Item 8.01 Other Events.
As previously announced, on December 14, 2021, CMC Materials, Inc., a Delaware
corporation ("CMC") entered into an Agreement and Plan of Merger (as amended
from time to time, the "Merger Agreement") with Entegris, Inc. ("Entegris") and
Yosemite Merger Sub, Inc., a wholly owned subsidiary of Entegris ("Merger Sub").
The Merger Agreement provides that, among other things and subject to the terms
and conditions of the Merger Agreement, Merger Sub will merge with and into CMC
(the "Merger"), with CMC surviving the Merger as a wholly owned subsidiary of
Entegris. The Merger Agreement was unanimously approved by the board of
directors of each of CMC and Entegris.
The information herein is being filed to update and supplement the definitive
proxy statement on Schedule 14A filed by CMC with the Securities and Exchange
Commission (the "SEC") on January 28, 2022 (the "Definitive Proxy Statement"),
relating to the Special Meeting of Stockholders of CMC to be held on March 3,
2022 in connection with the Merger. The information contained in this supplement
is incorporated by reference into the Definitive Proxy Statement. All page
references in this supplement are to pages of the Definitive Proxy Statement,
and all terms used in this supplement, but not otherwise defined, shall have the
meanings ascribed to such terms in the Definitive Proxy Statement.
The following information should be read in conjunction with the Definitive
Proxy Statement, which should be read in its entirety. To the extent that
information in this supplement differs from or updates information contained in
the Definitive Proxy Statement, the information in this supplement shall
supersede or supplement such information in the Definitive Proxy Statement.
* * * * *
Supplemental Disclosures Relating to Certain Lawsuits
Beginning in January 2022, CMC and its directors were named as defendants in
certain lawsuits alleging, among other things, that the Definitive Proxy
Statement omitted certain material information in connection with the Merger in
violation of Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934
(the "Exchange Act"), Rule 14a-9 promulgated under the Exchange Act, and/or
Delaware state law. Eight such lawsuits (the "Matters") have been filed on
behalf of purported stockholders of CMC in federal court and Illinois state
court: Stein v. CMC Materials, Inc., et al., Case No. 1:22-cv-00552 (S.D.N.Y.
Jan. 21, 2022); Ciccotelli v. CMC Materials, Inc., et al., Case No.
1:22-cv-00689 (S.D.N.Y. Jan. 26, 2022) (which additionally named Entegris and
Merger Sub as defendants); Garfield v. Noglows, et al., Case No. 2022CH000026
(Ill. Cir. Ct. Feb. 1, 2022); Finger v. CMC Materials, Inc., et al., Case No.
1:22-cv-00188-UNA (D. Del. Feb. 10, 2022); Whitfield v. CMC Materials, Inc., et
al., Case No. 2:22-cv-00560 (E.D. Pa. Feb. 11, 2022); Oday v. CMC Materials,
Inc., et al., Case No. 1:22-cv-00823 (E.D.N.Y Feb. 14, 2022); Raul v. CMC
Materials, Inc., et al., Case No. 1:22-cv-01399 (S.D.N.Y. Feb. 18, 2022); and
Taylor v. CMC Materials, Inc., et al., Case No. 1:22-cv-00219-UNA (D. Del. Feb.
18, 2022). The Matters seek, among other relief, an injunction preventing the
closing of the Merger, rescission of the Merger if it is consummated, damages
and an award of plaintiffs' attorneys' and experts' fees.
CMC believes the claims asserted in the Matters are without merit and
supplemental disclosures are not required or necessary under applicable laws.
However, in order to avoid the risk that the Matters delay or otherwise
adversely affect the Merger, and to minimize the costs, risks and uncertainties
inherent in litigation, and without admitting any liability or wrongdoing, CMC
has agreed to supplement the Definitive Proxy Statement as described in this
supplement. CMC and the other named defendants deny that they have violated any
laws or breached any duties to CMC's stockholders. Nothing in this Current
Report on Form 8-K shall be deemed an admission of the legal necessity or
materiality under applicable laws of any of the disclosures set forth herein. To
the contrary, CMC specifically denies all allegations in the Matters that any
additional disclosure was or is required.
