Business Context and Reporting Period
Company: Harmony Merger Corp. (SPAC)
Date: March 13, 2017
Event: The Company announced the execution of a non-binding Letter of Intent (LOI) to merge with NextDecade, LLC, a liquefied natural gas (LNG) development company focused on Texas export projects and pipelines.
Key Financial Metrics and Transaction Terms
- Transaction Type: Proposed all-stock business combination.
- Pro Forma Enterprise Value: Expected to exceed $1.0 billion at closing.
- Shareholder Ownership: Assuming no redemptions from the trust account, current Harmony Merger Corp. stockholders will own approximately 13.4% of the combined entity.
- Additional Consideration: NextDecade shareholders may receive additional stock upon achieving certain milestones.
- Trust Account Condition: Closing requires stockholders representing at least $25 million of trust funds to elect not to convert their shares.
- Operational Metrics (NextDecade): Has signed over 30 million tons of non-binding customer commitments for LNG per annum.
Note: The filing does not provide specific revenue, profit, cash flow, or debt figures for either entity.
Material Changes and Status
The filing represents a material change in the Company's status from a shell company seeking a target to a SPAC with a specific proposed target. Key developments include:
- Exclusivity: Parties agreed to a 30-day exclusivity period to negotiate a definitive merger agreement.
- Extension Request: The Company filed a proxy statement seeking to extend the deadline to consummate a business combination from March 27, 2017, to July 27, 2017.
- Liquidation Trigger: If a definitive agreement is not reached by April 27, 2017, the Company intends to seek approval to dissolve and liquidate or request a further extension.
Guidance, Risks, and Contingencies
Outlook: The transaction is subject to significant contingencies, including the negotiation of a definitive agreement, regulatory approvals (including FERC), and stockholder approval.
Risks and Uncertainties:
- Non-Binding Nature: The LOI and transaction terms are non-binding; there is no assurance the deal will close.
- Regulatory and Market Risks: Risks include changes in government regulations, geopolitical events, weather, and fluctuations in customer demand for LNG.
- Redemption Risk: The transaction may fail if too many shareholders redeem their shares, dropping the trust account below the $25 million threshold.
Investor Verification Checklist
- Verify the execution of a definitive merger agreement within the 30-day exclusivity period.
- Monitor the outcome of the stockholder vote on the extension of the business combination deadline to July 27, 2017.
- Review the upcoming definitive proxy statement for detailed financial projections and valuation assumptions.
- Assess the status of NextDecade's regulatory filings with the Federal Energy Regulatory Commission (FERC).
- Confirm whether the $25 million minimum trust account threshold will be met after shareholder redemptions.