DHC Acquisition Corp. (DHCA) to Combine with BEN in $358M Deal
by Nicholas Alan Clayton on 2023-09-08 at 9:34am

DHC (NASDAQ:DHCA) has entered into a definitive agreement to combine with marketing firm BEN at a pro forma enterprise value of $358 million.

Jackson, Wyoming-based BEN has developed AI-enhanced customer engagement services for enterprise clients in the automotive, healthcare and financial services sectors.

The combined company is expected to trade on the Nasdaq under the symbol “BNAI” once the deal is completed in the first quarter of 2024.

Transaction Overview

DHC has about $48 million in its current trust after seeing 85% of shares redeemed in earlier votes and it has until December 4 to complete a combination under its current deadline. BEN investor AFG has agreed to invest $6.5 million through a PIPE at $10 per share.

In connection with other strategic services, BEN plans to issue 1,750,000 shares and 3,750,000 warrants to AFG, the latter of which will vest based on revenue milestones met between the pair’s business relationship.

AFG will also purchase up to $26 million in shares after close at prices based on the VWAP of the combined company’s stock over 20 of 30 trading days with a $2.11 floor.

BEN expects to add $40 million to its balance sheet through the deal after paying $15 million in transaction expenses. DHC must maintain more than $5 million in cash available in order for the deal to close.

Assuming no further redemptions, BEN shareholders are expected to own 62.8% of the combined company with public DHC shareholders taking an 11.7% stake. AFG’s stakes through its PIPE and commercial incentives would combine for about 6% of total equity, while the SPAC’s sponsor would take a rather large 19.4% stake as its promote shares convert.

DHC’s sponsor is however expected to dangle up to 1,000,000 promote shares (12.9%) as incentives as a part of non-redemption agreements.

Company shareholders have agreed to a one-year lock-up but may be released early if company stock trades at or above $18 for 20 of 30 trading days at least 90 days out from close.

Quick Takes: AI may well become the new hot sector for SPAC deals, but there are important distinctions between targets in this arena and this week has ended with two deals that are quite different from one another.

Andretti (NYSE:WNNR) on Wednesday announced a combination with Zapata AI, a company with a focus on data-based generative AI aimed at improving efficiencies in industrial and other internal business processes. BEN, meanwhile, is very much an AI venture at the consumer end of the spectrum and that is something that pulls it in multiple directions.

The company was founded in 2018 and its CEO Michael Zacharski hopped on just last month according to his LinkedIn. BEN’s other major executive listed in its presentation materials, Global President Paul Chang, joined in June according to his page.

BEN’s primary product is essentially an animated chatbot that has improved comprehension and responses based on the feeds that each client has sorted through to date.

Many companies have some form of this in place, but BEN has placed a high value on the engagement it receives from its animated avatars that interact with customers featuring “a deeper level of comprehension, empathy & understanding”.

It cites surveys indicating four in five consumers prefer to interact with a chatbot with a face. But, a critic might describe this aspect of the business’ offerings as a better version of the Microsoft Word paper clip, circa 1997.

Nonetheless, its version is backed by 14 Korean and 13 US patents that have been alternately acquired and filed by BEN over the past five years that have amounted to 21 active patents with 19 pending. It estimates its addressable market at $10 billion going on $30 billion by 2028 with its initial target sectors being automotive service centers and car dealers, the healthcare sector and financial services.

It estimates about half of the total organizations potentially benefiting from its services fit into the auto category and it expects to lean on its investor AFG to help its rollout in this domain.

BEN is expecting hefty contracts from its clients however. It describes its lowest tier of enterprise relationship as generating $120,000 in ARR with no integration costs. But just up from that, it would charge $250,000 for a private cloud relationship with $480,000 in expected ARR and twice that for its full ring-fenced enterprise solutions.

The company has not yet released any financials on current revenue structures or contracts, and this feels somewhat aspirational. But, the wide range of AI software comps it has picked for itself in its materials trade at a range of 14.3x and 6.1x their 2023E revenue.

It notes that investors “will likely focus on forward revenue and gross profit multiples to account for growth” and that may be the case, but in general the public markets have appeared to have prized real-time cash generation in recent quarters. The pure-play AI sector may be an accelerant of its own, however.

DHC has already tried to match such trends with its first definitive agreement reached with GloriFi – a startup aiming to be essentially an anti-woke card payments company.

This fit the enthusiasm that de-SPACs with similar leanings had received in the case of Black Rifle Coffee (NYSE:BRCC), Rumble (NASDAQ:RUM) and the ever-pending Digital World (NASDAQ:DWAC) combination with Trump Media and Technology Group.

But, GloriFi wound up having more on paper than in operations and the deal officially folded in January.

Click here for the full investor presentation.


  • BEN Advisors:
    • Klehr Harrison Harvey Branzburg LLP and Haynes & Boone, LLP are acting as legal counsel
  • DHC Advisors:
    • Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC (“CCM”), is serving as exclusive financial advisor and lead capital markets advisor
    • Cooley LLP is acting as legal counsel
    • Evora Partners LLC is acting as advisor
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