Item 1.01 Entry into a Material Definitive Agreement.
On March 7, 2022, AZZ Inc., a Texas corporation (the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) by and between the Company and Sequa Corporation, a Delaware corporation (the “Seller”), pursuant to which the Company will acquire (the “Acquisition”) all of Seller’s right, title and interest in and to the membership interests of Sequa Mezzanine Holdings L.L.C., a Delaware limited liability company for $1,283,000,000, subject to certain customary working capital adjustments. The Company plans to finance the Transaction through the issuance of new debt financing that has already been committed, as described below. The Company’s obligation to fund the purchase price of the acquisition is not subject to a financing contingency or condition.
As part of the Acquisition, the Company is acquiring the Precoat Metals division of Seller, which engages in the business of applying protective and decorative coatings and films for continuous steel and aluminum coil and performing ancillary services related thereto (the “Precoat Business”). The Securities Purchase Agreement includes customary representations, warranties, covenants and agreements by the Company and the Seller related to the conduct of the Precoat Business and the Acquisition. The Company has obtained a representation and warranty insurance policy to insure against certain losses arising from breaches of or inaccuracies in the representations and warranties of the Seller in the Securities Purchase Agreement. Except with respect to losses arising from fraud, the Company will not have recourse against the Seller after the closing date with respect to breaches of the Seller’s representations and warranties in the Securities Purchase Agreement. Consummation of the Acquisition is subject to customary closing conditions, including the receipt of requisite antitrust approval (or the expiration of the applicable antitrust waiting period) and the absence of any event or circumstance having a material adverse effect on the Company and its subsidiaries. The Purchase Agreement may be terminated in certain circumstances by the Company or Seller. In addition, either party may terminate the Securities Purchase Agreement if the Acquisition is not consummated on or before July 7, 2022. The Securities Purchase Agreement includes customary non-competition and non-solicitation covenants by the Seller applicable during the two-year period following the closing date of the Acquisition.
Upon closing of the Acquisition, the Company and Seller will enter into a transition services agreement pursuant to which the Seller will continue to provide certain services with respect to the Precoat Business for a specified period of time post-closing of the Acquisition.
In connection with entry into the Securities Purchase Agreement, on March 7, 2022, the Company also entered into a commitment letter (the “Debt Commitment Letter”) with Citigroup Global Markets Inc. (“Citi”) and Wells Fargo Securities, LLC (“Wells Fargo” and, together with Citi, the “Lenders”). Under the Debt Commitment Letter, the Lenders have committed to provide the Company with $1,825,000,000 of debt financing, consisting of a senior secured term loan credit facility of $1,525,000,000 and a Revolving Facility (as defined in the Debt Commitment Letter) of $300,000,000, on the terms and conditions set forth in the Debt Commitment Letter. Pursuant to the Debt Commitment Letter, the Lenders will act as joint lead arrangers and bookrunners, with Citi acting as sole and exclusive administrative agent to make commercially reasonable efforts to form a syndicate of financial institutions and institutional lenders for the Facilities (as defined in the Debt Commitment Letter). The purchase price of the Acquisition will be financed using the Facilities and Revolving Facility. The commitment of the parties under the Debt Commitment Letter is subject to customary conditions, including, without limitation, execution and delivery of definitive documentation consistent with the Debt Commitment Letter and the Summary of Terms (as defined in the Debt Commitment Letter).
Citi and Wells Fargo and their affiliates from time to time have provided in the past and may provide in the future investment banking, commercial lending and financial advisory services to the Company and its affiliates in the ordinary course of business, and have received, and may in the future receive, customary fees for such transactions and services.
The foregoing description of the Securities Purchase Agreement and Debt Commitment Letter contained in Item 1.01 of this Current Report on Form 8-K does not purport to be complete and is qualified in its entirety by reference to the full text of the Securities Purchase Agreement attached as Exhibit 2.1 and incorporated herein by reference, and reference to the full text of the Debt Commitment Letter attached as Exhibit 99.1 and incorporated herein by reference. The foregoing description has been included to provide investors and security holders with information regarding the terms of the Securities Purchase Agreement and Debt Commitment Letter and is qualified in its entirety by the terms and conditions of the Securities Purchase Agreement and Debt Commitment Letter.
Except for its status as a contractual document that establishes and governs the legal relations among the parties with respect to the transactions described therein, the Securities Purchase Agreement is not intended to be a source of factual, business or operational information about the parties. The representations, warranties and covenants contained in the Securities Purchase Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Securities Purchase Agreement, and may be subject to limitations agreed among the parties, including being qualified by confidential disclosures among those parties. Instead of establishing matters as facts, the representations and warranties may have been made to allocate risks contractually among the parties, including where the parties do not have
complete knowledge of all facts. Furthermore, those representations and warranties may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, investors and security holders should not rely on representations, warranties, covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties.