Item 1.01. Entry into a Material Definitive Agreement.
On July 10, 2017, NN, Inc., a Delaware corporation (the
Company
), entered into a Purchase Agreement (the
Purchase Agreement
) with TSUBAKI NAKASHIMA Co., Ltd., a Japanese joint stock company (the
Purchaser
) for the sale of the Companys global precision bearing components business (the
PBC
Business
). Pursuant to the Purchase Agreement, subject to the satisfaction or waiver of certain conditions, the Purchaser has agreed to purchase and acquire the PBC Business for an aggregate purchase price of $375,000,000 in cash,
subject to certain adjustments set forth in the Purchase Agreement (the
Transaction
). The Transaction will be effected by (i) the sale of all of the outstanding equity interests in a to be formed Delaware limited
liability company and wholly owned subsidiary of the Company, to which the Company will transfer, contribute and assign assets and liabilities primarily related to the domestic operations of the PBC Business, and (ii) the sale by the Company to
the Purchaser of all of the outstanding equity of NN International B.V., and its direct or indirect subsidiaries NN Europe S.p.A., NN Netherlands B.V., NN Slovakia, s.r.o., NN d.o.o. Konjic (other than certain minority interests), NN Holdings B.V.,
NN Precision Bearing Products Co. Ltd., and Kunshan NN Trading Co., Ltd.
The Companys Board of Directors has unanimously approved
the Purchase Agreement, and the transactions contemplated thereby, including the Transaction. The closing of the Transaction is anticipated to occur in the second half of 2017, subject to applicable regulatory approvals and other closing conditions
set forth in the Purchase Agreement.
The Purchase Agreement contains customary representations, warranties and covenants by each party,
including, among others, covenants with respect to the Companys operation of the PBC Business during the interim period between the execution of the Purchase Agreement and the consummation of the Transaction. The consummation of the
Transaction is subject to customary closing conditions, including, but not limited to, (i) the accuracy of the representations and warranties of the parties, subject to materiality exceptions, (ii) that no material adverse effect with
respect to the PBC Business has occurred and is continuing as of the closing, (iii) the absence of certain legal impediments to the consummation of the Transaction, (iv) compliance by the parties with their respective obligations under the
Purchase Agreement, and (v) the satisfaction of requirements under applicable antitrust, merger control or competition rules and regulations (
Regulatory Approvals
). The closing of the Transaction is not subject to a vote of
the respective stockholders of the Company or the Purchaser.
The Purchaser has obtained approximately $360,000,000 in committed debt
financing from The Bank of Tokyo-Mitsubishi UFJ, Ltd., in addition to Purchasers available cash balances, to fund the purchase price payable to the Company. The availability of the financing, however, is not a condition to the consummation of
the Transaction, and the Purchaser will remain subject to the obligations of the Transaction under the Purchase Agreement until the Transaction is consummated or the Purchase Agreement is terminated in accordance with its terms.
Both the Company and the Purchaser have agreed to indemnify the other party for losses arising from certain breaches of the Purchase Agreement
and for certain other liabilities, subject to applicable limitations set forth in the Purchase Agreement. In connection with the Transaction, the Company and the Purchaser (or one or more of their respective affiliates) also will enter into certain
additional ancillary agreements, including a transition services agreement pursuant to which the Company will provide transition services to the Purchaser for a period of up to 12 months following the closing.
The Purchase Agreement contains certain customary termination rights for the Company and the Purchaser, including the right of each party to
terminate the Purchase Agreement if the Transaction has not been consummated on or prior to September 8, 2017 (the
2
Termination Date
). In addition, either party may terminate the Purchase Agreement if a governmental entity initiates an administrative or judicial action or proceeding to
challenge the Transaction as a violation of any antitrust, merger control or competition rule or regulation (a
Regulatory Challenge
). The Purchase Agreement also requires the Purchaser to pay a termination fee to the Company if
the Purchase Agreement is terminated under certain limited circumstances, as follows: (i) if the Purchase Agreement is terminated by any party either because the Transaction has not been completed by the Termination Date and the Regulatory
Approvals have not been obtained, or at any time because of a Regulatory Challenge, the Purchaser will be required to pay the Company a cash termination fee of $15,000,000, or (ii) if the Purchase Agreement is terminated by any party because
the Transaction has not been completed by the Termination Date and Purchaser has been unable to obtain the funding of the financing under certain limited circumstances as set forth in the Purchase Agreement, the Purchaser will be required to pay the
Company a cash termination fee of $18,750,000.
The Company engaged SunTrust Robinson Humphrey, Inc. as its financial advisor in
connection with the Transaction and to provide to the Companys Board of Directors a fairness opinion regarding the consideration to be received for the PBC Business, which fairness opinion was delivered prior to execution of the Purchase
Agreement.
A copy of the Purchase Agreement is attached as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by
reference. The foregoing summary of the Purchase Agreement and the transactions contemplated thereby is subject to, and qualified in its entirety by, the full text of the Purchase Agreement.
The Purchase Agreement has been included to provide investors and stockholders with information regarding its terms. It is not intended to
provide any other factual information about the Company, Purchaser or their respective subsidiaries and affiliates. The Purchase Agreement contains representations and warranties of the Company and Purchaser made solely for the benefit of the other.
The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules delivered in connection with the signing of the Purchase Agreement. The Companys disclosure schedules contain
information that has been included in the Companys general prior public disclosures, as well as additional non-public information. While the Company does not believe that the Companys disclosure schedules contain information required to
be publicly disclosed under the securities laws other than information that has already been so disclosed, the Companys disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and
warranties set forth in the Purchase Agreement. Moreover, certain representations and warranties in the Purchase Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed
as material to investors and stockholders, or may have been used for the purpose of allocating risk between the Company and Purchaser. Accordingly, the representations and warranties in the Purchase Agreement should not be relied on by any persons
as characterizations of the actual state of facts about the Company at the time they were made or otherwise. In addition, information concerning the subject matter of the representations and warranties may change after the date of the Purchase
Agreement, which subsequent information may or may not be fully reflected in the Companys public disclosures.