QUAKER CHEMICAL CORPORATION (NYSE:KWR) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
| Entry into a Material Definitive Agreement |
Share Purchase Agreement
On April 4, 2017, Quaker Chemical Corporation, a Pennsylvania
corporation (the Company), entered into a Share
Purchase Agreement (the Share Purchase
Agreement) with Gulf Houghton Lubricants, Ltd., an
exempted company incorporated under the laws of the Cayman
Islands (Gulf Houghton), Global Houghton Ltd.,
an exempted company incorporated under the laws of the Cayman
Islands (Global Houghton), and certain members
of the management of Global Houghton (collectively with Gulf
Houghton, the Sellers) and Gulf Houghton
Lubricants, Ltd., as agent for the Sellers (the Sellers
Representative).
Upon the terms and subject to the conditions set forth in the
Share Purchase Agreement, the Company has agreed to purchase (the
Acquisition) the entire issued and outstanding
share capital (the Shares) of Global Houghton
from the Sellers. The Shares will be sold for an aggregate
purchase price (subject to possible adjustment to the terms of
the Share Purchase Agreement) consisting of: (1) $172,500,000 in
cash; and (2) a number of shares (the Consideration
Shares) of common stock, $1.00 par value per share, of
the Company (the Common Stock) comprising 24.5%
of the Common Stock outstanding as of the closing of the
Acquisition (the Closing). However, if the
proposed Charter Amendment, as described below, is not approved
by the Companys shareholders at the Meeting (defined below), the
Company will instead issue, as Consideration Shares, shares of a
new series of voting preferred stock of the Company (the
Preferred Stock) with equivalent rights. A
portion of the cash consideration and the Consideration Shares
totaling in the aggregate $100,000,000 (the Cap)
will at the Closing be placed in escrow to secure the Sellers
representations warranties and covenants in the Share Purchase
Agreement. If the Company or Global Houghton is required, in
order to obtain the necessary regulatory approvals, to commit to
any divestiture, license, hold separate, sale or other
disposition of or with respect to the businesses, assets,
properties or product lines of the Company, Global Houghton or
any of their respective subsidiaries, representing a certain
amount of pro forma combined net sales of the Company and Global
Houghton (which commitment we refer to as a triggering
divestiture), the purchase price may be reduced subject
to the terms of the Share Purchase Agreement. In addition to the
purchase of the shares as described above, at the Closing, the
holders of certain stock options and stock appreciation rights
(SARs) of Global Houghton will surrender their
stock options and SARs for cancellation, in exchange for a
portion of the cash portion of the purchase price, as described
above.
The Company and the Sellers have each made representations and
warranties to each other that are customary for transactions of
this nature and which generally survive for a limited period.
Subject to certain exceptions, both the Companys and the Sellers
liability under the Share Purchase Agreement are subject to caps
and deductible amounts.
The Company, the Sellers and Global Haughton have agreed to
customary covenants between the date of the Share Purchase
Agreement and the Closing, including an agreement by the Sellers
that the business of Global Houghton will be conducted in the
normal course consistent with past practices, and not to take
certain actions specified in the Share Purchase Agreement. Gulf
Houghton and certain of its affiliates have each also agreed at
Closing to enter into an agreement under which they would not,
subject to certain exceptions, (a) for a period of two years from
the Closing, (i) own, manage, operate or control any business
which competes with the Company (as combined with Global Houghton
and including subsidiaries) or (ii) become a shareholder,
partner, member or owner of any Person who is engaged in the same
business as the Company (as combined with Global Houghton and
including subsidiaries) or (b) for a period of three years,
employ or solicit any employee of the Company or any of its
subsidiaries.
