Item 8.01. Other Events.
As previously announced on December 24, 2020, PRGX Global, Inc., a Georgia
corporation (the "Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Pluto Acquisitionco Inc., a Delaware corporation
("Parent"), and Pluto Merger Sub Inc., a Georgia corporation and wholly owned
subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub will merge
with and into the Company (the "Merger"), with the Company surviving as the
surviving corporation (the "Surviving Corporation") and a wholly owned
subsidiary of Parent. Parent is an affiliate of Ardian North America Fund II,
L.P. ("Ardian").
In connection with the Merger, the Company filed with the Securities and
Exchange Commission (the "SEC") a definitive proxy statement, dated January 29,
2021 (the "Proxy Statement"), which the Company commenced mailing to
shareholders on or about January 29, 2021. Set forth below are supplemental
disclosures relating to the Merger.
SUPPLEMENTAL DISCLOSURES
Following the filing of the Proxy Statement, as of the date of this Current
Report on Form 8-K, nine complaints have been filed on behalf of nine purported
shareholders of the Company against the Company and the members of its Board of
Directors. Of those nine complaints, four were filed in the United States
District Court for the Southern District of New York, one of which also names
Parent, Merger Sub and Ardian as defendants, two were filed in the United States
District Court for the District of Delaware, both of which also name Parent and
Merger Sub as defendants, and three were filed in the United States District
Court for the Northern District of Georgia, Atlanta Division. Those complaints
are captioned as follows: Kross v. PRGX Global, Inc., et al.,
No. 1:21-cv-01024-KPF (S.D.N.Y.); Stein v. PRGX Global, Inc., et al.,
No. 1:21-cv-01057-KPF (S.D.N.Y.); Freeman v. PRGX Global Inc., et al.,
No. 1:21-cv-01429 (S.D.N.Y.); Schulz v. PRGX Global, Inc., et al.,
No. 1:21-cv-01447 (S.D.N.Y.); Ciccotelli v. PRGX Global, Inc., et al.,
No. 1:21-cv-00156-UNA (D. Del.); Waterman v. PRGX Global, Inc., et al.,
No. 1:21-cv-00178-UNA (D. Del.); Plumley v. PRGX Global, Inc., et al.,
No. 1:21-cv-00571-MHC (N.D. Ga.); Sabatini v. PRGX Global, Inc., et al.,
No. 1:21-cv-00586-MHC (N.D. Ga.); and Finger v. PRGX Global, Inc., et al.,
No. 1:21-cv-00703-MHC (N.D. Ga.) (collectively, the "Shareholder Actions"). The
Shareholder Actions generally allege that the Proxy Statement omits certain
material information in violation of Section 14(a) of the Securities Exchange
Act of 1934 and Rule 14a-9 promulgated thereunder, and further that the members
of the Company's Board of Directors are liable for those omissions under
Section 20(a) of the Securities Exchange Act of 1934. One of the Shareholder
Actions also alleges a state law breach of fiduciary duty claim against the
members of the Company's Board of Directors with respect to the same
disclosures. The relief sought in the Shareholder Actions includes, among other
things, to enjoin the shareholder vote scheduled for March 2, 2021 at which the
Company's shareholders will vote on a proposal to adopt the Merger Agreement.
While the Company believes that the disclosures set forth in the Proxy Statement
comply fully with applicable law, and vigorously denies any wrongdoing or
liability with respect to the allegations and claims asserted, or which could
have been asserted, in the Shareholder Actions, to resolve the purported
shareholders' claims and moot the disclosure claims, to avoid nuisance,
potential expense, and delay, and to provide additional information to the
Company's shareholders, the Company has determined to voluntarily supplement the
Proxy Statement with the below disclosures (the "Supplemental Disclosures"). The
Supplemental Disclosures contained below should be read in conjunction with the
Proxy Statement, which is available on the Internet site maintained by the SEC
at http://www.sec.gov. The Company and the other named defendants deny that they
have violated any laws or breached any duties to the Company's shareholders. The
Company is providing the Supplemental Disclosures solely to eliminate the burden
and expense of litigation and to avoid any possible disruption to the Merger
that could result from further litigation. Nothing in the Supplemental
Disclosures should be deemed to be an admission of the legal necessity or
materiality of any Supplemental Disclosure under applicable laws. To the extent
that the information set forth below differs from or updates information
contained in the Proxy Statement, the information set forth herein supersedes or
supplements the information in the Proxy Statement. References to sections
herein are references to the corresponding sections of the Proxy Statement; all
page references are to pages in the Proxy Statement; and any capitalized terms
that are used herein have the same meanings ascribed to them in the Proxy
Statement.
