UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): August 1, 2016

 

 

U.S. Silica Holdings, Inc.

 

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-35416		26-3718801
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

8490 Progress Drive, Suite 300, Frederick, MD		21701
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (301) 682-0600

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01 Entry into a Material Definitive Agreement.

On August 1, 2016, U.S. Silica Holdings, Inc., a Delaware corporation (the “Company”), and U.S. Silica Company, a Delaware corporation and a wholly-owned subsidiary of the Company (the “Purchaser”), entered into Membership Unit Purchase Agreement, by and among the Company, the Purchaser, Sandbox Enterprises, LLC, a Texas limited liability company (“Sandbox”), each of the owners of membership units of Sandbox (the “Sellers”), and Sandy Creek Capital, LLC, as representative of the Sellers (the “Purchase Agreement”), pursuant to which the Purchaser will acquire all of the outstanding units of membership interest of Sandbox from the Sellers (the “Unit Purchase”). The consideration payable by the Purchaser in connection with the Unit Purchase consists of $75,000,000 of cash, subject to customary adjustments for net working capital, indebtedness, cash and transaction expenses as of the closing, and 4,195,180 shares of common stock of the Company. The consideration, less the amount of cash that will be deposited into escrow to support the post-closing purchase price adjustment and the Sellers’ indemnification obligations, will be payable to the Sellers at the closing of the Unit Purchase. The Sellers will be subject to a 60 day lock-up period from the closing date pursuant to which they will generally be prohibited from selling or otherwise disposing of shares of the Company’s common stock to be issued as consideration in the Unit Purchase. The Company has agreed to file a shelf registration statement with the Securities and Exchange Commission to enable the Sellers to resell the shares of the Company’s common stock following the lock-up period. In addition, four of the Sellers, who also are executive officers of Sandbox, have agreed not to sell or otherwise transfer a total of 217,018 shares of the Company’s common stock prior to December 31, 2018.

The consummation of the Unit Purchase is subject to the satisfaction or waiver of closing conditions applicable to the parties, including, among others, the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have expired or been terminated. The Purchase Agreement also contains customary representations, warranties, covenants and indemnification obligations of the parties. The covenants include, among others, an obligation on behalf of Sandbox to operate its business in the ordinary course until the Unit Purchase is consummated and a limitation on the right of Sandbox and the Sellers to solicit or engage in negotiations regarding alternative business combination transactions. The Purchase Agreement also provides for limited termination rights on behalf of the parties. The Unit Purchase is expected to close in the third quarter.

The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement. A copy of the Purchase Agreement will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016.

Item 3.02 Unregistered Sales of Equity Securities.

As described under Item 1.01 above (the content of which is incorporated herein by reference), at the closing of the Unit Purchase, the Company will issue 4,195,180 shares of its common stock to the Sellers in connection with the Unit Purchase. The shares will be issued pursuant to the exemption from registration provided in Section 4(a)(2) and Regulation D (Rule 506(b)) under the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering.

Item 8.01 Other Events.

On August 2, 2016, the Company issued a press release announcing that it had entered into the Purchase Agreement. A copy of the press release is attached hereto as Exhibit 99.1.

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Cautionary Language Regarding Forward-Looking Statements

Except for the historical information contained herein, certain of the matters discussed in this communication constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding benefits of the proposed Unit Purchase, the expected timing of completion of the transaction, anticipated future financial and operating performance and results, including estimates for growth. These statements are based on the current expectations of management of the Company and Sandbox, as applicable. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. For example, (1) conditions to the closing of the Unit Purchase may not be satisfied; (2) problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; (3) the Unit Purchase may involve unexpected costs, unexpected liabilities or unexpected delays; (4) the industry may be subject to future regulatory or legislative actions that could adversely affect the companies; and (5) the companies may be adversely affected by other economic, business, and/or competitive factors. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of the combined company. Discussions of some of these other important factors and assumptions are contained in the Company’s filings with the Securities and Exchange Commission (SEC), and available at the SEC’s website at www.sec.gov, including (1) the Company’s 2015 Annual Report on Form 10-K in (a) Item 1A. Risk Factors, (b) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Item 8. Financial Statements and Supplementary Data; and (2) the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 in (a) Part II, Other Information, Item 1A. Risk Factors, (b) Part I, Financial Information, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, Item 1. Financial Statements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication. The Company does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this communication.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number		Description
99.1		U.S. Silica Holdings, Inc. press release dated August 2, 2016.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 4, 2016

 

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		U.S. Silica Holdings, Inc. press release dated August 2, 2016.

		Exhibit 99.1

News Release

U.S. Silica to Acquire Logistics Solutions Provider Sandbox Enterprises

Accretive Acquisition Provides Customers Cost-Efficient Last-Mile Delivery System

Frederick, Md., Aug. 2, 2016 – U.S. Silica Holdings, Inc. (NYSE: SLCA) announced today that it has entered into a definitive agreement to acquire Sandbox Enterprises LLC, a leading provider of innovative logistics solutions and technology for the transportation of proppant used in hydraulic fracturing in the oil and gas industry. The transaction will be financed using a combination of $75 million of cash on hand and approximately 4.2 million U.S. Silica common shares. Based on the U.S. Silica closing price on Aug. 2, 2016 the transaction is valued at $218.3 million.

