Item 8.01. Other Events.
Supplement to Definitive Proxy Statement
This is a supplement to the Definitive Proxy Statement on Schedule 14A filed by
Select Interior Concepts, Inc., a Delaware corporation (the "Company" or "SIC"),
with the Securities and Exchange Commission (the "SEC") on September 15, 2021
(the "Definitive Proxy Statement"), and mailed to the Company's stockholders in
connection with the solicitation of proxies for use at a special meeting of the
Company's stockholders scheduled to be held on October 19, 2021. The Definitive
Proxy Statement is amended and supplemented by, and should be read as part of,
and in conjunction with, the information set forth in this Current Report on
Form 8-K. Capitalized terms used in this Current Report on Form 8-K but not
otherwise defined herein have the meanings ascribed to those terms in the
Definitive Proxy Statement.
As previously announced, on August 8, 2021, SIC entered into an Agreement and
Plan of Merger (the "Merger Agreement") by and among SIC, Astro Stone
Intermediate Holding, LLC ("Parent"), a Delaware limited liability company and
affiliate of Sun Capital Partners, Inc. ("Sun"), and Astro Stone Merger Sub,
Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Subsidiary"). Upon the terms and subject to the conditions set forth in the
Merger Agreement, Merger Subsidiary will be merged with and into SIC (the
"Merger") with SIC surviving the Merger as a wholly-owned subsidiary of Parent.
SIC believes that the Definitive Proxy Statement contains all material
information required to be disclosed.
The following underlined language is added to the second sentence and as a new
last sentence of the first full paragraph of the text on page 32 of the
Definitive Proxy Statement under the heading "Background of the Merger":
Of those 12 parties, eight parties, including Party B, entered into
confidentiality agreements with customary terms. The confidentiality agreement
entered into with Party B contained standstill and "don't ask, don't waive"
provisions.
The following underlined language is added to the first sentence of the fourth
paragraph of the text on page 33 of the Definitive Proxy Statement under the
heading "Background of the Merger":
On March 4, 2021, SIC entered into a confidentiality agreement containing
customary terms (including standstill and "don't' ask, don't waive" provisions)
with Party A, and Party A was granted access to the virtual data room and
provided with the same information regarding SIC that had been provided to other
interested parties in connection with the strategic alternatives process.
The following underlined language is added to the second sentence and as a new
last sentence of the second full paragraph of the text on page 34 of the
Definitive Proxy Statement under the heading "Background of the Merger":
Of those, 31 parties, including Parties C and D, entered into confidentiality
agreements with customary terms. The confidentiality agreements entered into
with Parties C and D each contained standstill and "don't ask, don't waive"
provisions.
The following underlined language is added to the last sentence of the fifth
full paragraph of the text on page 35 of the Definitive Proxy Statement under
the heading "Background of the Merger":
Also on this date, SIC entered into a confidentiality agreement containing
customary terms (including standstill and "don't ask, don't waive" provisions)
with another interested private equity sponsor ("Party E").
The following underlined language is added to the last sentence of the twelfth
full paragraph of the text on page 35 of the Definitive Proxy Statement under
the heading "Background of the Merger":
SIC entered into a confidentiality agreement containing customary terms
(including standstill and "don't ask, don't waive" provisions) with Party F, and
Party F was provided with the same information regarding SIC that had been
provided to the other interested parties.
The following underlined language is added to the first full paragraph of the
text on page 46 of the Definitive Proxy Statement under the heading "Opinion of
RBC Capital Markets, LLC - Financial Analyses - Selected Public
Companies Analysis":
Selected Public Companies Analysis. RBC Capital Markets performed a selected
public companies analysis of the Company in which RBC Capital Markets reviewed
certain financial and stock market information of the Company and the following
seven selected publicly traded companies in the building products industry with
equity market capitalizations (as of August 6, 2021) of approximately $1 billion
or less that RBC Capital Markets in its professional judgment considered
generally relevant for purposes of analysis, collectively referred to as the
selected companies:
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The following underlined language is added to the second sentence of the third
full paragraph of the text on page 46 of the Definitive Proxy Statement under
the heading "Opinion of RBC Capital Markets, LLC - Financial Analyses - Selected
Public Companies Analysis":
RBC Capital Markets then applied in its professional judgment selected ranges of
calendar year 2021 and calendar year 2022 estimated adjusted EBITDA multiples
derived from the selected companies of 6.0x to 10.0x and 6.0x to 9.5x,
respectively, to corresponding data of the Company based on financial
projections and other estimates of the Company's management.
