JWCA announces a deal:
| The Tile Shop and JWC Acquisition Corp. Announce Agreement for Business Combination Valued at Approximately $500 Million
- Companies to Conduct Investor Conference Call on Wednesday, June 27, at 11:00 a.m. EDT -
- Transaction Provides The Tile Shop with Additional Access to Capital To Support Growth -
- Combined Company Expects to At Least Double Store Count Over Next Several Years -
Press Release: JWC Acquisition Corp. – Wed, Jun 27, 2012 6:00 AM EDT
MINNEAPOLIS & BOSTON--(BUSINESS WIRE)--
The Tile Shop, LLC (The Tile Shop), a leading specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories, and JWC Acquisition Corp. (OTCBB: JWCA; JWCAW; JWCAU), a special purpose acquisition company, today announced a definitive agreement under which The Tile Shop will engage in a business combination with JWC Acquisition Corp.
The Tile Shop Highlights
Compelling unit economics – 40% average cash on cash return
Best-in-class margins – 28% Adjusted EBITDA* margin in 2011
Compelling same-store sales growth – 10 straight quarters
45% unit growth since 2008
Two-year revenue CAGR of 15% and projected long-term net income growth of 25%
Proprietary, vertically integrated supply chain provides compelling consumer value
Business combination valued at approximately $500 million on a fully diluted basis, implying a multiple of 9.8x projected 2012 Adjusted EBITDA and 8.3x projected 2013 Adjusted EBITDA The Tile Shop and JWC Acquisition Corp. will combine under a new holding company, Tile Shop Holdings, Inc. (Tile Shop Holdings), which intends to apply to list its shares of common stock on the Nasdaq Stock Market under the symbol “TTS” upon the closing of the business combination. The Tile Shop, with 61 specialty retail stores in 20 states, is positioned to further execute on its profitable long-term growth strategy with greater access to capital to support future growth.
Bob Rucker, Chief Executive Officer and Founder of The Tile Shop, commented, “This transaction marks the next step in The Tile Shop’s evolution into the leading North American specialty retailer of tile. As a public company, we not only will continue with our self-funded store growth across the country, but also be better positioned to take advantage of additional resources to accelerate our growth as the demand for our products increases. The agreement with JWC Acquisition Corp. supports our ability to pursue attractive growth opportunities in both current and new markets. As we continue to expand and gain market share in this highly-fragmented market, we should be able to increase both sales and cash flow, which will enhance our profitability over time.”
The Tile Shop Financial Highlights and Initial Outlook
The Tile Shop reported net sales of $152.7 million for the year ended December 31, 2011, an increase of 12.8% from $135.3 million in 2010, and Adjusted EBITDA of $42.6 million, an increase of 10.7% from $38.5 million in 2010. From 2007 through 2011, The Tile Shop’s net sales and Adjusted EBITDA increased at compounded annual growth rates of 8.2% and 13.3% respectively. Since 2007, growth has been driven by a combination of opening 22 new retail locations and increases in same store sales. The Tile Shop has opened eight new stores to date in 2012. It intends to open an additional five stores during the balance of 2012 and expects to open no less than 15 stores in 2013. The Tile Shop employed 668 people on May 31, 2012.
The Tile Shop’s net sales for the quarter ended March 31, 2012, were $45.9 million, an increase of 21.1% compared to $37.9 million in the first quarter of 2011, with same store sales increasing 9.9%.
William E. Watts, an officer of JWC Acquisition Corp. who will be Chairman of Tile Shop Holdings, stated “We are extremely excited to be partnering with The Tile Shop. The Tile Shop’s management team has truly built a dynamic destination specialty store that has emerged as a leader in the tile industry. This business combination will allow The Tile Shop to further penetrate new markets while selectively adding additional destination stores in their current markets. We look forward to completing the transaction and supporting the management team as they focus their efforts on building The Tile Shop into the nation’s leading coast-to-coast specialty retail destination tile store.”
All the members of The Tile Shop management team will continue in their current positions under the new ownership structure.
Summary of Business Combination Transaction
Under the terms of the proposed business combination, Tile Shop Holdings will become the owner of all of the equity of JWC Acquisition Corp. and The Tile Shop. The current stockholders of JWC Acquisition Corp. and the current owners of The Tile Shop will hold approximately 33% and 67%, respectively, of the issued and outstanding shares of the Tile Shop Holdings common stock, with Chief Executive Officer Robert Rucker owning approximately 18.5% of the issued and outstanding shares of Tile Shop Holdings common stock. The current owners of The Tile Shop also will receive $100 million in cash and promissory notes in an aggregate amount of $80 million less certain indebtedness and deferred compensation obligations outstanding at closing. The number of shares of Tile Shop Holdings common stock and the amount of cash to be received by the current owners of The Tile Shop will be subject to adjustment in accordance with the terms of the definitive agreement.
The cash currently held in JWC Acquisition Corp.’s trust account will be used to fund the cash payment to the current owners of The Tile Shop, redemption by public stockholders of JWC Acquisition Corp. of their common stock, administrative expenses of JWC Acquisition Corp. and transaction expenses, with any remaining cash being used for working capital and capital expenditures to facilitate growth initiatives and other general corporate purposes.
The boards of directors of JWC Acquisition Corp. and the board of managers of The Tile Shop have unanimously approved the proposed transaction. Completion of the transaction, which is expected during August 2012, is subject to approval by JWC Acquisition Corp. stockholders.
Citigroup Global Markets, lead financial advisor, and Telsey Advisory Group are providing advisory services to JWC Acquisition Corp. Legal counsel to The Tile Shop is Foley & Lardner LLP. Legal counsel to JWC Acquisition Corp. is McDermott Will & Emery LLP.
Additional information about the transaction, as well as The Tile Shop operations and historical financial information, will be contained in an investor presentation that will be made public today and filed by JWC Acquisition Corp. with the Securities and Exchange Commission. Interested parties should visit the SEC website at www.sec.gov.
The description of the transaction contained herein is only a summary and is qualified in its entirety by reference to the definitive agreement relating to the transaction, a copy of which will be filed by JWC Acquisition Corp. with the SEC as an exhibit to a Current Report on Form 8-K.
Conference Call Scheduled
The Tile Shop and JWC Acquisition Corp. will host a conference call to discuss the proposed business combination with the investment community on Wednesday, June 27, 2012 at 11:00 a.m. ET. The call will be broadcast through The Tile Shop’s website, cts.businesswire.com and click on the investor tab or at JWC Acquisition Corp.'s website, cts.businesswire.com. Investors may also participate in the conference call by dialing 800-344-6491 (US) or 785-830-7988 (international). A replay will be available by dialing 877-870-5176 (US) or 858-384-5517 (international) and entering replay pin number 5963245.
About The Tile Shop
The Tile Shop is a leading specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States. The Tile Shop offers a wide selection of products, superior value, and enhanced customer service in a unique showroom setting. As of May 31, 2012, The Tile Shop operated 61 stores in 20 states, with an average footprint of 23,000 square feet.
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