Item 8.01 Other Events.
As previously disclosed, on April 19, 2021, Knoll, Inc., a Delaware corporation
("Knoll"), entered into an Agreement and Plan of Merger with Herman Miller,
Inc., a Michigan corporation ("Herman Miller"), and Heat Merger Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of Herman Miller ("Merger
Sub"), providing for the merger of Merger Sub with and into Knoll, with Knoll
surviving as a wholly-owned subsidiary of Herman Miller (the "Merger"). On June
11, 2021, in connection with the Merger, each of Knoll and Herman Miller filed
with the Securities and Exchange Commission ("SEC") a definitive proxy statement
that also constitutes a prospectus of Herman Miller ("Definitive Proxy
Statement") with respect to the respective special meetings of Knoll
stockholders and Herman Miller shareholders, each scheduled to be held on July
13, 2021.
Litigation Related to the Merger
As previously disclosed in the Definitive Proxy Statement, at that time, three
lawsuits had been filed in connection with the Merger between May 27, 2021 and
June 9, 2021 against one or more of Knoll, the directors of Knoll, Herman Miller
and Merger Sub (the "Defendants"). Two complaints, Stein v. Knoll, Inc. et al.,
C.A. No. 1:21-cv-04759 and Waterman v. Knoll, Inc. et al., C.A. No.
1:21-cv-05119 (the "Waterman lawsuit"), were filed in the United States District
Court for the Southern District of New York. One complaint, Gatto v. Knoll,
Inc. et al., C.A. No. 2:21-cv-12287, was filed in the United States District
Court for the District of New Jersey.
Following the filing of the Definitive Proxy Statement with the SEC, an
additional six lawsuits were filed in connection with the Merger between June
15, 2021 and June 30, 2021 against one or more of the Defendants. One complaint,
Snitkoff v. Andringa et al., C.A. No. 21-6529CB (the "Snitkoff lawsuit"), was
filed in the 20th Circuit Court for the State of Michigan; one complaint,
Strickland v. Knoll, Inc. et al., C.A. No. 1:21-cv-05346, was filed in the
United States District Court for the Southern District of New York; two
complaints, O'Neill v. Knoll, Inc. et al., C.A. No. 1:21-cv-12741, and Martinez
v. Knoll, Inc. et al., C.A. No. 2:21-cv-13144, were filed in the United States
District Court for the District of New Jersey; one complaint, Coffman v. Knoll,
Inc. et al., C.A. No. 1:21-cv-00873-UNA, was filed in the United States District
Court for the District of Delaware; and one complaint, Whitfield v. Knoll, Inc.
et al., C.A. No. 2:21-cv-02776 (the "Whitfield lawsuit"), was filed in the
United States District Court for the Eastern District of Pennsylvania.
The complaints filed in federal court generally allege, among other things, that
Knoll and the directors of Knoll, and, in the case of the Waterman lawsuit and
the Whitfield lawsuit, Herman Miller, and Merger Sub, disseminated or controlled
the dissemination of a false or misleading registration or proxy statement
regarding the proposed Merger in violation of Sections 14(a) and 20(a) of the
Securities Exchange Act of 1934 (the "Exchange Act") and SEC Rule 14a-9
promulgated thereunder. Specifically, such complaints allege that the
registration statement filed by Herman Miller on May 24, 2021 in connection with
the Merger and/or the Definitive Proxy Statement were inaccurate or misleading,
including in respect of the disclosures concerning the parties' financial
projections and the analyses performed by Knoll's financial advisor in support
of its fairness opinion, and omitted material information concerning the sales
process leading up to the Merger and potential conflicts of interest involving
Knoll's financial advisor. The complaints further allege that the directors of
Knoll and, in the case of the Waterman lawsuit and the Whitfield lawsuit, Herman
Miller and Merger Sub, are liable for these violations as "controlling persons"
of Knoll under Section 20(a) of the Exchange Act.
