Algeco/Scotsman Holding S.à r.l. today announced that certain of its subsidiaries have entered into a definitive agreement with Double Eagle Acquisition Corp., a publicly traded special purpose acquisition company, to sell the Algeco Group's North American modular space and portable storage operations to Williams Scotsman Holdings Corp., a newly-formed subsidiary of DEAC.
Management of the Algeco Group believes that this acquisition will enable the business to continue to build upon its reputation as an industry innovator and market-leading provider of temporary space solutions to many diverse end markets across North America and to capitalize on additional strategic growth opportunities.
Diarmuid Cummins, CEO Algeco Scotsman: "We are very excited about the sale of Williams Scotsman to Double Eagle Acquisition Corp. This sale will not only enable Williams Scotsman to continue to build upon its position as the industry innovator and market leader but will also allow Algeco Scotsman to continue to improve its balance sheet and reduce its total debt outstanding."
The Transaction will be effected through the sale of all of the outstanding shares of Williams Scotsman International, Inc. ("WSII" and together with its subsidiaries, "Williams Scotsman") currently held by the Algeco Group to Holdco, at which time, Williams Scotsman will operate independently of the Algeco Group (the Algeco Group after giving effect to the sale of Williams Scotsman and the other transactions described in this press release is hereinafter referred to as the "Remaining Algeco Business"). In connection with the Transaction, DEAC is expected to be renamed ("New DEAC"), move its jurisdiction of incorporation from the Cayman Islands to the State of Delaware and continue trading on NASDAQ under a new ticker symbol.
Upon the closing of the Transaction, the board of directors of New DEAC is expected to consist of six (6) directors, of which two (2) will be designated by the founders of DEAC and four (4) will be designated by the Algeco Group's controlling shareholder, TDR Capital LLP, or certain of the investors or funds managed by it (collectively, "TDR"). Williams Scotsman will continue to be led by Brad Soultz, CEO & President, with Gerry Holthaus returning as Chairman.
Assuming no redemptions by DEAC stockholders in connection with the transaction, current DEAC stockholders and TDR will ultimately own approximately 70% and 30%, respectively, of the issued and outstanding shares of New DEAC's common stock immediately following consummation of the Transaction.
Transaction Details
Pursuant to the Stock Purchase Agreement, the Algeco Group will sell Williams Scotsman for an aggregate purchase price of $1,100 million, of which $1,021 million shall be paid in cash (the "Cash Consideration") to the Algeco Group or used to repay certain indebtedness of the Algeco Group (as described in more detail below) and the remaining $79 million shall be paid in the form of a 10% common equity interest in Holdco (the "Stock Consideration" and together with the Cash Consideration, the "Purchase Consideration"), which will be exchangeable, at the option of the Algeco Group or its permitted transferees, pursuant to the terms of an exchange agreement, for shares of common stock of New DEAC. We currently expect that the Transaction will be funded by (i) cash from DEAC's Trust Account (in an amount of at least $250 million and up to $500 million), (ii) committed new senior secured debt financing; and (iii) an equity commitment provided by TDR to DEAC of up to $500 million. T he Stock Purchase Agreement requires there be at least $125 million in cash on the balance sheet of New DEAC immediately following the closing of the Transaction. TDR's remaining equity commitment, after giving effect to any amounts used on the closing date to fund the Transaction, will be callable by the Board of New DEAC to support organic and inorganic growth of the company.
Prior to completing the Transaction, the Algeco Group will conduct a carve-out transaction in its North American business to carve-out certain assets related to the Algeco Group's remote accommodation business in the United States and Canada (Target Logistics) from Williams Scotsman and incorporate this division into the Remaining Algeco Business. As a result, the Remaining Algeco Business will consist of all of the Algeco Group's operations in Europe, Asia Pacific and Target Logistics. In connection therewith, Williams Scotsman and DEAC will enter into a transition services agreement with certain subsidiaries of the Algeco Group to ensure the orderly transition of the Williams Scotsman business to DEAC.
Furthermore, on August 21, 2017, and in connection with the Transaction, Algeco Holding's direct subsidiary, Algeco Scotsman Global S.à r.l. ("Algeco Global"), and the other parties thereto entered into an amendment to the ABL Credit Agreement to (i) permit the sale of Williams Scotsman to Holdco, (ii) permit the acquisition by the Algeco Group of all of the equity interests or all or substantially all of the assets of Iron Horse Ranch ("Iron Horse"), (iii) permit the acquisition by the Algeco Group of Touax's European Modular Division ("Touax"), (iv) reduce the commitments under the U.S. revolving facility provided pursuant to the ABL Credit Agreement to $150 million and make a related prepayment under the U.S. revolving facility, (v) repay the Canadian revolving facility provided pursuant to the ABL Credit Agreement and terminate the related Canadian revolver commitment, (vi) reduce the revolving commitments under the Australia/New Zealand revolving facility provided p ursuant to the ABL Credit Agreement to $120 million and (vii) effect certain other amendments, releases and consents to the ABL Credit Agreement (the "ABL Credit Agreement Amendment"). The closing of the ABL Credit Agreement Amendment is conditional upon, and will occur simultaneously with, the closing of the Transaction.
