Investment materially improves AgroFresh’s
balance sheet and financial flexibility
Industry specific expertise provided through
Paine Schwartz Partners to help further AgroFresh’s execution of
its strategic growth and diversification initiatives
AgroFresh Solutions, Inc. (“AgroFresh” or the “Company”)
(Nasdaq: AGFS), a global leader in produce freshness solutions,
today announced that it has entered into an agreement to sell $150
million of newly issued convertible preferred stock to an affiliate
of Paine Schwartz Partners, LLC (“Paine Schwartz” or “PSP”), a
leading private equity firm focused exclusively on sustainable food
chain investing.
Jordi Ferre, AgroFresh Chief Executive Officer, commented,
“Today’s announcement is an important milestone for AgroFresh. Our
refinanced capital structure will be more appropriately balanced
for our business and will allow greater flexibility to drive our
diversification initiatives and put the Company in a position to
achieve its next chapter of growth. Furthermore, Paine Schwartz
brings deep domain expertise within the agriculture sector, which
we believe will complement our leadership team and Board
composition. We are excited to welcome them to our team and look
forward to their future contributions.”
Graham Miao, AgroFresh Chief Financial Officer, commented, “This
investment provides several significant benefits to our
shareholders and represents an important step toward achieving our
goal of optimizing the Company’s capital structure and meaningfully
deleveraging the balance sheet. As we continue to improve the
results of our operations, including cost optimization, this
strategic equity investment will create further financial
flexibility to generate growth.”
Kevin Schwartz, Chief Executive Officer and a founding Partner
of Paine Schwartz, stated, “Through our global investments in fresh
produce, Paine Schwartz has developed a long-standing thesis in
post-harvest technology. We are excited to target new opportunities
in the sector through this strategic investment in AgroFresh.
AgroFresh is a leading independent platform that has a diversified
network of direct customer relationships, a solutions-based service
offering and a leading post-harvest portfolio. We look forward to
working closely with Jordi, Graham and the team to enhance
operations, drive growth and create value.”
Proceeds from the preferred stock investment will be used to
repay a portion of AgroFresh’s existing debt. On a pro-forma basis
for the twelve months ended March 31, 2020, the Company’s net
debt-to-adjusted EBITDA ratio will decline from approximately 5.8x
to 3.8x.
Adjusted EBITDA and net debt-to-Adjusted EBITDA are non-GAAP
financial measures. Please see the information under “Non-GAAP
Financial Measures” below for a description of Adjusted EBITDA and
the table at the end of this press release for a reconciliation of
these Non-GAAP financial measures to GAAP results.
Terms of the Investment
On an as-converted basis, the preferred stock would initially
represent approximately 36% of AgroFresh’s pro-forma common shares
outstanding. In connection with the investment, AgroFresh would
expand the size of its Board of Directors to ten members, with PSP
initially designating two members of the Board.
PSP’s $150 million convertible preferred stock investment
carries a 16% dividend, with a minimum 8% payable in cash. The
preferred stock will be convertible into shares of AgroFresh common
stock at a conversion price of $5.00 per share, reflecting a nearly
100% premium to the Company’s 60-day volume-weighted average
closing price.
The PSP investment is subject to customary closing conditions,
including the receipt of required regulatory approvals, and is
contingent upon the successful refinancing of AgroFresh’s senior
secured credit facility. The Company currently anticipates closing
the PSP investment and the refinancing of its senior secured credit
facility early in the third quarter of 2020.
AgroFresh will file a Form 8-K with the Securities and Exchange
Commission containing additional information regarding the terms of
the convertible preferred stock.
BMO Capital Markets acted as sole financial advisor and
Greenberg Traurig, LLP acted as legal advisor to AgroFresh.
Evercore acted as sole financial advisor and Kirkland & Ellis
LLP as legal advisor to Paine Schwartz.
About AgroFresh
AgroFresh (Nasdaq: AGFS) is a leading global innovator and
provider of science-based solutions, data-driven technologies and
experience-backed services to enhance the quality and extend the
shelf life of fresh produce. For more than 20 years, AgroFresh has
been revolutionizing the apple industry and has launched new
innovative solutions in a variety of fresh produce categories from
bananas to cherries and citrus to pears. AgroFresh supports
growers, packers and retailers by supplying post-harvest solutions
across the industry that enhance crop values while conserving our
planet’s resources and reducing global food waste. Visit
www.agrofresh.com to learn more. ™Trademark of AgroFresh Inc.
About Paine Schwartz Partners
A global leader in sustainable food chain investing, Paine
Schwartz Partners is a private equity firm focused exclusively on
investment opportunities in the fast-growing, dynamic global food
and agribusiness sectors. The firm's investment, operations and
finance professionals invest throughout cycles across the food and
agribusiness value chain, and bring a collaborative and active
management approach to portfolio companies. For further
information, please see www.paineschwartz.com.
Forward-Looking Statements
In addition to historical information, this release may contain
“forward-looking statements” within the meaning of the “safe
harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. All statements, other than
statements of historical facts, included in this release that
address activities, events or developments that the Company expects
or anticipates will or may occur in the future are forward-looking
statements and are identified with, but not limited to, words such
as “will,” “would,” “anticipate”, “believe”, “expect”, “estimate”,
“plan”, “outlook”, and “project” and other similar expressions (or
the negative versions of such words or expressions).
