Item 1.01. Entry into a Material Definitive Agreement.
On April 28, 2017, Apogee Enterprises, Inc., a Minnesota corporation (Apogee), entered into a stock purchase agreement (the
Stock Purchase Agreement) with EFCO Corporation, a Missouri corporation (EFCO), and Pella Corporation, an Iowa corporation (Pella). Under the terms of the Stock Purchase Agreement, Apogee agreed to purchase from
Pella all of the outstanding shares of capital stock of EFCO (the Shares). EFCO is a manufacturer of architectural aluminum window, curtain wall, storefront and entrance systems for commercial construction projects.
The purchase price for the Shares is equal to an aggregate amount of $195,000,000, subject to adjustments for available cash and net working
capital (the Purchase Price). The Purchase Price consists of (i) a
one-time
cash payment in an amount equal to $187,500,000 due at closing and (ii) three installment payments of
$2,500,000 due on the first three anniversaries of the closing date. Apogee expects to fund the payment of the Purchase Price with available cash and an increase in the aggregate loan commitment under its existing revolving credit facility. Apogee
expects to increase this aggregate loan commitment between signing and closing.
The Stock Purchase Agreement contains customary
representations and warranties by Apogee, EFCO and Pella as well as customary covenants and agreements, including with respect to the operations of the business of EFCO between signing and closing, restrictions on Pella and its affiliates regarding
soliciting and responding to alternative business combination transactions,
non-competition
and employee
non-solicitation
restrictions on Pella and its affiliates,
governmental filings and approvals, and other matters.
The Stock Purchase Agreement also contains customary conditions to closing,
including, among other things, the representations and warranties of Pella, EFCO and Apogee being true and correct at the closing, except where any inaccuracies would not have a material adverse effect; performance by Pella, EFCO and Apogee of the
covenants and agreements in the Stock Purchase Agreement; the absence of any material adverse effect; and receipt of required antitrust approvals, in each case as detailed in the Stock Purchase Agreement. Receipt of financing by Apogee is not a
condition to Apogees obligations under the Stock Purchase Agreement.
Under the terms of the Stock Purchase Agreement, Pella agrees
to indemnify Apogee for certain matters, including breaches by Pella or EFCO of specified representations and warranties, covenants included in the Stock Purchase Agreement, and payment obligations involving transaction expenses and intercompany
indebtedness. Similarly, under the terms of the Stock Purchase Agreement, Apogee agrees to indemnify Pella for certain matters, including breaches by Apogee of specified representations and warranties and covenants included in the Stock
Purchase Agreement. The parties respective indemnification obligations for breaches of certain representations and warranties apply only to the extent that the other partys losses exceed a deductible of $975,000 and are capped at a
maximum amount of $975,000; however, certain fundamental representations and warranties are not subject to any deductible or cap.
Apogee
is required to enter into a binder agreement with Ambridge Partners LLC respecting the issuance of a representations and warranties insurance policy and to purchase the insurance policy at closing. Pella agreed to reimburse Apogee for fifty percent
of the amount of the premium for the insurance policy, up to a maximum reimbursement amount of $500,000. To facilitate the transition of the business operations of EFCO under new ownership, Pella and EFCO agreed to enter into a transition services
agreement at the closing, providing for the post-closing performance by Pella of certain administrative and other services on behalf of EFCO.
The Stock Purchase Agreement also contains termination rights for each of Apogee, EFCO and Pella
exercisable in the event that certain closing conditions become incapable of fulfillment or if the closing has not occurred on or before the date six months following the date of the Stock Purchase Agreement.
The foregoing description of the Stock Purchase Agreement is not complete and is qualified in its entirety by reference to the Stock Purchase
Agreement, which is filed as Exhibit 2.1 and is incorporated herein by reference. The Stock Purchase Agreement has been provided solely to inform investors of its terms. The representations, warranties and covenants contained in the Stock Purchase
Agreement were made only for purposes of such agreement and as of specific dates, were made solely for the benefit of the parties to the Stock Purchase Agreement, and are intended not as statements of fact, but rather as a way of allocating risk to
one of the parties if those statements prove to be inaccurate. In addition, such representations, warranties and covenants may have been qualified by certain disclosures not reflected in the text of the Stock Purchase Agreement and may apply
standards of materiality in a way that is different from what may be viewed as material by shareholders of, or other investors in, Apogee. Investors are not third-party beneficiaries under the Stock Purchase Agreement and should not rely on the
representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Apogee, Pella or EFCO or any of their respective subsidiaries or affiliates.
Cautionary Statement Regarding Forward-Looking Information
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements reflect managements current views with respect to future events and financial performance. The words believe, expect, anticipate, intend, estimate, forecast,
project, should and similar expressions are intended to identify forward-looking statements. Any statements in this report which do not describe historical facts, including but not limited to, statements regarding the
proposed acquisition of EFCO by Apogee; the possibility that the closing conditions in the Stock Purchase Agreement will not be met; Apogees expectations about the expected benefits of the proposed transaction; the terms and conditions of the
Stock Purchase Agreement; the other transactions contemplated by the Stock Purchase Agreement; and Apogees expectations regarding financing for the acquisition, are forward-looking statements which involve risks and uncertainties that could
cause actual results to differ materially from those discussed in such forward-looking statements. From time to time, we also may provide oral and written forward-looking statements in other materials we release to the public, such as press
releases, presentations to securities analysts or investors, or other communications by Apogee. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results.
Apogee cannot give any assurance that any of the transactions contemplated by the Stock Purchase Agreement will be completed. A further list and description of additional business risks, uncertainties and other factors can be found in Apogees
filings with the Securities and Exchange Commission (SEC), including its annual report on
Form 10-K
for the fiscal year ended March 4, 2017 and subsequent filings with the SEC. Copies of
these filings, as well as subsequent filings, are available online at www.sec.gov and www.apog.com. Many of the factors that will determine the outcome of the subject matter of this communication are beyond Apogees ability to control or
predict. Apogee does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.