ReNew Power has agreed to merge with blank-check company RMG Acquisition Corporation II, giving India's biggest renewable power producer an enterprise value of USD 8 billion and a listing on NASDAQ.
The biggest deal in the fast-growing clean energy sector is expected to close in the second quarter, a company statement said on Wednesday.
The deal will be financed with cash proceeds of USD 1.2 billion, including USD 855 million in investments from serial blank-check dealmaker Chamath Palihapitiya, funds managed by BlackRock and Sylebra Capital.
A blank-check company is a developmental stage firm that does not have established business plan.
"The transaction would further bolster ReNew's leading position in solar and wind energy generation for the Indian market, by funding medium-term growth opportunities, as well as paying down debt," it said.
This is the first major overseas listing of an Indian company via the SPAC (special purposed acquisition company) route, which is a big hit currently on Wall Street.
A SPAC is a shell or blank-check company and its sole aim is to raise capital via an IPO (initial public offering) to acquire a private business at a later date and then take it public without going through the traditional route of IPOs.
In this transaction, RMG Acquisition Corporation II is the blank- check company. It raised USD 345 million in its December 2020 IPO. Founded in 2011, ReNew Power counts Goldman Sachs and Canada Pension Plan Investment Board (CPPIB) among its prominent investors. It owns and operates 5 GW of solar and wind energy projects.
The merger comes at a time when India is targeting 450 GW renewable energy capacity by 2030.
"The Indian renewable energy sector has grown rapidly over the last decade," said Sumant Sinha, founder Chairman and CEO of ReNew. "During this time, ReNew has been a driving force in making sure that the sources of this growth are sustainable, and also economically competitive." "Over the next decade, ReNew plans to maintain its track record of market share growth. Over time, we will expand our capabilities even further, with utility-scale battery storage, and customer-focused intelligent energy solutions," he said.
RMG II CEO Bob Mancini said the firm was looking to partner with a company driving change on a global scale, with a proven track record, and best-in-class management.
"We found that company in ReNew," he said.
The pro forma consolidated and fully diluted market capitalization of the combined company would be USD 4.4 billion.
"Proceeds (from the deal) will be used to support ReNew's growth strategy, including the buildout of its contracted, utility-scale renewable power generation capacity, as well as to reduce debt," the statement said.
ReNew's management, and its current group of stockholders, including Goldman Sachs, CPPIB, Abu Dhabi Investment Authority, and JERA Co, among others, who together own 100 per cent of ReNew today, will be rolling a majority of their equity into the new company, and are expected to represent 70 per cent of the effective company ownership upon close of the transaction. The firm's leadership will remain intact, with Sumant Sinha as Chairman & Chief Executive Officer of the combined company, overseeing its strategic growth initiatives and expansion.
The Board of Directors of the combined company will include representation from ReNew's existing stockholders, RMG II, and independent directors. Mancini will be the appointee from RMG II to the Board.
While Goldman Sachs and Morgan Stanley are financial advisors to ReNew Power, Bank of America is the financial advisor to RMG II.
Commenting on the deal, Gaurav Singhal, managing director, India Investment Banking, Bank of America, said "The transaction re-emphasises strong investor interest in Indian renewable energy sector with massive growth potential. The deal saw participation from some of the world's top ESG (environmental, social and governance) investors and opens the door for many more SPAC transactions from India across sectors."