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 experience and business process services company operating in 33 countries.
Key Financial Metrics and Transaction Terms
This filing details the terms of a merger rather than periodic financial performance metrics (revenue, profit, cash flow) for the reporting period. Key financial terms of the transaction include:
- Merger Consideration: Convergys shareholders will receive $13.25 in cash and 0.1193 shares of SYNNEX stock for each Convergys share.
- Stock Adjustment: The stock ratio 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 by 0.25% every 90 days up to a maximum of 2.75%.
- Termination Fees:
- Company Superior Proposal: Convergys pays SYNNEX $74 million if terminated for a superior proposal.
- Shareholder Approval Failure: A fee of $12.35 million is payable by the party whose shareholders fail to approve the deal.
Material Changes and Conditions
The filing announces a material change in corporate structure via the proposed acquisition. 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: Expiration of waiting periods under the Hart-Scott-Rodino Act and antitrust laws in Canada, the European Community, and the Philippines.
- NYSE Listing: Approval for the listing of SYNNEX stock to be issued as consideration.
- Deadlines: The agreement must be consummated by December 28, 2018, extendable by 90 days for regulatory approvals.
Guidance, Outlook, and Risks
Management Commentary: The transaction is intended to combine SYNNEX's distribution and integration services with Convergys's customer engagement capabilities. Management expects the combined company to deliver value through cost savings and expanded service offerings.
Risks and Contingencies:
- Integration Risk: Failure to successfully integrate the two businesses or realize anticipated synergies.
- Regulatory Risk: Failure to obtain necessary antitrust or regulatory approvals.
- Financing Risk: Reliance on the Bridge Facility and potential changes in interest rates or leverage ratios.
- Operational Disruption: Potential disruption to business relationships and operations during the transition.
- Legal Risk: 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 approval status of the merger by both Convergys and SYNNEX shareholders.
- Monitor regulatory clearance status in the U.S., Canada, the EU, and the Philippines.
- Review the definitive Joint Proxy Statement/Prospectus (Form S-4) for detailed financial projections and risk factors.
- Confirm the final exchange ratio of SYNNEX stock, as it is subject to price adjustments prior to closing.
- Assess the impact of the $3.57 billion Bridge Facility on SYNNEX's consolidated leverage ratio and future interest expenses.