Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On January 29, 2020, Comtech Telecommunications Corp., a Delaware corporation
("Comtech"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Gilat Satellite Networks Ltd., a company organized under the
laws of the State of Israel ("Gilat"), and Convoy Ltd., a company organized
under the laws of the State of Israel and a wholly owned subsidiary of Comtech
("Merger Sub"). The Merger Agreement provides for, among other things, the
merger of Merger Sub with and into Gilat, with Gilat continuing as the surviving
corporation (the "Merger"). The Comtech board of directors has, by unanimous
vote, approved the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement.
On the terms and subject to the conditions of the Merger Agreement, at the
effective time of the Merger (the "Effective Time"), each ordinary share of
Gilat, nominal value NIS $0.20 per share (the "Gilat Shares"), issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive (i) $7.18 in cash, without interest, and (ii) 0.08425 of a
share of Comtech common stock, par value $0.10 per share ("Comtech Common
Stock") (together, the "Merger Consideration"), with cash payable in lieu of
fractional shares of Comtech Common Stock.
On the terms and subject to the conditions of the Merger Agreement, at the
Effective Time, all options to purchase Gilat Shares outstanding immediately
prior to the Effective Time that are vested or that will become vested by virtue
of the Merger, will be cancelled and converted into the right to receive
the Merger Consideration with respect to the number of net shares subject to
such option, less applicable tax withholding. For this purpose, "net share"
means, with respect to an option, the quotient of (i) the product of (A) the
excess, if any, of the value of the Merger Consideration (calculated as
specified in the Merger Agreement) over the exercise price or purchase price per
Gilat Share (as applicable) subject to such option, multiplied by (B) the number
of Gilat Shares subject to such option, divided by (ii) the value of the Merger
Consideration. All options to purchase Gilat Shares outstanding immediately
prior to the Effective Time that are unvested and will remain unvested following
the Merger (the "Converted Options") will be assumed by Comtech and converted
into a number of Comtech restricted stock units ("Substituted RSUs") equal in
value on the date of grant (based on the volume-weighted average of the trading
prices of Comtech Common Stock for the ten (10) most recent trading days ending
on (and including) the second-to-last trading day immediately prior to the
Effective Time ("Comtech Average Trading Price")) to the product of (A) the
number of Gilat Shares underlying such option and (B) a cash amount equal to (x)
the Merger Consideration (with the cash value of the Comtech Common Stock
portion of the Merger Consideration calculated based on the Comtech Average
Trading Price), less (y) the per share exercise price of such option. The
Substituted RSUs shall be subject to vesting in accordance with the same vesting
schedule as was applicable to the Converted Options.
Completion of the Merger is subject to customary closing conditions, including,
among others, approval by Gilat shareholders of the Merger and the other
transactions contemplated by the Merger Agreement, obtaining all required
governmental authorizations, including the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, clearance or approval by certain other antitrust or
competition authorities in other jurisdictions, the absence of a material
adverse effect (as such term is defined in the Merger Agreement) with respect to
Gilat and Comtech from the date of the Merger Agreement, the absence of any
applicable law or governmental order prohibiting the consummation of the
transactions contemplated by the Merger Agreement, the U.S. Securities and
Exchange Commission (the "SEC") declaring effective the Form S-4 to be filed by
Comtech with respect to the shares of Comtech Common Stock to be issued in the
Merger, the shares of Comtech Common Stock to be issued in the Merger being
approved for listing on the Nasdaq Global Select Market, the expiration of
certain statutory waiting periods under Israeli securities law, the accuracy of
the representations and warranties of each party (subject to certain materiality
standards), and the material compliance by each party with its obligations under
the Merger Agreement. The consummation of the Merger is not subject to a
financing condition.
