WL Ross Holdings Corp. (NASDAQ: WLRH), a ‘blank-check’ special purpose acquisition company sponsored by WL Ross Sponsor LLC, agreed to acquire Nexeo Solutions Holdings, LLC, a leading global distributor of chemicals and plastics and provider of environmental services, from TPG, a leading global alternative asset firm.
As part of the transaction, TPG will roll over a substantial portion of its existing equity and retain approximately 35 percent ownership. The anticipated initial enterprise value, including fees and expenses, is $1,669 million, implying a multiple of 8.4x the company’s estimated adjusted EBITDA for 2016.
“It has been our privilege to work with Nexeo Solutions’ management since our acquisition of the business from Ashland Chemical in 2011 to build a world-class distribution platform poised for further growth,” said Christopher Yip of TPG. “We look forward to remaining a significant owner of the business and a value-added partner to the company as it enters this new phase of growth.”
“We are pleased to partner with TPG to introduce Nexeo Solutions as a publicly listed company,” said WLRH chairman, Wilbur L. Ross, Jr., who will serve as chairman of Nexeo.
Nexeo Solutions, based in Houston, Tex., is the No.1 plastics distributor and No. 3 chemicals distributor by revenue in North America. Through its exceptional distribution network in key end markets, Nexeo Solutions provides value-added services and a diverse array of product offerings, allowing it to provide customers with a one-stop-shop resource for their chemicals and plastics needs. Nexeo Solutions distributes products that are used in a broad cross section of manufacturing end markets, including household, industrial and institutional, lubricants, performance coatings (including architectural coatings, adhesives, sealants and elastomers), automotive, healthcare, personal care, and construction. The company generated revenues of $3.9 billion in the fiscal year ended September 30, 2015. Nexeo Solutions operates in more than 80 countries employing more than 2,450 people in 170 locations.
“This transaction allows us to align our ownership structure in a way that accelerates our progress towards defining distribution,” said David Bradley, president and CEO of Nexeo Solutions.
Upon completion of the transaction, WLRH will change its name to Nexeo Solutions, Inc., and will apply to continue to trade on NASDAQ under the ticker symbols NXEO, NXEOU, and NXEOW. TPG will continue to be represented on the board of directors of Nexeo Solutions. The current Nexeo Solutions management team, headed by David Bradley, is expected to continue to lead Nexeo Solutions, Inc. following the consummation of the merger.
At closing, WLRH will acquire Nexeo Solutions in exchange for up to 35 million shares of WLRH common stock (as adjusted for deferred purchase price consideration) plus $1,296 million in cash and assumed net debt for a total consideration of $1,646 million (which includes fees and expenses), assuming a $10.00 per share valuation for the shares of WLRH common stock. In addition, WLRH’s sponsor will exchange its warrants for 2.24 million shares of WLRH common stock (a 0.10 share per warrant exchange ratio). The cash portion of the consideration will be partially financed by debt facilities that have been committed to by Bank of America Merrill Lynch, Jefferies Finance LLC, an affiliate of Jefferies LLC, and Deutsche Bank.
As part of the transaction, the aggregate stock ownership of TPG and the other sellers will be capped at 35% of the value of the capital stock of WLRH. If that cap applies and WLRH does not otherwise satisfy the remaining purchase price in cash at closing, TPG and the other sellers will receive the remaining purchase price through future deferred payments in cash in lieu of receiving additional shares.
The transaction has been unanimously approved by both board of directors of WLRH and Nexeo Solutions, and is expected to close in the second quarter of 2016, subject to all requisite regulatory approvals, and approval of the stockholders of WLRH.
Lazard acted as sole M&A advisor, and Deutsche Bank Securities Inc., Credit Suisse and Bank of America Merrill Lynch acted as equity capital markets advisors to WLRH. Kirkland & Ellis LLP and Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel to WLRH. Jefferies LLC was financial advisor to Nexeo Solutions and TPG, and Vinson & Elkins LLP acted as counsel to TPG and Nexeo Solutions.
WL Ross Holding Corp. is a a special purpose acquisition company sponsored by WL Ross Sponsor LLC, an affiliate of WL Ross & Co. LLC, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or assets. WL Ross Holding Corp. completed its initial public offering in June 2014, raising approximately $500 million in cash proceeds. WL Ross Holding Corp.’s officers and certain of its directors are affiliated with WL Ross & Co. LLC. The company is based in New York, N.Y.
Founded in 2000, WL Ross & Co. LLC is a global value oriented private equity firm which seeks niche opportunities in markets where it believes its knowledge, insight and experience offers an advantage in assessing and cultivating new investment opportunities.
TPG is a leading global private investment firm founded in 1992 with over $70 billion of assets under management and offices in San Francisco, Fort Worth, Austin, Dallas, Houston, New York, Beijing, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, São Paulo, Shanghai, Singapore and Tokyo. TPG’s investment platforms are across a wide range of asset classes including private equity, growth venture, real estate, credit and public equity. TPG aims to build dynamic products and options for its investors while also instituting discipline and operational excellence across the investment strategy and performance of their portfolio. Since the start of 2014, TPG has raised more than $18.6 billion for its investment funds and has launched six new products including Pace Holdings, TPG Real Estate Finance Trust (TRT) and TSL Europe.