Business Context and Reporting Period
On October 5, 2009, Emerson Electric Co. filed a Form 8-K to report the entry into a Material Definitive Agreement. The filing details a merger agreement between Emerson, its newly-formed subsidiary Globe Acquisition Corporation, and Avocent Corporation.
Key Financial Metrics
- Transaction Value: Approximately $1.2 billion in cash.
- Offer Price: $25 per share of Avocent common stock.
- Termination Fee: $35 million payable by Avocent to Emerson under certain termination circumstances.
- Expense Reimbursement: Up to $7.5 million for transaction expenses payable by Avocent to Emerson under certain termination circumstances.
- Financing Condition: The offer is not subject to a financing condition.
Material Changes and Transaction Structure
Emerson agreed to acquire Avocent Corporation through a two-step process. First, Emerson will commence a tender offer by October 15, 2009, to purchase Avocent shares at $25 per share. The offer is conditional on a majority of outstanding shares being tendered and not withdrawn. Following the tender offer, Globe Acquisition Corporation will merge with Avocent, converting any remaining shares into the right to receive $25 per share. Avocent will become a wholly-owned subsidiary of Emerson.
The agreement includes an option for Emerson to purchase additional shares post-tender to achieve ownership of more than 90% of Avocent, facilitating a "short-form" merger under Delaware law.
Guidance, Risks, and Contingencies
- Regulatory Approvals: The transaction is subject to the expiration of the Hart-Scott-Rodino Act waiting period and requisite approvals under foreign competition laws.
- Termination Rights: The agreement contains customary termination rights for both parties. If terminated under specific circumstances, Avocent must pay the termination fee and/or reimburse expenses.
- Restrictions: Avocent has agreed not to solicit or initiate discussions regarding other acquisition proposals.
- Management Commentary: The filing states that representations and warranties were negotiated primarily to allocate risk and establish termination conditions rather than to establish facts about the parties.
Investor Verification Checklist
- Verify the final tender offer materials and related documents filed with the SEC for complete terms and conditions.
- Monitor the status of regulatory approvals, specifically under the Hart-Scott-Rodino Act and foreign competition laws.
- Confirm whether the majority ownership threshold for the tender offer is met by the offer deadline.
- Review the full Agreement and Plan of Merger (Exhibit 2.1) for detailed representations, warranties, and covenants.