Item 1.01. Entry into a Material Definitive Agreement.
On January 7, 2021, Domtar Corporation (the "Company") entered into a Securities
Purchase Agreement with an affiliate of American Industrial Partners (AIP), an
operationally-oriented middle market private equity firm (the "Purchaser"), to
sell the Company's personal care business to the Purchaser for a purchase price
of $920 million in cash, including elements of working capital estimated at
$130 million, subject to customary adjustments (the "Transaction"). The net book
value of the net assets being sold is approximately $1,060 million. The
Transaction is subject to customary closing conditions, including regulatory
approvals in the US and Europe. Subject to the satisfaction or waiver of
conditions of the Securities Purchase Agreement, the transaction is expected to
close in the first quarter of 2021.
The Securities Purchase Agreement contains representations, warranties and
covenants that are customary for similar transactions. The Securities Purchase
Agreement contains customary termination rights, including if the closing has
not occurred on or prior to June 7, 2021, and provides that, upon termination of
the Securities Purchase Agreement under specified circumstances, the Purchaser
will pay a $55 million termination fee.
The foregoing description of the Securities Purchase 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 Securities Purchase
Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated
herein by reference.
At the closing of the Transaction, the parties will enter into certain ancillary
agreements, including a transition services agreement and certain supply
agreements.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Transaction-Related Compensation Actions
In connection with the Transaction, the Human Resources Committee of the board
of directors of the Company has approved a cash retention bonus in the amount of
$816,156 (the "Retention Bonus") for Michael Fagan, President of the Company's
Personal Care Business. The Retention Bonus is payable to Mr. Fagan at the
earlier of (i) the consummation of the Transaction and (ii) December 31, 2021,
subject to Mr. Fagan's employment with the Company on such payment date.
Item 7.01. Regulation FD Disclosure.
On January 8, 2021, the Company published a press release announcing the
Transaction. A copy of the press release is filed as Exhibit 99.1 to this
Current Report on Form 8-K and is incorporated herein by reference.
Statements in this report about our plans, expectations and future performance
are "forward-looking statements." Forward-looking statements including, without
limitation, statements regarding the timing of the close of the sale of Domtar's
personal care business and the potential benefits of the sale, reflect the
current analysis of existing information and are subject to various risks and
uncertainties. Actual results may differ materially from those suggested by
these statements for a number of reasons, including our ability to obtain the
required regulatory approvals for the transaction, our ability to satisfy the
other closing conditions, our ability to consummate the transaction on the
anticipated timing, if at all, the COVID-19 pandemic and the resulting decrease
in paper sales and the challenges we face in maintaining manufacturing
operations, changes in customer demand and pricing, changes in manufacturing
costs, future acquisitions and divestitures, including facility closings, the
failure to achieve our cost containment goals, costs of conversion in excess of
our expectations, demand for linerboard, and the other reasons identified under
"Risk Factors" in our Form 10-K for 2019 as filed with the SEC and as updated by
subsequently filed Form 10-Qs. Except to the extent required by law, we
expressly disclaim any obligation to update or revise these forward-looking
statements to reflect new events or circumstances or otherwise.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Description of Exhibits
2.1 Securities Purchase Agreement, dated as of January 7, 2021, by and
between Domtar AI Inc., Domtar Luxembourg Investments Sàrl, Domtar
Corporation and Journey Personal Care Corp.*
99.1 Press Release of Domtar Corporation, dated January 8, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company will furnish the omitted schedules and exhibits to
the Securities and Exchange Commission upon request.
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