Sunday, October 30, 2011

Two-track transaction structure: case of acquisition of Immucor, Inc., by TPG Partners VI, L.P.

This note discusses in brief the two-track transaction structure (TTT Structure) generally employed in the United States for acquisitions of the corporations and for this purpose have considered the case of acquisition of Immucor, Inc., a Georgia corporation (Immucor or Target) by TPG Partners VI, L.P., a Delaware Limited Partnership (TPG Partners) as a base model.  Further, the note also discusses in brief the salient features of the merger agreement signed between Immucor and TPG Partners.

Transaction Structure

Under the terms of the merger agreement (Merger Agreement) signed on 2 July, 2011, between Immucor, IVD Holdings Inc., a Delaware Corporation (IVD Holdings or Parent), which is controlled by TPG Partners and IVD Acquisition Corporation, a Georgia corporation (Purchaser or Merger Sub) (Parent, Merger Sub, Immucor are collectively referred as Parties, and Parent, Merger Sub are collectively referred as Acquirers)) pursuant to consummation of tender offer (Tender Offer) in accordance with procedure laid under the Securities Exchange Act, 1934 (SEA), Merger Sub would acquire the share of Immucor from the shareholders tendering their shares under the Tender Offer at a purchase price of $27 per share and thereafter upon satisfaction or waiver of certain conditions, Merger Sub will be merged with and into Immucor (Merger), with Immucor continuing as the surviving corporation in the merger and a wholly owned indirect subsidiary of Parent.  



TTT Structure under the Merger Agreement

Under the terms of Merger Agreement, the Parties agreed to complete the Merger whether or not the Tender Offer is complete.  If the Tender Offer is not completed, the Parties agreed that the Merger could only be completed after the receipt of shareholder approval of the Merger Agreement at the special meeting.  Under a typical TTT Structure acquisition/ merger, the Tender Offer under SEA and the Merger under the State’s corporation law (here it is Georgia Business Corporation Code) are independent of each other and often runs parallel to each other.  The Target, parallely solicits proxies for the special meeting to obtain shareholder approval of the Merger Agreement to be able to consummate the Merger regardless of the outcome of the Tender Offer.  However, if the Tender Offer bid is successful and the Acquirer acquires more than 90% of the outstanding shares (95% shares in some States) or in certain qualified situation exercises Top-Up Option, discussed below and reach 90% shareholding level and therefore resultantly is in a position of effect short-form merger, then there is no requirement of special meeting of the shareholders to effect Merger.

The TTT Structure for the Tender Offer enables the Target’s shareholders to receive the cash price pursuant to the Tender Offer in a relatively short time-frame (and reduce the uncertainty during the pendency of the transaction), followed by the cash-out Merger in which the Target’s shareholders that do not tender in the Tender Offer will receive the same cash price as is paid in the Tender Offer.  In addition TTT structure permits the use of a one-step Merger, under certain circumstances, in the event the Tender Offer is unable to be effected in a timely manner.

Salient features of the merger agreement signed between the Parties


The Merger Agreement signed between the Parties had several boiler plate provisions typical to a merger agreement.  Among other things, some of the important provisions are discussed below:         

  • Top-Up Option: Pursuant to the Merger Agreement, Immucor granted to Purchaser an irrevocable option to purchase at the Offer Price an aggregate number of Shares equal to the lowest number of Shares that, when added to the number of Shares owned by Parent, Purchaser and their affiliates at the time of such exercise (after giving effect to the Offer Closing), will constitute one Share more than 90% of the outstanding Shares on a fully-diluted basis.
  • Equity Financing: In connection with the Merger Agreement, Parent received an equity commitment letter from the TPG Fund, dated 2 July, 2011,pursuant to which the TPG Partners has committed to purchase equity securities of Parent, at or prior to the Merger Closing, with an aggregate purchase price of up to $691 million, for the purpose of funding a portion of the aggregate offer price and/or the aggregate per share merger consideration, as applicable, required to be paid pursuant to the Merger Agreement and the transactions contemplated thereby, as well as related fees and expenses.
  • Debt Financing : Purchaser received a debt commitment letter, from Citigroup Global Markets Inc., which, JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC, to provide $1.1 billion in Debt Financing, consisting of a $600 million senior secured term loan facility, a $400 million senior unsecured bridge facility and a $100 million senior secured revolving facility.
  • Limited Guaranty: In connection with the Merger Agreement, the TPG Partners executed and delivered to the Target a limited guaranty (Guaranty), dated 2 July, 2011.  Pursuant to the Guaranty, the TPG Partners has irrevocably and unconditionally guaranteed the due and punctual payment by Parent to the Target of $90.0 million, when required to be paid under the terms of the Merger Agreement.

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