SEC Filing Summary: SYNNEX Corporation (Form 8-K)
Business Context and Reporting Period
Date of Report: June 28, 2018
Company: SYNNEX Corporation (NYSE: SNX)
Event: Entry into a Material Definitive Agreement to acquire Convergys Corporation (NYSE: CVG).
Business Overview: SYNNEX is a Fortune 500 technology distributor and business process services provider. Convergys is a global customer engagement and business process services company operating in 33 countries.
Key Financial Metrics and Transaction Terms
This filing details a merger agreement rather than periodic financial results. Key financial terms include:
- Merger Consideration: Convergys shareholders will receive $13.25 in cash and 0.1193 shares of SYNNEX stock for each Convergys share.
- Consideration Adjustment: The stock portion is subject to adjustment if SYNNEX's 20-day average trading price changes by more than 10% from a baseline prior to closing.
- Financing Facility: SYNNEX secured a commitment for a 364-day senior secured term loan (Bridge Facility) of up to $3.57 billion from JPMorgan Chase and Bank of America.
- Interest Rates: The Bridge Facility bears interest at LIBOR plus a margin ranging from 1.25% to 2.00% (increasing over time), based on SYNNEX's consolidated leverage ratio.
- Termination Fees:
- Company Termination Fee: $74 million payable by Convergys to SYNNEX under specific termination scenarios (e.g., superior proposal).
- Reverse Termination Fee: $12.35 million payable by SYNNEX to Convergys if SYNNEX shareholder approval is not obtained.
- Shareholder Approval Fee: $12.35 million payable by Convergys to SYNNEX if Convergys shareholder approval is not obtained.
Material Changes and Conditions
The filing announces a transformative change in SYNNEX's corporate structure through the acquisition of Convergys. The transaction is subject to several material conditions:
- Shareholder Approval: Requires approval by two-thirds of Convergys shareholders and a majority of SYNNEX stockholders.
- Regulatory Approvals: Includes expiration of waiting periods under the Hart-Scott-Rodino Act and approvals from antitrust authorities in Canada, the European Community, and the Philippines.
- NYSE Listing: Approval of the listing of SYNNEX stock to be issued as consideration.
- Deadlines: The agreement may be terminated if not consummated by December 28, 2018, extendable by 90 days for regulatory approvals.
Outlook, Risks, and Management Commentary
Management Commentary: The transaction is intended to combine SYNNEX's distribution and integration services with Convergys's customer engagement capabilities. Management has entered into a Voting Agreement with Convergys's CEO, CFO, and directors (holding approx. 1.19% of Convergys shares) to vote in favor of the merger.
Risks and Contingencies:
- Integration Risk: Potential failure to successfully integrate the two businesses or realize anticipated cost savings and synergies.
- Regulatory Risk: Failure to obtain necessary antitrust or regulatory approvals in the anticipated timeframe.
- Financing Risk: Reliance on the Bridge Facility and potential changes in interest rates or leverage ratios.
- Operational Disruption: Risks related to maintaining business relationships and retaining key personnel during the transition.
- Legal Risk: Potential litigation or regulatory actions related to the acquisition.
Forward-Looking Statements: The filing contains forward-looking statements regarding future financial results, integration plans, and transaction timing, which are subject to substantial uncertainties.
Investor Verification Checklist
- Verify the final terms of the Merger Agreement in the full text of Exhibit 2.1.
- Monitor the status of regulatory approvals in the U.S., Canada, EU, and the Philippines.
- Review the upcoming Joint Proxy Statement/Prospectus (Form S-4) for detailed financial projections and risk factors.
- Track SYNNEX's stock price to determine if the stock consideration adjustment mechanism is triggered.
- Confirm the outcome of shareholder votes for both SYNNEX and Convergys.
- Assess the impact of the $3.57 billion Bridge Facility on SYNNEX's future leverage and interest expense.