Westrock Coffee Holdings LLC announced it would merge with a special-purpose acquisition company (SPAC). The company is valuing itself at about $1.2 billion.
Special-purpose acquisition companies, also known as SPACs, are publicly listed companies that passively hold cash. Their purpose is to acquire private companies, not to trade with ongoing operations.
A SPAC exists to provide a quick way for private companies to become listed by acquiring those businesses and effectively taking them public without the headaches of running the traditional IPO process. Apart from being time-consuming and expensive, an IPO can also restrict the way the company describes itself to shareholders leading up to the public offering.
It’s worth noting that the listing rules exist to minimise investor risk, and some critics will argue that the risks to invest in a SPAC are therefore higher. SPACs were the rage in 2020-2021, with an incredible 621 SPACs listed, up from 165 a year earlier. 389 of those companies had raised money in 2021.
Westrock Coffee, based in Little Rock, Arkansas, serves market leaders across the retail, restaurant and food service, convenience store and travel centre, hospitality industries and many others. It provides over 20 million cups of coffee to the world daily. The gigantic “brand behind the brands” is now going public via this process.
Scott Ford, CEO and Co-Founder of Westrock Coffee, stated that the new business model could be the solution to enable farmers to earn a living wage – which is, according to Ford, also the reason why the company was founded in the first place – while also being self-sustaining and independent of charity sums and price premiums.
High-quality coffee, tea, and extracts products to the largest and most recognisable names in the world while making a noticeable impact in the lives of our farmer partners.Scott Ford, CEO and Co-Founder of Westrock Coffee
Riverview Acquisition, ticker code RVAC, has a market capitalisation of $310m. As part of the deal, they will raise a further $250m in a Private Investment in Public Equity (PIPE) deal. This is a mechanism where typically, Private Equity firms can make deals to invest in public companies, which may be preferential to issuing corporate debt.
Westrock Coffee is valued at $1.086 billion at $10 per share. The company expects to be profitable this year and “for sales to increase more than 30% to about $960 million.” The trajectory is probably not far-fetched, as the company is growing rapidly; its 2021 revenue was 26% higher than that of 2020, with $551 million. At an annual growth rate of 21%, the company would reach $1.25 billion in 2024.