SEC Form 8-K Summary
Registrant: Live Oak Acquisition Corp. II (LOKB), in connection with its proposed business combination with Navitas Semiconductor Limited and Navitas Semiconductor Ireland, LLC. Report date: October 6, 2021; filed October 7, 2021. This filing is transaction-related and does not provide current operating results for Navitas.
Business Context and Transaction Status
- LOKB, Merger Sub and Navitas entered into a business combination agreement under which Navitas would become a wholly owned subsidiary of LOKB.
- LOKB entered into additional subscription agreements for 1.8 million Class A shares at $10.00 per share, generating $18.0 million of additional PIPE commitments.
- Total PIPE financing increased to 17.3 million shares and $173.0 million, including the previously announced $145.0 million signing PIPE and $10.0 million initial additional PIPE.
- The PIPE closing is expected to occur substantially concurrently with the business combination and remains contingent on completion of the transaction and customary conditions.
- LOKB determined to withdraw its Class A common stock, warrants and units from the NYSE and, subject to closing, list the post-combination company’s common stock and warrants on the Nasdaq Global Market.
- A special meeting of LOKB stockholders was scheduled for October 12, 2021.
Financial Metrics, Funding and Capitalization
- The filing does not provide Navitas revenue, profit, cash flow, operating margin or debt results for the reporting period.
- Under the amended transaction assumptions, sources of funding are $253 million from the LOKB trust account, $950 million of Navitas shareholder equity rollover and $173 million of PIPE financing, for total sources of $1.376 billion, assuming no redemptions.
- Planned uses are $950 million of equity rollover, $385 million of cash to the balance sheet and $41 million of deal expenses.
- As of June 30, 2021, the trust account held $253.1 million, subject to adjustment for interest through closing.
- The filing states that approximately $173 million of a closing funding condition is expected to be satisfied by the PIPE, leaving approximately $77 million of trust-account funds required, subject to possible waiver or modification.
- Illustrative post-closing ownership, excluding warrant exercises, is 143.925 million total shares with no redemptions, 135.125 million with 8.8 million redemptions and 126.325 million with 17.6 million redemptions.
- PIPE investors are expected to hold 17.3 million shares, representing approximately 12.0%, 12.8% or 13.7% of shares in those three scenarios, respectively.
- Up to 10 million additional earnout shares may be issued to eligible Navitas equityholders based on stock-price targets of $12.50, $17.00 and $20.00.
Material Changes Versus Prior Disclosure
- PIPE commitments increased from 15.5 million shares and $155 million to 17.3 million shares and $173 million.
- The additional PIPE increased the number of shares issued to PIPE investors by 1.8 million and increased their modeled ownership percentages.
- LOKB disclosed revised ownership, redemption, sources-and-uses and dilution scenarios in a supplement to its definitive proxy statement/prospectus.
- The filing updated certain transaction disclosures to reflect up to 122.3 million shares potentially issued in connection with the business combination and PIPE, compared with the previously referenced 15.5 million shares for the PIPE component.
Forward Purchase Agreement and Other Unusual Items
- LOKB entered into an OTC prepaid forward transaction with ACM ARRT VII A LLC. The seller intends, but is not obligated, to acquire shares from redeeming holders and waive redemption rights for those shares.
- At maturity, two years after the transaction’s effective date, the seller is expected to transfer up to 3 million shares to LOKB at a price based on the applicable redemption price. LOKB will prepay the purchase price from trust-account funds after the business combination closes.
- The seller may sell shares and terminate the forward transaction for the corresponding amount, with repayment of the related prepayment amount. The seller’s obligations are secured by liens on sale proceeds and a controlled deposit account.
- If the seller cannot acquire 3 million subject shares, the sponsor may be required to transfer shares equal to 2.0% of the shortfall, subject to stated restrictions.
- The forward arrangement may reduce the number of public-share redemptions and could affect perceptions of the transaction and the post-combination trading market.
- The PIPE securities are to be issued under the Securities Act Section 4(a)(2) exemption. LOKB agreed to file a resale registration statement within 30 days after closing and use commercially reasonable efforts to make it effective promptly.
Outlook, Risks and Contingencies
- Completion remains subject to stockholder approval, satisfaction or waiver of closing conditions, redemption levels and other transaction requirements.
- High redemptions could reduce trust-account cash, public float and market liquidity, increase ownership concentration and potentially affect exchange-listing compliance.
- Potential dilution may result from PIPE shares, sponsor shares, warrants, replacement equity awards and up to 10 million earnout shares.
- Management identified risks involving customer retention and expansion, demand in end markets, revenue forecasting, customer diversification, personnel retention, tariffs and trade policy, COVID-19, government contracting compliance, regulation, intellectual property, competition and transaction-related litigation or costs.
- The filing cautions that projected financial information, expected transaction benefits and future operating performance are uncertain and may differ materially from expectations.
Investor Verification Points
- Verify whether the business combination and PIPE actually closed, the final redemption level and the final amount remaining in the trust account.
- Confirm the final share count, ownership percentages, earnout terms and dilution from warrants, options and other equity instruments.
- Review the full Forward Purchase Agreement, including the prepayment mechanics, maturity settlement, termination provisions and sponsor backstop obligations.
- Confirm the post-combination trading symbol, exchange listing and effectiveness of the PIPE resale registration statement.
- Review Navitas’s subsequent periodic filings for actual revenue, profitability, cash flow, liquidity, debt, margins and operating guidance, which are not presented in this 8-K.