The issuance of the Consideration Shares at Closing is subject to
the approval by the stockholders of the Company under the rules
of the New York Stock Exchange (the Company Stockholder
Approval). The Company expects to seek the Company
Stockholder Approval at a meeting of the Companys shareholders
(the Meeting), at which the Company will also
seek shareholder approval for an amendment (the Charter
Amendment) to the Companys articles of incorporation to
provide that every holder of Common Stock is entitled to one vote
for each share of Common Stock. The Closing is subject to the
receipt of the Company Stockholder Approval, as well as
satisfaction of other conditions, including certain regulatory
approvals. The Share Purchase Agreement may be terminated by the
Company or the Sellers Representative if any of the closing
conditions applicable to the other party have not been, or if it
becomes apparent that any of such conditions will not be,
fulfilled by the date that is twelve (12) months from the date of
Share Purchase Agreement, or if triggering divestitures in excess
of a certain level of pro forma 2016 net sales of the combined
entity are required by regulatory authorities.
Shareholder Agreement
In connection with the Share Purchase Agreement, the Company has
agreed, at the Closing, to enter into the Shareholder Agreement
(the Shareholder Agreement) with Gulf Houghton,
Gulf Oil International, Ltd., and GOCL Corporation Limited (each,
a Shareholder and together, the
Shareholders) substantially in the form attached
as an exhibit to the Share Purchase Agreement.
to the terms of the Share Purchase Agreement, in connection with
the Closing, the Company will set the size of the Board of the
Company (the Board) at 12 directors (or, if the
Company and the Sellers Representative mutually agree, nine
directors). Under the terms and subject to the conditions of the
Shareholder Agreement, including qualification standards under
the Companys corporate governance policies and the requirements
of the New York Stock Exchange, the Shareholders will have the
right to nominate three individuals for election to the Board
(each a Shareholder Designee), subject to
reduction if the Shareholders ownership percentage decreases.
Each Shareholder Designee would serve on a different class of the
Board and, for so long as a Shareholder Designee serves on the
Board, a Shareholder Designee would have the right to be a member
of each Board committee.
Under the Shareholder Agreement, the Shareholders would agree to
vote all of the Consideration Shares held by them in accordance
with the recommendation of the Board with regard to each slate of
individuals nominated for election to the Board until the date
that is six months after the first day on which no Shareholder
Designee is serving on the Board (the Governance
Restricted Period). Additionally, during the Governance
Restricted Period, each Shareholder would not, except to the
extent approved by the Board, directly or indirectly, participate
in a hostile transaction or change in control proposal.
During the Governance Restricted Period, the Shareholders would
have preemptive rights if the Company offers or sells any new
securities, subject to customary exceptions. Other than to the
foregoing participation right, however, the Shareholders may not,
for a period of two years following the Closing, acquire any
equity securities of the Company.
The Consideration Shares held by each Shareholder may not be
transferred within the first six months after the Closing and
transfers thereafter are subject to certain restrictions.
However, beginning six months after the Closing, the Shareholders
would have certain demand and piggyback registration rights,
related to sales and to registration under the Securities Act of
1933.
The foregoing description of the Share Purchase Agreement and the
Shareholder Agreement, and the transactions and agreements
contemplated thereby does not purport to be complete and is
subject to and qualified in their entirety by the full text of
the Share Purchase Agreement and the Shareholder Agreement, which
are attached to this Current Report on Form 8-K as Exhibit 10.1
(with the form of Shareholder Agreement attached to the Share
Purchase Agreement as Exhibit E thereto) and incorporated herein
by reference.
| Item 3.02. | Unregistered Sales of Equity Securities. |
The description of the Share Purchase Agreement set forth in Item
1.01 above is incorporated by reference to this Item3.02. to the
terms and conditions of the Share Purchase Agreement, the Company
will issue shares of Common Stock comprising 24.5% of the Common
Stock outstanding as of the Closing of the Acquisition, or an
equivalent number of shares of Preferred Stock, as part of the
consideration for the purchase price. The Company will offer and
sell such Common Stock or such Preferred Stock in reliance on the
exemption from registration to Section 4(a)(2) of the Securities
Act and/or Rule 506 of Regulation D promulgated under the
Securities Act.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed transaction, the Company will
file a proxy statement with the Securities and Exchange
Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ
THIS PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. Investors and security holders may
obtain a free copy of the proxy statement (when available) and
other documents filed by the Company with the Commission at the
Commission’s web site at http://www.sec.gov. Free copies of the
proxy statement, once available, and of the Companys other
filings with the Commission may also be obtained from the Company
by directing a request to: VictoriaK.Gehris, Investor Relations,
610.832.4246.
