Item 1.01
Entry into a Material Definitive Agreement.
Merger Agreement
On August
30
, 2017, NCS Multistage Holdings, Inc. (the “
Company
”) entered into an Agreement and Plan of Merger
(the “
Merger Agreement
”) with Spectrum Tracer Services, LLC, an Oklahoma limited liability company (“
Spectrum
”), Pioneer Investment, Inc., a Delaware corporation and indirect wholly owned subsidiary of the Company (“
Pioneer Investment
”), Spartan Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Pioneer Investment (“
Merger Sub
”) and STSR LLC, an Oklahoma limited liability company, solely in its capacity as the Representative (as defined in the Merger Agreement), pursuant to which the Company will acquire
Spectrum in exchange for $80 million, on a cash-free, debt-free basis, which will be c
omprised of (i) approximately $
73 million in cash (the “
Cash Consideration
”) and (ii) approximately 0.
4
million shares of common stock of the Company,
par value $0.01 per share (“
Company Common Stock
”), such shares of Company Common Stock to be issued to certain unitholders of Spectrum (the “
Rollover Members
”) who have elected to receive a portion of the Consideration payable to them in equity (the “
Equity Consideration
” and together with the Cash Consideration, the “
Consideration
”).
The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will be merged with and into Spectrum, with Spectrum continuing as the surviving entity and an indirect wholly owned subsidiary of the Company (the “
Merger
”).
The Cash Consideration is subject to certain adjustments, including an earn-out that would permit up to an additional $12.5 million in consideration if certain financial performance measures related to Spectrum’s operations are achieved, working capital adjustments and reimbursement by the
Company for specified capital expenditures.
The closing of the Merger (the “
Closing
”) is currently expected to occur on August 31, 2017.
The Merger Agreement includes customary representations and warranties regarding the operations and business of Spectrum, as well as customary covenants and indemnity provisions. The parties have agreed to indemnify each other with regards to breaches of their respective representations, warranties and covenants set forth in the Merger Agreement, subject to certain exceptions as more particularly set forth in the Merger Agreement. Spectrum has also agreed to indemnify the Company for certain environmental liability costs incurred in connection with, arising out of or resulting from Spectrum’s importation, exportation, manufacture, treatment, use, handling, transportation, storage, disposal of chemical substances, or exposure of any person to chemical substances, prior to the closing that is not in compliance with any applicable environmental law, as well as certain other matters enumerated in the Merger Agreement. The Closing is subject to the satisfaction or waiver of a number of customary closing conditions as set forth in the Merger Agreement, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “
HSR Act
”). The Federal Trade Commission has already granted early termination under the HSR Act. The Merger Agreement may also be terminated under certain limited
circumstances, including the right of either party to terminate the Merger Agreement i
f the Merger does not occur by
September 15, 2017.
Simultaneously with the Closing, the Company and the Rollover Members will enter into a Contribution Agreement, pursuant to which such members will contribute
certain
of their equity interests in Spectrum to the Company in exchange for Company Common Stock, comprising the Equity Consideration
portion of the Consideration to be paid by the Company in connection with the Merger
.
The foregoing description of the Merger Agreement and the transactions contemplated thereby in this Current Report on Form 8-K (“
Form 8-K
”) is only a summary and does not purport to be complete and is qualified by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and incorporated by reference herein.