Business Context and Reporting Period
This Form 8-K was filed by Churchill Capital Corp II, a special purpose acquisition company, with an event date of October 12, 2020 and a signature date of October 16, 2020. The filing announces definitive agreements to combine Churchill with Skillsoft and Global Knowledge, together with related financing, restructuring, governance and compensation arrangements. The filing is not a Skillsoft operating-results report.
Key Financial and Transaction Metrics
- At the Skillsoft merger closing, Churchill will redeem all issued Class C common stock for $505 million in cash plus $20 million of new second-out debt.
- The Skillsoft merger requires at least $644 million of Available Closing Date Cash and at least $5,000,001 of net tangible assets after the redemption offer.
- Prosus agreed to purchase 10 million Churchill Class A shares at $10 per share, or $100 million, at the Skillsoft closing. Prosus also received a 30-day option for up to an additional 40 million shares at $10 per share, subject to adjustments and ownership limitations.
- Rhône agreed to purchase 5 million shares at $10 per share, or $50 million, at the Global Knowledge closing, subject to a termination right.
- Lodbrok agreed to purchase 2 million shares at $10 per share, or $20 million, at the Global Knowledge closing.
- SuRo agreed to purchase 1 million shares at $10 per share, or $10 million, at the Skillsoft closing.
- Global Knowledge equity holders will receive 6 million warrants, or 5 million if the Rhône subscription is terminated. The warrants have an exercise price of $11.50 per share.
- The Global Knowledge restructuring contemplates cash and new-term-loan payments of $193.5 million to first-lien lenders and $32.5 million to second-lien lenders, with the stated alternatives of cash or new term loans for portions of those amounts. Certain other Global Knowledge debt claims are to be paid in cash in full, including accrued interest.
- Churchill engaged The Klein Group, an affiliate of its sponsor, for a $4 million fee upon completion of the Global Knowledge merger and a fee equal to 2% of qualifying PIPE financing.
- No revenue, profit, cash-flow, margin, balance-sheet, or standalone debt metrics for Skillsoft, Global Knowledge, or Churchill are reported in the filing text.
Material Changes and Transaction Structure
- Churchill entered into the Skillsoft Merger Agreement. Skillsoft will merge into Churchill, with Churchill surviving. Skillsoft shareholders will receive Churchill Class A and, in part, Class C common stock, subject to the merger agreement’s exchange ratios.
- Churchill entered into the Global Knowledge Merger Agreement. Global Knowledge will become a wholly owned subsidiary, and its equity holders will receive Churchill warrants rather than common stock. The Global Knowledge merger is conditioned on completion of the Skillsoft merger.
- Skillsoft shareholders holding approximately 62.3% of aggregate voting power agreed to support and vote for the Skillsoft merger.
- Churchill’s sponsor and directors agreed to vote in favor of the transaction, not redeem their Churchill Class A shares, waive certain additional founder-share conversion rights, and accept specified lock-up restrictions.
- Prosus may obtain board nomination rights, including at least two nominees if it owns at least 20% of Churchill’s Class A common stock after its potential second-step investment. Churchill’s sponsor retains specified board nomination rights based on its ownership level.
- Jeffrey Tarr is expected to become chief executive officer upon the Skillsoft closing. His agreement provides for a $750,000 base salary, target and maximum annual bonuses of 100% and 200% of base salary, respectively, and post-closing equity awards of 1 million options and 2 million restricted stock units.
- Additional subscription agreements dated October 13 and October 14, 2020 are included in the filing exhibits, although the principal report date is October 12, 2020.
Guidance, Outlook, Risks and Unusual Items
- The Skillsoft closing requires Churchill and Skillsoft shareholder approvals, antitrust clearance, an effective Form S-4 registration statement, NYSE listing approval, satisfaction of cash and net-tangible-asset thresholds, no material adverse effect, no specified debt default, and other customary conditions.
- The Global Knowledge closing requires completion of the Skillsoft merger, regulatory clearance, at least $50 million of pro forma available closing cash, no specified debt default, and other customary conditions.
- Both merger agreements may terminate if the transactions are not completed by June 12, 2021, subject to contractual exceptions.
- Global Knowledge entered into a restructuring support agreement with 100% of its first- and second-lien lenders. The restructuring is intended to occur concurrently with the Global Knowledge closing and is dependent on that closing.
- Global Knowledge’s merger agreement includes automatic or discretionary termination rights tied to bankruptcy, debt acceleration, lender enforcement actions, defaults under forbearance agreements, or material changes to the restructuring support agreement.
- Key risks include failure to obtain shareholder or regulatory approvals, delays or failure to close, inability to obtain sufficient financing, redemption-related dilution or cash shortfalls, substantial indebtedness, execution and integration risk, COVID-19 impacts, cybersecurity and intellectual-property risks, competition, employee retention, foreign-exchange exposure and potential litigation.
- The filing contains forward-looking statements and cautions that projections and pro forma figures, if referenced in related transaction materials, are illustrative and may not be reliable forecasts.
Investor Verification Checklist
- Verify the final merger consideration, exchange ratios, ownership dilution and treatment of Skillsoft Class C shares in the definitive proxy statement and Form S-4.
- Confirm whether all required shareholder, antitrust, SEC registration, NYSE listing, financing and debt-restructuring conditions are satisfied.
- Reconcile available closing cash with the $644 million Skillsoft threshold and the $50 million Global Knowledge pro forma cash condition after redemptions and financing.
- Confirm whether Prosus exercises its additional share option and whether Rhône completes or terminates its $50 million subscription.
- Review Skillsoft’s and Global Knowledge’s audited financial statements, debt balances, liquidity, operating performance and projections, which are not clearly provided in this filing text.
- Assess the Global Knowledge restructuring documents, lender recoveries, new debt terms and termination triggers.
- Review related-party fees, sponsor economics, lock-ups, board nomination rights and the terms of Mr. Tarr’s compensation and equity awards.