The acquisition is expected to be modestly accretive to 2016 EPS and generate EPS accretion of $0.20 to $0.30 in 2017. The transaction is expected to close later this month, subject to receiving certain regulatory approvals.

‘’This transformative acquisition enables us to offer customers significantly improved transportation and operating efficiencies, a safer work environment and significant cost savings relative to current proppant delivery systems,’’ said Bryan Shinn, U.S. Silica president and chief executive officer. “Sandbox’s proprietary delivery solution is critical to addressing the growing logistical challenges our customers face as E&P operators continue to increase the amount of proppant they use per well.’’

Sandbox utilizes specially designed, patent-protected equipment and processes to service wellsite operations. In addition, the company provides field personnel for installation, training and operation as required. The typical Sandbox system includes:

 

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Steel, weatherproof Sandbox containers, which can hold up to 22.5 tons of sand and are gravity fed to reduce silica dust. They can be stacked nine high empty or two high full, offering a reduced footprint relative to competing products and can be easily stacked at nearby locations to provide additional storage for remote wellsite operations. Sandbox containers can also serve as mobile transloading facilities.

 

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Specially designed truck chassis, which offer highly efficient delivery and represent a 60% lower investment than pneumatic equipment. Each chassis holds one full or two empty Sandbox containers, allowing efficient transportation of mass quantities of sand. The chassis are an effective replacement for pneumatic trailers, which require expensive power take-off units, blowers and related equipment and cause congestion at the wellsite due to long unloading times.

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Customized conveyor cradles, which deliver proppant directly into the blender hopper. Each conveyor can hold four Sandbox containers. The containers are lifted by forklift onto the conveyor cradle, which has a maximum throughput of 25,000 lbs. per minute. The ability to continuously feed proppant to the conveyor enables maximum sand volumes to be pumped downhole.

U.S. Silica Executive Vice President and Chief Commercial Officer Brad Casper said, ‘’The acquisition of Sandbox aligns with our strategy of managing the entire supply chain of frac sand from the mine to the well site. Containerized delivery increases transportation efficiency and lowers delivered costs through faster truck turns and reduced jobsite congestion.’’

Casper added, “We believe Sandbox has significant runway to grow its existing markets through partnerships with leading service companies, while at the same time making U.S. Silica’s logistics network even more efficient with capabilities for mobile transloading and in-basin proppant staging.”

The Company also noted it expects to achieve other potential synergies through direct loading of sand into containers from the Company’s Oklahoma and Texas-based regional sand mines for truck distribution to the wells and the ability to transload from any rail spur in the country.

The Company will discuss the Sandbox acquisition tomorrow on its second quarter 2016 earnings call at 9:00 a.m. ET.

Investors are invited to listen to a live webcast of the conference call by visiting the “Investor Resources” section of the Company’s website at www.ussilica.com. The webcast will be archived for one year. The call can also be accessed live over the telephone by dialing (877) 869-3847 or for international callers, (201) 689-8261. A replay will be available shortly after the call and can be accessed by dialing (877) 660-6853 or for international callers, (201) 612-7415. The conference ID for the replay is 13640925. The replay will be available through Sept. 2, 2016.

Morgan Stanley & Co. LLC acted as exclusive financial advisor to U.S. Silica Holdings, Inc. Piper Jaffray & Co., through its Simmons & Company International division, acted as exclusive financial advisor to Sandbox Enterprises, LLC in this transaction.

Forward-looking Statements

Certain statements in this press release are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of this date. Forward-looking statements made include any statement that does not directly relate to any historical or current fact and may include, but are not limited to, statements regarding U.S. Silica’s growth opportunities, strategy, future financial results, forecasts, projections, plans and capital expenditures, and the commercial silica industry. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are: (1) fluctuations in demand for commercial silica; (2) the cyclical nature of our

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customers’ businesses; (3) operating risks that are beyond our control; (4) federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing; (5) our ability to integrate the acquired business; (6) loss of, or reduction in, business from our largest customers; (7) increasing costs or a lack of dependability or availability of transportation services or infrastructure; (8) our substantial indebtedness and pension obligations; (9) our ability to attract and retain key personnel; (10) silica-related health issues and corresponding litigation; (11) seasonal and severe weather conditions; and (12) extensive and evolving environmental, mining, health and safety, licensing, reclamation and other regulation (and changes in their enforcement or interpretation). Additional information concerning these and other factors can be found in U.S. Silica’s filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

About U.S. Silica

U.S. Silica Holdings, Inc., a member of the Russell 2000, is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 116-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 260 products to customers across our end markets. The Company currently operates nine industrial sand production plants and eight oil and gas sand production plants. The Company is headquartered in Frederick, Maryland and also has offices located in Chicago, Illinois, and Houston, Texas.

U.S. Silica Holdings, Inc.

Michael Lawson

Director of Investor Relations and Corporate Communications

(301) 682-0304

lawsonm@ussilica.com

About Sandbox

Sandbox was founded in 2012. The privately-held company employees approximately 300 people at its six locations in the U.S. The company is active in all of the major shale plays including the Permian, the Eagle Ford, the Bakken, the DJ and the Marcellus basins. The company is headquartered in Houston, Texas. For more information about Sandbox, please visit their website at www.sandboxlogistics.com

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