Purchase price of $9.81 per share in cash, with a total transaction
value of $247 million
Transaction follows a comprehensive strategic
review process by the Trecora Board of Directors
Trecora to adopt limited-duration shareholder
rights plan as a condition to the transaction
SUGAR
LAND, Texas, May 11, 2022
/PRNewswire/ -- Trecora Resources ("Trecora" or the "Company")
(NYSE: TREC), a leading provider of specialty hydrocarbons and
specialty waxes, and an affiliate of Balmoral Funds, LLC (together
with its consolidated subsidiaries, "Balmoral") today announced
that they have entered into a definitive merger agreement (the
"Merger Agreement") pursuant to which Balmoral agreed to acquire
Trecora for $9.81 per share in cash
in a transaction that values the Company at an enterprise value of
$247 million, which represents
approximately 11.4x our 2021 adjusted EBITDA.
Under the terms of the Merger Agreement, which has been approved
by the Trecora Board of Directors (the "Trecora Board"), Balmoral
will commence a tender offer to acquire all outstanding shares of
Trecora's common stock, par value $0.10 per share (the "Trecora Common Stock") for
$9.81 per share in cash. The purchase
price represents a 29.9% premium to Trecora's closing stock price
on May 10, 2022.
"Under the oversight of our Board of Directors and with the
support of our talented team, we have worked diligently to enhance
our execution, maximize operating efficiencies and reposition the
Company for growth," said Pat
Quarles, Trecora's President and Chief Executive Officer.
"We are excited to enter this new chapter with Balmoral, which
shares our enthusiasm for the future of our business and our
opportunities for growth. With Balmoral's support, we remain deeply
committed to supporting our customers with the quality and service
level they have come to depend on us for."
Karen Twitchell, Chair of the
Trecora Board, added, "We are pleased to have reached this
agreement with Balmoral. The transaction announced today follows
careful consideration and negotiation by the Board and concludes a
deliberate and comprehensive strategic review process undertaken
over the past seven months with the assistance of our independent
financial advisor. Beginning in October
2021, we contacted 72 financial and strategic acquirers and
held discussions with a number of parties, including Balmoral,
through a formal, competitive process. Our Board believes this
transaction maximizes value for shareholders, who will receive a
significant premium and immediate and certain value for their
shares."
David Shainberg, Managing
Director of Balmoral, said, "We are delighted to announce this
transaction with Trecora and are eager to execute on its growth
plan. Having followed Trecora for years, we're encouraged by its
strong customer relationships and product demand. This is
Balmoral's fourth acquisition in the chemicals sector and we are
excited to contribute to Trecora's continued success as a private
company."
"I applaud Trecora's Board of Directors for recognizing
alternative value creation opportunities for Trecora and for
displaying disciplined attention to its fiduciary duties as
representatives of the Company's shareholders," said Bradley L. Radoff, one of the Company's largest
shareholders. "I have long thought that the best risk-adjusted
outcome for Trecora and its shareholders is a sale of the Company,
and I am proud that my constructive engagement with the Company
over the last several months has helped lay the groundwork for this
important transaction to unlock shareholder value. I commend the
Board for its responsiveness to shareholder input and for
conducting a thorough and deliberate process to deliver a
transaction at a valuation that I support."
Conditions and Approvals
The closing of the
transaction is subject to customary closing conditions, including
the expiration or termination of certain regulatory periods and the
tender of shares representing at least a majority of the Company's
outstanding common stock to Balmoral, and is expected to close in
the third quarter. Following the successful completion of the
tender offer, Balmoral will acquire all remaining shares not
tendered in the tender offer through a second-step merger at the
same price.
Upon completion of the transaction, Trecora will become a
privately held company and shares of Trecora Common Stock will no
longer be listed on any market.
Guggenheim Securities is acting as exclusive financial advisor
to Trecora and Morgan, Lewis & Bockius LLP and Vinson &
Elkins L.L.P. are serving as legal advisors to Trecora.
Piper Sandler & Co. is acting as
financial advisor and Blank Rome LLP is acting as legal advisor to
Balmoral.
One-Year Shareholder Rights Plan
In connection with
the transaction, the Trecora Board has adopted a limited duration
Shareholder Rights Plan (the "Plan") that is effective immediately.
