Business Context and Reporting Period
This Form 8-K, dated January 11, 2018, reports that SS&C Technologies Holdings, Inc. ("SS&C") entered into a definitive Merger Agreement to acquire DST Systems, Inc. ("DST"). The transaction involves a merger of a wholly-owned subsidiary of SS&C with and into DST, with DST becoming a wholly-owned subsidiary of SS&C.
Key Financial Metrics and Transaction Terms
- Merger Consideration: $84.00 per share in cash for each outstanding share of DST common stock.
- Termination Fee: DST may be required to pay SS&C $165 million if DST terminates the agreement to accept a superior proposal.
- Financing Structure: SS&C intends to finance the transaction using cash on hand and new debt facilities, including:
- Senior Secured Term Loan B-1 Facility: Approximately $6,873 million (subject to reductions).
- Senior Secured Term Loan B-2 Facility: Between $1,300 million and $1,700 million.
- Senior Secured Revolving Credit Facility: $250 million.
- Senior Unsecured Notes and/or Equity Securities: Targeting $1,250 million in gross proceeds.
- Bridge Facility: Up to $1,250 million to cover any shortfall in the Notes/Equity proceeds.
- Equity Treatment: Vested DST equity awards will be cashed out; unvested awards will generally convert to SS&C equity awards.
Material Changes and Conditions
The filing does not report changes to historical financial performance metrics (revenue, profit, cash flow) as this is a transaction announcement. Material conditions precedent to closing include:
- Approval by holders of a majority of outstanding DST shares.
- Receipt of requisite regulatory approvals, including under the Hart-Scott-Rodino Act and Irish competition law.
- Accuracy of representations and warranties.
- No legal restraints preventing the consummation of the Merger.
Closing is not subject to a vote of SS&C stockholders or conditioned on the receipt of financing, though financing commitments are in place.
Guidance, Outlook, and Risks
Management anticipates earnings enhancements and synergies from the acquisition, though specific quantitative guidance is not provided in this filing. The transaction is subject to significant risks, including:
- Failure to satisfy conditions precedent or obtain regulatory approvals.
- Inability to secure financing or unfavorable financing terms.
- Integration challenges and failure to realize anticipated synergies.
- Exposure to litigation and changes in the financial services industry.
- General economic conditions and cyberattack risks.
SS&C has engaged Credit Suisse and Morgan Stanley to provide the debt facilities and assist with the issuance of notes and equity securities.
Investor Verification Checklist
- Verify the final approval status of the merger by DST shareholders.
- Monitor the status of regulatory approvals, specifically Hart-Scott-Rodino and Irish competition law clearances.
- Review the final terms of the Senior Secured Credit Facilities and the pricing of the Senior Unsecured Notes/Equity Securities.
- Assess the potential for a superior proposal that could trigger the $165 million termination fee.
- Examine the detailed integration plan and synergy targets in the attached Investor Presentation (Exhibit 99.2).