Item 1.01. Entry into a Material Definition Agreement.
Purchase Agreement
On December 3, 2020, Nesco Holdings, Inc. ("Nesco") and Nesco Holdings II, Inc.,
a subsidiary of Nesco ("Buyer") entered into a Purchase and Sale Agreement (the
"Purchase Agreement") with certain affiliates of The Blackstone Group
("Blackstone") and other direct and indirect equity holders (collectively,
"Sellers") of Custom Truck One Source, L.P. ("CTOS"), Blackstone Capital
Partners VI-NQ L.P. ("Sellers' Representative") and, solely with respect to
Section 9.04 of the Purchase Agreement, PE One Source Holdings, LLC, an
affiliate of Platinum Equity ("Platinum"), pursuant to which Buyer has agreed to
acquire 100% of the partnership interests of CTOS (collectively, the
"Acquisition").
Transaction Consideration
Upon consummation of the Acquisition, Sellers will receive a base purchase price
of $1.475 billion, subject to customary adjustments in respect of the cash,
indebtedness, net working capital, and transaction expenses of CTOS as of the
closing of the Acquisition, as well as an adjustment on the basis of the
original equipment cost of the rental fleet inventory owned by CTOS as of the
closing date of the Acquisition.
Conditions to the Transaction
The closing of the Acquisition is subject to customary closing conditions,
including, among others, (a) the absence of laws or orders restraining,
enjoining or otherwise prohibiting the consummation of the Acquisition, (b) the
expiration or termination of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"),
(c) the completion of pre-closing reorganization transactions involving CTOS and
certain of its affiliates, (d) the execution of joinders to the Purchase
Agreement by each Seller who did not initially execute the Purchase Agreement,
(e) the receipt of required consents or waivers, or the refinancing, of certain
floorplan financing facilities of CTOS and its subsidiaries, (f) the completion
of the financing transactions contemplated by Buyer's debt and equity financing
commitments for the Acquisition, (g) the shares to be issued to certain Sellers
who have entered into Rollover and Contribution Agreements ("Rollover
Agreements") with Nesco being approved for listing on the New York Stock
Exchange, subject only to official notice of issuance thereof, (h) the accuracy
of the parties' representations and warranties in the Purchase Agreement
(subject to certain de minimis, materiality and material adverse effect
qualifications), (i) the compliance in all material respects by the parties
under the Purchase Agreement with the applicable covenants and agreements
therein, and (j) the absence of any material adverse effect on Nesco and its
subsidiaries or CTOS and its subsidiaries, in each case, taken as a whole. The
Acquisition is expected to close in the first quarter of 2021.
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Termination Fees
Sellers are entitled to receive, as Sellers' sole and exclusive recourse under
the Purchase Agreement, certain fees upon the valid termination of the Purchase
Agreement by Sellers' Representative as follows: (a) upon valid termination due
to a breach of the Purchase Agreement by Nesco or Buyer, a fee of $10 million is
payable by Nesco to Sellers, (b) upon valid termination due to a breach of the
Investment Agreement (described below) on (i) the basis of Platinum's failure to
use requisite efforts thereunder to cooperate in Nesco's financing of the
transactions contemplated thereby, a fee of $10 million is payable by Platinum
to Sellers, and (ii) the basis of certain other breaches by Platinum of the
Investment Agreement, a fee of $44.25 million is payable by Platinum to Sellers,
in each case other than where such breach by Platinum was the result, in any
material respect, of a related breach by Nesco under the Investment Agreement,
(c) upon valid termination in circumstances in which the closing of the
Acquisition does not occur due to Platinum's breach of its funding obligation
under the Investment Agreement when the conditions thereto have been satisfied,
a fee of $88.5 million is payable by Platinum to Sellers, and (d) upon valid
termination in circumstances in which the closing of the Acquisition does not
occur due to the failure of the Debt Financing (as described below) to be funded
when the conditions to such funding are satisfied, a fee of $44.25 million is
payable to Sellers, of which $34.25 million is payable by Platinum and $10
million is payable by Nesco.