Forward-looking statements include, without limitation, anticipated
timing and completion of necessary regulatory approvals, the
refinancing or any other conditions to closing, information
concerning the Company's possible or assumed future results of
operations, including all statements regarding financial guidance,
anticipated benefits from the investment by PSP, anticipated future
growth, business strategies, the Company’s ability to refinance its
existing indebtedness, competitive position, industry environment,
potential growth opportunities and the effects of regulation. These
statements are based on management's current expectations and
beliefs, as well as a number of assumptions concerning future
events. Such forward-looking statements are subject to known and
unknown risks, uncertainties, assumptions and other important
factors, many of which are outside the Company's management's
control that could cause actual results to differ materially from
the results discussed in the forward-looking statements. These
risks include, without limitation, the risk of increased
competition, the ability of the business to grow and manage growth
profitably, the ability to consummate the preferred equity
investment and/or to effect the refinancing of its existing senior
credit facility, risks associated with acquisitions and
investments, changes in applicable laws or regulations, conditions
in the global economy, including the effects of the coronavirus
outbreak, and the possibility that the Company may be adversely
affected by other economic, business, and/or competitive factors.
Additional risks and uncertainties are identified and discussed in
the Company's filings with the SEC, which are available at the
SEC's website at www.sec.gov.
Non-GAAP Financial Measures
This press release contains the non-GAAP financial measures
adjusted EBITDA and net debt-to-adjusted EBITDA. The Company
believes these non-GAAP financial measures provide meaningful
supplemental information as they are used by the Company's
management to evaluate the Company's performance, including
incentive bonuses and for bank covenant reporting. Management
believes that these measures enhance a reader's understanding of
the operating and financial performance of the Company and
facilitate a better comparison between fiscal periods. EBITDA
excludes income taxes, interest expense and depreciation and
amortization, whereas Adjusted EBITDA further excludes items that
are non-cash, infrequent, or non-recurring, such as share-based
compensation, severance, litigation and M&A related costs, to
provide further meaningful information for evaluation of the
Company’s performance.
The Company does not intend for the non-GAAP financial measures
contained in this release to be a substitute for any GAAP financial
information. Readers of this press release should use these
non-GAAP financial measures only in conjunction with the comparable
GAAP financial measures. Reconciliations of the non-GAAP financial
measures used herein to the most comparable GAAP measure are
provided in the table at the end of this press release.
The following table sets forth the non-GAAP financial measures
of EBITDA and Adjusted EBITDA. The Company believes these non-GAAP
financial measures provide meaningful supplemental information as
they are used by the Company’s management to evaluate the Company’s
performance (including incentive bonuses and for bank covenant
reporting), are more indicative of future operating performance of
the Company, and facilitate a better comparison among fiscal
periods. These non-GAAP results are presented for supplemental
informational purposes only and should not be considered a
substitute for the financial information presented in accordance
with GAAP.
The following is a reconciliation between the non-GAAP financial
measures of EBITDA and Adjusted EBITDA to their most directly
comparable GAAP financial measure, net loss:
(in thousands)
Last Twelve Months
ended March 31, 2020
GAAP net loss including non-controlling
interests
$
(52,739
)
Benefit for income taxes
(20,387
)
Interest expense(1)
32,005
Depreciation and amortization
82,972
Non-GAAP EBITDA
$
41,851
Share-based compensation
2,945
Asset impairment including
intangibles(2)
11,424
Severance related costs(3)
597
Other non-recurring costs(4)
7,296
Loss on foreign currency exchange(5)
3,081
Mark-to-market adjustments, net(6)
(520
)
Legal recovery
(1,600
)
Non-GAAP Adjusted EBITDA
$
65,074
Ratio of net debt to Adjusted
EBITDA
March 31, 2020
Pro Forma
Adjustment(7)
Pro Forma March 31,
2020
Gross debt
$
406,420
$
—
$
406,420
Less: available cash
(28,300
)
(131,000
)
(159,300
)
Net debt
$
378,120
$
(131,000
)
$
247,120
Net debt-to-Adjusted EBITDA
ratio
5.8x
3.8x
(1)
Interest on the term loan, inclusive of
accretion for debt discounts, debt issuance costs and contingent
consideration
(2)
Impairment on Verigo software, investment
in FFT and other investments
(3)
Severance costs related to ongoing cost
optimization initiatives
(4)
Costs related to certain professional and
other infrequent or non-recurring fees, including those associated
with transition service agreement, litigation and M&A related
fees
(5)
Loss on foreign currency exchange relates
to net losses and gains resulting from transactions denominated in
a currency other than the entity's functional currency
(6)
Non-cash adjustment to the fair value of
contingent consideration related to Tax Receivables Agreement with
Dow and Tecnidex acquisition
(7)
Represents proceeds from convertible
preferred stock investment from Paine Schwartz Partners, less
expenses
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200615005156/en/
For AgroFresh Solutions, Inc. Jeff Sonnek - Investor Relations
ICR Inc. Jeff.Sonnek@icrinc.com 646-277-1263
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