The Snitkoff lawsuit, the sole complaint filed in state court, alleges, among
other things, that the directors of Herman Miller breached their state law
fiduciary duties by approving the Merger and in disseminating materially
incomplete disclosures. The alleged material misstatements and omissions relate
to, among other topics, the opinion of Herman Miller's financial advisor,
potential conflicts of interest involving the directors of Herman Miller and
Herman Miller's financial advisor, and certain background events that occurred
in connection with the Merger.
Among other relief, the complaints seek injunctive relief, including
(1) enjoining the Merger unless and until the Defendants disclose the allegedly
omitted material information, (2) rescinding the Merger in the event the
Defendants consummate the Merger (or awarding rescissory damages), (3) damages,
and (4) an award of attorneys' and experts' fees.
Knoll and Herman Miller believe that the claims in the complaints are without
merit and that no further disclosure is required under applicable law. However,
in order to avoid the risk of the complaints delaying or adversely affecting the
Merger and to minimize the costs, risks, and uncertainties inherent in
litigation, and without admitting any liability or wrongdoing, Knoll and Herman
Miller have determined to voluntarily supplement the Definitive Proxy Statement
as described in this Current Report on Form 8-K. Nothing in this Current Report
on Form 8-K shall be deemed an admission of the legal necessity or materiality
under applicable laws of any of the disclosures set forth herein. To the
contrary, Knoll and Herman Miller specifically deny all allegations in the
complaints that any additional disclosure was or is required.
As a result of supplemental disclosures set forth herein, the plaintiffs in
these actions have agreed to voluntarily dismiss their actions with prejudice.
Supplemental Disclosures to Definitive Proxy Statement
This supplemental information to the Definitive Proxy Statement should be read
in conjunction with the Definitive Proxy Statement, which should be read in its
entirety. Nothing herein shall be deemed an admission of the legal necessity or
materiality of any of the disclosures set forth herein. All page references in
the information below are to pages in the Definitive Proxy Statement, and all
terms used but not defined below shall have the meanings set forth in the
Definitive Proxy Statement.
The following underlined language is added to the first full paragraph on page
48 in the section of the Definitive Proxy Statement entitled "The
Merger-Background of the Transactions."
Following further discussions and negotiations between representatives of
Investindustrial and the Knoll Board and their respective advisors to finalize
definitive investment documentation, and completion of Investindustrial's due
diligence, Knoll entered into an investment agreement with Investindustrial on
June 22, 2020, pursuant to which Knoll subsequently issued and sold to
Investindustrial 164,000 shares of Knoll's Series A Convertible Preferred Stock,
par value $1.00 per share (which we refer to as the "Knoll preferred stock") for
an aggregate purchase price of $164 million, which amount was downsized from the
initial $175 million proposed. The Knoll Board believed the investment by
Investindustrial fortified Knoll's balance sheet and enhanced Knoll's ability to
continue to execute its strategic plan in the face of an uncertain macroeconomic
environment, and also explore future strategic opportunities should they arise.
Pursuant to the terms of the investment agreement, Knoll increased the size of
its board as of the closing date of the investment by Investindustrial in order
to elect an individual designated by Investindustrial to fill the resulting
vacancy. The investment agreement also included a "standstill" provision with a
"don't ask, don't waive" clause, which provision expires on July 21, 2021. The
standstill provision in the investment agreement does not prohibit
Investindustrial from making a confidential proposal to the Knoll Board so long
as it is not publicly disclosed or announced and would not require public
disclosure by any person. Knoll and Investindustrial also entered into a
registration rights agreement.
The following underlined language is added to the second full paragraph on page
65 in the section of the Definitive Proxy Statement entitled "The
Merger-Background of the Transactions."
Also on April 17, 2021, BofA Securities delivered an updated draft disclosure
letter regarding certain of its relationships with Knoll, Herman Miller and
Investindustrial to the Knoll Board. The disclosure letter indicated that from
April 1, 2019 through March 31, 2021, BofA Securities and its affiliates derived
aggregate revenues from Investindustrial and certain of its affiliates of
approximately $4 million for corporate and/or investment banking services.
The following underlined language is added to, and the crossed out language is
deleted from, the first full paragraph in the section of the Definitive Proxy
Statement entitled "The Merger-Opinion of Goldman Sachs, Herman Miller's
Financial Advisor-Premia Analysis" that appears on page 80.