The Merger Agreement contains customary representations, warranties and
covenants, including, among others, covenants providing for Comtech and Gilat to
conduct their respective businesses in the ordinary course during the period
between the execution of the Merger Agreement and the Effective Time and to use
reasonable best efforts to obtain required governmental approvals, subject to
certain exceptions. The Merger Agreement provides that Comtech will use
reasonable best efforts to cause Comtech Common Stock to be listed on the Tel
Aviv Stock Exchange immediately prior to, on or promptly following the
consummation of the Merger.
The Merger Agreement also includes covenants requiring Gilat not to solicit or
enter into discussions with third parties relating to alternative business
combination transactions during the period between the execution of the Merger
Agreement and the Effective Time, subject to the fulfillment of certain
fiduciary requirements of the Gilat board of directors (the "Gilat Board") and,
subject to certain exceptions, not to modify or qualify in a manner adverse to
Comtech or withdraw the recommendation of the Gilat Board that Gilat's
shareholders approve the Merger.
The Merger Agreement contains certain termination rights, including the right of
Gilat to terminate the Merger Agreement if the Merger does not occur by July 29,
2020 and the right of Gilat to terminate the Merger Agreement in order to enter
into a definitive agreement with respect to a superior proposal for an
alternative transaction (so long as Gilat complies with certain notice and other
requirements under the Merger Agreement). Upon termination of the Merger
Agreement by Gilat or Comtech upon specified conditions, a termination fee of
$21,675,000 may be payable by Gilat to Comtech.
The foregoing description of the Merger Agreement is not complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached to this report as Exhibit 2.1 and incorporated herein by reference.
The Merger Agreement and the above description thereof have been included to
provide investors and stockholders with information regarding the terms of the
agreement. They are not intended to provide any other factual information about
Comtech or Gilat or their respective subsidiaries or affiliates or stockholders.
The representations, warranties and covenants contained in the Merger Agreement
were made only for purposes of the Merger Agreement as of the specific dates
therein, were solely for the benefit of the parties to the Merger Agreement, may
be subject to limitations agreed upon by the contracting parties, including
being qualified by confidential disclosures made for the purposes of allocating
contractual risk among the parties to the Merger Agreement instead of
establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those
applicable to investors. Investors are not third-party beneficiaries under the
Merger Agreement and should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state
of facts or condition of the parties thereto or any of their respective
subsidiaries or affiliates. Moreover, information concerning the subject matter
of representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in
Comtech's or Gilat's public disclosures. Accordingly, investors should read the
representations and warranties in the Merger Agreement not in isolation but only
in conjunction with the other information about Comtech or Gilat and their
respective subsidiaries and affiliates that the respective companies include in
reports, statements and other filings they make with the SEC.
Commitment Letter
In connection with the Merger Agreement, Comtech entered into a debt commitment
letter (the "Commitment Letter"), dated as of January 29, 2020, with Citibank,
N.A., Manufacturers and Traders Trust Company, Santander Bank, N.A., BMO Harris
Bank, N.A. and BMO Capital Markets, Regions Bank, Israel Discount Bank of New
York and Goldman Sachs Bank USA (collectively, the "Commitment Parties"),
pursuant to which, among other things, the Commitment Parties have committed to
provide Comtech with a senior secured revolving credit facility in an aggregate
principal amount of $800,000,000 to finance, in part, the acquisition of Gilat
(collectively, the "Financing"). The Commitment Parties' commitment to provide
the Financing is subject to various conditions, including (i) consummation of
the Merger in accordance with the Merger Agreement; (ii) the negotiation and
execution of definitive documentation consistent with the Commitment Letter;
(iii) delivery of certain audited, unaudited and pro forma financial statements;
(iv) the absence of a material adverse effect on Gilat; (v) the accuracy of
specified representations and warranties of Gilat in the Merger Agreement and
specified representations and warranties of Comtech to be set forth in the
definitive loan documents; (vi) the repayment of certain outstanding Gilat debt;
and (vii) and other customary closing conditions.
This foregoing description of the Commitment Letter is not complete and is
qualified in its entirety by reference to the Commitment Letter, which is
attached to this report as Exhibit 10.1 and incorporated herein by reference.
