SEC Filing Summary: SYNNEX Corporation (Form 8-K)
Business Context and Reporting Period
Date of Report: October 5, 2018
Company: SYNNEX Corporation (now operating as Concentrix Corporation following the acquisition)
Event: Completion of the acquisition of Convergys Corporation and the execution of a new credit facility to finance the transaction.
Key Financial Metrics and Transaction Details
- Acquisition Consideration: Total consideration consisted of $1.2 billion in cash and 11,510,855 shares of SYNNEX common stock.
- Per Share Consideration: Convergys shareholders received $13.25 in cash plus 0.1263 shares of SYNNEX stock per Convergys share.
- Post-Transaction Ownership: Former Convergys shareholders own approximately 22% of the outstanding SYNNEX stock.
- Outstanding Shares: Approximately 51,161,022 shares of SYNNEX stock outstanding immediately after the merger.
- Debt Financing: SYNNEX borrowed $1.45 billion under a new Credit Agreement on the closing date. The facility allows for up to $1.8 billion in aggregate term loans.
- Debt Terms: The Credit Agreement matures five years after the initial funding date. Interest rates are based on LIBOR or Prime plus an applicable margin ranging from 1.25% to 1.75% (LIBOR) or 0.25% to 0.75% (Prime).
Material Changes Versus Prior Period
This filing represents a material change in the company's capital structure and asset base due to the completion of the Convergys acquisition. The transaction significantly increased the company's debt load with the $1.45 billion initial term loan drawdown. The filing does not provide comparative revenue, profit, or cash flow metrics for the current period versus the prior period, as this is a current report on a specific event rather than a periodic financial statement.
Guidance, Outlook, Risks, and Contingencies
- Financial Covenants: The new Credit Agreement imposes strict financial covenants, including a Consolidated Leverage Ratio cap of 4.25:1.0 for the first five fiscal quarters post-merger, reducing to 4.0:1.0 thereafter. A Consolidated Interest Coverage Ratio of at least 3.50:1.0 is required.
- Use of Proceeds: Loan proceeds were used to finance the cash portion of the merger consideration, repay Convergys indebtedness, and cover transaction fees. Remaining funds are available for working capital.
- Future Borrowing: SYNNEX may borrow an additional $350 million within 90 days to repurchase or settle outstanding Convergys convertible debentures.
- Restrictions: The Credit Agreement restricts further indebtedness, asset dispositions, mergers, and stock repurchases without lender consent.
- Future Filings: Pro forma financial information and Convergys historical financial statements are expected to be filed in an amendment (Form 8-K/A) within 71 days.
Investor Verification Checklist
- Verify the final pro forma financial statements to assess the combined entity's leverage and liquidity position.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "Consolidated Leverage Ratio" and "Consolidated Interest Coverage Ratio."
- Monitor the status of the additional $350 million borrowing option for settling Convergys convertible debentures.
- Confirm the vesting schedule for Convergys equity awards granted on or after March 31, 2016, which remain unvested.
- Check for any subsequent amendments to the Merger Agreement or Credit Agreement filed as exhibits.