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GSC SPAC acquires energy company for $1.3bn

The alternative asset manager’s blank cheque vehicle, formed last June, has purchased power plant operator Complete Energy Holdings, a TCW portfolio company.

The special purpose acquisition vehicle sponsored by alternative asset manager GSC Group, GSC Acquisition, has agreed a $1.3 billion (€836 million) deal for power company Complete Energy, roughly one year after raising $203.4 million through the public markets.

The Texas-based power plant operator is currently owned in part by the energy and infrastructure investment arm of TCW Group, an asset management firm affiliated with French banking giant Societe General. TCW, whose size stake in the company is undisclosed, expects to become GSC Acquisition’s largest shareholder with approximately 42 percent of the AMEX-listed company’s stock post-transaction. GSC Acquisition’s existing shareholders will own roughly 42 percent of the combined public entity.

If approved later this month by shareholders of the blank cheque vehicle, or SPAC, GSC Acquisition will issue roughly $440 million of new equity to Complete Energy’s current owners and assume approximately $627 million of net project-level debt.

GSC Acquisition, chaired by GSC founder Alfred Eckert, will also pay transaction expenses of $183 million and issue a $50 million mezzanine note.

The deal not only represents New York-based GSC’s expansion into the world of SPACs, but also signals a strategic shift toward energy for the distressed investing specialists.

Complete Energy owns and operates two natural gas-fired power plants: a 1,022-megawatt facility in La Paloma, California and an 837-megawatt facility in Batesville, Mississippi. The proposed acquisition values the La Paloma Plant, which serves the greater Southern California region, at $900 million, and the Batesville Plant at $400 million. The firm’s co-founders, Hugh Tarpley and Lori Cuervo, will continue as chief executive and president, respectively.

Blank cheque vehicles have become an increasingly popular investment tool for alternative asset firms as credit market turbulence roils the buyout industry. Despite the rising number of SPAC floats, GSC’s deal is noteworthy in that many SPAC analysts have noted a significant decline in the number of acquisitions, owing to an unfriendly market for mergers and acquisitions.

The size and volume of acquisitions completed by SPACS this year is set to decline 26 percent from 2007, according to investment bank Morgan Joseph’s projections. Several high-profile SPACs, including Good Harbor Partners Acquisition, Grubb & Ellis Realty Advisors, Harbor Acquisition and Oracle Healthcare, have also recently been forced to liquidate after they were unable to complete an acquisition within their respective target windows.