|9 Months Ended|
Sep. 30, 2021
On November 9, 2021, the Company consummated the merger pursuant to the Business Combination Agreement, dated June 15, 2021, by and among Perimeter Solutions, SA, a newly-formed public company (“Holdco”), EverArc (BVI) (“Merger Sub”) and EverArc Holdings Limited (“EverArc”).
In connection with the Business Combination, among other things, the Sponsor contributed a portion of its ordinary shares to Holdco in exchange for preferred shares of Holdco and sold its remaining ordinary shares to Holdco for cash subject to certain customary adjustments for working capital, transaction expenses, cash and indebtedness. The cash consideration for the Business Combination was funded through cash on hand, proceeds from the sale of Ordinary Shares to the EverArc Subscribers, proceeds from the issuance of senior notes, and proceeds from a draw on a revolving credit facility, as described below.
In order to finance a portion of the cash consideration payable in the Business Combination and the costs and expenses incurred in connection therewith, on October 5, 2021, EverArc Escrow S.à r.l. (“Escrow Issuer”), a newly-formed limited liability company governed by the laws of the Grand Duchy of Luxembourg and a wholly owned subsidiary of EverArc, launched a private offering of $675,000 principal amount of 5.0% senior secured notes due 2029 (the “Senior Notes”) pursuant to that certain Indenture dated as of October 22, 2021 between SK Invictus Intermediate II S.à r.l., a private limited liability company governed by the laws of the Grand Duchy of Luxembourg (“Invictus II”), a subsidiary of the Company, and U.S. Bank National Association, as Trustee and Collateral Agent (the “Trustee”). Upon the consummation of the Business Combination, Invictus II assumed the Escrow Issuer’s obligations under the Senior Notes and borrowed $40,000 against the Revolving Credit Facility which provides for maximum borrowings of $100,000 with an interest rate equal to an applicable margin of 3.5%, plus, at Invictus II’s option, the prevailing London interbank rate or base rate for monthly interest period. The outstanding $40,000 borrowed against the Revolving Credit Facility was repaid in full on December 9, 2021.
The Senior Notes will bear interest at an annual rate of 5.0%. Interest on the Senior Notes will be payable in cash semi-annually in arrears on April 30 and October 30 of each year, commencing on April 30, 2022. The Senior Notes may be issued with original issue discount for U.S. federal income tax purposes.
The Senior Notes will be general, secured, senior obligations of Invictus II; will rank equally in right of payment with all existing and future senior indebtedness of Invictus II (including, without limitation, the Revolving Credit Facility); and together with the Revolving Credit Facility, will be effectively senior to all existing and future
indebtedness of Invictus II that is not secured by the collateral. The Senior Notes will be effectively subordinated to all existing and future indebtedness of Invictus II that is secured by assets other than the collateral, to the extent of the collateral securing such indebtedness, will be structurally subordinated to all existing and future indebtedness, claims of holders of any preferred stock that may be issued by, and other liabilities of, subsidiaries of Invictus II that do not guarantee the Senior Notes. The Senior Notes will be senior in right of payment to any future subordinated indebtedness of Invictus II and will be initially guaranteed on a senior secured basis by the guarantors and will also be guaranteed in the future by each subsidiary, if any, that guarantees indebtedness under the Revolving Credit Facility.
|Perimeter Solutions S A|
On November 9, 2021, the Company acquired all of the net assets of Perimeter and its subsidiaries for consideration conveyed of $1.39 billion as part of a Business Combination (the “Business Combination”). Perimeter has operations in the United States, Canada, Europe, Mexico, Australia and Israel.
The Perimeter acquisition will be accounted for as a business combination under ASC 805 Business Combinations, which requires the allocation of the total consideration to the identifiable assets and liabilities assumed measured at fair value at the acquisition date. This consideration includes payment to SK Invictus Holdings S.à r.l. ("SK Holdings") the sole stockholder of Invictus prior to the closing of the Business Combination as per the Business Combination Agreement, dated June 15, 2021, in the form of $1.29 billion in cash and $100.0 million in Preferred Equity Contributions. Preferred Equity Contributions were issued to existing Perimeter equity holders at par upon the acquisition. Par value is considered to approximate fair value as this amount is equal to the redemption value as of November 8, 2021 (the “Closing”). These instruments have been assessed for classification, and it was determined that the instrument should be classified as a liability due to mandatory redemption features. In addition to the consideration conveyed to SK Holdings, $702.4 million is being used to pay down existing Perimeter debt.
The cash consideration for the Business Combination was funded through cash on hand, proceeds from the sale of Ordinary Shares to the EverArc subscribers, proceeds from the issuance of senior notes, and proceeds from a draw on a revolving credit facility.
