Fortive Corp Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Fortive Corporation on June 26, 2018 (with events reported through June 29, 2018). The filing details a public offering of 5.00% Mandatory Convertible Preferred Stock, Series A, and the associated material modification to the rights of security holders.
Key Financial Metrics and Capital Structure
- Offering Size: 1,200,000 "Firm Shares" plus 180,000 "Option Shares" (fully exercised on June 27, 2018), totaling 1,380,000 shares.
- Aggregate Liquidation Preference: $1.38 billion ($1,000 per share).
- Net Proceeds: Approximately $1.34 billion after underwriting discounts, commissions, and estimated offering costs.
- Dividend Rate: 5.00% annual cumulative dividend ($50.00 per share), payable quarterly in cash or common stock at the Company's election.
- Conversion Terms: Mandatory conversion expected on July 1, 2021, into between 10.8554 and 13.2979 shares of common stock per preferred share, based on a 20-day VWAP.
Material Changes
The Company filed a Certificate of Designations with the Delaware Secretary of State on June 29, 2018, establishing the rights of the new Preferred Stock. Key changes include:
- Dividend Restrictions: No dividends or distributions may be paid on common stock or junior securities unless all accumulated and unpaid dividends on the Preferred Stock are paid or set aside.
- Liquidation Priority: Holders are entitled to $1,000 per share plus accrued dividends upon liquidation, senior to common stock but junior to debt and senior securities.
- Capital Structure: The issuance increases the Company's capital base significantly to fund strategic initiatives.
Outlook, Management Commentary, and Use of Proceeds
Management intends to use the net proceeds primarily to fund acquisition activities, specifically including the previously announced planned acquisition of Johnson & Johnson's sterilization solutions business. Proceeds may also be used for general corporate purposes, including debt repayment, working capital, and capital expenditures. The completion of the offering is not contingent upon the consummation of any specific acquisition.
Investor Verification Checklist
- Verify the full text of the Certificate of Designations (Exhibit 3.1) for specific anti-dilution adjustments and voting rights.
- Confirm the status of the Johnson & Johnson sterilization solutions acquisition and its impact on the use of proceeds.
- Review the Underwriting Agreement (Exhibit 1.1) for details on underwriting discounts and any lock-up provisions.
- Monitor the Company's ability to pay quarterly dividends in cash versus issuing common stock, which may affect dilution.
- Assess the impact of the mandatory conversion in 2021 on the Company's future earnings per share (EPS) and capital structure.