Fenix Parts Announces Merger With Stellex

Fenix Parts, Inc. announced that it has entered into a definitive merger agreement with Stellex Capital Management LP under which a Stellex-controlled affiliate would acquire the company for $0.40 per share in cash along with the assumption of over $40 million in operating and long-term liabilities, including $33 million of indebtedness.

The per share cash consideration under the merger, which has been unanimously approved by Fenix’s Board of Directors, represents a premium of approximately 56 percent to the 60-day volume-weighted average stock price as of February 9, 2018, the last trading day prior to the announcement by Upstate Shredding, LLC of an unsolicited, non-binding offer for the company.

Upstate Shredding, LLC is the East Coast’s largest privately-owned scrap metal processor. It submitted a non-binding offer to acquire all of the outstanding shares of common stock of Fenix Parts, Inc. for $0.50 per share. The purchase price represents an attractive all-cash premium of approximately 46 percent over the company’s closing price of $0.27 on February 8, 2018. Owner Adam Weitsman sent a letter to Kent Robertson, president and CEO of Fenix Parts, on February 9 proposing the purchase.

On February 13, 2018, Fenix announced that it had received Upstate Shredding’s unsolicited, non-binding offer to acquire the company but Fenix’s board concluded that there was significant doubt that the offer would be completed on its announced terms. “The board also observed that pursuing the offer, and the related lengthy due diligence process that would ensue, would jeopardize the advanced negotiations with Stellex. Comparatively, the Stellex offer followed months of extensive negotiation and due diligence, giving the board confidence that the proposed transaction with Stellex provided a better alternative for stockholders to monetize their shares and will facilitate the company entering into an extension to its forbearance agreement with its senior secured lender, which is expected to be executed later today,” Fenix announced in a Feb. 28 release.

The Stellex merger agreement is subject to shareholder approval, and a proxy statement will be mailed to shareholders shortly. The proxy statement and proxy card, as well as additional information about the transaction, will be accessible on the company’s website when it becomes available. The deal is expected to close in the second quarter of 2018.

Kent Robertson, CEO of the Company, commented, “We are pleased to announce this definitive merger agreement with Stellex following a long and exhaustive strategic review process, which included multiple offers from both strategic and financial entities that ultimately fell apart. Throughout this process, the company’s financial condition has continued to deteriorate due to ongoing liquidity constraints which limited the company’s car buying activity and the impact of a fire in April 2017 at our Toronto facility. As a result of continued negative cash flow from operations and the current liquidity situation, including the continuing default on our senior secured credit facility, there was significant doubt that the company could remain a going concern, limiting our options to move forward with the business. Due to all of these factors, the board believes this offer from Stellex represents the best opportunity for shareholders to maximize value.”

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