Category Archives: Manufacturing

Third and Fourth James Graf blank check companies file for IPOs

Not to be outdone by Tilman Fertitta, James Graf has also filed initial public offerings for his third and fourth SPAC (also known as a blank check company). The second ($225 million) filed to go public two weeks ago.

Graf Acquisition Corp III will be a $300 million IPO, while Graf Acquisition IV will be a $150 million IPO. All three will have the same management teams and objectives and be based in The Woodlands.

Graf Acquisition Corp I ($244 million IPO Oct 2018) completed its initial business combination with Velodyne Lidar in September 2020 for $1.5 billion.

Mr. Graf has also been involved in several other SPACs

  • Platinum Eagle Acquisition Corp ($325m IPO Jan 2018) – reverse takeover of Houston-based Target Hospitality for $1.3 billion in Mar 2019.
  • Double Eagle Acquisition Corp ($500m IPO Sept 2015) – combined with William Scotsman for $1.1 billion in Nov 2017.
  • Silver Eagle Acquisition Corp ($325m IPO July 2013) – combined with Videocon d2h for $273 million in March 2015.
  • Global Eagle Acquisition Corp ($190m IPO May 2011) – combined with Global Eagle Entertainment in Jan 2013.

S-1 filing Graf Acquisition III

S-1 filing Graf Acquisition IV

Two more Houston blank check companies file for IPOs

On Friday 12 February, a record 28 blank check companies filed for Initial Public Offerings (IPO), including two old favorites in Houston. Tilman Fertitta filed for his 4th blank check company, Landcadia Holdings IV, while Graf Acquisition Corp filed their 2nd.

In case you are wondering why Friday was so popular it’s because it was the last day a company with a calendar year-end can file for an IPO using a September 2020 balance sheet.

Landcadia and Graf History

Landcadia Holdings IV filed for a $500 million IPO. As before, the shareholders are Tilman Fertitta and Jefferies. As before, they are seeking companies that operate in the consumer, dining, hospitality, entertainment and gaming industries.

  • Landcadia III just went public in October 2020 and raised $500 million in its IPO. Last month it agreed to buy The Hillman Group for $2.64 billion in a reverse takeover.
  • Landcadia II raised $275 million in May 2019 and acquired Golden Nugget Online Gaming (a Fertitta company) in December 2020.
  • Landcadia I raised $250 million in June 2016 and acquired Waitr in November 2018.

Graf Acquisition Corp II filed for a $225 million IPO, same as the first Graf IPO that was completed in October 2018. The CEO is James Graf. Graf I completed its reverse takeover of Velodyne Lidar in September 2020.

Popularity of SPACs

Special Purpose Acquisition Companies (SPACs) or blank check companies as they are also known, have really taken off in the past couple of years, mainly because of the disadvantages in the traditional IPO route where the process is long (6-7 months) and the valuation (i.e. price) at completion is uncertain.

Furthermore, the investment bankers like their IPOs to be heavily oversubscribed and for the share price to ‘pop’ on the first day of trading. But that means that the selling shareholders have effectively given up part of their returns to the new shareholders.

In contrast, a blank check company can go public in 2-3 months and then spend the next few months negotiating a deal in secret with a potential target company. In this way, both the original sponsor and the shareholders of the target can generate a better return.

S-1 Landcadia Holdings IV

S-1 Graf Acquisition Corp II

Houston Blank check company files for $150m IPO – but with a twist

Good Works Acquisition Corp has filed for a $150 million Initial Public Offering (IPO). It is a Special Purpose Acquisition Company (SPAC) or blank check company. It has its head office in the Galleria area.

The company doesn’t have any commercial operations. It is focused on finding a business that has experienced financial distress or has recently emerged from a financial restructuring. It is particularly interested in finding a business that has been hard hit by COVID-19 but has good prospects for a rebound. The company is looking for a business with an enterprise value of between $400 million and $600 million.


