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April 10 Rentech Inc, which processes wood fibre, said Blackstone Group LP's credit arm would invest $150 million in the company in return for two board seats, sending its shares up as much as 19 percent.
Rentech, which also makes nitrogen fertilizer, also said it would give one board seat to a shareholder group, led by Engaged Capital LLC and Lone Star Value Management LLC, to settle a dispute over the company's fundraising plans.
The shareholder group were demanding Rentech halt any capital raising plans, criticizing the company's poor track record in allocating and spending funds.
As part of the settlement, the three new directors will be part of a new five-member finance committee to oversee Rentech's capital spending and review its executives' pay, the company said.
Rentech, which currently has a nine-member board, said it would use the proceeds to fund the growth of its wood fibre processing business to a scale necessary for a possible initial public offering.
Blackstone's GSO Capital Partners LP will invest $100 million through convertible preferred shares and a $50 million term loan to the company, valued at about $412 million as of the stock's close on Wednesday.
"The investment is a vote of confidence in both our fibre and fertilizer businesses by a leading global investor," Rentech Chief Executive Hunt Ramsbottom said in a statement.
Blackstone named Douglas Ostrover, GSO's co-founder, and Patrick Moore, former chief executive of Smurfit-Stone Container Corp, to Rentech's board.
Rentech said Michael Ray and its co-founder Dennis Yakobson had resigned.
The company's shares were up 14.4 percent at $2.07 in midday trade on Thursday. They touched a high of $2.15 earlier in the session.
Credit Suisse Securities (USA) LLC was Rentech's financial adviser. Latham & Watkins LLP and Holland & Hart LLP were its legal counsel.
Vinson & Elkins LLP, Moelis & Co, Alvarez & Marsal Private Equity Services, and Nexus PMG advised Blackstone. (Reporting by Anannya Pramanick and Sneha Banerjee in Bangalore; Editing by Savio D'Souza)