Secures $85 Million Equity Investment
Company Appoints Three Independent Directors to the SunOpta Board
TORONTO--(BUSINESS WIRE)--
SunOpta Inc. ("SunOpta") (Nasdaq:STKL) (TSX:SOY), a leading global
company focused on organic, non-genetically modified and specialty
foods, today announced that it has entered into an agreement with funds
managed by Oaktree Capital Management, L.P. ("Oaktree"), a leading
global alternative investment management firm. Oaktree is an experienced
investor in the consumer and retail industry, with a track record of
driving growth in complex consumer businesses, including AdvancePierre
Foods, Campofrío Food Group and Diamond Foods. In reaching this
agreement with Oaktree, SunOpta has concluded the previously announced
review of strategic alternatives for the Company.
Under the agreement, Oaktree invested $85 million in SunOpta in the form
of exchangeable preferred shares. Proceeds from the investment have been
used to reduce the Company's 2nd lien debt and to increase financial
flexibility.
In partnership with representatives of Oaktree and with representatives
of Engaged Capital (SunOpta's second largest shareholder), SunOpta is
conducting a thorough review of the Company's operations, management and
governance, with the objective of maximizing the Company's ability to
deliver long-term value to its shareholders. The Company expects to
provide an update on these efforts in conjunction with the Company's
third quarter earnings release, along with an updated mid-range plan
which will include performance improvements and cost savings to be
realized in 2017.
As announced on June 27, 2016, the SunOpta Board of Directors hired
independent financial and legal advisors to support a review of the
Company's operating plan and evaluate a complete range of strategic and
financial actions that SunOpta could undertake to maximize shareholder
value. This review was comprehensive in its evaluation of all potential
alternatives.
"After concluding a comprehensive review of strategic and financial
alternatives, we are excited to have a partner in Oaktree that truly
appreciates SunOpta's unique position in the market and the potential
value that can be created for all our shareholders through performance
improvement and accelerated growth," said Alan Murray, Chairman of the
Board of SunOpta. "Given Oaktree's deep industry knowledge and
operational expertise, we believe they are the ideal partner for SunOpta
as we seek to strengthen the company's operations in a way that can
reduce operational volatility and realize sustainable growth and value
creation. We believe this strategic option provides the highest risk
adjusted return from the many options available and evaluated by the
Board."
"With its strong and diverse portfolio of products and having recently
undergone a period of significant investment in the business, we believe
SunOpta has a substantial opportunity for growth in the rapidly
expanding market for healthy and organic foods," said Matt Wilson,
Managing Director and Co-Portfolio Manager of Oaktree. "SunOpta is a
natural fit for Oaktree given our experience in the consumer and food
industries, and we see a significant opportunity to provide strategic,
operational and financial support that will accelerate the Company's
value-enhancing initiatives and position it for long-term success."
In concert with today's announcement, SunOpta is also announcing
significant enhancements to the Company's corporate governance. First,
the Board of Directors has appointed two Oaktree-nominated independent
directors, Dean Hollis and Al Bolles, Ph.D., to the Board. Both
appointees bring extensive sector experience. Mr. Hollis is a Senior
Advisor at Oaktree with highly relevant sector experience as the
Chairman of the Board of AdvancePierre Foods and the former President
and Chief Operating Officer of the Consumer Foods Division of ConAgra
Foods and former Chairman of Boulder Brands. Mr. Bolles has demonstrated
leadership across multiple organizations in global innovation, research
and development and supply chain management, most recently as the former
Executive Vice President, Chief Technology & Operations Officer of
ConAgra Foods. Additionally, the Board has also appointed Brendan
Springstubb of Engaged Capital to the Board. Engaged Capital is the
Company's second-largest shareholder and has extensive investment
experience in the healthy living industry. The Board has committed to a
further review of governance and leadership with a particular focus on
continuing to add independent directors with significant operating and
supply chain expertise in the food industry. The Board would expect to
announce additional changes shortly. Concurrent with these appointments,
Douglas Greene, a pioneer in the natural foods industry who has served
on the SunOpta board for eight years, has resigned from the Board,
effective today.
"On behalf of the Board, I would like to thank Doug for all his hard
work over the years and his dedication to SunOpta," said Alan Murray.
"We would also like to welcome Dean, Al and Brendan to the Board. The
company will benefit greatly from their respective industry and capital
markets experience and we look forward to their contributions."
Oaktree is investing in the company by purchasing $85 million of newly
created Series A exchangeable preferred shares issued by SunOpta Foods
Inc. (the "Series A Preferred") as well as the right to purchase up to 3
million shares of SunOpta common stock in the open market for a period
of one year. The Series A Preferred is immediately exchangeable into
shares of the Company's common stock at an initial exchange price of
$7.50 per share and pays a cumulative dividend of 8% per year that may
be paid-in-kind or cash at SunOpta's option. This exchange price
represents a 80.3% premium to the closing price of US$4.16 per share on
June 24, 2016, the day before the strategic review was announced, and a
12.1% premium to the 60-day average closing price of US$6.69 per share.
