Filing Overview
Collier Creek Holdings, a Cayman Islands special purpose acquisition company, filed this Form 8-K on June 5, 2020, reporting its entry into a definitive business combination agreement with Utz Brands Holdings, LLC and the sellers of Utz. The transaction contemplated the creation of Utz Brands, Inc.
Business Context and Transaction Structure
- Collier Creek would domesticate from the Cayman Islands to Delaware and change its name to Utz Brands, Inc.
- The combined company would operate through an “Up-C” structure, with substantially all operating assets held by Utz and PubCo holding equity interests in Utz.
- Collier Creek would acquire interests in Utz and interests held by the sellers in exchange for cash and newly issued Class V common stock. Class V shares would have voting rights but no economic value and would be exchangeable, together with corresponding Utz Units, for Class A common stock subject to applicable restrictions.
- Transaction proceeds were expected to fund transaction expenses and reduce existing indebtedness.
- At closing, PubCo would enter into a tax receivable agreement requiring it to pay the sellers 85% of realized tax savings from specified increases in tax basis and related tax benefits.
- PubCo, the sellers, the sponsor and other parties were also expected to enter into investor rights, registration rights, lockup and standstill arrangements.
Financial Metrics, Debt and Liquidity
The filing does not provide a current-period income statement, balance sheet, cash flow statement, revenue, profit, margin, leverage or liquidity figures for Utz or Collier Creek.
- Closing required trust-account proceeds, net of shareholder redemptions, plus permitted equity financing and forward-purchase proceeds, to equal at least $300 million.
- The filing states that transaction proceeds would be used in part to reduce existing indebtedness, but it does not provide the amount of debt to be repaid or the resulting leverage.
- Under the related Unit Purchase Agreement, PubCo would purchase 125,000 Series A Preferred Units and 102,060.14 Common Units from BSOF SN LLC substantially simultaneously with closing. The purchase price is not stated in the filing text.
Material Changes and Outlook
The principal reported change was the execution of the definitive business combination agreement. The filing does not report operating results or a comparable prior-period financial performance analysis.
- The sponsor and certain independent directors agreed that 2 million existing Class B ordinary shares would convert into restricted Class B common stock, consisting of 1 million Series B-1 non-voting shares and 1 million Series B-2 non-voting shares.
- These shares would be subject to performance-based conversion conditions and automatic cancellation if not converted by the tenth anniversary of closing.
- Certain seller-retained Utz Units would be subject to performance-based vesting, distribution accruals and potential cancellation if not vested by the tenth anniversary of closing.
Conditions, Risks and Unusual Items
- Closing was subject to shareholder approval, applicable antitrust waiting-period requirements, the absence of a material adverse effect and satisfaction or waiver of other customary conditions.
- The agreement could generally be terminated if closing had not occurred by October 11, 2020, subject to an extension of up to six months under specified circumstances.
- Key risks included shareholder redemptions, failure to obtain approvals or satisfy closing conditions, inability to maintain NYSE listing, litigation, transaction costs, integration and growth execution, competition, employee retention, regulatory changes and COVID-19-related effects.
- The filing included forward-looking statements regarding completion timing, anticipated transaction benefits and future performance; actual outcomes could differ materially.
- The filing was also furnished with a press release and investor presentation under Regulation FD. A registration statement containing a proxy statement and prospectus was expected to be filed later.
Investor Verification Checklist
- Verify the final transaction consideration, ownership percentages, share counts and treatment of redemptions in the subsequent proxy statement/prospectus.
- Verify the amount and terms of any equity financing, forward-purchase commitments and trust-account proceeds.
- Review Utz’s historical and projected revenue, earnings, cash flow, debt and leverage, which are not provided in this Form 8-K.
- Review the tax receivable agreement, including the projected cash-payment obligations and duration.
- Confirm whether all closing conditions were satisfied and whether the transaction closed by the applicable outside date.
- Review the final risk factors, litigation disclosures and COVID-19 impacts in subsequent SEC filings.