Private equity giant Apollo Global Management Inc. has agreed to acquire a 51-per-cent stake in ABC Technologies Holdings Inc. less than two months after its initial public offering.
Apollo will purchase $276.6-million of shares from ABC’s parent company Cerberus Capital Management LP, but made no offer to to buy shares from public shareholders, who will own approximately 20.9 per cent of outstanding shares when the deal closes. Shares of ABC have traded at low volumes. Nearly 80 per cent of the company’s outstanding shares are owned by insiders.
Founded in 1974, ABC specializes in creating thermoplastics for car manufacturers. The Toronto-based company slashed its original IPO size by 60 per cent from $255-million to $100-million, eventually entering the Toronto Stock Exchange at $10 a share on Feb. 22.
Apollo will purchase 27.7 million common shares of ABC at $10 a share, a 2.56-per-cent premium on the stock’s price at the open on Feb. 13, when the deal was announced. The acquisition price could increase to $10.64 a share if ABC makes any acquisitions prior to or within 12 months of the Apollo deal closing.
“ABC’s strong operational and financial performance, combined with its near-term opportunities as a platform for industry consolidation in the automotive technical plastics space, led to an unsolicited offer from the Apollo Funds to acquire a majority stake in the Company,” ABC president and chief executive Todd Sheppelman said in a press release.
“With its recent IPO, ABC is well-positioned to win market share and drive its leadership in the automotive plastics industry through organic growth and acquisition opportunities,” Cerberus senior managing director Dev Kapadia said in the release.
Apollo declined to comment further.
“Cerberus’s intentions for this transaction are apparent as it desires to monetize its ownership of ABC at the same price as the recent IPO,” BMO Capital Markets analyst Peter Sklar wrote in a research note. “While Apollo’s intentions remain unclear, clearly it sees value at $10 per share. As well, Apollo’s agreement to pay more if ABC were to complete one or more acquisitions leads us to believe that potential acquisitions are more likely to unfold.”
As part of the deal, Apollo will be entitled to nominate five of ABC’s nine board members. ABC will be able to nominate three.
ABC’s sales and earnings have been relatively flat since Cerberus bought it in 2016. ABC made US$65-million in fiscal 2019, which ended in June, 2019, but lost US$26.1-million during fiscal 2020 because of the economic effects of the COVID-19 pandemic.
The company’s IPO had tepid interest from investors when it was marketed between $12 and $15 a share. Companies such as Boat Rocker Media Inc. and MDA Ltd. have also had to cut their IPO size this year. Saskatoon-based Vendasta Technologies Inc. has also struggled to sell its $100-million IPO.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.