Deal provides capital to promote growth.
The Tile Shop, LLC, a specialty retailer of manufactured and natural stone tiles and related accessories, and JWC Acquisition Corp., a special purpose acquisition company, on Wednesday announced an agreement to combine under a new holding company: Tile Shop Holdings, Inc.
Under the terms of the proposed business combination, Tile Shop Holdings will become the owner of all of the equity of JWC Acquisition Corp. and The Tile Shop. Shareholders of JWC Acquisition Corp. and the current owners of The Tile Shop will hold approximately 33 percent and 67 percent stakes, respectively, of the issued and outstanding shares of the Tile Shop Holdings common stock, with Chief Executive Officer Robert Rucker owning approximately 18.5 percent of the shares of Tile Shop Holdings common stock.
The current owners of The Tile Shop also will receive $100 million in cash and promissory notes in an aggregate amount of $80 million less certain indebtedness and deferred compensation obligations.
Cash currently held in JWC Acquisition Corp.'s trust account will be used to fund the transaction. The board of directors of JWC and the board of managers of The Tile Shop unanimously approved the proposed transaction. Completion of the transaction, which is expected during August 2012, is subject to approval by JWC Acquisition Corp. stockholders.
The new company will apply to list its shares of common stock on the Nasdaq Stock Market under the symbol "TTS" once closing of the deal, officials announced. The Tile Shop, based in Minneapolis, has 61 specialty retail stores in 20 states. This combination will give the company greater access to capital to support future growth, the company said.
Bob Rucker, Chief Executive Officer and Founder of The Tile Shop, said: "This transaction marks the next step in The Tile Shop's evolution into the leading North American specialty retailer of tile. As a public company, we not only will continue with our self-funded store growth across the country, but also be better positioned to take advantage of additional resources to accelerate our growth as the demand for our products increases. The agreement with JWC Acquisition Corp. supports our ability to pursue attractive growth opportunities in both current and new markets. As we continue to expand and gain market share in this highly-fragmented market, we should be able to increase both sales and cash flow, which will enhance our profitability over time."
The Tile Shop's net sales for the quarter ended March 31, were $45.9 million, an increase of 21 percent compared with the first quarter of 2011, with same store sales increasing 9.9 percent.
William E. Watts, an officer of JWC Acquisition Corp. who will be chairman of Tile Shop Holdings, said: "We are extremely excited to be partnering with The Tile Shop. The Tile Shop's management team has truly built a dynamic destination specialty store that has emerged as a leader in the tile industry. This business combination will allow The Tile Shop to further penetrate new markets while selectively adding additional destination stores in their current markets. We look forward to completing the transaction and supporting the management team as they focus their efforts on building The Tile Shop into the nation's leading coast-to-coast specialty retail destination tile store."
All the members of The Tile Shop management team will continue in their current positions under the new ownership structure.
James Walsh • 612-673-7428