Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On
February 13, 2018, Granite Construction Incorporated, a Delaware corporation (the
Company
), Layne Christensen Company, a Delaware corporation (
Layne
), and Lowercase Merger Sub Incorporated, a Delaware
corporation and a wholly owned subsidiary of the Company (
Merger Sub
), entered into an Agreement and Plan of Merger (the
Merger Agreement
) pursuant to which Merger Sub will, subject to the satisfaction or waiver
of the conditions therein, merge with and into Layne, and Layne will be the surviving corporation in the merger and a wholly owned subsidiary of the Company
(the
Merger
). The Boards of Directors of the Company
and
Layne have each unanimously approved the Merger Agreement and the Merger.
Pursuant to the terms of the Merger Agreement and subject to
the conditions therein, at the effective time of the Merger (the
Effective Time
), each share of Laynes common stock issued and outstanding at the Effective Time (other than shares (1) held in treasury of Layne or
(2) directly or indirectly owned by the Company, Merger Sub or a wholly owned subsidiary of Layne) will be cancelled and converted into 0.27 (the
Exchange Ratio
) validly issued, fully paid and
non-assessable
shares of the Companys common stock (the
Merger Consideration
). No fractional shares of the Companys common stock will be issued in the Merger and Laynes
stockholders will receive cash in lieu of any fractional shares.
Pursuant to the terms of the Merger Agreement and subject to the
conditions therein, at the Effective Time, Laynes outstanding stock options will be cancelled and converted into the right to receive an amount of cash equal to the product of (1) the number of Layne shares issuable upon the exercise of
the Layne stock option, multiplied by (2) the excess value, if any, of the (a) product of (i) the Exchange Ratio, multiplied by (ii) an amount equal to the average of the volume-weighted average price per share of Company common
stock on the New York Stock Exchange for each of the 10 consecutive trading days ending with the third trading day immediately preceding the closing date (
Company Common Stock Price
), and (b) the exercise price of the Layne
stock option. Laynes outstanding service-based restricted stock units will be cancelled and converted into the right to receive an amount of cash (without interest) equal to the product of (1) the number of Layne shares in respect of such
restricted units, multiplied by (2) the (a) product of (i) the Exchange Ratio, multiplied by (ii) the Company Common Stock Price.
Laynes outstanding unvested performance stock units will vest, and the underlying number of
Layne shares earned shall be determined, based on the maximum level of achievement of the applicable performance goals. Laynes performance stock units that are vested prior to the Effective Time or vest pursuant to the Merger Agreement will be
cancelled and converted into the right to receive an amount of cash (without interest) equal to the product of (1) the number of Layne shares earned in respect to the performance stock unit, multiplied by (2) the (a) product of
(i) the Exchange Ratio, multiplied by (ii) the Company Common Stock Price.
Consummation of the Merger is subject to certain
customary closing conditions, including, adoption of the Merger Agreement by Laynes stockholders, the absence of certain legal impediments, and the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
The Merger Agreement contains customary representations, warranties and covenants made by each of
Layne and the Company. Layne has agreed, among other things, not to solicit an Acquisition Proposal (as defined in the Merger Agreement) or, subject to certain exceptions, enter into discussions concerning, or provide confidential information in
connection with, any Acquisition Proposal. However, if at any time following the date of the Merger Agreement and prior to the Effective Time, (1) Layne has received from a third party a written, bona fide Acquisition Proposal, (2) a
breach by Layne of the Merger
1
Agreement has not contributed to the making of such Acquisition Proposal, (3) the Board of Directors of Layne (the
Layne Board
) determines in good faith, after
consultation with its financial advisors and outside counsel, that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal (as defined in the Merger Agreement) and (4) after consultation with its outside
counsel, the Layne Board determines in good faith that failure to take such action would be inconsistent with its fiduciary duties to Laynes stockholders under applicable law, then Layne may, subject to the limitations of the Merger Agreement,
(a) furnish confidential information with respect to Layne and its subsidiaries to the person making such Acquisition Proposal and (b) participate in discussions or negotiations with the person making such Acquisition Proposal regarding
such Acquisition Proposal.
