Business Context and Reporting Period
This Form 8-K, dated December 13, 2018, reports that One Madison Corporation (the "Company") entered into a definitive Stock Purchase Agreement on December 12, 2018, to acquire Rack Holdings L.P. and Rack Holdings, Inc. (collectively "Rack Holdings" or "Ranpak"). The transaction constitutes a business combination for the Company, a Cayman Islands exempted company and special purpose acquisition company (SPAC).
Key Financial Metrics and Transaction Terms
- Consideration: The base purchase price is $950 million in cash, subject to adjustments for net working capital (targeted at $22 million), cash on hand, debt, and unpaid transaction expenses at closing.
- Financing Structure: The transaction is funded through a combination of sources:
- Up to $300 million from the Company's IPO trust account (net of redemptions).
- $150 million from forward purchase agreements.
- $142 million from new subscription agreements for 14.2 million shares.
- Up to $650 million in senior secured credit facilities from Goldman Sachs Merchant Banking Division.
- Debt Commitments: The debt facility includes a $450 million First Lien Term Facility, a $45 million Revolving Facility, a $100 million First Lien Contingency Term Facility, and a $100 million Second Lien Contingency Term Facility.
- Working Capital Note: The Company issued a $4 million non-interest bearing promissory note to finance working capital expenses, due at closing or by September 12, 2019.
Material Changes and Conditions
The filing details the entry into a material definitive agreement to acquire a target business, marking a shift from a cash-holding SPAC to an operating entity. The closing is subject to customary conditions, including:
- Shareholder approval of the equity issuances and the business combination.
- Expiration of waiting periods under the Hart-Scott Rodino Antitrust Improvements Act and the German Act Against Restraints on Competition.
- Absence of a "Material Adverse Effect" on Rack Holdings.
- Accuracy of representations and warranties.
The agreement includes a termination date of July 12, 2019, if the closing has not occurred by that time.
Outlook, Risks, and Contingencies
Management has secured commitments for equity and debt financing but notes that the transaction is contingent on shareholder approval and regulatory clearance. The filing includes standard forward-looking statement disclaimers regarding the ability to complete the combination, retain key employees, and meet NYSE listing standards post-closing.
Key Risks Identified:
- Failure to obtain shareholder approval or necessary financing.
- Regulatory delays or prohibitions.
- Disruption to Rack Holdings' operations due to the transaction announcement.
- Redemptions of IPO shares reducing the available cash from the trust account.
The Company has purchased representation and warranty liability insurance, though it is subject to significant coverage limits and exclusions.
Investor Verification Checklist
- Verify the final purchase price after working capital, cash, and debt adjustments at closing.
- Monitor the level of shareholder redemptions from the IPO trust account, which directly impacts the equity portion of the funding.
- Confirm the status of antitrust approvals in the U.S. and Germany.
- Review the upcoming proxy statement for detailed information on the interests of directors and executive officers in the transaction.
- Assess the final terms of the $650 million senior secured credit facilities and any covenants imposed by the lenders.