A British ‘flying taxi’ company set up by the founder of OVO Energy is in advanced talks about a $2bn ‘blank cheque’ merger that will see another major British technology company heading for the US public markets.
Sky News can exclusively reveal that Vertical Aerospace, which was established by Stephen Fitzpatrick five years ago, is close to sealing a deal with Broadstone Acquisition Corp that will see it become a publicly traded company in New York.
City sources said the merger with Broadstone – which was established by the businessman Hugh Osmond last year – could be announced as soon as Thursday.
They added that the deal was likely to value Vertical Aerospace, which is targeting its first commercial flights in 2014, at close to $2bn.
It will tap into a growing investor frenzy in the area of urban air mobility (UAM) as governments and transport and infrastructure groups grapple with the future of travel in a decarbonising world.
Bristol-based Vertical Aerospace was conceived as a zero-carbon aviation pioneer by Mr Fitzpatrick, who is regarded as having assembled one of the leading teams in the industry.
The business is run by Michael Cervenka, a former Rolls-Royce executive.
It will be the latest UK-headquartered company to snub a London flotation by tapping into the frenzy of US-listed special purpose acquisition companies (SPACs).
Earlier this year, Cazoo, the used-car digital marketplace founded by Alex Chesterman, announced a merger with a SPAC involving prominent US tech entrepreneurs.
The decision to list Vertical Aerospace in New York will be particularly pointed because the deal involves two of Britain’s best-known entrepreneurs in Mr Fitzpatrick and Mr Osmond, and a potential British engineering export champion in the form of Vertical Aerospace.
As a result, the merger is likely to reinforce concerns about the depth of the UK capital markets, and UK-based investors’ willingness to back tech companies which require large amounts of long-term capital in order to deliver their commercial potential.
The government and City regulator are pressing ahead with reforms to the London SPAC rules, but they will not be implemented in time to compete for many of the current wave of tech companies pursuing public listings.
In March, Vertical Aerospace announced an engine supply partnership with Rolls-Royce Holdings that will see the Derby-based group powering its fleet of aircraft.
Vertical Aerospace vehicles will be capable of carrying four passengers for 120 miles at cruise speeds of up to 200mph, according to the company.
Mr Cervenka said at the time that the alliance demonstrated that Vertical Aerospace was “well-positioned to develop the world’s leading eVTOL aircraft, certified to the highest [regulatory] CAA and EASA safety standards being set globally”.
Honeywell, the US aerospace group, is also a partner of Vertical Aerospace.
Insiders said the capital-raising required to complete the merger between Broadstone and Vertical Aerospace was in the process of being finalised.
If concluded, the deal will see Vertical Aerospace becoming the latest in a string of next-generation aviation companies to list through a combination with a SPAC.
The others include Joby Aviation, a California-based electric vertical take-off and landing (eVTOL) aircraft developer, which went public earlier this year by merging with a vehicle set up by Reid Hoffman
Archer and Lillium, two other vertical aviation start-ups, have engineered similar SPAC deals in recent months.
EASA, the European aviation safety regulator, recently published a report predicting that by 2024-25, urban air mobility “may be a lived reality in Europe”.
For Mr Osmond, the merger will represent a high-profile return to blank cheque dealmaking in the wake of a choppier market for such SPAC mergers.
Nevertheless, in recent weeks, the American investor Bill Ackman has unveiled plans to acquire a stake in Universal Music Group at an implied valuation of more than $40bn, while private aviation provider Vista Global is also in talks about a SPAC deal.
Broadstone raised just over $300m last autumn, and is expected to raise a further sum as part of the PIPE – private investment into public equity – required to complete the Vertical Aerospace deal.
Mr Osmond became a prominent figure in British business after taking control of PizzaExpress in 1993 with Luke Johnson, another businessman who went on to transform the fortunes of a series of high street dining chains.
The duo, who paid about £20m for the business, took PizzaExpress public, turning it into a stock market darling, with Mr Osmond stepping down from the board after it hit a £500m market capitalisation.
Among Mr Osmond’s other major deals was the establishment of Punch Taverns, which he created in 1997 by acquiring Bass’s estate of leased pubs and combining it with the £2.75bn takeover of Allied Domecq’s pubs business.
He also made a significant impact on the UK insurance market, using a listed shell to snap up Pearl and Resolution and create what became Phoenix Group, Europe’s biggest consolidator of life policies.
A rare blip for the tycoon came in the form of APR Energy, a temporary power generator, which Mr Osmond took control of through another cash shell, called Horizon Acquisition.
After combining with GE’s equivalent operation in 2013 – while APR’s shares were still trading at a premium to their listing price – the company was engulfed by crisis in Libya, where it operated.
It was eventually taken private at a huge discount in 2015.
Barclays and Citi are understood to be working on the Broadstone-Vertical Aerospace deal, according to banking sources.
Spokesmen for Broadstone and Vertical Aerospace declined to comment.