Item 1.01. Entry into a Material Definitive Agreement.
On June 25, 2014, Alcoa Inc. (the "Company") and Alcoa IH Limited, a wholly
owned subsidiary of the Company (the "Company Sub"), entered into a Share
Purchase Agreement (the "Share Purchase Agreement") with FR Acquisition
Corporation (US), Inc. (the "US Target"), FR Acquisitions Corporation (Europe)
Limited (the "UK Target"), FR Acquisition Finance Subco (Luxembourg), S.À.r.l.
(the "Seller") and Oak Hill Capital Partners III, L.P. and Oak Hill Capital
Management Partners III, L.P. (collectively, the "Seller Representative")
pursuant to which the Company has agreed to acquire the Firth Rixson business.
The acquisition will be structured as a purchase by the Company (or one of its
subsidiaries) of all the outstanding shares of the US Target from the Seller and
a purchase by the Company Sub of all the outstanding shares of the UK Target
from the Seller, for aggregate consideration of approximately $500 million of
Company common stock (the "Shares") and $2.35 billion in cash, subject to a
customary post-closing adjustment based on, among other things, the amount of
cash, debt and working capital in the business at the closing date.
The Company also entered into an Earnout Agreement (the "Earnout Agreement"),
dated as of June 25, 2014, with the Seller and the Seller Representative,
pursuant to which the Company has agreed to make earn-out payments up to an
aggregate maximum amount of $150 million to the Seller, with the amount of such
payments to be determined based on the post-closing financial performance of
Firth Rixson's Savannah, Georgia facility.
The Seller and certain permitted transferees will be subject to a 120-day
lock-up period following the closing date during which time they will be
required to continue to hold the Shares, subject to certain exceptions for
permitted transfers. Following the expiration of the lock-up period, the Seller
and certain permitted transferees will have certain rights pursuant to a
registration rights agreement, which will be entered into by the Company
concurrently with the closing of the transaction.
The completion of the transaction is subject to receipt of certain regulatory
approvals and other customary closing conditions. The Share Purchase Agreement
may be terminated under certain circumstances, including by either party if the
acquisition has not been completed by April 1, 2015. The Company currently
anticipates that the acquisition will be completed by the end of 2014.
The Company expects to obtain "representation and warranty" insurance from
certain insurers, which will provide coverage for breaches of representations
and warranties of the US Target and the UK Target contained in the Share
Purchase Agreement, subject to deductibles and certain other terms and
On June 25, 2014, the Company entered into a commitment letter (the "Commitment
Letter") pursuant to which Morgan Stanley Senior Funding, Inc. (the "Lender")
committed to provide a 364-day senior unsecured bridge term loan facility in an
aggregate principal amount of $2.5 billion for the purpose of financing all or a
portion of the cash consideration for the acquisition (including the repayment
or redemption of the existing material indebtedness of the US Target and the UK
Target) and to pay the fees and expenses incurred in connection therewith. The
obligation of the Lender to provide the bridge term loans under the Commitment
Letter is subject to a number of customary conditions, including, without
limitation, execution and delivery of definitive documentation consistent with
the Commitment Letter. The commitment will expire on the earliest to occur of
(i) the execution and delivery of the definitive documentation by all parties
thereto, (ii) April 3, 2015, if the definitive documentation has not been
executed and delivered by all parties thereto, and (iii) the date of abandonment
of the acquisition or termination of the Company's or the Company Sub's
obligations under the Share Purchase Agreement. The Company expects that the
Commitment Letter and the commitment thereunder will be substituted with a
prudent combination of debt and equity-content securities.
The foregoing description of the Share Purchase Agreement, the Earnout Agreement
and the Commitment Letter and the transactions contemplated thereby do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the full text of the Share Purchase Agreement, the Earnout
Agreement and the Commitment Letter, which are filed as Exhibit 2.1, Exhibit
10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K.
The Share Purchase Agreement, the Earnout Agreement and the Commitment Letter
(the "Agreements") and the above descriptions have been included to provide
investors with information regarding the terms of the Agreements. They are not
intended to provide any other factual information about the Company or any other
parties to the Agreements or their respective affiliates or equityholders. The
representations, warranties and covenants contained in the Agreements were made
only for the purposes of the Agreements and as of the specific dates, were
solely for the benefit of the parties thereto, may have been used for purposes
of allocating risk between each party rather than establishing matters of fact,
may be subject to a contractual standard of materiality different from that
generally applicable to investors and may be subject to qualifications or
limitations agreed upon by the parties in connection with the negotiated terms,
including being qualified by schedules and other disclosures made by each party.
Accordingly, investors should not rely on the representations, warranties and
covenants in the Agreements as statements of factual information.
This filing does not constitute an offer to sell or the solicitation of an offer
to buy any securities. The Shares will only be issued pursuant to the terms of
the Share Purchase Agreement.
Item 3.02. Unregistered Sales of Equity Securities.
Pursuant to the Share Purchase Agreement, the Company has agreed, subject to the
terms and conditions of the Share Purchase Agreement, to issue 36,523,010 shares
of Company common stock at the closing of the transaction, with an aggregate
value of $500 million based on a per share price of $13.69 per share. The
issuance of such Shares upon closing is expected to be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(a)(2) thereof, because such issuance
does not involve a public offering.
Item 7.01. Regulation FD Disclosure.
The Company issued a press release on June 26, 2014 announcing execution of the
Share Purchase Agreement and the Earnout Agreement. A copy of the press release
is attached to this Current Report on Form 8-K as Exhibit 99.1.
