The Artius Acquisition (AACQ) SPAC is taking carbon-negative products maker Origin Materials public in a deal valued at $1.8 billion. The transaction is expected to close in the second quarter of 2021. Is AACQ stock a buy before the Origin Materials merger date?
After the merger closes, AACQ SPAC investors will own 39.3 percent of Origin Materials, while PIPE (private investment in public equity) investors will own 10.9 percent. AACQ SPAC stock is up 0.3 percent from its IPO price of $10 per share. However, the stock is still down 28.4 percent from its 52-week high of $14.01.
The AACQ SPAC’s sponsor
In its Jul. 2020 IPO, the AACQ SPAC offered 63 million shares for $10 each. AACQ’s sponsor is Artius Acquisition Partners, and the blank-check company is led by CEO and CFO Boon Sim and executive chairman Charles Drucker. Previously, Drucker worked at global payment company Worldpay.
The AACQ–Origin Materials merger date
AACQ and Origin Materials announced their agreement on Feb. 17, and the transaction is expected to close in the second quarter of 2021. Since the boards on both sides have already approved the deal, all that's needed now is the approval of AACQ shareholders. The combined company will be listed on the Nasdaq under the ticker symbol “ORGN”.
The details of AACQ–Origin Materials merger
Under the terms of the deal, Origin Materials will receive $925 million in gross proceeds to pursue its growth plans. The cash includes $725 million held in trust by AACQ and $200 million in PIPE at $10 per share. Investors in the PIPE include Danone, Nestlé Waters, PepsiCo, and affiliates of Apollo Global Management. Existing Origin Materials shareholders are set to own 42.4 percent of the combined entity when the transaction closes.
AACQ SPAC stock is expected to rise
Currently, AACQ SPAC stock is covered by Fermium Research’s Frank Mitsch. The analyst has rated the stock as a "buy" and given it a target price of $30. Origin Materials has a total addressable market opportunity of over $1 trillion, and $1.9 billion in signed customer contracts. An additional $547 million in customer contracts are under negotiation.
Origin is building its first plant, and it's set to be ready by the end of 2022 and generate sales in 2023. The company expects to report revenue of $60 million in 2023, $475 million in 2025, and $4 billion in 2030. It expects to turn EBITDA positive in 2025.
AACQ SPAC stock is a good buy before the Origin Materials merger date
AACQ has assigned Origin Materials a pro forma implied equity value of $1.84 billion, whereas at AACQ’s current stock price, Origin Materials is valued at around $1.85 billion. After adjusting for its $863 million in pro forma net cash and $20 million net debt, it would have a pro forma enterprise value of $1 billion.
Based on this enterprise value and Origin Materials’ projected sales, its valuation multiples for 2023, 2024, and 2025 are 16.7x, 8.2x, and 2.1x, respectively. The company’s 2030 EV-to-sales multiple of 0.2x looks the most appealing. The fall in AACQ stock has made it attractive for long-term investors.