Item 1.01 Entry into a Material Definitive Agreement.
Overview
On June 20, 2022, Convey Health Solutions Holdings, Inc., a Delaware corporation (the “Company”), Commodore Parent 2022, LLC, a Delaware limited liability company (“Parent”), and Commodore Merger Sub
2022, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions
and on the terms set forth therein, Merger Sub will merge (the “Merger”) with and into
the Company, with the Company continuing as the surviving corporation (the “Surviving Corporation”). Parent and Merger Sub are affiliates of TPG Cannes Aggregation, L.P., an affiliate of TPG Global, LLC and the holder of a majority of the outstanding capital stock of the Company (the “TPG Stockholder”).
A special committee (the “Special Committee”)
of the board of directors of the Company (the “Board”) comprised solely of members of the Board that are independent of Parent, Merger Sub and their respective
affiliates, has, by unanimous vote, (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and its stockholders (other than the TPG
Stockholder, Parent, Merger Sub or any of their respective affiliates or the Rollover Stockholders (as defined below)) (the “Unaffiliated Stockholders”) and (ii)
recommended that the Board take the actions described below.
The Board, acting upon the recommendation of the Special Committee, has (i) determined that the terms of the Merger Agreement and the
transactions contemplated thereby, including the Merger, are fair to, and in the best interests of, the Company and the Unaffiliated Stockholders, (ii) declared the Merger Agreement and the transactions contemplated thereby advisable, (iii) approved
the Merger Agreement, the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the Merger and the other transactions contemplated
thereby upon the terms and subject to the conditions contained therein and (iv) resolved to recommend that the stockholders of the Company vote to adopt and approve the Merger Agreement in accordance with the Delaware General Corporation Law, as may
be amended from time to time.
At the effective time of the Merger (the “Effective
Time”), each share of common stock, $0.01 par value per share, of the Company (the “Common Stock”) issued and outstanding immediately prior to the
Effective Time (other than Rollover Shares (as defined below), Common Stock owned by the Company, the TPG Stockholder, Parent or Merger Sub and Common Stock with respect to which appraisal rights under Delaware law are properly exercised and not
withdrawn) will be converted into the right to receive an amount in cash equal to $10.50 per share, payable to the holder thereof, without interest.
Treatment of Company Equity Awards
Pursuant to the Merger Agreement, at the Effective Time, each
outstanding option to purchase shares of Common Stock (“Company Option”), whether vested
or unvested, will remain outstanding and continue to be subject to the same terms and conditions as immediately prior to the Effective Time, as set forth in the applicable Company equity plan and award agreement, except that (i) each Company Option
will be exercisable for that number of shares of common stock, par value $0.01, of the Surviving Corporation (the “Surviving Corporation Shares”) equal to the product of (A) the number of shares subject to the Company Option immediately before the Effective Time multiplied by (B) 0.01 and (ii) the per share exercise price for each
Surviving Corporation Share issuable upon exercise of the Company Option shall be equal to the quotient (rounded up to the nearest whole cent) obtained by dividing (A) the exercise price per share of such Company Option immediately before the
Effective Time by (B) 0.01. In addition, each outstanding restricted stock unit, performance-based restricted stock unit and long-term incentive unit of the Company will remain outstanding and continue to be subject to the same terms and
conditions as immediately prior to the Effective Time, as set forth in the applicable Company equity plan and/or award agreement, as applicable, except that each restricted stock unit and performance-based restricted stock unit and, to the extent
settled in shares of Common Stock, long-term incentive unit, will settle in a number of Surviving Corporation Shares equal to the number of shares of Common Stock subject to such restricted stock unit, performance-based restricted stock unit or
long-term incentive award, as applicable, immediately before the Effective Time multiplied by 0.01.
