United States-based wholesale coffee roaster and dealer Coffee Holding Co Inc announced on September 30 that it has entered into a definitive merger and share exchange agreement with privately held logistics company Delta Corp Holdings Limited. The transaction will be effectuated through a newly created holding company structure, whereby Coffee Holdings and Delta will each become wholly-owned subsidiaries of Pubco.
Under the agreement, shareholders of Coffee Holdings will receive one ordinary share of Pubco for each share of Coffee Holdings common stock they own and Delta shareholders will exchange their shares of Delta for $625 million in ordinary shares of Pubco, subject to certain adjustments, at an implied diluted value per share of $5.50. Delta shareholders will become the majority shareholders of Pubco.
The agreement has been unanimously approved by the Board of Directors of Coffee Holding and by the Board of Directors of Delta. The Coffee Holding Board of Directors has also recommended to Coffee Holding’s shareholders that they vote to approve the agreement and the transaction.
The closing of the transactions contemplated by the definitive agreement is subject to certain conditions, including, without limitation, the approval of the shareholders of Coffee Holding and the approval of the listing of the shares of Pubco on the Nasdaq Stock Market, the companies said in a release.
The transactions are expected to close in the first quarter of 2023, after which the combined company will be known as Pubco and trade on Nasdaq under the ticker symbol “DLOG”. The combined company will continue to operate under the Delta management team led by Mudit Paliwal, Chief Executive Officer and Founder; Peter Shaerf, Non-Executive Chairman; and Joseph Nelson, Chief Financial Officer, while Coffee Holding, as a wholly owned subsidiary of Pubco, will continue to be operated under the leadership of Andrew Gordon, currently Coffee Holding’s President and Chief Executive Officer.
Immediately following the closing of the transaction, the shareholders of Delta are anticipated to collectively own approximately 95.21 percent of the outstanding ordinary shares of Pubco and Coffee Holding shareholders immediately prior to the closing of the transaction are anticipated to collectively own approximately 4.79 percent of the outstanding ordinary shares of Pubco on a diluted basis.
The transaction also includes an earnout to existing shareholders of Delta, which, if earned, consists of $50 million of additional ordinary shares of Pubco, which would be issued to Delta shareholders if Pubco achieves $70 million or greater of net income for the fiscal ending 2023.
Further, the agreement contains customary representations, warranties and covenants made by Coffee Holding and Delta, including covenants relating to both parties using their commercially reasonably efforts to cause the transactions contemplated by the agreement to be satisfied, covenants regarding obtaining the requisite approval of Coffee Holding’s shareholders, among others.
The agreement also contains certain termination rights for both Coffee Holding and Delta, and, in connection with the termination of the agreement under specified circumstances, Coffee Holding and Delta may be required to pay the other party a termination fee.
Andrew Gordon, President and Chief Executive Officer of Coffee Holding, said: “This transaction is a transformative next step for Coffee Holding. The Delta team has a successful track record building global business, offering our shareholders a unique opportunity and potential for additional returns. I am confident that Coffee Holding’s employees, customers, and shareholders will enjoy the many potential benefits of this partnership.”
Delta’s Chief Executive Officer and Founder, Mudit Paliwal, said: “Delta is excited to reach an agreement with Coffee Holding for the proposed transaction, which I believe will provide substantial benefits to all stakeholders of Delta and Coffee Holding.”
He added: “The transaction will enable us to accelerate the expansion of our business and enter new markets that have synergies with our core businesses. This includes a broadening of our energy transition, sustainability, and environmental stewardship related service offerings.”Notably, Maxim Group LLC is serving as exclusive financial advisor to Delta, and Ellenoff Grossman & Schole LLP is serving as counsel to Delta. Lowenstein Sandler LLP is serving as counsel to Coffee Holding.