Cranbury-based Innophos Holdings, Inc., a leading international producer of essential ingredients, has entered into a definitive agreement with an affiliate of One Rock Capital Partners, LLC, a leading middle-market private equity firm, whereby One Rock will acquire all of Innophos’ outstanding shares for $32 per share in cash in a transaction valued at approximately $932 million, including the assumption of debt. The transaction has been unanimously approved by Innophos’ board of directors.
The offer price represents an 18% premium to the 30-trading day volume-weighted average closing share price of Innophos’ common stock ended September 9, 2019, the last trading day prior to published market speculation regarding a potential transaction involving the Company.
“After careful consideration and a thorough review of our strategic alternatives, including an outreach program to multiple potential financial and strategic partners over several months, the Board determined that a sale to One Rock is in the best interest of all of our stakeholders,” said Innophos Chairman, President and Chief Executive Officer Kim Ann Mink. “We remain confident that our transformational strategy is the right path forward for Innophos; however, executing on this strategy in an increasingly volatile macroeconomic and complex financial environment as a small-cap public company remains challenging and could take longer than initially expected. While we believe our long-term goals are achievable, we believe that the offer from One Rock is in the best interest of our stockholders as it will deliver immediate and certain value. We believe this transaction represents a winning proposition for all of our stakeholders, including our employees and customers.”
Tony W. Lee, managing partner of One Rock, commented, “Innophos’ innovative ingredient solutions are used by world-leading brands across a wide range of attractive food, health, nutrition and industrial markets. The company has a strong foundation and a transformative growth strategy. In drawing upon One Rock’s extensive experience, part of our goal is to maximize Innophos’ growth potential by continuing to expand its presence in high-growth food, health and nutrition markets, while further strengthening and optimizing its cash-generative core business. We look forward to working with Innophos to accomplish these goals and position the company for continued success.”
The definitive agreement includes a 30-day “go-shop” period, commencing immediately, during which Innophos, with the assistance of its legal and financial advisors, will solicit alternative acquisition proposals and potentially enter into negotiations with respect to alternative proposals. There can be no assurance that this process will result in a superior proposal or that any other transaction will be approved or completed. Innophos does not expect to disclose developments with respect to the solicitation process unless and until the Board makes a determination requiring further disclosure.
Under the terms of the definitive agreement, the Company has suspended the payment of all dividends.
The transaction will be financed through a combination of committed equity financing provided by affiliates of One Rock, as well as committed debt financing from several financial institutions.
The closing of the transaction is expected to occur in the first quarter of 2020, subject to stockholder and regulatory approvals and the satisfaction of customary closing conditions. Upon the completion of the transaction, Innophos will become a privately held company and shares of Innophos’ common stock will no longer be listed on any public market.
Lazard is acting as exclusive financial advisor to Innophos, and Baker Botts LLP is acting as its legal counsel. Latham & Watkins LLP is acting as legal counsel to One Rock, and RBC Capital Markets, LLC is acting as its financial advisor with respect to the transaction.
Innophos is announcing preliminary Q3 2019 financial results with expectations for revenue of approximately $190 million, net income of $6 – $7 million, EBITDA of $24 – $25 million, and Adjusted EBITDA of $29 – $30 million. These results are preliminary in nature, based upon information available to the Company as of the date of this release and are subject to further changes upon completion of the Company’s standard closing procedures. This update has not been reviewed or verified by the Company’s independent auditors.
Innophos plans to announce Q3 2019 financial results the week of November 4, 2019. Given the pending transaction, the Company will not host a Q3 2019 earnings call.
The non-GAAP financial measures in this news release are utilized by management to compare Innophos’ operating performance on a consistent basis. Management believes that these financial measures enhance the overall understanding of the Company’s underlying operating performance trends compared with historical periods. Non-GAAP financial measures should not be considered as a substitute for financial information calculated in accordance with GAAP. The Company has not included a GAAP reconciliation of its preliminary Adjusted EBITDA to net income because such reconciliation could not be produced without unreasonable effort. The Company will provide a full GAAP reconciliation of final Adjusted EBITDA when it reports its full third quarter 2019 results.
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