If you have not already voted your shares in connection with the proposals to be
decided at the Company's virtual special meeting, you are urged to do so
promptly. This Form 8-K does not affect the validity of any proxy card or voting
instructions that the Company's shareholders may have previously received or
delivered. No action is required by any Company shareholder who has previously
delivered a proxy card or voting instructions and who does not wish to revoke or
change that proxy card or voting instructions.
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The Proxy Statement is hereby amended and supplemented by replacing the fifth
full paragraph on page 30, under the heading "THE MERGER- Background of the
Merger", as follows (with new text in underline):
Throughout the months of January and February 2020, PRGX management with the
assistance of Truist Securities worked to prepare a confidential information
memorandum ("CIM") for distribution to potentially interested third parties.
Also during this period, PRGX management worked with the assistance of Truist
Securities and PRGX's legal team to begin preparations for populating an online
data room, developing a list of potential buyers and preparing a form of
non-disclosure agreement, which included a customary standstill provision
restricting the counterparty from taking certain actions with respect to the
Company and its securities and a "don't ask, don't waive" ("DADW") provision,
both of which would fall away if the Company entered into, and publicly
announced, a definitive agreement with respect to a transaction involving all or
a controlling portion of the Company's equity securities or all or substantially
all of the Company's assets. Representatives of Truist Securities continued to
correspond with the Transaction Committee regularly during this period to
monitor market conditions and the Company's financial performance for
potentially launching the process in the spring. In late February and early
March 2020, economic conditions in the United States and globally became
increasingly affected by the COVID-19 coronavirus pandemic. At its regularly
scheduled Board meeting in March 2020, the Board determined that due to the
economic uncertainty associated with COVID-19, it would pause the work on the
proposed process and assess market conditions for a potential launch of a
process at a later time.
The Proxy Statement is hereby amended and supplemented by replacing the sixth
full paragraph beginning on page 30, under the heading "THE MERGER- Background
of the Merger", as follows (with new text in underline):
In early April 2020, the Company received expressions of interest from Sponsor A
and another financial sponsor regarding discussions related to a potential
transaction. Following execution of non-disclosure agreements, which included
the customary standstill and DADW provisions discussed above, Sponsor A and the
other financial sponsor conducted preliminary due diligence on the Company.
Separately, in early May 2020, the Company received an expression of interest in
discussions from an additional financial sponsor. This third financial sponsor
also executed a non-disclosure agreement, which also included the customary
standstill and DADW provisions discussed above, and conducted preliminary due
diligence. Throughout May and early June 2020, these parties conducted
preliminary due diligence through a review of materials in the online data room
and telephonic diligence sessions with members of PRGX management. The Company's
reported trailing twelve month Adjusted EBITDA through the first quarter of 2020
was approximately $23.8 million (compared to approximately $32.3 million for the
twelve months ending September 30, 2020). Following further discussions, two of
the three parties expressed that they did not wish to continue further diligence
for reasons related to their internal resources and priorities.
The Proxy Statement is hereby amended and supplemented by replacing the second
full paragraph on page 31, under the heading "THE MERGER- Background of the
Merger", as follows (with new text in underline):
During the week of July 6, 2020, another party, Strategic A, expressed interest
in a potential transaction with the Company and executed a non-disclosure
agreement, which included the customary standstill and DADW provisions discussed
above, with the Company on July 10, 2020 and began to conduct preliminary due
diligence.