The information in this Item 7.01 and in Exhibit 99.1 is furnished and shall not
be deemed to be "filed" for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the
liabilities of that section, and such information shall not be deemed to be
incorporated by reference into any of the Company's filings under the Securities
Act or the Exchange Act.
Item 9.01. Financial Statements and Exhibits.
(d) The following exhibits are filed as part of this report:
2.1 Share Purchase Agreement, dated as of June 25, 2014, by and among Alcoa
Inc., Alcoa IH Limited, FR Acquisition Corporation (US), Inc., FR
Acquisitions Corporation (Europe) Limited, FR Acquisition Finance Subco
(Luxembourg), S.À.r.l. and Oak Hill Capital Partners III, L.P. and Oak
Hill Capital Management Partners III, L.P., collectively in their capacity
as the Seller Representative.*
10.1 Earnout Agreement, dated as of June 25, 2014, by and among Alcoa Inc., FR
Acquisition Finance Subco (Luxembourg), S.À.r.l. and Oak Hill Capital
Partners III, L.P. and Oak Hill Capital Management Partners III, L.P.,
collectively in their capacity as the Seller Representative.
10.2 Commitment Letter, dated as of June 25, 2014, between Alcoa Inc. and
Morgan Stanley Senior Funding, Inc.
The following exhibit is furnished as part of this report:
99.1 Press Release issued by Alcoa Inc.
, dated June 26, 2014
* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company
agrees to furnish supplementally to the U.S.Securities and Exchange Commission
a copy of any omitted schedule or exhibit
Certain statements in this report, including statements regarding the proposed
acquisition by the Company of the Firth Rixson business, the proposed financing
of the transaction and potential earn-out payments, Alcoa's
transformation, the combined company's plans, objectives, expectations and
intentions, expected contribution to revenues and adjusted EBITDA, leadership in
the aerospace jet engine components industry, and the expected size, scope and
growth of the combined company's operations and the market in which it will
operate, expected synergies, the anticipated issuance of Company common stock in
the acquisition, as well as the expected timing, closing and benefits of the
transaction, may contain words such as "anticipates," "estimates," "expects,"
"forecasts," "intends," "outlook," "plans," "projects," "should," "could,"
"may," "seeks," "targets," "will," "believes," or other words of similar meaning
that constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based on the
Company's current expectations, estimates, forecasts and projections about the
proposed transaction and the operating environment, economies and markets in
which the Company and Firth Rixson operate. These statements are subject to
important risks and uncertainties that are difficult to predict, and the actual
outcome may be materially different. These statements reflect beliefs and
assumptions that are based on the Company's perception of historical trends,
current conditions and expected future developments, as well as other factors
management believes are appropriate in the circumstances. In making these
statements, the Company has made assumptions with respect to: the ability of the
Company and Firth Rixson to achieve expected synergies and the timing of same;
the ability of the Company and Firth Rixson to predict and adapt to changing
customer requirements, demand, preferences and spending patterns; future capital
expenditures, including the amount and nature thereof; trends and developments
in the aerospace, metals engineering and manufacturing sectors and other sectors
of the economy which are related to these sectors; business strategy and
outlook; expansion and growth of business and operations; credit risks;
anticipated acquisitions; future results being similar to historical results;
expectations related to future general economic and market conditions; and other
matters. The Company's beliefs and assumptions are inherently subject to
significant business, economic, competitive and other uncertainties and
contingencies regarding future events and as such, are subject to change. The
Company's beliefs and assumptions may prove to be inaccurate and consequently
the Company's actual results could differ materially from the expectations set
out herein. Actual results or events could differ materially from those
contemplated in forward-looking statements as a result of risks and
uncertainties relating to the transaction and financing thereof, including:
(a) the risk that the businesses will not be integrated successfully or such
integration may be more difficult, time-consuming or costly than expected, which
could result in additional demands on Alcoa's
resources, systems, procedures and
controls, disruption of its ongoing business and diversion of management's
attention from other business concerns; (b) Alcoa's
increased levels of
indebtedness as a result of the proposed transaction, which could limit Alcoa's
operating flexibility and opportunities; (c) Alcoa's inability to complete the
anticipated financing as contemplated by the commitment letter prior to the
contractually required time for closing of the proposed transaction or otherwise
secure favorable terms for such financing; (d) the possibility that certain
assumptions with respect to Firth Rixson or the proposed transaction could prove
to be inaccurate; (e) failure to receive, delays in the receipt of, or
unacceptable or burdensome conditions imposed in connection with, all required
regulatory approvals and the satisfaction of the closing conditions to the
proposed transaction; (f) the potential failure to retain key employees of Alcoa
or Firth Rixson as a result of the proposed transaction or during integration of
the businesses; (g) potential sales of the Company common stock issued in the
acquisition; (h) the loss of customers, suppliers and other business
relationships of Alcoa
or Firth Rixson as a result of the transaction; and
(i) disruptions resulting from the proposed transaction, making it more
difficult to maintain business relationships. Additionally, important factors
that could cause actual results to differ materially from those expressed or
implied in the forward-looking statements include the risk factors summarized in
Form 10-K for the year ended December 31, 2013
, Form 10-Q for the
quarter ended March 31, 2014
, and other reports filed with the Securities and
disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information, future
events or otherwise, except as required by applicable law. Nothing on our
website is included or incorporated by reference herein.