MGP Ingredients, Inc. (NASDAQ:MGPI) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
On June 26, 2017, a wholly-owned subsidiary of MGP Ingredients,
Inc. (“MGP” or “Company”) entered into an Agreement and Plan
of Merger (“Merger Agreement”) that would result in a sale of
its thirty percent equity ownership interest in Illinois Corn
Processing, LLC (“ICP”) to Pacific Ethanol Central, LLC
(“Pacific Ethanol”).
Inc. (“MGP” or “Company”) entered into an Agreement and Plan
of Merger (“Merger Agreement”) that would result in a sale of
its thirty percent equity ownership interest in Illinois Corn
Processing, LLC (“ICP”) to Pacific Ethanol Central, LLC
(“Pacific Ethanol”).
ICP produces high quality food grade alcohol, chemical
intermediates, and fuel at its Pekin, Illinois facility. Illinois
Corn Processing Holdings, Inc., an affiliate of SEACOR Holdings,
Inc., holds the remaining equity in ICP and is also a party to
the Merger Agreement.
intermediates, and fuel at its Pekin, Illinois facility. Illinois
Corn Processing Holdings, Inc., an affiliate of SEACOR Holdings,
Inc., holds the remaining equity in ICP and is also a party to
the Merger Agreement.
At the closing of the transaction, the aggregate $76.0 million
purchase price will be paid in proportion to the ICP members’
equity ownership percentage in a combination of $30.0 million in
cash (less a $2.0 million deposit paid at the signing of the
Merger Agreement, which will be retained) and through the
issuance of secured promissory notes with an aggregate principal
amount of $46.0 million. Pacific Ethanol has the option to
increase the cash portion of the consideration to $76.0 million
and eliminate the obligation to deliver secured promissory notes
at the closing of the transaction. MGP is expected to receive at
the closing cash consideration of $9.0 million, less its share of
transaction expenses and after the adjustments referenced below,
as well as a separate secured promissory note in the principal
amount of $13.8 million (the “Note”). The purchase price is
subject to customary pre- and post-closing adjustments, including
an adjustment based on the working capital of ICP. The Merger
Agreement also contemplates a special distribution of all of
ICP’s cash and cash equivalents to equity owners prior to the
closing. On June 26, 2017, ICPs Board of Directors approved an
initial distribution of $22.0 million. In addition, MGP
anticipates another smaller distribution at the time of closing.
purchase price will be paid in proportion to the ICP members’
equity ownership percentage in a combination of $30.0 million in
cash (less a $2.0 million deposit paid at the signing of the
Merger Agreement, which will be retained) and through the
issuance of secured promissory notes with an aggregate principal
amount of $46.0 million. Pacific Ethanol has the option to
increase the cash portion of the consideration to $76.0 million
and eliminate the obligation to deliver secured promissory notes
at the closing of the transaction. MGP is expected to receive at
the closing cash consideration of $9.0 million, less its share of
transaction expenses and after the adjustments referenced below,
as well as a separate secured promissory note in the principal
amount of $13.8 million (the “Note”). The purchase price is
subject to customary pre- and post-closing adjustments, including
an adjustment based on the working capital of ICP. The Merger
Agreement also contemplates a special distribution of all of
ICP’s cash and cash equivalents to equity owners prior to the
closing. On June 26, 2017, ICPs Board of Directors approved an
initial distribution of $22.0 million. In addition, MGP
anticipates another smaller distribution at the time of closing.
The principal amount of the Note to be received at the closing
will be subject to adjustment based on the working capital of ICP
as of the closing date. At the closing, ICP Merger Sub and ICP
will merge, with ICP surviving and becoming the obligor on the
Note. The Note will be secured by, among other things, all of the
limited liability company interests issued by ICP, as well as all
of the property and assets of ICP following the closing. The Note
will bear interest at LIBOR plus an applicable margin. The margin
is 5% for the first three months the Note is outstanding, 8% for
the next three months, and 10% at all times thereafter. The Note
matures 18 months from the closing of the merger transaction. The
Note may be prepaid without penalty or premium. The Note requires
mandatory prepayment in certain circumstances as a result of the
receipt of cash proceeds by the maker from the sale or other
disposition of the property which is collateral under the Note.
The Note includes customary representations and warranties and
events of default.
will be subject to adjustment based on the working capital of ICP
as of the closing date. At the closing, ICP Merger Sub and ICP
will merge, with ICP surviving and becoming the obligor on the
Note. The Note will be secured by, among other things, all of the
limited liability company interests issued by ICP, as well as all
of the property and assets of ICP following the closing. The Note
will bear interest at LIBOR plus an applicable margin. The margin
is 5% for the first three months the Note is outstanding, 8% for
the next three months, and 10% at all times thereafter. The Note
matures 18 months from the closing of the merger transaction. The
Note may be prepaid without penalty or premium. The Note requires
mandatory prepayment in certain circumstances as a result of the
receipt of cash proceeds by the maker from the sale or other
disposition of the property which is collateral under the Note.
