Item 1.01
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Entry into a Material Definitive Agreement.
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Stock Purchase Agreement
On December 17, 2020, Whole Earth
Brands, Inc. (“Whole Earth” or the “Company”) entered into a definitive Stock Purchase
Agreement (the “Purchase Agreement”) with WSO Investments, Inc. (the “Target” and together
with its subsidiaries “Wholesome”), WSO Holdings, LP (“WSO Partnership”), Edwards Billington
and Son, Limited (“EBS”), WSO Holdings, LLC (“WSO LLC,” and together with WSO Partnership
and EBS, the “WSO Sellers”), and WSO Partnership, in its capacity as representative for the WSO Sellers. The
Target is the direct parent of its wholly-owned subsidiary Wholesome Sweeteners, Incorporated, which was formed to import,
market, distribute, and sell organic sugars, unrefined specialty sugars, and related products. Upon the terms and subject to the
conditions set forth in the Purchase Agreement, at the closing, Whole Earth (or its designee) will purchase all of the issued and
outstanding equity interests of the Target from WSO Partnership, EBS and WSO LLC, and the Target will become an indirect wholly-owned
subsidiary of Whole Earth (the “Transaction”).
Transaction Consideration
Subject to the satisfaction and terms set
forth in the Purchase Agreement, at the closing of the Transaction, Whole Earth will pay, in exchange for all of the issued and
outstanding equity interests of the Target, an amount equal to (i) $180 million in cash, subject to customary post-closing
adjustments, plus (ii) as more thoroughly described below, up to an additional $55 million (the “Earn-Out Amount”)
upon the satisfaction of certain post-closing financial metrics by Wholesome. Payment of the Earn-Out Amount, in whole or in part,
is subject to Wholesome achieving certain EBITDA thresholds at or above thirty million and twenty-three thousand dollars ($30,023,000)
during the period beginning August 29, 2020, and ending December 31, 2021. A portion of the Earn-Out Amount (up to $27.5
million) may be paid, at the Company’s election, in freely tradeable, registered shares of Whole Earth common stock. Calculation
of the achievement of the Earn-Out Amount is subject to certain adjustments more thoroughly described in the Purchase Agreement.
While the Earn-Out Amount, if any, is currently expected to be payable in the first quarter of 2022, the payment could accelerate
upon the breach by Whole Earth of certain covenants more thoroughly described in the Purchase Agreement.
Termination
Fees
The Purchase Agreement
contains certain customary termination rights for Whole Earth, on the one hand, and the WSO Sellers, on the other hand. In certain
instances more thoroughly described in the Purchase Agreement, the WSO Sellers are entitled to receive, as WSO Sellers’ sole
and exclusive recourse under the Purchase Agreement, $9.5 million in as a Reverse Termination Fee (as defined in the Purchase Agreement).
Other Terms of the Transaction
The Purchase Agreement contains customary
representations, warranties and covenants of the parties thereto. The assertions embodied in those representations and warranties
were made for purposes of the Purchase Agreement and are qualified by information in disclosure schedules that the parties have
exchanged in connection with the execution of the Purchase Agreement. The disclosure schedules contain information that modifies,
qualifies and creates exceptions to the representations and warranties set forth in the Purchase Agreement. In addition, certain
representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different
from what an investor might view as material, or may have been used for purposes of allocating risk between the respective parties
rather than establishing matters as facts.
Upon entry into the Purchase Agreement,
the Company bound a buy-side representations and warranties insurance policy, which comprises the Company’s sole post-closing
recourse for breaches of representations and warranties, absent Fraud (as defined in the Purchase Agreement).
The closing of the Transaction is subject
to customary conditions, including, among others, that the applicable waiting period under the HSR Act (as defined in the Purchase
Agreement) will have expired or been terminated.
The foregoing
descriptions of the Purchase Agreement and the transactions contemplated thereby are not complete and are subject to and qualified
in their entirety by reference to the Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on
Form 8-K, and is incorporated herein by reference.
Debt Commitment Letter
In connection
with entering into the Purchase Agreement, the Company entered into a debt commitment letter dated December 17, 2020 (the
“Debt Commitment Letter”), with The Toronto-Dominion Bank, New York Branch, Toronto-Dominion (Texas) LLC, and
TD Securities (USA) LLC (together with each affiliate thereof and each former, current and future Representative of each such person,
the “Commitment Parties”), pursuant to which the Commitment Parties have agreed to repay all the existing indebtedness
of the Company under its current credit facility, to provide the financing necessary to fund the consideration to be paid pursuant
to the terms of the Purchase Agreement, to repay, redeem, defease or otherwise discharge third-party indebtedness of the WSO Sellers
and Wholesome, and to pay fees and expenses related to the foregoing (the “Debt Financing”).
The Debt Financing
is anticipated to consist of the following:
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A senior secured term loan facility in the aggregate principal amount of up to $375 million; and
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a revolving credit facility in an aggregate principal amount
of up to $75 million, $25 million of which shall be available to finance the purchase price for general corporate purposes, working
capital needs and for working capital adjustments payable under the Purchase Agreement.
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The funding of
the Debt Financing is contingent upon the satisfaction or waiver of certain conditions set forth in the Debt Commitment Letter,
including, without limitation, the execution and delivery of definitive documentation consistent with the Debt Commitment Letter.
The Debt Commitment Letter will terminate on the earliest of five business days after the termination date specified in the Purchase
Agreement and the date that the Purchase Agreement is terminated.
The
foregoing description of the Debt Commitment Letter does not purport to be complete and is qualified in its entirety by reference
to the full text of the Debt Commitment Letter, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and
is incorporated herein by reference.