Item 1.01.
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Entry Into a Material Definitive Agreement.
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On December 18, 2019, Synaptics Incorporated (the “Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) by and among the Company and Creative Legend Investments Ltd. (“Buyer”). Pursuant to the Purchase Agreement, the Company will sell to Buyer, and Buyer will purchase from the Company, the assets of the Company’s Asia-based, single-chip LCD Touch Controller and Display Driver Integration business line for LCD mobile displays (the “Business”). Subject to certain post-closing adjustments and indemnification obligations, the aggregate consideration payable by Buyer to the Company will be (i) $120 million in cash, (ii) the dollar value of specified Business inventory, at a purchase price of standard cost plus 5%, in cash, and (iii) the assumption of certain liabilities, as set forth in the Purchase Agreement. The transaction is expected to close in the second calendar quarter of 2020, subject to satisfaction of certain closing conditions. In the event all closing conditions shall be satisfied other than certain specified regulatory approvals on or prior to April 15, 2020, Buyer shall be obligated to deposit $50 million in cash to an escrow account, to be released to the Company or Buyer upon closing of the transaction or termination of the Purchase Agreement. The Purchase Agreement may be assigned by Buyer prior to closing to certain permitted assignees agreed to by the Company and Buyer.
In connection with the entry into the Purchase Agreement, the Company concurrently entered into a limited guarantee agreement (the “Limited Guarantee”) with Hua-Capital Cayman, L.P. (the “Guarantor”), which provides for a limited guarantee by Guarantor of Buyer’s obligations under the Purchase Agreement. The Limited Guarantee will terminate upon any assignment of the Purchase Agreement by Buyer to certain permitted assignees agreed to by the Company and Buyer.
The Purchase Agreement contains customary representations, warranties and covenants of the parties. The representations and warranties contained in the Purchase Agreement were made solely for purposes of the Purchase Agreement, subject to important qualifications and limitations, and were made solely for the benefit of the parties to the Purchase Agreement and may not have been intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among the parties to the Purchase Agreement. Accordingly, the representations and warranties contained in the Purchase Agreement should not be relied upon as factual information at the time they were made or otherwise.
Each party’s obligation to consummate the transaction pursuant to the Purchase Agreement is subject to a number of conditions as set forth therein, including, among others, (i) subject to certain exceptions, the accuracy of the representations and warranties of the parties; (ii) performance in all material respects by each of the parties of its obligations and covenants; (iii) procurement of certain specified third-party consents; (iv) absence of any Material Adverse Effect with respect to the Business; and (v) antitrust regulatory approvals in the People’s Republic of China.
The Purchase Agreement also contains certain termination rights for both the Company and Buyer. Promptly after the execution of the Purchase Agreement, Buyer is required to deposit $5 million in an escrow account to satisfy Buyer’s termination fee obligations that may become payable to the Company in the event of certain termination events specified in the Purchase Agreement.
Pursuant to the Purchase Agreement, the Company has also agreed, for a period of five years following the closing date, not to compete with certain business activities currently conducted by the Business, subject to certain exceptions. The Purchase Agreement also provides that the parties will enter into a customary transition services agreement at closing, and the Company and Buyer will also enter into license agreements at closing between each party providing a royalty-free license of certain intellectual property used in the Business.
The foregoing description of the Purchase Agreement and Limited Guarantee does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement and Limited Guarantee, which are expected to be filed with the Company’s next quarterly report in accordance with the rules and regulations of the Securities and Exchange Commission.