VANCOUVER, BC, May 5, 2021 /CNW/ - good natured Products
Inc. (the "Company" or "good natured®")
(TSXV: GDNP), a North American leader in earth-friendly plant-based
products, today announced that, through wholly owned subsidiaries,
it has entered into definitive agreements (the "Definitive
Agreements") to acquire all of the operating assets of Ex-Tech
Plastics Inc. ("Ex-Tech"), a manufacturer of high quality, rigid
plastic sheets, and real estate assets owned by a related company
ETP Inc. for cash consideration of approximately $14.1 million USD (the "Acquisition").
Founded in 1982, Ex-Tech is located 90 minutes from Chicago in Richmond,
Illinois and produces a variety of plastic sheet and film
products, including extruded roll stock sheet for thermoformed
packaging. Ex-Tech operates seven different extrusion lines in a
dedicated 75,000 square foot facility on 9.5 acres of land.
Ex-Tech's 105 customers serve a diverse set of end markets,
including retail, food, and medical packaging. Customers are
primarily located in the midwestern and southwestern United States.
"We are extremely pleased to build on our long-standing
partnership with Ex-Tech that dates back well before March 2016 when we acquired Ex-Tech's bioplastic
division," said Paul Antoniadis, CEO
of good natured®. "The combined entity
positions us as one of North
America's leading commercial sheet extruders, serving over
200 thermoforming packaging companies across North America.
This acquisition firmly secures the Company's market positioning
within our industrial roll stock market segment, while setting the
stage for future expansion in production and manufacturing
capabilities."
Paul Antoniadis, CEO
of good natured® continued, "This
acquisition will significantly add scale to our operations and
follows the acquisition of IPF in December 2020. Ex-Tech's
FY2020 revenues were $25.8 million
USD or approximately $33
million CAD, and when added with IPF's trailing twelve month
revenue of $17.1 million CAD and with
our fiscal 2020 revenue of $16.7
million CAD, the Ex-Tech acquisition will nearly again
double the revenue of good natured®. We expect to
access cost synergies in terms of eliminating our existing
outsourcing agreement and from our additional scale of operations.
The Ex-Tech Acquisition represents good natured®
third acquisition in the last 12-months and demonstrates our team's
capability in executing on our acquisition growth strategy."
"We have witnessed firsthand, over the past several years, the
tremendous growth we've achieved with good
natured® and also benefited as material owners of
good natured®," said Emily Pichon, Chair and majority owner of
Ex-Tech. "We believe now is the perfect time for the two companies
to fully integrate. Given the significant growing demand for
environmentally responsible materials and the greater scale and
influence we can achieve together, combining forces creates
tremendous value in our industry, as well as for all of us as
owners. Our family believes in the strategy and business model of
good natured® and intends to hold our
approximately 5 million shares in good
natured®."
Key Highlights of the Acquisition:
- Ex-Tech generated revenue of approximately $25.8 million USD and net income of approximately
$1.5 million USD in the calendar year
ended December 2020 (or
"FY2020")
- Ex-Tech generated unaudited variable gross margin rate of
approximately 30% and gross margin rate of approximately 21% in
FY20201.
- Adds 105 business-to-business ("B2B") customers, growing the
Company's B2B segment to a total of approximately 600
customers
- Adds between $11.0 and
$13.0 million USD (unaudited) of
total assets to the Company's balance sheet
- Ex-Tech delivered FY2020 EBITDA2 of approximately
$2.6 million USD
- The current management team operating Ex-Tech will be joining
the good natured® team
- Highly strategic and synergistic acquisition that is expected
to be immediately accretive to shareholders on an adjusted EBITDA
basis
- Expected to provide synergies of approximately $1.0 to $1.2 million
USD in the twelve months following the close of the
acquisition
- $3.25 million USD in net working
capital acquired at closing
- Includes real estate with a current appraised value of
approximately $4.25 million USD,
resulting in a net price for the business and operating assets of
$9.87 million USD
- The Company will begin accounting for 100% revenue and
financial results from the acquired Ex-Tech business concurrent
with closing which is expected later in May
2021
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1
|
Variable gross margin
is a non-IFRS measure and represents gross margin excluding fixed
production costs such as depreciation, repairs and maintenance,
utilities and similar overhead items"
|
Key Strategic Highlights:
- Capacity to produce compostable ("PLA") and plant-based PET
(Bio-PET) roll stock to support organic growth and conversion of
existing and future petroleum-based acquisition targets
- Significant potential for capacity and / or manufacturing
capability expansion, with available land to add a 40,000 square
feet facility and infrastructure at the existing facility in place
to support additional extrusion and or thermoforming production
lines, along with warehousing
- Minor customer overlap between Ex-Tech and Integrated Packaging
Films that was acquired in December
2020, with the potential to open additional cross-selling
opportunities
- Centrally located just 90 minutes outside of Chicago in Richmond,
Illinois along major shipping corridors to provide easy
access across much of the United
States
- Ex-Tech's facility includes 42 million pounds of annual
production capacity on an annual basis and growth potential to
approximately 60 million pounds with the addition of one standard
high speed extrusion production line for which there is space and
infrastructure available
- Opportunity to divest books of business that are not compatible
for material transition to plant-based materials to support
re-investment
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2
|
EBITDA is a non- IFRS
financial measure and does not have any standardized meaning
prescribed by IFRS-IASB. See 'Non- IFRS financial measures' in this
news release.
|
Financing Details
The Company anticipates arranging
the following financing to complete the Acquisition and related
integration costs:
- $5.0 million USD term loan from a
Canadian financial institution
- $2.8 million USD mortgage with a
US regional bank to support the acquisition of the real estate at
Ex-Tech
- $6.3 million USD in cash from the
Company's treasury
The financing above may be put in place prior to, or following
the closing of the Acquisition. The Company may complete the
Acquisition with cash from treasury if circumstances warrant.
