Business Context and Reporting Period
This Form 8-K, filed on June 6, 2019, reports the consummation of the "Ranpak Business Combination" on June 3, 2019. One Madison Corporation (formerly a Cayman Islands exempted company) domesticated to Delaware and renamed Ranpak Holdings Corp. (NYSE: PACK). The Company acquired 100% of the equity interests of Rack Holdings, Inc. (Ranpak), a leading provider of environmentally sustainable protective packaging solutions. Prior to the transaction, One Madison was a shell company with no operations; post-closing, it operates as a holding company for Ranpak.
Key Financial Metrics
Transaction Consideration and Financing
- Total Consideration: $798,890,451 USD and €140,000,000 EUR in cash.
- Use of Proceeds: Approximately $341.5 million USD and €140.0 million EUR were used to repay Ranpak's existing indebtedness and transaction expenses; the remainder was paid to the Seller.
- Financing Sources:
- $149.7 million from IPO trust account proceeds.
- $146.0 million from Forward Purchase Agreements.
- $142.0 million from Subscription Agreements.
- $20.0 million from a New Subscription Agreement.
- Senior secured credit facilities totaling approximately $539 million (including a $378.2 million USD term facility, €140.0 million EUR term facility, and $45.0 million revolving facility).
Historical Operating Results (Rack Holdings)
Data reflects the three months ended March 31, 2019, compared to the same period in 2018 (in thousands, except per share amounts):
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Net Sales | $66,083 | $61,607 | +7% |
| Net (Loss) Income | $(3,371) | $(6,781) | Improvement of 50% |
| Operating Income | $2,202 | $1,927 | +14% |
| Net Cash from Operating Activities | $13,676 | $13,498 | +1% |
| Total Assets (as of Mar 31, 2019) | $779,842 | N/A | - |
| Total Liabilities (as of Mar 31, 2019) | $590,307 | N/A | - |
Liquidity and Debt
- Cash and Equivalents: $23.2 million as of March 31, 2019.
- Debt Refinancing: Existing debt of approximately $495 million was repaid in full at closing and replaced with new senior secured credit facilities.
- Revolving Facility: $45.0 million available; no amounts drawn as of June 3, 2019.
- Interest Rates: Applicable margin of 4.00% for eurocurrency borrowings and 3.00% for base rate borrowings (subject to leverage-based stepdown).
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 7% year-over-year, driven by volume and price increases in paper consumables. On a constant currency basis, sales increased 12%.
- Profitability: Net loss narrowed significantly from $6.8 million to $3.4 million, primarily due to a $4.9 million swing in foreign currency results (from a $2.9M loss to a $1.9M gain) and improved operating income.
- Installed Base: The installed base of protective packaging systems grew 8% to 98,538 units as of March 31, 2019.
- Corporate Structure: Transitioned from a shell SPAC (One Madison) to an operating public company (Ranpak Holdings Corp.) with a new Delaware domicile.
- Accounting Firm: Dismissed WithumSmith+Brown, PC and engaged Deloitte & Touche LLP as the independent registered public accounting firm.
Guidance, Outlook, Risks, and Unusual Items
Management Commentary and Outlook
Management expects to incur incremental annual public company expenses of approximately $2.0 million or more. The Company believes cash from operations and the revolving credit facility will cover working capital needs for the next 12 months. Capital expenditures are expected to increase to support business growth.
Key Risks
- Supply Chain: Reliance on a limited number of paper suppliers (e.g., WestRock supplied ~45% of North American raw paper in 2018). Disruptions could halt production.
- Input Costs: Kraft paper is the primary input; price fluctuations may impact margins if not passed to customers.
- Customer Concentration: The largest single end-user accounted for approximately 11% of 2018 net sales. Some e-commerce customers are reducing consumable usage for environmental reasons.
- Debt Covenants: The new credit facilities include restrictive covenants and a "springing" financial covenant requiring a maximum first lien net leverage ratio of 9.10:1.00 if revolver usage exceeds 35% of commitments.
- Geographic Exposure: Approximately 54% of 2018 sales were generated outside the U.S., exposing the company to currency fluctuations and international trade risks (e.g., U.S.-China tariffs).
Unusual Items
- Transaction Costs: Estimated at approximately $42.2 million, including $10.5 million in deferred underwriting commissions.
- Foreign Currency: A significant non-operating gain of $1.9 million in Q1 2019 compared to a $2.9 million loss in Q1 2018, driven by the re-measurement of Euro-denominated debt.
Investor Verification Checklist
- Verify the final purchase price allocation and any post-closing true-up adjustments to the $798.9M / €140M consideration.
- Confirm the specific terms of the new First Lien Credit Agreement, particularly the leverage-based interest rate stepdowns and covenant thresholds.
- Monitor the Company's ability to pass on paper cost increases to customers to maintain gross margins.
- Review the impact of the largest end-user (11% of 2018 sales) reducing consumable usage on future revenue projections.
- Assess the integration of the new accounting firm (Deloitte) and the timeline for the first audited financial statements as a public operating company.