Other Terms of the Transaction
The Purchase Agreement includes representations and warranties and covenants of
a customary nature for a transaction similar to the Acquisition. In addition,
certain Sellers will be bound by two-year employee and business relation
non-solicit obligations and three-year non-competition obligations. Sellers have
agreed to indemnify Nesco and Buyer for losses arising out of the breach of
Sellers' pre-closing covenants in the Purchase Agreement and certain indemnified
tax matters, with recourse limited to a $10 million and $8.5 million escrow
account, respectively.
The foregoing description of the Purchase Agreement does not purport to be
complete, and is qualified in its entirety by reference to the full text of the
Purchase Agreement, which is field herewith as Exhibit 2.1 and is incorporated
herein by reference. The Purchase Agreement has been included to provide
investors with information regarding its terms. It is not intended to provide
any other factual information about Nesco or CTOS. The representations,
warranties and covenants contained in the Purchase Agreement were made only for
purposes of the Purchase Agreement as of the specific dates therein, were solely
for the benefit of the parties to the Purchase 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
between the parties to the Purchase 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 Purchase 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 Purchase
Agreement, which subsequent information may or may not be fully reflected in
Nesco's public disclosures.
Rollover Agreements
In connection with the Acquisition, Nesco and certain Sellers entered into the
Rollover Agreements, pursuant to which such Sellers agreed to contribute a
portion of their equity interests in CTOS with an aggregate value of $100
million in exchange for shares of Nesco's common stock, par value $0.0001 per
share (the "Common Stock"), valued at $5.00 per share. The contributions of
equity interests in exchange for shares of Common Stock contemplated by the
Rollover Agreements will be consummated immediately prior to the closing of the
Acquisition.
The foregoing description of the Rollover Agreements does not purport to be
complete, and is qualified in its entirety by reference to the full text of the
form of Rollover Agreement, which is field herewith as Exhibit 10.1 and is
incorporated herein by reference.
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Debt Commitment Letter
In connection with entering into the Purchase Agreement, Nesco and PE One Source
Holdings, LLC entered into a debt commitment letter dated December 3, 2020 (the
"Debt Commitment Letter"), with Bank of America, N.A. and BofA Securities, Inc.
(the "Commitment Parties"), pursuant to which the Commitment Parties have agreed
to provide a portion of the financing necessary to fund the consideration to be
paid pursuant to the terms of the Purchase Agreement, to repay, redeem, defease
or otherwise discharge third-party indebtedness of Nesco and CTOS and to pay
fees and expenses related to the foregoing (the "Debt Financing").
The Debt Financing is anticipated to consist of the following:
? an asset-based revolving credit facility in an aggregate principal amount of up
to $750.0 million, $400.0 million of which shall be available to finance the
purchase price or for working capital adjustments payable under the Purchase
Agreement; and
? senior secured notes yielding up to $1.0 billion in gross cash proceeds (the
"Notes") and/or to the extent that the issuance of such Notes yields less than
$1.0 billion in gross cash proceeds or such cash proceeds are otherwise
unavailable to consummate the Transaction, loans under a senior secured bridge
facility yielding up to $1.0 billion in gross cash proceeds (less the gross
cash proceeds received from the Notes and available for use, if any).
The funding of the Debt Financing is contingent upon the satisfaction or waiver
of certain conditions set forth in the Debt Commitment Letter, including,
without limitation, the execution and delivery of definitive documentation
consistent with the Debt Commitment Letter. The Debt Commitment Letter will
terminate on the earliest of five business days after the termination date
specified in the Purchase Agreement and the date that the Purchase Agreement is
terminated.
This Current Report does not constitute an offer to sell or the solicitation of
an offer to buy the Notes or any other securities and shall not constitute an
offer, solicitation or sale of any security in any jurisdiction in which such
offering, solicitation or sale would be unlawful. The Notes will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws, and may not be offered or sold in the United
States absent registration, except pursuant to an exemption form the
registration requirements of the Securities Act and applicable state securities
laws.
