SYNALLOY CORPORATION (NASDAQ:SYNL) Files An 8-K Entry into a Material Definitive AgreementITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On November 30, 2018, Synalloy Corporation’s (“Synalloy”) newly formed subsidiary ASTI Acquisition, LLC, a North Carolina limited liability company (“ASTI”), entered into an Asset Purchase Agreement (the “APA”) with American Stainless Tubing, Inc., a North Carolina corporation (“American Stainless”). to the terms and conditions in the APA, ASTI will acquire substantially all of American Stainless’ assets and operations in Statesville, North Carolina and Troutman, North Carolina. The parties’ obligations to consummate the transaction are subject to certain customary asset purchase closing conditions and termination rights. Subject to all of the conditions to closing, the transaction is expected to close on or about January 1, 2019.
The purchase price for the all-cash acquisition is estimated to be $21 million, which amount could be adjusted up or down depending on estimated working capital at closing. American Stainless will also receive quarterly earn-out payments for a period of three years following closing. to the APA, earn-out payments will equate to six and one-half percent (6.5%) of ASTI’s revenue over the three year earn-out period.
Synalloy will fund the acquisition with a draw against its asset based line of credit, which will be increased to a borrowing capacity of $100 million prior to closing, and a new 5-year $20 million term note, both with Synalloy’s current lender, Branch Banking and Trust Company.
On November 30, 2018, ASTI also entered into a Purchase and Sale Agreement (the “PSA”) with American Stainless. to the terms and conditions of the PSA, ASTI has agreed to purchase American Stainless’ real estate property in Statesville, North Carolina and Troutman, North Carolina (together the “Properties”) for a purchase price of $5 million. The parties’ obligations to consummate this real estate transaction are subject to completion of due diligence and certain customary closing conditions. Closing is expected to occur on or about January 1, 2019.
At or just prior to closing, ASTI intends to designate its rights to take title to the Properties to Store Capital Acquisitions, LLC, a Delaware limited liability company or its affiliate (together, “Store”), who will fund the full purchase price of the transaction and take title to the Properties. As part of the transaction, Synalloy has agreed to include the Properties in its current Amended and Restated Master Lease with Store to which Synalloy will lease the Properties from Store for the remainder of the initial term of 20 years, with two renewal options of ten years each. First year rent expense will be $430,000. The lease will include a rent escalator equal to the lesser of 1.25 times the percentage increase in the Consumer Price Index since the previous increase or 2.00%. Synalloy will provide payment and performance guaranties under the lease to provide a credit enhancement for the benefit of Store. At closing, Synalloy will sublease the Properties to ASTI.
The description of the APA and PSA contained in this Current Report on Form 8-K is a summary and is qualified in its entirety by the terms of the APA and PSA. The Company will file the APA and PSA with the U.S. Securities and Exchange Commission as an exhibit to its Annual Report on Form 10-K.
A copy of the press release announcing the execution of the APA and PSA is attached as Exhibit 99.1 and is incorporated by reference herein.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
Description of Exhibit
Press Release issued by Synalloy Corporation on December 4, 2018.
SYNALLOY CORP ExhibitEX-99.1 2 synl-astipressreleasexex99.htm EXHIBIT 99.1 Exhibit Exhibit 99.1NEWS RELEASE FOR IMMEDIATE RELEASE A Subsidiary of Synalloy Corporation Enters into a Definitive Agreement to Acquire the Assets of American Stainless Tubing,…To view the full exhibit click
About SYNALLOY CORPORATION (NASDAQ:SYNL)
Synalloy Corporation is a chemical manufacturing company. The Company operates through two segments: the Metals Segment and the Specialty Chemicals Segment. The Company’s Metals Segment comprises three subsidiaries: Synalloy Metals, Inc., which owns Bristol Metals, LLC (BRISMET), located in Bristol, Tennessee; Palmer of Texas Tanks, Inc. (Palmer), located in Andrews, Texas; and Specialty Pipe & Tube, Inc. (Specialty), located in Mineral Ridge, Ohio and Houston, Texas. The Company’s Metals Segment manufactures stainless steel, other alloy pipe, storage solutions and separation equipment. The Company’s Specialty Chemicals segment consists of the Company’s subsidiary, Manufacturers Soap and Chemical Company (MS&C). The Specialty Chemicals Segment manufactures lubricants, surfactants, reaction intermediaries, sulfated fats and oils, and chemical tolling manufacturing resources.