Item 8.01. Other Events.
As previously disclosed, On May 10, 2021, Domtar Corporation, a Delaware
corporation (the "Company") entered into an agreement and plan of merger (the
"Merger Agreement") with Karta Halten B.V., a private limited company organized
under the laws of the Netherlands ("Parent"), Paper Excellence B.V., a private
limited company organized under the laws of the Netherlands, Hervey Investments
B.V., a private limited company organized under the laws of the Netherlands, and
Pearl Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of
Parent ("Merger Sub"), pursuant to which, among other things, Merger Sub will be
merged with and into the Company (the "Merger"), with the Company surviving the
Merger as a wholly owned subsidiary of Parent.
On June 29, 2021, the Company filed a definitive proxy statement in connection
with the special meeting of the stockholders of the Company to consider and vote
on a proposal to adopt the Merger Agreement.
On June 17, 2021 and June 30, 2021, the Company received demand letters (the
"Demand Letters") from stockholders for supplemental disclosures regarding the
Merger.
The definitive proxy statement is modified and supplemented by, and should be
read as part of, and in conjunction with, the disclosures set forth in this
current report on Form 8-K. To the extent that information in this current
report on Form 8-K differs from or updates information contained in the
definitve proxy statement, the information in this current report on Form 8-K
shall supplement or modify the information in the definitve proxy statement.
Supplemental Disclosures
The Company is making the following supplemental disclosures to the definitive
proxy statement in connection with its response to the Demand Letters. The
Company believes that no further disclosure is required to supplement the
definitive proxy statement under applicable law. Nothing in this supplemental
disclosure shall be deemed an admission of the legal necessity or materiality of
any of the disclosures set forth herein. Capitalized terms used herein but not
otherwise defined herein have the meanings ascribed to those terms in the
definitive proxy statement. All page references are to the definitive proxy
statement and terms used below, unless otherwise defined, shall have the
meanings ascribed to such terms in the definitive proxy statement. For the
avoidance of doubt, no deletion of any text or information omitted from this
supplemental disclosure is intended.
The disclosure in the section entitled "Background of the Merger", beginning on
page 38 of the definitive proxy statement, is hereby modified by deleting the
struck through text and inserting the new text underlined in the below portions
of such section.
From time to time over the course of the next two years, Barclays remained in
contact with Mr. Williams and indicated that it believed PE was still interested
in a potential transaction, but no further discussions occurred between the
Company and PE during this period. The Board was kept apprised of all material
discussions with Barclays during this period.
On January 8, 2021, the Company announced an agreement to sell its personal care
business to AIP pPartners for $920 million in cash (the "AIP Transaction"). The
Company announced that it would use the proceeds to reduce debt by $600 million
and to repurchase $300 million in Company common stock. The transaction closed
on March 1, 2021. The AIP Transaction was executed prior to PE's renewed
expression of interest in a transaction, and there was no nexus between the AIP
Transaction and a potential transaction with PE.
On March 31, 2021, the parties executed a new bilateral non-disclosure
agreement, which contained customary standstill and non-solicitation provisions,
and a "clean team" addendum with respect to competitively sensitive information.
The standstill provision would expire in the event (i) of the entry by the
Company or one of its affiliates into a binding definitive agreement with any
third party to effect an Alternative Transaction, (ii) of the public
announcement by the Company that it is engaged in a process to review to its
strategic alternatives (including with respect to potential Alternative
Transactions) or (iii) that a tender or exchange offer, which if consummated
would constitute an Alternative Transaction, is made for securities of the
Company and the board of directors of the Company fails to recommend that its
stockholders reject such offer within ten business days from the date of
commencement of such offer. The term "Alternative Transaction", with respect to
the Company, is defined in the non-disclosure agreement to mean any proposal or
offer (other than a proposal or offer by PE or its affiliates) made by any
person relating to, in a single transaction or series of related transactions,
any direct or indirect (a) acquisition of more than 50% of the assets of the
Company and its subsidiaries, taken as a whole, or assets comprising 50% or more
of the consolidated revenues or EBITDA of the Company and its subsidiaries,
taken as a whole, including in any such case through the acquisition of one or
more subsidiaries of the other party or (b) acquisition in any manner by any
person or group of more than 50% of the Company's equity securities.
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The disclosure in the section entitled "Opinion of Morgan Stanley & Co. LLC" is
hereby modified by inserting the new text underlined in the below portion of
such section in the sub-section "Summary of Financial Analyses-Discounted Cash
Flow Analysis", beginning on page 53 of the definitive proxy statement.
The estimated unlevered free cash flows and the range of terminal values were
then discounted to present values as of March 31, 2021 by assuming the mid-year
convention and using a range of discount rates of between 8.2% and 9.8%, which
range of discount rates was selected, upon the application of Morgan Stanley's
professional judgment and experience, to reflect the Company's estimated
weighted average cost of capital based on the capital asset pricing model.
