Emerald Holding Inc., the parent of Surf Expo, Outdoor Retailer and other trade shows, announced plans to raise $400 million through the issuance of convertible participating preferred stock to affiliates of Onex Corporation, the company’s controlling stockholder and in a subsequent rights offering to the company’s other holders of common stock as of the record date for the rights offering, which will be backstopped by Onex.

The company entered into an investment agreement pursuant to which Onex, subject to customary closing conditions, will acquire $263.5 million of Preferred Stock in initial private placement and will also backstop a rights offering of $136.5 million of the same series of Preferred Stock to the company’s other holders of common stock as of the record date. As a result of the rights offering, all holders of common stock will have an opportunity to acquire Preferred Stock on a pro-rata basis. In addition, Onex has agreed to customary standstill undertakings and transfer restrictions for the benefit of the company.

Emerald expects to use the net proceeds from the investment, to repay outstanding debt under its credit facility and for general corporate purposes, including organic and acquisition growth initiatives. The investment also substantially buttresses Emerald’s existing liquidity position. As of June 9, 2020, the company carried cash on its balance sheet of $68 million, borrowings under its revolving credit facility of $100 million, borrowings under its term loan of $529 million and had funded $24 million of its canceled event liability which had stood at $72 million on March 31, 2020.

The initial purchase by Onex is expected to close on or about July 9, 2020, and the rights offering is expected to close during the third quarter of 2020 following the effectiveness of a registration statement covering the Preferred Stock to be offered in the rights offering as well as the underlying shares of common stock into which the Preferred Stock will be convertible. 

“We are extremely pleased to expand our relationship with Onex as we position our business for recovery once the impact of COVID-19 is behind us,” said Brian Field, interim president and chief executive officer of Emerald. “We have continued confidence in our strategic plan and the long-term prospects of our marketplaces. The capital we are raising positions us to build on the strength of our brands and accelerate new growth opportunities we expect will arise during these uncertain times.”

“We believe Emerald has the platform, strategy and management team in place to deliver strong performance through future periods of economic recovery and create meaningful long-term stockholder value,” said Kosty Gilis, Managing Director at Onex and Chairman of the Board of Emerald. “With this investment, Emerald’s enhanced liquidity and strong balance sheet will position the company to pursue many attractive opportunities that will arise in the coming years. We look forward to continuing to work with the management team to create value for all stakeholders.”

“Our deliberations led us to conclude that the approach to this essential capital raising, including the opportunity for all common stockholders to participate pro-rata via the rights offering, provides a structure that is both fair to and in the best interests of all of our stockholders,” explained Todd Hyatt, the Chair of the Special Committee.

Emerald is a leader in building dynamic, market-driven business-to-business platforms that integrate live events with a broad array of industry insights, digital tools and data-focused solutions. “As true partners, we at Emerald strive to build our customers’ businesses by creating opportunities that inspire, amaze and deliver breakthrough results. With over 140 events each year, our teams, creators and connectors who are thoroughly immersed in the industries we serve are committed to supporting the communities in which we operate,” said Emerald.

Graphic courtesy Emerald Holding