Post Holdings, Inc. (OTCMKTS:POSTU) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
|
Entry Into a Material Definitive Agreement. |
On April18, 2017, Post Holdings, Inc. (the Company or Post),
together with its newly organized subsidiary, Westminster
Acquisition Limited, a company registered in England and Wales
(the Buyer), entered into an Agreement for the Sale and Purchase
of the Entire Issued Share Capital of Latimer Newco 2 Limited
(the Purchase Agreement) with the shareholders (the Sellers) of
Latimer Newco 2 Limited, a company registered in England and
Wales (Latimer). Subject to the terms and conditions of the
Purchase Agreement, the Buyer will acquire all of the issued
share capital of Latimer and its direct and indirect subsidiaries
(collectively the Group). Post has guaranteed the obligations of
the Buyer under the Purchase Agreement.
The Group is a United Kingdom (UK) based packaged food company
that primarily produces ready-to-eat (RTE) cereal products
spanning branded and private label.
The aggregate purchase price payable by the Buyer to the Purchase
Agreement is approximately 1.4billion on a cash free, debt free
basis, subject to certain adjustments as described in the
Purchase Agreement.
The closing of the acquisition is subject only to the expiration
of applicable waiting periods under U.S. antitrust laws, the
receipt of applicable approvals from the Competition Authority of
Kenya (and in the event that Kenyan approval is delayed under the
circumstances set forth in the Purchase Agreement, the Kenyan
antitrust condition shall be deemed satisfied provided that the
shares in the Kenyan entity of the Group remain with the Sellers
until such time as the Kenyan approval is received), and the
receipt by Post of certain audited financial statements for the
Group as described in the Purchase Agreement.
to the Purchase Agreement, the closing of the acquisition will
occur on July3, 2017 or, if later, on the first day of Latimers
fiscal month immediately following the satisfaction or waiver of
the last of the applicable closing conditions (with either party
having the right under certain circumstances to delay the closing
up to 3 business days). Under certain circumstances described in
the Purchase Agreement following satisfaction of the closing
conditions and prior to the closing, the Buyer will deposit into
escrow a portion of the purchase price equal to 150million, which
amount will be applied towards the purchase price in the event
the acquisition is completed. In the event that the Sellers
validly terminate the Purchase Agreement in accordance with its
terms or if the closing of the acquisition does not occur as a
result of the Buyer otherwise being in material breach of the
Purchase Agreement, the deposit will be paid to the Sellers; in
all other circumstances the deposit will be returned to the
Buyer.
The Purchase Agreement will terminate automatically if the
closing conditions are not satisfied or waived on or prior to
December27, 2017. If as of December27, 2017, Post has received
the audited financial statements referred to above but one or
more of the U.S. or Kenyan antitrust conditions referred to above
has not been satisfied (other than as a result of the Sellers not
complying with their obligations in relation to such antitrust
conditions), then Post must pay the Sellers a termination fee of
30million.
to the Purchase Agreement, the Sellers have generally agreed to
cause the Group to carry on its business in the ordinary and
usual course in all material respects, and to not take certain
specified actions, in each case during the period between the
execution of the Purchase Agreement and the completion of the
acquisition.
The Purchase Agreement contains limited warranties by the
Sellers. In addition, in connection with the Purchase Agreement,
the Buyer entered into a Management Warranty Deed relating to the
sale and purchase of Latimer Newco 2 Limited (the Management
Warranty Deed) with certain of the Sellers who are members of the
Groups management (the Warrantors). The Management Warranty Deed
contains warranties made by the Warrantors with respect to the
Group, including as to the business, operations and accounts of
the Group. The Buyers recourse against the Warrantors for any
breaches of the warranties under the Management Warranty Deed is
subject to deductibles and other limitations as described in the
Management Warranty Deed, including an aggregate cap on the
liability of the Warrantors of 2.2million.
The foregoing summary of the Purchase Agreement, the Management
Warranty Deed 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 Purchase Agreement, a copy of
which is attached as Exhibit 2.1 and incorporated herein by
reference, and the full text of the Management Warranty Deed, a
copy of which is attached as Exhibit 2.2 and incorporated herein
by
reference. The Purchase Agreement and the Management Warranty
Deed have been included to provide investors with information
regarding their respective terms. They are not intended to
provide any other factual information about the parties to the
Purchase Agreement or the Management Warranty Deed or the
businesses of such parties.
Each of the Purchase Agreement and the Management Warranty Deed
contains warranties that the parties to the Purchase Agreement
and the Management Warranty Deed, respectively, made solely for
the benefit of each other. The assertions embodied in such
warranties are qualified by information contained in a
confidential disclosure letter that the parties exchanged in
connection with signing the Management Warranty Deed as well as
information otherwise disclosed to the Buyer as contemplated by
the Management Warranty Deed. In addition, such warranties (i)may
be intended not as statements of fact, but rather as a way of
allocating risk to one of the parties if those statements prove
to be inaccurate, (ii)may apply materiality standards different
from what may be viewed as material to investors and
securityholders, and (iii)were made only as of the date of the
Purchase Agreement and the Management Warranty Deed, or as of
such other date or dates as may be specified in the Purchase
Agreement and the Management Warranty Deed, as applicable.
