Business Context and Reporting Period
Company: CLARIVATE PLC
Filing Type: Form 8-K (Current Report)
Date: July 29, 2020
Event: Entry into a definitive agreement to acquire CPA Global, a global leader in intellectual property software and tech-enabled services.
Key Financial Metrics and Transaction Structure
- Consideration: Clarivate will issue up to 218,306,663 ordinary shares to Redtop Holdings Limited (Seller), representing approximately 35% pro forma fully diluted ownership.
- Financing Plan: At closing, Clarivate expects to refinance CPA Global's outstanding debt using approximately $400 million of cash on hand and $1.5 billion of new debt.
- Debt Facility: A $1.5 billion fully committed incremental term loan facility has been secured, led by Citi and Bank of America.
- Equity Issuance: Shares issued to the Seller are exempt from registration requirements under Section 4(a)(2) of the Securities Act.
Material Changes and Agreements
- Transaction Closing: Expected in the fourth quarter of 2020, subject to customary conditions including regulatory approvals and Hart-Scott-Rodino clearance.
- Board Composition: Leonard Green Partners (LGP) will receive the right to nominate two board members while holding at least 10% ownership, and one member while holding at least 5%.
- Lock-Up Periods: LGP and certain Seller owners agreed not to dispose of shares until October 1, 2021. Existing shareholders Onex and Baring agreed to a similar lock-up, with an exception allowing the sale of up to 49.6 million shares post-closing with CEO approval.
- Termination of Prior Agreements: Existing Sponsor, Shareholder, Registration Rights, and Director Nomination agreements will be terminated at closing.
Guidance, Outlook, and Risks
Outlook: Management anticipates realizing synergies from the combination, though specific financial projections are not detailed in this filing.
Risks and Contingencies:
- Closing is contingent on regulatory approvals and antitrust clearance.
- Forward-looking statements regarding the transaction and financing are subject to risks discussed in the 2019 Form 10-K and the June 19, 2020 Form 8-K.
- Actual results may differ materially due to factors outside management's control.
Investor Verification Checklist
- Verify the status of regulatory approvals and Hart-Scott-Rodino clearance required for closing.
- Confirm the final terms of the $1.5 billion incremental term loan facility at closing.
- Review the pro forma capital structure to understand the dilution impact of the 218 million new shares.
- Monitor the lock-up expiration date of October 1, 2021, for potential share sales by major shareholders.
- Assess the impact of terminating existing shareholder agreements on corporate governance.