Business Context and Reporting Period
This Form 8-K, dated March 4, 2021, reports that Sustainable Opportunities Acquisition Corp. (SOAC), a Cayman Islands exempted company and special purpose acquisition company (SPAC), has entered into a definitive Business Combination Agreement with DeepGreen Metals Inc. (DeepGreen), a British Columbia-based company focused on deep-sea mining of polymetallic nodules. The transaction involves SOAC migrating to British Columbia and acquiring DeepGreen, with the combined entity expected to close in the second quarter of 2021.
Key Financial Metrics and Transaction Terms
- Implied Equity Value: The transaction values DeepGreen at an implied equity value of $2.25 billion.
- PIPE Financing: SOAC secured commitments from institutional and accredited investors to purchase 33,030,000 shares at $10.00 per share, generating aggregate gross proceeds of $330,300,000.
- Minimum Cash Requirement: A closing condition requires aggregate cash proceeds from SOAC's trust account and the PIPE Financing to equal no less than $250,000,000 after redemptions and transaction expenses.
- Consideration Structure: DeepGreen shareholders will receive SOAC Common Shares and various classes of "Company Earnout Shares" (Classes A through H). The Sponsor will exchange 10% of its post-continuance shares for "Sponsor Earnout Shares" (Class I) and Class J Special Shares.
- Net Tangible Assets: SOAC must maintain at least $5,000,001 of net tangible assets post-closing to satisfy NYSE listing requirements.
Material Changes and Transaction Mechanics
The filing details a significant structural change for SOAC, transitioning from a SPAC to an operating company in the battery metals sector. Key mechanics include:
- Continuance: SOAC will migrate from the Cayman Islands to British Columbia, Canada.
- Share Exchange: DeepGreen will become a wholly-owned subsidiary of SOAC following a share exchange and amalgamation.
- Board Composition: Post-closing, the SOAC board will consist of nine directors: eight determined by DeepGreen and one by the Sponsor.
- Option Conversion: Existing DeepGreen options will convert to options for SOAC Common Shares and Earnout Shares on the same terms.
Outlook, Risks, and Conditions
The transaction is subject to numerous closing conditions, including shareholder approvals from both SOAC and DeepGreen, regulatory approvals (including the Investment Canada Act), and a final Canadian court order for the Plan of Arrangement. The filing highlights significant risks and uncertainties, including:
- Regulatory and Environmental Risks: Dependence on the International Seabed Authority (ISA) for exploitation regulations and potential government restrictions on deep-sea mining.
- Technical Feasibility: Risks associated with the commercial and technical viability of seafloor polymetallic nodule mining and processing.
- Market Risks: Volatility in battery metal prices and supply/demand dynamics.
- Termination Rights: The agreement may be terminated if not consummated by October 4, 2021, or if specific regulatory or shareholder approvals are not obtained.
Investor Verification Checklist
- Verify the final proxy statement/prospectus (Form S-4) for detailed risk factors and the definitive terms of the earnout shares.
- Confirm the status of regulatory approvals, specifically the Investment Canada Act review and the Canadian court order for the Plan of Arrangement.
- Monitor the redemption rate of SOAC shareholders to ensure the $250 million minimum cash condition is met.
- Review the technical feasibility studies and resource estimates for DeepGreen's polymetallic nodules, as these are critical to the $2.25 billion valuation.
- Check for any updates on the International Seabed Authority's exploitation regulations, which are cited as a material uncertainty.