One Madison Corp. (OMAD), announced Thursday morning that they have signed a definitive agreement with affiliates of Rhône Capital (“Rhône Capital”), to combine with Ranpak Corporation (“Ranpak”), sustainable systems-based packaging solution for e-Commerce and industrial supply chains.

This transaction will introduce Ranpak as a publicly listed company with an anticipated enterprise value of approximately $1.089 billion and is expected to close in the Spring of 2019.

Ranpak is the global leader in fiber-based, environmentally sustainable protective packaging solutions that safeguard products in commerce and industrial supply chains. It utilizes a systems-based business model to drive recurring revenue through an installed platform of over 90,000 machines. Ranpak sells consumables to end-users via a network of exclusive distributor relationships, delivering services to approximately 30,000 diversified end-users in over 40 countries with customer retention rates in excess of 90% over the past five years.

• Achieved a consistent average annual revenue growth rate of greater than 7% over the past five- and 15-year periods (adjusted for constant currency),while maintaining Adjusted EBITDA margins of greater than 30%.
• The Company’s asset-light operating model supports robust free cash flow conversion of over 80% of Adjusted EBITDA for the past three years and benefits from a short payback period of approximately 15 months on machine investment.
• Ranpak is targeting revenue growth of 8% in 2019 and Adjusted EBITDA of $95mm (resulting in a 33% Adjusted EBITDA margin).
• one-third of Ranpak’s sales are derived from e-Commerce

Quick takes:  This combination hits the right notes with “Socially Conscious” investors given that Renpak is a leader in environmentally sustainable packaging solutions. Plus, it appears to be a stable and resilient business model and in particular, the presentation seems to hit you over the head with how resilient Renpak is in a recession (Do they know something we don’t about the near future?).  Plus, Blackrock, which committed to a $150 million forward purchase at IPO, is still committed and they even added an additional $142 million backstop via a new PIPE at $10.00, for a total of $292 million to secure this transaction. This deal is getting done.

However, the discount to the peers looks a bit…meh.  But….fully one-third of Renpak’s sales are in e-commerce which has been growing at ~20% CAGR in the past few years.  Plus, sustainability is the future.  So one would expect that Renpak would be well positioned to capitalize on the increased focus of environmentally friendly products.  Regardless, this transaction is fully back-stopped so this deal is all wrapped up (in an environmentally sustainable package, naturally).

THE TRANSACTION

• Under the terms of the transaction, OMAD will acquire Ranpak for $950 million in cash, including the repayment of existing first lien and second lien debt.
• The transaction and related expenses are expected to be funded with:
  • (i) cash held in trust by OMAD of $300 million;
  • (ii) approximately $407 million of debt drawn from $650 million of committed new debt financing available to fund the transaction and related expenses on the closing date; and
  • (iii) approximately $292 million of committed equity investments from OMAD’s anchor investors at $10.00 per share
    • $150 million of proceeds from the forward purchase agreements entered into in connection with the IPO
    • $142 million of proceeds from subscription agreements entered into in connection with the Business Combination
• 2.3 million of the total 7.5 million promote shares are subject to an earnout and will be released at a share price of $12.50
  • 157,500 promote shares are owned by Blackrock (BSOF) and will be released at $12.25/share

• Pro forma for the acquisition, the combined company will have an anticipated enterprise value of approximately $1.1 billion, implying a multiple of 11.5x 2019E Adjusted EBITDA of $95 million.
• Post transaction, Omar Asali will serve as Executive Chairman of Ranpak and Mark Borseth will continue to serve as President and CEO.
• The transaction is expected to close in spring 2019

HIGHLIGHTS

• Company’s premium fiber-based solution to benefit from growing momentum in e-Commerce and increased consumer focus on environmental sustainability
• Fully committed debt and equity financing in place to complete transaction, including a newly committed $142 million common equity private placement at $10.00 per share
• One Madison’s investors and strategic partners include JS Capital and Soros Capital (the family offices of Jonathan Soros and Robert Soros, respectively), as well as entities managed by Blackstone Alternative Solutions L.L.C.
• Omar Asali to serve as Executive Chairman of Ranpak and Mark Borseth to continue as President and CEO

ADVISORS

• Citi acted as financial advisor to OMAD
• Credit Suisse and BofA Merrill Lynch acted as capital markets advisors for the transaction.
• Goldman Sachs acted as exclusive financial advisor to Rhône Capital and Ranpak.
• Davis Polk & Wardwell LLP served as legal counsel to OMAD
• Sullivan & Cromwell LLP acted as legal advisor to Rhône Capital and Ranpak.

The transaction includes committed debt financing from The Merchant Banking Division of Goldman Sachs.