The Note includes customary representations and warranties and
events of default.
The Agreement contains customary representations, warranties and
covenants, including covenants with respect to the operation of
ICP prior to the closing of the merger transaction. Many of the
representations made by MGP and the other seller are subject to
and qualified by materiality or similar concepts. The Merger
Agreement includes indemnification provisions to which, among
other things, MGP and the other seller have agreed to indemnify
Pacific Ethanol for losses arising from certain breaches of the
Merger Agreement, subject to customary limitations set forth in
the Merger Agreement.
covenants, including covenants with respect to the operation of
ICP prior to the closing of the merger transaction. Many of the
representations made by MGP and the other seller are subject to
and qualified by materiality or similar concepts. The Merger
Agreement includes indemnification provisions to which, among
other things, MGP and the other seller have agreed to indemnify
Pacific Ethanol for losses arising from certain breaches of the
Merger Agreement, subject to customary limitations set forth in
the Merger Agreement.
The transaction is subject to customary closing conditions,
including (1) the receipt of all required governmental approvals,
(2) the absence of any law or order which has the effect of
restraining, enjoining or otherwise prohibiting or making illegal
the consummation of the transaction and (3) there not being any
event, circumstance or occurrence that has or would reasonably be
likely to have a material adverse effect on ICP’s business,
operations or assets.
including (1) the receipt of all required governmental approvals,
(2) the absence of any law or order which has the effect of
restraining, enjoining or otherwise prohibiting or making illegal
the consummation of the transaction and (3) there not being any
event, circumstance or occurrence that has or would reasonably be
likely to have a material adverse effect on ICP’s business,
operations or assets.
The above description of the Merger Agreement is qualified in its
entirety by the terms of the Merger Agreement attached hereto as
Exhibit 10.1 and incorporated herein by reference.
entirety by the terms of the Merger Agreement attached hereto as
Exhibit 10.1 and incorporated herein by reference.
On June 27, 2017, MGP issued a press release announcing its entry
into the Merger Agreement. A copy of the press release is
furnished herewith as Exhibit 99.1.
into the Merger Agreement. A copy of the press release is
furnished herewith as Exhibit 99.1.
In connection with the receipt of the initial net cash proceeds
from the merger transaction together with the funds received in a
cash distribution from ICP ($6.6 million was declared on June 26,
2017) prior to the merger, MGP expects that its Board of
Directors will declare a special dividend of approximately $0.85
per share of common stock outstanding, or approximately $14.5
million in the aggregate.
from the merger transaction together with the funds received in a
cash distribution from ICP ($6.6 million was declared on June 26,
2017) prior to the merger, MGP expects that its Board of
Directors will declare a special dividend of approximately $0.85
per share of common stock outstanding, or approximately $14.5
million in the aggregate.
Effects of Transaction in 2017
Income from MGP’s ownership interest in ICP is reported as
equity method investment earnings. The transaction will not
affect MGP’s sales or operating income, but will reduce MGP’s
net income by eliminating equity method investment earnings after
the date of closing. For the quarter ended March 31, 2017, MGP
reported equity method investment earnings of $471,000 or $0.02
per share. For the year ended December 31, 2016, MGP reported
equity method investment earnings of $4.0 million from its
ownership of ICP, or $0.17 per share.
equity method investment earnings. The transaction will not
affect MGP’s sales or operating income, but will reduce MGP’s
net income by eliminating equity method investment earnings after
the date of closing. For the quarter ended March 31, 2017, MGP
reported equity method investment earnings of $471,000 or $0.02
per share. For the year ended December 31, 2016, MGP reported
equity method investment earnings of $4.0 million from its
ownership of ICP, or $0.17 per share.
The transactions contemplated by the Merger Agreement would
result in a gain on sale of equity method investment, net of tax,
of approximately $8.0 million. This pro forma financial
information is presented for illustrative purposes only, is based
on certain assumptions that we believe are reasonable, and is not
necessarily indicative of the results of the contemplated
transaction.
result in a gain on sale of equity method investment, net of tax,
of approximately $8.0 million. This pro forma financial
information is presented for illustrative purposes only, is based
on certain assumptions that we believe are reasonable, and is not
necessarily indicative of the results of the contemplated
transaction.
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking
statements as well as historical information. All statements,
other than statements of historical facts, included in this
filing regarding the closing of the transactions contemplated by
the Merger Agreement, and our prospects, plans (including special
dividend plans), financial position, business strategy, guidance
on growth in operating income, revenue, gross margin, and future
effective tax rate may constitute forward-looking statements.