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1. The first full paragraph on page 60 of the Definitive Proxy Statement under
the heading "The Merger-Opinion of CMC's Financial Advisor-Implied Premium and
Multiple Analysis" is amended and restated as follows:
In addition, Goldman Sachs calculated an implied equity value for CMC by
multiplying the implied merger consideration value by 29.1 million, the number
of fully diluted outstanding shares of CMC as provided by CMC's senior
management. Goldman Sachs then calculated an enterprise value for CMC by adding
$754 million to the implied equity value calculated for CMC, i.e., the net debt
of CMC as of September 30, 2021 as provided to Goldman Sachs by CMC's senior
management based on the latest Form 10-K of CMC for the 2021 fiscal year.
2. The third full paragraph on page 60 of the Definitive Proxy Statement under
the heading "The Merger-Opinion of CMC's Financial Advisor-Illustrative
Discounted Cash Flow Analysis" is amended and restated as follows:
Illustrative Discounted Cash Flow Analysis. Using the CMC prospective financial
information, Goldman Sachs performed an illustrative discounted cash flow
analysis on CMC. Using discount rates ranging from 9.50% to 11.50%, reflecting
estimates of CMC's weighted average cost of capital, Goldman Sachs discounted to
present value as of September 30, 2021 (1) estimates of unlevered free cash flow
for CMC for the years 2022 through 2026 as reflected in the CMC prospective
financial information and (2) a range of illustrative terminal values for CMC,
which were calculated by applying illustrative perpetuity growth rates ranging
from 3.00% to 4.00% to a terminal year estimate of the free cash flow to be
generated by CMC, as reflected in the CMC prospective financial information
(which analysis implied exit terminal year EBITDA multiples ranging from 8.8x to
13.6x). Goldman Sachs derived such discount rates by application of the capital
asset pricing model, which is referred to as CAPM, which requires certain
company-specific inputs, including the company's target capital structure
weightings, the cost of long-term debt, after-tax yield on permanent excess
cash, if any, future applicable marginal cash tax rate and a beta for the
company, as well as certain financial metrics for the United States financial
markets generally. The range of perpetuity growth rates was estimated by Goldman
Sachs utilizing its professional judgment and experience, taking into account
the CMC prospective financial information and market expectations regarding
long-term real growth of gross domestic product and inflation. Goldman Sachs
derived ranges of illustrative enterprise values for CMC by adding the ranges of
present values it derived above. Goldman Sachs then subtracted $754 million from
the range of illustrative enterprise values it derived for CMC, i.e., the net
debt of CMC as of September 30, 2021 as provided to Goldman Sachs by CMC's
senior management based on the latest Form 10-K of CMC for the 2021 fiscal year,
to derive a range of illustrative equity values for CMC. Goldman Sachs then
divided the range of illustrative equity values it derived by 29.1 million, the
number of fully diluted outstanding shares of CMC, as provided by CMC's senior
management, to derive a range of illustrative present values per share of CMC
common stock ranging from $133 to $215, rounded to the nearest dollar.
3. The last paragraph on page 60 and continuing onto page 61 of the Definitive
Proxy Statement under the heading "The Merger-Opinion of CMC's Financial
Advisor-Illustrative Present Value of Future Share Price Analysis" is amended
and restated as follows:
Illustrative Present Value of Future Share Price Analysis. Goldman Sachs
performed an illustrative analysis of the implied present value of an
illustrative future value per share of CMC common stock. For this analysis,
Goldman Sachs used the CMC prospective financial information to calculate the
illustrative enterprise values for CMC at the end of each fiscal year ending
September 30 for fiscal years 2021 to 2023 by multiplying the estimated the next
twelve months, which is referred to as NTM, Adjusted EBITDA as of such dates, as
reflected in the CMC prospective financial information by illustrative NTM
enterprise value to EBITDA multiples of 12.0x to 15.00x. The illustrative
multiple range was derived by Goldman Sachs utilizing its professional judgment
and experience, taking into account current and historical trading data and the
current and historical NTM enterprise value to EBITDA multiples for CMC. Goldman
Sachs then subtracted $754 million, the assumed amount of net debt, per the CMC
prospective financial information as of the relevant fiscal year-end, per the
CMC prospective financial information, from such enterprise values in order to
calculate the implied future equity values. The implied future equity values in
turn were divided by 29.1 million, the projected year-end fully diluted shares
of CMC common stock outstanding per the CMC prospective financial information.
