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Flags fly in front of a Veterans of Foreign Wars building in Columbus, Georgia, U.S. September 8, 2020.

NEW YORK, Nov 4 (Reuters Breakingviews) – Coffee energizes some people, and makes others anxious. For Black Rifle Coffee, a roaster run and founded by U.S. military veterans that’s merging with a special-purpose acquisition company called SilverBox Engaged Merger Corp I (SBEA.O), that’s sort of the point read more . It’s the kind of thing SPACs were made for.

The company led by Evan Hafer, himself a veteran, sells coffee in stores like Walmart (WMT.N) and 7-Eleven, runs its own coffee shops, and sells online, including to 270,000 subscribers. Sales doubled last year to $164 million and are expected to grow 40% this year. While it doesn’t expect to be profitable for the next two years, a gross margin of around 40%, larger than Starbucks’ (SBUX.O), shows it can charge a premium.

Hiring veterans ought to be an ESG-plus, too. The level of workforce participation by veterans was three-quarters that of the U.S. population overall in September, according to the Bureau of Labor Statistics. About half of Black Rifle Coffee employees are veterans or veteran spouses. That plays to an issue companies from JPMorgan(JPM.N) to Salesforce.com(CRM.N) have embraced.

Beyond that, things get complicated. Black Rifle sells coffee, not rifles, but in a traditional initial public offering, its name, and direct appeal to fans of military-style civilian firearms, would be likely to spook underwriters and investors trying to do less business with gunmakers. Hafer had to publicly distance his business from a man currently on trial for charges related to a shooting in Kenosha, Wisconsin last year.

Nonetheless, provocation is a feature, not a bug for a company that sells rifle-themed mugs marketed as a way to scare off workplace “snowflakes.” Even as a public-benefit company, a designation that lets Hafer consider goals other than shareholder value, many large institutions might shy away from the brand’s associations.

A SPAC looks like a smart solution. Blank-check firms are designed to cut out some of the usual middlemen and make it easier for quirky, fast-growth companies to find equity investors more directly. At $1.7 billion, Black Rifle Coffee’s enterprise value is just above 5 times next year’s sales, roughly a quarter higher than Starbucks according to Refinitiv. Thanks to SPACs, Hafer has found investors with as strong a stomach as his mug-toting customers.

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CONTEXT NEWS

– Black Rifle Coffee announced on Nov. 2 that it agreed to go public via a merger with special-purpose acquisition company SilverBox Engaged Merger Corp I. The deal values the coffee roaster at $1.7 billion and includes an investment of up to $300 million from Engaged Capital and other investors.

– The companies said in a presentation that Black Rifle Coffee is expected to have revenue of $230 million and a net loss of $12.1 million in 2021.

Editing by John Foley and Sharon Lam