ENPRO INDUSTRIES, INC. (NYSE:NPO) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Definitive Material Agreement.
On July 19, 2019, EnPro Industries, Inc. (the “Company”) entered into a Securities Purchase Agreement dated as of July 19, 2019 (the “ Purchase Agreement”) to acquire all of the equity securities of LeanTeq LLC and LeanTeq Co., Ltd. (collectively, the “Acquired Entities”), a Taiwan-based provider of refurbishment services for critical components and assemblies used in state-of-the-art semiconductor equipment (the “Acquisition”), with the owners of the Acquired Entities (the “Sellers”) and a representative of the Sellers. The Acquisition consideration is $305 million, subject to a customary working capital adjustment and reduction for net debt. The Acquisition is subject to customary closing conditions and a Taiwan Investment Commission approval and is anticipated to close in the fourth quarter of 2019.
The Purchase Agreement contains customary representations, warranties and covenants related to the Acquired Entities, the Sellers, and the Company. In addition to customary termination provisions, it provides for a $12.2 million termination fee payable by the Company if the Company fails to consummate the transaction as a result of a failure of its acquisition financing.
The parties have agreed to indemnification obligations for losses arising from breaches of their respective representations, warranties and covenants in the Purchase Agreement and other pre-closing liabilities, subject to certain limitations. The Sellers will also enter into non-competition and non-solicitation agreements in connection with the Acquisition.
The Purchase Agreement provides that the Company will establish cash retention programs to be allocated among key managers and other employees of the Acquired Entities for retention payments post-Closing.
The Purchase Agreement provides that two Sellers who are managers of the Acquired Entities (the “Seller Managers”) will apply approximately 10% of the total transaction consideration to purchase equity interests of the Company’s subsidiary (the “Acquisition Subsidiary”) acquiring the Acquired Entities to an agreement (the “LLC Agreement”) to be entered into upon the closing of the Acquisition (the “Closing”). The Seller Managers will have certain governance and information rights and be subject to transfer restrictions. Each Seller Manager will also have the right to sell to the Company, and the Company will have the right to purchase from each Seller Manager, the Seller Manager’s equity interests in the Acquisition Subsidiary, following the third anniversary of the Closing, a change-of-control of the Acquisition Subsidiary or the Company, dissolution of the Acquisition Subsidiary, termination of employment, death or disability of the Seller Manager, and certain other circumstances such as a dispute regarding the Company’s performance of the LLC Agreement. The consideration payable in two installments in the purchase and sale arrangements is generally based upon a multiple of twelve-month adjusted EBITDA based upon certain financial metrics of the Acquisition Subsidiary, plus cash and less indebtedness of the Acquisition Subsidiary prior to the relevant installment payment, subject to certain adjustments dependent upon the circumstances of the purchase and sale.
