LOS ANGELES--(BUSINESS WIRE)--Oaktree Capital Management, L.P. ("Oaktree"), a leader among global investment managers specializing in alternative investments, announced today the closing of the previously announced subscription by funds managed by Oaktree (the "Oaktree Funds") of an aggregate of 15,000 shares of Series B-1 Preferred Stock (as defined below) pursuant to the subscription agreement entered into on April 15, 2020 among the Oaktree Funds, SunOpta Inc. (the "Corporation" or "SunOpta"), SunOpta Foods Inc. (the "Subsidiary") and funds managed by Engaged Capital, LLC.
On closing of the first tranche of the transactions contemplated by the subscription agreement (the "Initial Closing"), the Oaktree Funds subscribed to an aggregate of 15,000 shares of Series B-1 Preferred Stock (the "Series B-1 Preferred Stock") in the capital of the Subsidiary, that are exchangeable into common shares (the "Common Shares") in the capital of the Corporation, for aggregate consideration of US$15 million, representing C$21,094,500 based on the daily exchange rate posted by the Bank of Canada on April 23, 2020.
Under the second tranche, the Corporation has the right, but not the obligation (the "Sale Option"), to require the Oaktree Funds to purchase their proportionate shares of Series B-2 Preferred Stock (the "Series B-2 Preferred Stock" and together with the Series B-1 Preferred Stock, collectively, the "Series B Preferred Stock") in the capital of the Subsidiary that are exchangeable into Common Shares, for aggregate consideration of up to US$15 million by giving notice to the Oaktree Funds on or before July 15, 2020. The closing for the purchase and issuance of the Series B-2 Preferred Stock pursuant to the Sale Option would be expected to occur no later than 25 days following the exercise by the Corporation of the Sale Option.
The Oaktree Funds are entitled to vote the Series B Preferred Stock with the Common Shares on an as-exchanged basis, subject to a voting cap pursuant to which the Oaktree Funds will only be able to vote their shares of Series B Preferred Stock, on an as-exchanged basis, to the extent that, when taken together with any other voting securities that the Oaktree Funds control, such votes do not exceed 19.99% of the votes eligible to be cast by all security holders of the Corporation. The Oaktree Funds are also subject to a beneficial ownership exchange cap and an exchange cap related to the Corporation's shareholder rights plan. The beneficial ownership exchange cap and the rights plan exchange cap will limit the number of Common Shares issuable to the Oaktree Funds upon exchange of their shares of Series B Preferred Stock to the extent such the Oaktree Funds' beneficial ownership following such exchange would exceed 19.99% of the Common Shares and voting securities, respectively, of the Corporation then outstanding, subject to specified exceptions.
The Series B-1 Preferred Stock and the Series B-2 Preferred Stock are new series of securities that rank senior to the common stock and any other shares of stock junior to the Series B Preferred Stock in the capital of the Subsidiary with respect to distribution rights and rights upon liquidation. The Subsidiary previously issued to the Oaktree Funds on October 7, 2016 85,000 shares of Series A Preferred Stock (the "Series A Preferred Stock" and together with the Series B Preferred Stock, collectively, the "Preferred Stock") in the capital of the Subsidiary that are exchangeable into Common Shares. The Series A Preferred Stock ranks on par with the Series B Preferred Stock.
Immediately prior to the Initial Closing, the Oaktree Funds beneficially owned (i) 85,000 shares of Series A Preferred Stock, and (ii) 8,092,699 Common Shares, representing ownership on an as-exchanged basis of 19,426,032 Common Shares, or approximately 19.5% of the Common Shares outstanding on a partially-diluted basis (excluding all other securities convertible or exchangeable into Common Shares).
Immediately after completion of the Initial Closing, assuming the Sale Option will not be exercised, the Oaktree Funds beneficially own an aggregate of (i) 85,000 shares of Series A Preferred Stock, (ii) 15,000 shares of Series B-1 Preferred Stock, and (iii) 8,092,699 Common Shares. In the absence of the voting and beneficial ownership caps to which the Oaktree Funds are subject, the securities owned or controlled by the Oaktree Funds would represent approximately 23.3% of the votes eligible to be cast by the shareholders of the Corporation. However, as a result of such caps, the Oaktree Funds will own or control securities with 19.99% of the votes eligible to be cast by all security holders of the Corporation. In the absence of such caps, and assuming the exchange of the outstanding shares of Series A Preferred Stock for Common Shares and the exchange of the shares of Series B-1 Preferred Stock owned or controlled by the Oaktree Funds for Common Shares, the Oaktree Funds would own approximately 24.6% of the then-outstanding Common Shares. However, as a result of such caps, the aggregate number of Common Shares deliverable to the Oaktree Funds upon exchange of their shares of Series B-1 Preferred Stock will be capped at that number of Common Shares that would result in the Oaktree Funds' beneficial ownership being limited to 19.99% of the Common Shares that would be outstanding immediately following such exchange.
The Oaktree Funds intend to continuously evaluate the businesses and prospects of SunOpta and its subsidiaries, alternative investment opportunities and all other factors deemed relevant in determining whether additional securities of SunOpta will be acquired by the Oaktree Funds or by other accounts or funds associated with the Oaktree Funds, or whether the Oaktree Funds or any such other accounts or funds will dispose of the Preferred Stock or Common Shares. At any time, subject to the limitations set forth in the definitive agreements entered into in connection with the Initial Closing, as such agreements may be amended or supplemented from time to time, additional securities of SunOpta or its subsidiaries may be acquired or some or all of the securities beneficially owned by the Oaktree Funds may be sold, in either case in the open market, in privately negotiated transactions or otherwise, including, without limitation, by electing to exchange Preferred Stock into Common Shares, or by increasing or decreasing holdings in Preferred Stock or in Common Shares.
This news release is issued under the early warning provisions of the Canadian securities legislation. An early warning report with additional information in respect of the foregoing matters has been filed and made available on the System for Electronic Document Analysis and Review (SEDAR) at www.sedar.com under SunOpta's issuer profile. In order to obtain a copy of the early warning report, you may also contact Alyssa Linn Lorenzo of Sard Verbinnen & Co. on behalf of Oaktree, at telephone number: (310) 201-2040. Oaktree's address is 333 South Grand Ave., 28th Floor, Los Angeles, CA 90071. SunOpta's address is 2233 Argentia Road, Suite 401, Mississauga, Ontario, L5N 2X7.
Oaktree is a leader among global investment managers specializing in alternative investments, with $125 billion in assets under management as of December 31, 2019. Oaktree emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in real estate, distressed debt, corporate debt (including mezzanine finance, high yield debt and senior loans), control investing, convertible securities, listed equities and multi-strategy solutions. Headquartered in Los Angeles, the firm has over 950 employees and offices in 19 cities worldwide. For additional information, please visit Oaktree's website at www.oaktreecapital.com.