$7.6M Sale Leaseback and Simultaneous Exercise of Purchase Option for Micropore, Inc.

Introduction: 

Ascension Advisory is excited to announce the successful closing of a creative sale leaseback and purchase option exercise on behalf of Micropore, Inc. ("Micropore") and their investor, Spring Mountain Capital ("SMC"). Founded in 1997, Micropore is a pioneer in packaging fine powder chemistries into solid absorbent cartridges used to absorb carbon dioxide in rebreathing and life support systems. 

Client Objective: 

Micropore was leasing its industrial and warehouse facility in Elkton, Maryland, about an hour outside of Philadelphia. The Company executed the lease agreement in 2018 and included a purchase option to buy the facility from the current landlord at a fixed purchase price. The purchase option was a one-time right with an expiration date of May 30th, which was three months away. The Ascension team approached Spring Mountain Capital to discuss executing a sale leaseback simultaneous with exercising their purchase option, and pocketing the spread. The Company and its investor were interested in pursuing this as Micropore would benefit from incremental liquidity to invest into strategic company initiatives.  

Solution: 

After a few weeks, Micropore decided to move forward with the sale leaseback strategy. Ascension moved swiftly to bring in sale leaseback investor feedback. Within one week, an LOI was executed with a private industrial real estate investment firm. Ascension carefully structured the deal process to align the timing of the due diligence period, the purchase option exercise, and the sale leaseback closing to ensure a successful outcome. The Ascension team’s expertise in structuring complicated deals and running efficient processes, along with the Company's legal counsel Eversheds Sutherland's proficiency, provided a smooth, quick transaction and generated optimized outcomes for all parties involved, despite the significant coordination and creativity required regarding the purchase option arrangement and various legal nuances. 

Outcome: 

The teams adeptly navigated the various complexities and achieved the sale leaseback closing four weeks ahead of schedule at a price of $7.6 million. This creative simultaneous execution allowed Micropore to exercise their option without needing to deploy any cash. Given the differences in the sale leaseback price and the purchase option price, Micropore generated a significant spread of $3.2 million immediately at closing. These proceeds provided Micropore with important liquidity to reinvest into the business as growth capital. 

Conclusion:

This sale leaseback was challenging given the various moving parts, however with the collaboration among the teams, we were able to bring the transaction to a successful completion, ahead of schedule, and at a sale price that was meaningfully lucrative to the Company. This case study further underlines the importance of working with experienced deal teams to ensure any hurdles that may come up are resolved timely and efficiently to meet fixed deadlines.