Business Context and Reporting Period
Company: Eastman Kodak Company
Filing Type: Form 8-K (Current Report)
Date of Report: November 11, 2018
Event: Entry into a Material Definitive Agreement to sell the Company's flexographic packaging segment (the "Business").
Key Financial Metrics and Transaction Terms
- Purchase Price: $340 million in cash, subject to purchase price adjustments.
- Deferred Payment: $7.5 million of the purchase price may be deferred if the transfer of the China Business is delayed until after the Closing.
- Earn-Out Potential: Up to $35 million in additional cash consideration based on EBITDA targets:
- 2018: $10 million
- 2019: $10 million
- 2020: $15 million
- Prepayment: $15 million payable at Closing to an affiliate of the Company as a prepayment for future services and products under commercial agreements.
- Use of Proceeds: Expected to be used to reduce outstanding term loan debt.
Material Changes and Transaction Structure
The Company entered into a Stock and Asset Purchase Agreement with MIR Bidco SA, an investment vehicle for Montagu Private Equity LLP. The transaction involves the sale of shares of subsidiaries and holding companies, as well as assets relating to the flexographic packaging segment. The filing does not provide comparative revenue, profit, or cash flow metrics for the Business versus prior periods, as this is a transaction announcement rather than a periodic financial report.
Guidance, Outlook, and Risks
- Closing Timeline: The Company expects to close the Transaction in the first half of 2019.
- Closing Conditions: Subject to customary conditions including regulatory approvals (HSR Act, German Federal Cartel Office), absence of material adverse effects, and the existence of a fully effective representation and warranty insurance policy.
- Non-Compete: The Company agrees not to compete with the Business for five years post-Closing (three years in the UK and EU).
- Post-Closing Arrangements: Includes a transition services agreement and various supply, service, development, and license agreements.
- Risks: Potential delays in regulatory approvals, complications in carve-out activities, failure to achieve EBITDA targets for earn-out payments, and inability to retain key management or employees.
Investor Verification Checklist
- Verify the final closing date and whether the China Business transfer is deferred.
- Monitor regulatory approval status under the HSR Act and German Federal Cartel Office.
- Track the Business's EBITDA performance in 2018, 2019, and 2020 to determine earn-out eligibility.
- Confirm the actual reduction of term loan debt upon receipt of proceeds.
- Review the terms of the transition services and commercial agreements for ongoing revenue implications.