Item 8.01. Other Events.
Litigation Related to the Merger.
As previously disclosed, on December 8, 2020, MTS Systems Corporation, a
Minnesota corporation (the "Company"), Amphenol Corporation, a Delaware
corporation ("Parent") and Moon Merger Sub Corporation, a Minnesota corporation
and wholly-owned subsidiary of Parent ("Merger Sub") entered into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which Merger Sub will be
merged with and into the Company, with the Company surviving as a wholly-owned
subsidiary of Parent (the "Merger").
Lawsuits relating to the Merger have been filed by purported shareholders of the
Company as follows (collectively, the "Lawsuits"): (i) a lawsuit captioned Shiva
Stein v. MTS Systems Corporation, et. al., No. 1:21-cv-00139-ARR-RLM, was filed
on January 11, 2021 in the United States District Court for the Eastern District
of New York (the "Stein Lawsuit"); (ii) a lawsuit captioned Samuel Carlisle v.
MTS Systems Corporation, et. al., No 1:21-cv-00589, was filed on January 22,
2021 in the United States District Court for the Southern District of New York
(the "Carlisle Lawsuit"); (iii) a lawsuit captioned Anne Roy v. MTS Systems
Corporation, et. al., No. 1:21- cv-00388, was filed on January 23, 2021 in the
United States District Court for the Eastern District of New York (the "Roy
Lawsuit"); (iv) a lawsuit captioned Leo Schumacher v. MTS Systems Corporation,
et al., No. 1:21-cv-00094-UNA, was filed on January 27, 2021 in the United
States District Court for the District of Delaware (the "Schumacher Lawsuit");
(v) a lawsuit captioned Alain Dulac v. MTS Systems Corporation, et. al., No:
1:21-cv-00926, was filed on February 3, 2021 in the United States District Court
for the Southern District of New York (the "Dulac Lawsuit"); (vi) a lawsuit
captioned Frank Gallo v. MTS Systems Corporation, et. al., No:
4:21-cv-10301-SFC-RSW, was filed on February 9, 2021 in the United States
District Court for the Eastern District of Michigan (the "Gallo Lawsuit"); (vii)
a lawsuit captioned Marc Waterman v. MTS Systems Corporation, et al., No.
1:2021cv00184, was filed on February 10, 2021 in the United States District
Court for the District of Delaware (the "Waterman Lawsuit") and (viii) a lawsuit
captioned Jose Alvarenga v. MTS Systems Corporation, et al., No. 1:21-cv-01454,
was filed on February 18, 2021 in the United States District Court for the
Southern District of New York (the "Alvarenga Lawsuit").
The Lawsuits allege that the preliminary proxy statement filed on January 8,
2021 (in the case of the Stein Lawsuit, the Carlisle Lawsuit, the Roy Lawsuit
and the Schumacher Lawsuit) or the definitive proxy statement filed on January
28, 2021 (in the case of the Dulac Lawsuit, the Gallo Lawsuit, the Waterman
Lawsuit and the Alvarenga Lawsuit), relating to the transactions contemplated by
the Merger Agreement, omitted material information in violation of Sections
14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and certain
rules promulgated thereunder. The lawsuits name as defendants the Company and
its directors and seek, among other relief, injunctive relief. There can be no
assurance regarding the ultimate outcome of these lawsuits.
The Company believes that the claims asserted by the plaintiffs in the Lawsuits
are without merit. However, in order to moot the plaintiffs' unmeritorious
disclosure claims, alleviate the costs, risks and uncertainties inherent in
litigation and provide additional information to its shareholders, the Company
has determined to voluntarily supplement the definitive proxy statement filed on
January 28, 2021 (the "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, the Company specifically
denies all allegations by the plaintiffs that any additional disclosure was or
is required.
Supplemental Disclosures.
The following disclosures supplement the disclosures contained in the Proxy
Statement and should be read in conjunction with the disclosures contained in
the Proxy Statement, which should be read in its entirety. To the extent the
information set forth herein differs from or updates information contained in
the Proxy Statement, the information set forth herein shall supersede or
supplement the information in the Proxy Statement. All page references are to
pages in the Proxy Statement, and terms used below, unless otherwise defined,
have the meanings set forth in the Proxy Statement.