Goldman Sachs reviewed and analyzed, using publicly available information, the
acquisition premia for all the 530 all-cash and mixed consideration acquisition
transactions announced during the time period from January 1, 2007 through April
16, 2021, involving a US-based public company as the target where the disclosed
enterprise values for the transaction were between $1 billion and $5 billion.
The following underlined language is added to, and the crossed out language is
deleted from, the second full paragraph in the section of the Definitive Proxy
Statement entitled "The Merger-Opinion of Goldman Sachs, Herman Miller's
Financial Advisor-Selected Precedent Transactions Analysis" that appears on page
80.
Based on information in public filings, press releases and financial media
reports relating to the applicable transactions, for each of the selected
transactions, Goldman Sachs calculated and compared the implied enterprise value
of the applicable target company based on the consideration paid in the
transaction as a multiple of the target company's publicly disclosed EBITDA over
the last four-quarter period ended prior to the announcement of the applicable
transaction ("EV/LTM EBITDA multiple"). This analysis indicated an illustrative
range of EV/LTM EBITDA multiples of 11.5x to 15.6x and a median of 13.5 14.1x.
The following underlined language is added to the table following the second
full paragraph in the section of the Definitive Proxy Statement entitled "The
Merger-Opinion of Goldman Sachs, Herman Miller's Financial Advisor-Selected
Precedent Transactions Analysis" that appears on page 80.
Selected Transactions
Announcement Date Target Acquirer LTM EV/EBITDA
February 5, 2014 Poltrona Frau S.p.A. Haworth, Inc.* 15.3x**
March 30, 2015 Norcraft Companies, Inc. Fortune Brands Home 11.5x
& Security
October 16, 2016 Steinhoff 15.6x
Fantastic Holdings International
December 21, 2017 Muuto Knoll, Inc. 14.3x
May 23, 2018 Ekornes ASA Qumei Home 12.0x
Furnishing Group
June 7, 2018 HAY A/S Herman Miller, Inc. 14.0x
* Acquired 58.6% interest
** The median EV/LTM EBITDA multiple disclosed in the prior S-4/A of Herman
Miller filed on June 9, 2021 was calculated using a prior multiple for this
transaction (13.1x) that inadvertently excluded cash and debt.
The following underlined language and table are added following the final three
lines of the section of the Definitive Proxy Statement entitled "The
Merger-Opinion of Goldman Sachs, Herman Miller's Financial Advisor-Illustrative
Present Value of Future Share Price Analysis of Herman Miller" that appear on
page 82.
The following tables present the results of this analysis:
Ranges of Implied Present Values as of February 27, 2021 of Future Stock Prices
of Stand-alone Herman Miller
2022E 2023E 2024E
$43.37 - $48.65 $46.66 - $52.03 $47.61 - $52.81
Ranges of Implied Present Values as of February 27, 2021 of Future Stock Prices
of Pro Forma Combined Company*
2022E 2023E 2024E
$42.20 - $49.18 $47.65 - $54.80 $50.20 - $57.11
* Analysis pro forma for the transaction (including the Herman Miller
synergies) assumes NTM EBITDA, in all years, includes 100% credit for run-rate
synergies. Further assumes that one-time costs to achieve the Herman Miller
synergies are added back to NTM EBITDA.
The following underlined language is added to the third full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Knoll-Selected Publicly Traded Companies Analysis" that appears on page 87.
