StoneMor Inc. (NYSE: STON) (“StoneMor” or the “Company”), a leading
owner and operator of cemeteries and funeral homes, announced today
that its board of directors (the “
Board”) has
received an unsolicited proposal letter (the
“
Proposal”), dated May 24, 2020, from Axar Capital
Management, LP (“
Axar”) proposing to acquire all
of the outstanding shares of common stock of the Company not owned
by Axar or its affiliates in a “going-private” transaction for
$0.67 per share in cash, subject to certain conditions. According
to the Proposal, the $0.67 per share price represents a premium of
approximately 17% to 50-day moving average share price as of the
market close on May 22, 2020.
Axar currently owns approximately 52% of the
Company’s outstanding common stock. Axar has engaged Schulte Roth
& Zabel LLP as its legal advisor for the proposed transaction.
According to the Proposal, the proposed transaction would not be
contingent on any financing and would be funded with equity from
Axar and its affiliates. The Proposal states that the proposed
transaction would be conditioned upon, among other things, the
negotiation and execution of mutually satisfactory definitive
agreements, which Axar proposed would contain terms customary for a
transaction of this type, including a closing condition that the
approval of holders of a majority of the outstanding Shares not
owned by Axar or its affiliates be obtained. A copy of the Proposal
is attached hereto as Annex A.
On May 26, 2020, the Board formed a special
committee (the “Special Committee”) consisting of
independent directors to consider and evaluate the potential
“going-private” transaction contemplated by the Proposal. The
Special Committee intends to retain independent legal and financial
advisors to assist in its review and evaluation of the proposed
transaction and has been authorized by the Board to reject the
proposed transaction or to recommend that the Board approve the
terms of the proposed transaction.
The Board cautions the Company’s stockholders
and others considering trading in the Company’s securities that the
Board has just received the Proposal and that neither the Board nor
the Special Committee has had an opportunity to carefully review
and evaluate the Proposal or make any decision with respect to the
Company’s response to the Proposal. There can be no assurance that
any agreement with respect to the proposed transaction will be
executed or that this or any other transaction will be approved or
consummated. The Company does not undertake any obligation to
provide any updates with respect to this or any other transaction,
except as required under applicable law.
The Company also announced that it entered into
a Common Stock Purchase Agreement on May 27, 2020 (the
“Purchase Agreement”) with affiliates of Axar
pursuant to which those affiliates agreed to purchase 23,287,672
shares of the Company’s common stock at a price of $0.73 per share,
an aggregate of $17.0 million. As previously reported, on April 1,
2020, the Company and Axar had entered into a letter agreement (the
“Axar Commitment”) pursuant to which (a) Axar
agreed to purchase 176 shares of the Company’s Series A Preferred
Stock (the “Preferred Shares”) for an aggregate purchase price of
$8.8 million, (b) the Company agreed to conduct a rights offering
pursuant which it would distribute purchase rights to its
stockholders which would represent the right to purchase shares of
common stock at a price equal to $0.73 per share and with aggregate
gross proceeds of not less than $17.0 million, (c) Axar agreed to
exercise its pro rata share of such rights in full (the
“Basic Rights”) and to tender the Preferred Shares
in payment of the subscription price therefor and (d) Axar further
agreed to purchase for cash such additional shares of common stock
offered in the Rights Offering for which stockholders other than
Axar did not exercise their subscription rights, including any
oversubscription rights, provided that Axar would not be obligated
to purchase more than 23,287,672 shares of common stock. Because
the Company’s common stock has been trading at a price less than
the $0.73 subscription price, the Board determined and Axar agreed
in the Purchase Agreement to amend the Axar Commitment to provide
for a direct purchase of the 23,287,672 shares of common stock and
avoid the expense of proceeding with the Rights Offering while
obtaining the same per share and aggregate purchase price
contemplated by the Axar Commitment. The $17.0 million purchase
price will be paid by delivering the Preferred Shares purchased on
April 3, 2020 and paying an additional cash purchase price of $8.2
million. The Company expects the transactions contemplated by the
Purchase Agreement to close in June 2020.
About StoneMor Inc.
StoneMor Inc., headquartered in Trevose,
Pennsylvania, is an owner and operator of cemeteries and funeral
homes in the United States, with 319 cemeteries and 88 funeral
homes in 27 states and Puerto Rico.
StoneMor’s cemetery products and services, which
are sold on both a pre-need (before death) and at-need (at death)
basis, include: burial lots, lawn and mausoleum crypts, burial
vaults, caskets, memorials, and all services which provide for the
installation of this merchandise. For additional information about
StoneMor Inc. please visit StoneMor’s website, and the investors
section, at http://www.stonemor.com.
CONTACT: |
Investor Relations |
|
StoneMor Inc. |
|
(215) 826-4438 |
Cautionary Note Regarding
Forward-Looking Statements
Certain statements contained in this press
release, including, but not limited to, information regarding
actions of the Special Committee, the terms of any definitive
agreements with respect to the Proposal and the anticipated timing
of closing under the Purchase Agreement, are forward-looking
statements. Generally, the words “believe,” “may,” “will,” “would,”
“estimate,” “continue,” “anticipate,” “intend,” “project,”
“expect,” “predict” and similar expressions identify these
forward-looking statements. These statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.
