Business Context and Reporting Period
This Form 8-K filing by TTM Technologies, Inc. (TTM) reports a material definitive agreement entered into on December 1, 2017. The filing details the acquisition of Anaren Holding Corp. (Anaren), a manufacturer of high-frequency components, and the associated financing arrangements.
Key Financial Metrics and Transaction Terms
- Acquisition Price: $775 million in cash, subject to customary working capital and other adjustments.
- Financing Structure:
- Incremental Facility: Up to $700 million senior secured term loan arranged by Barclays Bank PLC under TTM's existing credit agreement.
- Backstop Facility: Up to $1.05 billion senior secured term loan committed by Barclays to refinance the existing credit agreement and fund the acquisition if the Incremental Facility is not fully funded.
- Termination Fee: $31.0 million payable by TTM to the Seller if the transaction fails to close by June 1, 2018 (extendable to September 1, 2018) due to failure to obtain required regulatory approvals.
- Insurance: TTM has obtained a representation and warranty insurance policy to cover certain seller representations, subject to retention amounts and exclusions.
Material Changes and Conditions
The filing does not report changes to historical financial performance but outlines significant future capital structure changes contingent on the acquisition. The transaction is subject to several material conditions:
- Expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
- Clearance by the Committee on Foreign Investment in the United States (CFIUS) and the Defense Security Service.
- Absence of any order, injunction, or law prohibiting the consummation.
- Accuracy of representations and warranties and absence of a Material Adverse Effect.
Outlook, Risks, and Management Commentary
Management has unanimously approved the acquisition, viewing it as a strategic expansion. The company plans to host a conference call with investors to discuss the transaction. Key risks and contingencies identified include:
- Regulatory Risk: Failure to obtain necessary antitrust or foreign investment approvals could result in termination and a $31.0 million fee.
- Integration Risk: Challenges in retaining Anaren's customers and employees, integrating operations, and achieving expected synergies.
- Financing Risk: Dependence on credit market conditions to issue debt on acceptable terms.
- Forward-Looking Statements: The filing cautions that actual results may differ materially from predictions regarding the successful completion of the acquisition and post-closing performance.
Investor Verification Checklist
- Verify the status of regulatory approvals, specifically CFIUS and Defense Security Service clearance.
- Review the full text of the Stock Purchase Agreement (Exhibit 2.1) for specific definitions of "Material Adverse Effect" and working capital adjustment mechanisms.
- Examine the Commitment Letter (Exhibit 10.1) for detailed terms, interest rates, and covenants of the Incremental and Backstop Facilities.
- Monitor the timeline for the June 1, 2018 (or September 1, 2018) closing deadline to assess termination fee exposure.
- Assess the impact of the $775 million cash outlay and new debt on TTM's existing leverage ratios and liquidity position.