Item 1.01 Entry into a Material Definitive Agreement
Exchange and Subscription Agreements
On June 20, 2018, Wright Medical Group N.V. (the
Company
) entered into privately-negotiated agreements (the
Agreements
) among the Company, Wright Medical Group, Inc., an indirect, wholly-owned subsidiary of the Company (
WMG
), and a limited number of investors who are both accredited investors (within the meaning of
Rule 501 promulgated under the U.S. Securities Act of 1933, as amended (the
Securities Act
)) and qualified institutional buyers (as defined in Rule 144A under the Securities Act) to issue and sell $675 million aggregate
principal amount of WMGs 1.625% cash convertible senior notes due 2023 (the
Notes
). The Notes will be fully and unconditionally guaranteed by the Company on a senior unsecured basis. The Notes are referred to as
exchangeable in the offering documents because they will be issued by WMG, not the Company. The issuance of the Notes is expected to close on June 28, 2018, subject to customary closing conditions.
Pursuant to certain of the Agreements, a limited number of holders of WMGs existing 2.00% cash convertible senior notes due 2020 (the
Existing Notes
) have agreed to exchange their Existing Notes for the Notes (the
Exchange
). For each $1,000 principal amount of Existing Notes validly submitted for Exchange, WMG will deliver $1,146.10 principal
amount of Notes to the exchanging investor (subject, in each case, to rounding to the nearest $1,000 aggregate principal amount for each such exchanging investor). There will be no separate cash payment in respect of rounded amounts or interest, if
any, accrued and unpaid to the closing date of the Exchange, subject to the terms and conditions set forth in the Agreements.
The
foregoing description of the Agreements does not purport to be complete and is qualified in its entirety by reference to the forms of the Agreements, which are filed as Exhibits 10.1 and 10.2 to this Current Report on
Form 8-K
and are incorporated herein by reference.
Convertible Note Hedge and Warrant Transactions
On June 20, 2018, the Company and WMG entered into cash-settled convertible note hedge transactions with two counterparties,
Bank of America, N.A. and JPMorgan Chase Bank, National Association (the
Option Counterparties
), which are expected generally to reduce the net cash payments that WMG may be required to make upon conversion of the Notes to the
extent that such cash payments exceed the principal amount of exchanged Notes and the per share market price of the Companys ordinary shares, par value 0.03 per share (the
Ordinary Shares
), as measured under the terms
of the cash convertible note hedge transactions, is greater than the strike price of the cash convertible note hedge transactions, which is initially $33.37, corresponding to the initial conversion price of the Notes, and is subject to anti-dilution
adjustments generally similar to those applicable to the conversion rate of the Notes.
On June 20, 2018, the Company also entered
into warrant transactions with the Option Counterparties in which the Company agreed to sell the Option Counterparties warrants that are initially exercisable into 20,228,333 Ordinary Shares and subject to adjustment upon the occurrence of certain
events. The strike price of the warrants will initially be $40.86 per Ordinary Share, which is approximately 50% above the last reported sale price of the Ordinary Shares on June 20, 2018, as reported on the NASDAQ Global Select Market. The
warrant transactions will have a dilutive effect on the Ordinary Shares to the extent that the market price per Ordinary Share, as measured under the terms of the warrant transactions, exceeds the strike price of the warrants.
WMG intends to pay approximately $141 million in the aggregate to the Option Counterparties for the note hedge transactions, and receive
approximately $102 million in the aggregate from the Option Counterparties for the warrants, resulting in a net cost to the Company of approximately $39 million.
Aside from the initial payment of a premium to the Option Counterparties of approximately $141 million and subject to the right of the
Option Counterparties to terminate the convertible note hedge transactions in certain circumstances, the Company will not be required to make any cash payments to the Option Counterparties under the convertible note hedge transactions and will be
entitled to receive from the Option Counterparties an amount of cash, generally equal to the amount by which the market price per Ordinary Share, as measured under the terms of the cash convertible note hedge transactions, is greater than the strike
price of the cash convertible note hedge transactions during the relevant valuation period under the cash convertible note hedge transactions. The Company will not receive any additional proceeds if warrants are exercised.
The convertible note hedge transactions and the warrant transactions are each separate transactions, entered into by the Company and WMG with
the Option Counterparties, and are not part of the terms of the Notes. Holders of the Notes will not have any rights with respect to the convertible note hedge transactions or the warrant transactions.
The foregoing description of the convertible note hedge transactions and warrant transactions is qualified in its entirety by reference to
call option transaction confirmations relating to the convertible note hedge transactions and the warrant confirmations relating to the warrant transactions with each of the two Option Counterparties, which will be filed as exhibits to a future
filing by the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
Convertible Note Hedge and Warrant Unwind Transactions
In connection with the foregoing transactions, the Company and WMG expect to enter into agreements with the counterparties (the
Existing Option Counterparties
) to WMGs existing convertible note hedge transactions to terminate a portion of such existing convertible note hedge transactions in a notional amount corresponding to the amount of the
existing notes exchanged pursuant to the Exchange (the
Call Spread Unwind Agreements
). Pursuant to the Call Spread Unwind Agreements, the Existing Option Counterparties will also terminate a portion of the Companys existing
warrant transactions with the Existing Option Counterparties in respect of the existing notes with the Existing Option Counterparties.
The foregoing description of the Call Spread Unwind Agreements is qualified in its entirety by reference to the Call Spread Unwind Agreements
with each of the three Existing Option Counterparties, which will be filed as exhibits to a future filing by the Company with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.