ClimateRock (NASDAQ:CLRC) has entered into a definitive agreement to combine with GreenRock for about $446 million in share compensation.

Transaction Overview

ClimateRock has about $26.8 million in its current trust having seen about 67.3% of its shares redeemed in an earlier extension that gives it the right to push its transaction deadline to May 2. It has not yet supplemented this with other committed capital.

GreenRock shareholders are to receive 44,685,000 shares, but 16,685,000 (37.3%) of these are to be held in escrow and be subject to earnout hurdles. These are to be released to company shareholders if its adjusted EBITDA for the 2024 fiscal year exceeds $38.85 million and will be forfeit if it generates les than $24.3 million.

If adjusted EBITDA for the year finishes in between these two points then investors will receive a number of shares proportionate two the difference between them.

The SPAC must maintain at least $15 million in cash available in order for the deal to close.

The parties have not yet agreed to a lock-up and other details on the transaction will be added to ClimateRock’s profile page as they are made public.

Quick Takes: Friday afternoon deal releases frequently come up short on details, but information on this transaction is remarkably short even by such standards.

GreenRock appears to have been set up by the ClimateRock’s renewable energy-focused team to serve as a vehicle listing certain assets through this transaction, but it is for now leaving investors guessing what those assets are.

This is perhaps not a great surprise as ClimateRock kept details on its earlier announced business combination with Eco Energy World similarly close to the vest.

The SPAC ultimately released an investor presentation on the Eco Energy World transaction, but only seven months after the deal was announced.

Its terms required ClimateRock to provide at least $40 million in cash proceeds, but was terminated on November 30 because the closing conditions had not been met or waived in time for the deal’s outside date two months earlier.

Although it has made a quick shift to this new transaction, many SPAC deals with internally incubated merger candidates have found the deals trickier to close than their sponsors may have anticipated.

Alpine Acquisition listed itself in August 2021 with the stated intention of combining with the sponsor’s hospitality company Two Bit Circus. It formally announced that deal nine months later, but wound up liquidating after adjourning its completion vote a number of times.

Quantum FinTech (NYSE:ATCH) has gotten further in advancing its merger of affiliate AtlasClear with two targets and itself, securing shareholders approval on November 6, but getting to close has been more elusive and it is still pending.

As with ClimateRock, this was Quantum Fintech’s second announced deal, and both teams may have determined that internal negotiations were preferable to hammering out an outside deal. Getting outside investors to come along for the ride appears to have been the more difficult aspect.

Nonetheless, ClimateRock’s deal terms indicate some confidence in the business it has chosen with much of the consideration subject to positive EBITDA performance thresholds in the near term.

To that point, ClimateRock CEO Per Regnarsson criticized some of the deal trends from earlier in the SPAC cycle in a January 2023 interview with S&P Global.

“We’re now in SPAC 2.0 where things are being much more regulated and governed,” he told the publication. “There was a lot of money going into these [targets] … with no revenues, no cash flows and just a lot of promises. Now it’s about investing in cash-flowing activities.”

Investors have yet to see the specific promises ClimateRock is making in this case.