Business Context and Reporting Period
Company: Isos Acquisition Corporation (SPAC)
Date of Report: July 1, 2021
Event: Entry into a Material Definitive Agreement (Business Combination Agreement) with Bowlero Corp. The transaction involves Bowlero merging with and into Isos, with Isos surviving as a Delaware corporation. The closing is expected in the fourth quarter of 2021, subject to shareholder approvals and customary conditions.
Key Financial Metrics and Transaction Structure
Equity Value: $1,601,053,751.89
Consideration Structure:
- Common Stock: Bowlero shareholders may elect cash or stock. The "Per Share Merger Consideration Value" is calculated as Equity Value divided by Company Outstanding Shares. Stock consideration is 1/10th of this value per share.
- Preferred Stock: Converted to cash equal to the Series A Per Share Liquidation Preference.
- Options: Holders may elect cash, stock, or assumption by the Surviving Company based on the "Option Spread."
- Earnout Shares: Up to 20,750,000 shares issuable if the stock price hits $15.00 (10.375M shares) and $17.50 (10.375M shares) within 20 trading days over a 5-year period.
PIPE Offerings (Private Investment in Public Equity):
- Common PIPE: 15 million shares at $10.00/share for an aggregate of $150.0 million.
- Preferred PIPE: 95,000 shares of Acquiror Preferred Stock at $1,000.00/share for an aggregate of $95.0 million.
- Total PIPE Proceeds: $245.0 million.
Forward Purchase Contract: Amended to require subscribers to purchase 10 million units for $100.0 million.
Liquidity Conditions: Closing requires "Closing Acquiror Cash" to be at least $520,000,000. The company must have net tangible assets of at least $5,000,001 post-closing.
Material Changes and Agreements
Acquiror Preferred Stock Terms:
- Dividends: 5.5% per annum, accreted semi-annually.
- Conversion: Convertible to Class A Common Stock at approx. $13.00/share.
- Redemption: Mandatory repurchase upon a "Fundamental Change" at Liquidation Preference plus accrued dividends.
Stockholder Support:
- Atairos (A-B Parent LLC) agreed to a written consent for the merger and will make a Cash Election up to the cap, with the remainder in stock.
- TS (Cobalt Recreation LLC) agreed to a Stock Election for all shares.
- Sponsor and LionTree agreed to vote in favor, not redeem, waive anti-dilution rights, and lock up shares for 12 months.
Lock-Up Agreements: Existing Bowlero stockholders are locked up for 180 days or until the stock price exceeds $12.00 for 20 of 30 trading days (whichever is earlier, subject to a 90-day minimum).
Guidance, Risks, and Contingencies
Closing Conditions: The transaction is contingent on Isos and Bowlero shareholder approvals, SEC registration statement effectiveness, antitrust clearance (HSR Act), and the absence of a Material Adverse Effect.
Termination Rights: Either party may terminate if the transaction is not consummated by February 1, 2022, or if certain representations are breached and uncured within 30 days.
Risk Factors:
- Failure to close the transaction or meet the business combination deadline.
- Impact of the COVID-19 pandemic on Bowlero's operations, customer demand, and ability to access funding.
- Redemptions by Isos shareholders reducing cash below the $520 million threshold.
- General economic conditions and competition in the entertainment industry.
Management Commentary: The filing contains forward-looking statements regarding revenue growth and facility expansion but does not provide specific financial guidance for the combined entity in this document.
Investor Verification Checklist
- Verify the final "Per Share Merger Consideration Value" once the Company Outstanding Shares are finalized.
- Confirm the outcome of the Isos shareholder vote and the level of redemptions to ensure the $520 million cash condition is met.
- Review the upcoming Form S-4 proxy statement/prospectus for detailed risk factors and financial projections.
- Monitor the status of the PIPE closings and the Forward Purchase Contract execution.
- Assess the impact of the 5.5% dividend on the Acquiror Preferred Stock on the combined company's cash flow.