The Proxy Statement is hereby amended and supplemented by replacing the fifth
full paragraph on page 31, under the heading "THE MERGER- Background of the
Merger", as follows (with new text in underline):
On July 30, 2020, at the request of the Board, Truist Securities began
distributing the anonymous teaser and form of non-disclosure agreement, which
included the customary standstill and DADW provisions discussed above. Over the
course of the next two weeks, Truist Securities, at the Board's direction and on
the Company's behalf, contacted a total of 134 potential buyers, consisting of
15 potential strategic buyers and 119 potential financial sponsors. 49 buyers
declined to execute the non-disclosure agreement. Many of these buyers cited a
lack of strategic fit or concerns related to a transaction with a public company
and the complexities associated with such a transaction. Upon receipt of an
executed non-disclosure agreement from each of the remaining parties, including
customary standstill and DADW provisions, Truist Securities delivered a CIM to
the interested party and granted access to the online data room. Overall, Truist
Securities delivered a CIM to 85 interested parties, including three potential
strategic buyers and 82 financial sponsors. Over the next several weeks,
representatives of the Company continued to populate the data room with
additional financial and other information regarding the Company. During this
same time period, representatives of Troutman began to prepare a form of bid
merger agreement.
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The Proxy Statement is hereby amended and supplemented by replacing the third
full paragraph on page 45 under the heading "THE MERGER- Opinion of the
Company's Financial Advisor - Discounted Cash Flow Analysis" as follows (with
new text in underline and removing text that is struck through):
Truist Securities performed the discounted cash flow analysis of the Company by
calculating the estimated net present value of the projected unlevered free cash
flows (calculated as earnings before interest and taxes, less taxes, plus
depreciation and amortization, less capital expenditures and less the amount of
any increase or plus the amount of any decrease in net working capital) of the
Company based on the Management Projections for the years 2021 to 2024. Taking
into account its experience and professional judgment, Truist Securities applied
perpetuity growth rates ranging from 0.0% to 2.0%, taking into account its
experience and professional judgment, and discount rates ranging from 13.0% to
14.0% to the year 2024 estimated unlevered free cash flow of the Company to
calculate the a range of terminal values of the Company of $201.4 million to
$261.4 million as of 2024. The net present values of the projected unlevered
free cash flows and terminal values of the Company were then calculated using
discount rates ranging from 13.0% to 14.0%, taking into account Truist
Securities' experience and professional judgment and an estimate of the
Company's weighted average cost of capital by application of the capital asset
pricing model. The capital asset pricing model requires certain company-specific
inputs, including the company's target capital structure weightings, the cost of
long-term debt, future applicable marginal cash tax rate and a beta for the
company, as well as certain financial metrics for the United States financial
markets generally.
The Proxy Statement is hereby amended and supplemented by replacing the first
and second full paragraphs on page 46 under the heading "THE MERGER- Opinion of
the Company's Financial Advisor - Other Matters" as follows (with new text in
underline):
Truist Securities was retained by the Company as its financial advisor based on
Truist Securities' experience and reputation and Truist Securities' knowledge of
the Company and its industry. For its services as financial advisor to the
Company, Truist Securities will receive a transaction fee (contingent upon the
consummation of the Merger) based on the value of the proposed Merger, which fee
is currently estimated to be approximately $3,750,000. Upon the rendering of its
opinion, Truist Securities became entitled to a fee of $750,000, which is
creditable to the extent previously paid against the transaction fee. In
addition, the Company has agreed to reimburse certain expenses incurred by
Truist Securities in connection with its engagement and to indemnify Truist
Securities and certain related parties for certain liabilities arising out of
its engagement.
SunTrust Bank, a predecessor to Truist Bank, previously served as administrative
agent and issuing bank under the Company's prior credit facility, which was
terminated and repaid in March 2019. In addition, Truist Securities and its
affiliates may in the future provide investment banking and other financial
services to the Company, Parent, and/or certain of their respective affiliates
for which Truist Securities and its affiliates would expect to receive
compensation. Truist Securities is a full service securities firm engaged in
securities trading and brokerage activities as well as providing investment
banking and other financial services. In the ordinary course of business, Truist
Securities and its affiliates may acquire, hold or sell, for its and its
affiliates' own accounts and the accounts of customers, equity, debt and other
securities and financial instruments (including bank loans and other
obligations) of the Company, Parent and/or certain of their respective
affiliates and any other company that may be involved in the Merger, as well as
provide investment banking and other financial services to such companies. In
addition, Truist Securities and its affiliates (including Truist Bank and Truist
Financial Corporation) may have other financing and business relationships with
the Company, Parent and their respective affiliates.
