Prospector Capital Corp. (PRSR) to Combine with LeddarTech in $348M Deal

Prospector Capital (NASDAQ:PRSR) has entered into a definitive agreement to combine with autonomous driving technology firm LeddarTech at an equity value of $348 million.

Québec City-based LeddarTech is developing a software suite to help vehicles process information from sensors for autonomous and assisted driving platforms.

The combined company is expected to trade on the Nasdaq under the symbol “LDTC” once the deal is completed in the fourth quarter of 2023.

Transaction Overview

Prospector has about $23 million in its current trust having seen about 93.3% of shares redeemed in a January extension vote. It plans to supplement this with $43 million in a convertible private placement with participation from Prospector affiliate FS Investors, Investissement Québec, Desjardins Capital and BDC Capital.

The parties have not yet filed their merger documents or an investor presentation, but Prospector’s profile page will be updated once additional information is available.

LeddarTech CEO Charles Boulanger will retire when the transaction closes with President and COO Frantz Saintellemy slated to succeed him. Prospector Capital CEO Derek Aberle is to become the combined company’s chairman post-close.

Quick Takes: This is the second SPAC deal in as many months that has included a PIPE investment from Investissement Québec, the Canadian province’s fund for investing in local companies.

Direct state investment in SPAC deals is rare, but it is notable besides because these investments have been a part of the largest PIPEs of the year.

Stratim Cloud (NASDAQ:SCAQ) has pledged to include a PIPE of up to $120 million for its combination with Force Pressure, but has not yet announced contributions to this and already has structures in place to compensate the seller with shares for the extent this that this falls short.

So, setting it aside, 2023’s largest two PIPEs of the year are both attached to deals with Québec-based targets and include participation from Investissement Québec.

The other such transaction is Forbion Europe’s (NASDAQ:FRBN) combination with Montréal-based biotech firm enGene with a $56.9 million PIPE at $10.25 per share.

The province’s second largest pension fund, Caisse de dépôt et placement du Québec, was also set to be a seller in a rumored deal for security technology firm Allied Universal involving two Warburg Pincus SPACs and JAWS Estates Capital in 2022.

This unique SPAC ménage à trois ultimately was not consummated and the Warburg Pincus SPACs each liquidated in March. But, the more recent involvement of Québec’s state investment wing in ushering local companies to the US exchanges is a potential trend to watch.

The province has roughly the same population as Israel, which similarly translated some proactive state support into getting a run of its tech firms listed through SPACs in recent years.

LeddarTech in fact straddles these two jurisdictions with R&D centers in Tel Aviv in addition to offices in Québec City, Montréal and Toronto. But, its work with advanced driver assistance systems (ADAS) and autonomous driving (AD) does make it feel like a blast from the past early in this SPAC cycle.

What helps differentiate it from the many of ADAS/AD de-SPACs of the past few years is its focus on software rather than hardware, however. Many past deals propelled forward companies that were essentially lidar-makers with similar specs among their rigs.

As a result, some of these have already begun to consolidate post-de-SPAC like Ouster (NYSE:OUST), which merged with de-SPAC peer Velodyne Lidar in February.

But, LeddarTech is both sensor and processor-agnostic and could in theory be incorporated into any ADAS/AD build that carmakers are now testing and integrating into their coming vehicle designs.

That’s in theory, however. Proceeds from this transaction are to be used for “the commercialization of its first embedded software solutions” as well as expanding sales engagements and product lines.

As such, LeddarTech has not yet entered the proving ground that many of its ADAS/AD de-SPAC predecessors have. But, it has racked up 150 patents, 70 of which are pending, and it believes that its software-first approach could be a part of the next wave of development and deals in this space.

The nine lidar de-SPACs that closed deals between 2020 and 2022, meanwhile, last closed at a median price of $2.43, led still by Luminar (NASDAQ:LAZR) and Ouster (NYSE:OUST) at $6.86 and $5.82 respectively.

Luminar reported $14.5 million in revenue in the first quarter of 2023 and a book of orders of about $1 billion, thanks to being integrated into Volvo’s (ST:VOLCAR) upcoming EX90 model. It trades at 58.5x revenue.

Ouster, meanwhile, generated $17 million in revenue during this period albeit with $99 million in goodwill impairment charges and high operating costs as it sorted through its merger with Velodyne. It trades at a much more conservative 0.8x revenue.

ADVISORS

• Company
  • Stikeman Elliot LLP and Vedder Price PC are representing LeddarTech as legal counsel.
• SPAC
  • TD Cowen is serving as financial advisor to Prospector
  • Current Capital is serving as a financial advisor that provided a fairness opinion to Prospector’s board of directors.
  • Osler, Hoskin and Harcourt LLP and White & Case LLP are representing Prospector as legal counsel.