Item 1.01 Entry into a Material Definitive Agreement.
On December 10, 2019, Rondo Acquisition LLC ("Rondo"), a newly formed subsidiary
of Amneal Pharmaceuticals, Inc., a Delaware Corporation (the "Company"), entered
into a definitive equity purchase agreement (the "Purchase Agreement") to
acquire approximately 65% of AvKARE Inc., a Tennessee corporation ("AvKARE"),
and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability
company ("R&S Northeast" and together with AvKARE, the "Target"), for an implied
enterprise value of $340 million, including $255 million, which shall be paid in
cash at or in connection with closing, including proceeds from the Facilities
(as defined below) to be entered into at closing, as well as through the
issuance of approximately $44.2 million in long-term promissory notes to Sellers
(the "Sellers Notes") with the balance of the implied enterprise value
contributed through the selling shareholders' rollover interest in the newly
formed subsidiary (the "Acquisition").
AvKARE is one of the largest private label providers of generic pharmaceuticals
in the U.S. federal agency sector, primarily focused on serving the Department
of Defense and the Department of Veterans Affairs. R&S Northeast is a national
pharmaceutical wholesaler focused primarily on offering 340b-qualified entities
products to provide consistency in care and pricing. The Acquisition does not
include AvKARE's business involving the sale of medical surgical supplies and
laboratory consumables and supplies, durable medical equipment and other
non-pharmaceutical items and products, which business will be disposed of prior
to the closing of the Acquisition.
The Purchase Agreement was entered into among the Jerry Brian Shirley Business
Trust (the "JBS Trust"), the Darren Thomas Shirley Business Trust (the "DTS
Trust"), the Steve Shirley Business Trust (the "SS Trust"), the Jerry Shirley
Business Trust (the "JS Trust," and together with the JBS Trust, the DTS Trust,
and the SS Trust, the "Trusts"), Troy Mizell, Darrell Calvert (collectively with
the Trusts and Mr. Mizell, the "Sellers"), AvKARE, R&S Northeast, and Rondo.
Pursuant to the terms of the Purchase Agreement, and subject to the conditions
set forth therein, the Company has agreed to (i) provide an equity commitment in
an aggregate amount of $76 million (the "Equity Contribution"), and (ii) obtain
first lien senior secured credit facilities in an aggregate principal amount of
$210 million (the "Facilities"). The Facilities will consist of (i) a senior
secured first lien term loan facility in an aggregate principal amount equal to
$180 million, and (ii) a senior secured first lien revolving credit facility in
an aggregate commitment amount equal to $30 million. The Facilities are secured
by the assets of the Target and are not guaranteed by the Company.
The proceeds of the Equity Contribution and the Facilities will be used to
(i) finance a portion of the consideration payable in connection with the
acquisition pursuant to the Purchase Agreement, (ii) refinance and/or repay in
full substantially all of the existing third party indebtedness for borrowed
money of the Target and terminate and/or release substantially all commitments,
guarantees and liens (other than those described in the preceding parenthetical)
on the assets of the Target, and (iii) pay (or reimburse) fees, costs and
expenses incurred in connection with the transactions described in the Purchase
Agreement.
Closing is subject to customary conditions. The Sellers and the other parties to
the Purchase Agreement have made customary representations and warranties and
have agreed to certain customary covenants, including non-competition,
non-solicitation, confidentiality and indemnification. The Purchase Agreement
contains customary termination rights and may be terminated by either the
Sellers or Rondo if: (a) the parties mutually consent to do so; (b) there exists
a material breach of or inaccuracy in any representation or warranty of any
Seller or Rondo, or any Seller or Rondo have breached any of the covenants or
agreements set forth in the Purchase Agreement, such that closing would not be
satisfied; (c) if closing has not occurred by June 30, 2020, provided that Rondo
may extend such date under certain conditions described in the Purchase
Agreement; (d) if any statute, law, ordinance, regulation, rule, code, order,
constitution, treaty, common law, judgment, decree, other requirement or rule of
law of any governmental authority that makes consummation of the transactions
illegal or otherwise prohibited; or (e) any governmental authority has issued a
governmental order restraining or enjoining the transactions, and such
governmental order has become final and non-appealable.
The Sellers granted Rondo an exclusive right during the 180-dayperiod following
the closing of the Acquisition to negotiate the purchase of all of the tangible
and intangible assets and properties owned by, or the outstanding equity
interests in, Apace KY LLC, a Kentucky limited liability company d/b/a Apace
Packaging LLC ("Apace"), in exchange for consideration that is to be determined
and mutually agreeable to Rondo and the owners of Apace. Apace is a provider of
packaging solutions for the pharmaceutical industry.
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The foregoing description of the Purchase Agreement is not complete and is
qualified in its entirety by reference to the Purchase Agreement, which is
attached as Exhibit 2.1 to this Form 8-K and incorporated herein by reference.
The Purchase Agreement contains representations and warranties that the parties
to the Purchase Agreement made solely for the benefit of each other. In
addition, these representations and warranties (i) may be intended not as
statements of fact, but rather as a way of allocating risk to one of the parties
if those statements prove to be inaccurate, (ii) may apply materiality standards
different from what may be viewed as material to investors and securities
holders, and (iii) were made only as of the date of the Purchase Agreement or as
of such other date or dates as may be specified in the Purchase Agreement.
Moreover, information concerning the subject matter of such representations and
warranties may change after the date of the Purchase Agreement, which subsequent
information may or may not be fully reflected in the Company's public
disclosures. Investors and securities holders are urged not to rely on such
representations and warranties as characterizations of the actual state of facts
or circumstances at this time or any other time.
Item 7.01 Regulation FD Disclosure.
On December 10, 2019, the Company issued a press release announcing the
Acquisition. A copy of the press release is included as Exhibit 99.1 to this
Current Report on Form 8-K and incorporated herein by reference.
Item 9.01 Exhibits.
(d) Exhibits
See the Exhibit Index below, which is incorporated by reference herein.
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