Item 1.01 Entry into a Material Definitive Agreement
Exchange Agreements
On January 30, 2019,
Wright Medical Group N.V. (the
Company
) entered into privately-negotiated agreements (the
Agreements
) among the Company, Wright Medical Group, Inc., an indirect, wholly-owned subsidiary of the Company
(
WMG
), and a limited number of investors who are accredited investors (within the meaning of Rule 501 promulgated under the U.S. Securities Act of 1933, as amended (the
Securities Act
)) and/or qualified
institutional buyers (as defined in Rule 144A under the Securities Act) who are holders of WMGs existing 2.00% cash convertible senior notes due 2020 (the
Existing Notes
) to exchange $112,106,000 aggregate principal amount
of Existing Notes for $120,223,000 aggregate principal amount of newly issued notes under WMGs existing indenture for its 1.625% cash convertible senior notes due 2023 (the
2023 Notes
). The 2023 Notes are fully and
unconditionally guaranteed by the Company on a senior unsecured basis. For each $1,000 principal amount of Existing Notes validly submitted for exchange, WMG will deliver $1,072.40 principal amount of 2023 Notes to the exchanging investor (subject,
in each case, to rounding to the nearest $1,000 aggregate principal amount for each such exchanging investor). There will be no separate cash payment in respect of rounded amounts or interest, if any, accrued and unpaid to the closing date of the
exchange. The 2023 Notes are referred to as exchangeable in the exchange documents because they will be issued by WMG, not the Company. The exchange is expected to close on February 7, 2019, subject to customary closing conditions.
Neither the Company nor WMG will receive any cash proceeds from the exchange of Existing Notes for the 2023 Notes.
The additional 2023
Notes will be issued pursuant to the Indenture, dated June 28, 2018, by and among the Company, WMG and Bank of New York Mellon Trust Company, N.A., governing the 2023 Notes (the Indenture). On June 28, 2018, $675 million
aggregate principal amount of 2023 Notes were issued under the Indenture. After giving effect to the issuance of the additional 2023 Notes and the exchange of the Existing Notes pursuant to the exchange, $795,233,000 aggregate principal amount of
the 2023 Notes will be issued and outstanding under the Indenture and $74,483,000 aggregate principal amount of the Existing Notes is expected to remain issued and outstanding.
The foregoing description of the Agreements does not purport to be complete and is qualified in its entirety by reference to the form of the
Agreements, which is filed as Exhibit 10.1 to this Current Report on
Form 8-K,
and the Indenture, which was filed as Exhibit 4.1 to the Companys Current Report on Form
8-K,
filed with the SEC on July 3, 2018, each of which are incorporated herein by reference.
Convertible Note Hedge and Warrant Transactions
On January 30, 2019, 2019, the Company and WMG entered into cash-settled convertible note hedge transactions with two counterparties,
Deutsche Bank AG, London Branch and JPMorgan Chase Bank, National Association (the
Option Counterparties
), which are expected generally to reduce the net cash payments that WMG may be required to make upon conversion of the newly
issued 2023 Notes to the extent that such cash payments exceed the principal amount of such exchanged 2023 Notes and the per share market price of the Companys ordinary shares, par value 0.03 per share (the
Ordinary
Shares
), as measured under the terms of the cash convertible note hedge transactions, is greater than the strike price of the cash convertible note hedge transactions, which is initially $33.37, corresponding to the initial conversion
price of the 2023 Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the 2023 Notes.
On January 30, 2019, the Company also entered into warrant transactions with the Option Counterparties in which the Company agreed to
sell the Option Counterparties warrants that are initially exercisable into 3,602,831 Ordinary Shares and subject to adjustment upon the occurrence of certain events. The strike price of the warrants will initially be $40.86 per Ordinary Share,
which is approximately 36.3% above the last reported sale price of the Ordinary Shares on January 30, 2019, as reported on the NASDAQ Global Select Market. The warrant transactions will have a dilutive effect on the Ordinary Shares to the
extent that the market price per Ordinary Share, as measured under the terms of the warrant transactions, exceeds the strike price of the warrants.
WMG intends to pay approximately $26.0 million in the aggregate to the Option Counterparties for the note hedge transactions, and receive
approximately $18.3 million in the aggregate from the Option Counterparties for the warrants, resulting in a net cost to the Company of approximately $7.7 million.
Aside from the initial payment of a premium to the Option Counterparties of approximately $26.0 million and subject to the right of the
Option Counterparties to terminate the convertible note hedge transactions in certain circumstances, the Company will not be required to make any cash payments to the Option Counterparties under the convertible note hedge transactions and will be
entitled to receive from the Option Counterparties an amount of cash, generally equal to the amount by which the market price per Ordinary Share, as measured under the terms of the cash convertible note hedge transactions, is greater than the strike
price of the cash convertible note hedge transactions during the relevant valuation period under the cash convertible note hedge transactions. The Company will not receive any additional proceeds if warrants are exercised.