Business Context and Reporting Period
Company: Rayonier Advanced Materials Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 24, 2017
Event: Entry into a Material Definitive Agreement to acquire Tembec Inc.
Key Financial Metrics and Transaction Terms
This filing details a proposed acquisition rather than periodic financial results. Key transaction metrics include:
- Consideration per Tembec Share: Shareholders may elect C$4.05 in cash or 0.2302 shares of Rayonier Advanced Materials common stock.
- Proration Structure: The agreement mandates that 63.3% of Tembec shares convert to cash and 36.7% convert to stock.
- Financing Commitment: A commitment letter dated May 24, 2017, secures up to $450,000,000 in senior secured term loans from Bank of America, Merrill Lynch, and Wells Fargo to fund the cash portion of the deal and refinance Tembec debt.
- Financial Results: The filing text does not provide current revenue, profit, cash flow, or margin data for Rayonier Advanced Materials.
Material Changes and Transaction Status
The primary material change is the execution of an Arrangement Agreement to acquire all outstanding common shares of Tembec Inc. The transaction is expected to close in the second half of 2017. The deal has been unanimously approved by the boards of directors of both companies but remains subject to several closing conditions:
- Approval by Tembec shareholders.
- Approval by the Superior Court of Québec.
- Receipt of regulatory approvals, including under the Hart-Scott-Rodino Antitrust Improvements Act, the Competition Act (Canada), and the Investment Canada Act.
Guidance, Risks, and Contingencies
Management Commentary: The company issued a press release and investor presentation on May 25, 2017, regarding the transaction. A conference call was held to discuss the deal.
Risks and Contingencies:
- Termination Fees: The agreement includes provisions for termination fees payable by Tembec to the Company (e.g., in connection with a superior proposal) and by the Company to Tembec (e.g., failure to obtain regulatory approvals).
- Forward-Looking Statements: The filing warns that expectations regarding closing timing and approvals are based on assumptions that may prove incorrect. Actual results may differ materially.
- Regulatory Uncertainty: Closing is contingent on specific regulatory approvals which are not guaranteed.
Investor Verification Checklist
- Verify the final approval status of the Arrangement by Tembec shareholders and the Superior Court of Québec.
- Confirm receipt of all required regulatory approvals (Hart-Scott-Rodino, Competition Act, Investment Canada Act).
- Review the full text of the Arrangement Agreement (Exhibit 2.1) for specific termination fee triggers and amounts.
- Monitor the status of the $450 million senior secured term loan commitment and any conditions precedent to funding.
- Check for the filing of Tembec's information circular with the Canadian Securities Administrators for additional details.