Business Context and Reporting Period
This Form 8-K, dated September 23, 2008, reports on GHL Acquisition Corp. ("GHQ"), a special purpose acquisition company. The filing details the entry into a definitive agreement to acquire Iridium Holdings LLC ("Iridium Holdings"). Upon closing, the combined entity will be renamed "Iridium Communications Inc." and listed on NASDAQ. The transaction is expected to close in the first part of 2009, subject to regulatory and stockholder approvals.
Key Financial Metrics and Transaction Terms
The filing outlines the financial structure of the proposed acquisition rather than historical operating results for the period.
- Consideration: GHQ will acquire Iridium Holdings for 36.0 million shares of GHQ common stock and $77.1 million in cash, subject to adjustment.
- Tax Benefits Payment: GHQ may make a payment of up to $30 million to certain Sellers 90 days post-closing to compensate for tax basis step-up, contingent on a valid Section 754 election.
- Financing: Greenhill & Co. Europe Holdings Limited agreed to purchase a $22.9 million convertible subordinated promissory note. This converts to approximately 3% of outstanding GHQ shares post-transaction.
- Tender Offer: GHQ intends to launch a tender offer for its common shares at $10.50 per share, with an aggregate purchase price cap of $120 million (reduced by cash distributed to redeeming stockholders).
- Break-up Fee: A termination fee of $5.0 million is payable to Iridium Holdings if GHQ fails to obtain stockholder approval and subsequently consummates a different business combination.
Material Changes and Conditions
The primary material change is the execution of the Transaction Agreement on September 22, 2008. The closing is subject to several material conditions:
- Expiration or termination of waiting periods under the Hart-Scott-Rodino Act.
- Approval from the Federal Communications Commission and other regulatory bodies.
- Approval by GHQ stockholders, including a majority of shares issued in the initial public offering.
- A specific requirement that no more than 11,999,999 shares (30% minus one share of the IPO issuance) vote against the transaction and exercise conversion rights.
Guidance, Outlook, and Risks
Outlook: The transaction is expected to close in early 2009. Post-closing, the board will consist of two directors selected by Greenhill, five current Iridium directors, the current Iridium CEO, and two independent GHQ directors. Current Iridium officers will retain their positions.
Risks and Contingencies:
- Termination Deadlines: The agreement may be terminated if not consummated by June 29, 2009, or February 14, 2010, depending on the status of regulatory approvals.
- Regulatory Risk: Closing is contingent on FCC and other regulatory approvals.
- Stockholder Approval Risk: Failure to meet the specific voting thresholds regarding dissenting shares could prevent closing.
- Lock-up Agreements: Shares held by GHQ affiliates and Iridium owners are subject to a one-year lock-up, with limited exceptions for underwritten secondary offerings after six months.
Important Facts for Investor Verification
- Verify the final terms of the definitive proxy statement and tender offer statement once filed with the SEC.
- Confirm the status of regulatory approvals, specifically from the Federal Communications Commission.
- Monitor the voting results of GHQ stockholders to ensure the transaction does not exceed the 30% dissent threshold required for closing.
- Review the final cash consideration amount, as the $77.1 million figure is subject to adjustment.
- Check for the filing of the registration rights agreement and pledge agreements required as conditions to closing.