The board of directors of Metalico, Inc., an operator of scrap metal recycling facilities primarily in the eastern Great Lakes corridor, has agreed to sell the company to Total Merchant Limited for total consideration of approximately $105 million.
The all-cash deal will include a payment to Metalico’s stockholders of $0.60 for each share of Metalico common stock owned by them as of the date of closing. The price includes roughly $44 million for Metalico’s outstanding equity plus the cost of retiring the company’s primary term and institutional senior and convertible debt, estimated at approximately $45 million and the assumption of approximately $16 million of additional debt as of June 15, 2015.
Total Merchant is an investment vehicle formed to seek appropriate opportunities in the U.S. metals and commodities market. Total Merchant is controlled by Chung Sheng Huang, the chairman of the board and managing director of Ye Chiu Group, one of the leading recyclers and producers of aluminum and aluminum alloys in the world and a prominent Asian scrap metal recycler with operating facilities in China and Malaysia.
Under the terms of the governing merger agreement, a subsidiary of Total Merchant will merge with and into Metalico, making Metalico a wholly owned subsidiary of Total Merchant. The merger is subject to certain closing conditions, including approval of the merger agreement by holders of a majority of Metalico’s outstanding common stock and other customary conditions. However, no regulatory approval is required.
The transaction is expected to close in the third quarter of 2015, but the dates for Metalico’s stockholder meeting to vote on the merger agreement and for closing the merger have not yet been determined, although the merger agreement has a termination date of September 21, 2015 and Metalico has agreed with their senior lenders that the merger should be completed by August 31, 2015.
Under the terms of the agreement, Metalico has agreed not to solicit alternative proposals for an acquisition of the company. However, Metalico is able to consider unsolicited proposals pursuant to the exercise of its board of directors’ fiduciary duties with Total Merchant having customary rights to match any proposal. Metalico would be required to pay Total Merchant a termination fee equal to $2,245,930 (corresponding to 3.6 percent of the value of the fully diluted equity) if Metalico terminates the merger agreement to accept a superior proposal. In addition, Total Merchant has agreed to a penalty of $3,119,347 (corresponding to 5.0 percent of the fully-diluted equity) if it fails to close the transaction assuming all closing conditions have been satisfied. Total Merchant has agreed to escrow this amount. Total Merchant has also indicated it intends to retain Metalico’s management and all other personnel.
Published in the July 2015 Edition of American Recycler News