Business Context and Reporting Period
This Form 8-K, dated September 24, 2017, reports a material definitive agreement entered into by Colfax Corporation (the "Company"). The filing details the sale of the Company's fluid handling business to CIRCOR International, Inc. ("CIRCOR").
Key Financial Metrics and Transaction Terms
The transaction involves the sale of specific subsidiaries and assets comprising the fluid handling business. The consideration structure is as follows:
- Cash Consideration: $542 million.
- Stock Consideration: 3,283,424 shares of CIRCOR common stock.
- Liabilities Assumed: CIRCOR will assume certain liabilities, including specific pension liabilities.
- Ownership Stake: The CIRCOR shares are expected to represent approximately 16% of CIRCOR's issued and outstanding shares immediately following the closing.
- Financing: CIRCOR has obtained a debt financing commitment from Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., SunTrust Robinson Humphrey, Inc., and SunTrust Bank. The obligation to consummate the transaction is not conditioned on the receipt of financing.
The filing text does not provide specific revenue, profit, cash flow, margin, or debt metrics for the Company or the divested business segment.
Material Changes and Transaction Conditions
The transaction is subject to customary closing conditions, including:
- Receipt of required antitrust approvals and expiration of waiting periods.
- Absence of any injunction or order prohibiting the transaction.
- Absence of a "Buyer Material Adverse Effect" or "Material Adverse Effect" regarding the business.
- Accuracy of representations and warranties and compliance with covenants.
- Approval of CIRCOR shares for listing on the New York Stock Exchange.
Asbestos Litigation: Certain subsidiaries involved in previously disclosed asbestos litigation will retain associated liabilities, assets, insurance policies, and rights to recovery. These will not be transferred to CIRCOR.
Termination Fee: If the Company terminates the agreement because CIRCOR fails to consummate the transaction after conditions are satisfied, CIRCOR must pay a reverse termination fee of $50 million.
Guidance, Outlook, and Stockholder Agreement
Upon closing, the Company and CIRCOR will enter into a Stockholder Agreement with the following key provisions:
- Lock-up Period: The Company is prohibited from transferring CIRCOR shares for six months following the closing, subject to customary exceptions.
- Transfer Restrictions: Transfers to CIRCOR competitors or persons owning more than 5% of CIRCOR voting shares are prohibited for the duration of the agreement. Daily transfer limits apply.
- Voting Rights: The Company must vote shares proportionally consistent with other unaffiliated CIRCOR stockholders while owning at least 5% of CIRCOR.
- Registration Rights: CIRCOR must file a shelf registration statement within 90 days of closing to permit resale. The Company has rights to require up to three underwritten offerings in any twelve-month period after the lock-up expires.
The filing includes a standard cautionary note regarding forward-looking statements, noting that actual results may differ materially due to risks detailed in the Company's 2016 Annual Report on Form 10-K.
Investor Verification Checklist
- Verify the final purchase price adjustments and the exact closing date of the transaction.
- Confirm the status of required antitrust and regulatory approvals.
- Review the specific scope of liabilities retained by the Company regarding asbestos litigation.
- Monitor the effectiveness of the shelf registration statement for the CIRCOR shares held by the Company.
- Assess the impact of the divestiture on the Company's remaining business segments and future liquidity.