Business Context and Reporting Period
Company: Harvard Bioscience, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 22, 2018
Reporting Period: Events occurring on January 22, 2018.
Harvard Bioscience, Inc. announced a series of material transactions on January 22, 2018, including the acquisition of Data Sciences International, Inc. (DSI), the sale of its Denville Scientific subsidiary, and the restructuring of its debt facilities.
Key Financial Metrics and Transactions
- Acquisition: Entered into a definitive agreement to acquire Data Sciences International, Inc. (DSI) for approximately $70 million (subject to working capital adjustments).
- Asset Disposition: Sold substantially all assets of Denville Scientific, Inc. to Thomas Scientific, LLC for approximately $20 million, including a $3 million earn-out provision.
- Financing: Secured a commitment letter from Cerberus Business Finance, LLC for a $89 million senior secured credit facility (potentially up to $92 million). This includes a $64 million term loan and a $25 million revolving credit facility.
- Debt Repayment: Repaid the prior credit facility in full using proceeds from the Denville sale. The outstanding balance at repayment was approximately $11.95 million.
Material Changes Versus Prior Period
This filing represents a significant strategic shift rather than a standard periodic financial update. Key changes include:
- Portfolio Restructuring: The company is exiting the Denville Scientific business line while simultaneously entering the data sciences sector via the DSI acquisition.
- Capital Structure: The company is replacing its prior credit facility (Brown Brothers Harriman & Co. / Bank of America) with a new, larger facility from Cerberus to fund the DSI acquisition.
Guidance, Outlook, Risks, and Contingencies
Conditions to Closing (DSI Merger):
- Approval by holders of a majority of DSI's common stock and at least two-thirds of DSI's preferred stock.
- Dissenting shareholders must not constitute more than 8% of the aggregate pro rata share of the Merger Consideration.
- No Material Adverse Effect (MAE) must occur.
Termination Rights:
- The Merger Agreement may be terminated if the Closing does not occur by February 28, 2018 (the "Outside Date").
- Termination is also permitted for material breaches that cannot be cured by the Outside Date.
Financing Contingencies: The new $89 million facility is subject to customary closing conditions, including the consummation of the DSI Merger and the absence of a material adverse effect.
Investor Verification Checklist
- Verify the final purchase price for DSI after net working capital and customary adjustments.
- Confirm the successful approval of the Merger Agreement by DSI shareholders prior to the February 28, 2018 deadline.
- Review the pro forma financial information (Exhibit 99.2) to assess the impact of the DSI acquisition and Denville sale on leverage and liquidity.
- Monitor the status of the $3 million earn-out provision related to the Denville Scientific sale.
- Confirm the execution of loan documents for the Cerberus facility and the final terms of the financial covenants.