Westrock Coffee invests $75.0 million equity to support long-term growth strategy
July 11 - 2023
Coffee Geography Magazine
Westrock Coffee has entered into definitive agreements with affiliates of HF Capital, LLC and the Herbert Hunt family to make aggregate equity investments of $75.0 million in the Company through the purchase of 7,500,000 shares of Company common stock at a price of $10.00 per share. The transactions are expected to close in August 2023, subject to the satisfaction of customary closing conditions, including, in the case of the investment by HF Capital, termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The Company also announced it has amended its existing $400 million credit agreement to (i) increase the Company’s total net leverage financial covenant for a period of time not to exceed April 1, 2025, and (ii) to raise the minimum interest coverage ratio from 1.50x to 2.00x.
Scott T. Ford, CEO and Co-founder stated, “We are excited to announce both a follow-on $50.0 million equity investment by HF Capital, one of the original investors in our go-public transaction, and a $25.0 million equity investment by the Herbert Hunt family, a new investor who was excited for the opportunity to partner with our team as we expand our extract and ready-to-drink (“RTD”) capabilities. In addition, we are pleased to announce an amendment to our credit facility that allows us greater access to our revolver as we continue to build out our Conway, Arkansas extract and RTD facility. Together, the equity investments and credit agreement amendment form part of a capital plan that allows us to not only complete the previously announced Phase 1 and 2 expansions, which consist of high-speed can and glass bottle lines, a multi-serve bottle line, and bag-in-box and bulk lines, but now, two additional can lines and an industry leading product development lab and FDA certified pilot plant to develop coffee, tea, and other beverages including dairy and plant-based milks to support our customers’ innovation needs. The expansion of our extracts and RTD business in Conway is the gateway to future EBITDA expansion and remains our top strategic priority and key enabler of future growth.”
Andrew Seamons, Chief Investment Officer at HF Capital, commented, “Our agreement to make this additional investment further validates our belief in Westrock Coffee’s strategy to capitalize on the strong demand for extracts and RTD as a growing consumer category, and on the ability of the Westrock Coffee team to deliver on that strategy.”
Wells Fargo Securities served as a Capital Markets Advisor to Westrock Coffee. Wachtell, Lipton, Rosen & Katz served as legal counsel to Westrock Coffee, and Bass, Berry & Sims served as legal counsel to HF Capital. 2023 Outlook
The Company is updating its 2023 outlook for Adjusted EBITDA to now reflect flat to up 10% growth over 2022 from 10% to 25% previously.
Chris Pledger, the Company’s CFO said, “This change in near term guidance is driven by external factors, such as product launch delays by certain customers in response to macro-economic uncertainty, and internal factors, such as the challenges we’ve experienced scaling our single-serve platform in the face of equipment delays in the first half of the year, and investments we are making to build out the infrastructure to support the launch of our extract and RTD facility. While we believe that the combination of these factors warrants a change in our full-year 2023 guidance, we expect new customer wins, continued improvement in the performance of our single-serve platform, and the growth in our extract and RTD business to drive a strong back half of 2023 and to accelerate considerably with the launch of our extracts and RTD facility in 2024.”
This guidance is an estimate of what the Company believes is realizable as of the date of this release, and actual results may vary from this guidance and the variations may be material. Management will provide additional details regarding the 2023 outlook on the second quarter 2023 earnings results call.
The Company is not readily able to provide a reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income without unreasonable effort because certain items that impact such figures are uncertain or outside the Company’s control and cannot be reasonably predicted. Such items include the impacts of non-cash gains or losses resulting from mark-to-market adjustments of derivatives and the change in fair value of warrant liabilities, among others.
The Company also announced that as part of the annual Russell stock indices reconstitution, Westrock Coffee Company, under the ticker WEST, has been selected for inclusion in the Russell 3000® and Russell 2000® indices effective after the US market opened on June 26, 2023.