Item 1.01. Entry into a Material Definitive Agreement.
On September 26, 2018, Foundation Building Materials, LLC (“FBMLLC”), FBM Canada SPI, Inc. (“Canada SPI”) and FBM Logistics, LLC (“Logistics”) (collectively, FBMLLC, Canada SPI and Logistics referred to as the “Sellers”), wholly owned subsidiaries of Foundation Building Materials, Inc. (the “Company”) entered into a Stock and Asset Purchase Agreement (the “Purchase Agreement”) with SPI LLC ( the “Purchaser”), pursuant to which FBMLLC and Logistics agreed to sell, and Purchaser agreed to acquire, (i) all right, title and interest in, to and under all of the assets, properties and business of the mechanical insulation segment of the Company in the U.S. (the “U.S. Business”), excepting certain excluded assets (the “Purchased Assets”), and (ii) all outstanding shares of Canada SPI (the “Stock”), representing the business in Canada (the “Canadian Business”). The U.S. Business and the Canadian Business are referred to collectively as the “Business.”
As aggregate consideration for the Purchased Assets and the Stock, the Purchaser will pay $122.5 million in cash at the closing of the transaction (subject to certain working capital and other pre- and post-closing adjustments as set forth in the Purchase Agreement) and assume certain post-closing liabilities. The Purchase Agreement contains customary representations, warranties and covenants made by each of the Purchaser and the Sellers, as well as mutual indemnification obligations.
The transactions contemplated by the Purchase Agreement are subject to certain closing conditions, including: (i) the accuracy of each party’s representations and warranties (subject to customary materiality qualifiers); (ii) each party’s compliance with its covenants and agreements contained in the Purchase Agreement (subject to customary materiality qualifiers); (iii) the execution by the parties of certain ancillary agreements, (iv) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (v) other customary closing conditions.
The Purchase Agreement may be terminated under certain circumstances, including: (i) by mutual written consent of the parties, (ii) by the Sellers, if the Purchaser breaches certain of its obligations under the Purchase Agreement, subject to a cure period; (iii) by the Purchaser, if the Sellers breach certain of their obligations under the Purchase Agreement, subject to a cure period; (iv) by either party on or after the earlier of December 4, 2018, the date of a permanent injunction prohibiting the closing, or the date of effectiveness of any law that makes the consummation of the transaction illegal or otherwise prohibited; or (v) by the Sellers, if all conditions to the closing in Article 7 of the Purchase Agreement have been satisfied or waived and the Sellers have notified the Purchaser in writing that they either irrevocably confirm that the conditions to the obligations of the Sellers to consummate the transactions contemplated by the Purchase Agreement set forth in Article 8 of the Purchase Agreement have been satisfied or that the Sellers are irrevocably waiving such conditions and that Sellers are ready, willing and able to consummate such transactions and the Purchaser fails to consummate such transactions within five business days after the later of the date of delivery of the written notice and the date upon which the closing of such transactions was required to occur.
The Purchase Agreement contemplates the entry by the parties into certain ancillary agreements as of the closing of the transaction, including: (i) a Transition Services Agreement between the Sellers and Purchaser to which the Sellers will provide certain services to accommodate the transition of the Business to the Purchaser; (ii) an Assignment Agreement and Bill of Sale by and among the Purchaser, Logistics and FBMLLC; (iii) an Escrow Agreement; and (iii) other customary agreements, instruments and certificates contemplated thereby.
The foregoing description of the Purchase Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the complete text of such agreement. The Company will file the Purchase Agreement as an exhibit to a forthcoming periodic financial report.