Goldman Sachs then calculated the present values of each implied future value
per share of CMC common stock by discounting such implied future value per share
of CMC common stock to September 30, 2021. Goldman Sachs then added to such
amounts the cumulative present value of dividends per share expected to be paid
over the applicable period, per the CMC prospective financial information,
calculated by discounting the future values of such dividends per share to
September 30, 2021. For the purpose of discounting, Goldman Sachs used a
discount rate of 11.50%, reflecting Goldman Sachs' estimate of CMC's cost of
equity. Goldman Sachs derived such discount rate by application of the CAPM,
which requires certain company-specific inputs, including a beta for CMC, as
well as certain financial metrics for the United States financial markets
generally. Goldman Sachs determined to apply CAPM based on its professional
judgment and experience. This analysis resulted in a range of implied present
values per share of CMC common stock of $131 to $216 per share, rounded to the
nearest dollar.
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4. The last paragraph on page 61 of the Definitive Proxy Statement under the
heading "The Merger-Opinion of CMC's Financial Advisor-Selected Precedent
Transactions Multiples Analysis" is amended and restated as follows:
Based on Goldman Sachs' analyses of the various transactions and its
professional judgment, Goldman Sachs applied a reference range of EV/LTM EBITDA
multiples of 10.0x (reflecting the minimum EV/LTM EBITDA multiple in the
transactions referenced above) to 22.3x (reflecting the maximum EV/LTM EBITDA
multiple in the transactions referenced above) to CMC's fiscal year 2021
adjusted EBITDA to derive a range of implied enterprise values for CMC. Goldman
Sachs then subtracted $754 million from the range of illustrative enterprise
values it derived for CMC, i.e., the net debt of CMC as of September 30, 2021,
to derive a range of illustrative equity values for CMC. Goldman Sachs divided
the results by 29.1 million, the number of fully diluted outstanding shares of
CMC common stock, as provided by CMC's senior management, to derive a range of
implied values per share of CMC common stock of $100 to $255, rounded to the
nearest dollar.
5. The last paragraph on page 61 and continuing onto page 62 of the Definitive
Proxy Statement under the heading "The Merger-Opinion of CMC's Financial
Advisor-Premia Analysis" is amended and restated as follows:
Goldman Sachs reviewed and analyzed, using publicly available information, the
acquisition premia for 210 transactions announced during the time period from
2012 through 2021 (year to date) involving a U.S. public company as the target
where the disclosed enterprise values for the transaction ranged between $2.5
billion and $7.5 billion, with greater than 50% cash consideration. For the
entire period, using publicly available information, Goldman Sachs calculated
the median, 25th percentile and 75th percentile premiums of the price paid in
the transactions relative to the target's stock price four weeks before
announcement of the transaction. This analysis indicated a 25th percentile
premium of 20.2%, a median premium of 33.9%, and 75th percentile premium of
50.3% across the period. Using this analysis, Goldman Sachs applied a reference
range of illustrative premiums of 20.2% to 50.3% to the undisturbed closing
price per share of CMC common stock of $144.99 as of December 13, 2021 and
calculated a range of implied equity values per share of CMC common stock of
$174 to $218, rounded to the nearest dollar.
