Plans for the Oscar-winning special effects house DNEG to go public by a merger with Sports Ventures Acquisition Co. have been terminated, according to a filing to the Securities & Exchange Commission this morning.
Sports Ventures, a special purpose acquisition (SPAC) company led by Atlanta Falcons co-owner Alan Kestenbaum and Inner Circle Sports executives Rob Tilliss and Steve Horowitz, inked a deal in January valuing DNEG at $1.7 billion.
“Due to the headwinds in the SPAC marketplace and general market volatility, we have decided to terminate our SPAC process with Sports Ventures. Alan and the team at Sports Ventures have been great partners in this process, and we wish them well as they move forward,” DNEG Chairman and CEO Namit Malhotra said in a press release accompanying the regulatory filing.
Sports Ventures, which declined to comment, was initially formed to merge with a sports, media or entertainment business and raised $230 million in an initial public offering in January 2021. The deal with DNEG, a London-based studio that has won six Academy Awards for best visual effects, was expected to close by the end of last year. Like many SPAC mergers of late, the venture was beset by problems securing interim financing from other investors to bring enough cash to close the deal, known as PIPE financing, or private investment in public equity. At the time of the merger announcement, PIPE investors were going to contribute as much as $168 million, led by Icelandic billionaire Thor Björgólfsson’s Novator Capital and investment firms Fairfax Financial and Arbor Financial.
Sports Ventures now has to start from scratch and find a target to merge with by Jan. 5, 2023, or return the IPO money to shareholders, according to rules for SPACs that cannot complete a merger within their stated time frame. While there is still time for the blank check business to find another opportunity, in practice the executives have less time to secure a deal, given it takes about four months to close the typical going-public transaction after it is announced. A number of early sports SPACs came to market in 2020 and 2021 during the height of SPAC enthusiasm. The first of them are now facing the prospect of liquidating. There remain 66 active sports-related SPACs seeking mergers, according to the Sportico Sports SPAC Tracker.
With assistance from Corey Leff.
(This article has been updated to indicate that Sports Ventures declined to comment.)