|
Item 1.01.
|
Entry into a Material Definitive Agreement
|
On November 10,
2020, ACCO Brands Corporation (the “Company”), ACCO Brands USA LLC, a wholly owned subsidiary of the Company
(“Buyer”), Bensussen Deutsch & Associates LLC (“Seller”), and, solely with respect to
certain provisions thereof, Bensussen Deutsch Holdings, Inc. (“Seller Parent”), Jacob B. Deutsch (“Mr. Deutsch”)
and Eric E. Bensussen (“Mr. Bensussen”), entered into an Equity Purchase Agreement (the “Purchase
Agreement”), pursuant to which Buyer will acquire the consumer electronics and video gaming accessory business of Seller,
referred to as Seller’s Consumer Products Division (the “PowerA Business”).
Subject to the terms
and conditions of the Purchase Agreement, Seller will (i) directly transfer certain non-U.S. assets and intellectual property
of the PowerA Business to Buyer or a subsidiary designee and (ii) contribute (the “Contribution”)
the other assets and properties of the PowerA Business into a newly formed, wholly owned subsidiary of Seller (“NewCo”),
after which Buyer will purchase all of the outstanding equity interests of NewCo (the “Transaction”).
The purchase price for the Transaction is approximately $340 million, subject to customary adjustments set forth in the Purchase
Agreement (as so adjusted, the “Purchase Price”), and up to $55 million
of additional purchase price, contingent upon the PowerA Business achieving certain revenue and direct contribution targets during
the calendar years 2021 and 2022, as set forth in the Purchase Agreement.
The Purchase Agreement
contains customary representations, warranties and covenants on other provisions related to the PowerA Business and the Transaction.
In connection with the Transaction, the Company intends to purchase a buy-side representations and warranties insurance policy
to insure against potential breaches of representations in the Purchase Agreement. In addition, the Purchase Agreement contains
customary covenants restricting the ability of Seller, Seller Parent, Mr. Bensussen and Mr. Deutsch to (i) solicit
or hire any employee of the PowerA Business for three years following the closing, subject to customary exceptions and (ii) compete
with the PowerA Business for a period of five years following closing, subject to customary exceptions.
Completion of the Transaction
is subject to certain conditions set forth in the Purchase Agreement, including, among others: (i) requisite approval for
the Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) the accuracy of the representations
and warranties of each party contained in the Purchase Agreement, subject to customary exceptions; (iv) performance in all
material respects with covenants required to be performed under the Purchase Agreement; (v) the absence of a Material Adverse
Effect (as defined in the Purchase Agreement) since the date of the Purchase Agreement; (vi) receipt of approvals for the
Transaction pursuant to certain material contracts of the PowerA Business; and (vii) receipt of audited and unaudited interim
financial statements of the PowerA Business necessary for Buyer to comply with its obligations under applicable securities laws.
The Purchase Agreement includes customary termination provisions, including if the closing of the Transaction has not occurred
on or before June 30, 2021.
The foregoing description
of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of
the Purchase Agreement. A copy of the Purchase Agreement is filed as Exhibit 2.1 to this Current Report on Form 8-K and is
incorporated herein by reference. The representations, warranties and covenants set forth in the Purchase Agreement have been made
only for the purposes of the Purchase Agreement and solely for the benefit of the parties thereto and may be subject to limitations
agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating
contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts. In addition, such
representations and warranties were made only as of the dates specified in the Purchase Agreement and information regarding the
subject matter thereof may change after the date of the Purchase Agreement. Accordingly, the Purchase Agreement is included with
this filing only to provide investors with information regarding its terms and not to provide investors with any other factual
information regarding the Company or its business as of the date of the Purchase Agreement or as of any other date. Investors and
security holders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances,
since they were made only as of a specific date and are modified in important part by the underlying disclosure schedules. In addition,
certain representations and warranties may be subject to a contractual standard of materiality different from what might be viewed
as material to stockholders.
In connection the Transaction,
effective November 10, 2020, the Company entered into a Fourth Amendment (the “Fourth
Amendment”) to its Third Amended and Restated Credit Agreement, as amended (the “Credit
Agreement”), among the Company, certain subsidiaries of the Company, Bank of America, N.A., as administrative agent,
and the other lenders party thereto. Pursuant to the Fourth Amendment, the Credit Agreement was amended to, among other things:
|
·
|
provide flexibility under the permitted acquisition provisions to accommodate the acquisition of the PowerA Business;
|
|
·
|
increase the Maximum Net Leverage Ratio (as defined in the Credit Agreement) financial covenant
by 0.5:1.00 from current levels for each of the six fiscal quarters beginning March 31, 2021 and ending June 30, 2022. The
new Maximum Net Leverage Ratio covenant is at 5.25:1.00 for fiscal quarters ending March 31 and June 30, 2021, stepping down
to 4.75:1.00 for the fiscal quarter ending September 30, 2021, stepping down to 4.25:1.00 for fiscal quarters ending December
31, 2021, March 31, 2022 and June 30, 2022, and further stepping down to 3.75:1;00 for each fiscal quarter thereafter;
and
|
|
·
|
exempt the borrowings that may be made under the Credit Agreement that are applied toward the funding of the Transaction from the Credit Agreement’s anti-cash hoarding clause.
|
The foregoing summary
of the Fourth Amendment does not purport to be complete and is qualified in its entirety by reference to the Fourth Amendment,
a copy of which is filed as Exhibit 10.1 and incorporated by reference herein.