Item 1.01 Entry Into a Material Definitive Agreement.
On June 29, 2021, PLBY Group, Inc., a Delaware corporation (“PLBY”), announced that it has entered into a Share Purchase Agreement (the “Agreement”), dated June 28, 2021, by and among PLBY, PLBY Australia Pty Ltd, a company organized under the laws of the Australia and an indirect, wholly-owned subsidiary of PLBY (“Buyer”), Honey Birdette (Aust) Pty Limited, a company organized under the laws of Australia (“HB”), the holders of all of the capital stock of HB (the “Sellers”), and Ray Itaoui, as the Sellers’ representative (the “Representative”), pursuant to which Buyer will acquire all of the capital stock of HB (the “Transaction”), resulting in HB becoming an indirect, wholly-owned subsidiary of PLBY.
Pursuant to the Agreement, Buyer will acquire all of the capital stock of HB for aggregate consideration valued at AUD439 million (or approximately $333 million, based on the exchange rate in effect at the close of business on June 28, 2021), subject to certain adjustments. The consideration to be paid is expected to consist of a combination of approximately AUD314 million (or approximately $238 million) of cash and shares of PLBY’s common stock valued at approximately AUD125 million (or approximately $95 million) based on the daily dollar‑volume‑weighted average price for PLBY shares, as reported by Bloomberg, L.P. for the 20 trading day period immediately preceding the date of the Agreement (the “Stock Consideration”), a portion of which Stock Consideration will be subject to restrictions on transfer under the Agreement pending the final determination of certain post-Closing True-Up adjustments as described below.
In addition, the Agreement provides that AUD1 million (or approximately $759,400) of the cash consideration will be placed in an escrow account at the closing of the Transaction (the “Closing”) for the satisfaction of certain post-Closing adjustments payable by the Sellers. Following Closing, the Sellers may also be entitled to the issuance of additional shares of PLBY common stock in the event that HB’s financial results for each of its 2021 and 2022 fiscal years exceed certain financial targets set forth in the Agreement (each a “True-Up”). In the event that HB fails to achieve certain financial results for its 2021 and 2022 fiscal years as set forth in the Agreement, a portion of the Stock Consideration may be canceled in accordance with the terms of the Agreement. For any shares of PLBY common stock delivered as Stock Consideration (including any shares issued pursuant to any True-Up), the Agreement requires PLBY to prepare and file with the Securities and Exchange Commission a registration statement on Form S-1 for benefit of the Sellers receiving such Stock Consideration.
The consummation of the Transaction is subject to customary closing conditions, including the continued accuracy of representations and warranties made by the parties to the Agreement, the performance in all material respects of obligations required to be performed under the Agreement, and the receipt of approval of the Transaction from the Australian Foreign Investment Review Board. The Agreement also contains customary representations and warranties of each of PLBY, Buyer, HB and the Sellers, as well as customary pre-Closing covenants of the parties to the Agreement. The Agreement requires HB and Sellers to abide by customary exclusivity restrictions on the ability of them and their affiliates to solicit alternative acquisition proposals from third parties. PLBY expects that the Closing will occur in the third quarter of 2021.
The representations and warranties contained in the Agreement, other than certain fundamental representations and warranties, will not survive the closing of the Transaction, and PLBY’s primary recourse with respect to damages resulting from a breach of such representations and warranties of the Sellers will be against a representations and warranties insurance policy issued to PLBY in connection with the Transaction. The representations and warranties insurance policy is subject to certain customary exclusions and deductibles. The Agreement also contains certain limited indemnification obligations of the parties, including with respect to breaches of the parties’ respective covenants required to be performed following consummation of the Transaction, as well as certain other matters, subject to certain specified limitations, including, among other things, limitations on the period during which PLBY and Buyer may make certain claims for indemnification and limitations on the amounts for which the Sellers may be liable.
The Agreement contains certain termination rights for Buyer and the Representative. Upon termination of the Agreement under specified circumstances, Buyer will be required to pay to Sellers a termination fee of approximately AUD22 million (or approximately $17 million based on the exchange rate in effect at the close of business on June 28, 2021).
The foregoing summary of the Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Agreement filed herewith as Exhibit 2.1, which is incorporated herein by reference. The Agreement has been included as an exhibit hereto solely to provide stockholders with information regarding its terms. It is not intended to be a source of financial, business, or operational information about PLBY, HB, or their respective subsidiaries or affiliates. The representations, warranties, and covenants contained in the Agreement: are made only for purposes of the Agreement and are made as of specific dates; are solely for the benefit of the parties to the Agreement; may be subject to qualifications and limitations agreed upon by the parties to the Agreement in connection with negotiating the terms of the Agreement, including being qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties rather than establishing matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors or stockholders. Investors and stockholders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of PLBY, HB or their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Agreement which subsequent information may or may not be fully reflected in public disclosures.