Know Who Drives Return

Kyle Bransfield and Ruben Minski on the Union Acquisition II / Procaps SPAC Deal

September 16, 2021 Season 1 Episode 3
Know Who Drives Return
Kyle Bransfield and Ruben Minski on the Union Acquisition II / Procaps SPAC Deal
Show Notes Transcript

Boardroom Alpha's David Drapkin welcomes Union Acquisition II CEO Kyle Bransfield and Procaps CEO Ruben Minski to the podcast. The deal goes to vote on September 22, 2021 and ex-redemption on September 17, so this will be one of shareholders' last opportunities to hear from the team before deciding to redeem or go long alongside Kyle and Ruben. Investors should note that ~$65M was already redeemed from trust at their extension vote in April 2021.

Episode Details

  • Intro to Procaps
  • Why Procaps going public now?
  • Decision to go via SPAC rather than IPO?
  • Why Union Acquisition?
  • SPAC history for Union
  • Redemptions + Capital Structure
  • PIPE Investors
  • Procaps valuation
  • Growth prospects
  • Where are the risks?
  • Will Union be a longterm partner?
  • Procaps transition to a public company
  • Will Union continue in SPACs
  • Parting words 


Kyle P. Bransfield, CEO of Union Acquisition
Kyle P. Bransfield is co-founder of Union Acquisition Group and has served as our Chief Executive Officer and a director since our inception. He has also served as director of Union I since November 2017 (and currently sits on the audit, compensation, and nominating and governance committees) and served as its Chief Executive Officer from December 2017 until it completed its merger with Bioceres in March 2019. Mr. Bransfield is a Partner at Exos Financial, leading the firm’s SPAC strategy. Mr. Bransfield has over 14 years of experience in direct equity and debt private markets principal investing, capital raising, and investment banking. Prior to joining Exos, Mr. Bransfield was a partner at Atlantic-Pacific Capital, leading the firm’s global direct private placement and structured investment activities from 2015 to 2019. Prior to Atlantic-Pacific, Mr. Bransfield was an investment banker in Sagent Advisors’ Private Financing Solutions Group from 2014 to 2015. Prior to Sagent, Mr. Bransfield spent five years from 2009 to 2014 as a Principal and General Partner at CS Capital Partners, a Philadelphia-based multi-family office focused on alternative investments. In his role there, he co-managed a portfolio of direct investments, served as an observer to several boards of directors, and fulfilled operating roles within portfolio companies. In 2006, Mr. Bransfield began his career in the Mergers & Acquisitions Group at Stifel Nicolaus Weisel. Mr. Bransfield received a B.S. in Business Administration from American University.

Ruben Minski, Founder, Chief Executive Officer and Director
Ruben Minski, founder, CEO and president of Procaps Group, with extensive experience and recognition in the pharmaceutical industry. Chemical Engineer from Northeastern University in Boston, Massachusetts, he participated in the Owners/President Management program at Harvard University - School of Business, CEOs' II: The Next Step in Strategic Management and in the CEOs' Management Program at Kellogg School of Management at Northwestern University, USA.

David Drapkin:

Hello, everyone and welcome back to another edition of the Boardroom Alpha podcast today, it's our pleasure to be speaking with Ruben Minsky, Rubens founder, Chairman and CEO of the pro cops group, pro cops is going public via union acquisition Corp two, we also have Kyle bransfield, who's the CEO of that's back joining us today. Pro cops and Union have a shareholder vote scheduled for next week, September 22. RUBIN. Kyle, thanks for taking the time to speak to us today. Really appreciate it.

Ruben Minski:

Thank you for having us today.

David Drapkin:

To kick things off, why don't you tell us a little bit about the pro cops group, you know, an overview of the business and you know, the quick history, if you will.

Ruben Minski:

Right. So our company was founded by my family back in 1977. We like to think of it as a 44 year old, very young and entrepreneurial spirit all over it. We are a healthcare pharmaceutical company in the region, we are the largest cdmo. That's a contract manufacturing organization, in Latin. And, and we have we are top three globally, in terms of social building capsule production, six manufacturing sites, the first FDA approved facility in Latin America, for the US market, more than 5000 of our extended family are part of our organization. And we sell our product services to more than 50 countries worldwide, very inclining to innovation for a patent or on patents, the four buttons are on 50 more coming up very vertically and horizontally integrated. Our revenue this year, David is going to be around 400 million with a nav that our 105. Right.

David Drapkin:

So thank you for that. So you say you're 45 year old company, wise now, the right time to go public through what was going into your decision making process to to choose now as the time to enter the public markets?

Ruben Minski:

That's a great question, where, for the last few years, we have always had in our mind that for 23 2024, we're going to go public, it was an important issue for us, we felt that we had much more to offer to the world than what we have we've been doing with restricted a public funding from the banks and other organizations. So what we decided, at that time, he said, we will construct everything along the ways of 2023 I want to happen is that we really fell last year that we were very alienated resources, a pipeline a huge amount of talent. And we felt that it was a great the right moment, to try to jump into the possibility of being a public company. And we we saw the whole spark space, we were extremely lucky to find the union constituents group and Kyle and Dan. And they were they were fantastic. We have had a great ride with them. And they were extremely happy that we took that decision right now.

David Drapkin:

That's great. And so, you know, let's let's talk about this back for a second. You know, pro caps is not what you would say. Some of them this back trends out there. You know, you're not an electric carmaker. You're not a pre revenue pre product, you know, crazy pie in the sky company or a real established 40 year old company with with real EBIT, da, can you talk about the decision to go the SPAC route via other capital markets transaction or traditional IPO? What? What what sort of drove you to this back this back decision?

Ruben Minski:

What is back expect gave us a great amount of positive positive alternatives. The most important one, of course, was the fast track things that we can say that we will be able to say otherwise in an IPO. And yes, if you compare us with other sparks out there in the market, definitely, in our union, it's a comes on board with with an unimportant revenue with a long history of success of revenues. So it is quite a differentiating factor between us and others boxes in the marketplace.

David Drapkin:

Right. And then the decision to go with union. Can you talk a little bit about what was attractive from from unions perspective, maybe there's back history had had a lot to do with it.

Ruben Minski:

Absolutely. We found the Union had, of course, the leadership they had were impeccable, was impeccable, I think But also they have great experience not only just in this back world, but also in South America, they were very keen and very oriented to South America, which takes a very important frame of mind to think of the great potential that South America has an old emerging markets have as far as growth is concerned. So we have found great chemistry, we are extremely happy, we have found them to come out. And they have taken us by the hand in many of the situations there which which in all honesty within norba, regarding the whole spec process, and we are extremely happy, we made a fantastic, good decision.

David Drapkin:

Great. And Kyle, maybe this is a question for you. Given this as you know, the second go around for you guys. You know, what, what drove you towards pro cops? You know, anything that you learned from from transaction one, you know that that's helping you in transaction number two?

Kyle Bransfield:

Yeah, pretty much everything from transaction. That's been helpful for the playbook of transaction two, I'd say there's some commonality. You know, number one, what we saw in in pro cops is a business that has integrity, that has long standing relationships with companies like Pfizer, Abbott, Bear, Glaxo. And in that mean something to us, they have multi year contracts, they have managed quite well, their FX exposure, which in the emerging markets is something that we are keenly focused on sustainability. And the focus on the human side of business is, is actually very important to us. It's a common theme video series is focused on global problems solving how we feed a massively growing population. Ruben and his team from the get go have been focused on how do they improve the quality of care and the quality of life of not only South Americans, but the 50 other countries they serve around the world, including developed countries, it's an area that has shown we've shown a quite a bright spotlight given COVID. And I'm proud to be a part of it. In terms of, you know, tactics, yeah, you know, we went the pipe route, this time, there's a reason we did not go a pipe route with Bo Series B Series now trading 30 40%, up on average, we will be in a position with this company, I think, to attract some of the leading private businesses to join us in m&a. And that's in the developing world and the developed world. You know, just engaging with folks like yourself is something that we've been focused on PR is the name of the game in terms of getting the message out, especially in today's stock market, retail individuals, institutions, they need to understand what we're doing. And we're trying to do that in a better way this time than we did last time.

David Drapkin:

Right. Right. Totally agree. And, you know, that brings me to another question. Obviously, your stock is trading above 10. But given how a lot of these merger votes have been going recently, namely high redemptions, how are you? How are you in the company thinking about capitalization going forward? In the event that you would see higher than expected redemptions? Maybe?

Kyle Bransfield:

Yeah, totally. David, I'm just tackle the elephant in the room, we're in a very high redemption environment for sparks. That's just something that's out of the control of myself and Ruben, having said that, we have a pipe that is delivering $100 million of capital in the pipe is different in its complexion. Our pipe is fundamental, long only. And I'm sure folks have said this to you. But actually, we do not have anyone, any technical investors, we don't have any trading investors, we have lat am focused healthcare oriented investors in our pipe, they've also been very active in supporting or I expect them to be very active in supporting the stock post closing. This is a business that's been well tracked by investors before we even showed up on the screen said there's a lot of interest. You know, in a high redemption environment, we're prepared for that. And I don't think we're going to we're going to be there, I think, I think we're going to deliver something normal to the business. You'll also notice that Rubin very intelligently organized the debt side of his capital structure before close, and this business only levered 2.6 times. And it's, it's growing substantially. So, look, we're going to deliver the maximum amount of capital that we can from our trust account, and we're going to use the public markets, which is one of the reasons Rubin is attracted to it, to bring in the capital that is needed to deliver and continue to grow the business.

David Drapkin:

Thank you for that. And was that debt offering strictly a refinancing?

Kyle Bransfield:

It was. It's jetting, the point there is if you look at the individuals or the institutions that are behind it, they're pretty big boys. And they're very well known guys. I mean, Prudential insurance companies, these are people that want to deploy more than 115 million bucks on on the cover of the offering. And I suspect there's many more that will come along in the event that we find an interesting m&a, which is a big part of our, our strategy.

David Drapkin:

Right. Right. And when you talk about the pipe shareholders or any of the pipe shareholders that that you say, our long term shareholders or were they previous investors in the company, are they all new investors in the company?

Ruben Minski:

We the the pipe holders is this is a very important question, David, what we have is we in our board, and in our shareholder position in our we have Alejandro Waseem, he's a he's the he's in charge of the chairman of our m&a committee. And he used to he was the former CEO of CFR pharmaceuticals, which was a very successful company in the region in which is from a Chilean origin. And they later on they build the company through m&a acquisitions and many other various stood movements. And they finally sold the company to out for almost $3 billion. So he's he's very much involved in this. And many of many people that are also in the pipeline do as from the past, but also knew Alejandro, and they, and they were important a investors now in the pipe that we have the pleasure of having with us now.

David Drapkin:

Great. And so can you help us think about the valuation so struck at 1.1 billion? If I'm an investor, how should I think about that valuation context and maybe relative to some of your peers in the market?

Ruben Minski:

Okay, we we feel that the what we did is we decided this on purpose is that we wanted to put a share value very small, very low number very attractive, a is 10.75. All the companies that you see, not only from the last time they visit, but also worldwide in the form of business and in the cdmo business, and go from either maybe 1314, to up to 2022 times every data. So we feel that we have we have a great, we have made a major effort to bring on important investors for the long term. And by by putting such an attractive multiple, that. Great,

Kyle Bransfield:

David, if I could just piggyback on on you know, I just point to one specific call, I would say Blau pharmaceuticals is a company that we have been, we know we've been union has been close with. And that's been one of the most successful Brazilian IPOs of all industries of late and in healthcare, it's a shining star, that valuation is a substantial gap from what we are starting from. And we think that that's how you design a attractive deal to grow into the market, in addition to not taking any secondary to the primary drivers of value here, Rubin and the team, the family, no one's taken any cash out. Their cash will come when the stock rises, and everybody else makes money.

Ruben Minski:

Right. Right.

David Drapkin:

That's some of your public company experience. Working in your favor there. Can you talk about growth growth prospects for profit gaps is empty m&a, organic growth, or can you can you talk a little bit about that?

Ruben Minski:

Yeah, from from from the organic side, we have a huge pipeline, very important pipeline. And we have important rollouts and expansion into new geographies and new therapeutic areas in the business. So we do expect organically speaking to in five years time to be a $1 billion company. And we have no questions about and we feel that the space is there for us to grow. We're gonna have the higher team's growth in years to come for the next few years. We have through through the vision that we have other of the pipeline are under 33. We are absolutely convinced of that. In addition to that, we also have the inorganic growth. And in that a Our m&a is quite ambitious, were led by Alejandro wasty. We are looking into different businesses were very busy. We have been doing that for the last eight months or so. And they there are great opportunities for us to capitalize on

David Drapkin:

it and so you Not not to be negative, but what what were what would some obstacles be, you know, that might stand in the way of maybe hitting some of your targets.

Ruben Minski:

Most of the time, you know, the farmer business has searches is a very, is very has very low permeability in the in social issues and everything because of course, governments and people, of course, health is number one priority for governments, especially in the region, the there is, that's a non negotiable item, they want to have the cover to cover more and more of the social medicine system for the benefit of the inhabitants of the countries. So we, we don't foresee really any major situations that will obstruct us from from these growth a actually is the other way around, we feel that there is a great wind in our favor, as as as the in general, the region is growing at a much faster rate in the pharma business than the worldwide growth as the aging population comes on board. And they're really great spaces for us to grow further than even when expected. You know, once again, we are very much keen into and we have been taught by our friends at Union that to be to under promise and over deliver years to come.

David Drapkin:

That's sage advice. You know, so and also in some of these batch transactions, you know, a lot of the bad rap that you know, sponsors are getting or they're in it for for more transactional reasons. And maybe they do the transaction, then they go away. How is union? I see the you guys are joining the board. Are you intending to be a long term partner of procap?

Kyle Bransfield:

Without a doubt, I mean, every SPAC has a little bit of a different approach. And, you know, to your point earlier about being attracted to or using the vehicle for late stage venture sort of high growth, hyper growth really, businesses, we are hyper growth with 35% year over year revenue growth in latam. hyper growth, okay, is an area that we're we are aware of latam is has some really interesting targets. However, what we do is we can add value to businesses like rabbet in our DNA is fundamental, fundamental investing for the most part. And if you look at Bo series, you know, I sit on that board among three, three of the three committees. We have helped by way of m&a, we have used our own balance sheet, my own capital, and my partner's mon Sartori, who was a sitting senator in Oregon. When Macri lost the election, we have the debt financing in place. And we stepped in when when that went sideways, and we provided a $15 million loan to the company, subordinated and in a blink of an eye in order to allow the business to continue to grow. We we bring governance expertise, you know, the folks around the table include guys like and gals like Dan mud and Farah rintala. Dan was CEO fortress, you CEO of Fannie Mae, these are individuals steeped in in public company governance. And I don't mean that in terms of Rubin needs help getting a shop in where no, no, no, it's all about Sarbanes Oxley, it's about, you know, really taking that step to being a public company, and we're here to help we're here to help him in the long term, I would own the stock forever if I could

David Drapkin:

write, again, a little more on the, you know, the transitioning from, from from private to public. Obviously, you have a lot of experience there. You know, how have you helped Rubin and the company prepare? Because it's obviously a much different construct. You know, what, once you're once you're in the public, absolutely.

Kyle Bransfield:

So in a few different ways. I mean, number one, it's already started, if you look at our PR, what we're what we're doing in our role right now, pre transaction is really trying to prep the company for what the public wants to see, number one, but more importantly, what they need. And you need for to run an m&a campaign. You need some folks that are experienced in m&a? Yes, my team can do that. But what we want to do is build the long term team that can continue that campaign, with or without us. And we've done that Rubin attracted and Alan hunter Weinstein, who we can't emphasize enough, the head of the m&a Committee has brought in the CFO that architected most of the m&a at CFR that ultimately sold that Ruben has referenced, that is a starting point number two, we helped bring accounting resources to the company, to prep to start that process. You know, it's an ongoing process. With Sarbanes Oxley and reporting and automating systems, I mean, this company has 5000 employees, right? You've got to integrate, you've got to orient, you've got to educate them on things like insider trading, all of that has been started. And we're gonna continue that, you know, going forward.

David Drapkin:

Right. Right. And then, you know, on union, right, so you one successful transaction another in the works. Will we see a third? eye?

Kyle Bransfield:

Absolutely, uh, you know, we have a couple of vehicles that we're working on. And, you know, this, this spot market is not overly strong. But yeah, we're here to stay. We're global. You know, we're, we're one thing that I'm very proud of, you know, our team members are everywhere, from Saudi Arabia, to the UK, to Canada, to the US to erg y to Brazil. So, you know, I think what you'll see from us is vehicles that absolutely focus on companies like pro caps, we're here to stay in latam I think you'll see us spread our wings a little bit and maybe go after some global targets, particularly in Europe, where we see interesting opportunities. In no way do we want to be like everybody else, I mean, that the very beginning of union was, let's do a spec, but let's be different. 97% at the time of our first IPO, 97% of spax were focused on North American targets. I don't want to be swimming in that pond

David Drapkin:

97% focus on North America and very broad and, you know, sometimes don't don't stick to their stated targets in it's great Well, guys think thanks again, anything parting words, you know, ahead of ahead of the vote next week, you know, that that he thinks shareholders should know?

Ruben Minski:

Okay, maybe from my side the David is that we we feel that there is a great space for to be an investor of a great company. We have been absolutely dedicated ourselves for years to innovation. We're absolutely obsessed with it. We have great technologies within the music, great space, not only in the regional expansion, but also to be a global player in the soft shell, business function related business. We have created atoms and everything for cost competitiveness that allow us to think big in this region. And what we need now is long term investors that believe in us, and we will absolutely comply with our promises. So thank you so much for having excellent and

Kyle Bransfield:

the only thing I'd add David is, while we were sitting here conducting this interview, 1.5 million shares have traded at an all time high of 10 a team. So let's go. Cool.

David Drapkin:

Kyle. Ruben. Thanks again, so much for your time. Best of luck in the in the transaction and pro cops going forward much bye. Thank you.