Moreover, information concerning the subject matter of such
warranties may change after the date of the Purchase Agreement
and the Management Warranty Deed, which subsequent information
may or may not be fully reflected in Posts public disclosures.
Investors and securityholders are urged not to rely on such
warranties as characterizations of the actual state of facts or
circumstances at this time or any other time.
| Item2.02. |
Results of Operations and Financial Condition. |
In a press release dated April 18, 2017, a copy of which is
attached hereto as Exhibit 99.1, and the text of which is
incorporated by reference herein, the Company announced certain
preliminary results for its second quarter ended March31, 2017
and commented on financial guidance for fiscal 2017.
Additionally, on April18, 2017, the Company will hold a
conference call and simultaneous presentation to investors at 8
a.m. EDT (1:00 p.m. BST) to discuss the acquisition of the Group.
The investor presentation is attached hereto as Exhibit 99.2 and
is incorporated by reference herein.
The information contained in Item 2.02 and Exhibits 99.1 and 99.2
attached hereto shall not be deemed to be filed for purposes of
Section18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or otherwise subject to the liabilities of that
Section, nor shall it be deemed incorporated by reference into
any filing under the Securities Act of 1933, as amended (the
Securities Act) or the Exchange Act, except as expressly set
forth by specific reference in such filing.
In the Companys press release and investor presentation, the
Company makes reference to certain non-GAAP financial measures,
including Adjusted EBITDA and free cash flow. Management uses
certain non-GAAP measures, including Adjusted EBITDA and free
cash flow, as key metrics in the evaluation of underlying Company
and segment performance, in making financial, operating and
planning decisions, and, in part, in the determination of cash
bonuses for its executive officers and employees. Management
believes the use of non-GAAP measures, including Adjusted EBITDA
and free cash flow, provides increased transparency and assists
investors in understanding the underlying operating performance
of the Company and its segments and in the analysis of ongoing
operating trends.
The Company
considers Adjusted EBITDA as an important supplemental measure of
performance and ability to service debt. Adjusted EBITDA is often
used to assess performance because it allows comparison of
operating performance on a consistent basis across periods by
removing the effects of various items.
In the Companys
press release and investor presentation, the Company provides
Adjusted EBITDA guidance and discloses its expectations as to the
effect of the transaction described in Item 1.01 above on Posts
Adjusted EBITDA, including the expected annual contribution of
the Group, and free cash flow only on a non-GAAP basis and does
not provide a reconciliation of its forward-looking non-GAAP
guidance measures to the mostly directly comparable GAAP measures
due to the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliations,
including adjustments that could be made for non-cash
mark-to-market adjustments and cash settlements on interest rate
swaps, provision for legal settlement, transaction and
integration costs, restructuring and plant closure costs, losses
on assets held for sale, mark-to-market adjustments on commodity
hedges, and other charges reflected in the Companys
reconciliation of historic numbers, the amounts of which, based
on historical experience, could be significant.
Because the
Company discusses free cash flow in Exhibits 99.1 and 99.2 only
in relation to managements expectations of the future effect of
the transaction discussed in Item 1.01 above on this non-GAAP
measure, the Company has not, for the reasons discussed above,
provided a reconciliation of its forward-looking free cash flow
expectations to the most directly comparable GAAP
measures.
The Company
believes that Adjusted EBITDA is useful to investors in
evaluating the Companys operating performance and liquidity
because (i)the Company believes it is widely used to measure a
companys operating performance without regard to items such as
depreciation and amortization, which can vary depending upon
accounting methods and the book value of assets, (ii)it presents
a measure of corporate performance exclusive of the Companys
capital structure and the method by which the assets were
acquired, and (iii)it is a financial indicator of a companys
ability to service its debt, as the Company is required to comply
with certain covenants and limitations that are based on
variations of EBITDA in the Companys financing documents.
The calculation of
Adjusted EBITDA is not specified by GAAP, and may not be
comparable to similarly titled measures of other companies.
Adjusted EBITDA should not be considered as a substitute for, and
should only be read in conjunction with, measures of financial
performance prepared in accordance with GAAP. For additional
information, see the non-GAAP reconciliation table furnished with
this Form 8-K in each of Exhibits 99.1 and 99.2.
