Transformative Transaction to Simplify
Capital Structure, Lower Cost of Capital and Provide Greater
Financial Flexibility to Pursue Growth Initiatives
LSB Industries, Inc. (“LSB” or “the Company”), (NYSE: LXU), led
by a Special Committee of the Board of Directors representing the
disinterested stockholders of the Company (the “Special Committee”)
today announced that it has signed a definitive agreement (the
“Exchange Agreement”) with LSB Funding LLC, an affiliate of
Eldridge, to exchange the shares of LSB Series E-1 and Series F-1
Redeemable Preferred Stock held by Eldridge for shares of LSB
common stock. Under the terms of the agreement, LSB would exchange,
at the closing, approximately $300 million of preferred stock held
by Eldridge into an equivalent value of LSB common stock based on
an exchange price of $6.16, which is equal to the 30-day volume
weighted average price as of the date of the Exchange Agreement. In
connection with the transaction, existing unaffiliated LSB common
stockholders will receive a special dividend in the form of 0.30
shares of LSB common stock for every share owned as of the record
date.
Transaction Highlights:
- Eliminates the current financial impact and repayment of the
accrued compounding preferred stock and future accruing dividends
at 14.5% (increasing to 16.0% in April 2023) unburdening the
Company and unlocking shareholder value.
- The Special Committee, Board of Directors and LSB management
believe this could lead to a rating upgrade potentially allowing
the Company to refinance its senior secured notes at a lower
interest rate and on improved terms, which would reduce its cash
interest expense and overall cost of capital.
- Improves the Company’s financial flexibility allowing it to
pursue organic growth initiatives, including in green ammonia and
clean energy and accretive M&A opportunities.
- Preserves the Company’s significant tax attributes, including
approximately $620 million of federal net operating losses, thereby
protecting potentially significant future cash savings and
stockholder value.
Mark Behrman, LSB’s President and CEO, stated, “The Special
Committee, the Board of Directors and management believe that the
exchange of our outstanding Series E-1 and F-1 preferred stock for
LSB common stock relieves the Company and our common stockholders
from the expensive, compounding burden of the payment-in-kind
dividend this preferred stock carries. This measure not only
improves our current capital structure but, we believe, combined
with the favorable credit markets will allow us to refinance our
senior secured notes on more favorable terms than our current
senior secured notes and provide us with the financial flexibility
needed to grow our business organically and through strategic
M&A; while maintaining our significant federal net operating
losses which we believe we will start utilizing this year.”
“Over the last several years we have evaluated options to reduce
or eliminate our preferred stock. However, during that period, the
nitrogen chemical market pricing environment has not been helpful
as selling prices had been at multi-year lows. That prevented us
from generating sufficient free cash flow to make cash dividend
payments on the preferred stock and therefore caused the dividends
thereon to accrue at a compounded rate, which significantly
increased the preferred stock balance. While the nitrogen chemical
market pricing environment has significantly improved and we are
seeing selling prices that are now at multi-year highs, we are in a
commodity business where pricing can be volatile and change
quickly. As a result, we believe that now is an opportune time to
take these actions especially given our desire to refinance our
senior secured notes and our need for flexibility to take advantage
of numerous attractive organic growth opportunities, including the
emerging blue/green ammonia and clean energy markets. Additionally,
we regularly evaluate M&A prospects that we believe could be
accretive to earnings as a result of the increased scale and
expanded production capabilities that they would provide us. We
believe that the exchange of our outstanding Series E-1 and Series
F-1 preferred stock and the overall simplification of our capital
structure as well as the potential refinancing of our senior
secured notes will be a critical step in unlocking our ability to
take advantage of these opportunities.”
The LSB Board of Directors delegated authority to a committee of
its independent and disinterested directors with the mandate to act
in the interest of the disinterested holders of LSB’s common stock
with respect to LSB’s evaluation of potential business
opportunities, including potential transactions involving Eldridge.
The highly qualified, independent and disinterested directors have
been acting through the Special Committee and are empowered to act
in the interests of the holders of LSB common stock with respect to
any business opportunity that would require the holdings of
Eldridge to be modified, converted or exchanged other than pursuant
to the existing terms of the Securities Purchase Agreement dated
December 4, 2015, and other related agreements. Further, any such
change or action was irrevocably conditioned on both the approval
of the Special Committee and the affirmative vote of the
disinterested members of the Board of Directors and the affirmative
vote of a majority of the outstanding shares of common stock of the
Company held by disinterested stockholders.
The Special Committee is composed of Richard W. Roedel, former
Chairman and CEO of BDO Seidman LLP; Lynn F. White, former Vice
President, Corporate Development at CF Industries; Diana M.
Peninger, President & CEO of Reproductive Solutions; and
Richard S. Sanders, Jr. former Vice President of Manufacturing for
Terra Industries. Mr. Roedel and Mr. White led the Special
Committee as co-chairs.
In conjunction with its comprehensive evaluation of the exchange
transaction, the Special Committee:
- Retained independent financial advisor, Houlihan Lokey Capital,
Inc. and
- Retained independent legal counsel, Blank Rome
Completion of the exchange transaction is subject to a number of
customary closing conditions, including receipt of stockholder
approval from the holders of a majority of the shares of our
outstanding common stock not held by Eldridge or any of its
affiliates. LSB expects to file a preliminary proxy for a Special
Meeting of Stockholders and deliver additional information related
to the special meeting to stockholders within the next few weeks.
