JZ Capital exiting Xpress – Within the circular that covers the adoption of JZ’s proposed liquidity strategy, JZ Capital is also seeking approval for its plans to sell its entire interest in Xpress Logistics, a subsidiary of one of the portfolio companies, U.S. Logistics. The proposed sale would, in effect, be made to Capstone Logistics which is a portfolio company of Resolute Fund III, being one of the funds managed by The Jordan Company. David Zalaznick and Jay Jordan (together the JZAI Founders who are the founders and principals of the investment adviser, JZAI), are also the founders of The Jordan Company (with Jay Jordan being the non-executive chairman) and have an economic interest in Resolute Fund III or its affiliated funds.
On 26 September 2019, Xpress Logistics entered into a merger agreement with Capstone. If it goes through, JZ Capital will disposing of its entire ownership interests as well as its associated debt investments. Xpress Logistics shareholders, including U.S. Logistics, will receive in aggregate, initial consideration of approximately US$45 million in cash. US$450,000 will be held in escrow to be released in accordance with final closing adjustments to reflect the amount of cash, indebtedness, working capital and transaction expenses at the time of closing in respect of Xpress Logistics and
its subsidiaries. In addition, the shareholders of Xpress Logistics may receive contingent earn-out consideration of up to, in aggregate, approximately US$5 million in cash.
JZ Capital owns a 37.74 per cent. ownership interest in Xpress Logistics by way of both its 37.72 per cent. ownership interest in U.S. Logistics (which owns 90.5 per cent. of Xpress Logistics) and its 3.6 per cent. ownership interest directly in Xpress Logistics. It should receive about US$16,939,000. The proceeds are intended to be used towards the implementation of the aims of the amended and restated investment policy and for general corporate purposes.
Xpress Logistics has a subsidiary, Priority Express which was founded in 2005 and provides over 500 customers in the healthcare and e-commerce end markets with expedited freight and distribution services, scheduled routed delivery services and on-demand delivery services. The business conducts its warehousing and logistics activities in five cross docking facilities strategically located across New Jersey, Delaware, New York, Connecticut, Virginia, Maryland, Pennsylvania and the Middle Atlantic region of the United States and has a network of more than 450 independent third party drivers for its delivery functions.
Not for the first time, this is a Related Party Transaction under Chapter 11 of the Listing Rules and so shareholder approval is being sought. Whilst the Listing Rules provide for written confirmation to be obtained from a sponsor that the terms of a Related Party Transaction are fair and reasonable as far as shareholders are concerned, such a confirmation has not been received in relation to the Xpress Logistics Proposal. Shareholders are reminded that the company also departed from the same requirement in relation to the Deflecto and Water Treatment transactions last year and the Avante-MERS and Orizon transactions earlier this year. the argument is that this would be unreasonably expensive.
JZCP : JZ Capital exiting Xpress