Specialty phosphate maker Innophos Holdings Inc., Cranbury, N.J., on Oct. 21 announced that it has entered into a definitive agreement with an affiliate of One Rock Capital Partners LLC, a middle-market private equity firm, whereby One Rock will acquire all of Innophos’ outstanding shares for $32.00 per share in cash in a transaction valued at approximately $932 million, including the assumption of debt. The transaction has been unanimously approved by Innophos’ Board of Directors.
The offer price represents an 18 percent premium to the 30-trading day volume-weighted average closing share price of Innophos’ common stock ending Sept. 9, 2019, the last trading day prior to published market speculation regarding a potential transaction involving the company.
“After careful consideration and a thorough review of our strategic alternatives, including an outreach program to multiple potential financial and strategic partners over several months, the Board determined that a sale to One Rock is in the best interest of all of our stakeholders,” said Innophos Chairman, President, and CEO Kim Ann Mink.
“We remain confident that our transformational strategy is the right path forward for Innophos; however, executing on this strategy in an increasingly volatile macroeconomic and complex financial environment as a small-cap public company remains challenging and could take longer than initially expected. While we believe our long-term goals are achievable, we believe that the offer from One Rock is in the best interest of our stockholders as it will deliver immediate and certain value. We believe this transaction represents a winning proposition for all of our stakeholders, including our employees and customers,” Mink added.
“Innophos’ innovative ingredient solutions are used by world-leading brands across a wide range of attractive food, health, nutrition, and industrial markets,” said One Rock Managing Partner Tony Lee. “The company has a strong foundation and a transformative growth strategy. In drawing upon One Rock’s extensive experience, part of our goal is to maximize Innophos’ growth potential by continuing to expand its presence in high-growth food, health, and nutrition markets, while further strengthening and optimizing its cash-generative core business. We look forward to working with Innophos to accomplish these goals and position the company for continued success.”
The definitive agreement includes a 30-day “go-shop” period, commencing immediately, during which Innophos, with the assistance of its legal and financial advisors, will solicit alternative acquisition proposals and potentially enter into negotiations with respect to alternative proposals. There can be no assurance that this process will result in a superior proposal or that any other transaction will be approved or completed. Innophos does not expect to disclose developments with respect to the solicitation process unless and until the Board makes a determination requiring further disclosure.
Under the terms of the agreement, the company has suspended the payment of all dividends.
The transaction will be financed through a combination of committed equity financing provided by affiliates of One Rock, as well as committed debt financing from several financial institutions.
The closing of the transaction is expected to occur in the first quarter of 2020, subject to stockholder and regulatory approvals and the satisfaction of customary closing conditions. Upon the completion of the transaction, Innophos will become a privately-held company and shares of Innophos’ common stock will no longer be listed on any public market.
Lazard is acting as exclusive financial advisor to Innophos, and Baker Botts LLP is acting as its legal counsel. Latham & Watkins LLP is acting as legal counsel to One Rock, and RBC Capital Markets LLC is acting as its financial advisor with respect to the transaction.
In announcing the deal, Innophos also revealed preliminary third-quarter 2019 financial results, which included expected revenue of approximately $190 million, net income of $6-$7 million, EBITDA of $24-$25 million, and Adjusted EBITDA of $29-$30 million. Final results will be released the week of Nov. 4. Due to the pending transaction, the company said it would not host a third-quarter earnings call.
Net income for the six months ending June 30, 2019, was $10 million ($0.51 per share) on sales of $376 million (GM Aug. 9, p. 29), down from the year-ago $17 million ($0.87 per share) and $412 million, respectively. Adjusted EBITDA was $60 million, down from $63 million.
In addition to supplying ingredients to the health, nutrition, food, and beverage industries, Innophos also produces fertilizer products, including granular TSP and merchant green phosphoric acid (MGA). The company has plants in the U.S., Canada, Mexico, and China, and claims nearly 1,400 employees.
One Rock said it makes controlling investments in companies with potential for growth and operational improvement using a rigorous approach that utilizes highly experienced operating partners to identify, acquire, and enhance businesses in select industries.
Its current portfolio includes companies in several fields, including business and environmental, chemicals and process industries, food manufacturing, and distribution, as well as specialty manufacturing and healthcare products. Current assets include food-related Orion Food Systems, Sioux Falls, S.D., as well as fertilizer-related Monarch Landscape Companies LLC, Los Angeles, which is a regional consolidation of landscape service companies in the Western U.S.