The following underlined language is added to the first paragraph of the text on
page 47 of the Definitive Proxy Statement under the heading "Opinion of RBC
Capital Markets, LLC - Financial Analyses - Selected Precedent Transactions
Analysis":
Selected Precedent Transactions Analysis. RBC Capital Markets performed a
selected precedent transactions analysis of the Merger in which RBC Capital
Markets reviewed, to the extent publicly available, certain financial
information relating to the following 11 selected precedent transactions that
RBC Capital Markets in its professional judgment considered generally relevant
for purposes of analysis as transactions involving companies with operations in
the building products industry, collectively referred to as the selected
transactions:
The following underlined language is added to the second sentence of the third
paragraph of the text on page 47 of the Definitive Proxy Statement under the
heading "Opinion of RBC Capital Markets, LLC - Financial Analyses - Selected
Precedent Transactions Analysis":
RBC Capital Markets then applied in its professional judgment a selected range
of LTM adjusted EBITDA multiples derived from the selected transactions of 9.0x
to 11.0x to the Company's LTM adjusted EBITDA (as of June 30, 2021).
The following underlined language is added to the second and third sentences in
the last full paragraph of the text beginning at the bottom of page 47 and
concluding at the top of page 48 of the Definitive Proxy Statement under the
heading "Opinion of RBC Capital Markets, LLC - Financial Analyses - Discounted
Cash Flow Analysis":
RBC Capital Markets calculated terminal values for the Company by applying to
the Company's terminal year unlevered free cash flow a selected range of
perpetuity growth rates of 2.0% to 3.0% selected based on RBC Capital Markets'
professional judgment and taking into account, among other factors, financial
projections and other estimates of the Company's management, such management's
long-term growth expectations for the industry and markets in which the Company
operates and trends in the overall economy generally. The unlevered free cash
flows and terminal values were then discounted to present value (as of June 30,
2021) using a selected range of discount rates of 13.0% to 15.0% derived from a
weighted average cost of capital calculation.
The following underlined language is added to the second bullet of the first
full paragraph of the text on page 48 of the Definitive Proxy Statement under
the heading "Opinion of RBC Capital Markets, LLC - Certain Additional
Information":
• publicly available research analysts' forward stock price targets for Common
Stock, which indicated a target stock price range for Common Stock of $13.00 to
$15.00 per share (undiscounted) and $11.07 to $12.78 per share (discounted to
present value as of August 6, 2021 at the Company's estimated cost of equity).
