Fortress Value Acquisition Corporation

Fortress Value Acquisition Corporation

Oct 19, 2020 by viktoria.v

PROPOSED BUSINESS COMBINATION: MP Materials


ESTIMATED CURRENT FUNDS in TRUST: $345.2 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.00*
ENTERPRISE VALUE: $1.0 billion

*SPACInsider estimate 

Fortress Value Acquisition Corp. proposes to combine with MP Materials, the owner and operator of Mountain Pass, the only rare earth mining and processing site of scale in North America. The combined company will have an estimated post-transaction enterprise value of $1.0 billion and an equity value of approximately $1.5 billion with over $500 million in net cash. Additionally, cash proceeds raised will consist of FVAC’s $345 million of cash in trust and an additional $200 million investment, led by institutional investors including Slate Path Capital, Chamath Palihapitiya and Omega Family Office, at $10.00 per share . Upon completion of the transaction, the combined company will be named MP Materials Corp. and will remain NYSE-listed under the new ticker symbol “MP”.

MP Materials currently produces a rare earth concentrate product that represents an estimated 15% of the world’s production. As part of the Company’s growth plan, it will produce refined Neodymium-Praseodymium (“NdPr”). NdPr is the primary rare earth material used in high-strength permanent magnets that power the traction motors inside electric vehicles, wind turbines, robotics, drones, defense systems, and many other high-growth, advanced motion technologies. While China currently controls over 80% of the global NdPr market, global industries and governments are actively seeking to diversify beyond China to ensure material availability and supply chain certainty to support the anticipated surge in electric vehicle production and other forms of electrification. By 2035, annual consumption of NdPr by electric vehicles alone is forecast to exceed the total expected production of NdPr in 2020.

MP Materials is expected to deliver over $100 million in estimated revenue and nearly $30 million in estimated Adjusted EBITDA in 2020. The net proceeds raised from the transaction will be used to fund MP Materials’ strategic plan to retrofit and fully recommission its existing on-site refining facilities and will further enable the Company to pursue additional downstream growth opportunities in the magnetics industry. MP Materials’ growth strategy is expected to generate estimated Adjusted EBITDA of over $250 million in 2023, subject to rare earth market conditions over that period.

Current MP Materials shareholders, JHL Capital Group LLC and QVT Financial LP, will roll 100% of their existing equity holdings into equity of the combined company. The business combination has been unanimously approved by the boards of directors of both MP Materials and FVAC. Informational meetings with the investment community are anticipated to be held in September 2020.

Following completion of the transaction, MP Materials will retain its experienced management team. Co-Chairman James Litinsky will become Chairman and CEO, current CEO Michael Rosenthal will become COO, Ryan Corbett will continue to serve as CFO, and Sheila Bangalore will continue to serve as Chief Strategy Officer and General Counsel.

SUBSEQUENT EVENTS – Amendment to Merger Agreement

  • Parent will waive the obligation of the Companies to deliver to Parent the Title Opinion and the Survey prior to the initial filing
  • The Parties also agreed modify the conditions under which Earnout Shares will be issued in the event Parent enters into a binding agreement with respect to a Parent Sale prior to the date that is ten (10) years following the Closing Date
    • Only if the consideration paid for each share of Parent Stock in such Parent Sale is equal to or in excess of the respective Earnout Share targets set forth in the Merger Agreement will such Earnout Shares be issued effective as of one day prior to the consummation of the Parent Sale.
    • To the extent the per share value of consideration paid for each share of Parent Stock in such Parent Sale includes contingent consideration or property other than cash, the Parent Board shall determine, in good faith, the per share value of consideration paid for each share of Parent Stock in such Parent Sale and any equitable adjustment required in respect of any unissued Earnout Shares.
  • The parties agreed to amend the vesting terms of the Vesting Shares in the event Parent enters into a binding agreement with respect to a “Parent Sale” prior to the date that is ten (10) years following the Closing Date
    • Only if the consideration paid for each share of Parent Stock (as defined in the Parent Sponsor Letter Agreement) in such Parent Sale is equal to or in excess of the respective vesting targets set forth in the Parent Sponsor Letter Agreement will such Vesting Shares that remain unvested at the time of such Parent Sale, if any, vest effective as of one day prior to the consummation of the Parent Sale.
    • To the extent the consideration paid for each share of Parent Stock in such Parent Sale includes contingent consideration or property other than cash, Parent’s board of directors shall determine, in good faith, the value of the purchase consideration paid for each share of Parent Stock in such Parent Sale and any equitable adjustment required in respect of any unvested Vesting Shares.

