Hennessy Capital Acquisition Corp. II (NASDAQ:HCAC; HCACU; HCACW), a blank-check company founded by Daniel J. Hennessy, agreed to acquire St. Paul, Minnesota-based United Subcontractors, Inc., for $348.5 million, in cash and newly issued stock. HCAC will change its name to USI Holdings, Inc. and continue to list its common stock and warrants on the NASDAQ Capital Market under the tickers “USI” and “USIW,” respectively.
To fund the deal, Hennessy plans to raise $100 million in debt financing, and through a private placement of up to $35 million of HCAC’s convertible preferred stock. The stock consideration will consist of 7.1 million shares of HCAC common stock, which will result in USI’s stockholders owning approximately 22% of the combined company.
HCAC’s CEO and chairman Daniel J. Hennessy will serve as chairman of the combined company. He serves as chairman and CEO of Hennessy Capital LLC and president of GEO Holdings Corp. He is a co-founder and partner of Chicago-based middle-market private equity firm CHS Capital since 1998, and previously served as a vice president at Citicorp Mezzanine Investments and its Leveraged Capital Group in Chicago.
The transaction is expected to be completed in the third quarter of 2016.
Hennessy Capital was advised on the transaction by UBS Investment Bank, Cantor Fitzgerald & Co., BMO Capital Markets and XMS Capital Partners, LLC, as financial advisors, Sidley Austin LLP and Ellenoff Grossman & Schole LLP, as legal counsel, and with Grant Thornton LLP providing financial due diligence services. USI was advised by RBC Capital Markets, as financial advisor and Willkie Farr & Gallagher LLP, as legal counsel.
USI is a leading provider of installation, construction and distribution services to the residential and commercial construction markets in the United States, with a national platform consisting of 43 locations, and more than 1,800 employees serving customers in 13 states. The company was founded in 1998.
USI believes it is the third largest insulation installer in the U.S. based on revenue and maintains the first or second market position in more than 50% of its local markets based on estimated permits issued. USI benefits by having a national scale, long-standing vendor relationships and a diverse customer base that includes production and custom homebuilders, multi-family and commercial contractors and homeowners.
“HCAC is extremely pleased to introduce USI to the public markets,” said Daniel J. Hennessy, chairman and CEO of HCAC. “USI is a truly differentiated building products company with an industry-leading platform led by an exceptional management team. We believe that the USI’s established presence in high-growth construction markets when combined with strategic acquisitions will lead to sustained revenue growth and profitability for our stockholders.”
The combined company will be led by current USI president and CEO, Bill Varner, who added, “Today is an exciting day for USI. As a public company, we will be better positioned to grow our product and service offerings, make accretive acquisitions and open branches in new markets. We are thrilled to have Dan and HCAC as partners.”