Item 1.01. Entry into a Material Definitive Agreement.
On May 29, 2022, Roper Technologies, Inc. ("Roper") and its wholly owned
subsidiaries, Roper International Holding Inc. and RIPIC Holdco Inc.
(collectively, the "Sellers") and RIPIC Equity LLC ("RIPIC TopCo") entered into
an equity purchase agreement (the "Equity Purchase Agreement") with CD&R Tree
Delaware Holdings, L.P., a newly formed investment vehicle owned by affiliates
of Clayton, Dubilier & Rice, LLC ("Buyer"), related to the acquisition by Buyer
of a majority equity interest (the "Equity Purchase") in Roper's industrial
businesses, including its entire Process Technologies segment and the industrial
businesses within its Measurement & Analytical Solutions segment. The businesses
included in this transaction are Alpha, AMOT, CCC, Cornell, Dynisco, FTI,
Hansen, Hardy, Logitech, Metrix, PAC, Roper Pump, Struers, Technolog, Uson, and
Viatran (collectively referred to herein as the "Business"). RIPIC TopCo
currently owns all of the equity of RIPIC Holdings, LLC ("RIPIC Holdings"), a
limited liability holding company that indirectly holds the operating companies
comprising the Business. Immediately following the closing of the transactions
contemplated by the Equity Purchase Agreement (the "Closing"), Sellers will
continue to own 49% of the equity of RIPIC TopCo. Roper will then cease to
consolidate the results of the Business within its financial statements and will
report its ownership interest in the Business using the equity method of
accounting.
Immediately prior to the Equity Purchase, RIPIC TopCo will make an estimated
distribution of approximately $1,775 million in cash to Sellers, subject to
certain adjustments relating to cash, debt, net working capital and transaction
expenses of the Business. Under the terms of the Equity Purchase Agreement, it
is anticipated that a wholly owned operating subsidiary of RIPIC Holdings will
incur new third-party funded indebtedness of approximately $1,950 million
through borrowings of term loans under new secured credit agreements. A portion
of the proceeds of the term loans will fund the distribution to Sellers at
Closing. The secured credit agreements will also include a $300 million
revolving credit facility, which could be used to fund future cash needs of the
Business and other general corporate purposes.
Pursuant to the Equity Purchase Agreement, Buyer will pay a purchase price of
approximately $829 million to the Sellers in exchange for approximately 51% of
the total outstanding equity of RIPIC TopCo at the Closing. In addition, the
Sellers shall be entitled to an earnout of payment from Buyer of up to
$51 million if the Business exceeds a threshold level of earnings before
interest taxes, depreciation and amortization ("EBITDA") for the year ended
December 31, 2022.
At the Closing, Buyer and the Sellers will enter into an amended and restated
limited liability company agreement of RIPIC TopCo (the "LLC Agreement") that
will govern RIPIC TopCo. Under the LLC Agreement, the Sellers will be required
to make quarterly payments, directly or indirectly to Buyer, either (at the
Sellers' election) (i) in cash, with total payments initially equaling
approximately $29 million per year on a pre-tax basis, or (ii) in kind through
the transfer of the Sellers' equity interests in RIPIC TopCo to Buyer, initially
representing approximately a 1.7% ownership interest of RIPIC TopCo on an annual
basis. Sellers' obligation to make such quarterly payments under the LLC
Agreement will cease upon the Business' trailing twelve months EBITDA exceeding
at least $425 million in any three twelve month periods ending at the end of a
fiscal quarter, whether or not consecutive. In the event of a liquidation of
RIPIC TopCo, Buyer would be entitled to a liquidation preference in an initial
amount of approximately $829 million, subject to increase in accordance with the
terms of the LLC Agreement.
The Equity Purchase Agreement contains customary representations and warranties,
covenants, agreements and indemnities. The closing of the Equity Purchase, which
is currently expected to occur by the end of 2022, is subject to customary
closing conditions, including (i) the expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and applicable foreign jurisdictions; (ii) the
absence of any law restraining, enjoining or prohibiting the Equity Purchase;
(iii) the accuracy of the other party's representations and warranties (subject
to customary materiality qualifiers); (iv) the other party's compliance with its
covenants and agreements contained in the Equity Purchase Agreement (subject to
customary materiality qualifiers); (v) completion of a marketing period in
connection with the new third-party financing arranged by Buyer for the
transaction; and (vi) the delivery of audited financial statements for the
Business for the year ended December 31, 2021 that satisfy certain EBITDA
thresholds. The Closing is not subject to any financing contingency or the
approval of Roper's stockholders.