The disclosure in the section entitled "Opinion of Morgan Stanley & Co. LLC" is
hereby modified by inserting the new text underlined in the below portion of
such section in the sub-section "Summary of Financial Analyses- Discounted
Equity Value Analysis", beginning on page 53 of the definitive proxy statement.
Morgan Stanley then discounted the resulting ranges of equity value per share of
Company common stock to March 31, 2021 at a discount rate of 10.0%, selected by
Morgan Stanley based on the application of its professional judgment and
experience to reflect the Company's cost of equity based on the capital asset
pricing model.
The disclosure in the section entitled "Opinion of Morgan Stanley & Co. LLC" is
hereby modified by inserting the new text underlined in the below portion of
such section in the sub-section "Summary of Financial Analyses- Publicly Traded
Comparable Companies Analysis", beginning on page 54 of the definitive proxy
statement.
Publicly Traded Comparable Companies Analysis. Morgan Stanley performed a
publicly traded comparable companies analysis, which attempts to provide an
implied value of a company by comparing it to similar companies that are
publicly traded. Morgan Stanley reviewed and compared, using publicly available
information, certain future financial information for the Company with
corresponding future financial information, ratios and public market multiples
for other companies that shared certain similar characteristics to the Company
(the "comparable companies"). Morgan Stanley chose comparable companies that it
judged to be similar in certain respects to the Company's business or aspects
thereof based on Morgan Stanley's professional judgment and experience.
The disclosure in the section entitled "Opinion of Morgan Stanley & Co. LLC" is
hereby modified by deleting the struck through text and inserting the new text
underlined in the below portion of such section in the sub-section "General",
beginning on page 56 of the definitive proxy statement.
In the two years prior to the date of its opinion, Morgan Stanley and its
affiliates have provided financial advisory and financing services to the
Company and have received aggregate fees in connection with such services of
approximately $10 million to $20 million in the aggregate. In the two years
prior to the date of its opinion, Morgan Stanley and its affiliates have not
received any fees from any of the Parent Parties in connection with financial
advisory or financing services. In the two years prior to the date of its
opinion, Morgan Stanley and its affiliates have provided financial advisory
services to the Company and have received aggregate fees in connection with such
services of approximately $10 million to $15 million in the aggregate. In the
two years prior to the date of its opinion, Morgan Stanley and its affiliates
have also provided financing services to the Company and have received aggregate
fees in connection with such services of less than $1 million in the aggregate.
In addition, Morgan Stanley or an affiliate thereof is currently (and was as of
the date of its opinion) a lender to the Company. Morgan Stanley may also seek
to provide financial advisory and financing services to the Company or the
Parent Parties and their respective affiliates in the future and would expect to
receive fees for the rendering of these services.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. This
communication may be deemed to be solicitation material in respect of the
proposed merger between Domtar and Karta Halten B.V. In connection with the
proposed merger, Domtar has filed a definitive proxy statement with the SEC.
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT, BECAUSE IT CONTAINS
IMPORTANT INFORMATION. Security holders may obtain a free copy of the proxy
statement and other documents filed by Domtar with the SEC at
http://www.sec.gov. Free copies of the proxy statement and Domtar's other
filings with the SEC may also be obtained from Domtar. Free copies of documents
filed with the SEC by Domtar will be made available free of charge on Domtar's
investor relations website at
https://www.domtar.com/en/who-we-are/investors-governance/investors.
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PARTICIPANTS IN THE MERGER SOLICITATION
Domtar and its directors and executive officers may be deemed to be participants
in the solicitation of proxies from Domtar's stockholders in respect of the
proposed merger. Information about the directors and executive officers of
Domtar is set forth in Domtar's annual proxy, which was filed with the SEC on
March 25, 2021. Stockholders may obtain additional information regarding the
interest of such participants by reading the proxy statement regarding the
proposed merger.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this article, and other written and oral
statements made from time to time by us or on our behalf are based on current
expectations, projections about operations, industry conditions, financial
condition, and liquidity, may not relate strictly to historical or current facts
and may contain forward-looking statements that reflect our current views with
respect to future events and financial performance including the proposed
transaction between Domtar and Parent. As such, they are considered
"forward-looking statements" which provide current expectations or forecasts of
future events. Such statements can be identified by the use of terminology such
as "anticipate", "believe", "expect", "intend", "aim", "target", "plan",
"continue", "estimate", "project", "may", "will", "should" and similar
expressions. These forward-looking statements should be considered with the
understanding that such statements involve a variety of risks and uncertainties,
known and unknown, and may be affected by inaccurate assumptions. Consequently,
no forward-looking statement can be guaranteed and actual results may vary
materially. Many risks, contingencies and uncertainties could cause actual
results to differ materially from our forward-looking statements.
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