CONSTELLATION BRANDS

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CONSTELLATION BRANDS, INC. : Entry into a Material Definitive Agreement, Change in Directors or Principal Officers, Financial Statements and Exhibits (form 8-K)

06/30/2022 | 05:25pm

Item 1.01 Entry into a Material Definitive Agreement.



Reclassification



On June 30, 2022, Constellation Brands, Inc., a Delaware corporation
("Constellation" or the "Company"), announced a plan to reclassify the Company's
common stock to eliminate its Class B common stock (the "Reclassification"). In
support of the Reclassification, the Company has entered into a Reclassification
Agreement, dated June 30, 2022 (the "Reclassification Agreement"), with Richard
Sands
, Robert Sands, other members of the Sands family and certain of their
related entities (the "Sands Stockholder Group"), the beneficial owners of
approximately 98% of the issued and outstanding shares of the Class B Common
Stock, par value $0.01 per share, of the Company (the "Class B Common Stock").



The Reclassification Agreement provides that, following the satisfaction of the
conditions thereto, the Company will amend and restate its Restated Certificate
of Incorporation (the "A&R Charter"). Upon the A&R Charter being duly filed with
the Delaware Secretary of State (the "Effective Time"), among other things, each
share of Class B Common Stock issued and outstanding immediately prior to the
Effective Time will be reclassified, exchanged and converted into one share of
Class A Common Stock, par value $0.01 per share, of the Company ("Class A Common
Stock") and the right to receive $64.64 in cash, without interest. The Company
intends to seek incremental third party financing to fund the cash portion of
the consideration and has the ability to substitute up to $500 million of such
cash consideration with additional Class A Common Stock if the Company's
available cash at the Effective Time is insufficient to pay the total cash
consideration.



The closing of the Reclassification is subject to customary conditions,
including, (i) approval of the A&R Charter by the affirmative vote of the
holders of (a) a majority of the voting power of the issued and outstanding
shares of Class A Common Stock and Class B Common Stock entitled to vote
thereon, voting together as a single class, (b) a majority of the issued and
outstanding shares of Class B Common Stock, and (c) the affirmative vote of at
least 50.3% of the issued and outstanding shares of Class A Common Stock held by
the Unaffiliated Class A Holders (as defined in the Reclassification Agreement),
(ii) the effectiveness of the Company's registration statement on Form S-4 to be
filed with the U.S. Securities and Exchange Commission (the "SEC") in connection
with the Reclassification, (iii) approval by the New York Stock Exchange of the
listing of the shares of Class A Common Stock into which the Class B Common
Stock will be reclassified, exchanged and converted into, subject to official
notice of issuance; and (iv) the accuracy of the representations and warranties
of each party (subject to materiality qualifiers) and compliance in all material
respects by each party with its obligations under the Reclassification
Agreement.



Subject to specified exceptions, the members of the Sands Stockholder Group who
exercise voting rights with respect to Class A Common Stock and Class B Common
Stock have irrevocably and unconditionally agreed to vote all of their shares of
Class A Common Stock and Class B Common Stock,



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representing approximately 98% of issued and outstanding Class B Common Stock
and approximately 60% of the combined voting power of the issued and outstanding
Class A Common Stock and Class B Common Stock when voting together as a single
class, in favor of the A&R Charter. The Sands Stockholder Group is also subject
to certain transfer restrictions up until the Effective Time.



The Reclassification Agreement contains certain termination rights, including
the right of either party to terminate for specified breaches of the other party
(subject to a cure period), the requisite stockholder approvals not being
obtained or if the Reclassification does not occur on or prior to June 30, 2023.



Post-Closing Matters



The Reclassification Agreement also sets forth the arrangements between the
Company and the Sands Stockholder Group relating to certain post-closing
matters.



Until the fifth anniversary of the Effective Time, WildStar Partners LLC
("WildStar"), an entity associated with Mr. Richard Sands and Mr. Robert Sands,
will have the right (so long as there have not been certain breaches of the
Reclassification Agreement) to designate (i) two individuals that the board of
directors of the Company (the "Board") will nominate for election to the Board
so long as the Sands Stockholder Group collectively beneficially own at least
10% of the total issued and outstanding shares of Class A Common Stock and
(ii) one individual that the Board will nominate for election to the Board so
long as the Sands Stockholder Group collectively beneficially own at least 5% of
the total issued and outstanding shares of Class A Common Stock. Following the
fifth anniversary of the Effective Time, WildStar will have the right (so long
as there have not been certain breaches of the Reclassification Agreement) to
designate one individual that the Board will nominate for election to the Board
so long as the Sands Stockholder Group collectively beneficially own at least 5%
of the total issued and outstanding shares of Class A Common Stock.



The Reclassification Agreement imposes certain (x) transfer restrictions with
respect to the shares of common stock held by the Sands Stockholder Group,
including a prohibition on transfer of more than 7,957,925 shares of the
Company's capital stock during an initial 3-year period following the Effective
Time and (y) customary standstill limitations for a period of 5 years following
the Effective Time (or, if later, until such time as there are no Sands
Stockholder Group
director nominees on the Board) including, among others, with
respect to acquisitions of Company equity securities, making proposals for a
merger or similar transaction and seeking to control or influence the business
or policies of the Company. The Company also stated in the Reclassification
Agreement the Board's intention to rotate the lead independent director position
on the Board at the next available normal cycle opportunity. The
Reclassification Agreement provides that, in connection with the closing of the
Reclassification, the Company and the Sands Stockholder Group will enter into a
registration rights agreement (the "Registration Rights Agreement") pursuant to
which the Sands Stockholder Group will be provided certain rights relating to
the registration of their common stock.



