Overview
Located in Southampton, PA, NewAge Industries celebrated 65 years of service in 2019. The Company manufactures and fabricates thermoplastic and thermoset tubing and hose and also supplies fittings and clamps. Priding itself on high quality, a wide selection of products and a commitment to personal service, NewAge Industries was founded by Raymond Baker and has remained within the Baker family. The Company has 210 team members.
Situation
NewAge Industries’ CEO Ken Baker, working with professionals from SES and its affiliated law firm, established an ESOP in 2006, when Baker sold 30 percent of the Company to the employees. The ESOP instilled a pride of ownership in NewAge Industries’ employees, and added a new incentive to employees’ retirement plans. An additional 10 percent of the Company was sold to the ESOP seven years later, and in 2016 the ESOP’s ownership was increased to 49 percent, all under the guidance of SES professionals.
Solution
Looking again to SES ESOP Strategies as a trusted advisor, Baker aimed to solidify the Company’s succession plan and make NewAge Industries a 100 percent employee-owned company. Working on behalf of the Company, SES professionals negotiated a debt raise and the details of the final ESOP transaction. All of the prior ESOP transactions were funded with seller debt. Moving to a 100 percent ESOP-owned company, the Company wanted to take advantage of the current senior bank debt market. SES finance professionals ran a thorough senior debt raise process with banks competing against one another to get the business. Attorneys from SES’s legal affiliate negotiated the legal documents for the transaction and also represented an independent committee of the Board. The ESOP and the financing transactions were both closed on Aug. 23, 2019.
In doing the ESOP in four stages, the share price increased more than 1000%, and Baker feels he received close to strategic value for the shares overall. Also, as a result of becoming a 100 percent ESOP-owned S Corporation, NewAge now enjoys the benefits of operating as a tax-exempt business enterprise due to the tax-exempt status of the ESOP as the company’s sole shareholder, freeing up $14 million that would’ve been paid in taxes in 2020.
Embracing the ownership culture already prevalent at the Company, NewAge Industries’ employee owners shared their enthusiasm over becoming 100 percent employee-owned following the transaction. The Company was also featured in New York Times article touting the benefits of ESOPs.
“This is the outcome I’ve always hoped for, and I’m very happy that we’ve had SES to guide us through,” said Ken Baker, CEO. “The pride of ownership among our employees shines through to customers, and we are also pleased that the ESOP sets up a succession plan that will ensure NewAge Industries is in this business far into the future, ensuring our customers have continuity of the service they’ve come to trust.”
For more information on this transaction, please contact Jim Steiker, Chairman, at 215.508.5643 or Sean-Tamba Matthew at 215.508.7705.
NewAge Industries Celebrates 100% Employee Ownership from NewAge Industries/AdvantaPure on Vimeo.