Business Context and Reporting Period
Company: Matson, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 11, 2014
Event: Entry into a Material Definitive Agreement to acquire Horizon Lines, Inc. ("Horizon").
On November 11, 2014, Matson Navigation Company, Inc., a wholly owned subsidiary of Matson, Inc., entered into an Agreement and Plan of Merger to acquire Horizon Lines, Inc. Simultaneously, Horizon agreed to sell its container shipping business serving Hawaii from the continental United States to The Pasha Group ("Pasha") immediately prior to the merger.
Key Financial Metrics and Transaction Terms
This filing details the terms of a proposed merger rather than periodic financial performance metrics (revenue, profit, cash flow). Key financial terms of the transaction include:
- Merger Consideration: $0.72 per share in cash for each outstanding share of Horizon Common Stock.
- Warrant Treatment: Cash equal to the Merger Consideration multiplied by the number of shares subject to the warrant.
- Equity Incentives: Restricted stock units and restricted stock convert to cash equal to the Merger Consideration. Options convert to cash equal to the excess of the Merger Consideration over the exercise price.
- Termination Fees:
- Horizon to pay Matson: $17,149,600 plus out-of-pocket expenses under specified circumstances.
- Horizon to pay Pasha: $4,950,400 plus out-of-pocket expenses if the Hawaii Precedent Transaction is terminated under specified circumstances.
- Financing: The consummation of the Merger is not subject to a financing condition.
Material Changes and Conditions
The filing does not report changes to Matson's historical financial results. The material change is the initiation of the acquisition process. The transaction is subject to the following key conditions:
- Adoption of the Merger Agreement by holders of a majority of outstanding Horizon Common Stock.
- Completion of the "Hawaii Precedent Transaction" (sale of Horizon's Hawaii business to Pasha).
- Absence of a material adverse effect on Horizon's non-Hawaii business.
- Regulatory and third-party consents.
- Fuel Condition: If Horizon's Alaska trade lane vessels use ultra-low-sulfur fuel, the net adverse financial impact must be $15 million or less for the period before closing.
Guidance, Outlook, and Risks
Management Commentary: The Boards of Directors of Matson and Horizon have approved the agreement. Horizon's Board recommends that stockholders adopt the Merger Agreement. A joint press release and investor conference call were held on November 11, 2014.
Voting Support: Security holders representing 55% of Horizon's fully diluted equity (41% of outstanding voting stock) have entered into Voting Agreements to vote in favor of the merger.
Risks and Contingencies:
- Failure to obtain necessary regulatory approvals or stockholder adoption.
- Termination of the agreement due to superior proposals or failure of closing conditions.
- Disruption of management time and business operations during integration.
- Failure to realize expected synergies.
- Competitive responses and changes in economic conditions.
Forward-Looking Statements: The filing includes a Safe Harbor statement noting that projections regarding the merger's benefits and timing are subject to significant risks and uncertainties.
Investor Verification Checklist
- Verify the final vote count of Horizon stockholders on the Merger Agreement.
- Confirm the successful completion of the Hawaii Precedent Transaction with The Pasha Group.
- Monitor regulatory approval status for both the merger and the divestiture of the Hawaii business.
- Review the definitive proxy statement to be filed by Horizon for detailed financial information and risk factors.
- Assess the financial impact of ultra-low-sulfur fuel usage on Horizon's Alaska trade lane relative to the $15 million threshold.