The Merger Agreement also requires Layne to call and hold a stockholders meeting and, subject to certain
exceptions, recommend that Laynes stockholders approve and adopt the Merger Agreement.
The Merger Agreement contains certain
termination rights for each of Layne and the Company, including the right of each party to terminate the Merger Agreement if the Merger has not been consummated by September 30, 2018 (the
Outside Date
).
Pursuant to the Merger Agreement, the Company will be entitled to receive from Layne a termination fee of $16,000,000 in the event that:
|
|
|
the Merger Agreement is terminated by Layne prior to Laynes stockholders adopting the Merger Agreement in order to enter into an agreement relating to a Superior Proposal;
|
|
|
|
the Merger Agreement is terminated by the Company because (1) the Layne Board makes an adverse change in its recommendation relating to the vote on the Merger Agreement by Laynes stockholders, (2) the
Layne Board shall (a) not have rejected an Acquisition Proposal within seven days of the making public thereof or (b) have failed to reconfirm its recommendation relating to the vote on the Merger Agreement by Laynes stockholders
within four days after a request from the Company to do so following an Acquisition Proposal, or (3) Layne shall have violated in any material respect its obligations with respect to the
non-solicitation
of Acquisition Proposals; or
|
|
|
|
the Merger Agreement is terminated (1) by either party following the Outside Date, (2) by the Company due to the failure of Laynes stockholders to adopt the Merger Agreement, or (3) by the Company
due to the occurrence of a material adverse effect with respect to Layne or a breach by Layne of its representations, warranties or covenants in a manner that would prevent the closing condition with respect thereto from being satisfied, in each
case of (1), (2) and (3) above if (a) prior to such termination there shall have been an Acquisition Proposal for a majority of the outstanding capital stock or assets of Layne that is made known to Layne or made directly to Laynes
stockholders generally or any person shall have publicly announced an intention to make such an Acquisition Proposal (whether or not conditional or withdrawn) and (b) concurrently with such termination or within 12 months thereafter, Layne
enters into an agreement providing for, or consummates, a transaction contemplated by an Acquisition Proposal involving the sale of a majority of the outstanding capital stock or assets of Layne.
|
In addition, the Company has agreed to appoint a
non-employee
member of the Layne Board to its board
of directors as of the Effective Time, with such director to be selected by the Company.
The foregoing description of the Merger
Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached to this Current Report on Form
8-K
as Exhibit 2.1 and incorporated herein by reference in its
entirety. The Merger Agreement has been attached to provide
2
investors with information regarding its terms. It is not intended to provide any other factual information about Layne or the Company. In particular, the assertions embodied in the
representations and warranties contained in the Merger Agreement are qualified by information in confidential Disclosure Letters provided by Layne to the Company and by the Company to Layne in connection with the signing of the Merger Agreement.
These confidential Disclosure Letters contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger
Agreement were used for the purpose of allocating risk between Layne and the Company rather than establishing matters as facts. Accordingly, you should not rely on the representations and warranties in the Merger Agreement as characterizations of
the actual state of facts about Layne or the Company.
Voting Agreement
In connection with the Merger, certain stockholders of Layne (collectively, the
Specified Layne Stockholders
) entered into
voting agreements with the Company, each dated February 13, 2018 (the
Voting Agreements
). The Specified Layne Stockholders together own, in the aggregate, approximately 10% of the currently outstanding shares of Laynes
common stock.
Pursuant to the Voting Agreements, each Specified Layne Stockholder has agreed, among other things, to vote the shares of
Laynes common stock beneficially owned by such Specified Layne Stockholders in favor of adoption of the Merger Agreement.
The
foregoing is a summary only and does not purport to be a complete description of all of the terms and provisions contained in the Voting Agreements, and is subject to and qualified in its entirety by reference to the Form of Voting Agreement
attached hereto as Exhibit 10.1 which is incorporated by reference into this Item 1.01.