Concrete Pumping Holdings, Inc. current report, 07 September 2018

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Business Context and Reporting Period

Company: Industrea Acquisition Corp. (Registrant) and Concrete Pumping Holdings, Inc. (Target, "CPH")
Date: September 7, 2018
Event: Entry into a Material Definitive Agreement (Agreement and Plan of Merger) to combine Industrea Acquisition Corp. with Concrete Pumping Holdings, Inc. in a business combination.

Key Financial Metrics and Transaction Structure

Merger Consideration: Aggregate consideration of $610.0 million for CPH, subject to customary adjustments.
Cash Consideration: Expected to range between $446.9 million and $550.0 million, dependent on the number of public share redemptions.
Valuation: CPH shares and options valued at $10.20 per share.
Debt Financing:

  • Term Facility: $350.0 million seven-year term loan (Credit Suisse).
  • ABL Facility: $60.0 million five-year asset-based revolving credit facility (Wells Fargo).
Equity Financing (PIPE):
  • Argand Subscription: $54.4 million for 5,333,333 shares, plus up to $25.0 million contingent on redemptions exceeding $106.5 million.
  • Common Stock PIPE: $17.5 million for 1,715,686 shares.
  • Preferred Stock PIPE: $25.0 million for Series A Zero-Dividend Convertible Perpetual Preferred Stock (convertible at 1:1 after six months; redeemable after four years at 7.0% annual accrual).
Redemption Backstop:
  • First $106.5 million offset by Debt and PIPE proceeds.
  • Next $25.0 million offset by Argand Investor share issuance.
  • Remaining redemptions offset by Peninsula (BBCP Investors, LLC) share contributions.
Expense Reimbursement: Up to $3.0 million for CPH transaction expenses if the deal is terminated due to Industrea's breach or failure to obtain stockholder approval.

Material Changes and Conditions

Conditions to Closing:

  • Approval by Industrea stockholders.
  • Written consent of CPH stockholders within two business days of the agreement date.
  • Expiration or termination of Hart-Scott-Rodino Antitrust waiting periods.
Termination Rights:
  • Either party may terminate if closing does not occur within 180 days (unless due to willful breach).
  • CPH may terminate if Industrea's board fails to recommend the deal or changes its recommendation.
  • CPH may terminate if Industrea stockholders do not approve the merger.
Corporate Structure: CPH will merge into a subsidiary of Newco (surviving entity), and Industrea will merge into Newco, with Newco becoming the public company.

Guidance, Outlook, and Risks

Management Commentary: The transaction is structured to provide liquidity to CPH shareholders while maintaining a public listing. Significant capital is being raised via debt and equity to fund the cash portion of the deal and offset potential redemptions.
Risks and Contingencies:

  • Failure to obtain stockholder approval from either Industrea or CPH.
  • Antitrust regulatory delays or denials.
  • Significant redemptions exceeding the backstop capacity, potentially requiring additional equity dilution or deal termination.
  • Forward-looking statements regarding future performance and deal timing are subject to significant uncertainties.
  • Disruption of current operations during the merger process.
Unusual Items: The deal includes complex rollover structures for U.K. investors (Camfaud Group Limited) involving debt conversion and share exchanges, and specific director appointment rights for Peninsula based on post-closing ownership thresholds.

Investor Verification Checklist

  • Redemption Levels: Verify the final number of public shares redeemed, as this directly impacts the cash consideration paid to CPH and the final capitalization of Newco.
  • Stockholder Approval: Confirm the outcome of the special meeting of Industrea stockholders and the written consent of CPH stockholders.
  • Debt Commitments: Verify the final closing of the $350.0 million term loan and $60.0 million ABL facility, including interest rates and covenants.
  • PIPE Closing: Confirm the full funding of the $121.9 million (minimum) PIPE financing and the issuance of preferred stock.
  • Regulatory Clearance: Monitor the status of the Hart-Scott-Rodino waiting period expiration.
  • Proxy Statement: Review the definitive proxy statement/prospectus (Form S-4) for detailed risk factors and financial projections not fully disclosed in this 8-K.