Appleton Papers Inc. and Hicks Acquisition Company II, Inc. have announced a definitive agreement under which Appleton will engage in a business combination with Hicks Acquisition Company II valued at $675 million. The combined company will be listed on the Nasdaq exchange, positioning Appleton for long-term growth and profitability with an improved balance sheet and greater access to capital. Appleton is a leading manufacturer of specialty high value-added coated paper products and a provider of proprietary encapsulation applications. Hicks Acquisition Company II is a special purpose acquisition company founded and headed by Thomas O. Hicks with approximately $149.3 million of cash in trust.
It was also announced today that when the transaction closes Appleton will change its corporate name to Appvion. The new name combines the words “applied” and “innovation,” reflecting the company?s successful transformation from a paper company to a business focused on coating formulations and applications, and specialty chemicals.
Appleton was founded in 1907 in Appleton, Wisconsin. With 2011 sales of nearly $860 million, Appleton is a global leader operating in three business segments: direct thermal, in which it holds the leading position in North America and is considered to be the market leader in innovation; carbonless/security, in which, under its NCR PAPER and Appleton brands, the company holds the number one position worldwide; and Encapsys, an innovative and rapidly growing specialty chemical operation that is a leader in microencapsulation for use in branded consumer products. The company employs approximately 1,800 people and has been 100 percent employee-owned since November 9, 2001.
Under the terms of the proposed business combination, Hicks Acquisition Company II will invest the cash held in trust, less expenses and amounts paid for certain repurchases and redemptions of its stockholders, to acquire an equity interest in Appleton. Proceeds from the transaction may be used by Appleton for reducing the amount of debt outstanding, capital expenditures to facilitate growth initiatives, reducing the amount of warrants outstanding or other general corporate purposes.
Thomas O. Hicks, founder and chairman of Hicks Acquisition Company II, commented, “We are tremendously pleased to be partnering with Appleton, its management team and its employee-owners. Appleton is a true leader in its markets with a broad and diverse product line, globally respected brands, a legacy of innovation and a world-class management team. We are very impressed by Appleton?s recent steps to further transform its business to value added converting and encapsulation. In particular, we believe that its recent agreement with Domtar allows the company to focus on its core, value-added capabilities, while reducing asset intensity and substantially increasing its profitability and free cash flow. We look forward to completing the transaction and supporting the management team as they continue to realize Appleton?s full potential.”
Members of the Appleton management team will continue in their current positions under the new ownership structure.
“This transaction will be the latest milestone in Appleton?s transformation from a paper producer to a company focused on coating formulations and applications, and specialty chemicals,” said Mark Richards, Appleton?s chairman, president and chief executive officer. “The combination with Hicks Acquisition Company II provides the company with capital to further strengthen our balance sheet, support our businesses and pursue attractive growth opportunities in our markets. Our customers will benefit as we continue to expand and improve the value-added products and services we provide them. Appleton ESOP participants, through their ownership interests in Paperweight Development Corp. (“Paperweight”), the parent company of Appleton, will be able to share in an even stronger company and hold a more flexible security with greater potential for appreciation. We are proud to partner with Tom Hicks and his colleagues, who have a decades-long record of supporting and building the value of specialty manufacturing companies.”
Mr. Richards added, “Our new name – Appvion – recognizes this milestone in our transformation. Appvion stands for „applied innovation,? representing what we have accomplished so far and where we are heading as a company.”
Following completion of the transaction, Mr. Hicks, Founder and Chairman of Hicks Acquisition Company II and Chairman and CEO of Hicks Holdings LLC, and Christina Weaver Vest, CEO of Hicks Acquisition Company II and a Managing Director and Partner of Hicks Equity Partners, will join the existing Appleton board of directors. The current Appleton directors, Stephen P. Carter, Terry M. Murphy, Andrew F. Reardon, Kathi P. Seifert, Mark A. Suwyn and George W. Wurtz, all of whom are independent directors, and Mr. Richards, will remain on the Board. Mr. Richards will continue to serve as board chairman.
The boards of directors of Hicks Acquisition Company II, Paperweight and Appleton have unanimously approved the proposed transaction. Completion of the transaction, which is expected during July 2012, is subject to expiration or early termination of any applicable Hart-Scott-Rodino waiting period, approval of the transaction by Hicks Acquisition Company II?s stockholders, approval by State Street Bank and Trust Company, the trustee representing participants in the Appleton ESOP, and certain other closing conditions.
Jefferies & Company, Inc. is serving as exclusive financial advisor to Appleton. Deutsche Bank Securities Inc. is serving as exclusive financial advisor to Hicks Acquisition Company II. Legal counsel to Appleton is DLA Piper LLP and Morgan, Lewis & Bockius LLP. Legal counsel to Hicks Acquisition Company II is Akin Gump Strauss Hauer & Feld LLP.