RANCHO BERNARDO, Calif. – Eco Soil Systems Inc., a manufacturer of chemical, fertilizer and seed products for turf and crop maintenance, announced Tuesday that it has agreed to sell substantially all of the assets of its Turf Partners subsidiary to the J.R. Simplot Company.
The asset purchase agreement calls for Eco Soil and Simplot to enter into separate agreements in which Simplot will sell Eco Soil proprietary products into turf and agricultural markets.
William Adams, Eco Soil chairman and CEO, said, "We expect that the distribution agreements with Simplot will enhance our proprietary product sales in both the agriculture and turf markets … In regards to the turf market, the asset purchase agreement contemplates that Simplot will agree to a five-year distribution agreement for Eco Soil’s proprietary product sales. During this period, Turf Partners would continue to be the exclusive distributor of proprietary products and equipment for turf markets."
Eco Soil’s proprietary products are generally made up of biotech discoveries by research companies and universities and are sold under the FreshPack® or the BioJect® brands for use in the golf and agricultural industries. According to the company, these products, along with standard turf maintenance products, are sold to nearly 40 percent of America’s golf courses through Eco Soil's Turf Partners subsidiary and are sold to the agricultural market, along with irrigation products, through its Agricultural Supply subsidiary.
"Eco Soil wanted to form a strategic alliance that would allow entrance into larger agricultural markets and increase our market share in the turf industry, while not incurring substantial investment expenses. In terms of the transaction, Eco Soil expects to successfully accomplish both of these goals," said Adams.
The transaction is expected to close during July 2000 with a purchase price equal to six times Turf Partners’ 2000 EBITDA (earnings before interest, taxes, depreciation and amortization) from sales of distributed products. Simplot also will assume liabilities associated with existing vendor payables, contracts and leases, including an external debt of approximately $17 million.
At the closing, Simplot will make a down payment of $20 million, subject to adjustment if: (a) Turf Partners’ net tangible assets at June 30, 2000 are more or less than $3 million, (b) if Turf Partners has not generated at least 75 percent of the EBITDA it has projected for the first six months of 2000 or (c) if Turf Partners fails to satisfy other balance sheet tests.
Simplot will pay the balance of the purchase price in March 2001 based on an audited balance sheet and statements of operations.