That’s a bit of a misnomer. Cement is only an ingredient in concrete, but let’s just go with it…

Late Friday afternoon, Industrea Acquisition Corp. announced their deal with Concrete Pumping Holdings, Inc., or “CPH”, a leading concrete pumping services and concrete environmental waste management solutions provider in the U.S. and U.K. The proposed transaction will introduce CPH as a publicly traded company with an anticipated initial enterprise value of approximately $696 million, with net debt of approximately $244 million

However, the timing of the announcement seemed strange. Friday afternoon announcements generally imply you don’t want people to notice them. So, of particular concern, as with any business combination that involves a PIPE or any other type of financing, was – at what price were the various new investments and the backstop done?  Well, all appear to be on-the-level and done at $10.20 (initial trust value). There is, however, a minor twist with the re-investment from Peninsula Pacific, CPH’s majority shareholder.

Peninsula Pacific’s Re-investment Includes an Additional Term:

Peninsula has a separate term, just for them, so that if the cash amount in trust post-redemptions is less than $103,138,275 (the threshold amount), Peninsula receives additional shares at $9.18.

For example: if post-redemptions the trust value is $100,000,000.  The difference between $103,138,275 (the Threshold Amount) and $100,000,000 (Cash in Trust) is $3,138,275.  Peninsula would receive 341,860 shares at $9.18, or $3,138,275.

However, the chances the cash in trust, post-redemptions, breaches that threshold amount of $103 million seems unlikely.  Current funds in trust, per the most recent 10-Q, stand at $236.7 million.  Plus, they have additional protection via a backstop with Argand Partners that kicks in if the trust level reaches below $128,138,275. On top of that, they have plenty of time to complete – their deadline isn’t until July of 2019.  And frankly, this looks like a good deal.

The only drawback we see is the fact that Industrea started out as a 102% in trust deal, or $10.20 per share. With interest earned, the redemption value per share will be higher and wind up being somewhere north of $10.30+ (current cash in trust is $236.7 million, per the most recent 10-Q). So, regardless of whether an investor likes this deal, is the transaction strong enough to entice investors to stay in?  Or, will they collect the redemption amount and keep the warrant as a free look?  That’s the real question and the risk with over-funding the trust at this level at IPO.

It’s still sort of puzzling why Industrea announced late Friday.  Maybe an expert in this sector can shed some light on anything we’re missing that is industry specific.  Regardless, Industrea has some time before this closes.  A summary of the various financings is summarized below.

$25 million zero-dividend convertible perpetual preferred with Nuveen

• 2,450,980 shares at $10.20
• conversion right is 1:1 ratio, optional six months post-closing

$350 million term-loan and $60 million ABL revolver

• Term-loan facility:  Libor + 450 bps
• ABL Revolver: Libor + 175-225 bps (based on leverage levels)

$25 million backstop agreement with Argand Partners (Industrea’s sponsor)

• $10.20 per share
• Kicks in if the amount in trust after redemptions is less than $128,138,275

$71.9 million PIPE with Argand Partners and another institutional investor

• $10.20 share

Re-investment

• CPH Management Shareholder: $9 million at $10.20
• CPH Management: $42 million at $10.20
• Peninsula Pacific:  $9 million….$10.20, however;
  • If the cash amount in trust post-redemptions is less than $103,138,275 (the threshold amount), Peninsula receives the difference between the threshold amount and the cash in trust value in additional shares at $9.18.