Item 1.01. Entry into a Material Definitive Agreement.
On March 24, 2021, Houston Wire & Cable Company (the "Company"), Omni Cable, LLC
("Omni"), and OCDFH Acquisition Sub Inc., a Delaware corporation and wholly
owned subsidiary of Omni ("Merger Sub"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which, subject to the satisfaction
of customary closing conditions, Merger Sub will be merged with and into the
Company (the "Merger"), with the Company continuing as the surviving corporation
in the Merger (the "Surviving Corporation") and a, wholly owned subsidiary of
Omni. Omni is a subsidiary of Dot Holdings Co, which is owned by Dot Family
Holdings, owners and operators of Dot Foods, Inc., the largest food industry
redistributor in North America.
Pursuant to the terms of the Merger Agreement, at the effective time of the
Merger, each share of common stock, par value $0.001, of the Company (the
"Company common stock") issued and outstanding immediately prior to the
effective time of the Merger (other than shares as to which dissenters' rights
are exercised in accordance with the Delaware General Corporation Law) will be
automatically converted into the right to receive $5.30 in cash (without
interest) (the "Per Share Merger Consideration"). The Merger is subject to,
among other conditions, adoption of the Merger Agreement by stockholders at the
Company's 2021 Annual Meeting of Stockholders, scheduled to be held on May 25,
2021.
Concurrently with the execution of the Merger Agreement, Omni entered into
voting agreements dated March 24, 2021 (the "Voting Agreements") with Nierenberg
Investment Management Company, Inc., on behalf of itself and certain managed
funds that own shares of Company common stock, and each of the Company's
directors and officers, pursuant to which such persons have agreed, subject to
the terms of the Voting Agreements, to vote the shares of Company common stock
beneficially owned by them in favor of the adoption of the Merger Agreement and
approval of the Merger and against any competing acquisition proposals relating
to the Company. Such persons currently beneficially own approximately 19% of the
outstanding Company common stock. The Voting Agreements will terminate upon the
earlier to occur of (1) the effective time of the Merger, (2) the date on which
the Merger Agreement is terminated in accordance with its terms and (3) the
mutual written agreement of the parties to terminate a Voting Agreement.
The board of directors of the Company (the "Board") unanimously adopted and
approved the Merger Agreement and the transactions contemplated thereby,
including the Merger, and, subject to the terms and conditions of the Merger
Agreement, resolved to recommend that the Company's stockholders adopt the
Merger Agreement.
With respect to the Company's stock-based equity awards, at the effective time
of the Merger, all unvested awards will vest (at target, in the case of
performance-based stock unit awards), and each of the 300,461 stock units
outstanding under the Company's stock and deferred compensation plans will be
cancelled in exchange for the Per Share Merger Consideration. No consideration
will be paid in connection with the cancellation of outstanding stock options,
as all have exercise prices greater than the Per Share Merger Consideration.
The transaction is expected to close following the Company's 2021 Annual Meeting
of Stockholders in May 2021, subject to the satisfaction or waiver of certain
closing conditions, including, among other things: (1) the adoption of the
Merger Agreement by the affirmative vote of holders of a majority of the
outstanding shares of Company common stock; (2) the absence of certain legal
impediments preventing the completion of the Merger; (3) the accuracy of the
representations and warranties of the parties and the compliance of the parties
with their respective covenants, subject to customary qualifications, including
with respect to materiality; and (4) conditions relating to the Company's
tangible net book value and indebtedness.
Pursuant to the terms of a "go-shop" provision in the Merger Agreement, during
the period beginning on the date of the Merger Agreement and ending at 12:01
a.m. on April 24, 2021 (such date, the "No-Shop Period Start Date"), the Company
may (1) initiate, solicit, propose, induce or encourage any alternative
acquisition proposals from third parties; (2) provide nonpublic information to
such third parties; and (3) participate in discussions and negotiations with
such third parties regarding alternative acquisition proposals. Beginning on the
No-Shop Period Start Date, the Company will become subject to customary
"no-shop" restrictions on its ability, except as permitted by the Merger
Agreement, to solicit, initiate, propose or induce the making or knowingly
encourage alternative acquisition proposals from third parties and to provide
nonpublic information to, or participate in, discussions or negotiations with
third parties regarding alternative acquisition proposals.
Each of the Company, Omni and Merger Sub has made certain customary
representations, warranties and covenants in the Merger Agreement. The Company's
covenants include, among other things, the obligation: (1) to conduct its
business in all material respects in the ordinary course of business consistent
with past practice (subject to certain conditions, during the period between the
execution of the Merger Agreement and the completion of the Merger); and (2) to
provide all cooperation requested by Omni in connection with its arranging for
any financing for the transaction. The Merger is not conditioned on Omni's
receipt of any financing.
The Merger Agreement contains certain termination rights for the Company and
Omni, including, among others, if the Merger is not consummated by September 30,
2021. Upon termination of the Merger Agreement under specified circumstances,
the Company will be required to pay Parent a termination fee of $4 million.
