Holley Inc. / Empower Ltd. Form 8-K Summary
Reporting date: March 11, 2021; filed March 12, 2021. The registrant was Empower Ltd., a Cayman Islands special purpose acquisition company, reporting entry into a definitive agreement to combine with Holley Intermediate Holdings, Inc. The transaction was disclosed under Items 1.01, 3.02, 7.01 and 9.01.
Business Context and Transaction Structure
- Empower agreed to acquire Holley through a two-step merger following Empower’s domestication from the Cayman Islands to Delaware.
- Empower Merger Sub I will merge with Holley, followed immediately by a merger of Holley into Empower Merger Sub II, which will survive as a wholly owned subsidiary.
- Holley’s existing stockholder will receive up to $387.5 million in cash and at least 57.75 million shares of the domesticated company’s common stock, valued at $10.00 per share solely for determining the share amount.
- The transaction requires approval by Empower shareholders and Holley’s stockholder, regulatory clearance, NYSE listing approval and satisfaction of other customary closing conditions.
Financing and Key Financial Terms
| Item | disclosed terms |
|---|---|
| PIPE financing | 24 million shares at $10.00 per share, for gross proceeds of $240 million, subject to closing conditions. |
| Forward purchase | Empower Funding LLC agreed to purchase 5 million units at $10.00 per unit, or approximately $50 million, substantially concurrent with closing, subject to conditions. |
| Minimum funding condition | Holley’s closing condition requires trust-account proceeds after redemptions, forward-purchase proceeds and PIPE proceeds to total at least $350 million. |
| Minimum net tangible assets | Empower must have at least $5.000001 million in net tangible assets at closing. |
| Founder-share earn-out | 2,187,500 shares may vest in two equal tranches if the post-closing share price reaches $13.00 and $15.00, respectively, under specified trading or transaction conditions. |
The filing does not provide clear historical or projected values for Holley’s revenue, net income, adjusted EBITDA, cash flow, margins, debt or standalone liquidity. It also does not present a prior-period comparison.
Material Changes Versus the Prior Comparable Period
- The principal material change was the execution of the merger agreement and related financing and governance arrangements; this filing is not an earnings report.
- Empower entered into a sponsor agreement, amended and restated its forward purchase agreement, entered into a lock-up agreement with Holley’s stockholder and arranged the PIPE financing.
- Holley’s stockholder agreed to transfer restrictions covering portions of the stock consideration for up to one year and six months, respectively.
Outlook, Risks and Unusual Items
- The transaction was targeted for completion by September 11, 2021, subject to a possible 30-day extension if specified shareholder proposals were approved before that date.
- Empower could terminate if Holley did not deliver PCAOB-compliant audited financial statements for the year ended December 31, 2020 by May 10, 2021.
- Other termination rights include failure to obtain shareholder approval, regulatory or legal impediments, uncured breaches and mutual consent.
- The filing references projections of future revenue, adjusted EBITDA and other metrics, but the provided filing text does not state the projection amounts.
- Key risks include transaction termination, failure to obtain financing or approvals, shareholder redemptions, inability to meet NYSE listing standards, litigation, integration and execution risks, competition, retention of customers and employees, regulatory changes, COVID-19 effects and the accuracy of Holley’s financial estimates.
- The PIPE shares were to be issued in reliance on Section 4(a)(2) and/or Regulation D and were not registered under the Securities Act at issuance.
Investor Verification Items
- Verify the final Form S-4/proxy statement, shareholder approvals and the actual closing date and terms.
- Verify Holley’s PCAOB-compliant audited 2020 financial statements and subsequent reported revenue, profitability, adjusted EBITDA, cash flow, debt and liquidity.
- Verify actual trust-account proceeds, shareholder redemptions, forward-purchase funding and PIPE funding against the $350 million minimum condition.
- Review the final share count, dilution from the 57.75 million shares, PIPE shares, warrants and founder-share earn-out.
- Review the merger agreement, sponsor agreement, lock-up agreement and financing agreements for amendments, termination rights and closing conditions.