The fifth paragraph on page 30 under the header "Background of the Merger" of
the Proxy Statement is hereby amended and restated as follows:
In early 2019 and again in early 2020, the Company sought to inquire of an
industry participant (which we refer to as "Party A") whether Party A would be
interested in exploring a potential strategic transaction. At that time those
times, the Company did not receive a response from Party A regarding whether it
would be interested in exploring a potential transaction.
The fourth paragraph on page 34 under the header "Background of the Merger" of
the Proxy Statement is hereby amended and restated as follows:
On August 28, 2020, an industry participant (which we refer to as "Party H")
contacted Brian T. Ross, the Chief Financial Officer of the Company, to express
its interest in acquiring one of the Company's business units. The Company
engaged in preliminary discussions with Party H, but Party H did not submit a
formal proposal to acquire one of the Company's business units.
The fifth paragraph on page 35 under the header "Background of the Merger" of
the Proxy Statement is hereby amended and restated as follows:
Also on September 9, 2020, the Board convened a special meeting, with
representatives of J.P. Morgan, Evercore, Sidley and the Company's senior
management present for a portion of the meeting. The Company's senior management
presented the Company's five-year forecast which, after discussion with the
Board, the Board approved. The Board directed J.P. Morgan and Evercore to use
the five-year forecast to update their preliminary financial analyses and review
such updated financial analyses at the next Board meeting. These September
projections were used by J.P. Morgan and Evercore for their preliminary
financial analyses but were not provided to potential counterparties.
Representatives of J.P. Morgan summarized a call between representatives of J.P.
Morgan and Party A's financial advisor on September 8, 2020, during which Party
A's financial advisor emphasized Party A's willingness to pursue an acquisition
of the Company. Mr. Martinez discussed with the Board the inquiry from Party H
regarding an acquisition of one of the Company's business units. The Board and
the Company's advisors discussed the various proposals received to date and
potential responses to each party. The Board determined to continue its
discussion at the next Board meeting after review of updated preliminary
financial analyses from J.P. Morgan and Evercore. The Board directed Mr.
Martinez to contact Party D to request an extension of Party D's deadline for
the Company's response to its proposal.
The second paragraph on page 38 under the header "Background of the Merger" of
the Proxy Statement is hereby amended and restated as follows:
In October of 2020, consistent with the Board's instructions and discussions
with the Company's senior management, representatives of J.P. Morgan and
Evercore contacted six strategic parties (including Parent and an industry
participant (which we refer to as "Party J") to determine whether they were
interested in potentially pursuing a strategic transaction with the Company. Of
these six parties, three, including Parent and Party J, entered into
confidentiality agreements with the Company. Each of the confidentiality
agreements contained a standstill provision which either terminated or permitted
the counterparty to make private proposals to the Company if the Company entered
into a definitive agreement for a change of control transaction. One of these
three parties elected not to explore an acquisition of the Company after signing
a confidentiality agreement on October 15, 2020, and did not submit a formal
proposal to acquire the Company. The other three strategic parties that
representatives of J.P. Morgan and Evercore contacted at the direction of the
Board elected not to sign a confidentiality agreement.
The seventh paragraph on page 39 under the header "Background of the Merger" of
the Proxy Statement is hereby amended and restated as follows:
On October 17, 2020, representatives of J.P. Morgan and Evercore informed Party
G of the bid procedures. As Party G had declined to enter into a confidentiality
agreement in connection with the first round of bidding to acquire the Company
and was therefore moving forward based on only publicly-available information,
Party G received separate bid procedures with a deadline of October 23, 2020 for
a preliminary non-binding indication of interest.