The Series A Preferred cumulative dividend will increase from 8% per
year to 12.5% beginning in the tenth year. The agreement also entitles
Oaktree to designate two nominees for election to SunOpta's Board of
Directors. Oaktree will be entitled to vote the Series A Preferred with
the common shares on an as-exchanged basis. The Series A Preferred
constitute on an as-exchanged basis a partially diluted ownership level
of approximately 11.7% of the company. Currently, Oaktree's ownership is
subject to a 19.99% cap under the agreement unless and until shareholder
approval is obtained to remove the cap.
Additional information regarding the investment will be included in a
Form 8-K to be filed by the Company with the Securities and Exchange
Commission. In connection with the transaction, SunOpta intends to rely
on the exemption set forth in Section 602.1 of the TSX Company Manual
which provides that the TSX will not apply certain of its requirements
to issuers whose shares are listed on another recognized stock exchange
such as the Nasdaq.
Rothschild Inc. is acting as financial advisor to SunOpta and Davies
Ward Phillips & Vineberg LLP and Stoel Rives are acting as its legal
advisors. Oaktree is represented by Kirkland & Ellis LLP and Stikeman
Elliott LLP.
Conference Call
SunOpta will host a conference call today at 2:00 PM Eastern Time to
discuss today's announcement. This conference call can be accessed via a
link on SunOpta's website at www.sunopta.com
under the "Investors" section. To listen to the live call over the
Internet, please go to SunOpta's website at least 15 minutes early to
register, download and install any necessary audio software.
Additionally, the call may be accessed with the toll free dial-in number
1 (877) 312-9198 or International dial-in number 1 (631) 291-4622. If
you are unable to listen live, the conference call will be archived and
can be accessed for approximately 90 days on the company's website.
Director Biographies
Dean Hollis presently serves as a senior advisor for Oaktree Capital and
Chairman of the Board at AdvancePierre Foods Holdings, Inc. Prior to
retiring in 2008, Mr. Hollis served as the President and Chief Operating
Officer of the Consumer Foods Division of ConAgra Foods from December
2004 to July 2008. In that role, Mr. Hollis developed and executed a
worldwide business transformation strategy, while overseeing the largest
part of the ConAgra Foods portfolio. During Mr. Hollis' 21 years with
ConAgra Foods, he held many executive level positions, including
Executive Vice President, Retail Products; President, Grocery Foods;
President, Frozen Foods; President, Specialty Foods; and President,
Gilardi Foods. Mr. Hollis previously served on the board of directors of
Diamond Foods, Inc., where he served on the audit and nominating and
governance committees. Mr. Hollis also previously served on the board of
directors of Boulder Brands, Inc., where he served as Chair of the board
of directors and on the audit committee. Mr. Hollis also served on the
board of directors of Landec Corporation, where he chaired the
compensation committee. Dean has several privately held businesses and
investments, ranging from transportation services, to specialized
retail. Mr. Hollis is a graduate of Stetson University. Mr. Hollis also
currently serves as Chair of the Board of Trustees of Brownell Talbot
College Preparatory School.
Dr. Albert Bolles most recently served as Executive Vice President,
Chief Technology & Operations Officer of ConAgra Foods, a leading
consumer products food company with net sales exceeding $16B. Prior to
this role, Al was Executive Vice President, Research, Quality and
Innovation for ConAgra, championing the development and execution of
multiple new and improved products, realizing incremental growth for
ConAgra Foods and a multi-year pipeline to sustain and advance growth
further. Prior to joining ConAgra in 2006, Dr. Bolles served as Vice
President, Worldwide R&D for PepsiCo Beverages and Foods, responsible
for global R&D leadership for beverages (Pepsi, Gatorade, and Tropicana)
and Quaker Foods including product, process, package and sensory R&D,
Nutrition, Quality, and Scientific & Regulatory Affairs. His prior
appointment was with Gerber Foods for over 8 years up to R&D Director,
overseeing infant and toddler global research and development. Mr.
Bolles currently serves on the Board of Directors of Landec Corporation
and is a member of the Compensation Committee and the Nominating and
Corporate Governance Committee for Landec. He has a Ph.D. and M.S.
degrees in Food Science, and a Bachelors' Degree in Microbiology, all
from Michigan State University.