Results of the stockholder vote will be tabulated at the Special
Meeting of Stockholders expected to be held in the third quarter of
2021.
The Company is represented by its legal counsel, Ropes &
Gray LLP, and financial advisor, Jefferies LLC. Eldridge is
represented by WilmerHale.
About LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma,
manufactures and sells chemical products for the agricultural,
mining, and industrial markets. The Company owns and operates
facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor,
Oklahoma, and operates a facility for a global chemical company in
Baytown, Texas. LSB’s products are sold through distributors and
directly to end customers primarily throughout the United States.
Additional information about the Company can be found on its
website at www.lsbindustries.com.
About Eldridge
Eldridge invests in businesses across the Insurance, Asset
Management, Technology, Mobility, Sports & Gaming, Media &
Music, Real Estate, and Consumer landscapes. The firm seeks to
build and grow businesses led by proven management teams that have
demonstrated leadership and experience to scale an enterprise.
Eldridge is headquartered in Greenwich, Connecticut, with
additional offices in Beverly Hills, New York, and London.
Additional information about Eldridge can be found on its website
at www.eldridge.com
Forward-Looking Statements
Statements in this release that are not historical are
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements, which are subject to known and unknown risks,
uncertainties and assumptions about us, may include projections of
our future financial performance including the effects of the
COVID-19 pandemic and anticipated performance based on our growth
and other strategies and anticipated trends in our business. These
statements are only predictions based on our current expectations
and projections about future events. There are important factors
that could cause our actual results, level of activity, performance
or actual achievements to differ materially from the results, level
of activity, performance or anticipated achievements expressed or
implied by the forward-looking statements. Significant risks and
uncertainties may relate to, but are not limited to, our ability to
consummate the exchange transaction on the terms described herein
or at all, business and market disruptions related to the COVID-19
pandemic, market conditions and price volatility for our products
and feedstocks, as well as global and regional economic downturns,
including as a result of the COVID-19 pandemic, that adversely
affect the demand for our end-use products; disruptions in
production at our manufacturing facilities; and other financial,
economic, competitive, environmental, political, legal and
regulatory factors. These and other risk factors are discussed in
the Company’s filings with the Securities and Exchange Commission
(SEC).
Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time,
and it is not possible for our management to predict all risks and
uncertainties, nor can management assess the impact of all factors
on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Although we
believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
level of activity, performance or achievements. Neither we nor any
other person assumes responsibility for the accuracy or
completeness of any of these forward-looking statements. You should
not rely upon forward-looking statements as predictions of future
events. Unless otherwise required by applicable laws, we undertake
no obligation to update or revise any forward-looking statements,
whether because of new information or future developments.
No Offer or Solicitation
This communication is not intended to and shall not constitute
an offer to buy or sell or the solicitation of an offer to buy or
sell any securities, or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made, except by
means of a prospectus meeting the requirements of Section 10 of the
U.S. Securities Act of 1933, as amended, or an exemption from the
registration requirements thereof.
Additional Information about the Exchange Transaction and
Where to Find It
In connection with the proposed transaction, LSB intends to file
with the Securities and Exchange Commission ("SEC") a proxy
statement for the special meeting of LSB stockholders and may also
file other relevant documents with the SEC regarding the proposed
transaction. This communication is not a substitute for the proxy
statement or any other document that LSB may file with the SEC. The
definitive proxy statement (if and when available) will be mailed
to LSB stockholders. INVESTORS AND SECURITY HOLDERS ARE URGED TO
READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT MAY
BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO
THOSE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT LSB AND THE PROPOSED TRANSACTION. Investors and
security holders will be able to obtain free copies of the proxy
statement (if and when available) and other documents containing
important information about LSB and the proposed transaction, once
such documents are filed with the SEC through the website
maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by LSB may be obtained free of charge
on LSB’s website at www.lsbindustries.com or by contacting Michael
Foster, General Counsel and Secretary by email at
mfoster@lsbindustries.com or by phone at 405-510-3596
Participants in the Solicitation
LSB and certain of its directors and executive officers may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transaction. Information about the directors and
executive officers of LSB, including a description of their direct
or indirect interests, by security holdings or otherwise, is set
forth in LSB's proxy statement for its 2021 Annual Meeting of
Stockholders, which was filed with the SEC on April 19, 2021, and
LSB's Annual Report on Form 10-K for the fiscal year ended December
31, 2020, which was filed with the SEC on February 25, 2021. Other
information regarding the participants in the proxy solicitations
and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy
statement and other relevant materials to be filed with the SEC
regarding the proposed transaction when such materials become
available. Investors should read the proxy statement carefully when
it becomes available before making any voting or investment
decisions. You may obtain free copies of these documents from LSB
using the sources indicated above.
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version on businesswire.com: https://www.businesswire.com/news/home/20210720005682/en/
Company Contact: Mark Behrman, President & CEO Cheryl
Maguire, Executive Vice President & CFO (405) 235-4546
Investor Contact: The Equity Group Inc. Fred Buonocore,
CFA (212) 836-9607 Mike Gaudreau (212) 836-9620
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