Business Context and Reporting Period
Company: Performance Food Group Company (PFGC)
Filing Type: Form 8-K (Current Report)
Date of Report: July 1, 2019
Event: Entry into a Material Definitive Agreement to acquire Reinhart Foodservice, L.L.C. and related subsidiaries.
Key Financial Metrics and Transaction Terms
- Transaction Consideration: $2.0 billion in cash, subject to customary adjustments for debt, cash, and net working capital.
- Financing Commitments: Total of up to $2.06 billion secured from Credit Suisse and Wells Fargo.
- Senior unsecured bridge loan facility: Up to $1.46 billion.
- Additional Pari Passu Term Loans and Additional Junior Term Loans: Up to $600 million.
- Termination Fees Payable by Company:
- $100 million if Holdings terminates due to Company material breach.
- $80 million if terminated due to failure to obtain HSR Act Clearance by the Outside Date or a final legal restraint related to HSR clearance.
Material Changes and Conditions
This filing announces a significant expansion via acquisition rather than reporting operational financial results for a specific period. The transaction is subject to several closing conditions:
- Expiration or termination of the Hart-Scott-Rodino (HSR) Act waiting period without burdensome conditions.
- Absence of legal restraints preventing consummation.
- Continuing accuracy of representations and warranties.
- Performance Condition: The Company may terminate if 2018 Adjusted EBITDA of the Acquired Companies falls below a certain level.
Outlook, Risks, and Contingencies
- Timeline: The transaction must close by April 1, 2020 (the "Outside Date"), which may be extended to July 1, 2020 under certain circumstances.
- Financing Risk: Debt financing commitments automatically terminate if initial borrowings do not occur within five business days after the Outside Date, if the agreement is terminated, or if the transaction closes without requiring the borrowings.
- Insurance: The Company has secured a customary representations and warranties insurance policy for losses arising from breaches related to the Acquired Companies and pre-closing taxes.
- Regulatory Risk: Failure to obtain HSR Act Clearance by the Outside Date triggers an $80 million termination fee.
Investor Verification Checklist
- Verify the final purchase price after customary adjustments for debt, cash, and net working capital.
- Confirm the status of the HSR Act Clearance and any potential regulatory conditions.
- Monitor the 2018 Adjusted EBITDA of Reinhart Foodservice to ensure it meets the threshold required to prevent Company termination.
- Track the closing date to ensure it occurs before the Outside Date (April 1, 2020, or extended to July 1, 2020) to avoid termination fees.
- Review the full text of the Membership Interest Purchase Agreement (Exhibit 2.1) for detailed representations and warranties.