Business Context and Reporting Period
This Form 8-K Current Report, dated October 16, 2020, is filed by Compass Diversified Holdings (CODI) and Compass Group Diversified Holdings LLC. The filing announces the closing of a previously announced acquisition of BOA Technology, Inc. and its subsidiaries. CODI acquires and manages small to middle-market businesses in the ordinary course of its business.
Key Financial Metrics and Transaction Details
- Purchase Price: Approximately $454 million (before working capital and certain other adjustments).
- Funding Sources: Cash on balance sheet and a draw on CODI's revolving credit facility of approximately $300 million.
- Ownership Structure: CODI directly owns approximately 82% of BOA Holdings, which indirectly owns all equity interests of BOA Technology. Certain minority stockholders of BOA contributed shares in exchange for BOA Holdings common stock (Rollover Shares).
- New Debt Facility: A credit facility was provided to BOA Technology, Inc. and BOA with an initial outstanding amount of approximately $121 million, consisting of a secured revolving loan commitment and a secured term loan.
- Collateral: Loans are guaranteed by BOA Holdings and Buyer and secured by substantially all assets and properties of the entities involved.
Material Changes
The primary material change is the addition of BOA Technology as a wholly-owned subsidiary of CODI. This transaction increases CODI's portfolio of managed businesses and alters its capital structure through the utilization of existing cash reserves, a draw on its revolving credit facility, and the establishment of a new $121 million credit facility for the acquired entity.
Guidance, Outlook, and Risks
The filing does not provide specific forward-looking guidance, revenue projections, or margin outlooks for the combined entity. Management commentary indicates that the terms of the new loans are considered fair and reasonable given the leverage and risk profile of BOA. The filing notes that historical financial statements and pro forma financial information for the transaction will be filed in an amendment to this report no later than 71 calendar days after the due date.
Investor Verification Checklist
- Verify the final purchase price after working capital and other adjustments are calculated.
- Review the upcoming amendment to this 8-K for historical financial statements and pro forma financial information regarding BOA Technology.
- Assess the impact of the $300 million draw on CODI's revolving credit facility on overall liquidity and debt covenants.
- Examine the specific terms of the $121 million BOA Credit Agreement, including interest rates and maturity dates.
- Confirm the integration plan and expected synergies between CODI and BOA Technology.