The following underlined language and table are added to the first sentence of
the third full paragraph of the text on page 52 of the Definitive Proxy
Statement under the heading "Opinion of Truist Securities, Inc. - Financial
Analyses - Selected Public Companies Analysis":
Based upon its experience and judgment, and information provided by the Company,
the overall low to high for the LTM and the calendar year ending 2021 estimated
adjusted EBITDA multiples observed for selected companies were 3.0x to 9.9x
(with a mean of 7.0x and a median of 7.6x) and 3.1x to 9.2x (with a mean of 6.9x
and a median of 6.9x), respectively, as reflected more fully below:
EV/2021E
Selected Companies EV/LTM Adjusted EBITDA Adjusted EBITDA
BlueLinx Holdings Inc. 3.0x 3.1x
Ceasarstone Ltd. 4.8x 5.9x
Interface, Inc. 9.3x 9.2x
Quanex Building Products Corporation 6.9x 6.5x
Tecnoglass Inc. 9.9x 9.1x
Hardwoods Distribution Inc 8.2x 7.3x
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The following underlined language and table are added to the first sentence of
the third paragraph of the text on page 53 of the Definitive Proxy Statement
under the heading "Opinion of Truist Securities, Inc. - Financial Analyses -
Selected Precedent Transactions Analysis":
The overall low to high LTM adjusted EBITDA multiples observed for the selected
transactions were 6.7x and 12.9x (with a median of 9.1x), as reflected more
fully below:
EV/LTM
Announcement Date Acquiror Target Adjusted EBITDA
An affiliate of Select Interior Concepts,
May 2021 Blackstone Inc. Inc. - Residential Design 11.3x
Services segment
February 2021 Funds managed by Interior Logic Group 11.3x
Blackstone Inc. Holdings, LLC
Foundation Building Beacon Roofing Supply,
December 2020 Materials, Inc. Inc. - Interior products 11.7x
and insulation businesses
September 2019 Reece Limited Todd Pipe & Supply, LLC 7.4x
September 2018 Industrea Acquisition Concrete Pumping 8.9x
Corp. Holdings, Inc.
April 2018 GMS Inc. WSB Titan 9.2x
March 2018 BlueLinx Corporation Cedar Creek Holdings, 6.9x
Inc.
March 2018 TopBuild Corp. United Subcontractors, 10.2x
Inc.
Trilok Industries, Inc.,
Installed Building Alpha Insulation and
October 2016 Products, Inc. Waterproofing, Inc., and 6.7x
Alpha Insulation and
Waterproofing Company
August 2016 ABC Supply Co., Inc. L&W Supply Corporation 12.9x
Foundation Building Superior Plus Corp. -
August 2016 Materials, Inc. Construction products 8.8x
division (Winroc-SPI)
An affiliate of Rugby Acquisition, LLC -
June 2016 Hardwoods Rugby Architectural 8.6x
Distribution Inc. Building Products
The following underlined language is added to the second and third sentences of
the paragraph of the text beginning at the bottom of page 53 and concluding at
the top of page 54 of the Definitive Proxy Statement under the heading "Opinion
of Truist Securities, Inc. - Financial Analyses - Discounted Cash Flow
Analysis":
Truist Securities applied perpetuity growth rates ranging from 1.0% to 3.0%,
taking into account its experience and professional judgment and factors such as
financial projections and estimates of the Company's management, including
management's long-term growth expectations for the industry and markets in which
the Company operates and trends in the overall economy generally, to the year
2025 estimated unlevered free cash flow of the Company to calculate the terminal
values of the Company. The net present values of the projected unlevered free
cash flows and terminal values of the Company were then calculated using
discount rates ranging from 10.7% to 11.6%, taking into account Truist
Securities' experience and professional judgment and an estimate of the
Company's weighted average cost of capital, which took into account, among other
factors, the impact of estimated cost of equity, cost of debt, tax rates and
capital structure.
The following underlined language is added as a new last sentence to the second
full paragraph of the text on page 54 of the Definitive Proxy Statement under
the heading "Opinion of Truist Securities, Inc. - Miscellaneous":
Truist Securities and certain of its affiliates in the future may also provide
investment banking, commercial banking and/or financial advisory services
unrelated to the Merger to Sun and/or certain of its affiliates and portfolio
companies, for which services Truist Securities and its affiliates may receive
compensation.
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The following underlined language is added under the headings "Litigation
Related to the Merger" on pages 14 and 62 of the Definitive Proxy Statement:
As of the date of this proxy statement, no stockholder litigation related to the
Merger Agreement has been brought against SIC or any members of the SIC Board.
