The SPAC transaction values the combined company at just over $1 billion in enterprise value.
Sandbridge Acquisition Corp. will bring $230 million to the deal raised through its SPAC public offering last fall. The vehicle is a partnership between Sandbridge Capital and Newport Beach-based asset manager Pacific Investment Management Co., or PIMCO.
SPACs are shell companies that function as investment vehicles. They have no operations of their own and are primarily used to raise funds from the public markets. Managers then use the funds to target and acquire a private company interested in going public through a reverse-merger transaction.
A private placement in public equity, or PIPE, following the merger will add another $130 million to the transaction. The companies expect Owlet to net roughly $325 million in cash on its balance sheet following the deal’s close.
Based in Utah, Owlet launched eight years ago and sells a baby-monitoring Smart Sock, camera and connected mobile app. The company’s goal is to become a “connected nursery ecosystem,” with a range of smart baby products linked through its software, according to Sandbridge Capital co-founder and Managing Partner Ken Suslow.
“We see these anchor products as being this ‘Trojan Horse,’ as it were, to building that connected nursery ecosystem, with substantial digital telehealth optionality in the future,” Suslow said.
Owlet made $75 million in revenue last year, according to the company, up 50% from 2019. It also achieved profitability in the last two quarters of 2020, according to Suslow — although he declined to provide specific income figures.
Suslow added that Owlet was already on track to go public before his firm met the company to discuss the possibility of a SPAC deal. The company’s loyal customer base and head start in the “connected nursery” space leave it poised for accelerating growth in the years ahead, according to Suslow.
“We believe (Owlet) will expand substantially more than 50% (in annual revenue) in the future,” Suslow added.
Suslow will also be focused on helping Owlet expand. “We have taken a number of brands to Asia,” he said. “If you are a growth brand, you really need to get to China.”
Sandbridge elected to receive 50% of its promote — the main compensation received by SPAC sponsors — in the form of earnouts, according to Suslow. The firm also agreed with other investors to an extended lockup, the period of time that shares in the company must be held before being sold.
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