Business Context and Reporting Period
Company: Rayonier Advanced Materials Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 23, 2017
Event: Entry into a Material Definitive Agreement regarding the acquisition of Tembec Inc.
Key Financial Metrics and Transaction Terms
This filing details an amendment to the acquisition agreement for Tembec Inc. rather than standard operating financial results. Key transaction metrics include:
- Revised Cash Consideration: Increased to C$4.75 per Tembec Common Share (previously C$4.05).
- Revised Stock Consideration: Increased to 0.2542 shares of Rayonier Advanced Materials Inc. common stock per Tembec Common Share (previously 0.2302).
- Revised Proration Ratio: 66.8% of shares will receive cash consideration; 33.2% will receive stock consideration (previously 63.3% cash / 36.7% stock).
- Financing Commitment: Up to $450,000,000 in senior secured term loans committed by a syndicate of banks to fund the cash portion of the deal and refinance Tembec debt.
- Revised Closing Date: No earlier than October 16, 2017.
Note: The filing text does not provide specific values for the Company's revenue, profit, cash flow, margins, or existing debt levels outside of the new financing commitment.
Material Changes Versus Prior Period
Compared to the original Arrangement Agreement dated May 24, 2017, the following material changes were executed on July 23, 2017:
- Increased Consideration: Both the cash and stock components offered to Tembec shareholders were increased.
- Shift in Mix: The proportion of the deal paid in cash increased from 63.3% to 66.8%.
- Delayed Closing: The earliest possible closing date was pushed back to October 16, 2017.
- Shareholder Support: The Company secured voting agreements with affiliates of Oaktree Capital Management (approx. 19.6% of shares) and Restructuring Capital Associates (approx. 17.1% of shares) to vote in favor of the arrangement.
Guidance, Outlook, and Risks
Management Commentary and Outlook: The Company has unanimously approved the amendment and secured significant shareholder support to facilitate the acquisition. The financing commitment letter was amended to remain valid under the new terms.
Risks and Contingencies:
- The transaction is subject to customary closing conditions.
- The deal requires approval at a special meeting of Tembec shareholders scheduled for July 27, 2017.
- Financing is contingent on the commitments from the lending syndicate (Bank of America, JPMorgan Chase, Wells Fargo, SunTrust, and others).
Important Facts for Investor Verification
- Verify the total implied enterprise value of Tembec based on the new C$4.75 cash and 0.2542 stock consideration.
- Confirm the final approval status of the Tembec shareholder vote scheduled for July 27, 2017.
- Review the specific terms of the $450 million senior secured term loan commitment and its impact on Rayonier's leverage ratios.
- Monitor the revised closing timeline to ensure the transaction closes no earlier than October 16, 2017.