Item 1.01 Entry into a Material Definitive Agreement.
On February 23, 2017, KEMET Electronics Corporation (“KEMET”), a wholly-owned subsidiary of KEMET Corporation (the “Company”), entered into a definitive stock purchase agreement with NEC Corporation (“NEC”) (the “Definitive Stock Purchase Agreement”), to acquire all of the outstanding shares of common stock and preferred stock of NEC TOKIN Corporation (“NT”) not already held by KEMET. NT is a joint venture between KEMET and NEC. Upon closing, NEC TOKIN will change its name to TOKIN Corporation (“TOKIN”) and will be a 100% owned subsidiary of KEMET. KEMET originally acquired a 34% economic, and 51% common stock interest in NT on February 1, 2013.
In addition, the Company announced on February 23, 2017, that NT has entered into a master sale and purchase agreement (the “Master Sale and Purchase Agreement”), with Japan Industrial Partners, Inc. ("JIP") and NTJ Holdings 1 Ltd. ("NTJ Holdings"), a special purpose entity that is owned by funds managed or operated by JIP, pursuant to which NT agreed to sell its electromagnetic devices business (the “EMD Business”) to NTJ Holdings for approximately JPY 48.2 billion or approximately US$422 million. The purchase price is subject to adjustment in certain circumstances.
Pursuant to the terms of the Definitive Stock Purchase Agreement, KEMET will pay to NEC the amount of JPY 6.0 billion (approximately $52.5 million), plus one-half of the amount which is determined to be the excess amount of net cash proceeds from the sale of the EMD Business, after the repayment of outstanding indebtedness of NT and after the payment of taxes, fees and expenses relating to the sale of the EMD Business. NT will use a portion of the net proceeds to repay in full the outstanding indebtedness of NT that is owed to NEC, which is currently approximately JPY 25.4 billion (approximately $222.4 million). On a consolidated basis (KEMET and TOKIN) the remaining net excess cash from the transaction, after subtracting the purchase price of the NEC shares, will be approximately $42 million.
The acquisition of the outstanding shares of NT is subject to customary closing conditions, including making any required regulatory filings and obtaining any required third party consents, and is also conditioned on the closing of the sale of the EMD Business. The Definitive Stock Purchase Agreement contains customary covenants, representations and warranties, and also provides for NEC to bear one-half of certain indemnity obligations that may arise out of the sale of the EMD Business by NT, subject to certain conditions and limitations.
The sale of the EMD Business by NT is subject to customary closing conditions, including making any required regulatory filings, the absence of pending litigation and a customer due diligence condition. The Master Sale and Purchase Agreement contains customary covenants, representations and warranties, and indemnification provisions requiring NT to indemnify the purchaser of the EMD Business for certain liabilities in certain circumstances, subject to certain conditions and limitations.
The sale of the EMD Business is expected to close on or around April 3, 2017. The acquisition of the outstanding shares of common stock and preferred stock of NT is expected to close on or around April 10, 2017.
A copy of the Definitive Stock Purchase Agreement is attached as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated by reference herein. The description of the material terms of the Definitive Stock Purchase Agreement is qualified in its entirety by reference to such exhibit.
A copy of the press release reporting entry into the Definitive Stock Purchase Agreement and Master Sale and Purchase Agreements has been included as Exhibit 99.1.
Item 1.02 Termination of a Material Definitive Agreement.
The Definitive Stock Purchase Agreement will also serve to terminate the existing Stock Purchase Agreement dated March 12, 2012, among KEMET, NEC and NT upon the closing of the transaction. The Option Agreement dated March 12, 2012, as amended by Amendment No.1 thereto dated as of August 29, 2014 (the “Option Agreement”), between KEMET and NEC, which provided a right to NEC, in certain circumstances and subject to certain conditions, to require KEMET to purchase the outstanding shares of common stock and preferred stock of NT at a price determined in accordance with a formula set forth in the Option Agreement, and the Stockholders’ Agreement dated March 12, 2012, among KEMET, NEC and NT, will also be superseded and replaced by the Definitive Stock Purchase Agreement, and each of those agreements will terminate at the closing of the transaction.