AgroFresh Solutions (AGFS): $150 Million Equity Investment Commitment From Paine Schwartz

By Dan Anderson ● June 15, 2020
  • AgroFresh Solutions Inc (NASDAQ: AGFS) announced it entered an agreement to sell $150 million of newly issued convertible preferred stock to an affiliate of Paine Schwartz Partners

AgroFresh Solutions Inc (NASDAQ: AGFS), a leader in produce freshness solutions, announced it entered an agreement to sell $150 million of newly issued convertible preferred stock to an affiliate of Paine Schwartz Partners, LLC — which is a leading private equity firm focused exclusively on sustainable food chain investing.

The proceeds from the preferred stock investment will be used for repaying a portion of AgroFresh’s existing debt. And on a pro-forma basis for the twelve months ended March 31, 2020, the company’s net debt-to-adjusted EBITDA ratio will decline from approximately 5.8x to 3.8x.

What are the terms? On an as-converted basis, the preferred stock would initially represent approximately 36% of AgroFresh’s pro-forma common shares outstanding. And in connection with the investment, AgroFresh would expand the size of its Board of Directors to ten members with PSP initially designating two members of the Board.

PSP’s $150 million convertible preferred stock investment carries a 16% dividend with a minimum 8% payable in cash. And the preferred stock will be convertible into shares of AgroFresh common stock at a conversion price of $5 per share, reflecting a nearly 100% premium to the company’s 60-day volume-weighted average closing price.

The PSP investment is subject to customary closing conditions, including the receipt of required regulatory approvals and it is contingent upon the successful refinancing of AgroFresh’s senior secured credit facility. And the Company currently anticipates closing the PSP investment and the refinancing of its senior secured credit facility early in the third quarter of 2020.

BMO Capital Markets acted as sole financial advisor and Greenberg Traurig, LLP acted as legal advisor to AgroFresh. And Evercore acted as sole financial advisor and Kirkland & Ellis LLP as legal advisor to Paine Schwartz.

Key Quotes:

“Today’s announcement is an important milestone for AgroFresh. Our refinanced capital structure will be more appropriately balanced for our business and will allow greater flexibility to drive our diversification initiatives and put the Company in a position to achieve its next chapter of growth. Furthermore, Paine Schwartz brings deep domain expertise within the agriculture sector, which we believe will complement our leadership team and Board composition. We are excited to welcome them to our team and look forward to their future contributions.”

– AgroFresh Chief Executive Officer Jordi Ferre

“This investment provides several significant benefits to our shareholders and represents an important step toward achieving our goal of optimizing the Company’s capital structure and meaningfully deleveraging the balance sheet. As we continue to improve the results of our operations, including cost optimization, this strategic equity investment will create further financial flexibility to generate growth.”

– AgroFresh Chief Financial Officer Graham Miao

“Through our global investments in fresh produce, Paine Schwartz has developed a long-standing thesis in post-harvest technology. We are excited to target new opportunities in the sector through this strategic investment in AgroFresh. AgroFresh is a leading independent platform that has a diversified network of direct customer relationships, a solutions-based service offering and a leading post-harvest portfolio. We look forward to working closely with Jordi, Graham and the team to enhance operations, drive growth, and create value.”

– Kevin Schwartz, Chief Executive Officer and a founding Partner of Paine Schwartz