Better World Acquisition, Heritage Distilling enter business combination deal

Better World Acquisition announced it has entered into a Business Combination Agreement with Heritage Distilling Holding Company. The parent company following the consummation of the transaction, Heritage Distilling Group, Inc., will be a new Delaware holding company that will be led by Justin Stiefel, Co-Founder and Chief Executive Officer of Heritage. Pubco’s common stock is expected to be listed on the Nasdaq Capital Market following the consummation of the transaction under the ticker symbol "CASK". Better World said, "For the past nine years, Heritage has been the most awarded craft distillery in North America by the American Distilling Institute, and has been recognized for its innovative brand family of premium whiskies, gins, vodkas, rums and ready-to-drink cocktails. As one of the largest independent craft distilleries on the West Coast, Heritage aims to become the leading national craft spirits company. Working collectively with Native American tribes across the country, Heritage is focused on creating a national craft spirits network, with the goal of providing economic benefits to tribes across the country. In collaboration with the Chehalis tribe, Mr. Stiefel successfully worked to overturn a 184-year-old Federal law banning distilling spirits on tribal lands, positioning Heritage to advance its unique operating model. As a result of the business combination, Heritage expects to become one of the only publicly-traded, pure play craft distilleries. The proposed transaction combines Heritage’s brands with Better World’s consumer products and beverage expertise. Better World brings marketing, finance and capital markets experience that the parties believe will accelerate the growth of Heritage’s business." Following the closing of the transaction, and assuming no redemptions by Better World stockholders in connection with the stockholder vote to approve the transaction, it is anticipated the Combined Company will have approximately $44M in cash, prior to the payment of the parties’ expenses related to the business combination. Pursuant to the Agreement, each of Heritage and Better World will merge with newly-formed subsidiaries of Pubco, which itself is a newly-formed subsidiary of Better World. As a result of such mergers, Heritage stockholders will receive new shares of Pubco and Better World security holders will exchange their securities of Better World for securities of Pubco. The shares of Pubco common stock to be issued to the Heritage equity holders will have an aggregate value equal to $77.5M, subject to adjustment for certain indebtedness of Heritage as determined in accordance with the Agreement, with each share of Pubco common stock valued at $10.00 per share. Cash proceeds released from Better World’s trust account, which currently has approximately $44M in cash, after any stockholder redemptions and payment of transaction expenses and other Better World liabilities, will remain with the combined company. Heritage and Better World are contributing into a CVR escrow account an aggregate of the equivalent of 4,000,000 shares of Pubco common stock and RSUs that will settle into shares of Pubco common stock. The CVRs will provide Better World’s public stockholders who do not redeem their shares in connection with the transaction with downside protection. The transaction implies a Pubco pro forma enterprise value of $122.2M immediately after closing of the business combination assuming no redemptions by Better World stockholders and a redemption price of $10.52 per share. As merger consideration, each Better World public stockholder who participates in the business combination will receive: One share of Pubco common stock. One CVR, which provides the holder with a 10% per annum preferred simple return including downside protection ranging from approximately $4.00 to $6.00 per share during the 18-month period following the closing, which may be extended by six months at the option of Better World’s sponsor. As merger consideration, each Heritage stockholder who participates in the business combination will receive: Approximately 4.15 shares of Pubco common stock for each share of Heritage common stock held by a stockholder based on Heritage’s current capitalization and net debt adjustments. In addition, Heritage stockholders have the contingent right to receive up to 3,000,000 earnout shares from Pubco as additional consideration if the applicable earnout milestones as set forth in the Agreement are achieved by Pubco. Pubco also will assume certain convertible notes, warrants and RSUs issued by Heritage. Assuming no redemptions by Better World’s public stockholders, it is estimated that the current security holders of Heritage will own approximately 47% of the issued and outstanding shares in the Combined Company at closing of the transaction. The transaction has been unanimously approved by the boards of directors of both Better World and Heritage. Completion of the transaction is subject to approval by equity holders of each company and certain other conditions specified in the Agreement. The transaction is currently expected to close in the second quarter of 2023.