SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL)
(TSX:SOY), a leading global company focused on plant-based foods
and beverages, fruit-based foods and beverages, and organic
ingredient sourcing and production, today announced that it had
successfully closed a US$30 million preferred equity financing. As
originally announced on April 16, 2020, the Company entered into a
financing agreement with funds managed by Oaktree Capital
Management, L.P. (“Oaktree”) and Engaged Capital, LLC (“Engaged”),
leading alternative investment management firms, which invest in
companies with strong, defensible franchises.
Under the agreement, Oaktree and Engaged have invested US$30
million in SunOpta in the form of exchangeable preferred shares and
have committed to include an additional US$30 million at the
Company’s option. Proceeds from the equity investment will be used
primarily to invest in the Company’s plant-based foods and
beverages business, principally to add capacity via capital
projects and to provide incremental liquidity given the current
general economic uncertainty.
Summary of the Financing
Oaktree and Engaged committed to purchase newly created Series B
exchangeable preferred shares to be issued by the Company’s
wholly-owned subsidiary, SunOpta Foods Inc. (the “Series B
Preferred”) in two tranches. The first tranche consists of US$30
million of Series B-1 Preferred and closed on April 24, 2020. The
Series B-1 Preferred issued in the initial closing is immediately
exchangeable into shares of the Company's common stock at an
initial exchange price of US$2.50 per share, which represents a 23%
premium to the closing price of US$2.03 per share on April 15,
2020. The Series B-1 Preferred constitutes 12.0 million shares
as-converted, and on an as-exchanged basis, an ownership level of
approximately 12.0% (excluding any conversion of the previously
issued 2016 Series A preferred shares) of the Company based on 88.3
million common shares outstanding.
In addition, the Company has the option to require that Oaktree
and Engaged purchase a second tranche of the Series B-2 Preferred
for up to US$30 million by giving notice to Oaktree and Engaged on
or before July 15, 2020. The initial exchange price of the Series
B-2 Preferred will be equal to a 30% premium to the 15-day volume
weighted average stock price through the trading day immediately
prior to the notice date, with an exchange price floor of US$2.00
per share and an exchange price cap of US$3.50 per share. Should
the full amount of the second tranche of US$30 million be issued by
the Company, the Series B-2 Preferred would constitute 8.6-15.0
million shares as-converted based on the US$2.00 to US$3.50
conversion price range, and on an as-exchanged basis, an
incremental ownership level of approximately 7.9-13.0% (excluding
any conversion of the previously issued 2016 Series A preferred
shares) of the Company based on 88.3 million common shares
outstanding.
Both the Series B-1 and B-2 Preferred (if issued) will initially
pay a cumulative dividend of 8% per year that may be paid-in-kind
or cash at the Company's option. At the end of the Company’s third
quarter in 2029, the dividend will increase from 8% per year to 10%
and will be payable only in cash. As part of the transaction, the
Company has committed to nominating a designee of Engaged to serve
on the Company’s Board, subject to certain conditions. Engaged has
the right to nominate one director candidate to the Company’s
Board. Oaktree continues to have the right to nominate two director
candidates to the Company’s Board.
Oaktree and Engaged will be entitled to vote the Series B
Preferred with the common shares on an as-exchanged basis, subject
to a permanent 19.99% voting cap. As a result of the voting cap,
each of Oaktree and Engaged will only be able to vote its Series B
Preferred to the extent that, when taken together with any other
voting securities it controls, such votes do not exceed 19.99% of
the votes eligible to be cast by all security holders of the
Company. Each of Oaktree and Engaged is also be subject to a
permanent exchange cap which will limit the number of common shares
issuable to it on its exchange of the Series B Preferred to the
extent such investor’s beneficial ownership following such exchange
would exceed 19.99% of the voting securities of the Company then
outstanding. In addition, Oaktree and Engaged have agreed to
protective covenants relating to a change of control of the
Company. The covenants prohibit joint action between Oaktree and
Engaged, and locking up (in the case of Engaged) or locking up or
tendering (in the case of Oaktree) to a change of control
transaction that has not been approved by a majority of the
independent members of the Board. Oaktree and Engaged are also
prohibited from any disposition that results in the acquirer
beneficially owning more than 19.99% of the Company’s then
outstanding common shares, subject to specified exceptions.
Immediately after closing, and disregarding the effect of the
exchange and voting caps on an as-exchanged basis, Oaktree would
own approximately 24.6% of the then-outstanding common shares and
Engaged would own approximately 15.6% of the then-outstanding
common shares.
Additional information regarding the terms of the financing will
be included in a Current Report on Form 8-K to be filed by the
Company with the Securities and Exchange Commission and a material
change report to be filed by the Company on www.sedar.com.
About SunOpta Inc.
SunOpta Inc. is a leading global company focused on plant-based
foods and beverages, fruit-based foods and beverages, and organic
ingredient sourcing and production. SunOpta specializes in the
sourcing, processing and packaging of organic, natural and non-GMO
food products, integrated from seed through packaged products; with
a focus on strategic vertically integrated business models.
