eager to invest in SPACs.

Reporting by Svea Herbst-Bayliss and Joshua Franklin; editing by Jonathan Oatis

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