Last month, following a bidding war, the US-headquartered multichannel marketing and business services group said it was set to be acquired by its largest investor, Chatham Asset Management, for $10.85 (£8.04) per share in cash.
The situation took a fresh turn last Wednesday (29 December), when the company said it had received an unsolicited non-binding ‘Alternative Acquisition Proposal’, as defined in its definitive merger agreement with affiliates of Chatham, from a strategic party, that was unnamed but referred to as the ‘Strategic Party’, to acquire all of the outstanding shares of RRD’s common stock for $11.00 per share in cash, subject to other terms and conditions.
In late November, RRD had received a non-binding proposal from the same strategic party to acquire all of the outstanding shares of RRD’s common stock for $10.00 per share in cash, subject to other terms and conditions.
On 29 December, RRD’s board of directors determined, in good faith after consultation with the company’s outside financial advisor and legal counsel, that the proposal from the strategic party would reasonably be expected to lead to a ‘Superior Proposal’, as defined in the merger agreement with Chatham.
As at 29 December, the board had not determined that the proposal from the strategic party constituted a Superior Proposal, and said there could be no assurances that a transaction would result from the strategic party’s proposal or that any alternative transaction would be entered into or consummated.
RRD also confirmed receipt of a letter from Chatham regarding the proposal from the strategic party, which had previously been shared with Chatham as required by Chatham’s merger agreement.
In Chatham’s letter, it stated its belief that the strategic party’s proposal does not constitute, and would not reasonably be expected to lead to, a Superior Proposal, and that it is Chatham’s belief that a conclusion otherwise by the board would be a breach of the company’s obligations under the Chatham merger agreement.
Chatham further stated its belief that RRD is not permitted to engage in negotiations or discussions with, or to furnish non-public information or data to, the strategic party.
Under the merger agreement with Chatham, RRD is required to pay a $12m expense reimbursement to Chatham if it terminates the Chatham agreement in order to enter into a definitive merger agreement with respect to the proposal from the strategic party.
The company would also be required to reimburse Chatham for the $20m payment previously made by Chatham to cover the termination fee due under its now-terminated definitive merger agreement with affiliates of Atlas Holdings.
In its own proposal, the strategic party has stated it would agree to pay both the expense reimbursement and the Atlas termination fee refund to Chatham on RRD’s behalf in such event.
At this time, RRD said it remains subject to the Chatham merger agreement and is complying with its terms and conditions, which remain in effect unless and until it is terminated.
Accordingly, subject to and as required by the merger agreement, RRD’s board reaffirms its recommendation of the Chatham agreement and rejects all alternative acquisition agreements. In addition, as required by the Chatham agreement, RRD will file a preliminary proxy statement in respect of the transactions contemplated by the Chatham agreement.
RRD said it does not intend to disclose developments with respect to this process unless and until it determines it is appropriate to do so, subject to the terms of its merger agreement with Chatham. It has not published any update on the situation since 29 December.
Shares in RRD were down by 0.71% yesterday, closing at $11.18, and had a pre-market price today of $11.00.
