Item 1.01 Entry into a Material Definitive Agreement.
On
Algoma is the parent holding company of
Concurrently with the execution of the Merger Agreement, Algoma and Legato
entered into subscription agreements ("Subscription Agreements") with investors
for an aggregate investment in the combined company of
The Merger and the other transactions contemplated by the Merger Agreement ("Transactions") are expected to be consummated in the third quarter of 2021, following receipt of the required approval by Legato's stockholders and the fulfilment of certain other conditions set forth in the Merger Agreement (the "Closing") and described herein.
The parties have ascribed a post-Closing enterprise value of
The following summary of the Merger Agreement is qualified in its entirety by reference to the text of the Merger Agreement, which is attached as an exhibit hereto and is incorporated herein by reference.
Merger Agreement Closing Consideration
Pursuant to the Merger Agreement, (i) immediately prior to the effective time of
the Merger ("Effective Time"), Algoma will effectuate a stock split ("Stock
Split"), such that each outstanding Algoma Common Share will become such number
of Algoma Common Shares, each valued at
1 Earnout
Pursuant to the Merger Agreement, the holders of Algoma Common Shares prior to
the Merger (including the holders of Algoma Common Shares issued upon exchange
of long-term incentive plan awards pursuant to the Merger Agreement)
(collectively, the "Algoma Shareholders") will have the contingent right to
receive their pro rata portion of additional earnout consideration if certain
earnout targets based on Adjusted EBITDA and the trading price of the Algoma
Common Shares are met, as described in more detail below. The Merger Agreement
defines "Adjusted EBITDA" as consolidated net income (loss) of
The Algoma Shareholders may earn the following aggregate number of Algoma Common Shares upon the satisfaction of the following earnout targets (each, an "Earnout Event"):
(i) 15,000,000 Algoma Common Shares if Adjusted EBITDA (as calculated by
Algoma's management and accepted by its board of directors, including a majority
of disinterested directors), is equal to or greater than
(ii) 7,500,000 Algoma Common Shares, less the number of shares issued in
connection with the Second EBITDA Issuance, if the volume weighted average price
("VWAP") of Algoma Common Shares on The Nasdaq Capital Market ("Nasdaq") or
other primary stock exchange exceeds
(iii) 7,500,000 Algoma Common Shares, less the number of shares issued in
connection with the Third EBITDA Issuance, if the VWAP exceeds
Item 3.02 Unregistered Sales of
The information set forth in Item 1.01 relating to the Subscription Agreements is incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
Press Release
Attached as Exhibit 99.1 to this Report is the press release jointly issued by
the parties announcing the Transactions on
Investor Meetings
Attached as Exhibit 99.2 to this Report is the form of investor presentation to be used by Legato and Algoma in presentations to certain of their securityholders and other persons regarding the proposed Transactions.
The information set forth in this Item 7.01, including the exhibits attached hereto, is intended to be furnished and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.
Cautionary Note Regarding Forward Looking Statements
Neither Legato, Algoma nor any of their respective affiliates makes any representation or warranty as to the accuracy or completeness of the information contained in this Current Report on Form 8-K. This Current Report on Form 8-K is not intended to be all-inclusive or to contain all the information that a person may desire in considering the proposed Transactions discussed herein. It is not intended to form the basis of any investment decision or any other decision in respect of the proposed Transactions.
This Current Report on Form 8-K and the exhibits filed or furnished herewith include "forward-looking statements" within the meaning of the federal securities laws with respect to the proposed transactions between Legato and Algoma, including statements regarding the benefits of the transaction, the anticipated timing of the Transactions, the business of Algoma and the markets in which it operates. Legato's and Algoma's actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. These forward-looking statements generally are identified by the words "aspire," "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "will be," "will continue," "will likely result," "could," "should," "believe(s)," "predicts," "potential," "continue," "future," "opportunity," "strategy," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, Legato's and Algoma's expectations with respect to future performance and anticipated financial impacts of the proposed Transactions.
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These forward-looking statements involve significant risks and uncertainties
that could cause the actual results to differ materially from the expected
results. Most of these factors are outside Legato's and Algoma's control and are
difficult to predict. Factors that may cause such differences include, but are
not limited to: the risk that the benefits of the Merger may not be realized;
the risk that the Merger may not be completed in a timely manner or at all,
which may adversely affect the price of Legato's securities; the failure to
satisfy the conditions to the consummation of the Merger, including the failure
of Legato's stockholders to approve and adopt the Merger Agreement or the
failure of Legato to satisfy the Minimum Cash Condition following redemptions by
its stockholders; the inability to complete the PIPE; the occurrence of any
event, change or other circumstance that could give rise to the termination of
the Merger Agreement; the outcome of any legal proceedings that may be initiated
following announcement of the Merger; the combined company's continued listing
on Nasdaq and application to list on the TSX after closing of the proposed
business combination; the risk that the proposed transaction disrupts current
plans and operations of Algoma as a result of the announcement and consummation
of the Merger; costs related to the Merger; changes in applicable laws or
regulations; the possibility that the combined company may be adversely affected
by other economic, business, and/or competitive factors; the impact of COVID-19
or other adverse public health developments; and other risks and uncertainties
that will be detailed in the Proxy Statement/Prospectus (as defined below) and
as indicated from time to time in Legato's filings with the
Legato and Algoma caution that the foregoing list of factors is not exclusive. Legato and Algoma caution readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Neither Legato nor Algoma undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.
Additional Information and Where to Find It
This document is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any securities or in respect of the transaction and does not constitute an offer to sell, buy, or exchange or the solicitation of an offer to sell, buy, or exchange any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, purchase, or exchange of securities or solicitation of any vote or approval in any jurisdiction in contravention of applicable law.
In connection with the proposed transaction between Algoma and Legato, Algoma
will file with the
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Participants in the Solicitation
Legato, Algoma and certain of their respective directors, executive officers,
and employees may be considered to be participants in the solicitation of
proxies in connection with the transaction. Information regarding the persons
who may, under the rules of the
Non-GAAP/IFRS Financial Information
Some of Algoma's financial information and data contained herein and in the
exhibits hereto does not conform to SEC Regulation S-X in that it includes
certain financial information not derived in accordance with United States
Generally Accepted Accounting Principles ("GAAP") or International Financial
Reporting Standards as issued by the
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits: Exhibit Description 2.1* Agreement and Plan of Merger, dated as ofMay 24, 2021 , by and among 1295908B.C. Ltd. ,Algoma Merger Sub, Inc. , andLegato Merger Corp. 10.1 Form of Subscription Agreement, dated as ofMay 24, 2021 . 10.2 Form of Support Agreement, dated as ofMay 24, 2021 . 10.3 Form of Lockup Agreement, dated as ofMay 24, 2021 . 99.1Joint Press release, datedMay 24, 2021 . 99.2 Investor Presentation.
* Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2).
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