Embattled hospitality equipment leasing business Silver Chef (ASX: SIV) has settled on a deal to be acquired by private equity firm Next Capital.
The company today announced to the market it has entered into a binding scheme implementation agreement with a consortium of investors led by Next Capital to be paid a cash consideration of $0.70 per share.
In addition, Silver Chef will have the ability to have a piece in the potential upside in the run-down of the GoGetta equipment financing business.
While this deal comes at a premium to Silver Chef’s previous closing price of $0.31, it is considerably less than Next Capital’s takeover offer in April of $1.00 per share.
At the time of the original offer, Silver Chef provided access to due diligence, but it seems that after running over the company’s books, Next Capital reduced its valuation.
Silver Chef, which provides funding and leasing of commercial kitchen and catering equipment to hospitality enterprises, ran into financial issues early last year after exiting its GoGetta equipment financing brand.
As of 30 June 2018, it has remained in breach of debt agreements.
Next Capital’s offer also follows Silver Chef posting a statutory net loss after tax of $11.7 million and a near 17% drop in revenue (year-on-year) for the FY2019 first half.
Given its current money troubles, Silver Chef’s independent board committee has unanimously recommended shareholders accept the new offer.
“Today’s announcement represents the culmination of extensive negotiations with Next Capital and the company’s financiers and takes into account the prospects facing the company in a constrained funding environment and the urgent need to cure the covenant breaches to ensure the ongoing support of the company’s financers,” the company stated.
Silver Chef chair of the independent board committee Sophie Mitchell said the offer has been compared to the “existing challenges in raising sufficient debt and/or equity to cure breaches of debt covenants”.
“The independent directors have also weighed up the material risk of Silver Chef not receiving ongoing support from financiers and that it may be required to repay its credit facilities within a short timeframe without that support,” she said.
“The scheme consideration provides certainty of value to Silver Chef shareholders and an ability to share in the potential upside from the run-down of the GoGetta business,” Ms Mitchell added.
A scheme booklet containing further information is expected to be sent to Silver Chef shareholders by late July, with the implementation of the scheme anticipated in mid to late September.
By afternoon trade, Silver Chef shares had surged by a staggering 126% to $0.70.