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The Equity Purchase Agreement contains certain termination rights of the
parties, including if (i) the Closing has not occurred on or prior to
January 31, 2023 and (ii) the other party has breached its representations,
warranties or covenants, subject to certain negotiated materiality
qualifications and cure periods as set forth in the Equity Purchase Agreement.
Upon termination of the Equity Purchase Agreement under specified circumstances,
Buyer will be required to pay the Sellers a termination fee of approximately
$107 million in cash.
Under the Equity Purchase Agreement, Roper has agreed not to compete with the
Business or solicit employees from the Business for a period of three years
following the Closing, subject to certain customary exceptions.
In connection with the Equity Purchase, at Closing, the Sellers, Buyer and
certain of their affiliates will enter into an investor rights agreement and
certain related agreements, pursuant to which Roper will initially be entitled
to designate three of RIPIC Holdings' eight board members. The remaining
directors will initially be (i) four directors designated by Buyer and (ii) the
Chief Executive Officer of RIPIC Holdings, who will initially be John Stroup.
For so long as the Sellers own, directly or indirectly through RIPIC TopCo, at
least 25% of the outstanding equity of RIPIC Holdings, the Sellers will have
certain consultation rights related to the hiring of a new Chief Executive
Officer of RIPIC Holdings, subject to the board of RIPIC Holdings ultimately
being entitled to hire a new Chief Executive Officer of RIPIC Holdings. Prior to
an initial public offering with aggregate gross cash proceeds of at least
$500 million (a "Qualified IPO"), so long as any party to the investor rights
agreement owns equity, directly or indirectly through RIPIC TopCo, at least 15%
of the total outstanding equity of RIPIC Holdings, the consent of such party
will be needed for certain significant actions with respect to RIPIC TopCo and
its subsidiaries, including, among other things, liquidation and dissolution,
issuance of certain equity, incurrence of additional indebtedness and the
acquisition or disposal of a material amount of assets (subject to specified
dollar thresholds), in each case subject to certain exceptions. Under limited
circumstances, either the Sellers or Buyer have the right to cause the Qualified
IPO of RIPIC Holdings for so long as they own, directly or indirectly through
RIPIC TopCo, at least 25% of the equity of RIPIC Holdings held in the aggregate
by the Sellers and Buyer. The investor rights agreement will provide customary
registration rights to members of RIPIC Holdings and certain of their
transferees and will include certain restrictions on the ability of each party
to the investor rights agreement to transfer its equity interests in RIPIC TopCo
and RIPIC Holdings. Subject to certain limitations and exceptions, (i) Buyer has
customary drag along rights, (ii) the Sellers and Buyer have customary rights of
first refusal, and (iii) the Sellers, Buyer and their respective permitted
transferees have customary tag along rights and preemptive rights.
The above description of the Equity Purchase Agreement is only a summary, does
not purport to be complete and is qualified in its entirety by reference to full
text of the Equity Purchase Agreement, a copy of which will be filed as an
exhibit to Roper's quarterly report on Form 10-Q for the quarterly period ended
June 30, 2022. The representations, warranties and covenants contained in the
Equity Purchase Agreement were made only for purposes of the Equity Purchase
Agreement and as of specified dates, were solely for the benefit of the parties
to the agreement, and may be subject to limitations agreed upon by the
contracting parties, including being qualified by confidential disclosures
exchanged between the parties in connection with the execution of the agreement.
The representations and warranties have been made for the purpose of allocating
contractual risk between the parties to the Equity Purchase Agreement instead of
establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those
applicable to investors. Investors should not rely on the representations,
warranties and covenants or any description thereof as characterizations of the
actual state of facts or condition of applicable parties thereto. Moreover,
information concerning the subject matter of the representations, warranties and
. . .
Item 7.01. Regulation FD Disclosure.
On June 1, 2022, Roper issued a press release announcing entry into the Equity
Purchase Agreement and related transactions, a copy of which is attached as
Exhibit 99.1 to this report on Form 8-K.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press release dated June 1, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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