Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On December 23, 2019, AquaVenture Holdings Limited, a business company
incorporated under the laws of the British Virgin Islands ("AquaVenture"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Culligan International Company, a Delaware corporation ("Parent"), and Amberjack
Merger Sub Limited, a business company incorporated under the laws of the
British Virgin Islands and wholly-owned subsidiary of Parent ("Merger Sub" and,
together with Parent, the "Acquiring Parties") pursuant to which, subject to the
satisfaction or waiver of the conditions therein, Merger Sub will merge with and
into AquaVenture (the "Merger"), with AquaVenture surviving as a wholly-owned
subsidiary of Parent. The Merger Agreement was unanimously approved by the
members of the board of directors of AquaVenture (the "Board") and the Board
resolved to recommend approval of the Merger Agreement to AquaVenture's
shareholders.
Subject to the terms of the Merger Agreement, at the effective time of the
Merger (the "Effective Time"), each ordinary share, of no par value per share,
of AquaVenture issued and outstanding immediately prior to the Effective Time
(other than shares held by the Company in treasury, or owned by Parent or Merger
Sub or held by stockholders who are entitled to dissent and who properly demand
dissenter's rights under BVI law) will be converted into, and thereafter only
represent the right to receive $27.10 in cash, without interest (the "Merger
Consideration").
At the Effective Time, each AquaVenture stock option, whether vested or
unvested, that is outstanding immediately prior to the Effective Time will be
cancelled and automatically exchanged for the right to receive an amount in cash
(less any applicable tax withholdings) equal to the product of the excess, if
any, of the Merger Consideration over the applicable per share exercise
price. At the Effective Time, each outstanding AquaVenture restricted stock
unit, whether vested or unvested, will vest in full and will be cancelled in
exchange for the right to receive an amount in cash (less any applicable tax
withholdings) equal to the Merger Consideration. At the Effective Time, each
AquaVenture phantom unit, whether vested or unvested, that is outstanding
immediately prior to the Effective Time will vest in full and will be cancelled
in exchange for the right to receive an amount in cash (less any applicable tax
withholdings) equal to the Merger Consideration.
The Merger Agreement contains customary representations, warranties and
covenants of AquaVenture and the Acquiring Parties, including, among others,
covenants by AquaVenture to conduct its business in the ordinary course of
business during the period between execution of the Merger Agreement and
consummation of the Merger (the "Closing") and prohibiting AquaVenture from
engaging in certain kinds of activities during such period without the consent
of the Parent. The Merger Agreement also contains customary termination
provisions for both AquaVenture and Parent, as discussed in more detail below.
The Merger is conditioned upon, among other things, the approval of the Merger
Agreement by the affirmative vote of holders of at least two-thirds of the
shareholders of AquaVenture (the "Shareholders") present at a meeting of the
Shareholders held for such purpose, the expiration of the applicable waiting
period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and other customary closing conditions. The Closing is
not subject to a financing condition.
The Merger Agreement contains a customary "no-shop" provision whereby, subject
to certain exceptions, AquaVenture will be prohibited from (i) entering into
discussions concerning, or providing confidential information in connection
with, any alternative transaction and (ii) withholding, withdrawing, or
modifying in any manner adverse to Parent the recommendation of the Board that
the Shareholders adopt the Merger Agreement. The "no shop" provision is subject
to a customary "fiduciary out" provision.
The Merger Agreement contains certain termination rights for both AquaVenture
and Parent, and provides that, upon termination of the Merger Agreement under
specified circumstances, the Parent may be required to pay a break-up fee of
$54,611,815 and any Financing Cooperation Expenses (as defined in the Merger
Agreement) to which AquaVenture is entitled. In addition, under specified
circumstances resulting in termination of the Merger Agreement, including,
subject to compliance with specified process and notice requirements, if
AquaVenture exercise its "fiduciary out" to terminate the Merger Agreement in
order to enter into an agreement providing for a Superior Proposal (as such term
is defined in the Merger Agreement), AquaVenture may be required to pay Parent a
break-up fee in the amount of $34,132,500.
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Voting Agreements
In connection with the execution and delivery of the Merger Agreement, certain
shareholders of AquaVenture have entered into voting agreements with Parent (the
"Voting Agreements"), pursuant to which such individuals have agreed, among
other things, to vote their respective Shares (as defined in the Merger
Agreement) for the approval and adoption of the Merger Agreement and the
approval of the Merger and the other transactions contemplated by the Merger
Agreement. The shareholders signing Voting Agreements currently own an aggregate
of 35.50% of the outstanding Shares.
The foregoing description of Voting Agreements does not purport to be complete
and is subject to, and qualified in its entirety, by the Form of Voting
Agreement, which accompanies this Current Report on Form 8-K as Exhibit 99.1 and
which is incorporated herein by reference.
Financing Commitments
Parent has obtained equity and debt financing commitments for the transactions
contemplated by the Merger Agreement, the aggregate proceeds of which will be
sufficient for Parent to pay the aggregate Merger Consideration and all related
fees and expenses of the Acquiring Parties and to repay certain indebtedness of
AquaVenture. Investors affiliated with Parent have committed, pursuant to an
equity commitment letter dated as of December 23, 2019 (the "Equity Commitment
Letter"), to capitalize Parent, at or prior to the Effective Time, with an
aggregate equity contribution in an amount of $656,847,678.29, on the terms and
subject to the conditions set forth in the Equity Commitment Letter.