Preliminary
Adjusted EBITDA for the Company for the fiscal year ended
September30, 2016 and for the quarter ended March31, 2017
reflects adjustments for net interest expense, income taxes,
depreciation and amortization, as well as the following
adjustments:
| a. |
Loss on extinguishment of debt: The Company has excluded losses recorded on extinguishment of debt as such losses are inconsistent in amount and frequency. Additionally, the Company believes that these costs do not reflect expected ongoing future operating expenses and do not contribute to a meaningful evaluation of the Companys current operating performance or comparisons of the Companys operating performance to other periods. |
| b. |
Non-cash mark-to-market adjustments and cash settlements on interest rate swaps: The Company has excluded the impact of non-cash mark-to-market adjustments and cash settlements on interest rate swaps due to the inherent uncertainty and volatility associated with such amounts based on changes in assumptions with respect to estimates of fair value and economic conditions and the amount and frequency of such adjustments and settlements are not consistent. |
| c. |
Provision for legal settlement: The Company has excluded gains and losses recorded to recognize a receivable or liability associated with an anticipated resolution of certain ongoing litigation as the Company believes such gains and losses do not reflect expected ongoing future operating expenses and do not contribute to a meaningful evaluation of the Companys current operating performance or comparisons of the Companys operating performance to other periods. |
| d. |
Non-cash stock-based compensation: The Companys compensation strategy includes the use of stock-based compensation to attract and retain executives and employees by aligning their long-term compensation interests with shareholders investment interests. The Company has excluded non-cash stock-based compensation as non-cash stock-based compensation can vary significantly based on reasons such as the timing, size and nature of the awards granted and subjective assumptions which are unrelated to operational decisions and performance in any particular period and do not contribute to meaningful comparisons of the Companys operating performance to other periods. |
| e. |
Transaction costs and integration costs: The |
|
not factored into managements evaluation of potential acquisitions or its performance after completion of an acquisition or the evaluation to divest an asset. In addition, the frequency and amount of such charges varies significantly based on the size and timing of the acquisitions and divestitures and the maturities of the businesses being acquired or divested. Also, the size, complexity and/or volume of past acquisitions and divestitures, which often drive the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of future acquisitions or divestitures. By excluding these expenses, management is better able to evaluate the Companys ability to utilize its existing assets and estimate the long-term value that acquired assets will generate for the Company. Furthermore, the Company believes that the adjustments of these items more closely correlate with the sustainability of the Companys operating performance. |
| f. |
Restructuring and plant closure costs, including accelerated depreciation: The Company has excluded certain costs associated with facility closures as the amount and frequency of such adjustments are not consistent. Additionally, the Company believes that these costs do not reflect expected ongoing future operating expenses and do not contribute to a meaningful evaluation of the Companys current operating performance or comparisons of the Companys operating performance to other periods. |
| g. |
Assets held for sale: The Company has excluded adjustments recorded to adjust the carrying value of facilities and other assets classified as held for sale as such adjustments represent non-cash items and the amount and frequency of such adjustments are not consistent. Additionally, the Company believes that these adjustments do not reflect expected ongoing future operating expenses and do not contribute to a meaningful evaluation of the Companys current operating performance or comparisons of the Companys operating performance to other periods. |
| h. |
Inventory valuation adjustments on acquired businesses: The Company has excluded the impact of fair value step-up adjustments to inventory in connection with business combinations as such adjustments represent non-cash items, are not consistent in amount and frequency and are significantly impacted by the timing and size of the Companys acquisitions. |
| i. |
Mark-to-market adjustments on commodity hedges: The Company has excluded the impact of mark-to-market adjustments on commodity hedges due to the inherent uncertainty and volatility associated with such amounts based on changes in assumptions with respect to fair value estimates. Additionally, these adjustments are primarily non-cash items and the amount and frequency of such adjustments are not consistent. |
| j. |
Gain on sale of business and/or plant: The Company has excluded gains recorded on divestitures as such adjustments represent non-cash items and the amount and frequency of such adjustments are not consistent. Additionally, the Company believes that these costs do not reflect expected ongoing future operating expenses and do not contribute to a meaningful evaluation of the Companys current operating performance or comparisons of the Companys operating performance to other periods. |
| k. |
Foreign currency gains and losses on intercompany loans: The Company has excluded the impact of foreign currency fluctuations related to intercompany loans denominated in currencies other than the functional currency of the respective legal entity in evaluating Company performance to allow for more meaningful comparisons of performance to other periods. |
| Item7.01. | Regulation FD Disclosure |
In its press
release dated April 18, 2017 referenced in Item 2.02 above, Post
also announced that it had entered into the Purchase Agreement to
acquire Latimer. In addition, Post will host a conference call on
Tuesday, April18, 2017 at 8:00 a.m. EDT (1:00 p.m. BST) to
discuss the acquisition and to respond to questions.
The press release
is furnished as Exhibit 99.1, and the investor presentation is
attached hereto as Exhibit 99.2, and each are incorporated herein
by reference.
The information in
this Form 8-K under Item 7.01 and Exhibit 99.1 and Exhibit 99.2
attached hereto shall not be deemed filed for purposes of
Section18 of the Exchange Act or otherwise subject to the
liabilities of that Section, nor shall they be deemed
incorporated by reference in any filing under the Securities Act
or the Exchange Act, except as expressly set forth by specific
referencing in such filing.
| Item9.01. | Financial Statements and Exhibits. |
(d)
Exhibits
See Exhibit
Index.
Post Holdings, Inc. (OTCMKTS:POSTU) Recent Trading Information
Post Holdings, Inc. (OTCMKTS:POSTU) closed its last trading session 00.00 at 151.00 with 448 shares trading hands.
