ACON S2 Item 8.01. Other Events.
As previously disclosed, onMay 6, 2021 ,ACON S2 Acquisition Corp. , aCayman Islands exempted company, (the "Company" or "STWO"), entered into an Agreement and Plan of Merger (as it may be amended, supplemented or otherwise modified from time to time, the "Merger Agreement") withSCharge Merger Sub, Inc. , aDelaware corporation and a wholly-owned direct subsidiary of STWO ("Merger Sub"), andESS Tech, Inc. , aDelaware corporation ("ESS"), pursuant to which, subject to the terms and conditions of the Merger Agreement, STWO will consummate its initial business combination with ESS (the "Business Combination"). OnSeptember 9, 2021 , STWO filed a registration statement (the "Registration Statement") on Form S-4 (No. 333- 257232) containing a proxy statement/prospectus of STWO in connection with the Business Combination (such proxy statement/prospectus in definitive form, the "Proxy Statement/Prospectus"), which was declared effective by theSecurities and Exchange Commission (the "SEC") onSeptember 14, 2021 , and STWO commenced mailing the Proxy Statement/Prospectus onSeptember 14, 2021 . OnJuly 14, 2021 ,August 13, 2021 ,September 15, 2021 andSeptember 16, 2021 , STWO received a total of four demand letters from purported shareholders of STWO (the "Demand Letters") alleging that the Proxy Statement/Prospectus contained disclosure deficiencies and/or incomplete information regarding the Business Combination. STWO believes that the disclosures set forth in the Proxy Statement/Prospectus comply fully with applicable law and that the allegations contained in the Demand Letters are entirely without merit. However, in order to moot the purported STWO shareholders' unmeritorious disclosure claims, preclude any efforts to delay the closing of the Business Combination, avoid nuisance and alleviate the costs, distractions, risks and uncertainties inherent in litigation, STWO has determined to voluntarily supplement the Proxy Statement/Prospectus with certain supplemental disclosures (the "Supplemental Disclosures") as described in the following section entitled "Supplemental Disclosures to Proxy Statement Prospectus" in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, STWO specifically denies all allegations by the purported STWO shareholders in the Demand Letters that any additional disclosure was or is required. The Supplemental Disclosures contained herein will not affect the timing of STWO's extraordinary general meeting of its shareholders, which is scheduled to be held virtually onOctober 5, 2021 at10:30 AM Eastern Time . You will be able to virtually attend, vote your shares and submit questions during the extraordinary general meeting via a live audio webcast by pre-registering at https://www.cstproxy.com/acon/sm2021. STWO's board of directors continues to recommend that STWO shareholders vote "FOR" each proposal being submitted to a vote of the STWO shareholders at the extraordinary general meeting.
Entry Into Irrevocable Proxy and Power of Attorney Agreement
As previously disclosed,ESS andSB Energy Global Holdings One Ltd. ("SBE") filed a jointCommittee on Foreign Investment inthe United States ("CFIUS") notice inAugust 2021 seeking CFIUS's approval of SBE's acquisition of certain voting shares, as well as certain deferred information and governance rights, in New ESS (the "SBE CFIUS Approval"). ESS and SBE will use their reasonable best efforts to satisfy CFIUS and provide any documentation or information requested or required by CFIUS prior to Closing, but the receipt of CFIUS approval is not a condition to Closing. The receipt and timing of the SBE CFIUS Approval is uncertain. In anticipation of Closing, ESS, STWO, and SBE entered into an Irrevocable Proxy and Power of Attorney Agreement, dated as ofSeptember 30, 2021 (the "Irrevocable Proxy Agreement"), pursuant to which certain SBE rights will be subject to receipt of the SBE CFIUS Approval. In particular, SBE will grant the Secretary of New ESS an irrevocable proxy to vote its shares in New ESS that represent more than 9.9% of all issued and outstanding shares of New ESS pro rata in the same manner and proportion as how the other holders of New ESS common stock vote their shares. Such proxy shall remain in place for all SBE shares above 9.9% of all issued and outstanding shares until the SBE CFIUS Approval is obtained, at which time it shall continue in place but with a revised threshold, applying to all SBE shares above 19.9% of all issued and outstanding shares. We cannot assure you that we will receive the SBE CFIUS Approval, and cannot predict what (if any) mitigation measures CFIUS may request, require or impose before granting the SBE CFIUS Approval or the impact of such mitigation measures on New ESS' business, including our -------------------------------------------------------------------------------- relationship with SBE. Failure to receive the SBE CFIUS Approval could have a materially adverse effect on our business, prospects, and financial condition. In addition, if we do become subject to CFIUS mitigation measures, actual or alleged violations could damage New ESS' reputation and ability to do business. The following is a summary of certain material terms and provisions of the Irrevocable Proxy Agreement. This summary does not purport to describe all of the terms and provisions of the Irrevocable Proxy Agreement and is qualified in its entirety by the complete text of the Irrevocable Proxy Agreement, which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Supplemental Disclosures to Proxy Statement/Prospectus
The following supplemental information should be read in conjunction with the Proxy Statement/Prospectus, which should be read in its entirety. All page references are to pages in the Proxy Statement/Prospectus, and terms used below, unless otherwise defined, have the meanings set forth in the Proxy Statement/Prospectus.