FVAC transaction summary 7-15-20


PIPE

  • PIPE Investors have committed to purchase an aggregate amount of at least $200,000,000 in shares of Parent Class A Stock at a purchase price of $10.00 per share.

SPONSOR WARRANT EXCHANGE AGREEMENT

  • FVAC will be exchanging their 5,933,333 private placement warrants for 0.15 share, or 890,000 shares of Class F common stock

SPONSOR FOUNDER SHARES VESTING SCHEDULE

FVAC Founder owned 8,625,000 Founder Shares at IPO

FVAC founder shares


NOTABLE CONDITIONS TO CLOSING

  • Parent having at least $150,000,000 in available cash immediately prior to the effective time of the first of both of the MPMO Mergers and SNR Mergers (after taking into account
    • payments required to satisfy Parent’s stockholder redemptions and
    • the net proceeds from the PIPE

NOTABLE CONDITIONS TO TERMINATION

  •  By either Parent or the Companies if the consummation of the Business Combination has not occurred on or prior to March 31, 2021 (the “Outside Date”).

ADVISORS

  • Morgan Stanley & Co. LLC is serving as financial advisor to MP Mine Operations LLC (dba “MP Materials”).
  • Sidley Austin LLP is acting as legal advisor to MP Mine Operations LLC (dba “MP Materials”).
  • Simpson Thacher & Bartlett LLP and Murray Devine are serving as legal and financial advisor, respectively, to Secure Natural Resources (the owner of the mineral rights at Mountain Pass), which is also a party to the merger and will become a wholly-owned subsidiary of the combined company.
  • Deutsche Bank Securities and RBC Capital Markets, LLC are serving as financial advisors, capital markets advisors, and private placement agents to FVAC.
  • Weil Gotshal & Manges, LLP is acting as legal advisor to FVAC.

FORTRESS VALUE MANAGEMENT & BOARD


Executive Officers

Andrew A. McKnight, 42
Chief Executive Officer & Director

Mr. McKnight is a Managing Partner of the Credit Funds business at Fortress. Mr. McKnight is based in San Francisco and Heads the liquid credit investment strategies at Fortress, serves on the investment committee for the Credit Funds business at Fortress and is a member of the Management Committee of Fortress. Mr. McKnight previously served on the board of directors of Mosaic from 2017 to 2020. Prior to joining Fortress in February 2005, he was the trader for Fir Tree Partners where he was responsible for analyzing and trading high yield and convertible bonds, bank debt, derivatives and equities for the value-based hedge fund. Prior to Fir Tree, Mr. McKnight worked on Goldman, Sachs & Co.’s distressed bank debt trading desk. Mr. McKnight received a B.A. in Economics from the University of Virginia.


R. Edward Albert III, 43
President & Director 

He has served as a director on multiple corporate boards and is a currently a Managing Director of the Credit Funds Business at Fortress which he joined in 2007 and rejoined in 2011. Mr. Albert’s main focus at Fortress is on structured equity and lending. From 2009 to 2011, Mr. Albert led the NY special situations business at Macquarie Bank USA. Prior to 2007, he was a Managing Director at Milestone Capital and a Director with Ernst & Young Corporate Finance. Mr. Albert began his career working for the Chief Financial Officer of Marriott International in its Financial Planning and Analysis Group. Mr. Albert received an MBA in finance from the University of Maryland at College Park in 1997, and is a Chartered Financial Analyst.