Fred Zeidmann is the Chairman and CEO. He has served as Chairman of Gordian Group LLC, a U.S. investment bank specializing in board level advice in complex financial matters since December 2014.

Douglas Wurth is Co-Chairman and worked for JP Morgan for over 20 years. During his time there he served as the CEO of the Alternative Investments business and the CEO of the International Private Bank.

The third co-founder is Cary Grossman.  He co-founded Shoreline Capital Advisors, an investment banking firm focused on financial advisory services and middle market corporate finance transactions.

Donation to Non-Profits

Zeidman, Wurth and David Pauker, an non-exec director, have agreed to make available 750,000 founder shares (5% of the initial allotment) to be contributed to non-profit organizations, including those involved in the arts, human rights and the advancement of life sciences. These shares will be donated within six months of the IPO closing.

A spate of SPACs

Nationwide there have been a spate of blank check companies seeking to go public. According to the Wall Street Journal, so far, in 2020 there have been 75 new SPACs, raising $30 billion. This is more than double the amount raised in 2019.

In Houston

SEC filing – S-1 Good Works Acquisition

CEO resigns from specialty ingredient company after poor results

Brent Rystrom has resigned from his position as CEO of RiceBran Technologies after poor second quarter results. The company also announced that it had hired BMO Capital Markets to review strategic alternatives.

RiceBran is a manufacturer and marketer of products derived from rice bran. These are sold to food and animal nutrition manufacturers and retailers. The company moved its head office from Sacramento to The Woodlands in June 2018 so that it could be nearer the supply of rice in Arkansas and Louisiana. The company has revenues and a market capitalization of around $25 million.

Mr Rystrom became the CEO in October 2018. He joined the company as CFO in March 2017. He will receive a severance package of 90 days of base salary. Mr Rystrom will provide consulting services through the end of the year.

Peter Bradley, who joined the Board of Directors in July 2019, has been appointed Chairman and Chief Executive.

In the second quarter, the business had a negative gross profit margin of 20% as it got squeezed at both ends in the pandemic. Surging consumer demand for rice resulted in both large price increases and shortages for rough rice (a raw material input). As a result, the company had trouble maintaining output at its Arkansas mill. Customer development also slowed.

Houston blank check company makes big merger deal

Steve Jurvetson

[UPDATE 9-30-20 – Deal has been completed – Head office moved to San Jose]

Graf Industrial Corp, which went public in October 2018, has announced that it has entered into a reverse merger agreement with San Jose-based Velodyne Lidar. Velodyne makes radar-like sensors used in autonomous vehicles. In 2005 it invented a real time 3D Lidar ( Light Detection and Ranging).

Velodyne was founded by David Hall and is backed by Ford, Baidu, Nikon and Hyundai Mobis. They will continue to own 80% of the combined company after the deal closes in the third quarter.


The proforma enterprise value of the combined entity is $1.6 billion. Graf will issue $1.5 billion in new stock to existing Velodyne shareholders. Cash sitting on the Graf balance sheet ($117 million) and from the issuance of $150 million of new shares to institutional investors will be used to add $190 million of cash to Velodyne’s balance sheet and to pay $50 million to the existing Velodyne shareholders.

For 2018 through 2020, Velodyne has negative EBITDA of approximately $50 million each year. Its revenue of approximately $100 million in 2020 is projected to grow to $684 million.

Blank check company

Graf is based in NW Houston and was formed by blank check veteran James Graf. A blank check company is a company that goes public without any underlying business. Normally it has 18 months to make an acquisition, otherwise the money has to be returned. However, a company can ask its shareholders for an extension.

[Sentinel Energy, another Houston blank check company, went public in November 2017, failed to make an acquisition and returned funds to its shareholders two years later]. 

Purecycle deal falls through

Back in April, just before the proxy vote requesting an extension, Graf announced it was in negotiations to buy Purecycle, a PE-backed polypropylene recycling company in Ohio. Purecyle is developing technology (under license from Proctor and Gamble) that takes contaminated plastics and converts it into a reusable resin on a commercial scale. It’s not clear why this deal fell apart.

