Business Context and Reporting Period
Company: Capitol Investment Corp. IV (a Cayman Islands special purpose acquisition company, or SPAC).
Date of Report: April 7, 2019.
Event: Entry into a Material Definitive Agreement (Merger Agreement) to acquire NESCO Holdings I, Inc. ("Nesco"), a leading specialty equipment rental provider for transmission, distribution, telecom, and rail industries in North America.
Transaction Structure: Capitol will domesticate as a Delaware corporation, rename itself "Nesco Holdings, Inc.," and merge with Nesco. The transaction is expected to close in the second quarter of 2019, subject to shareholder approval and other conditions.
Key Financial Metrics and Deal Terms
Consideration to Nesco Owner:
- Cash: $75,000,000 (subject to adjustment).
- Common Stock: 17,464,235 shares.
- Warrants: Warrants to purchase 2,500,000 shares of common stock.
- Contingent Value Rights: Up to 1,800,000 additional shares payable over five years if the stock price exceeds $13.00 or $16.00 per share for specified periods, or if a sale transaction occurs above those thresholds.
Financing Commitments:
- First Lien: $350 million senior secured asset-based revolving credit facility.
- Second Lien: $400 million senior secured increasing rate bridge loans (subject to conditions).
Liquidity Conditions:
- Capitol must have at least $5,000,001 of net tangible assets remaining after redemptions.
- Capitol must have at least $265 million in cash available after paying redeeming shareholders.
Historical Financials: The filing text does not provide specific revenue, profit, or cash flow figures for Nesco or Capitol. It notes that some financial data in exhibits may be non-GAAP and will be adjusted in future SEC filings.
Material Changes and Transaction Mechanics
Corporate Restructuring:
- Capitol will convert from a Cayman Islands company to a Delaware corporation.
- Outstanding Class A ordinary shares convert 1:1 to common stock.
- Outstanding Class B ordinary shares convert to common stock upon consummation.
- Existing warrants convert to warrants exercisable 30 days post-closing.
Sponsor Adjustments: Sponsors (affiliates of Mark D. Ein and L. Dyson Dryden) and pre-IPO holders will forfeit certain shares and warrants and subject additional shares to a lockup tied to the $13.00 and $16.00 share price triggers.
Guidance, Risks, and Contingencies
Closing Conditions:
- Approval by Capitol shareholders.
- Effectiveness of the Registration Statement on Form S-4.
- Receipt of regulatory approvals and absence of prohibitory orders.
- Availability of financing per the Debt Commitment Letter.
- Listing of Capitol common stock on a national securities exchange.
Termination Rights: The agreement may be terminated if the transaction is not consummated by August 21, 2019 (or October 7, 2019 if shareholders approve a later date), or if shareholder approval is not obtained.
Risks and Forward-Looking Statements:
- Financial projections are speculative and subject to significant uncertainty.
- Actual results may differ materially from projections.
- Failure to meet closing conditions could result in the transaction not occurring.
Investor Verification Checklist
- Verify the final redemption rate of public shareholders to ensure the $265 million cash condition is met.
- Confirm the effectiveness of the Form S-4 Registration Statement and the absence of SEC stop orders.
- Monitor the execution of definitive documentation for the $350 million revolving credit facility and $400 million bridge loans.
- Review the upcoming Proxy Statement/Prospectus for detailed financial information and risk factors not fully disclosed in this 8-K.
- Track the stock price performance relative to the $13.00 and $16.00 triggers for contingent share issuance.