Business Context and Reporting Period
This Form 8-K, filed on February 27, 2018, reports on events occurring on February 26, 2018, for Compass Diversified Holdings (Holdings) and Compass Group Diversified Holdings LLC (the Company), collectively referred to as CODI. CODI acquires and manages small to middle-market businesses. The filing announces the closing of an add-on acquisition by one of its portfolio companies, Sterno Products, LLC.
Key Financial Metrics and Transaction Details
- Transaction Type: Acquisition of 100% of the issued and outstanding capital stock of Rimports, Inc. by Sterno Products, LLC.
- Purchase Price: Approximately $145 million, excluding working capital adjustments.
- Contingent Consideration: Potential earn-out payment of up to $25 million based on future financial performance.
- Financing: Funded through a draw on CODI's revolving credit facility.
- Debt Structure: An amendment to the Sterno Credit Agreement provided for additional term loans of $136 million (senior and subordinate) and revolving loans of $10 million to fund the transaction.
- Ownership: Rimports is now a wholly-owned subsidiary of Sterno and an indirect subsidiary of the Company.
Material Changes
The primary material change is the expansion of Sterno's operations through the acquisition of Rimports. Concurrent with the closing, Rimports joined as a guarantor to the Guarantee and Collateral Agreement securing the obligations of Sterno and The Sterno Group LLC under the amended Sterno Credit Agreement. No revenue, profit, or margin figures for the current or prior periods are provided in this specific filing.
Guidance, Outlook, and Risks
The filing does not contain updated financial guidance or management commentary regarding future earnings outlook beyond the transaction details. The Company states that the terms of the amended Sterno Credit Agreement are considered fair and reasonable given the leverage and risk profile of Sterno. Historical financial statements and pro forma financial information for the acquired business are not included in this report but will be filed in an amendment within 71 calendar days.
Investor Verification Checklist
- Verify the final purchase price after working capital adjustments.
- Monitor the performance of Rimports to determine if the $25 million earn-out is triggered.
- Review the upcoming amendment to this 8-K for historical financial statements and pro forma information regarding Rimports.
- Assess the impact of the additional $146 million in debt ($136 million term + $10 million revolving) on Sterno's leverage ratios.