Brendan B. Springstubb is a Principal at Engaged Capital, a
California-based investment firm and registered advisor with the SEC
focused on investing in small and mid-cap North American equities. In
this role, Mr. Springstubb has been responsible for sourcing and
managing a variety of Engaged Capital's investments in the consumer,
healthcare and technology sectors. Prior to joining Engaged Capital, Mr.
Springstubb held multiple roles with Relational Investors, LLC
("Relational") a $6 billion activist equity fund, from June 2005 to
April 2013. At Relational, Mr. Springstubb was most recently the senior
analyst covering the healthcare sector where he was responsible for
identifying and overseeing activist investment opportunities and
communicating with portfolio company management teams. Prior to leading
the healthcare group, Mr. Springstubb was a generalist covering
investments in the telecom, financial and technology sectors. Mr.
Springstubb earned a Master's degree in Biotechnology with a dual
concentration in Biotechnology Enterprise and Regulatory Affairs from
Johns Hopkins University and a Bachelor's degree in Economics and
Molecular Biology from Pomona College. Mr. Springstubb is also a CFA
Charter holder and a Certified Financial Risk Manager.
About SunOpta Inc.
SunOpta Inc. is a leading global company focused on organic,
non-genetically modified ("non-GMO") and specialty foods. The Company
specializes in the sourcing, processing and packaging of organic and
non-GMO food products, integrated from seed through packaged products,
with a focus on strategic vertically integrated business models. The
Company's organic and non-GMO food operations revolve around value-added
grain-, seed-, fruit- and vegetable-based product offerings, supported
by a global sourcing and supply infrastructure.
About Oaktree
Oaktree is a leader among global investment managers specializing in
alternative investments, with $98 billion in assets under management as
of June 30, 2016. The firm emphasizes an opportunistic, value-oriented
and risk- controlled approach to investments in distressed debt,
corporate debt (including high yield debt and senior loans), control
investing, convertible securities, real estate and listed equities.
Headquartered in Los Angeles, the firm has over 900 employees and
offices in 18 cities worldwide. For additional information, please visit
Oaktree's website at www.oaktreecapital.com.
About Engaged Capital
Engaged Capital, LLC ("Engaged Capital") was established in 2012 by a
group of professionals with significant experience in activist investing
in North America and was seeded by Grosvenor Capital Management, L.P.,
one of the oldest and largest global alternative investment managers.
Engaged Capital is a limited liability company owned by its principals
and formed to create long-term shareholder value by bringing an owner's
perspective to the managements and boards of undervalued public
companies. Engaged Capital manages both a long-only and long/short North
American equity fund. Engaged Capital's efforts and resources are
dedicated to a single investment style, "Constructive Activism" with a
focus on delivering superior, long-term, risk-adjusted returns for
investors. Engaged Capital is based in Newport Beach, California.
Additional information can be found at www.engagedcapital.com.
Forward-Looking Statements
Certain statements included in this press release may be considered
"forward-looking statements" within the meaning of the United States
Private Securities Litigation Reform Act of 1995 and applicable Canadian
securities legislation, which are based on information available to us
on the date of this release. These forward-looking statements include,
but are not limited to, statements about our ability to achieve
performance improvements and cost savings in 2017, and reduce
operational volatility and realize sustainable growth and value
creation. Generally, forward-looking statements do not relate strictly
to historical or current facts and are typically accompanied by words
such as "will", "should", "believe", "would", "may", "plans", "expect",
"anticipate", "estimate", "intend", "project", "potential", "continue",
"might", "predict" and other similar terms and phrases intended to
identify these forward-looking statements. Forward-looking statements
are based on information available to us on the date of this release and
are based on estimates and assumptions made by the Company in light of
our experience and perception of historical trends, current conditions
and expected future developments as well as other factors we believe are
appropriate in the circumstances. The Company makes no representation
that reasonable business people in possession of the same information
would reach the same conclusions. Whether actual timing and results will
agree with expectations and predications of the Company is subject to
many risks and uncertainties including risks described from time to time
under "Risk Factors" in our Annual Report on Form 10-K and its Quarterly
Reports on Form 10-Q (available at www.sec.gov).
Consequently, all forward-looking statements made herein are qualified
by these cautionary statements and there can be no assurance that the
actual results or developments that we anticipate will be realized.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161007005645/en/
SunOpta Inc. Contact:
Dan Gagnier
Gagnier Communications
646-273-9391
dg@gagnierfc.com
or
Scott
Van Winkle
ICR
617-956-6736
scott.vanwinkle@icrinc.com
or
Oaktree
Contact:
John Christiansen / Alyssa Linn
Sard Verbinnen &
Co.
415-618-8750 / 310-201-2040
or
Engaged Capital
Contact:
Riyaz Lalani, 416-907-9365
Bayfield Strategy, Inc.
rlalani@bayfieldstrategy.com
Source: SunOpta Inc.
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