Acasta has entered into a definitive agreement for the previously announced sale of its Stellwagen business unit to Martello Finance Company, which will be indirectly owned by Douglas Brennan and certain other investors.
“We are pleased to have reached the terms of a transaction that will significantly strengthen the Company and ensure the ongoing viability of our consumer products businesses, all without impacting our ability to serve our customers, suppliers and other stakeholders,” commented Geoff Beattie, Chair of the Board of Directors. “This is an essential step in the repositioning of Acasta as we move towards right-sizing the Company’s balance sheet.”
Acasta will sell Stellwagen to Martello for $35 million, and in exchange for the cancellation of 26 million class B shares in the capital of Acasta beneficially owned by Martello and certain other Acasta shareholders, representing approximately 27% of the issued and outstanding Class B Shares. Acasta will also receive downside protection of up to $5 million if the proceeds realised from the monetization of Acasta’s profit participating notes (PPNs) issued by Stelloan Investment Company I DAC, which have a book value of $47.5 million, are at specified levels below a certain threshold; and termination of the earn-out from Acasta’s acquisition of Stellwagen in January 2017.
Acasta will use the proceeds from the transaction to satisfy the previously disclosed payment of $25 million owed by Acasta by March 31, 2018 under its $150 million credit facility and to pay down additional amounts outstanding under the credit facility.
Under the terms of the Purchase Agreement, Acasta will retain ownership of the PPNs and will oversee the sale of the PPNs to one or more third parties. Acasta continues to work with its financial advisor to monetize the PPNs. The purchaser has also agreed to assist Acasta with the PPN sale process.
Martello owns 21,280,160 of the outstanding Class B Shares, representing an approximate 22.4% ownership interest (calculated on a non-diluted basis). All of the share capital of Martello is held in trust for Douglas Brennan, who is the Chief Executive Officer of Stellwagen.