Subsequent to the mailing of the Definitive Proxy Statement, six complaints
related to the Merger Agreement were filed: Finger v. Select Interior Concepts,
Inc., et al., No. 1:21-cv-04047 (N.D. Ga.); Harding v. Select Interior Concepts,
Inc., et al., No. 1:21-cv-08119 (S.D.N.Y.); Jones v. Select Interior Concepts,
Inc., et al., No. 1:21-cv-08138 (S.D.N.Y.); O'Neill v. Select Interior Concepts,
Inc. et al., No. 1:21-cv-01400 (D. Del.); Romero v. Select Interior Concepts,
Inc., et al., No. 1:21-cv-05539 (E.D.N.Y.); Whitfield v. Select Interior
Concepts, Inc., No. 2:21-cv-04329 (E.D. Pa.). The complaints are brought by
purported putative stockholders against SIC and members of the SIC Board. Among
other things, the complaints allege that the Definitive Proxy Statement omits
and/or misrepresents material information regarding the Merger in violation of
the Exchange Act and the rules and regulations promulgated thereunder. The
plaintiffs in these cases seek various forms of relief, including unspecified
monetary damages, legal fees, and injunctive relief enjoining consummation of
the Merger.
The defendants, including SIC and the SIC Board, believe that the claims
asserted in these lawsuits are without merit. Nonetheless, the outcome of these
lawsuits cannot be predicted with any certainty.
Cautionary Forward-Looking Statements
Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: To the extent any statements made in this report contain information that
is not historical, these statements are essentially forward-looking and are
subject to risks and uncertainties, including the difficulty of predicting
future results, the regulatory environment, fluctuations in operating results
and other risks detailed from time to time in the Company's filings with the
SEC. The matters discussed in this report may also involve risks and
uncertainties concerning the Company's services described in the Company's
filings with the SEC. In particular, see the risk factors described in the
Company's most recent Form 10-K and Form 10-Q. Additional factors may include
the effect of the announcement of the Merger and related transactions on the
Company's business relationships, operating results and business generally; the
occurrence of any event, change or other circumstances that could give rise to
the termination of the Merger Agreement, and the risk that the Merger Agreement
may be terminated in circumstances that require the Company to pay a termination
fee to Parent; the outcome of any legal proceedings that may be instituted
against the Company related to the Merger Agreement; and the failure to satisfy
conditions to completion of the Merger, including the receipt of all required
regulatory clearances related to the Merger. Although we believe that these
forward-looking statements are based on reasonable assumptions, there are many
factors that could affect our actual financial results or results of operations
and could cause actual results to differ materially from those in the
forward-looking statements. All future written and oral forward-looking
statements by us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to above.
Except for the Company's ongoing obligations to disclose material information as
required by the federal securities laws, the Company does not have any
obligations or intention to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in the future or
to reflect the occurrence of unanticipated events.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the
proposed acquisition of SIC by Parent.
In connection with the Merger, SIC has filed a definitive proxy statement (and
any amendments or supplements thereto) with the SEC. SIC'S STOCKHOLDERS ARE
URGED TO READ THE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS
ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION. SIC stockholders may obtain
a free copy of the proxy statement and any other relevant documents filed with
the SEC from the SEC's website at http://www.sec.gov. In addition, SIC
stockholders are able to obtain, without charge, a copy of the proxy statement
and other relevant documents filed with the SEC from the SEC's website at
www.sec.gov. Copies of the documents filed with the SEC by SIC are available
free of charge on SIC's website at www.selectinteriorconcepts.com or by
contacting SIC's Investor Relations Department by email at ir@sicinc.com at or
by phone at (470) 548-7370.
Participants in the Solicitation
SIC and its directors, executive officers and other members of its management
and employees as well as Sun and its directors and officers may be deemed to be
participants in the solicitation of proxies with respect to the Merger.
Information about SIC's directors and officers and their ownership of SIC's
common stock is set forth in the proxy statement. Stockholders may obtain
additional information regarding the direct and indirect interests of the
participants in the solicitation of proxies in connection with the Merger,
including the interests of SIC's directors and executive officers in the Merger,
which may be different than those of SIC stockholders generally, by reading the
proxy statement, which was filed with the SEC on September 15, 2021, and other
materials relating to the Merger filed with the SEC. Investors should read such
materials carefully before making any voting or investment decision.
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