Earlier this week, the other Houston blank check, Landcadia Holdings II announced it would be buying Golden Nugget Online Gaming.

SEC Filing – Graf Velodyne reverse merger

Blue Bell Directors agree to $60 million settlement over listeria mismanagement claims

The directors of Blue Bell Creameries have agreed to a $60 million settlement resolving claims that their alleged mismanagement led to a deadly 2015 listeria outbreak. The deal has to be approved by the judge in the Delaware Court.

The Settlement

The Directors were part of the General Partnership (GP) that managed the ice cream manufacturer. They were sued by Mary Wenske, who owns a stake in Blue Bell’s controlling partnership. She alleged that the mismanagement caused a breach of the limited partnership agreement.

Blue Bell owes the GP $45 million in management fees and interest. As part of the settlement, this will be canceled. In addition the GP will pay Blue Bell $15 million in 8 installments by December 2021 (Technically, Blue Bell will pay the GP $15 million as a capital contribution which will then be returned back to the company as settlement proceeds).

Out of the $15 million, the lawyers in the transaction will be paid $9 million.

The Listeria outbreak

Blue Bell was formed in 1907 and is based in Brenham, TX.  The company has three production plants in Brenham, Broken Arrow (Oklahoma) and Sylacauga (Alabama).  Prior to to the listeria outbreak it had revenues of $850 million.

In February 2015, the South Carolina Department of Health and Environmental Control found listeria in a routine sample of products in a local distribution center that were manufactured in Brenham. The following month Kansas authorities identified 5 hospital patients with listeria who had eaten “Scoops” ice cream made in Brenham. They also found listeria in products made in Oklahoma.

In April 2015, Blue Bell voluntarily recalled all its products on the market. Ultimately, 3 people died from listeria. The plants were closed for a few months. Ultimately, Blue Bell paid a fine of $175,000 to the state of Texas.

In late 2015 it was reported that the Department of Justice was reportedly investigating the company but no charges have ever been filed.

The Aftermath

In July 2016, Texas billionaire, Sid Bass, agreed to lend the company $125 million. He also purchased a $100 million warrant to acquire 42% of Blue Bell.

More pertinently for the plaintiffs, after the shutdown, distributions to the limited partners were cut from $4,000 per unit, paid quarterly, to $0 per unit.

According to the lawsuit, Blue Bell had discovered listeria bacteria in its Oklahoma plant on 5 separate occasions in 2013 and 10 more occasions in 2014. They never conducted a root cause analysis, nor increased the frequency of testing. A lawsuit filed by a different stockholder alleged that the Board were never informed of the listeria cases and did not have a process to review food safety compliance in its board meetings.

Under the terms of the limited partnership agreement, the GP was vested with exclusive authority to manage Blue Bell’s business and affairs, in accordance with ‘sound business practices in the industry’. The controlling partnership alleged that the GP, by ignoring the listeria found in 2013 and 2014, breached the agreement.

Blue Bell Directors Reach $15 Million Listeria-Outbreak Deal – Bloomberg







Building Products company appoints new CFO

Quanex Building Products has appointed Scott Zuehlke as its new CFO. He became the interim CFO in June 2019 after previous CFO Brent Korb was let go.


Quanex has a market cap of $635 million and is based in the Galleria area. The company designs and produces energy-efficient windows and doors fenestration products in addition to kitchen and bath cabinet components.

Mr Zuehlke has been with the company since 2016. Prior to that, he was VP, Investor Relations at Halcon Resources. The company had been conducting an executive search but elected to promote from within instead. Mr Zuehlke will receive a base salary of $330,000.

The company also appointed Mark Livingston as its new Chief Accounting Officer. He joined the company in February 2019, having previously served as the CAO of Omega Protein Corporation until it was taken private in December 2017.

Quanex also made similar moves with its General Counsel. It promoted Paul Cornett from the Deputy Counsel role and terminated the employment of Kevin Delaney who had been in the role since 2005. Mr Delaney will get a severance of $562,500 (representing 18 months’ of salary) and a pro-rata bonus for 2019.