The Proxy Statement is hereby amended and supplemented by replacing the first
two paragraphs on page 56, under the heading "THE MERGER- Interests of Certain
Persons in the Merger - Potential for Future Employment Arrangements", as
follows (with new text in underline and removing text that is struck through):
To our knowledge, while Ardian expressed an interest in retaining the management
team, no employment, equity contribution or other agreement, arrangement or
understanding between any executive officer or director of PRGX, on the one
hand, and Parent, Merger Sub, any of their affiliates or PRGX, on the other
hand, existed as of the date of this proxy statement, and the Merger is not
conditioned upon any executive officer or director of PRGX entering into any
such agreement, arrangement or understanding.
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While, to our knowledge, no executive officer or director of PRGX engaged in any
negotiations with the Parent regarding employment, compensation or equity
participation in the Surviving Corporation prior to the execution of the Merger
Agreement, it is possible that certain members of our current management team
will enter into employment arrangements with the Surviving Corporation which may
become effective following the completion of the Merger. Such arrangements may
include the right to purchase or participate in the equity of the Surviving
Corporation or its affiliates. Any such arrangements with the existing
management team are currently expected to be entered into before the Merger and
will not become effective until after the Merger is completed, if at all. There
can be no assurance that any parties will reach an agreement on any terms, or at
all.
Cautionary Statement Regarding Forward-Looking Statements
In addition to historical information, this report includes certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements include, but are not limited to,
both implied and express statements regarding the completion of the transaction
and timing for closing, the benefits expected from the transaction, and the
Company's current expectations and projections relating to its future
performance and business following closing. Such forward-looking statements are
not guarantees of future performance and are subject to risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to differ materially from the historical results or from any results
expressed or implied by such forward-looking statements. Risks that could cause
actual results to differ materially from those in the forward-looking statements
include: the risks that the transaction will not close in the timeframe
expected, or at all; the risk that the expected benefits and effects of the
transaction will not be achieved; the risk that the requisite number of the
Company's shareholders fail to approve the transaction; the risk that a
governmental entity may prohibit, delay or refuse to grant approval for the
consummation of the transaction; the risk that the Company's business will
suffer due to uncertainty related to the transaction; and other general economic
and business risks. For a discussion of other risk factors that may impact the
Company's business, please see the Company's filings with the Securities and
Exchange Commission. The Company disclaims any obligation or duty to update or
modify these forward-looking statements.
Additional Information and Where to Find It
In connection with the Merger, the Company filed a proxy statement with the SEC
in connection with its solicitation of proxies regarding the shareholder vote to
approve the merger. COMPANY SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT,
AS MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, THE PROXY CARD AND ANY
OTHER RELATED MATERIALS FILED WITH THE SEC BEFORE MAKING ANY DECISION WITH
RESPECT TO THE MERGER, BECAUSE THESE DOCUMENTS CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTIONS AND THE PARTIES THERETO. Shareholders of the
Company may obtain a free copy of these documents and other documents filed by
the Company with the SEC at the SEC's website at www.sec.gov. In addition,
shareholders may obtain a free copy of the proxy statement and all related
documents filed by the Company with the SEC from the Company's website at
www.prgx.com.
Participants in the Solicitation
The Company and its directors, executive officers and other members of
management and employees, under SEC rules, may be deemed to be participants in
the solicitation of proxies from the Company's shareholders in connection with
the proposed transactions. Investors and security holders may obtain more
detailed information regarding the names, affiliations and interests of certain
of the Company's executive officers and directors in the solicitation by reading
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2019, which was filed with the SEC on March 12, 2020, and its definitive proxy
statement for the 2020 annual meeting of shareholders, which was filed with the
SEC on April 29, 2020 (the "2020 Proxy Statement"). These documents may be
obtained free of charge from the SEC's website at www.sec.gov and the Company's
website at www.prgx.com.
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