6. The first table on page 64 of the Definitive Proxy Statement under the heading
"The Merger-Certain Unaudited Prospective Financial Information-CMC
Prospective Financial Information" is amended and restated as follows:
$ in millions 2022E 2023E 2024E 2025E 2026E
Revenue $ 1,301 $ 1,456 $ 1,618 $ 1,751 $ 1,865
Gross Margin $ 520 $ 619 $ 711 $ 790 $ 848
Adjusted EBITDA1 $ 380 $ 448 $ 536 $ 610 $ 661
Adjusted EBIT2 $ 225 $ 318 $ 407 $ 482 $ 539
Taxes $ (47 ) $ (68 ) $ (88 ) $ (104 ) $ (116 )
Net Operating Profit After Tax $ 178 $ 250 $ 320 $ 379 $ 423
Capital Expenditure $ (101 ) $ (93 ) $ (75 ) $ (78 ) $ (64 )
Unlevered Free Cash Flow3 $ 208 $ 257 $ 341 $ 403 $ 459
Dividends $ 55 $ 58 $ 61 $ 64 $ 68
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(1) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation,
and amortization, adjusted for one-time charges.
(2) Adjusted EBIT is defined as earnings before interest and taxes, adjusted for
one-time charges.
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(3) Unlevered free cash flow is defined as Adjusted EBITDA subtracting the impact
of cash taxes, and capital expenditures and adjusted for changes in net
working capital. Unlevered free cash flow estimates were approved for use by
Goldman Sachs in connection with performing its financial analysis and
opinion by CMC's senior management, as described in more detail in the
section entitled "The Merger-Opinion of CMC's Financial Advisor" beginning on
page 57.
* * *
Additional Information about the Merger and Where to Find It
This communication does not constitute an offer to buy or sell or the
solicitation of an offer to buy or sell any securities or a solicitation of any
vote or approval. This communication relates to a proposed business combination
between Entegris and CMC. In connection with the proposed transaction, Entegris
filed with the Securities and Exchange Commission (the "SEC") a registration
statement on Form S-4 (the "Registration Statement") that included a proxy
statement of CMC and that also constitutes a prospectus of Entegris. Each of
Entegris and CMC may also file other relevant documents with the SEC regarding
the proposed transaction. This document is not a substitute for the proxy
statement/prospectus or Registration Statement or any other document that
Entegris or CMC may file with the SEC. The Registration Statement on Form S-4
was declared effective by the SEC on January 28, 2022 and CMC commenced mailing
of the definitive proxy statement/prospectus to its stockholders on or about
January 28, 2022. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE
REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY
BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE
DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will
be able to obtain free copies of these documents and other documents containing
important information about Entegris and CMC, through the website maintained by
the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by
Entegris are available free of charge on Entegris' website at
http://entegris.com or by contacting Entegris' Investor Relations Department by
email at irelations@entegris.com or by phone at +1 978-436-6500. Copies of the
documents filed with the SEC by CMC are available free of charge on CMC's
website at www.cmcmaterials.com/investors or by contacting CMC's Investor
Relations Department by email at investors@cmcmaterials.com by phone at +1
630-499-2600.
Participants in the Solicitation
Entegris, CMC and certain of their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies in respect of
the proposed transaction. Information about the directors and executive officers
of Entegris is set forth in Entegris' in the definitive proxy
statement/prospectus included in the Registration Statement, and Entegris'
Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which
was filed with the SEC on February 4, 2022. Information about the directors and
executive officers of CMC is set forth in the definitive proxy
statement/prospectus included in the Registration Statement, and CMC's Annual
Report on Form 10-K for the fiscal year ended September 30, 2021, which was
filed with the SEC on November 12, 2021 and amended by the Form 10-K/A filed
with the SEC on January 19, 2022. Other information regarding the participants
in the proxy solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in other
relevant materials to be filed with the SEC regarding the proposed transaction
when such materials become available. Investors should read the Registration
Statement and the proxy statement/prospectus carefully before making any voting
or investment decisions. You may obtain free copies of these documents from
Entegris or CMC using the sources indicated above.