Forward-looking statements are usually identified by or are
associated with such words as “intend,” “plan,” “believe,”
“estimate,” “expect,” “anticipate,” “hopeful,”
“should,” “may,” “will,” “could,” “encouraged,”
“opportunities,” “potential” and/or the negatives or
variations of these terms or similar terminology. They reflect
management’s current beliefs and estimates and are not
guarantees of future performance. All such forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. The risks
and uncertainties in connection with such forward-looking
statements related to the proposed transactions include, but are
not limited to, the occurrence of any event, change or other
circumstances that could delay the closing of the proposed
transactions; the possibility of non-consummation of the proposed
transactions and the termination of the Merger Agreement; the
failure to satisfy any of the conditions to the closing of the
merger in the Merger Agreement; adverse effects on the Companys
common stock because of the failure to complete the proposed
merger transaction; and the dependence of the proposed special
dividend of the consummation of the merger transaction. For
further information on other risks and uncertainties that may
affect our business see Item 1A. Risk Factors of our Annual
Report on Form 10-K for the year ended December 31, 2016.
statements as well as historical information. All statements,
other than statements of historical facts, included in this
filing regarding the closing of the transactions contemplated by
the Merger Agreement, and our prospects, plans (including special
dividend plans), financial position, business strategy, guidance
on growth in operating income, revenue, gross margin, and future
effective tax rate may constitute forward-looking statements.
Forward-looking statements are usually identified by or are
associated with such words as “intend,” “plan,” “believe,”
“estimate,” “expect,” “anticipate,” “hopeful,”
“should,” “may,” “will,” “could,” “encouraged,”
“opportunities,” “potential” and/or the negatives or
variations of these terms or similar terminology. They reflect
management’s current beliefs and estimates and are not
guarantees of future performance. All such forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. The risks
and uncertainties in connection with such forward-looking
statements related to the proposed transactions include, but are
not limited to, the occurrence of any event, change or other
circumstances that could delay the closing of the proposed
transactions; the possibility of non-consummation of the proposed
transactions and the termination of the Merger Agreement; the
failure to satisfy any of the conditions to the closing of the
merger in the Merger Agreement; adverse effects on the Companys
common stock because of the failure to complete the proposed
merger transaction; and the dependence of the proposed special
dividend of the consummation of the merger transaction. For
further information on other risks and uncertainties that may
affect our business see Item 1A. Risk Factors of our Annual
Report on Form 10-K for the year ended December 31, 2016.
Item 9.01. Financial Statements and Exhibits.
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(d)
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Exhibits
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>>2.1 Agreement and Plan of Merger, dated June 26, 2017, by
and among Pacific Ethanol Central, LLC, ICP Merger Sub, LLC,
Illinois Corn Processing, LLC, Illinois Corn Processing Holdings
Inc., and MGPI Processing, Inc. *
and among Pacific Ethanol Central, LLC, ICP Merger Sub, LLC,
Illinois Corn Processing, LLC, Illinois Corn Processing Holdings
Inc., and MGPI Processing, Inc. *
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99.1
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Press release dated June 27, 2017
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_____________________
*The Agreement and Plan of Merger filed as Exhibit 2.1 omits
certain exhibits and the disclosure schedules to the Merger
Agreement to Item 601(b)(2) of Regulation S-K promulgated by the
SEC. The Company agrees to furnish on a supplemental basis a copy
of the omitted exhibits and schedules to the SEC upon request.
certain exhibits and the disclosure schedules to the Merger
Agreement to Item 601(b)(2) of Regulation S-K promulgated by the
SEC. The Company agrees to furnish on a supplemental basis a copy
of the omitted exhibits and schedules to the SEC upon request.
MGP INGREDIENTS INC ExhibitEX-2.1 2 exh21-seacorxicpagreement.htm EX 2.1 – SEACOR – ICP AGREEMENT Exhibit Execution VersionAGREEMENT AND PLAN OF MERGERby and amongPACIFIC ETHANOL CENTRAL,…To view the full exhibit click here About MGP Ingredients, Inc. (NASDAQ:MGPI)
MGP Ingredients, Inc. is a holding company. The Company’s principal operating subsidiaries are MGPI Processing, Inc. and MGPI of Indiana, LLC (MGPI-I). The Company produces and supplies distilled spirits, and wheat proteins and starches. The Company’s distilled spirits include bourbon and rye whiskeys, and grain neutral spirits, including vodka and gin. The Company also produces industrial alcohol for use in both food and non-food applications. Its distillery products are derived from corn and other grains, including rye, barley, wheat, barley malt and milo. The Company operates through two segments: distillery products and ingredient solutions. Its distillery products segment consists of food grade alcohol and co-products of its distillery operations, including distillers feed, fuel grade alcohol and corn oil. Its ingredient solutions segment consists of specialty wheat starches, specialty wheat proteins, commodity wheat starch and commodity wheat protein or vital wheat gluten.
