Hennessy Capital Acquisition Corp II (HCAC) and United Subcontractors Inc (USI) are to merge with HCAC acquiring all of the outstanding capital stock of USI Senior Holdings, Inc, the indirect parent company of USI.
In connection with the merger, 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.
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 serving customers in 13 states. USI believes it is the third largest insulation installer in the US based on revenue and maintains the first or second market position in more than 50 per cent 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,” says 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 says: “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.”
Under the terms of the merger agreement dated as of April 1, 2016 (the “Merger Agreement”), the aggregate merger consideration is USD348.5 million, subject to certain adjustments. HCAC will pay the total merger consideration with a combination of cash and newly issued shares of common stock. The cash consideration will be funded through a combination of (i) cash held in HCAC’s trust account after any redemptions of HCAC common stock, (ii) cash raised in an anticipated USD100.0 million debt financing, and (iii) the net proceeds, if any, received by HCAC from a potential private placement (at HCAC’s option) of up to USD35 million of HCAC’s convertible preferred stock to one or more institutional investors. The stock consideration will equal approximately 7.1 million shares of HCAC common stock, which will result in USI’s stockholders owning approximately 22 per cent of the combined company (assuming no redemptions of HCAC common stock or purchase price adjustments).
The Merger Agreement contemplates that the Board of Directors of the combined company will consist of seven members: HCAC’s CEO and Chairman Daniel J. Hennessy, who will serve as Chairman of the Board; Bill Varner, USI’s CEO; current HCAC directors Richard Burns, Kevin Charlton, and Peter Shea; Michael Kestner, the former CFO of BMC Stock Holdings, Inc. (NASDAQ:STCK); and an additional USI designee. The transaction is subject to the satisfaction or waiver (if applicable) of customary closing conditions, including regulatory and HCAC stockholder approvals and the receipt of proceeds from HCAC’s anticipated debt financing, and is expected to close promptly following HCAC’s special stockholders’ meeting to approve the transaction. The parties expect the transaction will be completed in the third quarter of 2016.
HCAC 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.
The description of the transaction contained herein is only a summary and is qualified in its entirety by reference to the Merger Agreement, a copy of which will be filed by HCAC with the Securities and Exchange Commission (the SEC) as an exhibit to a Current Report on Form 8-K.
