Item 1.01
|
Entry into a Material Definitive Agreement
|
Agreement and Plan of Merger
On
January 13, 2020, Primo Water Corporation (Primo) entered into an Agreement and Plan of Merger (the merger agreement) with Cott Corporation (Cott), Cott Holdings Inc., a wholly owned subsidiary of Cott
(Holdings), Fore Merger LLC, a wholly owned subsidiary of Holdings (Merger Sub), and Fore Acquisition Corporation, a wholly owned subsidiary of Merger Sub (the Purchaser).
Pursuant to the merger agreement, and upon the terms and subject to the conditions described therein, Purchaser will commence an exchange
offer (the offer) to purchase all of the outstanding shares of common stock of Primo, par value $0.001 per share, in exchange for, at the election of the holder, (i) $14.00 in cash (the cash consideration),
(ii) 1.0229 Cott common shares, no par value per share, plus cash in lieu of any fractional Cott common shares (the stock consideration), or (iii) $5.04 in cash and 0.6549 Cott common shares (the mixed consideration), in
each case, without interest and less any applicable taxes required to be deducted or withheld in respect thereof ((i), (ii), and (iii) as applicable, the transaction consideration).
Primo stockholders who tender and do not properly withdraw their Primo shares into the offer and do not make a valid election will receive the
mixed consideration for their Primo shares. Primo stockholders who elect the cash consideration or the stock consideration will be subject to proration to ensure that no more than 64.02% of the aggregate consideration in the offer will be paid in
Cott common shares and no more than 35.98% of the aggregate consideration in the offer (as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the General Corporation Law of the State of
Delaware (DGCL)) will be paid in cash.
If the conditions to the offer are satisfied and the offer closes, Purchaser would
acquire any remaining Primo shares by a merger of Purchaser with and into Primo (the first merger), with Primo surviving the first merger as a wholly owned subsidiary of Merger Sub. Immediately following the first merger, Primo will
merge with and into Merger Sub, with Merger Sub being the surviving entity (the second merger and, together with the first merger, the mergers). Primo and Cott intend, for U.S. federal income tax purposes, that the offer and
the mergers, taken together, will constitute a single integrated transaction that will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the Code). Upon completion of
the Mergers, Primos common stock will cease to be traded on The Nasdaq Stock Market LLC.
The obligation of Purchaser to consummate
the offer is subject to customary closing conditions, including (i) shares of Primo stock representing at least a majority of the then-outstanding shares of Primo stock having been validly tendered and not properly withdrawn, (ii) the
expiration or termination of the waiting period applicable to the offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any injunction or other order issued by a court of competent jurisdiction
prohibiting the consummation of the offer or the mergers and (iv) other customary conditions set forth in Annex I of the merger agreement. Accordingly, no vote of Primo stockholders will be required in connection with the mergers if Purchaser
consummates the offer. The merger agreement contemplates that, if the offer is completed, the first merger will be effected pursuant to Section 251(h) of the DGCL, which permits completion of a merger without a stockholder vote as soon as
practicable following the successful consummation of an offer for all of the outstanding stock of a corporation that has a class of stock listed on a national securities exchange. The consummation of the offer is not subject to any financing
condition.
At the effective time of the first merger (the first effective time), each share of Primo stock issued and
outstanding immediately prior to the first effective time (other than certain dissenting, converted and cancelled shares, but including shares paid to a holder of a vested Primo equity-based award (other than deferred stock unit awards) or Primo
warrant immediately prior to the first effective time, as described further in the merger agreement) will be converted into the right to receive the transaction consideration (subject to the same proration applicable to the offer as described
above), without interest, and net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof.
The offer and the withdrawal rights of Primos stockholders will expire at 12:01 a.m. Eastern Time on the 21st business day after
commencement of the offer, unless extended in accordance with the terms of the offer and the merger agreement and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the SEC).
Cott has obtained financing commitments of up to $400,000 from Deutsche Bank AG, New York Branch,
to support the payment of the cash portion of the transaction consideration.
Primo Stock Options
Immediately prior to the first effective time, the portion of each Primo option that is then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration, to the extent vested in accordance with its terms as of the first effective time, will be settled and paid to such holder in Primo shares (net
of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such
holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. Any vested Primo options with a per-share exercise price that is equal
to or greater than the transaction consideration will be cancelled for no consideration.
At the first effective time, the portion of each
Primo option that is outstanding and unexercised as of immediately prior to the first effective time, and has not vested in accordance with its terms, will be cancelled in exchange for an option issued, immediately following the first effective
time, under Cotts equity incentive plans, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, to purchase a number of Cott common shares equal to (a) the number of Primo shares
subject to such unvested Primo option as of immediately prior to the first effective time, multiplied by (b) the equity award adjustment ratio, with an exercise price per share equal to (y) the exercise price per Primo share for which such
Primo option was exercisable as of immediately prior to the first effective time, divided by (z) the equity award adjustment ratio. The equity award adjustment ratio is equal to 1.0229.
Primo Restricted Stock Units
Immediately prior to the first effective time, the portion of each Primo restricted stock unit award (RSU) that is then
outstanding, to the extent vested in accordance with its terms as of the first effective time, will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in
respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo
shares.