The Plan is designed to assist the Trecora Board in maximizing
shareholder value in connection with the sale of the Company. The
Plan will not in any way prevent the transaction from occurring,
nor will it prevent or restrict any person from making a superior
proposal pursuant to the terms of the Merger Agreement.
Pursuant to the Plan, the Trecora Board declared a dividend
distribution of one right (each a "Right") for each outstanding
share of Trecora Common Stock to shareholders of record at the
close of business on May 23, 2022.
Each Right entitles its holder, under the circumstances described
below, to purchase from Trecora one half of a share of Trecora
Common Stock. The purchase price for each whole share of
Trecora Common Stock pursuant to the exercise of a Right is
initially $38.00 (equivalent to
$19.00 for each one-half of a share
of Trecora Common Stock), subject to adjustment.
The Rights will be exercisable only if a person or group of
affiliated or associated persons (other than Balmoral or any of its
affiliates or associates acting pursuant to the Merger Agreement)
acquires beneficial ownership of 10% or more of the Company's
common stock. The Plan provides that the ownership of shareholders
that beneficially own 10% or more of the Trecora Common Stock on
the date of adoption of the Plan will be grandfathered, but the
Rights would become exercisable if at any time any such shareholder
increases its ownership. Derivative interests in the Trecora Common
Stock, such as swap arrangements, regardless of whether such
arrangements carry with them the right to control voting or
disposition of the underlying securities, are also considered
beneficial ownership of the underlying Trecora Common Stock for
purposes of the Plan.
Additional details about the Plan will be included in a Form 8-K
to be filed by Trecora with the U.S. Securities and Exchange
Commission (the "SEC").
About Trecora Resources
Trecora owns and operates a
specialty petrochemicals facility specializing in high purity
hydrocarbons and other petrochemical manufacturing and a specialty
wax facility, both located in Texas, and provides custom processing services
at both facilities.
About Balmoral Funds
Balmoral is a Los Angeles, CA based private equity fund that
was founded in 2005. Balmoral's objective is to be the financial
partner of choice for entrepreneurial, emotionally intelligent and
successful C-suite executives and operating advisors creating
transformative, revitalizing change in the businesses they
co-invest in together. Balmoral has approximately $1 billion of assets under management. Balmoral
typically invests in companies that have revenues between
$30 to $500
million and require equity investments of $10 to $75 million,
with the capability of doing more in particularly compelling
opportunities.
Important Information
The tender offer for all of the
outstanding shares of Trecora Common Stock has not yet commenced.
This communication is for informational purposes only and is
neither an offer to purchase nor a solicitation of an offer to sell
shares of Trecora Common Stock. The solicitation and offer to buy
shares of Trecora Common Stock will only be made pursuant to the
tender offer materials that Balmoral intends to file with the SEC.
At the time the tender offer is commenced, Balmoral will file a
tender offer statement on Schedule TO with the SEC, and Trecora
will file a solicitation/recommendation statement on Schedule 14D-9
with the SEC with respect to the tender offer. TRECORA'S
SHAREHOLDERS ARE ADVISED TO READ THE SCHEDULE TO (INCLUDING THE
OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND OTHER
TENDER OFFER DOCUMENTS) AND THE SCHEDULE 14D-9, AS EACH MAY BE
AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND ANY OTHER RELEVANT
DOCUMENTS FILED BY BALMORAL OR TRECORA WITH THE SEC WHEN THEY
BECOME AVAILABLE BEFORE THEY MAKE ANY DECISION WITH RESPECT TO THE
TENDER OFFER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION AND THE PARTIES THERETO. Both the tender
offer statement and the solicitation/recommendation statement will
be mailed to Trecora's shareholders free of charge. Investors and
shareholders may obtain free copies of the Schedule TO and Schedule
14D-9, as each may be amended or supplemented from time to time,
and other documents filed by the parties (when available) at the
SEC's web site at www.sec.gov, by contacting Trecora's Investor
Relations either by telephone at (212) 836-9626, e-mail at
jhellman@equityny.com, or on Trecora's website at
ir.trecora.com/.
Important Additional Information
Trecora, its
directors and certain of its executive officers are participants in
the solicitation of proxies from the Trecora's shareholders in
connection with the 2022 annual meeting of shareholders (the "2022
Annual Meeting"). Trecora intends to file a definitive proxy
statement and a BLUE proxy card with the SEC in connection
with any such solicitation of proxies from Trecora's shareholders.
SHAREHOLDERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ SUCH
PROXY STATEMENT, ACCOMPANYING BLUE PROXY CARD AND ALL OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION.
Trecora's definitive proxy statement for the 2021 annual meeting of
shareholders contains information regarding the direct and indirect
interests, by security holdings or otherwise, of Trecora's
directors and executive officers in the Company's securities.
Information regarding subsequent changes to their holdings of the
Company's securities can be found in the SEC filings on Forms 3, 4
and 5, which are available on Trecora's at ir.trecora.com/ or
through the SEC's website at www.sec.gov. Information can also be
found in Trecora's other SEC filings, including its Annual Report
on Form 10-K for the year ended December 31,
2021, filed on March 10, 2022
and amended on April 29, 2022.
Updated information regarding the identity of potential
participants, and their direct or indirect interests, by security
holdings or otherwise, will be set forth in the definitive proxy
statement and other materials to be filed with the SEC in
connection with the 2022 Annual Meeting. Shareholders will be able
to obtain the definitive proxy statement, any amendments or
supplements to the proxy statement and other documents filed by the
Company with the SEC at no charge at the SEC's website at
www.sec.gov. Copies will also be available at no charge on
Trecora's website at ir.trecora.com/.
Forward-Looking Statements
Some of the statements and
information contained in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements regarding the
Company's financial position, business strategy and plans and
objectives of the Company's management for future operations and
other statements that are not historical facts, are forward-looking
statements. Forward-looking statements are often characterized by
the use of words such as "outlook," "may," "will," "can," "shall,"
"should," "could," "expects," "plans," "anticipates,"
"contemplates," "proposes," "believes," "estimates," "predicts,"
"projects," "potential," "continue," "intend," or the negative of
such terms and other comparable terminology, or by discussions of
strategy, plans or intentions.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions, and other important factors that could
cause the actual results, performance or our achievements, or
industry results, to differ materially from historical results, any
future results, or performance or achievements expressed or implied
by such forward-looking statements. Such risks, uncertainties and
factors include, but are not limited to not completing, or not
completely realizing the anticipated benefits from, the sale of the
business, receipt and timing of necessary regulatory approvals, the
impacts of the COVID-19 pandemic on our business, financial results
and financial condition and that of our customers, suppliers, and
other counterparties; general economic and financial conditions
domestically and internationally, including the impact of rising
inflation and supply chain issues; the ongoing impact of
geopolitical conflict; the impact of actions by activist
shareholders; insufficient cash flows from operating activities;
our ability to attract and retain key employees; feedstock and
product prices; feedstock availability and our ability to access
third party transportation; competition; industry cycles; natural
disasters or other severe weather events, health epidemics and
pandemics (including the COVID-19 pandemic) and terrorist attacks;
our ability to consummate, and the costs associated with,
extraordinary transactions, including acquisitions, dispositions
and other business combinations, and realize the financial and
strategic goals of such transactions; technological developments
and our ability to maintain, expand and upgrade our facilities;
regulatory changes; environmental matters; lawsuits; outstanding
debt and other financial and legal obligations; difficulties in
obtaining additional financing on favorable conditions, or at all;
local business risks in foreign countries, including civil unrest
and military or political conflict, local regulatory and legal
environments and foreign currency fluctuations; and other risks
detailed in our latest Annual Report on Form 10-K, including, but
not limited to, "Part I, Item 1A. Risk Factors" and "Part II, Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" therein and in our other filings with the
SEC. Many of these risks and uncertainties are currently amplified
by and will continue to be amplified by, or in the future may be
amplified by, the COVID-19 pandemic and other natural disasters
such as severe weather events.
There may be other factors of which we are currently unaware or
deem immaterial that may cause our actual results to differ
materially from the forward-looking statements. In addition, to the
extent any inconsistency or conflict exists between the information
included in this release and the information included in our prior
releases, reports and other filings with the SEC, the information
contained in this release updates and supersedes such
information.
Forward-looking statements are based on current plans,
estimates, assumptions, and projections, and, therefore, you should
not place undue reliance on them. Forward-looking statements speak
only as of the date they are made, and we undertake no obligation
to update them in light of new information or future events.
Investor Contact
Jeremy
Hellman, CFA
The Equity Group, Inc.
(212) 836-9626
jhellman@equityny.com
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SOURCE Trecora Resources