The following disclosure replaces the third sentence of the last paragraph on page 102 of the Proxy Statement/Prospectus:
STWO entered into non-disclosure agreements with over 50 of these potential business combination targets, each of which STWO believes contained customary confidentiality terms for a special purpose acquisition company and a private company target, including ESS, for purposes of performing due diligence and further evaluating and analyzing these companies as potential business combination targets.
The following disclosure is added after the second paragraph on page 105 of the Proxy Statement/Prospectus:
On
The following disclosure is added before the first paragraph on page 112 of the Proxy Statement/Prospectus before the heading "Certain ESS Projected Financial Information". Comparable Public Companies STWO's management worked with its financial advisors to develop a comparable companies data set and ran a comparable companies analysis to assess the value that the public markets would likely ascribe to STWO following a business combination with ESS. The relative valuation analysis was based on selected publicly traded companies in the battery storage, fuel cell and electrolyzers, and renewable technologies sectors (each further described below and together, the "Publicly Traded Benchmark Companies"). The selected companies were chosen because they were determined by STWO's management to be relevant comparisons to ESS (but, for the avoidance of doubt, each of the selected companies is not necessarily a direct competitor of ESS). Some of the factors considered by STWO's management in selecting these companies as examples of comparable publicly traded companies include the similarity of their end markets, business models, go-to-market strategies, ESG characteristics, and forecasted margins and growth rates relative to ESS. While these companies may share certain characteristics that are similar to those of ESS, STWO recognized that no company was identical in nature to ESS. Using publicly available information, STWO's management reviewed, among other things, the estimated revenues, revenue growth rate, estimated gross profit margin, estimated EBITDA, and estimated EBITDA margin with respect to each such selected comparable company over a range of years. The data reviewed by STWO for the Publicly Traded Benchmark Companies is summarized as follows: --------------------------------------------------------------------------------
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-------------------------------------------------------------------------------- Based on the review of these selected comparable publicly traded companies, the STWO Board concluded that ESS' estimated revenues, revenue growth rate, gross profit margin, EBITDA and EBITDA margin were attractive relative to the selected comparable companies, as well as the median of the Publicly Traded Benchmark Companies. The results of this analysis supported the STWO Board's determination, based on a number of factors, that the terms of the merger were fair to and in the best interests of STWO and its shareholders. The STWO Board did not rely extensively on the results of this analysis because it saw ESS as a category catalyst in long duration energy storage solutions.
The following disclosure amends the third sentence of the third paragraph on page 112 of the Proxy Statement/Prospectus:
Management of ESS provided STWO with internally prepared projections for
estimated total revenue, gross profit, EBITDA, debt and capital expenditures of
ESS for 2021 through 2027 on
The following disclosure is added after the last paragraph on page 117 of the Proxy Statement/Prospectus:
Interests of ESS' and
In connection with the consummation of the Business Combination, (i) Deutsche Bank is entitled to (a) expense reimbursement and customary indemnification in connection with its services as a M&A advisor to STWO and as placement agent for the PIPE Financing and (b) customary placement agent fees from STWO in connection with its services as placement agent for the PIPE Financing, and (ii) Nomura is entitled to (a) expense reimbursement and customary indemnification in connection with its services as a financial and capital markets advisor to ESS and (b) customary financial advisory fees and a discretionary bonus. Additionally, in connection with the consummation of the Business Combination, Deutsche Bank will be entitled to deferred underwriting compensation, as set forth in the registration statement for STWO's initial public offering, which closed onSeptember 18, 2020 . These fees will be paid at the closing of the Business Combination and are conditioned upon the successful completion of the Business Combination. If the Business Combination does not close, Deutsche Bank and Nomura will be entitled to expense reimbursement and customary indemnification, but will not be entitled to such fees. In addition, Deutsche Bank (together with its affiliates) and Nomura (together with its affiliates) are each full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investing, hedging, market making, brokerage and other financial and non-financial activities and services. Deutsche Bank has not provided any investment banking or other commercial dealings unrelated to the Business Combination (or STWO's Initial Public Offering) to STWO, ESS or their respective affiliates. In addition, in the ordinary course of its business activities, Deutsche Bank, Nomura and their respective affiliates, officers, directors and employees may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of STWO or its affiliates or ESS or its affiliates. Deutsche Bank and Nomura and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
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The table of the Proxy Statement/Prospectus entitled "Security Ownership of
Certain Beneficial Owners and Management" is amended and supplemented for the
following stockholders to account for shares purchased in the PIPE Financing:
After the Business Combination
Before the Business Combination Assuming No Redemption Assuming Maximum Redemption
Number Number Number of Number of
of STWO of STWO % of Shares of % of Shares of % of
Class A Class B Total New ESS Total New ESS Total
Ordinary Ordinary Voting Common % of Voting Common % of Voting
Five percent holders Shares Shares Power Stock Class Power Stock Class Power
BASF Venture Capital GmbH (1) - - - % 7,721,878 5.1 % 5.1 % 7,721,878
6.1 % 6.1 %
Breakthrough Energy Ventures, LLC (2) - - - % 15,527,317 10.2 % 10.2 % 15,527,317 12.2 % 12.2 %
. . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
99.1 Irrevocable Proxy and Power of Attorney Agreement, dated as of
September 30, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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