DUET Acquisition Corp. (NASDAQ:DUET) has signed a business combination agreement with social media firm Fenix 360 at an enterprise value of $610 million.

Singapore-based Fenix 360 is developing an app-based social media platform designed for artists to better engage with fans and monetize interactions.

The combined company is expected to trade on the Nasdaq once the deal is completed in the first half of 2024.

Transaction Overview

DUET has an estimated $52.3 million in its current trust having seen 41.5% of its shares redeemed in an earlier extension vote. It currently can extend its transaction deadline up to January 24, 2024.

The SPAC is expected to acquire 100% of Fenix 360’s equity interests through the deal, but few other details have been made available on the transaction at this time. DUET’s profile page will be updated once it files additional merger documents and information.

Quick Takes: DUET is fishing closer to home with its second announced transaction both geographically and in terms of business type.

The SPAC’s Malaysia-based team initially set out to find a target in the Asia-Pacific region in the broadly big data, fintech or ecommerce fields. In particular, it liked the idea finding a middle market target with “enabling technology”, which could be turned into a platform for further acquisitions.

It announced its first combination with Spain-based AnyTech365 in July 2022, which provides an outsourced technical support-as-a-service subscriptions to small businesses.

One can see how other services eventually could have been folded into such a business model, and the parties set an initial 12-month outside date to get it completed. But, things fell apart before that point as the two sides terminated it in April 2023.

No explanation was given for the breakup, but it came two weeks before DUET lost about $37.2 million from its trust in an extension vote and the parties may have had some idea of the incoming figures on that front by that time.

At any rate, AnyTech365 was a smaller deal with a $287 million enterprise value. And, although DUET has found Fenix 360 on its more familiar Southeast Asian hunting grounds, it is a larger prey at $610 million that DUET is trying to take down with a smaller bullet in the form of its trust.

The notion that DUET aims to take over 100% of Fenix 360’s equity with just $52 million currently available is curious. Full buyouts via SPAC are unusual, but not completely novel.

In June, Metals Acquisition Corp. completed a near-full equity takeover of Glencore’s (LON:GLEN) CSA Copper Mine in Australia. Given that possible redemptions make trust values a moving target and finance markets are tight, it took a plethora of deal modifications tacking on new forms outside financing to make that deal finally possible.

DUET could be in for more of the same to make this transaction happen, unless Fenix 360 is going to be content with dilutive share issuances to fill in the gaps in value.

But, perhaps Fenix 360 would like some sort of an arrangement that distributes shares to its users. The company is designed to provide services that would allow artists of various genres to create their own apps and monetize social media engagement.

Fenix 360 asserts that the notion would be to have a decentralized network of interactions and monetization that would provide greater benefit to those creators. Structurally, this would surely be attractive for such users as many have seen pass-through revenue from places like Spotify sit far below traditional royalties.

For those artists, however, their best bet may still be going to the platforms that have the critical mass of user activity. What Fenix 360 is ultimately offering is a startup platform that may or may not have the cash on hand to drive the sort of marketing necessary to get the eyeballs and earbuds necessary for real revenue generation.

According to its website, Fenix 360 has been cultivating artists and brand ambassadors since before 2021 and has made regional trial launches in 2022. The main go-to-market and global launch is set to kick off this year, but it does not appear to have announced that launch just yet.

In the meantime, DUET has put out a preliminary proxy for an extension vote for a yet-unspecified date in 2023. For now, it hopes to gain the right to extend its deadline up to January 24, 2025 with monthly contributions to the trust of the lesser $40,000 or $0.04 per share.

So, while DUET likely needs more cash coming in to complete this deal, it may see some cash going out first.

ADVISORS

• Company
  • Lucosky Brookman LLP serves as legal counsel.
• SPAC
  • Nelson Mullins Riley & Scarborough LLP serves as legal counsel.