Privately held Southland Holdings, LLC (“Southland”), and Legato
Merger Corp. II (NASDAQ: LGTO, LGTOU and LGTOW) (“Legato II”), a
special purpose acquisition company, today jointly announced that
they have signed a definitive agreement for a business combination
transaction (the “Business Combination”), which would result in
Southland becoming a direct wholly-owned subsidiary of Legato II.
As a wholly-owned subsidiary of Legato II,
Southland will continue to execute its growth strategies under the
leadership of Southland’s current management. Legato II’s Board of
Directors will include five directors designated by Southland and
two directors designated by Legato II. Brian Pratt, Legato II’s
current Chairman and former Chairman and CEO of Primoris Service
Corporation, will continue to serve as Chairman of Legato II.
It is expected that at the time of the Business Combination, Legato
II will change its name to “Southland Holdings, Inc.”
“In a period of unprecedented need for
infrastructure spending, this transaction would provide Southland
with the necessary resources to accelerate future growth and take
advantage of the significant opportunities ahead of us. Our
position and in-house capabilities securely place Southland in an
optimal position to build critical infrastructure projects over the
next several decades. We look forward to partnering with Legato
II’s team and continuing to deliver vital, world class
infrastructure engineering and construction services,” said Frank
Renda, Southland’s Chief Executive Officer.
“Legato II’s Board and I are excited to be able
to partner with Southland’s management team, who have been industry
leaders for nearly 30 years,” said Eric Rosenfeld, Legato II’s
Chief SPAC Officer. “We believe Southland’s diversified skill
set and ability to bring unique solutions to construction projects
will provide a significant value creation opportunity to our
shareholders. The pro forma combined company is valued at 5.6x
calendar year 2022 adjusted EBITDA, if it hits its bonus adjusted
EBITDA earnout targets of $145 million in 2022 and $165 million in
2023, while it is valued at 6.2x 2022 adjusted EBITDA, if it hits
its base adjusted EBITDA earnout targets of $125 million in 2022
and $145 million in 2023. This represents a discount of 36% and
29%, respectively, compared to the average of its peers (8.8x
consensus estimated 2022 EBITDA(1)). We believe that the combined
company provides a great value for Legato II’s shareholders. This
transaction is expected to allow Southland to fund future organic
growth, make potential future acquisitions and de-lever its balance
sheet,” said Gregory Monahan, Legato II’s Chief Executive
Officer.
Transaction Overview
Southland’s holders will receive a combination
of cash and stock valued at up to $498 million. The transaction is
expected to add $220 million of cash to Southland’s balance sheet
(without taking into account any redemption of Legato public
shares), and at closing implies a pro forma enterprise value of
$810 million, inclusive of contingent
consideration. Southland’s existing holders will receive $343
million of Legato II common stock and $50 million in cash at
closing. In addition, Southland’s existing holders may receive an
additional 10.3 million shares of Legato II common stock valued at
$105 million, contingent upon achievement of specified Adjusted
EBITDA targets for calendar years 2022 and 2023. The pro
forma valuation of the combined business, assuming a $10.15 stock
price, represent a great value opportunity for Legato
stockholders. Following completion of the transaction,
and assuming all of the contingent consideration is paid and
without taking into account redemptions of any shares by Legato
II’s public stockholders, Southland’s current holders and
management team will hold approximately 55% of Legato II’s
outstanding common stock and Legato II’s current stockholders will
hold approximately 45% of Legato II’s outstanding common
stock.
Southland Overview
-
Leading provider of specialized infrastructure construction
services across North America including bridges, tunneling,
transportation and facilities, marine, hydroelectric structures,
water and sewer treatment, and water pipeline end markets.
-
Southland has a diverse customer base with a significant amount of
work coming from recurring customers
-
Experienced management team led by CEO, Frank Renda, and CFO, Cody
Gallarda.
With roots dating back to 1900, Southland and
its subsidiaries, together, make up one of the largest construction
companies in North America, with experience throughout the world.
The company has built transportation infrastructure that connects
our nation, constructed water pipelines and built treatment
facilities to carry water across vast regions, bored tunnels
through some of the world’s most challenging geology, and completed
some of the nation’s most iconic structural landmarks. The
Southland family of companies are innovators in construction
technology and means-and-methods engineering, bringing unique
solutions to challenging construction projects.
Southland's Board of Managers and Legato II’s
Board of Directors have unanimously approved the merger agreement
and Legato II’s Board recommends that its stockholders approve and
adopt the merger agreement and the transaction. The transaction is
expected to close in the fourth quarter of 2022.