The obligation of the parties to consummate the Merger is subject to
various conditions, including: (i) adoption of the Merger Agreement by a majority of the voting power of the outstanding shares of the Common Stock; (ii) the absence of any law, order, judgment, decree, injunction or ruling prohibiting the
consummation of the Merger; (iii) the accuracy of the representations and warranties of the parties (subject to customary materiality qualifiers); and (iv) each party’s performance in all material respects of its covenants and obligations contained
in the Merger Agreement. The Merger Agreement does not contain a financing condition. Following
the execution of the Merger Agreement, the TPG Stockholder, which holds approximately 75% of the outstanding shares of Common Stock, executed and delivered to the Company a written consent adopting the Merger Agreement and approving the Merger (the
“Stockholder Consent”), thereby providing the required
stockholder approval for the Merger. No further action by holders of shares of Common Stock is required to complete the transaction.
No-Shop
Under the Merger Agreement, the Company is subject to a customary “no-shop” provision that restricts the Company and its
representatives from soliciting Acquisition Proposals (as defined in the Merger Agreement) from third parties or providing information to or participating in any discussions or negotiations with third parties regarding Acquisition Proposals.
However, the “no-shop” provision allows the Company, prior to the receipt of the Stockholder Consent, under certain circumstances and in compliance with certain obligations set forth in the Merger Agreement, to provide non-public information and
engage in discussions and negotiations with respect to an unsolicited Acquisition Proposal that would reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement).
Financing and Rollover Stockholders
Parent and Merger Sub have secured debt financing to be provided by
certain lenders on the terms and subject to the conditions set forth in the debt commitment letter. The obligations of such lenders to provide debt financing under the debt commitment letter are subject to a number of customary conditions.
In addition, certain of the Company’s directors and officers (the “Rollover Stockholders”) have entered into a rollover and support agreement with Parent,
pursuant to which, among other matters, such rollover investors have agreed that a certain portion of their shares of Common Stock (the “Rollover Shares”) will
be converted into Surviving Corporation Shares.
Termination; Termination Fees
The Merger Agreement contains certain termination rights for the
Company and Parent, including the right of either party to terminate the Merger Agreement if the Merger is not consummated on or before December 20, 2022. The Merger Agreement further provides that Parent may be required to pay the Company, under
certain specified circumstances, a termination fee of $50 million, and may be required, under certain specified circumstances, to reimburse the Company’s fees and expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby, up to $10 million in the aggregate. The Merger Agreement also provides that the Company may be required to pay Parent a termination fee of $24 million under certain specified circumstances. In addition, certain investment
funds affiliated with TPG Global, LLC have agreed to guarantee the obligations of Parent to pay the termination fee and certain reimbursement obligations that may become payable by Parent to the Company.
Representations, Warranties and Covenants
The Company has made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants
(i) to use commercially reasonable efforts to conduct its business in the ordinary course of business in all material respects during the interim period between the execution of the Merger Agreement and the consummation of the Merger, (ii) not to
engage in specified types of transactions or take specified actions during this period unless agreed to in writing by Parent and (iii) subject to certain exceptions, not to withdraw, modify or qualify in a manner adverse to Parent the recommendation
of the Board that the Company’s stockholders vote for the adoption of the Merger Agreement.
Delisting of Shares of Common Stock
If the Merger is consummated, the shares of Common Stock will be delisted from the New York Stock Exchange and deregistered under the
Securities Exchange Act of 1934, as amended.
Description of Merger Agreement Not Complete
The Merger Agreement and the above description of the Merger Agreement
have been included to provide investors with information regarding the terms of the Merger Agreement. It is not intended to provide any other factual information about the
Company, Parent or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of
the parties to the Merger Agreement and may be subject to limitations agreed upon by the parties in connection with negotiating the terms of the Merger Agreement, including being qualified by confidential disclosures made by each party to the other
for the purposes of allocating contractual risk between them. In addition, certain representations and warranties may be subject to a contractual standard of materiality different from those generally applicable to investors and may have been used
for the purpose of allocating risk between the parties rather than establishing matters as facts. Information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which
subsequent information may or may not be fully reflected in public disclosures by the Company. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the parties that is or
will be contained in, or incorporated by reference into, the Forms 10-K and Forms 10-Q filed and to be filed by the Company, the Information Statement to be filed by the Company in connection with the Merger and other documents that the parties
will file with the Securities and Exchange Commission. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company, Parent or
any of their respective subsidiaries, affiliates or businesses. The foregoing description of the Merger 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 Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated herein by reference.