Morgan Stanley Senior Funding, Inc., Ares Capital Management, LLC, PSP
Investment Credits USA LLC, Royal Bank of Canada, RBC Capital Markets, Bank of
America, N.A. Credit Suisse AG and Credit Suisse Loan Funding LLC (collectively,
the "Lenders") have committed to provide $500 million in debt financing (the
"Debt Financing") for the Merger, which may be comprised of a senior secured
cash flow revolver, a senior secured term loan facility and/or senior unsecured
notes, on the terms and subject to the conditions set forth in a debt commitment
letter, dated as December 23, 2019 and delivered to AquaVenture in advance of
execution of the Merger Agreement (the "Debt Commitment Letter"). The
obligations of the Lenders to provide the Debt Financing under the Debt
Commitment Letter are subject to a number of conditions, including the receipt
of executed loan documentation, accuracy of representations and warranties,
consummation of the transactions contemplated in the Merger Agreement and
contribution of the equity contemplated by the Equity Commitment Letter.
The foregoing description of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and
qualified in its entirety, by the full text of the Merger Agreement, which
accompanies this Current Report on Form 8-K as Exhibit 2.1 and which is
incorporated herein by reference.
The Merger Agreement is attached to provide investors with information regarding
its terms and is not intended to provide any other factual information about
AquaVenture, Parent or Merger Sub. The Merger Agreement also contains
representations and warranties of each of AquaVenture, Parent and Merger
Sub. The assertions embodied in those representations and warranties were made
for purposes of the Merger Agreement and are subject to qualifications and
limitations agreed to by the respective parties in connection with negotiating
the terms of the Merger Agreement, including information contained in certain
disclosures between the parties. Accordingly, investors and security holders
should not rely on such representations and warranties as characterizations of
the actual state of facts or circumstances, since they were only made as of a
specific date and are modified in important part by the disclosures between the
parties. In addition, certain representations and warranties may be subject to a
contractual standard of materiality different from what might be viewed as
material to shareholders, or may have been used for purposes of allocating risk
between the respective parties rather than establishing matters of
fact. Moreover, information concerning the subject matter of such
representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in
AquaVenture's or the Acquiring Parties' public disclosures.
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Item 8.01. Other Events.
On December 23, 2019, AquaVenture and Parent issued a joint press release
announcing the entry into the Merger Agreement. A copy of the press release is
attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Additional Information about the Proposed Transaction and Where to Find It
In connection with the proposed transaction, AquaVenture will file a proxy
statement with the Securities and Exchange Commission (the "SEC"). Additionally,
AquaVenture will file other relevant materials in connection with the proposed
acquisition of AquaVenture by Parent. The materials to be filed by AquaVenture
with the SEC may be obtained free of charge at the SEC's web site at
www.sec.gov. In addition, investors and security holders may obtain free copies
of the documents filed with the SEC by AquaVenture on AquaVenture's website at
https://aquaventure.com or by contacting AquaVenture investor relations at
investors@aquaventure.comor the investors hotline at 855-278-WAAS (9227).
INVESTORS AND SECURITY HOLDERS OF AQUAVENTURE ARE URGED TO READ THE PROXY
STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE
MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED
TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Certain Information Regarding Participants
AquaVenture and its directors, executive officers and other persons, may be
deemed to be participants in the solicitation of proxies of AquaVenture
shareholders in connection with the proposed transaction. Information concerning
the interests of AquaVenture's participants in the solicitation, which may, in
some cases, be different than those of AquaVenture's shareholders generally, is
set forth in the materials filed by AquaVenture with the SEC, including in
AquaVenture's definitive proxy statement filed with the SEC on April 26, 2019,
and will be set forth in the proxy statement relating to the proposed
transaction when it becomes available.
Cautionary Statement Regarding Forward-Looking Statements
This announcement contains forward-looking statements, including statements
about the expected impact of this transaction on Parent's and AquaVenture's
financial and operating results and business, the operation and management of
AquaVenture after the acquisition, the anticipated funding for the transaction,
and the timing of the closing of the acquisition. Although Parent and
AquaVenture believe that the assumptions upon which their respective
forward-looking statements are based are reasonable, these statements involve
risks and uncertainties, and actual results could differ materially from those
discussed. Factors that could cause or contribute to such differences include,
but are not limited to, the receipt and timing of regulatory approvals for the
transaction, the possibility that the transaction may not close, the reaction to
the transaction of AquaVenture's customers and business partners, the reaction
of competitors to the transaction, the retention of AquaVenture employees,
Parent's plans for AquaVenture, economic conditions in the global markets in
which Parent and AquaVenture operate, the future growth of AquaVenture's and
Parent's businesses and the possibility that integration following the
transaction may be more difficult than expected.
More information about these and other factors can be found in AquaVenture's
most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and other filings with the SEC. Neither Parent nor
AquaVenture accept any responsibility for any financial or operational
information contained in this press release relating to the business, results of
operations or financial condition of the other. Each of Parent and AquaVenture
expressly disclaims any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statements contained herein to reflect any
change in the expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
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Item 9.01 - Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated December 23, 2019, by and among
Culligan International Company, Amberjack Merger Sub Limited and
AquaVenture Holdings Limited.
99.1 Form of Voting Agreement.
99.2 Joint Press Release, dated December 23, 2019.
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