About Oaktree
Oaktree is a leader among global investment managers
specializing in alternative investments, with $125 billion in
assets under management as of December 31, 2019. The firm
emphasizes an opportunistic, value-oriented and risk- controlled
approach to investments in distressed debt, corporate debt
(including high yield debt and senior loans), control investing,
convertible securities, real estate and listed equities.
Headquartered in Los Angeles, the firm has over 950 employees and
offices in 19 cities worldwide. For additional information, please
visit Oaktree's website at www.oaktreecapital.com.
About Engaged
Engaged Capital was established in 2012 by a group of
professionals with significant experience in activist investing in
North America and was seeded by Grosvenor Capital Management, L.P.,
one of the oldest and largest global alternative investment
managers. Engaged Capital is a limited liability company owned by
its principals and formed to create long-term shareholder value by
bringing an owner’s perspective to the managements and boards of
undervalued public companies. Engaged Capital manages approximately
$1 billion of assets and dedicates its efforts and resources
towards a single investment style, “Constructive Activism” with a
focus on delivering superior, long-term, risk-adjusted returns for
investors. Engaged Capital is based in Newport Beach,
California.
Forward-Looking Statements
Certain statements included in this press release may be
considered "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and
applicable Canadian securities legislation, which are based on
information available to us on the date of this release. These
forward-looking statements include, but are not limited to, our
expectation that the significant investments to be made in the
Company’s business will drive aggressive growth in 2021 and beyond,
our belief that the Series B Preferred financing provides the
highest risk-adjusted return among the options evaluated by the
Special Committee, and the anticipated closing date of the Series B
Preferred financing. Generally, forward-looking statements do not
relate strictly to historical or current facts and are typically
accompanied by words such as “expect”, “believe”, “anticipate”,
“continue”, “estimates”, “can”, “will”, “target”, "should",
"would", "plans", "becoming", "intend", "confident", "may",
"project", "potential", "intention", "might", "predict", “budget”,
“forecast” or other similar terms and phrases intended to identify
these forward-looking statements. Forward-looking statements are
based on information available to the Company on the date of this
release and are based on estimates and assumptions made by the
Company in light of its experience and its perception of historical
trends, current conditions and expected future developments
including, but not limited to, the Company’s actual financial
results; management’s assessment of the incremental capacity and
EBITDA to be realized from the capital projects for which the
proceeds of the financing will be used; current customer demand for
the Company’s products and the additional anticipated demand due to
COVID-19; general economic conditions; continued consumer interest
in health and wellness; the Company’s ability to maintain product
pricing levels; planned facility and operational expansions,
closures and divestitures; cost rationalization and product
development initiatives; alternative potential uses for the
Company’s capital resources; portfolio optimization and
productivity efforts; the sustainability of the Company’s sales
pipeline; the Company’s expectations regarding commodity pricing,
margins and hedging results; improved availability and field prices
for fruit; procurement and logistics savings; freight lane cost
reductions; yield and throughput enhancements; and labor cost
reductions. Whether actual timing and results will agree with
expectations and predictions of the Company is subject to many
risks and uncertainties including, but not limited to, the
inability to satisfy, or potential delays in satisfying, any of the
closing conditions applicable to the Series B Preferred financing
or the other debt financing alternatives that the Company is
pursuing; liquidity constraints and the availability of alternative
financing sources; potential loss of suppliers and customers as
well as supply chain, logistics and other disruptions resulting
from or related to COVID-19; unexpected issues or delays with the
Company’s structural improvements and automation investments;
failure or inability to implement portfolio changes, process
improvements, go-to-market improvements and process sustainability
strategies in a timely manner; changes in the level of capital
investment; local and global political and economic conditions;
consumer spending patterns and changes in market trends; decreases
in customer demand; delayed or unsuccessful product development
efforts; potential product recalls; working capital management;
availability and pricing of raw materials and supplies; potential
covenant breaches under the Company’s credit facilities; and other
risks described from time to time under "Risk Factors" in the
Company's Annual Report on Form 10-K and its Quarterly Reports on
Form 10-Q (available at www.sec.gov). Consequently, all
forward-looking statements made herein are qualified by these
cautionary statements and there can be no assurance that the actual
results or developments anticipated by the Company will be
realized. The Company undertakes no obligation to publicly correct
or update the forward-looking statements in this document, in other
documents, or on its website to reflect future events or
circumstances, except as may be required under applicable
securities laws.
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version on businesswire.com: https://www.businesswire.com/news/home/20200427005193/en/
Scott Van Winkle ICR 617-956-6736 scott.vanwinkle@icrinc.com or
Oaktree Contact: mediainquiries@oaktreecapital.com or Engaged
Capital Contact: Dan Gagnier, 212-687-8080 x226 Gagnier
Communications dg@gagnierfc.com
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