The overall low to high 2021E EV/EBITDA multiples observed for the selected
companies were 8.0x to 22.5x (with a mean of 12.9x and a median of 11.1x). The
overall low to high 2022E EV/EBITDA multiples observed for the selected
companies were 7.5x to 20.2x (with a mean of 10.6x and a median of 8.2x). Based
on BofA Securities' review of the 2021E EV/EBITDA and 2022E EV/EBITDA multiples
for the selected companies and on its professional judgment and experience and
taking into consideration, among other things, the historical trading multiples
of Knoll and the selected companies and certain differences in the respective
financial profiles of Knoll and the selected companies, BofA Securities applied
a multiple reference range of 8.0x to 13.5x to Knoll management's estimated
calendar year 2021E Adjusted EBITDA as reflected in the Knoll forecasts (and
burdened for estimated stock-based compensation expense of $14 million as
provided by the management of Knoll), and a multiple reference range of 7.5x to
10.5x to Knoll management's estimated calendar year 2022E Adjusted EBITDA as
reflected in the Knoll forecasts (and burdened for estimated stock-based
compensation expense of $14 million as provided by the management of Knoll) to
calculate a range of indicative enterprise values from which BofA Securities
subtracted Knoll's net debt and tax-effected pension liability of $290 million
as of December 31, 2020, as reflected in Knoll public filings, and dividing the
result by a number of fully-diluted shares of Knoll common stock outstanding
(calculated on a treasury stock method basis, based on information provided by
the management of Knoll, including assumed conversion of Knoll preferred stock)
to arrive at a range of indicative equity values per share of Knoll common stock
(rounded to the nearest $0.25).
The following underlined language is added to the fourth full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Knoll-Selected Publicly Traded Companies Analysis" that appears on pages 87 and
88.
The overall low to high 2021E Price/EPS multiples observed for the selected
companies were 14.4x to 56.2x (with a mean of 28.8x and median of 22.1x). The
overall low to high 2022E Price/EPS multiples observed for the selected
companies were 13.2x to 27.7x (with a mean of 19.4x and median of 17.2x). Based
on BofA Securities' review of the Price/EPS multiples for the selected companies
and on its professional judgment and experience and taking into consideration,
among other things, the historical trading multiples of Knoll and the selected
companies and certain differences in the respective financial profiles of Knoll
and the selected companies, BofA Securities applied a 2021E Price/ EPS multiple
reference range of 20.0x to 30.0x to Knoll management's estimates of calendar
year 2021E Adjusted Diluted EPS as reflected in the Knoll forecasts, and a 2022E
Price/EPS multiple reference range of 15.0x to 25.0x to Knoll management's
estimates of calendar year 2022E Adjusted Diluted EPS as reflected in the Knoll
forecasts to calculate implied equity value reference ranges per share of Knoll
common stock (rounded to the nearest $0.25).
The following underlined language is added to the table following the first full
paragraph in the section of the Definitive Proxy Statement entitled "The
Merger-Opinion of BofA Securities, Knoll's Financial Advisor-Summary of Material
Financial Analyses of Knoll-Selected Precedent Transactions Analysis" that
appears on page 88.
BofA Securities reviewed, to the extent publicly available, financial
information relating to the following six selected transactions involving
acquisitions of publicly traded furniture companies since 2014.
Transaction
Date Announced Target Acquiror TV/LTM EBITDA Value (1)(2)
Herman Miller, $232
October 2019 HAY A/S Inc. 13.8x
iGuzzini Illuminazione Fagerhult $429
October 2018 S.p.A Group 10.8x
QuMei Home $695
May 2018 Ekornes Furnishings 11.6x
December 2017 Muuto Knoll, Inc. 14.5x $304
Generation Brands $525
May 2016 Holdings, Inc. AEA Investors 10.5x
February 2014 Poltrana Frau Group Haworth Inc. 15.1x $654
(1) Full transaction value implied when less than 100% stake.
(2) Figures in USD in millions.
The following underlined language is added to the third full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Knoll-Selected Precedent Transactions Analysis" that appears on pages 88 and 89.
Based on BofA Securities' review of the TV/LTM EBITDA multiples for the selected
transactions and on its professional judgment and experience, BofA Securities
applied a TV/LTM EBITDA multiple reference range of 10.5x to 15.0x derived from
the selected transactions to Knoll management's estimate of Knoll's LTM Adjusted
EBITDA as of March 31, 2021 of approximately $97 million, as reflected in the
Knoll forecasts (and burdened for stock-based compensation), to calculate a
range of implied enterprise values for Knoll. BofA Securities then calculated an
implied equity value reference range per share of Knoll common stock (rounded to
the nearest $0.25) by subtracting from this range of implied enterprise values
Knoll's net debt and tax-effected pension liability of $290 million as of
December 31, 2020, as reflected in Knoll public filings and dividing the result
by a number of fully-diluted shares of Knoll common stock outstanding
(calculated on a treasury stock method basis, based on information provided by
the management of Knoll, including assumed conversion of Knoll preferred stock).