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Cautionary Note on Forward Looking Statements
This communication contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are subject to risks and
uncertainties and are made pursuant to the safe harbor provisions of Section 27A
of the Securities Act of 1993, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. The words "believe" "continue," "could,"
"expect," "anticipate," "intends," "estimate," "forecast," "project," "should,"
"may," "will," "would" or the negative thereof and similar expressions are
intended to identify such forward-looking statements. These forward-looking
statements, including statements related to anticipated results of operations,
business strategies of Entegris, CMC and the combined company, anticipated
benefits of the proposed transaction, the anticipated impact of the proposed
transaction on Entegris' and CMC's business and future financial and operating
results, the expected amount and timing of synergies from the proposed
transaction, the anticipated closing date for the proposed transaction and other
aspects of CMC's and Entegris' operations or operating results, are only
predictions and involve known and unknown risks and uncertainties, many of which
are beyond Entegris' and CMC's control, and could cause actual results to differ
materially from those indicated in such forward-looking statements. These
factors and risks include, but are not limited to, (i) weakening of global
and/or regional economic conditions, generally or specifically in the
semiconductor industry, which could decrease the demand for Entegris' and CMC's
products and solutions; (ii) the parties' ability to meet rapid demand shifts;
(iii) the parties' ability to continue technological innovation and introduce
new products to meet customers' rapidly changing requirements; (iv) Entegris'
and CMC's ability to protect and enforce intellectual property rights; (v)
operational, political and legal risks of Entegris' and CMC's international
operations; (vi) the increasing complexity of certain manufacturing processes;
(vii) raw material shortages, supply and labor constraints and price increases;
(viii) changes in government regulations of the countries in which Entegris and
CMC operate; (ix) the fluctuation of currency exchange rates; (x) fluctuations
in the market price of Entegris' stock; (xi) the level of, and obligations
associated with, Entegris' and CMC's indebtedness; (xii) the impact of public
health crises, such as pandemics (including coronavirus (COVID-19)) and
epidemics and any related company or government policies and actions to protect
the health and safety of individuals or government policies or actions to
maintain the functioning of national or global economies and markets; and (xiii)
other risk factors and additional information. In addition, risks that could
cause actual results to differ from forward-looking statements include: the
inherent uncertainty associated with financial or other projections; the prompt
and effective integration of Entegris' businesses and the ability to achieve the
anticipated synergies and value-creation contemplated by the proposed
transaction; the risk associated with CMC's ability to obtain the approval of
the proposed transaction by its stockholders required to consummate the proposed
transaction and the timing of the closing of the proposed transaction, including
the risk that the conditions to the transaction are not satisfied on a timely
basis or at all and the failure of the transaction to close for any other
reason; the risk that a regulatory consent or authorization that may be required
for the proposed transaction is not obtained or is obtained subject to
conditions that are not anticipated; unanticipated difficulties or expenditures
relating to the transaction, the outcome of any legal proceedings related to the
merger, the response and retention of business partners and employees as a
result of the announcement and pendency of the transaction; and the diversion of
management time on transaction-related issues. These risks, as well as other
risks related to the proposed transaction, are included in the registration
statement on Form S-4, as amended, and proxy statement/prospectus that were
filed with the SEC in connection with the proposed transaction. While the list
of factors presented here is, and the list of factors to be presented in the
registration statement on Form S-4, as amended, and proxy statement/prospectus
are, considered representative, no such list should be considered to be a
complete statement of all potential risks and uncertainties. For a more detailed
discussion of such risks and other factors, see Entegris' and CMC's filings with
the SEC, including under the heading "Risks Factors" in Item 1A of Entegris'
Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which
was filed with the SEC on February 4, 2022, and CMC's Annual Report on Form 10-K
for the fiscal year ended September 30, 2021, which was filed with the SEC on
November 12, 2021 and amended by the Form 10-K/A filed with the SEC on January
19, 2022, CMC's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2021, which was filed with the SEC on February 3, 2022, and in
other periodic filings, available on the SEC website or www.entegris.com or
www.cmcmaterials.com. Entegris and CMC assume no obligation to update any
forward-looking statements or information, which speak as of their respective
dates, to reflect events or circumstances after the date of this communication,
or to reflect the occurrence of unanticipated events, except as may be required
under applicable securities laws. Investors should not assume that any lack of
update to a previously issued "forward-looking statement" constitutes a
reaffirmation of that statement.
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