The Acquisition is subject to customary closing conditions,
including TSX Venture Exchange approval.
Term Loan
The Company is in the process of
negotiating a $5.0 million USD term
loan from an independent Canadian financial institution at
competitive market terms.
Debt Financing Facilities from US Regional Bank
The
Company is in discussions with a US regional bank to provide a
$2.9 million USD mortgage to support
the real estate at Ex-Tech. The financing is subject to negotiating
and settling final documentation with the bank.
Further Details on the Acquisition
The Acquisition is
an arms' length transaction. The Definitive Agreement was signed on
May 4, 2021 and includes an outside
date for closing of June 30, 2021
(the "Outside Date"), subject to extension by mutual consent of the
parties.
Acquisition Conference Call
To provide more details
on the Acquisition and related financings, the Company is pleased
to host a conference call with Paul
Antoniadis, Executive Chair & CEO, and Don Holmstrom, Executive Vice President of
Corporate Development, Strategic Partnerships and Capital Planning,
on May 5, 2021 at 12:00 PM Eastern / 9:00 AM
Pacific time.
Date: May 5, 2021
Time: 12:00 PM EST / 9:00 AM PST
Toll-Free: 1-833-900-2239
International: +1 (236) 712-2470
Conference ID: 3051738
Participants are asked to dial in 10 minutes prior to the start of
the call.
A replay of the call will be available approximately two hours
after its completion through to May 19,
2021. The replay will be available by dialing 1-800-585-8367
or +1 (416) 621-4642.
The good natured® corporate profile can be
found at: investor.goodnaturedproducts.com
About good natured Products Inc.
good
natured® is passionately pursuing its goal of
becoming North America's leading
earth-friendly product company by offering the broadest assortment
of eco-friendly options made from plants instead of petroleum.
We're all about making it easy and affordable for business owners
and consumers to switch to better everyday products®
made from renewable materials and free from chemicals of
concern.
Part of the sustainable consumer goods market, good
natured® offers over 385 products and services
through wholesale and retail channels, including our own e-commerce
stores. From plant-based home organization products to compostable
food containers, bioplastic industrial supplies and medical
packaging, we're focused on delivering a great customer experience
to make more plant-based products readily accessible to more people
as the path to deliver meaningful environmental and social
impact.
For more information: goodnaturedproducts.com
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibilities for the adequacy or
accuracy of this release.
Non-IFRS financial measures
We have included in this press release certain non-IFRS
measures that are used to evaluate the performance of Ex-Tech,
including adjusted EBITDA. As non-IFRS measures generally do not
have a standardized meaning, they may not be comparable to similar
measures presented by other issuers. Adjusted EBITDA does not have
a generally accepted industry definition.
Cautionary Statement Regarding Forward-Looking Information
This press release contains "forward-looking statements"
within the meaning of applicable securities laws. Forward-looking
statements can be identified by words such as: "anticipate,"
"intend," "plan," "budget," "believe," "project," "estimate,"
"expect," "scheduled," "forecast," "strategy," "future," "likely,"
"may," "to be," "could,", "would," "should," "will" and similar
references to future periods or the negative or comparable
terminology, as well as terms usually used in the future and the
conditional. Examples of forward-looking statements include, among
others, the expected closing of the Acquisition, the availability
of debt and equity financing for the Acquisition, statements
regarding the Acquisition, and the projected impact of completion
of the Acquisition on the Company's business, financial conditions
and results.
By their nature, forward-looking statements involve known and
unknown risks, uncertainties, changes in circumstances and other
factors that are difficult to predict and many of which are outside
of the Company's control which may cause our actual results,
performance or achievements, or other future events, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
the Company's current beliefs, expectations and assumptions
regarding the future of its business, future plans and strategies,
projections, anticipated events and trends, general market
conditions, the economy and other future conditions. The Company's
actual results and financial condition may differ materially from
those indicated in the forward-looking statements. Therefore, you
should not rely on any of these forward-looking statements.
Important factors that could cause actual results and financial
conditions to differ materially from those indicated in the
forward-looking statements include, among others:
- The risk that the closing conditions for completion of the
Acquisition are not satisfied, including due to lack of
financing.
- Risks relating to general economic, market and business
conditions.
- Unforeseen delays in the timelines for any of the
transactions or events described in this press release.
The Company considers its assumptions to be reasonable based
on currently available information, but cautions the reader that
Its assumptions regarding future events, many of which are beyond
the control of the Company, may ultimately prove to be incorrect
since they are subject to risks and uncertainties that affect the
Company and its businesses. When relying on the Company's
forward-looking statements and information to make decisions,
investors and others should carefully consider the foregoing
factors and other uncertainties and potential events. The Company
has assumed that the material factors referred to above will not
cause such forward-looking statements and information to differ
materially from actual results or events. However, there can be no
assurance that such assumptions will reflect the actual outcome of
such items or factors.
Other than as required under securities laws, the Company
does not undertake to update this information at any particular
time.
Forward-looking statements contained in this news release are
based on the Company's current estimates, expectations and
projections regarding, among other things, sales volume and pricing
which it believes are reasonable as of the current date. The reader
should not place undue importance on forward-looking statements and
should not rely upon these statements as of any other date. All
forward-looking statements contained in this news release are
expressly qualified in their entirety by this cautionary
statement.
SOURCE Good Natured Products