This analysis indicated the following approximate implied equity value reference
ranges per share of Knoll common stock (rounded to the nearest $0.25), as
compared to the implied consideration value:
Implied Equity Value Implied
Reference Range Per Share Consideration
of Knoll Common Stock Value
$11.75 - $19.00(1) $ 25.18
(1) In its presentation to the Knoll Board on April 18, 2021, BofA Securities
inadvertently omitted certain shares of Knoll restricted stock from its
calculation when performing this analysis and derived a range of indicative
equity values per share of Knoll common stock (rounded to the nearest $0.25)
of $12.00 to $19.25.
The following underlined language is added to the first full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Knoll-Discounted Cash Flow Analysis" that appears on page 89.
BofA Securities performed a discounted cash flow analysis of Knoll to calculate
a range of implied present values per share of Knoll common stock utilizing
estimates of the standalone, unlevered, after-tax free cash flows Knoll was
expected to generate over the period from December 31, 2020 through December 31,
2025 based on the estimates provided to BofA Securities by Knoll management as
described in the section entitled "Certain Unaudited Prospective Financial
Information-Certain Knoll Unaudited Prospective Financial Information." BofA
Securities calculated a terminal value for Knoll by applying a selected range of
perpetuity growth rates of 2.00% to 2.50%, based on BofA Securities'
professional judgment and experience and after taking into consideration, among
other things, the observed data for Knoll and the selected companies, the
historical trading multiples of Knoll and the selected companies, and certain
differences in the respective financial profiles of Knoll and the selected
companies as described under "-Summary of Material Financial Analyses of
Knoll-Selected Publicly Traded Companies Analysis", to Knoll's normalized free
cash flows in the terminal year of approximately $109 million as derived from
the estimates provided to BofA Securities by Knoll management as described in
the section entitled "Certain Unaudited Prospective Financial
Information-Certain Knoll Unaudited Prospective Financial Information" and
approved by the management of Knoll. BofA Securities then calculated implied
equity value reference ranges per share of Knoll common stock (rounded to the
nearest $0.25) by deducting from this range of present values, Knoll's net debt
and tax-effected pension liability of $290 million as of December 31, 2020, as
reflected in Knoll public filings and dividing the result by a number of
fully-diluted shares of Knoll common stock outstanding (calculated on a treasury
stock method basis, based on information provided by the management of Knoll,
including assumed conversion of Knoll preferred stock). The cash flows were
discounted to present value as of December 31, 2020, utilizing mid-year
discounting convention, and using a discount rate range of 7.50% to 9.75%, which
was based on an estimate of Knoll's weighted average cost of capital derived
using the capital asset pricing model (which takes into account the risk free
rate, the levered beta and the applicable equity market risk premium) and the
estimated cost of debt. This analysis indicated the following approximate
implied equity value reference range per share of Knoll common stock (rounded to
the nearest $0.25), as compared to the implied consideration value:
Implied Equity Value Implied
Reference Range Per Share Consideration
of Knoll Common Stock Value
$14.75 - $25.75 $ 25.18
The following underlined language is added to the third full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Herman Miller-Selected Publicly Traded Companies Analysis" that appears on page
90.
