Ex-Apollo Hand Launches Blank Check Co.

Firm: Marathon Acquisition Corp.

IPO Target: $280 million

Bookrunning manager: Citigroup Global Markets

Legal Counsel: Marathon: Sutherland Asbill & Brennan LLP

The climb to respectability has not been easy for special purpose acquisition companies (SPAC) or their cousins the “blank check” vehicles. Michael Gross’s entry into the market, however, could change that.

The Apollo Management co-founder, who in February left his post as head of the firm’s Apollo Investment affiliate (a business development company), has filed to launch his own “blank check” vehicle, seeking roughly $280 million for the New York-based Marathon Acquisition Corp.

Gross, who’s investing directly into the new entity, has also enlisted the help of Adam Aron and Martin Franklin, who will serve as directors. Aron left his position as chairman and chief executive of Vail Resorts the same month Gross exited Apollo, while Franklin remains the chairman and CEO of consumer products outfit Jarden Corp., a portfolio company of Warburg Pincus.

Marathon’s mandate sounds similar to that of nearly any generalist buyout fund. According to the firm’s registration statement, Marathon’s efforts “will not be limited to a particular industry,” as the company “intends to focus on various industries and target businesses in the United States and Europe that may provide significant opportunities for growth.”

Citigroup Global Markets is serving as sole book-running manager of Marathon’s offering, while Ladenburg Thalmann & Co. will assist with the underwriting. Sutherland Asbill & Brennan LLP is providing legal counsel in connection with the offering.

Following the IPO, and assuming that the underwriters do not exercise the over-allotment option, Gross, Aron and Franklin would own a combined 20% of the outstanding shares of common stock.

An interesting note within the filing stated that “none of [Marathon’s] officers and directors are required to commit their full time to [the company’s] affairs.”

Up until Gross’s arrival, many in the industry have viewed SPACs as either a last refuge for, or a first step into, private equity. Apple cast-off Ellen Hancock and Robert Hellman, the head of McCown De Leeuw, are among those to raise these vehicles.

Gross, however, brings some cachet to the fledgling “blank check” market place. He was at Apollo Management in 1990 and helped spearhead its launch. He also founded the firm’s debut business development company, Apollo Investment Corp. The BDC raised $930 million in a 2004 IPO and spawned multiple copycat vehicles in the months that followed. Gross also spent three years as a managing partner of the firm’s distressed debt fund.

For the not-yet initiated, a SPAC is essentially an empty holding company that is floated publicly with the sole purpose of buying a private business through a reverse merger. Most SPACs and “blank check” companies dedicate around 80% of an IPO’s proceeds to the purchase, which generally has to be made within 18 to 24 months of the offering.

The market for SPACs has been growing rapidly, and following a slew of launches last year, SPAC-led mergers have slowly started trickling in. This past March, for example, Services Acquisition Corp. International agreed to buy San Francisco-based drinks company Jamba Juice for around $265 million. Services Acquisition Corp. is headed by Steven Berrard, the former chief of Blockbuster Entertainment Group and Autonation.—K.M