For additional information on the Business
Combination, see Legato II’s Current Report on Form 8-K, which will
be filed promptly, and which can be obtained, without charge, at
the Securities and Exchange Commission’s internet site
(http://www.sec.gov).
For the purposes of this transaction, Legato II
is represented by Graubard Miller and Southland is represented by
Winstead PC. D.A. Davidson & Co. and Thompson Davis & Co.
are acting as capital market advisors to Legato II.
Conference CallMessrs. Pratt, Monahan, Renda
and Gallarda will host a conference call on Thursday, May 26th, at
9:00 am Eastern Standard Time to discuss the transaction. To
view the presentation for the conference call, please visit Legato
II’s website (www.legatomerger.com).
We encourage participants to pre-register for
the conference call using the following link
https://dpregister.com/sreg/10167678/f300e13210. Callers who
pre-register will be given a conference passcode and unique PIN to
gain immediate access to the call and bypass the live operator.
Participants may pre-register at any time, including up to and
after the call start time. A recorded webcast of this
presentation will also be available at www.legatomerger.com.
CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking
statements within the meaning of U.S. Federal securities laws. The
words “believe”, “expect”, “intend”, “plan”, “potential”, and
similar expressions are intended to identify forward-looking
statements, and these statements may relate to the merger
transaction. These statements involve a number of known and unknown
risks, which may cause actual results to differ materially from
expectations expressed or implied in the forward-looking
statements. These risks include uncertainties about Legato II’s
ability to complete the Business Combination; the business and
operations of Southland following completion of the Business
Combination and other matters discussed in the “Risk Factors”
section of Legato II’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2021, and any updates thereto in subsequent
reports filed with the Securities and Exchange Commission (the
“SEC”). The forward-looking statements in this press release speak
as of the date of this release. Although Legato II may from time to
time voluntarily update its prior forward-looking statements, it
disclaims any commitment to do so except as required by securities
laws.
IMPORTANT INFORMATION FOR STOCKHOLDERS
This communication does not constitute an offer
to buy or sell or the solicitation of an offer to buy or sell any
securities or a solicitation of any vote or approval. This
communication relates to a proposed business combination between
Legato II and Southland.
In connection with the proposed Business
Combination, Legato II intends to file with the SEC a registration
statement on Form S-4, which will include a proxy statement to
solicit the vote of Legato II’s stockholders on the transaction.
The definitive proxy statement for Legato II (if and when
available) will be mailed to stockholders of Legato II. LEGATO II
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER
DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS
COMBINATION.
Legato II stockholders will be able to obtain
free copies of these documents (if and when available) and other
documents containing important information about Legato II and
Southland, once such documents are filed with the SEC, through the
website maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC will also be made available free of
charge by contacting Legato II using the contact information
below.
PARTICIPANTS IN SOLICITATION
Legato II and its directors, executive officers
and other members of its management and employees may be deemed to
be participants in the solicitation of proxies from Legato II’s
stockholders in connection with the Business Combination.
Stockholders are urged to carefully read the proxy statement
regarding the Business Combination when it becomes available,
because it will contain important information. Information
regarding the persons who may, under the rules of the SEC, be
deemed participants in the solicitation of Legato II’s stockholders
in connection with the Business Combination will be set forth in
the proxy statement when it is filed with the SEC. Information
about Legato II’s executive officers and directors will be set
forth in the proxy statement relating to the Business Combination
when it becomes available. You can obtain free copies of these and
other documents containing relevant information at the SEC’s web
site at www.sec.gov or by directing a request to the address or
phone number set forth below.
About Legato Merger Corp. II
Legato Merger Corp. II is a blank check company organized for
the purpose of effecting a merger, capital stock exchange, asset
acquisition or other similar business combination with one or more
businesses or entities. Legato II’s common stock, units and
warrants trade on the Nasdaq Capital Market under the symbols
“LGTO,” “LGTOU” and “LGTOW,” respectively.
For further information, please contact:
Legato Merger Corp. II.777 Third Avenue, 37th Floor,New York,
New York 10017Attention: Greg Monahan+ 1 (212) 319
7676gmonahan@crescendopartners.com
Southland Holdings 1100 Kubota Dr.Grapevine, TX, 76051Attention:
Cody Gallarda+ 1 817 293
4623cgallarda@southlandholdings.com
(1) Source of Information: S&P Capital IQ. Market data
as of May 23, 2022. Estimates based on consensus estimates.
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