UPDATE: Universal Forest Products (UFPI) to Acquire idX Corp in $68M Deal; Will Pay $94.5M to Retire Debt
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(Updated - September 1, 2016 9:11 AM EDT)
Universal Forest Products, Inc. (Nasdaq: UFPI) announced that it has signed a definitive agreement to purchase idX Corp., an international provider of highly customized merchandising solutions. Under terms of the agreement, UFPI will acquire all outstanding shares of stock of the holding company, idX Holdings, Inc. The move opens new doors to Universal for growth in adjacent markets and with new products, and offers idX access to enhanced capacity and to new customers and markets. The transaction is expected to close by the end of the third quarter.
Based in St. Louis, Mo., idX is a market leader in the fragmented $6 billion merchandising solutions industry, with a comprehensive offering of products and services. The company was founded in 1999. Today, it has a network of more than 20 manufacturing, program management and sales facilities across North America, Europe and Asia. It had 2015 sales of approximately $303 million.
“idX is a dynamic company that creates and installs highly customized merchandising solutions for some of the world’s most renowned brands,” said Universal CEO Matthew J. Missad. “It is led by a team of professionals who are respected for their expertise, integrity and moxie and who have been successfully growing their business by continually adding new markets, products and services, and by expanding their international footprint.”
“idX brings to Universal the opportunity to supply some of their operations with products we currently manufacture, to grow adjacent business and capabilities, and to serve new customers and markets. idX’s growth strategies, including their focus on international business and on new end-markets, align with our growth objectives,” he added. “They are a great fit, culturally and strategically, and we’re thrilled they are becoming a part of the Universal family.”
Said idX President Terrence L. Schultz: “This presents a great next step in the exciting history of idX. By joining the Universal team, we have the opportunity to enhance our capacity, expand our client base, take advantage of synergies and provide more opportunities for our people to grow. Universal provides the capital strength we need to continue to grow our portfolio of products and services. It has the same customer-focused culture and philosophy that idX has employed throughout its history, which was critical to us as we considered this opportunity. And working with Universal’s existing businesses, we can play a key role in Universal’s growth and success. We are thrilled the leadership of Universal recognized the strengths and opportunities idX brings to the table, and we are excited to become a vital part of such a respected organization.”
UFPI doesn’t expect the merger to contribute significantly to profitability for the remainder of 2016, due to the seasonality of idX’s business. The Company currently targets $25 million to $28 million in EBITDA with approximately $6 million in depreciation and amortization for 2017.
UPDATE - UFPI disclosed the following in an SEC 8-K on Thursday:
Item 1.01 - Entry into a Material Definitive Agreement / Merger Agreement
On September 1, 2016, Universal Forest Products, Inc., a Michigan corporation (the "Company"), UFP Apple Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub"), idX Holdings, Inc., a Delaware corporation ("idX"), ABP II SR, L.L.C., a Delaware limited liability company, and, for certain limited purposes, Acon-Bastion Partners II, L.P., a Delaware limited partnership, Acon-Bastion Partners II (Offshore), L.P., a Cayman Islands exempted limited partnership, and Terrence L. Schultz, an individual, entered into an Agreement and Plan of Merger (the "Merger Agreement"), providing for the Company's acquisition of idX.
idX specializes in the design, production and installation of customized in-store environments that are used in a range of end markets. It is a one stop shop, offering a comprehensive portfolio of custom products (including display shelves, cases, fixtures, seating and signage) in a broad range of materials, along with a broad suite of value added services, including design, prototyping and manufacturing. idX has a global footprint that includes close to 20 facilities and sales offices strategically located across North America, China, India and the U.K.
Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into idX (the "Merger") so that iDX will continue as the surviving corporation of the Merger and will become a wholly owned subsidiary of the Company. The Merger Agreement has been unanimously approved by the boards of directors of the Company, Merger Sub and idX.
The aggregate purchase price payable by the Company for idX's capital stock pursuant to the Merger is approximately $68.0 million, subject to adjustments for idX's transaction expenses and net working capital at closing. Additionally, at closing the Company will advance to idX approximately $94.5 million to retire outstanding debt and certain other obligations, and $1.625 million of the purchase price will be held in escrow until the earlier of (x) 30 days after delivery to the surviving corporation of its audit for the fiscal year ending December 31, 2017 and (y) June 30, 2018.
Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, (i) each issued and outstanding share of idX preferred stock will be automatically canceled and converted into the right to receive a portion of the aggregate purchase price, and (ii) each issued and outstanding share of idX common stock will be automatically canceled and converted into the right to receive a portion of the aggregate purchase price, (iii) shares of idX owned by the Company, Merger Sub or idX or any of their respective direct or indirect wholly owned subsidiaries shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor, and (iv) each outstanding option or warrant relating to idX's stock shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.
The consummation of the Merger is subject to certain conditions, including, without limitation, (i) the absence of any legal proceedings to prevent, enjoin or otherwise delay the closing, and (ii) the absence of any order, injunction, judgment, decree, stipulation, determination, ruling, writ, assessment, arbitration or other award prohibiting the Merger. Moreover, each party's obligation to consummate the Merger is subject to certain other customary conditions, including, without limitation, (i) the accuracy of the other party's representations and warranties (subject to customary materiality qualifiers), and (ii) the other party's compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers). Each of the Company, Merger Sub and idX has made customary representations and warranties and has agreed to customary covenants. The Merger is expected to close by the end of the third quarter of this year.
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