Drained of Cash, Buffalo Bills Owner’s SPAC Closes In on a Deal

(Bloomberg) — The cachet of Terry Pegula, owner of the National Football League’s Buffalo Bills, is such that even after his blank-check company returned the bulk of its cash to shareholders, it’s still an attractive deal partner.

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Abacus Life is pushing ahead with a merger with Pegula’s East Resources Acquisition Co., despite the fact that 92% of shareholders in the SPAC have swapped their stock for their money back. The remaining shareholders are likely to vote in favor of the deal with Abacus Settlements and Longevity Market Assets Thursday.

While the smaller amount of shares available for trading may cause Abacus to be volatile and will bring in less cash, at a time when many de-SPACs are tanking, it’s not a big enough concern to deter the life insurance asset manager. That’s because a pact with Pegula’s SPAC would raise awareness around the company, said Abacus’s chief executive Jay Jackson.

“To be able to secure an investor with the resources and experience in alternative assets and wealth management investment provides us a pretty significant opportunity,” Jackson said in an interview.

The Orlando, Florida-based company buys life insurance policies that holders no longer want to pay for. Instead of paying premiums until they die, the holders can get paid for their policies by Abacus at a market rate. Abacus buys policies from individuals as well as insurer partners, typically at a discount of about 20%.

Abacus is “cash-flow positive today,” offering investors exposure to an asset class that’s not correlated to the broader market, Jackson said. That puts it in “rarefied air as a growth company with actual net income.”

Standing Out

Abacus’ profitability stands out compared with the go-go days for special-purpose acquisition companies, which brought to market speculative companies that were years from generating revenue in some cases. Despite the growing pile of now bankrupt de-SPACs and companies trading below a $1 a share, a SPAC merger was more attractive than a traditional initial public offering given the experience of Pegula, who also owns the National Hockey League’s Buffalo Sabres, and his team, Jackson said.

It’s worth noting that Pegula’s SPAC initially set its sights on bringing an energy company public, assessing over 40 business associations within the sector, before pivoting to Abacus, said Adam Gusky, Chief Investment Officer of East Asset Management.

Abacus is “revenue, earnings, cash flow positive — that’s something you need in the SPAC market today,” Gusky said in an interview.

After more than two years of searching for a target, the company received a pair of six-month extensions from investors to give it enough time to complete the Abacus deal. But in buying that time, the SPAC saw more than 90% of its shares swapped for cash, with Thursday’s vote giving the remaining holders the opportunity to cash in their stock as well. That could further hamper the already dwindling pile of money going to Abacus.

SPAC Crisis

As part of the deal, both East Asset and Abacus equity holders will lock up 85% of their shares for a full 24 months, with the remainder locked for 12 months, a signal that the insiders are long-term investors, Gusky said.

Abacus is on pace to be the 38th SPAC to close a deal this year, while many others have thrown in the towel. Despite the broader stock markets rally, the median company to debut this year has erased 40% of its value with about one-fifth of newly public companies trading higher, data compiled by Bloomberg show.

Given the problems hitting SPACs, Gusky doesn’t anticipate East Asset pooling together investor cash for another blank check firm.

“It’s been a tough road for SPACs in general, so most likely no,” he said.