Toronto / CA. (so) SunOpta Inc., a leading global company focused on organic, non-genetically modified and specialty foods, announced that it has entered into an agreement with funds managed by Oaktree Capital Management, L.P., a leading global alternative investment management firm. Oaktree is an experienced investor in the consumer and retail industry, with a track record of driving growth in complex consumer businesses, including AdvancePierre Foods, Campofrío Food Group and Diamond Foods. In reaching this agreement with Oaktree, SunOpta has concluded the previously announced review of strategic alternatives for the Company.
Under the agreement, Oaktree invested 85 million USD in SunOpta in the form of exchangeable preferred shares. Proceeds from the investment have been used to reduce the Company’s 2nd lien debt and to increase financial flexibility.
In partnership with representatives of Oaktree and with representatives of Engaged Capital (SunOpta’s second largest shareholder), SunOpta is conducting a thorough review of the Company’s operations, management and governance, with the objective of maximizing the Company’s ability to deliver long-term value to its shareholders. The Company expects to provide an update on these efforts in conjunction with the Company’s third quarter earnings release, along with an updated mid-range plan which will include performance improvements and cost savings to be realized in 2017.
As announced on June 27, 2016, the SunOpta Board of Directors hired independent financial and legal advisors to support a review of the Company’s operating plan and evaluate a complete range of strategic and financial actions that SunOpta could undertake to maximize shareholder value. This review was comprehensive in its evaluation of all potential alternatives.
«After concluding a comprehensive review of strategic and financial alternatives, we are excited to have a partner in Oaktree that truly appreciates SunOpta’s unique position in the market and the potential value that can be created for all our shareholders through performance improvement and accelerated growth», said Alan Murray, Chairman of the Board of SunOpta. «Given Oaktree’s deep industry knowledge and operational expertise, we believe they are the ideal partner for SunOpta as we seek to strengthen the company’s operations in a way that can reduce operational volatility and realize sustainable growth and value creation. We believe this strategic option provides the highest risk adjusted return from the many options available and evaluated by the Board».
«With its strong and diverse portfolio of products and having recently undergone a period of significant investment in the business, we believe SunOpta has a substantial opportunity for growth in the rapidly expanding market for healthy and organic foods», said Matt Wilson, Managing Director and Co-Portfolio Manager of Oaktree. «SunOpta is a natural fit for Oaktree given our experience in the consumer and food industries, and we see a significant opportunity to provide strategic, operational and financial support that will accelerate the Company’s value-enhancing initiatives and position it for long-term success».
In concert with today’s announcement, SunOpta is also announcing significant enhancements to the Company’s corporate governance. First, the Board of Directors has appointed two Oaktree-nominated independent directors, Dean Hollis and Al Bolles, Ph.D., to the Board. Both appointees bring extensive sector experience. Mr. Hollis is a Senior Advisor at Oaktree with highly relevant sector experience as the Chairman of the Board of AdvancePierre Foods and the former President and Chief Operating Officer of the Consumer Foods Division of ConAgra Foods and former Chairman of Boulder Brands. Mr. Bolles has demonstrated leadership across multiple organizations in global innovation, research and development and supply chain management, most recently as the former Executive Vice President, Chief Technology + Operations Officer of ConAgra Foods. Additionally, the Board has also appointed Brendan Springstubb of Engaged Capital to the Board. Engaged Capital is the Company’s second-largest shareholder and has extensive investment experience in the healthy living industry. The Board has committed to a further review of governance and leadership with a particular focus on continuing to add independent directors with significant operating and supply chain expertise in the food industry. The Board would expect to announce additional changes shortly. Concurrent with these appointments, Douglas Greene, a pioneer in the natural foods industry who has served on the SunOpta board for eight years, has resigned from the Board, effective today.
«On behalf of the Board, I would like to thank Doug for all his hard work over the years and his dedication to SunOpta», said Alan Murray. «We would also like to welcome Dean, Al and Brendan to the Board. The company will benefit greatly from their respective industry and capital markets experience and we look forward to their contributions».
Oaktree is investing in the company by purchasing 85 million USD of newly created Series A exchangeable preferred shares issued by SunOpta Foods Inc. (the «Series A Preferred») as well as the right to purchase up to 3 million shares of SunOpta common stock in the open market for a period of one year. The Series A Preferred is immediately exchangeable into shares of the Company’s common stock at an initial exchange price of 7.50 USD per share and pays a cumulative dividend of 8 percent per year that may be paid-in-kind or cash at SunOpta’s option. This exchange price represents a 80.3 percent premium to the closing price of 4.16 USD per share on June 24, 2016, the day before the strategic review was announced, and a 12.1 percent premium to the 60-day average closing price of 6.69 USD per share. The Series A Preferred cumulative dividend will increase from 8 percent per year to 12.5 percent beginning in the tenth year. The agreement also entitles Oaktree to designate two nominees for election to SunOpta’s Board of Directors. Oaktree will be entitled to vote the Series A Preferred with the common shares on an as-exchanged basis. The Series A Preferred constitute on an as-exchanged basis a partially diluted ownership level of approximately 11.7 percent of the company. Currently, Oaktree’s ownership is subject to a 19.99 percent cap under the agreement unless and until shareholder approval is obtained to remove the cap.
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