Virgin Galactic’s $1.5 Billion Merger with Social Capital Hedosophia

Credit Suisse acted as capital markets advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to SCH. M Klein and Company served as financial advisor to VG and Virgin Group for the merger with SCH. LionTree Advisors and Perella Weinberg Partners served as financial advisors to the company regarding its capital raising alternatives. Latham & Watkins LLP acted as VG and Virgin Group’s legal advisor.

Virgin Galactic (“VG”) and Social Capital Hedosophia (“SCH”), a public investment vehicle sponsored by Social Capital and Hedosophia, have approved a definitive agreement under which VG and SCH will merge, with the current shareholders of SCH expected to own up to approximately 49% of the combined company. Upon closing of the transaction, which is expected in the second half of 2019, VG will be introduced as the first and only publicly traded commercial human spaceflight company.

SCH (NYSE: IPOA) entered into a definitive agreement to combine with VG with a combination of stock and cash financing. The merged company will have an anticipated initial enterprise value of $1.5 billion implying a 2.5x multiple of 2023 projected revenue and a 5.5x multiple of 2023 projected EBITDA as commercial operations are expected to achieve scale. After the completion of the transaction, the majority of the net cash from SCH’s trust is expected to be held on VG’s balance sheet to fund operations and support continued growth.

In connection with the transaction, SCH’s founder has agreed to invest an additional $100 million at $10.00 per share at completion of the transaction. The selling equity owners of VG will receive $1.3 billion in total consideration, inclusive of $1.0 billion of common stock of the combined company valued at $10.00 per share and up to $300 million in cash consideration. Assuming no redemptions by the public shareholders of SCH, current VG shareholders and current holders of SCH will hold approximately 51% and 49% of the combined company, respectively, at closing.

The transaction is currently expected to be completed during the second half of 2019, subject to approval by SCH’s shareholders and other customary closing conditions.

The Skadden team includes: M&A partners Howard Ellin (Picture) and Christopher Barlow and associates Alexandria Robertson and Sean Coburn; Intellectual Property and Technology partners Stuart Levi and Bruce Goldner and associate Cristina Vasile; Tax partner Victor Hollender and associate Abigail Friedman; Capital Markets partners Gregg Noel (Palo Alto; Los Angeles) and Jonathan Ko (Los Angeles) and associate Robert Goldstein (Los Angeles); and National Security partner Ivan Schlager (Washington, D.C.), counsel Daniel Gerkin (Washington, D.C.) and associate Michelle Weinbaum (Washington, D.C.).

Involved fees earner: Christopher Barlow – Skadden Arps Slate Meager & Flom; Sean Coburn – Skadden Arps Slate Meager & Flom; Howard Ellin – Skadden Arps Slate Meager & Flom; Abigail Friedman – Skadden Arps Slate Meager & Flom; Daniel Gerkin – Skadden Arps Slate Meager & Flom; Bruce Goldner – Skadden Arps Slate Meager & Flom; Robert Goldstein – Skadden Arps Slate Meager & Flom; Victor Hollender – Skadden Arps Slate Meager & Flom; Jonathan Ko – Skadden Arps Slate Meager & Flom; Stuart Levi – Skadden Arps Slate Meager & Flom; Gregg Noel – Skadden Arps Slate Meager & Flom; Alexandria Robertson – Skadden Arps Slate Meager & Flom; Ivan Schlager – Skadden Arps Slate Meager & Flom; Cristina Vasile – Skadden Arps Slate Meager & Flom; Michelle Weinbaum – Skadden Arps Slate Meager & Flom;

Law Firms: Skadden Arps Slate Meager & Flom;

Clients: Social Capital Hedosophia Holdings Corp.;