The overall low to high 2021E EV/EBITDA multiples observed for the selected
companies were 9.6x to 22.5x (with a mean of 14.0x and a median of 13.1x). The
overall low to high 2022E EV/EBITDA multiples observed for the selected
companies were 8.0x to 20.2x (with a mean of 11.1x and a median of 9.3x). Based
on BofA Securities' review of the 2021E EV/EBITDA and 2022E EV/EBITDA multiples
for the selected companies and on its professional judgment and experience and
taking into consideration, among other things, the historical trading multiples
of Herman Miller and the selected companies and certain differences in the
respective financial profiles of Herman Miller and the selected companies, BofA
Securities applied (i) a multiple reference range of 8.0x to 13.5x to Herman
Miller management's estimated calendar year 2021E Adjusted EBITDA as reflected
in the Herman Miller forecasts (and burdened for estimated stock-based
compensation expense of $10 million as provided by the management of Knoll) to
calculate a range of indicative enterprise values from which BofA Securities
subtracted Herman Miller's net debt and non-controlling interest and
tax-effected pension liability of $15 million as of December 31, 2020, as
provided by the management of Knoll, and dividing the result by the number of
fully-diluted shares of Herman Miller common stock outstanding (calculated on a
treasury stock method basis, based on information provided by the management of
Knoll), and (ii) a multiple reference range of 7.5x to 10.5x to Herman Miller
management's estimated calendar year 2022E Adjusted EBITDA as reflected in the
Herman Miller forecasts (and burdened for estimated stock-based compensation
expense of $12 million as provided by the management of Knoll) to calculate a
range of indicative enterprise values from which BofA Securities subtracted
Herman Miller's net debt and non-controlling interest and tax-effected pension
liability of $15 million as of December 31, 2020, as provided by the management
of Knoll, and dividing the result by the number of fully-diluted shares of
Herman Miller common stock outstanding (calculated on a treasury stock method
basis, based on information provided by the management of Knoll), in each case,
to arrive at a range of indicative equity values per share of Herman Miller
common stock (rounded to the nearest $0.25).
The following underlined language is added to the fourth full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Herman Miller-Selected Publicly Traded Companies Analysis" that appears on page
90.
The overall low to high 2021E Price/EPS multiples observed for the selected
companies were 20.6x to 56.2x (with a mean of 31.9x and median of 29.5x). The
overall low to high 2022E Price/EPS multiples observed for the selected
companies were 14.3x to 27.7x (with a mean of 20.0x and median of 17.2x). Based
on BofA Securities' review of the Price/EPS multiples for the selected companies
and on its professional judgment and experience and taking into consideration,
among other things, the historical trading multiples of Herman Miller and the
selected companies and certain differences in the respective financial profiles
of Herman Miller and the selected companies, BofA Securities applied a 2021E
Price/ EPS multiple reference range of 20.0x to 30.0x to the estimates of
calendar year 2021E Adjusted EPS provided to BofA Securities by Knoll management
as described in the section entitled "Certain Unaudited Prospective Financial
Information-Certain Herman Miller Unaudited Prospective Financial Information"
and a 2022E Price/EPS multiple reference range of 15.0x to 25.0x to the
estimates of calendar year 2022E Adjusted EPS provided to BofA Securities by
Knoll management as described in the section entitled "Certain Unaudited
Prospective Financial Information-Certain Herman Miller Unaudited Prospective
Financial Information" to calculate implied equity value reference ranges per
share of Herman Miller common stock (rounded to the nearest $0.25).
The following underlined language is added to the first full paragraph in the
section of the Definitive Proxy Statement entitled "The Merger-Opinion of BofA
Securities, Knoll's Financial Advisor-Summary of Material Financial Analyses of
Herman Miller-Discounted Cash Flow Analysis" that appears on page 91.
BofA Securities performed a discounted cash flow analysis of Herman Miller to
calculate a range of implied present values per share of Herman Miller common
stock utilizing estimates of the standalone, unlevered, after-tax free cash
flows Herman Miller was expected to generate over the period from December 31,
2020 through December 31, 2025 based on the estimates provided to BofA
Securities by Knoll management as described in the section entitled "Certain
Unaudited Prospective Financial Information-Certain Herman Miller Unaudited
Prospective Financial Information." BofA Securities calculated a terminal value
for Herman Miller by applying a selected range of perpetuity growth rates of
2.00% to 2.50%, based on BofA Securities' professional judgment and experience
and taking into consideration, among other things, the observed data for Herman
Miller and the selected companies, the historical trading multiples of Herman
. . .
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