The preliminary purchase price was allocated among the identified assets to be acquired, based on a preliminary analysis. All valuation procedures were related to Perimeter’s existing assets as no new assets were identified as a
result of the procedures performed. Goodwill was recognized as a result of the acquisition, which represents the excess fair value of consideration over the fair value of the underlying net assets, largely arising from the extensive industry expertise that has been established by Perimeter. A deferred tax liability was recorded as part of the purchase price allocation, based on an analysis of the tax impacts of the Business Combination by location and by asset.
The estimates of fair value are based upon preliminary valuation assumptions believed to be reasonable but which are inherently uncertain and unpredictable; and, as a result, actual results are expected to differ from estimates.
Refer to Note 3 to the Unaudited Interim Condensed Consolidated Financial Statements of Perimeter for further information related to the LaderaTech Contingent Earnout.
The Company estimated the fair value of its property, plant, and equipment, inventory, intangible assets, and the LaderaTech earnout as of the acquisition date as well as all other identifiable assets and liabilities. Such fair values were determined in accordance with FASB ASC Topic 820, Fair Value Measurement (FASB Topic 820), using unobservable inputs or an income approach, which represents Level 3 inputs under FASB ASC Topic 820.
The actual results of operations of the acquisition will be included in the consolidated statements of operations and comprehensive income (loss) from the date of acquisition.
Revolving Credit Facility
In connection with the consummation of the Business Combination, SK Invictus Intermediate II S.à r.l., a private limited liability company governed by the laws of the Grand Duchy of Luxembourg ("Invictus II"), as borrower, entered into a five-year revolving credit facility (the “Revolving Credit Facility”), which provides for a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million. The Revolving Credit Facility matures on November 9, 2026. The Revolving Credit Facility includes a $20.0 million swingline sub-facility and a $25.0 million letter of credit sub-facility. The Revolving Credit Facility allows Invictus II to increase commitments under the Revolving Credit Facility up to an aggregate amount not to exceed the greater of (i) $143.0 million and (ii) 100.00% of consolidated EBITDA for the most recent four-quarter period (minus the aggregate outstanding principal amount of certain ratio debt permitted to be incurred thereunder). All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties, subject to certain exceptions.
Borrowings under the Revolving Credit Facility bear interest at a rate equal to (i) an applicable margin, plus (ii) at Invictus II’s option, either (x) LIBOR determined by reference to the cost of funds for U.S. dollar deposits for the
interest period relevant to such borrowing, adjusted for certain additional costs (but which will not be less than a 0.00% LIBOR floor) or (y) a base rate determined by reference to the highest of (a) the prime commercial lending rate published by the Wall Street Journal, (b) the federal funds rate plus 0.50%, (c) the one-month LIBOR rate plus 1.00% and (d) a minimum floor of 1.00%. The applicable margin is 3.25% in the case of LIBOR-based loans and 2.25% in the case of base rate-based loans, with two step downs of 0.25% each based upon the achievement of certain leverage ratios.
High Yield Offering
In order to finance a portion of the cash consideration payable in the Business Combination and the costs and expenses incurred in connection therewith, on October 5, 2021, EverArc Escrow S.à r.l. (“Escrow Issuer”), a newly-formed limited liability company governed by the laws of the Grand Duchy of Luxembourg and a wholly owned subsidiary of EverArc, launched a private offering of $675,000 principal amount of 5.0% senior secured notes due 2029 (the “Senior Notes”) pursuant to that certain Indenture dated as of October 22, 2021 between SK Invictus Intermediate II S.à r.l., a private limited liability company governed by the laws of the Grand Duchy of Luxembourg (“Invictus II”), a subsidiary of Perimeter, and U.S. Bank National Association, as Trustee and Collateral Agent (the “Trustee”). Upon the consummation of the Business Combination, Invictus II became a wholly owned subsidiary of the Company and assumed the Escrow Issuer’s obligations under the Senior Notes. Additionally, upon closing of the Business Combination, Invictus II borrowed $40,000 against the Revolving Credit Facility. The outstanding $40,000 borrowed against the Revolving Credit Facility was repaid in full by Invictus II on December 9, 2021.
Stock Repurchase Program
On December 8, 2021, the board of directors of the Company (the “Board”) authorized a stock repurchase program (the “Stock Repurchase Program”). Under the Stock Repurchase Program, the Company is authorized to repurchase up to $100,000 of its issued and outstanding common Stock over a period of 24-months, expiring December 8, 2023. Repurchases under the Stock Repurchase Program may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef