The proposed $143m takeover of zero-waste recycler Close the Loop Group by Sydney-based private equity group Adamantem Capital has been terminated.
According to Close the Loop, the Indicative Proposal “involved considerable complexity, and the parties were unable to reach alignment on the commercial terms by which a successful transaction could be agreed and executed”.
Adamantem was offering 27c a share, which at the time of the initial offer on 21 November represented a 49 per cent premium on the rolling 30-day average. Close the Loop shares fell by 20 per cent to 24c when the due diligence deadline was extended on 16 January, and have now tumbled by half that, to 12.5c.
The proposed deal came as Close the Loop seeks to expand its North American and European operations. It also involved a realignment of its board, as its North American operations take greater importance. CEO Joe Foster, chairman Greg Toll, and CFO Marc Lichtenstein all resigned their board positions, with the company looking for a US-based CEO, and an IT focused chairman. Foster will remain with the company, as chief operating officer.
Close the Loop is currently in the process of compiling information received from its global businesses and finalising its half-year results. Following the review of recent information received from the various business units, the expectation is that first half revenue will be broadly in line with the prior corresponding period of $106.2m, however EBITDA will be in the range of $11m-$13m, half the figure of the prior corresponding period.
The company cites several factors for the diminished EBITDA, including a temporary unfavourable shift in business mix, and a delay in the opening of the Mexicali facility. It says it is actively addressing these short-term challenges and expects resolution in the coming months.
Close the Loop has two main business activities, its sustainable packaging operations, and IT recycling and refurbishment.