The Company and its directors, executive officers and other
members of its management may solicit proxies from its
shareholders in favor of the transaction. Information concerning
such persons who may be considered participants in the
solicitation of the Companys shareholders under the rules of the
Commission will be set forth in the definitive proxy statement to
be filed by the Company with the Commission in connection with
the transaction.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
projected in such statements. A major risk is that demand for the
Company’s products and services is largely derived from the
demand for its customers’ products, which subjects the Company
to uncertainties related to downturns in a customer’s business
and unanticipated customer production shutdowns. Other major
risks and uncertainties include, but are not limited to,
significant increases in raw material costs, customer financial
stability, worldwide economic and political conditions, foreign
currency fluctuations, future terrorist attacks and other acts of
violence. Other factors, including those related to the
transaction, could also adversely affect us including, but not
limited to:
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the risk that the Company shareholders may not approve the issuance of certain consideration for the proposed transaction; |
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the risk that a required regulatory approval will not be obtained or is subject to conditions that are not anticipated or acceptable to us; |
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the potential for regulatory authorities to require divestitures in connection with the proposed transaction, which would result in a smaller than anticipated combined business; |
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the risk that a closing condition to the proposed transaction may not be satisfied in a timely manner; |
| risks associated with the financing of the transaction; |
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the occurrence of any event, change or other circumstance that could give rise to the termination of the purchase agreement; |
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potential adverse effects on the Companys business, properties or operations caused by the implementation of the transaction; |
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The Companys ability to promptly, efficiently and effectively integrate Houghtons operations into those of the Company; and |
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risks related to disruption of management time from ongoing business operations due to the proposed transaction; and, |
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the outcome of any legal proceedings that may be instituted against the companies following announcement of the merger agreement and transactions contemplated therein. |
Therefore, we caution you not to place undue reliance on our
forward-looking statements.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer
to the Risk Factors detailed in Item 1A of our 2016 Form 10-K,
and in our subsequent quarterly and other reports filed from time
to time with the Commission. We caution you not to place undue
reliance on these forward-looking statements, which are current
only as of the date on which we issued this report. We do not
intend to, and we disclaim any duty or obligation to, update or
revise any forward-looking statements to reflect new information
or future events or for any other reason
| Item 9.01. | Financial Statements and Exhibits. |
The following exhibits are included as part of this report:
|
Exhibit No. |
Description |
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| 10.1* |
Share Purchase Agreement, dated April 4, 2017, by and among Quaker Chemical Corporation, a Pennsylvania corporation, Gulf Houghton Lubricants, Ltd., an exempted company incorporated under the laws of the Cayman Islands, Global Houghton Ltd., an exempted company incorporated under the laws of the Cayman Islands, and certain members of the management of Global Houghton Ltd. and Gulf Houghton Lubricants, Ltd., as agent for the Sellers. |
* Certain exhibits and schedules have been omitted and the
Company agrees to furnish supplementally to the Securities and
Exchange Commission a copy of any omitted exhibits and schedules
upon request.
About QUAKER CHEMICAL CORPORATION (NYSE:KWR)
Quaker Chemical Corporation is engaged in providing process fluids, chemical specialties and technical expertise to a range of industries, including steel, aluminum, automotive, mining, aerospace, tube and pipe, cans and others. The Company operates through four segments: North America, the Europe; Middle East and Africa (EMEA); Asia/Pacific, and South America. The Company develops, produces and markets a range of formulated chemical specialty products. The Company’s principal products and services include rolling lubricants, corrosion preventives, metal finishing compounds, machining and grinding compounds, forming compounds, bio-lubricants, hydraulic fluids, chemical milling maskants, temporary and permanent coatings, construction products, specialty greases, die casting lubricants and programs to provide chemical management services (CMS). The Company offers CMS for various heavy industrial and manufacturing applications. QUAKER CHEMICAL CORPORATION (NYSE:KWR) Recent Trading Information
QUAKER CHEMICAL CORPORATION (NYSE:KWR) closed its last trading session up +9.82 at 138.39 with 41,948 shares trading hands.