Goldman Sachs has agreed to invest USD95 million in MDC Partners through the purchase of non-voting convertible preference shares (the Preference Shares).
In connection with the closing of the transaction, Bradley J Gross, a managing director in the Merchant Banking Division of Goldman Sachs, will join the MDC Partners Board of Directors, which will expand to seven members. Subject to the satisfaction of certain conditions, the transaction is expected to close in the first quarter of 2017.
Scott L Kauffman, Chairman and Chief Executive Officer of MDC Partners, says: "We are extremely pleased to be partnering with Goldman Sachs. Their investment in MDC affirms the value of our world-class agency portfolio, strengthens our balance sheet, and validates a solid finish to 2016 and our prospects going forward. Brad and his team bring an exceptional track record and important expertise to our continued pursuit of maximising long-term shareholder value."
Bradley J Gross, Managing Director of Goldman Sachs, says: "We are excited to partner with MDC to help drive growth and innovation in the marketing and communications industry. The MDC partner agencies are market leaders with strong reputations and a demonstrated history of serving their clients. We look forward to working with Scott and his team to further position the company for long term growth."
Upon completion of the transaction, Goldman Sachs will own approximately 15 per cent of the outstanding equity of the Company, assuming the full conversion of the Preference Shares into the Company's Class A common shares (the "Class A Shares"). The Preference Shares will have a liquidation preference that accretes at a rate of 8.0 per cent per annum, compounded quarterly until the five-year anniversary of the issuance date of the Preference Shares.
The Preference Shares will be convertible at the option of the holder into Class A Shares at an initial conversion price of USD10.00 per Preference Share (subject to customary adjustments for share splits and combinations, dividends, recapitalisations and other matters), which represents a 48 per cent premium to the 30-day average closing price of USD6.75 per Class A Share. The Company may force conversion of the Preference Shares into Class A Shares after two years if the Class A Shares close at or above 125 per cent of the then-applicable conversion price for at least 30 consecutive trading days, and after five years if the Class A Shares close at or above 100 per cent of the then-applicable conversion price for at least 30 consecutive trading days.
MDC Partners expects to use the net proceeds from the investment to pay down existing debt under the Company's credit facility and for general corporate purposes.
LionTree Advisors acted as lead advisor in connection with their previously-announced engagement to conduct a comprehensive review of the Company's financial and capital structure, which is now concluded. LionTree and JPMorgan acted as financial advisors to the Company on this transaction.
