Appleton Papers Inc. has agreed to a business combination with Hicks Acquisition Company II, Inc. (HKAC) valued at $675 million, the two companies said Wednesday. Under the terms of the deal, Hicks Acquisition will acquire an equity stake in Appleton.
The boards of directors of Hicks Acquisition, Paperweight and Appleton have unanimously approved the proposed deal. The transaction is expected to be completed during July 2012 and the combined company will be listed on the Nasdaq exchange.
Appleton is owned by Paperweight, which is owned by the Appleton ESOP or employee stock ownership plan. Appleton is a maker of specialty high value-added coated paper products.
Hicks Acquisition is a special purpose acquisition company founded and headed by Thomas Hicks, with about $149.3 million of cash in trust.
Hicks Acquisition said it will invest the cash held in trust, less expenses and amounts paid for certain repurchases and redemption of its stockholders, to acquire the equity interest in Appleton.
On its part, Appleton may use the proceeds from the transaction to repay debt, for capital expenditures, to reduce the amount of warrants outstanding, or for other general corporate purposes.
On closing of the transaction, Appleton will change its corporate name to Appvion. The company noted that the new name combines the words "applied" and "innovation," reflecting its transformation from a paper company to a business focused on coating formulations and applications, and specialty chemicals.
Following completion of the deal, Hicks and the other current stockholders of Hicks Acquisition will own about 63 percent of the pro forma outstanding equity of the combined company.
Paperweight will own the remaining 37 percent of the pro forma outstanding equity and will be entitled to receive up to 3 million additional shares based on certain stock price performance targets.
Members of Appleton's management team will continue in their current positions under the new ownership structure. Hicks Acquisition founder and Chairman Thomas Hicks, and CEO Christina Weaver Vest will join the existing Appleton board of directors.
The current Appleton directors, Stephen Carter, Terry Murphy, Andrew Reardon, Kathi Seifert, Mark Suwyn and George Wurtz, all of whom are independent directors, and Mark Richards, will remain on the Board. Richards will continue to serve as board chairman.
Founded in 1907 in Wisconsin, Appleton recorded sales of nearly $860 million in 2011.
Commenting on the deal, Thomas Hicks, said, "We are very impressed by Appleton's recent steps to further transform its business to value added converting and encapsulation. In particular, we believe that its recent agreement with Domtar allows the company to focus on its core, value-added capabilities, while reducing asset intensity and substantially increasing its profitability and free cash flow."
Mark Richards, Appleton's chairman, president and CEO said, "The combination with Hicks Acquisition Company II provides the company with capital to further strengthen our balance sheet, support our businesses and pursue attractive growth opportunities in our markets."
In Wednesday's regular session, HKAC is trading at $10.01, up $0.14 or 1.42 percent on a volume of 262,240 shares.
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