Business Context and Reporting Period
Company: Crown Holdings, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 30, 2013
Event: Entry into a Material Definitive Agreement to acquire Mivisa Envases, S.A.U. ("Mivisa"), a leading European manufacturer of food cans and ends based in Murcia, Spain. The seller is Lata Lux Holding Parent S.à r.l., majority owned by funds managed by affiliates of The Blackstone Group L.P. and N+1 Mercapital.
Key Financial Metrics and Transaction Terms
- Enterprise Value: €1.2 billion in cash.
- Interest Payment: €5.5 million per month accrued from June 30, 2013, to the closing date.
- Financing Structure: The Company has obtained debt financing commitments from Citigroup Global Markets Inc. Options include:
- Amendment to existing credit agreement: Up to $960 million in new Term A loans and $700 million in new Term B loans.
- New senior secured credit agreement: $1.2 billion revolving credit, $1.18 billion Term A loans, €110 million Term Euro loans, and $700 million Term B loans.
- Maturity Dates: Proposed new facilities mature on the fifth anniversary of closing; Term B loans mature on the seventh anniversary.
- Break Fee: €41 million payable to the Seller if the transaction is not consummated by September 5, 2014, or if the European Commission determines the transaction is impermissible (subject to specific conditions).
Material Changes and Conditions
This filing represents a material change in the Company's capital structure and operational footprint due to the proposed acquisition. The transaction is subject to the following closing conditions:
- Approval under the European Union Merger Regulation from the European Commission.
- Approvals from antitrust regulators in other jurisdictions.
- Absence of any restraint by governmental authorities.
- Divestiture Commitments: The Company has agreed to certain divestitures related to its food can operations if necessary to obtain competition authority approval.
- Financing Condition: The closing is not subject to a financing or funding condition.
Guidance, Risks, and Contingencies
Management Commentary: The Company intends to fund the purchase price and related fees using the committed debt financing and available cash on hand. Alternative financing forms may be sought.
Risks and Contingencies:
- Regulatory Risk: Failure to obtain antitrust approvals could result in the termination of the agreement and the payment of the €41 million transaction payment.
- Termination Rights: Either party may terminate if the other breaches material obligations regarding antitrust approvals, if the European Commission deems the transaction impermissible, or by mutual agreement. Either party may also terminate after September 5, 2014, provided they are not in material breach.
- Operational Covenants: The Seller must conduct business in the ordinary course and repay the Company for any dividends or distributions ("leakage") from the Mivisa group during the interim period.
Investor Verification Checklist
- Verify the status of European Commission and other antitrust regulatory approvals.
- Confirm the final structure of the debt financing (amendment vs. new credit agreement) and associated interest rates.
- Monitor the specific assets or operations Crown Holdings may be required to divest to satisfy competition authorities.
- Track the monthly interest accrual of €5.5 million pending the closing date.
- Review the September 5, 2014, deadline for transaction consummation to assess break fee exposure.