A new public company, led by former Royster-Clark Inc. executives, has completed a $138 million initial public offering and is intent on making acquisitions in the agriculture business. Francis Jenkins Jr., 63, chairman and CEO, and Kenneth Moshenek, 54, president and chief operating officer, held similar positions with Royster-Clark before it was sold to Agrium Inc.
The new company, Shermen WSC Acquisition Corp., New York, announced May 30 that it had completed an IPO of 23 million units – including 3 million units purchased by the underwriters to cover over-allotments – at a price of $6 per unit. Each unit consists of one share of common stock and two warrants. Each warrant entitles the holder to purchase one share of common stock at a price of $5.00. The offering was underwritten by a syndicate led by CIBC World Markets and CRT Capital Group. Units of the company are listed on the OTC market under the symbol SACQU.
In its prospectus, filed in late May, Shermen outlines a long list of possible ag acquisitions, including commodity trading; equipment, financing; product manufacturing; alternative fuels; distribution; farm and crop management; golf course, lawn, and garden maintenance; livestock feed; animal health products; and ag industry support services.
Shermen did not rule out getting back in the fertilizer business, but noted that both Jenkins and Moshenek are bound by non-competition agreements until July 22, 2010, and cannot compete with Royster-Clark until that time unless a waiver is obtained. With certain exceptions, they are also prevented from utilizing confidential information of and soliciting for employment any current employee or contractors of Royster-Clark. Shermen noted that R-C’s business is identified as retail and wholesale distribution of mixed fertilizer, fertilizer materials, seed, crop protection products, and agronomic services to farmers, primarily in the Southeast and Midwest regions of the U.S.
Shermen said it has no specific business combination under consideration, nor has it been approached by any candidates. It says the initial business combination must be with an operating business whose fair market value is equal to at least 80 percent of Shermen’s net assets at the time of acquisition. Shermen may raise additional funds through private sale of securities or debt.
If Shermen is unable to consummate a business combination within 18-24 months, it will dissolve. Also, it will not continue with a combination if public stockholders owning 40 percent or more of the shares sold in this offering vote against the combination. It also plans to complete only one business combination.
Upon the completion of the offering, Shermen said its existing stockholders, directors, and officers will collectively own approximately 20 percent of issued and outstanding shares of common stock. Directors and officers have agreed to purchase 5,214,286 million warrants at a price of $.70 per warrant ($3.65 million) concurrently with the IPO, which will allow them to increase their ownership percentage. These warrants will expire worthless if Shermen does not complete a combination.
The existing shareholders, directors, and officers also agree to waive their respective rights to participate in any liquidation distribution occurring upon the failure to consummate a business combination, but only with respect to shares owned by them prior to the offering.
Other fertilizer veterans associated with Shermen include Gregory St. Clair, 49, vice president and director, a former Royster-Clark managing director; and Donald Pottinger, 64, a director, who is currently vice president of major accounts, global partner relations with AGCO Corp., a major equipment company. Previously, Pottinger held senior positions at Ag-Chem Equipment, Hickson Kerley Co., and J.R. Simplot Co. Both Jenkins and Moshenek are also directors.
John Toffolon, 54, is chief financial officer. He has been an independent investor and consultant since his resignation from Nomura Holdings in 2001. He also has experience with The First Boston Corp., investment banking firm Blyth Eastman Dillon, and the Federal Reserve Bank.
Joseph Prochaska, 60, of the consulting firm Prochaska & Co., is also a director. Both Jenkins and Moshenek are also directors.
Michiel McCarty, 55, of CRT, which is underwriting the offering, is also a director.
The Shermen Group’s business address is 1251 Avenue of the Americas, Suite 900, New York, NY 10020. The phone number is 212- 300-0020.