Common Stock Purchase Agreement
On December 3, 2020, Nesco entered into a Common Stock Purchase Agreement (the
"Investment Agreement") with Platinum, relating to the issuance and sale (the
"Subscription") to Platinum of (i) Common Stock, for an aggregate purchase price
in the range of $700 million to $763 million, with the specific amount to be
calculated in accordance with the Investment Agreement based upon the total
equity funding required to fund the consideration to be paid pursuant to the
terms of the Purchase Agreement, and (ii) additional shares of Common Stock for
an aggregate purchase price of not more than $100 million, if necessary, in
connection with the Supplemental Equity Financing (as defined below). The shares
of Common Stock issued and sold to Platinum will have a purchase price of $5.00
per share. Promptly following the execution of the Investment Agreement and
subject to the terms thereof, Nesco has agreed to use its reasonable best
efforts to sell shares of Common Stock in (i) a private placement, (ii) a
registered public offering and/or (iii) a rights offering to its stockholders,
in each case for the aggregate amount of up to $200 million (the "Supplemental
Equity Financing"). The proceeds of the Subscription and the Supplemental Equity
Financing will be used to pay a portion of the purchase price in the Acquisition
and other fees and expenses.
This Current Report does not constitute an offer to sell or the solicitation of
an offer to buy any Common Stock or any other securities and shall not
constitute an offer, solicitation or sale of any security in any jurisdiction in
which such offering, solicitation or sale would be unlawful.
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Conditions to the Subscription
The closing of the Subscription (the "Subscription Closing") is subject to the
approval of (i) the issuance of shares of Common Stock in connection with the
Subscription and the Supplemental Equity Financing for purposes of applicable
New York Stock Exchange rules, by the holders of a majority of the total votes
cast at a meeting of the stockholders of Nesco and (ii) the amendment and
restatement of Nesco's certificate of incorporation (the "Amended Charter"), by
the holders of a majority of the outstanding shares of Common Stock at a meeting
of the stockholders of Nesco (collectively, the "Stockholder Approval"). Nesco
has agreed to seek the Stockholder Approval at a special meeting of stockholders
to be held as promptly as reasonably practicable. In addition, the Subscription
Closing is conditioned upon satisfaction or waiver of certain closing
conditions, including, among others (a) Nesco's net debt at the Subscription
Closing, calculated in accordance with the Investment Agreement, not exceeding
$773 million, giving effect to certain of the estimated proceeds of the
Supplemental Equity Financing, (b) the simultaneous consummation of the
Acquisition Closing (as defined in the Investment Agreement) and the funding of
the Debt Financing, (c) the absence of any governmental order restraining,
enjoining or otherwise making illegal the consummation of the Subscription
Closing, (d) the expiration or termination of the waiting period under the HSR
Act applicable to the Subscription (separate and independent from the expiration
or termination of the waiting period under the HSR Act applicable to the
Acquisition), (e) the filing of the Amended Charter and (f) other customary
closing conditions.
No Solicitation
Subject to certain exceptions, Nesco has agreed not to (i) solicit, initiate, or
knowingly facilitate or encourage the making of a proposal that constitutes, or
is reasonably likely to result in the submission of an Acquisition Proposal (as
defined in the Investment Agreement), (ii) enter into discussions or
negotiations with any person regarding an Acquisition Proposal, (iii) furnish
any non-public information with respect to Nesco, its assets or business to any
person for the purpose of evaluating a proposal for an Acquisition Proposal, or
(iv) enter into any agreement with respect to an Acquisition Proposal.
Prior to obtaining the Stockholder Approval, to the extent failure to do so
would reasonably be expected to result in a breach of applicable fiduciary
duties and subject to certain notice and other conditions set forth in the
. . .
Item 3.02 Unregistered Sales of Equity Securities.
The information contained in Item 1.01 is incorporated herein by reference.
As described in Item 1.01, under the terms of the Investment Agreement, Nesco
has agreed to issue shares of common stock to Platinum. The issuance and sale
will be exempt from registration under the Securities Act, pursuant to Section
4(a)(2) of the Securities Act. Platinum represented to Nesco that it is an
"accredited investor" as defined in Rule 501 of the Securities Act and that the
common stock is being acquired for investment purposes and not with a view to,
or for sale in connection with any distribution thereof, and appropriate legends
will be affixed to any certificates evidencing the shares of common stock.
