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Upstate Shredding owner makes unsolicited bid to acquire competitor Metalico

OWEGO, N.Y. — The owner of Owego–based Upstate Shredding, LLC and sister company Weitsman Recycling has announced an unsolicited proposal to acquire one of its key scrap-metal competitors Metalico, Inc. (NYSE MKT: MEA) for 78 cents a share in cash.

The proposal values Metalico at about $45 million.

Adam Weitsman has submitted a written proposal detailing his offer to Carlos Aguero, chairman, president, and CEO of Cranford, New Jersey–based Metalico.

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Metalico operates a scrap-metal facility at 6223 Thompson Rd. in DeWitt. Upstate Shredding has 15 locations throughout New York and Pennsylvania, including one in Solvay.

Weitsman, who resides in Skaneateles, announced his proposal in a news release distributed on Monday.

The proposal, which would take Metalico private, represents about a 32 percent premium to the average market price of Metalico’s shares over the past 30 days and an approximately 27 percent premium to the closing price of the firm’s shares on Friday, Feb. 20, according to the news release.

Weitsman currently owns about 11.7 percent of the outstanding common stock of Metalico, a stake that he acquired recently.

A tweet on the Upstate Shredding Twitter account reads, “Carlos, the next move is yours…..” along with a link to the Weitsman news release.

The “apparent unwillingness” of Metalico’s board and management to meet with Weitsman to this point, despite his “significant holdings” in Metalico, has left Weitsman “deeply disappointed,” the Upstate Shredding CEO said in the news release.

“As a result, I have decided to publicly announce my proposal to acquire MEA (Metalico), which I believe represents a compelling opportunity for MEA’s stockholders to obtain liquidity for their shares while maximizing the value of their shares at a premium. I strongly believe that MEA has great potential but do not believe it is in the best interest of stockholders for MEA to continue as an independent company, let alone a public company, given MEA’s long-term underperformance and poor stock price performance,” said Weitsman. 

Metalico’s share price has declined steadily from the low $6 range in early 2011 to its current level in the 60 to 65-cent range. Metalico reported a net loss of more than $10 million through the first three quarters of 2014.

Weitsman’s proposal is “conditioned upon the satisfactory completion of confirmatory due diligence, obtaining all material and necessary consents and approvals, including by Metalico’s convertible noteholders and bank lenders, waiver of any company anti-takeover provisions, including redemption of the company’s poison pill, other customary conditions for a transaction of this type and size and the execution of a definitive agreement,” according to the news release.

Weitsman’s affiliates have been in the scrap-metal recycling business since 1938 and “therefore limited confirmatory due diligence will be required,” the company contended. 

Weitsman is prepared to open up discussions with Metalico’s convertible note holders and bank lenders and is “highly confident” of receiving their consent for this transaction based on Upstate Shredding’s “financial strength and reputation in the industry,” according to the release.

Upstate Shredding will pursue replacement financing “if necessary.” 

In the news release, Upstate Shredding – Weitsman Recycling describes itself as “the East Coast’s largest privately owned scrap-metal processor and recycling center.”

 

Metalico plans

On the same day that Weitsman announced his acquisition proposal, Metalico also announced it has hired New York City–based Gordian Group, LLC to assist the recycling company “with an overall review of its business strategies going forward,” according to a news release posted to the Metalico website on Monday.

The release also noted that Metalico “earlier this month” adopted a stockholder-rights plan to “assure that all of the company’s stockholders receive fair and equal treatment in the event of any proposed takeover of the company and to guard against tactics to gain control of the company without paying all stockholders a premium for that control.”

Metalico describes itself as “a holding company with operations in one principal business segment: ferrous and non-ferrous scrap metal recycling.” The firm operates recycling facilities in New York, Pennsylvania, Ohio, West Virginia, New Jersey, and Mississippi.

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