Voting Agreements
Concurrently with the execution of the Merger Agreement, Comtech entered into
Voting Agreements (collectively, the "Voting Agreements") with certain of
Gilat's shareholders, including directors and executive officers of Gilat who
beneficially own Gilat Shares (each, a "Shareholder" and, collectively, the
"Shareholders") representing approximately 45% of the issued and outstanding
Gilat Shares in the aggregate, pursuant to which each Shareholder has agreed,
among other things, to vote its Gilat Shares (i) in favor of the Merger and the
other transactions contemplated by the Merger Agreement, including any matter
necessary for the consummation of the Merger, (ii) in favor of any proposal to
adjourn or postpone any meeting of Gilat shareholders at which any of the
foregoing matters are submitted for consideration and vote of the Gilat
shareholders if there are not sufficient votes for approval of any such matters
on the date on which the meeting is held, (iii) against any third party
acquisition transactions and (iv) against any other proposal made in opposition
to the adoption of the Merger Agreement or that would reasonably be expected to
prevent the consummation of the Merger. The Voting Agreement will terminate upon
the earliest to occur of (i) the Effective Time, (ii) the date the Merger
Agreement is terminated in accordance with its terms, (iii) a change of the
recommendation of the Gilat Board that Gilat's shareholders approve the Merger
that is unanimously approved by the Gilat Board, and (iv) with respect to any
Shareholder, the mutual written agreement of Comtech and such Shareholder to
terminate the Voting Agreement, or at the option of such Shareholder, upon the
entry without the prior written consent of such Shareholder into any amendment
or modification of the Merger Agreement which results in a decrease in the
Merger Consideration or imposes any material restrictions or material
constraints on the payment of the consideration to be paid for the Gilat Shares.
The foregoing description of the Voting Agreement is not complete and is
qualified in its entirety by reference to the form of Voting Agreement, which is
attached hereto as Exhibit 99.1 and incorporated herein by reference.
Additional Information and Where to Find It
This current report is being made in respect of a proposed business combination
involving Comtech and Gilat. This current report does not constitute an offer to
sell or the solicitation of an offer to buy or subscribe for any securities or a
solicitation of any vote or approval nor shall there be any sale, issuance or
transfer of securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. The proposed transaction will be
submitted to the shareholders of Gilat for their consideration. Comtech intends
to file with the U.S. Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-4 that will include a preliminary prospectus
with respect to Comtech's common stock to be issued in the proposed transaction
and a proxy statement of Gilat in connection with the merger of an indirect
subsidiary of Comtech with and into Gilat, with Gilat surviving. The information
in the preliminary proxy statement/prospectus is not complete and may be
changed. Comtech may not sell the common stock referenced in the proxy
statement/prospectus until the Registration Statement on Form S-4 becomes
effective. The proxy statement/prospectus will be provided to Gilat
shareholders. Comtech and Gilat also plan to file other documents with the SEC
regarding the proposed transaction.
This current report is not a substitute for any prospectus, proxy statement or
any other document that Comtech or Gilat may file with the SEC in connection
with the proposed transaction. Investors and security holders of Comtech and
Gilat are urged to read the proxy statement/prospectus and any other relevant
documents that will be filed with the SEC carefully and in their entirety when
they become available because they will contain important information about the
proposed transaction.
You may obtain copies of all documents filed with the SEC regarding this
transaction, free of charge, at the SEC's website (www.sec.gov). In addition,
. . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Description
2.1* Agreement and Plan of Merger, dated as of January 29, 2020, among
Comtech Telecommunications Corp., Gilat Satellite Networks Ltd. and
Convoy Ltd.
10.1 Commitment Letter, dated as of January 29, 2020, among Comtech
Telecommunications Corp., Citibank, N.A.and the other commitment
parties party thereto.
99.1 Form of Voting Agreement.
* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Comtech hereby agrees to furnish supplementally a copy of any of the omitted
schedules upon request by the U.S. Securities and Exchange Commission.
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