In connection with the Transaction, WSII (i) will use approximately $625 million of the Cash Consideration to prepay certain amounts outstanding under the U.S. revolving facility established pursuant to the Algeco Group's Amended and Restated Syndicated Facility Agreement, originally dated as of December 19, 2013 and as further amended, restated, amended and restated, supplemented or otherwise modified) among Algeco Global and certain of its subsidiaries, the lenders party thereto and Bank of America, N.A., a national banking association, in its capacity as collateral agent and administrative agent (the "ABL Credit Agreement"), (ii) will use approximately $40 million of the Cash Consideration to prepay in full all amounts outstanding under the Canadian revolving credit facility established pursuant to the ABL Credit Agreement and (iii) will use approximately $10 million to repay outstanding letters of credits of its direct subsidiaries, in each case assuming that the Transact ion will close in October 2017. It is currently anticipated that the Algeco Group will use a portion of the remaining Cash Consideration to finance the previously announced acquisitions of Iron Horse and Touax, respectively. The Algeco Group currently does not anticipate that any proceeds from the Transaction will be used to prepay the Algeco Group's Senior Secured Notes or Senior Unsecured Notes.
Immediately following the Transaction, the entities comprising Williams Scotsman will no longer be subsidiaries of Algeco Global. Accordingly, the entities comprising Williams Scotsman will no longer be obligors under, or guarantee any of, the Remaining Algeco Business's outstanding indebtedness and the liens on the stock and assets of such entities securing the Remaining Algeco Business's outstanding indebtedness will be released. Based on available unaudited consolidated financial information of the Algeco Group for the twelve months ended June 30, 2017 (the "reference period"), we estimate that Williams Scotsman generated revenue of approximately $424 million and Adjusted EBITDA of approximately $119 million during the reference period. The Remaining Algeco Business generated revenue of approximately $1,049.3 million and Adjusted EBITDA of approximately $242.5 million during the reference period. We currently estimate that the consolidated net secured debt ratio of the Rem aining Algeco Business after giving pro forma effect to the Transaction, the Iron Horse and Touax acquisitions and the conversion of the Stock Consideration into newly issued public stock of DEAC will be approximately 6.5x compared to the estimated net secured debt ratio of the Algeco Group of 6.8x as of June 30, 2017. Our calculation of net senior secured leverage does not include any cash proceeds of the $250 million equity commitment made by TDR to former holders of certain PIK loans made to a subsidiary of Algeco Holding, which we do not anticipate will be funded in connection with the Transaction.
Through certain of its directly and indirectly managed funds, TDR holds a majority interest in the Algeco Group and is also expected to hold a minority interest in New DEAC, following the Transaction. In connection with the Transaction, an independent financial advisor delivered an opinion to the boards of managers of Algeco Holding and Algeco Global, respectively, stating that, based on certain customary assumptions, (i) the Purchase Consideration to be received by the Algeco Group in the Transaction is fair to the Algeco Group from a financial point of view and (ii) the terms of the Transaction are not materially less favorable to the Algeco Group than those that would have been obtained in a comparable transaction by the Algeco Group with an unrelated person on an arm's-length basis.
DEAC's board of directors has approved the terms of the Stock Purchase Agreement and has recommended that its stockholders approve the transaction. The boards of managers and directors of the Algeco Group have approved the terms of the Transaction. The closing of the Transaction is subject to a number of conditions including the approval of the Transaction by the requisite number of stockholders of DEAC, a financing condition, applicable regulatory clearances and other customary closing conditions, and we currently expect the Transaction to close in October 2017. Failure to satisfy any of the aforementioned conditions could result in the Transaction not being completed on a timely basis, or at all. In the event that the Transaction is not consummated by December 19, 2017 (or such other date as is agreed in writing between the parties to the Stock Purchase Agreement), the Stock Purchase Agreement may be terminated by either party. The Stock Purchase Agreement contains customar y representations and warranties and provides for limited post-closing indemnification of Holdco regarding certain matters by the Algeco Group.
About Algeco Scotsman
Algeco Scotsman is the leading global business services provider focused on modular space, secure portable storage solutions, and remote workforce accommodation management. Headquartered in Baltimore, Algeco Scotsman has operations in 25 countries with a modular fleet of approximately 275,000 units. The company operates as Williams Scotsman and Target Logistics in North America, Algeco in Europe, Elliott in the United Kingdom, Ausco in Australia, Portacom in New Zealand, and Algeco Chengdong in China.
