Business Context and Reporting Period
This Form 8-K, filed on April 8, 2010, reports the completion of TTM Technologies, Inc.'s acquisition of the printed circuit board (PCB) business of Meadville Holdings Limited (the "PCB Combination"). The transaction closed on April 8, 2010, involving the purchase of four indirect wholly-owned subsidiaries of Meadville. Concurrently, TTM entered into a Registration Rights Agreement, a Shareholders Agreement, and assumed obligations under a Credit Agreement.
Key Financial Metrics and Transaction Details
- Consideration Paid: TTM issued 36,334,000 shares of common stock and paid $114,034,328 in cash to Meadville.
- Debt Financing: The acquired PCB subsidiaries entered into a Credit Agreement totaling approximately $582.5 million, consisting of:
- $350 million Term Loan (Tranche A)
- $87.5 million Revolving Credit Facility (Tranche B)
- $65 million Revolving Invoice/Trade Credit Facility (Tranche C)
- $80 million Letter of Credit Facility (Tranche D)
- Related Party Transactions: Historical annual purchases from affiliates controlled by the Tang family (SSST and GSST) totaled $47.0 million in 2009. Purchases from former Meadville laminate subsidiaries (MAF and MAG) totaled $50.2 million in 2009.
- Financial Statements: The filing states that audited financial statements of the acquired business and unaudited pro forma financial information will be filed by amendment within 71 days. No specific revenue, profit, or cash flow figures for the combined entity are provided in this text.
Material Changes and Agreements
The primary material change is the expansion of TTM's operations through the acquisition of Meadville's PCB subsidiaries. Key contractual changes include:
- Shareholders Agreement: Limits the aggregate beneficial ownership of the Principal Shareholders (Mr. Tang and affiliates) to 33% (or 39% under certain circumstances) without board approval. It includes a lock-up period prohibiting sales for 18 months following Meadville's special dividend distribution.
- Voting Rights: The Principal Shareholders may vote up to 23% of total voting power at their discretion; any excess must be voted in proportion to non-affiliate stockholders. They are entitled to nominate one director to TTM's board.
- Guarantees: TTM and its subsidiary TTM Hong Kong became guarantors for the $582.5 million Credit Agreement obligations of the PCB subsidiaries.
Guidance, Outlook, and Risks
The filing does not provide specific financial guidance or outlook for future periods. However, it outlines several risks and contingencies:
- Covenant Compliance: The Credit Agreement requires the Tang Family to maintain at least 20% ownership of TTM stock and control over 50% of the TTM Hong Kong board for the four-year term. Failure to meet financial covenants (tangible net worth, gearing ratio) or ownership thresholds could trigger default.
- Related Party Dependence: The company continues to rely on affiliates of the Tang family for the supply of laminate and prepreg materials, creating ongoing related party transaction risks.
- Regulatory Approval: The Shareholders Agreement termination is subject to the Committee on Foreign Investment in the United States (CFIUS) not objecting to change of control events.
Investor Verification Checklist
- Verify the final purchase price per share implied by the 36,334,000 shares issued plus the $114 million cash payment.
- Review the upcoming amendment to this 8-K for the pro forma financial statements to assess the impact on TTM's leverage and earnings.
- Monitor the Tang Family's shareholding percentage to ensure compliance with the 20% minimum ownership covenant in the Credit Agreement.
- Confirm the terms of the new three-year supply agreement with GSST and SSST to evaluate pricing stability compared to market rates.
- Check for any CFIUS objections regarding the Shareholders Agreement or future change of control scenarios.