Just days before China shuts down for the week-long Spring Festival, Shanghai Pret Composites Co. Ltd. announced it has completed the acquisition of U.S. recycler WPR Holdings LLC, revealing many details of the transaction including board changes.
The deal closed on Feb. 11 in the U.S. — Feb. 12 in China — and all shares of WPR and its subsidiaries Wellman Plastics Recycling LLC (“Wellman Plastics”) and DC Foam Inc. are now owned by Pret Holdings LLC, a wholly owned U.S. subsidiary under Pret's Shanghai-based investment arm.
On that day, Pret wired $65.451 million to WPR's controlling shareholder Wellman Plastics Recycling Holdings Inc. (“Wellman Holdings”) and CEO Robert Michael Fotsch. Pret had previously deposited $5 million in an escrow account at SunTrust Banks Inc.
The deal was priced at $70.451 million (433 million yuan), about 95.9 percent of WPR's total shareholders' equity, which was evaluated at $73.5 million as of Sept. 27 by China United Assets Appraisal Group.
According to due diligence reports, venture capital firm J.H. Whitney VI L.P. is the sole owner of Wellman Plastics Recycling Holdings Inc., and the latter owned about 71.7 percent of WPR.
WPR was incorporated in Delaware in March 2009 but operates from Johnsonville, S.C. Fotsch owned about 18.2 percent of WPR in incentive stocks and preferred stocks. The remaining shares belonged to 107 employees in the form of restricted incentive units, but WPR has bought all of them back as a part of the acquisition process.
Wellman Plastics was incorporated in Delaware in 2008 and also operates from Johnsonville, S.C. It is owned by WPR and Wellman Holdings.
Wellman Plastics owns a 650-acre campus in Johnsonville as WPR's main production site. It also owns an unused 250-acre site in nearby Hickory Hill.
DC Foam — originally founded in 1993 in Maryland — was acquired by WPR in August 2011 from Louis Renbaum and Alan Tabackman for $1.7 million.
WPR had put a lien on all of its shares in Wellman Plastics and DC Foam in order to get credit from SunTrust for the companies.
On Feb. 10, Wellman Plastics and DC Foam signed a credit agreement amendment with SunTrust, which agreed to the transaction of the shares while continuing its lending.
With the closing of the deal, WPR board directors Peter Castleman and Micah Meisel resigned on Feb 11. The new board consists of Pret chairman Zhou Wen, now serving as the new WPR chairman, Fotsch, and Sun Xingyuan.
The trio also serves as the new board for Wellman Plastics and DC Foam. Resignations were reported for former Wellman Plastics board directors Castleman, Meisel and Thomas Stevens as well as DC Foam board member Scott Taylor.
Other than that, there has been no other personnel change among the executives of the acquired companies, Pret said Feb 16.
Pret also unveiled several milestones of the transaction, starting with Oct. 2, 2014, when WPR agreed to Pret's non-binding offer. The parties signed the purchase agreement on Jan. 2. Pret's shareholders approved the deal on Jan. 29.
Pret is funding the cash deal mostly with bank loans. Its investment division borrowed $49.3 million from the Exim Bank of China on Feb. 4 to cover 70 percent of the payment. The remaining 30 percent came from its own funds.