At the first effective time, the portion of each Primo RSU that is outstanding as of immediately prior to the first effective
time that is not vested will be cancelled in exchange for a restricted stock unit award issued, immediately following the first effective time, under Cotts equity incentive plans, subject to the same vesting schedule in effect immediately
prior to the first effective time, in each case, covering a number of Cott common shares that is equal to (i) the number of shares of Primo common stock subject to such unvested Primo RSU as of immediately prior to the first effective time,
multiplied by (ii) the equity award adjustment ratio (after such conversion, rollover RSUs). Any rollover RSU issued will be subject to the same terms and conditions as set forth in the cancelled unvested Primo RSU to the extent
such terms and conditions are required for compliance with Section 409A of the Code.
Other Primo Equity-Based Awards
Immediately prior to the first effective time, each vested long-term performance plan unit award then outstanding will be settled and paid to
such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder
will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. At the first effective time, each unvested long-term performance plan unit award will be cancelled for no
consideration.
Immediately prior to the first effective time, each deferred stock unit award will be cancelled in exchange for the right
to receive cash (without interest and net of any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration.
Primo Warrants
Immediately prior to the first effective time, each warrant then outstanding and unexercised and that has a
per-share exercise price less than the amount of the cash consideration will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price
thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive
transaction consideration with respect to such settled and paid Primo shares. Any warrant with an exercise price greater than the cash consideration will be cancelled for no consideration.
The merger agreement and the consummation of the transactions contemplated thereby have been unanimously approved by Primos Board of
Directors, and the Board of Directors has resolved to recommend to the stockholders of Primo to accept the offer and tender their Primo shares to Purchaser pursuant to the offer.
The merger agreement contains representations, warranties and covenants of Cott, Purchaser and Primo that are customary for a transaction of
this nature, including among others, covenants regarding the conduct of their respective businesses during the pendency of the transactions contemplated by the merger agreement, public disclosures and the use of reasonable best efforts to cause the
conditions to such transactions to be satisfied. In addition, Primo has agreed to use reasonable best efforts to obtain and deliver to Cott at or prior to the first effective time the resignation of each director and officer (exclusively from such
officers constitutional officer position and not from employment) of Primo, and Cott has agreed to appoint two of Primos current directors to Cotts Board of Directors after the mergers are consummated and to rebrand Cotts
corporate name under the name Primo Water Corporation.
Pursuant to the merger agreement, prior to the first effective time, Primo is not
permitted to solicit, initiate or knowingly encourage or facilitate any alternative transaction proposals from third parties or to participate in any discussions or negotiations with third parties with respect to any alternative transaction
proposals. Notwithstanding this limitation, prior to the acceptance time of the offer, subject to customary limitations and conditions, Primo may provide information and participate in discussions or negotiations with any third party from whom Primo
receives an unsolicited alternative transaction proposal that Primos Board of Directors determines in good faith constitutes or would reasonably be expected to lead to a superior offer (as defined in the merger agreement). In
addition, upon termination of the merger agreement under specified circumstances, including, among others, the termination by Cott in the event Primos Board of Directors withholds, modifies, or removes its recommendation of the Offer or by
Primo in order to accept a superior offer, Primo must pay Cott a termination fee of $18.94 million in cash.
In
connection with the execution of the merger agreement, Cott and Purchaser entered into separate tender and support agreements (each, a support agreement and collectively, the support agreements) with each of Primos
directors and executive officers (collectively, the supporting stockholders), who beneficially own, in the aggregate, approximately 10.4% of Primo common stock, as of January 10, 2020, to commit, among other things, to tender or
cause to be tendered all outstanding shares of Primo common stock owned by such supporting stockholder no later than 10 business days following commencement of the offer. In connection with the support agreements, each of Primos directors and
officers has agreed to elect the stock consideration in exchange for their tendered shares (except to the extent of mixed consideration shares necessary to ensure that the overall transaction consideration payable to such holder includes sufficient
cash to cover such holders withholding obligations on Primo shares vesting immediately prior to or in connection with the closing of the transactions contemplated by the merger agreement).
The foregoing description of the merger agreement and support agreements does not purport to be complete and is qualified in its entirety by
reference to the full text of the merger agreement, which is attached hereto as Exhibit 2.1 (including the form of support agreement in Annex II to such exhibit) and is incorporated herein by reference.
A copy of the merger agreement has been included to provide security holders with information regarding its terms and is not intended to
provide any factual information about Cott or Primo. The representations, warranties and covenants contained in the merger agreement have been made solely for the purposes of the merger agreement and as of specific dates; were solely for the benefit
of the parties to the
merger agreement; are not intended as statements of fact to be relied upon by security holders, but rather as a way of allocating the risk between the parties to the merger agreement in the event
the statements therein prove to be inaccurate; have been modified or qualified by certain confidential disclosures that were made between the parties in connection with the negotiation of the merger agreement, which disclosures are not reflected in
the merger agreement itself; may no longer be true as of a given date; and may apply standards of materiality in a way that is different from what may be viewed as material by security holders. Security holders are not third-party beneficiaries
under the merger agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Cott, Purchaser or Primo. Moreover, information concerning
the subject matter of the representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in Cotts or Primos public disclosures.