Forward-looking statements are based on
management’s current expectations and estimates. These statements
are neither promises nor guarantees and are made subject to certain
risks and uncertainties that could cause actual results to differ
materially from the results stated or implied in this press
release. Such risks and uncertainties include the risk that an
agreement with respect to the proposed transaction will not be
executed and that the transactions contemplated by any such
agreement that may be executed or by the Purchase Agreement will
not be consummated. When considering forward-looking statements,
you should keep in mind the risk factors and other cautionary
statements set forth in StoneMor’s Annual Report on
Form 10-K and Quarterly Reports on
Form 10-Q and the other reports that StoneMor files with
the Securities and Exchange Commission, from time to time. Except
as required under applicable law, StoneMor assumes no obligation to
update or revise any forward-looking statements made herein or any
other forward-looking statements made by it, whether as a result of
new information, future events or otherwise.
Annex A
May 24, 2020
Board of DirectorsStoneMor Inc.3600 Horizon BoulevardTrevose,
Pennsylvania 19053
Ladies and Gentlemen:
Axar Capital Management, LP (“Axar” or “we”) is pleased to
propose a transaction whereby we would acquire all of the
outstanding shares of common stock (“Common Stock”) of StoneMor
Inc. (the “Company”) not owned by Axar or its affiliates for an
amount equal to $0.67 in cash per share (the “Proposed
Transaction”). The proposed cash consideration represents an
approximately 17% premium to the Common Stock’s 50-day moving
average share price as of the market close on Friday, May 22, 2020.
In our view, the Proposed Transaction represents a fair price to
the Company’s stockholders.
The Proposed Transaction would allow the Company’s stockholders
to immediately realize value, in cash, for their investment and
provides the Company’s stockholders certainty of value for their
shares of Common Stock, particularly in light of the Company’s
ongoing equity capital requirements. These requirements include
additional funding until the Company’s turnaround strategy is
complete, as the cemetery business faces heightened challenges as a
result of the pandemic. The Company may also need to raise further
equity in the future to satisfy its bondholders and / or other
credit providers, with those equity raises likely to result in
significant dilution to the public stockholders.
In the last two years, Axar has been the only investor willing
to provide any significant amount of equity capital to the Company.
In the fall of 2019, we backstopped a rights offering of common
units by StoneMor Partners LP. Of the $40 million of rights offered
to the public, less than $4 million of the rights were exercised by
the public stockholders. More recently, this spring, in order to
obtain an indenture amendment to give the Company some breathing
room under its covenants, we agreed to support the Company in
raising $17.0 million of cash equity through the purchase $8.8
million of preferred stock of the Company (exchangeable for common
stock at $0.73 per common share) and the backstop of a rights
offering at $0.73 per share for $8.2 million of common stock. There
is little evident interest by public stockholders in the rights
offering, as the market price of the Common Stock has traded
substantially below the rights offering price since the day of the
rights offering announcement. Reducing the rights offering price to
at or below the current market price to induce the public to
support the company would result in significant additional dilution
of the public stockholders.
The Proposed Transaction would be conditioned upon, among other
things, the approval of the Board of Directors of the Company (the
“Board”) and the negotiation and execution of mutually satisfactory
transaction agreements.
As you are aware, Axar owns approximately 52% of the outstanding
Common Stock. In considering the Proposed Transaction, please note
that we have no current interest in selling the Common Stock we own
nor would we currently expect, in our capacity as an owner of
Common Stock, to vote in favor of any alternative sale, merger or
similar transaction involving the Company other than the Proposed
Transaction.
It is our expectation that the Board will appoint a special
committee of independent directors (a “Special Committee”) to
consider our proposal and make a recommendation to the full Board.
We will not move forward with the Proposed Transaction unless it is
approved by the Special Committee. We expect the Proposed
Transaction’s definitive agreements would contain terms customary
for a transaction of this type, including a customary closing
condition that the approval of holders of a majority of the
outstanding Common Stock not owned by Axar or its affiliates be
obtained. The Proposed Transaction will not be contingent on any
financing and will be funded with equity from Axar and its
affiliates. As you aware, Axar and its affiliates are a Permitted
Holder under the Company’s bond indenture and this transaction
would not trigger a Change of Control under such documents.
Axar has not had any substantive discussions or negotiations
with members of the Company’s management regarding their ability to
“roll” their shares or stock options, or regarding any changes to
existing employment agreements, equity incentive plans or benefit
arrangements, in connection with the Proposed Transaction. However,
at the appropriate time, we may explore, and discuss with
management, any or all such topics. Axar strongly supports the
existing executive management team and is hopeful this leadership
team will remain in place following the closing of the Proposed
Transaction.
As legally required, we will promptly file an amendment to our
Schedule 13D, including a copy of this letter, and as such, we
suggest the Company issue a press release regarding our proposal.
We expect to make our Schedule 13D filing after the closing of the
New York Stock Exchange on May 27, 2020.
In connection with this proposal, we have engaged Schulte Roth
& Zabel LLP as our legal advisor, and we encourage the Special
Committee to retain its own legal and financial advisors to assist
it in its review of the Proposed Transaction. We and our advisors
look forward to working with the Special Committee and its advisors
to complete a mutually acceptable transaction, and are available at
your convenience to discuss any aspects of our proposal or the
Proposed Transaction.
Should you have any questions, please do not hesitate to contact
us or our advisors.
Very truly yours,AXAR CAPITAL MANAGEMENT, LPBy: Axar GP,
LLC, its General Partner
By: /s/ Andrew M.
Axelrod
Name: Andrew
Axelrod
Title: Sole Member
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