Business Context and Reporting Period
This Form 8-K, dated June 29, 2021, reports that Trebia Acquisition Corp. (Trebia) entered into a Business Combination Agreement on June 28, 2021, with System1, Inc. (System1) and System1 SS Protect Holdings, Inc. (Protected). The transaction involves Trebia domesticating from the Cayman Islands to Delaware and merging with the target companies to form a combined entity operating in an "Up-C" structure. The combined company will continue operations through the subsidiaries of System1 and Protected.
Key Financial Metrics and Transaction Terms
- Consideration to Shareholders: The aggregate consideration is approximately $1.13 billion, split between cash and equity.
- Cash Consideration: Approximately $462.5 million total. This includes $212.5 million to System1 and Protected management and $250 million to certain System1 shareholders.
- Equity Consideration: Approximately $667.5 million in Trebia Class A and Class C Common Stock, valued at $10 per share.
- Debt Financing: A commitment letter from Bank of America, N.A. provides a $400 million first lien term loan (maturing in 7 years) and a $50 million revolving facility (maturing in 5 years).
- Liquidity and Backstop: Trebia holds $518 million in its trust account. This is backstopped by a $200 million subscription from Cannae Holdings, Inc. and $218 million from the Bank of America term loan to cover potential shareholder redemptions.
- Stock Structure: Post-closing, Trebia will have Class A (publicly traded), Class C (voting rights), and Class D (non-voting, convertible to Class A if VWAP exceeds $12.50 for 20 of 30 days within 5 years) common stock.
Material Changes and Agreements
- Termination of Prior Agreement: Trebia and Cannae terminated a previous Forward Purchase Agreement (FPA) dated June 5, 2020, which had obligated Cannae to purchase 7.5 million shares and 2.5 million warrants.
- Backstop Agreement: Cannae agreed to subscribe for up to $200 million of Trebia Class A Common Stock to fund redemptions.
- Sponsor Forfeitures: Sponsors agreed to forfeit 2.9 million Class B Ordinary Shares (Class B Forfeiture) and up to 1.73 million additional shares (Backstop Forfeiture) contingent on equity backstop commitments.
- Tax Receivable Agreement: Trebia will enter into an agreement to pay 85% of actual tax savings realized from the transaction to certain signatories.
Guidance, Risks, and Conditions to Closing
The filing does not provide specific financial guidance or revenue projections for the combined company. The consummation of the Business Combination is subject to several material conditions, including:
- Expiration of the HSR Act waiting period and receipt of governmental approvals.
- Trebia maintaining at least $5,000,001 in net tangible assets at closing.
- Trebia holding at least $469.25 million in cash (or $417.5 million if an Additional Seller Backstop Election is made).
- Shareholder approval and NYSE listing approval for the new Class A Common Stock.
- No Material Adverse Effect occurring with respect to System1 or Protected.
- Renewal or replacement of a specific contract with pricing not materially less favorable than existing terms, expiring no earlier than June 30, 2023.
Risks: The filing highlights risks regarding the failure to obtain regulatory or shareholder approval, the impact of COVID-19, disruption of operations, and the possibility that the transaction may be terminated if conditions are not met by March 28, 2022.
Investor Verification Checklist
- Verify the final redemption rate of Trebia shareholders to determine the actual cash outflow and equity dilution.
- Confirm the status of the Bank of America financing commitment and any conditions precedent to funding.
- Review the specific terms of the contract renewal condition (Item 1.01) to ensure no material adverse pricing changes occur.
- Monitor the performance of the Class D Common Stock conversion trigger ($12.50 VWAP) over the five-year post-closing period.
- Examine the upcoming proxy statement/prospectus for detailed financial statements of System1 and Protected, as this 8-K does not contain historical operating results.