Specifically, the termination fee will be payable if the Merger Agreement is
terminated by (1) Omni, if the Board changes its recommendation with respect to
the Merger, (2) Omni, if the Company breaches or fails to perform, in accordance
with the Merger Agreement, in any material respect its obligations under the
alternative acquisition solicitation provisions in the Merger Agreement or fails
to present the Merger for a stockholder vote, or (3) the Company, if the Board
authorizes the acceptance of a superior proposal and such proposal was not
solicited in breach of the alternative acquisition solicitation provisions in
the Merger Agreement. The termination fee will also be payable in certain
circumstances if (1) the Company has failed to obtain the required approval of
its stockholders and the Merger Agreement is terminated (a) by either Omni or
the Company because the Merger is not completed by September 30, 2021 or because
of such vote failure or (b) by Omni because of a material breach of the
Company's representations, warranties or covenants in a manner that would cause
the related closing conditions to not be satisfied, (2) prior to such
termination (but after the date of the Merger Agreement) a proposal, generally
speaking, to acquire at least 25% of the Company's stock or assets is publicly
announced or disclosed by a third party and (3) within one year of such
termination the Company consummates, or enters into a preliminary or definitive
agreement providing for, a transaction involving the acquisition of at least 25%
of its stock or assets.
As soon as practicable after the Merger, Omni will take the necessary actions to
delist the Company common stock from Nasdaq and to deregister the Company common
stock under the Securities Exchange Act of 1934.
The foregoing description of the Merger Agreement is qualified in its entirety
by reference to the full text of the Merger Agreement, a copy of which is filed
as Exhibit 2.1, and is incorporated herein by reference.
The Merger 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 Merger Agreement were made only for purposes of that
agreement and as of specific dates, were solely for the benefit of the parties
to that agreement and may have been qualified by disclosures in the disclosure
letters to the Merger Agreement. Furthermore, those representations and
warranties may be subject to contractual standards of materiality that differ
from those under applicable securities laws. Accordingly, investors and security
holders should not rely on such representations, warranties, covenants or any
descriptions thereof as characterizations of the actual state of facts or
condition of the parties.
Item 8.01. Other Events.
On March 25, 2021, the Company issued a press release announcing entry into the
Merger Agreement. A copy of the press release is attached hereto as Exhibit 99.1
and is incorporated herein by reference.
* * * * *
Additional Information and Where to Find It
This report relates to the proposed transaction involving the Company and Omni.
The Company intends to file a proxy statement (the "Proxy Statement") with the
Securities and Exchange Commission (the "SEC") in connection with the
solicitation of proxies in connection with the proposed transaction. This report
does not constitute a solicitation of any vote or approval, and is not a
substitute for the Proxy Statement or any other document that the Company may
file with the SEC or send to its stockholders in connection with the proposed
transaction.
Promptly after filing the definitive Proxy Statement with the SEC, the Company
will mail the definitive Proxy Statement and a proxy card to each stockholder
entitled to vote at the annual meeting at which the Merger will be considered.
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR
SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY FILES
WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will
be able to obtain the documents (when available) free of charge at the SEC's web
site, http://www.sec.gov, at the Company's website, www.houwire.com, or by
writing to the Company at Houston Wire & Cable Company, 10201 North Loop East,
Houston, TX 77029, attention: Corporate Secretary.
Participants in Solicitation
The Company and its directors and executive officers are participants in the
solicitation of proxies from stockholders in connection with the proposed
transaction. Information about the directors and executive officers of the
Company is set forth in the proxy statement for the Company's 2020 annual
meeting of stockholders, which was filed with the SEC on March 26, 2020, and in
the Company's Annual Report on Form 10-K for the year ended December 31, 2019,
which was filed with the SEC on March 13, 2020, and will be set forth in the
Annual Report on Form 10-K for the year ended December 31, 2020, expected to be
filed later today. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the Proxy Statement and
other relevant materials to be filed with the SEC in respect of the proposed
transaction when they become available.
Cautionary Note Regarding Forward-Looking Statements
Forward-looking statements in this report are made in reliance upon the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may relate to, but are not limited to, information or
assumptions about the duration, extent and impact of the COVID-19 pandemic, our
sales and marketing strategy, sales (including pricing), income, operating
income or gross margin improvements, working capital, cash flow, interest rates,
impact of changes in accounting standards, future economic performance,
management's plans, goals and objectives for future operations, performance and
growth or the assumptions relating to any of the forward-looking statements.
These statements can be identified by the fact that they do not relate strictly
to historical or current facts. They use words such as "aim", "anticipate",
"believe", "could", "estimate", "expect", "intend", "may", "plan", "project",
"should", "will be", "will continue", "will likely result", "would" and other
words and terms of similar meaning in conjunction with a discussion of future
operating or financial performance. The Company cautions that forward-looking
statements are not guarantees because there are inherent difficulties in
predicting future results. Actual results could differ materially from those
expressed or implied in the forward-looking statements. The factors listed under
"Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2019 and in subsequent Quarterly Reports on Form 10-Q provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of March 24, 2021, among
Omni Cable, LLC, OCDFH Acquisition Sub Inc. and Houston Wire &
Cable Company.
10.1 Form of Voting Agreement, dated as of March 24, 2021, between
Omni Cable, LLC and (i) each of the directors and executive
officers of Houston Wire & Cable Company and (ii) Nierenberg
Investment Management Company (incorporated by reference to Exhibit
B to Exhibit 2.1).
99.1 Press release dated March 25, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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