Item 1.01
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Entry into a Material Definitive Agreement.
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On May 9, 2018, Gannett Co., Inc., a Delaware
corporation (Gannett), Orca Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Gannett (Merger Sub), WordStream, Inc., a Delaware corporation (WordStream), and Shareholder Representative
Services LLC, a Colorado limited liability company (the Equityholder Representative), entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which, among other things and subject to the satisfaction
or waiver of specified conditions, Merger Sub will merge with and into WordStream (the Merger), with WordStream surviving the Merger as a wholly owned subsidiary of Gannett.
The respective boards of directors of Gannett, Merger Sub and WordStream have approved the Merger Agreement and the consummation of the Merger and the other
transactions contemplated by the Merger Agreement.
At the effective time of the Merger (the Effective Time), each outstanding share of common
stock of WordStream, par value $0.001 per share (WordStream Common Stock), other than WordStream Common Stock held by Gannett, Merger Sub, WordStream or any of their respective subsidiaries or held by stockholders who have validly
exercised their dissenters rights in accordance with Delaware law, will be converted into the right to receive the
per-share
portion of the Aggregate Closing Consideration and the
per-share
portion of any Additional Consideration, in each case in accordance with the Merger Agreement. The Aggregate Closing Consideration is $130,000,000, plus (i) any net working capital in
excess of the target, plus (ii) cash on hand at closing, plus (iii) the aggregate stock and warrant exercise price amounts, minus (iv) any net working capital shortfall, minus (v) outstanding indebtedness, minus (vi) unpaid
transaction expenses, minus (vii) escrow holdbacks totaling $6,300,000, and minus (viii) a holdback of $100,000 for the Equityholder Representatives expenses. The Additional Consideration includes up to an additional
$20,000,000 in potential
earn-out
payments based on WordStream meeting certain revenue targets and any additional amounts that become payable under the Merger Agreement, including any release of the escrow
holdbacks or the Equityholder Representatives expense holdback.
Pursuant to the Merger Agreement, each option to purchase WordStream Common Stock
(Stock Option) that is outstanding, unexercised and vested as of immediately prior to the Effective Time will be cancelled and the holder will be entitled to receive an amount equal to the
per-share
portion of the Aggregate Closing Consideration, less the exercise price for such Stock Option, and the
per-share
portion of any Additional Consideration.
Unvested Stock Options will be terminated as of the Effective Time, with no consideration due from Gannett to the holders of such Stock Options. Each warrant to purchase capital stock of WordStream (Warrant) that is outstanding and
exercisable as of immediately prior to the Effective Time will be cancelled and the holder will be entitled to receive an amount equal to the
per-share
portion of the Aggregate Closing Consideration, less the
exercise price for such Warrant, and the
per-share
portion of any Additional Consideration.
The Merger Agreement
contains customary representations and warranties. In addition, WordStream has agreed to various covenants and agreements, including, among others, (i) to operate its business in the ordinary course of business and in accordance with past
practice before the closing and to comply with certain other
pre-closing
operating covenants and (ii) not to solicit alternative transactions to the Merger. The parties agree to use commercially
reasonable efforts to satisfy the conditions to closing.
The closing of the Merger is subject to customary closing conditions, including, among other things, expiration
or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. WordStream has delivered the required consent of its stockholders to the Merger, and the closing of the Merger is not subject to
any financing condition or a vote of Gannetts stockholders.
Each of Gannett and WordStream is permitted to terminate the Merger Agreement in
certain circumstances, including if the closing has not taken place on or before July 31, 2018.
The WordStream stockholders, optionholders and
warrantholders agree to indemnify Gannett for breaches of representations or warranties made by WordStream, failure of WordStream or the Equityholder Representative to perform its covenants,
pre-closing
tax
liabilities and certain other specified matters, subject to certain exceptions and limitations. In addition, Gannett is obtaining a representation and warranty insurance policy that will provide coverage for certain representations and warranties of
WordStream contained in the Merger Agreement, subject to a retention amount, exclusions, policy limits and certain other terms and conditions.
The Merger
Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information with respect to Gannett, Merger Sub or WordStream. There are representations and warranties contained
in the Merger Agreement which were made by the parties to each other as of specific dates. The assertions embodied in these representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important
qualifications and limitations agreed to by the parties in connection with negotiating its terms. Moreover, certain representations and warranties may not be accurate or complete as of any specified date because they are subject to a contractual
standard of materiality that is different from certain standards generally applicable to stockholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. In light of the foregoing, investors
should not rely on the representations and warranties contained in the Merger Agreement as statements of factual information. In addition, information concerning the subject matter of the representations and warranties may change after the date of
the Merger Agreement, which subsequent information may or may not be reflected in Gannetts public disclosures. Investors should read the Merger Agreement together with the other information concerning Gannett that Gannett publicly files in
reports and statements with the U.S. Securities and Exchange Commission (the SEC).
The foregoing description of the Merger Agreement and the
transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed herewith as Exhibit 2.1 and is incorporated herein by
reference.