Business Context and Reporting Period
This Form 8-K, dated January 21, 2019, reports that Thunder Bridge Acquisition, Ltd. (a Cayman Islands exempted company) entered into an Agreement and Plan of Merger with Hawk Parent Holdings, LLC ("Repay"). Upon completion, Thunder Bridge will domesticate to a Delaware corporation, merge with Repay, and change its name to "Repay Holdings Corporation." The transaction involves a business combination between a Special Purpose Acquisition Company (SPAC) and Repay, a provider of electronic payment processing services.
Key Financial Metrics and Transaction Structure
- Total Merger Consideration: $600,000,000, subject to adjustments.
- Consideration Mix: Paid in a combination of cash ("Cash Consideration") and Post-Merger Repay Units ("Unit Consideration"), which are exchangeable one-for-one for Class A common stock.
- Required Cash Consideration: The agreement mandates a minimum cash payment of approximately $283,801,405 (calculated as $300 million less specific escrow and representative amounts).
- Unit Valuation: Post-Merger Repay Units are valued at $10.00 per unit.
- Debt Financing: The parties are seeking debt financing consisting of a $170.0 million senior secured term loan and a $20.0 million senior secured revolving credit facility.
- Debt Cap Condition: Closing is conditioned on the post-merger indebtedness not exceeding $210,000,000.
- Net Tangible Assets: The combined company must have net tangible assets of at least $5,000,001 after closing and redemptions.
Material Changes and Transaction Mechanics
The filing details a significant structural change where Thunder Bridge shareholders will convert their shares to the new Company's Class A common stock. Repay equity holders will receive the $600 million consideration. The transaction includes specific escrow arrangements:
- Escrow Units: 60,000 Post-Merger Repay Units (valued at $600,000) will be held in escrow to cover negative post-closing adjustments.
- Cash Escrows: $14,048,595 is set aside for contingent earn-out obligations, and $150,000 for indemnity matters.
- Earn-Out Rights: Repay equity holders may receive up to 7,500,000 additional units based on the Company's stock price performance over 24 months (triggers at $12.50 and $14.00 VWAP).
- Tax Receivable Agreement: The Company will pay 100% of realized tax savings from basis increases to the TRA Participants.
Guidance, Outlook, and Risks
Management commentary is limited to the terms of the agreement and the intent to consummate the transaction. The filing includes standard forward-looking statements regarding future financial results and market opportunities, noting that actual results may differ materially.
Key Risks and Contingencies:
- Closing Conditions: The deal is contingent on shareholder approvals (both Thunder Bridge and Repay), expiration of the HSR Act waiting period, effectiveness of the Form S-4 registration statement, and Nasdaq listing approval.
- Financing Risk: While debt financing is being sought, obtaining it is not a condition to closing; however, failure to secure financing could impact the ability to meet the cash consideration requirement.
- Redemption Risk: The transaction must satisfy the net tangible asset test after accounting for any shareholder redemptions.
- Termination Date: The agreement may be terminated if the closing does not occur by June 30, 2019.
Investor Verification Checklist
- Verify the final amount of cash available in Thunder Bridge's trust account after shareholder redemptions to ensure the $283.8 million cash condition can be met.
- Confirm the final terms of the debt financing commitment from SunTrust Bank, as documentation is not yet finalized.
- Review the upcoming Form S-4 proxy statement/prospectus for detailed financial data on Repay and the pro forma combined company.
- Monitor the status of the Hart-Scott-Rodino (HSR) Act waiting period and Nasdaq listing approval.
- Assess the impact of the Tax Receivable Agreement on future cash flows and earnings.