Daniel N. Bass, 53
Chief Financial Officer

Mr. Bass has served as Chief Financial Officer of Fortress since 2003, leading the firm’s finance, accounting, tax, corporate real estate, information technology, HR and corporate development functions. At Fortress, Mr. Bass supported the business growth in AUM from $3 billion to $80 billion. Mr. Bass was the Chief Financial Officer of Fortress for the entire time it was a public company (NYSE:FIG) (2007-2017). Mr. Bass also co-led the completed merger with SoftBank which closed in December 2017. Prior to joining Fortress, Mr. Bass was the Chief Financial Officer of the Corporate Investments division at Deutsche Bank. The division housed over $100 billion in firm assets worldwide. Also, while at Deutsche Bank, Mr. Bass was the global Business Area Controller of the Investment Banking division. In this capacity, he supported growth of the bank’s global investment banking division, including integration of the Banker’s Trust accounting team upon acquisition. Prior to Deutsche Bank, Mr. Bass was with PricewaterhouseCoopers LLP’s international tax practice where he advised multi-national & international banks on US & global tax matters. Mr. Bass is a board member of the Real Estate Center at Florida State University. Mr. Bass received both a B.S. and a Masters in Accounting from Florida State University.


Micah B. Kaplan, 34
Chief Operating Officer

Mr. Kaplan is a Managing Director in the Corporate Debt and Securities Group at Fortress, where he is responsible for the sourcing, underwriting and execution of public and private debt and equity investments across a broad range of industries. Prior to joining Fortress in July 2011, Mr. Kaplan was a research analyst at Bank of America Merrill Lynch, where he analyzed and published research on high yield issuers. Mr. Kaplan received a B.A. in Political Science from the University of Pennsylvania.


 

Board of Directors

Joshua A. Pack, 45
Chairman 

Mr. Pack is a Managing Partner of the Credit Funds business at Fortress. Mr. Pack has 20 years of credit investment and workout experience through multiple credit cycles. He is based in Los Angeles and Heads the illiquid credit investment strategies at Fortress, serves on the investment committee for the Credit Funds business at Fortress and is a member of the Management Committee of Fortress. Since joining the Credit Funds business at Fortress at its inception in 2002, Mr. Pack has analyzed, structured and negotiated hundreds of lending, structured equity and real estate transactions. Prior to joining Fortress, Mr. Pack was a Vice President with Wells Fargo & Co. in the capital markets group. Before that, Mr. Pack was a Vice President with American Commercial Capital, an independent specialty finance company focused on corporate and real estate lending to middle market businesses that was subsequently acquired by Wells Fargo & Co. in 2001. He serves as a director on multiple corporate Boards and is on the Board of the San Diego Zoo Global Foundation. Mr. Pack previously served on the board of directors of Mosaic from 2017 to 2020. Mr. Pack attended the United States Air Force Academy and received a B.A. in Economics from California State University, San Marcos.


Aaron F. Hood, 47
Director 

Mr. Hood is a Finance Senior Fellow at the United States Military Academy. Mr. Hood was previously a Partner at Perella Weinberg Partners (“PWP”) for over thirteen years since helping to found the firm in 2006. While at PWP Mr. Hood held a number of senior executive positions, including Head and Co-Head of Perella Weinberg Partners’ Asset Management division and Chief Financial Officer of the firm. He was also a member of the Firm’s Executive, Management, Private Investment, Risk, and Valuation Committees. Prior to PWP, Mr. Hood was a Vice President and Associate in Morgan Stanley’s Leveraged Finance department where he helped arrange financings for the firm’s energy, power and transportation clients. Mr. Hood serves a number of charitable organizations including as a member of the Board of Trustees and the Endowment Board of Toledo St. Frances de Sales High School and the board of West Point Fellowship of Christian Athletes. Mr. Hood received a Bachelor of Science in Theoretical Economics and Political Science from the United States Military Academy at West Point where he graduated as a Distinguished Cadet. He also earned a Master in Business Administration with High Distinction, Baker Scholar, from Harvard Business School.


Carmen Policy [Added June 22, 2020]
Director

Mr. Policy has served as a consultant and arbitrator for the National Football League (“NFL”) and certain NFL teams since 2014. In addition, since 2003, Mr. Policy has been the President and Chief Executive Officer of Five Vines, LLC and oversees the operations and sales of the company’s vineyard and winery under the label of Casa Piena. From 2011 to 2015, Mr. Policy served as a lead consultant to Lennar Corporation and the city of San Francisco on the planning and development of the Hunters Point Shipyard and Candlestick Point redevelopment projects. Prior to that, Mr. Policy was President, Chief Executive Officer and minority owner of the Cleveland Browns from 1998 to 2004 and President and Chief Executive of the San Francisco 49ers from 1991-1998.