SEC filing – Quanex Building Products – new CFO

Former employee charged with $10 million fraud

James Camp has been charged with $10 million fraud from his former employer, Lubrizol Corporation, based in Deer Park.

The 10-count indictment for wire fraud was returned in the Southern District of Texas. The indictment remains under seal. Therefore many details of the scheme have not been released.

Lubrizol is a provider of specialty chemicals. It was a public company until it was acquired by Berkshire Hathaway in 2011. Its corporate head office is in Ohio.

Mr Camp allegedly defrauded the company of $9,256,713 between April 1998 and November 2017. Camp submitted fraudulent invoices for laboratory services from two companies he owned. He then allegedly caused Lubrizol to issue payments to those companies. The indictment further alleges that he used the fraudulently obtained payments for his own personal benefit.

If convicted, Camp faces up to 20 years imprisonment on each count as well as a possible $250,000 fine.



Houston company settles with SEC over allegations of reporting violations

Omega Protein Corporation has settled with the Securities and Exchange Commission (SEC) over allegations that it misrepresented that it was in compliance with covenants on its loan agreements.

The company has agreed to pay a penalty of $400,000. Omega settled without admitting or denying the findings in the SEC order

Business financed by federal loans

Omega, which had its head office in west Houston, was publicly traded until it was taken over by Cooke Inc, a private Canadian company, for $500 million in December 2017.

The company’s biggest business is the production of fish oil for use as a protein ingredient in animal feed. It has facilities in Virginia, Mississippi and Louisiana. Historically, a significant source of Omega’s external financing was the federal government, which provided loans as part of a broader program to support the national fishing and acquaculture industry.

Pollution offenses

Omega had been a repeat offender of the Clean Water Act. It had pleaded guilty to criminal charges in 2013 over pollution in Reedville, Virginia. The company paid a fine of $5.5 million. It also made a $2 million payment to the National Fish and Wildlife Foundation.

In January 2017, it again pleaded guilty to criminal counts of pollution through illegal discharges at its Abbeville, Louisiana facility. This time the fine was $1 million.

The pollution in Louisiana actually occurred in December 2014. A whistleblower called the company ethics hotline in March 2015. This was before the company filed its annual report. However senior management only became aware of it a month later. This was because the hotline system Omega had put in place failed to notify the appropriate executives.

Breach of Covenant

As part of its 2014 annual report, the senior management of the company certified that it was in compliance with all environmental obligations. That was a covenant put in place on the federal loans after the first guilty plea.

The subsequent quarterly reports for 2015 also falsely claimed that the company was in compliance. In fact the company would have had to pay accelerated interest on its $21 million federal debt, if a default had been declared.

To make matters worse, a default on the federal loans was grounds for a cross default on the company’s commercial credit facility. Instead, during 2015, the company increased its commercial credit facility and used that to pay off the federal loans.

Executive bonuses

To put the $400,000 penalty in context, the 5 senior executives of Omega received cash bonuses of $1.9 million for the 2015 fiscal year.

CFO out at Houston Building Products Company

Quanex Building Products has let go CFO Brent Korb with immediate effect. Scott Zuehlke, VP of Investor Relations and Treasury has been appointed interim CFO while the company conducts an executive search.

Quanex has a market cap of $558 million and is based in the Galleria area. The company designs and produces energy-efficient windows and doors fenestration products in addition to kitchen and bath cabinet components.

Mr Korb joined the company in 2001 and had been the CFO since August 2008. He will receive 18 months of severance ($627,000) and a pro-rated target bonus for 2019 (approx $160,000). He will also receive 18 months of benefit premiums ($29,000). Unlike most companies, upon termination, unvested stock options and restricted stock are forfeited and do not vest.

Mr Zuehlke has been with the company since 2016. Prior to that, he was VP, Investor Relations at Halcon Resources.

SEC filing