Business Context and Reporting Period
This Form 8-K, dated August 21, 2017, reports a material definitive agreement entered into by Avista Healthcare Public Acquisition Corp. (AHPAC), a Cayman Islands exempted company and emerging growth company. The filing details a proposed Business Combination with Envigo International Holdings, Inc. (Envigo). The transaction involves AHPAC domesticating to Delaware, followed by a series of mergers where Envigo becomes a wholly-owned subsidiary of AHPAC. The agreement was unanimously approved by the AHPAC Board of Directors on August 20, 2017.
Key Financial Metrics and Transaction Terms
The filing outlines the consideration payable to Envigo equity holders, which is subject to a fully diluted share count calculation. Key financial terms include:
- Per Share Merger Value: Based on a total cash pool of $390,133,441, subject to adjustments.
- Cash Component Cap: The aggregate cash consideration available to Envigo shareholders is limited to $100 million. If elections exceed this amount, cash payments are reduced pro rata.
- Liquidity Requirement: Closing is conditioned on AHPAC having at least $260 million in cash, net of any redemptions.
- Warrant Consideration: Envigo holders may receive warrants to purchase one-half of one share of AHPAC Common Stock. The total pool of warrants is 4,100,000.
- Stock Consideration: Holders may elect to receive AHPAC Common Stock valued at $10.00 per share, plus additional shares derived from a pool of 3,875,000 shares.
- Tax Receivable Agreement: AHPAC will pay 85% of U.S. federal, state, local, and U.K. cash tax savings realized from net operating losses and imputed interest deductions to pre-closing Envigo shareholders.
The filing does not provide specific revenue, profit, cash flow, or margin data for either company, as this is a transaction announcement rather than a periodic financial report.
Material Changes and Transaction Structure
The primary material change is the entry into the Transaction Agreement, which fundamentally alters the corporate structure of AHPAC and Envigo. The transaction structure includes:
- Domestication: AHPAC will move from the Cayman Islands to Delaware.
- First Merger: AHPAC's subsidiary (Merger Sub) merges with Envigo; Envigo survives as a subsidiary of AHPAC.
- Second Merger: The surviving Envigo entity merges into another AHPAC subsidiary (NewCo); NewCo survives.
- Shareholder Election: Envigo shareholders can choose between a cash-heavy option (subject to the $100M cap) or a stock-heavy option involving AHPAC shares and warrants.
- Private Placement Repurchase: The Parent Sponsor will surrender 3,875,000 Class B shares, and AHPAC will repurchase 4,100,000 Private Placement Warrants for $0.50 per warrant.
Guidance, Outlook, Risks, and Contingencies
Outlook and Listing: AHPAC Common Stock and Warrants are expected to list on the NASDAQ Capital Market upon consummation. The post-transaction board will consist of seven directors (one executive, six non-executive).
Conditions to Closing: The transaction is contingent upon:
- Approval by AHPAC shareholders.
- Expiration or termination of the HSR Act waiting period.
- Availability of at least $260 million in cash at AHPAC net of redemptions.
- Obtaining necessary governmental approvals.
Termination Rights: The agreement may be terminated by mutual consent or if the Business Combination is not consummated by January 31, 2018, unless the delay is due to a breach by the terminating party.
Risks: The filing includes standard forward-looking statement disclaimers. Risks include failure to obtain shareholder approval, inability to meet listing standards, disruption of Envigo's operations, and the possibility that the combined company may not achieve anticipated benefits due to competition or management retention issues.
Important Facts for Investor Verification
- Shareholder Approval: Verify the outcome of the AHPAC shareholder vote required to approve the Business Combination.
- Redemption Levels: Monitor the number of AHPAC shareholder redemptions to ensure the $260 million cash condition is met.
- Proxy Statement: Review the definitive proxy statement for detailed financial projections, risk factors, and the exact calculation of the fully diluted share count which determines the per-share value.
- Cash Cap Impact: Assess the likelihood that the $100 million cash component cap will be triggered, which would force pro-rata reductions in cash payments to Envigo shareholders.
- Regulatory Approval: Confirm the status of HSR Act waiting periods and any other required governmental clearances.