Business Context and Reporting Period
This Form 8-K Current Report, dated July 1, 2021, is filed by HC2 Holdings, Inc. (the "Company"). The filing reports the closing of a previously announced transaction involving the sale of a subsidiary and the execution of related support agreements. The Company is incorporated in Delaware and its common stock trades on the New York Stock Exchange under the symbol "HCHC."
Key Financial Metrics
This filing is a current report regarding a material definitive agreement and asset disposition; it does not contain audited or unaudited financial statements, revenue, profit, cash flow, margin, debt, or liquidity metrics for the Company. The filing references unaudited pro forma financial statements (Exhibit 99.2) that give effect to the transaction for the three-month period ended March 31, 2021, and the year ended December 31, 2020, but the specific numerical values from those statements are not included in the text of this report.
Material Changes and Transactions
- Completion of Asset Sale: On July 1, 2021, the Company closed the sale of its wholly-owned subsidiary, Continental Insurance Group, Ltd. ("Continental"), to Continental General Holdings LLC ("Purchaser").
- Related Party Transaction: The Purchaser is controlled by Michael Gorzynski, who is a director of HC2, the executive chairman and president of Continental, and the beneficial owner of approximately 6.6% of HC2's outstanding common stock.
- Support Agreements: In connection with the sale, HC2 entered into two definitive agreements with the Purchaser and Continental General Insurance Company ("CGIC"):
- HC2 Preferred Support Agreement: Requires the voting of HC2 preferred shares owned by the Purchaser/CGIC in favor of the HC2 Board's director nominees and against removal proposals, subject to transfer restrictions.
- DBM Support Agreement: Requires the voting of DBM Global Inc. ("DBM") common shares owned by the Purchaser/CGIC in favor of the DBM Board's director nominees and against removal proposals, subject to transfer restrictions.
- Term of Agreements: The Support Agreements are set to terminate on July 1, 2022, unless earlier terminated by mutual agreement.
Guidance, Outlook, and Risks
The filing does not provide specific financial guidance, forward-looking outlook, or management commentary regarding future performance. The primary risk disclosed relates to the related-party nature of the transaction with Michael Gorzynski and the resulting voting restrictions imposed on the Purchaser and CGIC regarding HC2 and DBM shares for a one-year period. The filing notes that the summary of agreements is qualified by reference to the full text of the Stock Purchase Agreement and Support Agreements filed as exhibits.
Investor Verification Checklist
- Review Exhibit 99.2 (Unaudited Pro Forma Financial Information) to understand the specific financial impact of the Continental Sale on HC2's balance sheet and operations.
- Examine Exhibit 2.1 (Stock Purchase Agreement) for details on the purchase price, payment terms, and any earn-out provisions not detailed in the summary.
- Verify the specific terms of the Support Agreements (Exhibits 10.1 and 10.2) to understand the extent of voting control limitations and transfer restrictions.
- Confirm the status of Michael Gorzynski's beneficial ownership and any potential conflicts of interest arising from his dual role as a HC2 director and controller of the Purchaser.