Boxwood Merger Corp. (BWMC), announced this morning that they have entered into a definitive agreement with Atlas Intermediate Holdings LLC (“Atlas”), a provider of professional testing, inspection, engineering and consulting services. Atlas is currently a portfolio company of Bernhard Capital Partners, a services-focused private equity management firm established in 2013.

Headquartered in Austin, Texas, Atlas provides mission-critical technical services that help its public and private sector clients test, inspect, certify, plan, design and manage a wide variety of projects across the transportation, commercial, industrial, government, education and other nonresidential markets. Its highly technical infrastructure services are delivered through a nationwide footprint, as its approximately 2,100 highly-skilled, technical staff of scientists, engineers, inspectors and other field experts operate from over 140 offices located across 40 states. Atlas clients include government agencies, quasi-public entities, schools, hospitals, utilities and airports, as well as private sector clients across a variety of industries and approximately 95% of Atlas’ revenues are generated from clients that have tenures longer than 10 years.

Upon the closing of the proposed transaction, the Company will be led by Atlas’ management team, including Chief Executive Officer L. Joe Boyer and Chief Financial Officer Walter Powell, who will continue to serve in their respective roles.  Stephen Kadenacy, Chairman and Chief Executive Officer of Boxwood, will become Atlas’ Executive Chairman upon the closing of the transaction.

Immediately following the proposed transaction, Boxwood intends to change its name to Atlas Technical Consultants, Inc. (“Atlas Technical”) and its shares of Class A common stock are expected to continue to be listed on The Nasdaq Stock Market under the ticker symbol “ATCX.”

TRANSACTION

The combined company will be organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries (“Atlas”) will be held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which the Company’s only direct assets will consist of Holdings Units.

• The purchase price to be paid by the Buyer is $617 million
• The Buyer will pay off the existing debt of the Seller which is anticipated to be approximately $160 million
• The Seller will receive aggregate consideration of $457 million, which shall consist of:
  • Between $260 million and $337 million of cash and
    • Between $120 million and $197 million of Holdings Units, with each such unit valued at $10.00 per unit (the “Rollover Units”), and
    • Class B common stock. (For each Holdings Unit received by the Seller as consideration, the Company will issue to the Seller one share of Class B common stock)
• The final amount of cash and the value of the Rollover Units and Class B common stock is dependent on the amount of money remaining in the Company’s trust account following any redemptions, and the amount of additional proceeds (if any) raised by the Company through equity financing sources prior to the Closing (the “Available Equity”).

DEBT COMMITMENT

• On August 12, 2019, the Company entered into a debt commitment letter with Macquarie Capital (USA) Inc. (“Macquarie Capital”), Macquarie Capital Funding LLC (“Macquarie Funding”) and Natixis, New York Branch (together with Macquarie Capital and Macquarie Funding, the “Commitment Parties”).
• The Commitment Parties have agreed to provide for Credit Facilities in the aggregate principal amount of up to $400 million, consisting of:
  • A senior secured first lien term loan facility in an aggregate principal amount of up to $290 million (the “First Lien Term Facility”)
  • A senior secured first lien revolving credit facility in an aggregate principal amount of $40 million (the “Revolving Facility”) and
  • A senior secured second lien term loan facility in an aggregate principal amount of up to $70 million (together with the First Lien Term Facility, the “Term Loan Facilities”), made available to Buyer.
• If there is immediately prior to the Closing, Available Equity of (i) greater than $100 million and less than or equal to $160 million, the principal amount of the Term Loan Facilities will be reduced by the difference between the Available Equity and $100 million, with such reduction to be allocated between such facilities as determined by the Commitment Parties in their sole discretion
• If there is immediately prior to closing, Available Equity of (ii) greater than $160 million:
  • The number of Rollover Units received by the Seller will be reduced (and the cash consideration to be paid to such party will be correspondingly increased) by an amount equal to 20% of the difference between the Available Equity and $160 million and
  • The principal amount of the Term Loan Facilities will be reduced by an amount equal to 80% of the difference between the Available Equity and $160 million, with such reduction to be allocated between such facilities as determined by the Commitment Parties until such time as the principal amount of the Term Loan Facilities is reduced to $270 million.
  • Furthermore, to the extent the principal amount of the Term Loan Facilities has been reduced to $270 million, the value of the Rollover Units received by the Seller will be reduced until their value is equal to $120 million, and thereafter the principal amounts of the Term Loan Facilities may be reduced further.

SPONSOR SHARES AND WARRANTS

• No surrender of sponsor shares and warrants

NOTABLE CONDITIONS TO CLOSING:

• The expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
• Available Equity of at least $100 million immediately prior to the Closing
• The Seller’s obligation to consummate the business combination is subject to the pro forma debt to equity ratio remaining below the specified threshold and the value of the Rollover Units and Class B Common Stock not exceeding $197 million in the aggregate.

NOTABLE CONDITIONS TO TERMINATION

The Agreement may be terminated if the Closing has not occurred by February 19, 2020

ADVISORS

• Greenhill & Co. and Macquarie Capital are acting as financial advisors to Boxwood
• BofA Merrill Lynch, Morgan Stanley, Macquarie Capital and Helena Capital Advisors are acting as capital markets advisors to Boxwood.
• Boxwood has secured committed debt financing for the transaction from Macquarie Capital and Natixis.
• Winston & Strawn LLP and Atrium LLP are serving as legal advisors to Boxwood
• Kirkland & Ellis LLP is acting as legal advisor to Atlas.

CONFERENCE CALL

Boxwood and Atlas will host a joint investor conference call to discuss the proposed transaction on August 13, 2019 at 10 AM ET.

Interested parties may listen to the call via telephone by dialing

• 1-877-407-9716 (Domestic)
• 1-201-493-6779 (International).

A telephone replay will be available shortly after the call and can be accessed by dialing

• 1-844-512-2921 (Domestic) or 1-412-317-6671
• pass code: 13693526.

The conference call webcast and a related investor presentation with more detailed information regarding the proposed transaction will be available in the Investor Information section of the Boxwood website at www.boxwoodmc.com.

Quick takes:  Atlas looks like a decent enough company and there appears to be a healthy discount to the comps.  Plus, it has strong growth numbers with plans for additional organic growth as well as growth by acquisition.   The recurring revenue and back log make this company attractive as well.  However, like a lot SPAC acquisitions, it’s going to require a massive marketing effort. “Professional testing, inspection, engineering and consulting services” is not a particularly sexy story, like a Virgin Galactic deal, so in order to get this share price moving in the right direction, they’re going to need to get in front of a LOT of new investors to create demand.  However, if done right, there is potential for this one, but it’s probably going to be a slow burn.