In addition to the provisions stated above, the Reclassification Agreement
contains customary representations, warranties and covenants of each of the
parties thereto for a transaction of this type. The Company anticipates
completing the Reclassification during the second half of 2022.



At the Effective Time, the Board will also (i) amend and restate the bylaws of
the Company to implement certain conforming changes in connection with the A&R
Charter and to implement certain



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other changes to update the bylaws in accordance with best corporate practices,
including adopting a majority standard in uncontested elections of directors,
(ii) amend and restate the Board Corporate Governance Guidelines and the
Corporate Governance and Responsibility Committee Charter to reflect
modernizing, clarifying, and conforming changes in connection with the A&R
Charter and Bylaws Amendment, and (iv) adopt a Board anti-pledging policy
applicable to directors and executive officers. Individuals nominated by
WildStar for appointment to the Board will be permitted to continue to pledge
their shares subject to certain limitations set forth in the Reclassification
Agreement.



The foregoing description of the Reclassification Agreement does not purport to
be complete and is qualified in its entirety by reference thereto. The
Reclassification Agreement (including the appended form of the Amended and
Restated Certificate of Incorporation of the Company, reflecting the A&R
Charter, the form of Amended and Restated Bylaws of the Company, the form of
Registration Rights Agreement, the form of Amended and Restated Board Corporate
Governance Guidelines, the form of Amended and Restated Corporate Governance and
Responsibility Charter and form of Board Anti-Pledging Policy) is filed as
Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by
reference.



Item 5.02 Departure of Directors or Certain Officers; Election of Directors;



Appointment of Certain Officers; Compensatory Arrangements of Certain



Officers.



The information contained in Item 1.01 above is incorporated by reference herein
in its entirety.



Messrs. Robert and Richard Sands, who currently serve as Executive Chairman of
the Board and Executive Vice Chairman of the Board, respectively, will, to the
extent they remain employees of the Company or a subsidiary of the Company
immediately prior to the Effective Time, retire and cease their employment with
the Company in such capacities effective at the Effective Time. Pursuant to the
Reclassification Agreement, the Company shall take all necessary action so that
Messrs. Robert and Richard Sands become, as applicable, Non-Executive Chairman
of the Board and a Board member, respectively, as of and immediately following
the Effective Time.



Forward-Looking Statements



This Current Report on Form 8-K contains forward-looking statements. All
statements other than statements of historical fact are forward-looking
statements. The word "expect," and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words. These statements may relate to future plans and
objectives of management and Constellation's Board of Directors, as well as
information concerning expected actions of third parties. All forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from those set forth in, or implied by, such forward-looking
statements. No assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur.



The forward-looking statements are based on management's current expectations
and should not be construed in any manner as a guarantee that such results will
in fact occur. All forward-looking statements speak only as of the date of this
Current Report on Form 8-K and Constellation does not undertake any obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.



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Statements in this Current Report on Form 8-K regarding Constellation and the
Reclassification transaction that are forward-looking, including projections as
to the anticipated benefits of the proposed transaction, the impact of the
proposed transaction on Constellation's business and future financial and
operating results and capital structure following the closing of the proposed
Reclassification and the closing date for the proposed transaction, are based on
management's estimates, assumptions and projections, and are subject to
significant uncertainties and other factors, many of which are beyond
Constellation's control. These factors include, among other things, (1) failure
to receive the requisite approvals of Constellation's shareholders necessary to
achieve the Reclassification; (2) any other delays with respect to, or the
failure to complete, the Reclassification; (3) the ultimate outcome of any
litigation matter related to the Reclassification, (4) the ability to recognize
the anticipated benefits of the Reclassification, (5) Constellation's ability to
execute successfully its strategic plans, and (6) the effect of the announcement
or the consummation of the proposed Reclassification on the market price of the
capital stock of Constellation. The foregoing review of important factors should
not be construed as exhaustive and should be read in conjunction with the other
cautionary statements that are included elsewhere. Additional information
concerning risks that could cause actual future performance or events to differ
from current expectations can be found in Constellation's filings with the SEC,
including the risk factors discussed in Constellation's most recent Annual
Report on Form 10-K for the fiscal year ended February 28, 2022 and Quarterly
Report on Form 10-Q for the quarter ended May 31, 2022.



IMPORTANT ADDITIONAL INFORMATION



This Current Report on Form 8-K does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any vote or
approval nor shall there be any sale 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. No offer of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
Constellation intends to file with the SEC a Registration Statement on Form S-4,
which will contain a proxy statement/prospectus in connection with the proposed
Reclassification. STOCKHOLDERS OF CONSTELLATION ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain a free copy
of the proxy statement/prospectus (when available), as well as other filings
containing information about Constellation, without charge, at the SEC's
website, www.sec.gov, and on Constellation's Investor Relations website at
https://ir.cbrands.com.



PARTICIPANTS IN THE SOLICITATION



The directors and executive officers of Constellation and other persons may be
considered participants in the solicitation of proxies from stockholders in
connection with the proposed transaction. Information regarding Constellation's
directors and executive officers is available in Constellation's most recent
proxy statement, dated May 27, 2022, for the Annual Meeting of Stockholders to
be held on July 19, 2022, which was filed with the SEC on June 2, 2022, and
Constellation's other filings with the SEC. Other information regarding the
participants in the proxy solicitation and a description of their direct and
indirect interests will be contained in the proxy statement/prospectus when it
becomes available.



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Item 9.01 Financial Statements and Exhibits.



For the exhibits that are filed or furnished herewith, see the Index to Exhibits
immediately following.

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