The second paragraph on page 59 under the header "Opinions of the Company's
Financial Advisors-Opinion of J.P. Morgan Securities LLC" of the Proxy Statement
is hereby amended and restated as follows:
None of the selected transactions reviewed was identical to the merger. However,
the selected transactions were chosen because, based on J.P. Morgan's
professional judgment and experience, certain aspects of the transactions,
including industry, date of transaction and because they involved target
companies that, for purposes of J. P. Morgan's analysis, may be considered
sufficiently similar to the Company based on their operations and businesses,
for purposes of J.P. Morgan's analysis, may be considered sufficiently similar
to the merger. The analyses necessarily involve complex considerations and
judgments concerning differences in financial and operational characteristics of
the companies involved and other factors that could affect the transaction
differently than they would affect the merger.
The first paragraph on page 60 under the header "Opinions of the Company's
Financial Advisors-Opinion of J.P. Morgan Securities LLC" of the Proxy Statement
is hereby amended and restated as follows:
The unlevered free cash flows that the Company is expected to generate beginning
with fiscal year ended 2021 through the end of fiscal year 2025 were provided to
J.P. Morgan in the financial projections prepared by the management of the
Company. J.P. Morgan calculated a range of terminal values of the Company by
applying perpetual growth rates ranging from 2.0% to 3.0% of the unlevered free
cash flow of the Company during the terminal year. The unlevered free cash flows
and the range of terminal values were then discounted to present values using a
range of discount rates from 9.5% to 11.0%, which was chosen by J.P. Morgan were
selected by J. P. Morgan in its professional judgment based upon an analysis of
the weighted average cost of capital of the Company, taking into account
macro-economic assumptions, estimates of risk and the Company's target capital
structure, derived using the capital asset pricing model described above and
J.P. Morgan's professional judgment and experience. The present value of
unlevered free cash flows and range of terminal values were then adjusted for
the Company's net debt of $523 million as of September 30, 2020, and then
divided by the number of fully diluted shares of company common stock
outstanding at the midpoint, as provided by the Company management (based on
approximately 19.3 million basic shares outstanding and adjusted to reflect the
impact of dilutive securities calculated in accordance with the treasury stock
method), to arrive at a range of implied equity value per share of the Company's
common stock, rounded to the nearest $0.25, of $42.00 to $65.00. The range of
implied per share equity values for the Company's common stock was compared to
the closing share price of the Company of $38.52 on December 8, 2020 and the
merger consideration of $58.50 per share.
The second paragraph on page 61 under the header "Opinions of the Company's
Financial Advisors-Opinion of J.P. Morgan Securities LLC" of the Proxy Statement
is hereby amended and restated as follows:
For services rendered in connection with the merger and the delivery of its
opinion, the Company has agreed to pay J.P. Morgan a fee of approximately $18.3
million, of which $4 million was paid upon the delivery of the opinion and the
remainder will be payable upon the consummation of the merger. In addition, the
Company has agreed to reimburse J.P. Morgan for its expenses incurred in
connection with its services, including the fees and disbursements of counsel,
and will indemnify J.P. Morgan against certain liabilities, including
liabilities arising under the Federal securities laws. During the two years
preceding the date of J.P. Morgan's opinion, J.P. Morgan and its affiliates have
had, and continue to have, commercial or investment banking relationships with
the Company and the Parent, for which J.P. Morgan and such affiliates have
received, or will receive, customary compensation. Such services during such
period have included acting as joint lead arranger and joint bookrunner on the
Company's revolving credit facility, which closed in November 2019, joint
bookrunner on the Company's offering of debt securities, which closed in July
2019, financial advisor to the Company in connection with its strategic
planning, joint lead arranger and joint bookrunner on Parent's revolving credit
facility, which closed in January 2019, and as joint bookrunner on Parent's
offerings of debt securities, which closed in April 2020, September 2019 and
January 2019, respectively. In addition, J.P. Morgan's commercial banking
affiliate is an agent bank and a lender under outstanding credit facilities of
the Company and Parent, for which it receives customary compensation or other
financial benefits. During the two year period preceding delivery of its
opinion, the aggregate fees recognized by J.P. Morgan (including its commercial
banking affiliates) from the Company were approximately $2.4 million and from
Parent were approximately $6.1 million. In addition, J.P. Morgan and its
affiliates hold, on a proprietary basis, less than 1% of the outstanding common
stock of each of the Company and Parent. In the ordinary course of their
. . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being furnished herewith:
Exhibit No. Description
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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