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Additional Information About the Acquisition and Where to Find It
This communication is being made in respect of the proposed acquisition of CTOS
by Nesco. A special meeting of the stockholders of Nesco will be announced as
promptly as practicable to seek stockholder approval in connection with the
proposed acquisition. Nesco expects to file with the Securities and Exchange
Commission ("SEC") a proxy statement and other relevant documents in connection
with the proposed acquisition. The definitive proxy statement will be sent or
given to the stockholders of Nesco and will contain important information about
the proposed transaction and related matters. INVESTORS AND STOCKHOLDERS OF
NESCO ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT
MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NESCO, CTOS AND THE ACQUISITION.
Investors may obtain a free copy of these materials (when they are available)
and other documents filed by Nesco with the SEC at the SEC's website at
www.sec.gov, at Nesco's website at www.nescospecialty.com or by sending a
written request to Nesco Holdings, Inc., 6714 Pointe Inverness Way, Suite 220,
Fort Wayne, Indiana 46804, Attention: Chief Financial Officer and Secretary.
Participants in the Solicitation
Nesco and its directors, executive officers and certain other members of
management and employees may be deemed to be participants in soliciting proxies
from its stockholders in connection with the acquisition. Information regarding
the persons who may, under the rules of the SEC, be considered to be
participants in the solicitation of Nesco's stockholders in connection with the
acquisition will be set forth in Nesco's definitive proxy statement for its
special stockholder meeting. Additional information regarding these individuals
and any direct or indirect interests they may have in the acquisition will be
set forth in the definitive proxy statement when it is filed with the SEC in
connection with the Merger. You can find information about Nesco's directors and
executive officers in Nesco's filings with the SEC, including Nesco's definitive
proxy statement for its 2020 Annual Meeting of Stockholders, which was filed
with the SEC on May 1, 2020.
Forward Looking Statements
Certain statements contained in this current report may be considered
forward-looking statements within the meaning of U.S. securities laws, including
section 21E of the Securities Exchange Act of 1934, as amended, including
statements regarding the proposed transaction and the ability to consummate the
proposed transaction. When used in this current report, the words "potential,"
"estimates," "projected," "expects," "anticipates," "forecasts," "plans,"
"intends," "believes," "seeks," "may," "will," "should," "future," "propose" and
variations of these words or similar expressions (or the negative versions of
such words or expressions) are intended to identify forward-looking statements.
these forward-looking statements are not guarantees of future performance,
conditions or results, and involve a number of known and unknown risks,
uncertainties, assumptions and other important factors, many of which are
outside Nesco's control, that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements. important
factors, among others, that may affect actual results or outcomes include: the
ability to consummate the acquisition of CTOS and to integrate the acquisition
into the Nesco business; failure to obtain necessary stockholder and regulatory
approvals or to satisfy any of the other conditions related to the acquisition
of CTOS; the ability to realize expected synergies and the timing for any such
realization; projected financial results for Nesco and CTOS, including on a
combined basis; potential litigation associated with the acquisition of CTOS;
the potential impact of the announcement of the acquisition of CTOS on Nesco's
or CTOS's relationships, including with suppliers, customers, employees and
regulators; the impact of the COVID-19 pandemic on Nesco's or CTOS's business
operations, as well as the overall economy; Nesco's ability to execute on its
plans to develop and market new products and the timing of these development
programs; Nesco's estimates of the size of the markets for its solutions; the
rate and degree of market acceptance of Nesco's solutions; the success of other
competing technologies that may become available; Nesco's ability to identify
and integrate acquisitions, including the acquisition of Truck Utilities; the
performance and security of Nesco's services; potential litigation involving
Nesco; and general economic and market conditions impacting demand for Nesco's
services. For a more complete description of these and other possible risks and
uncertainties, please refer to Nesco's annual report on form 10-K filed with the
securities and exchange commission on March 13, 2020 and quarterly report on
form 10-Q filed with the securities and exchange commission on May 7, 2020, as
well as to Nesco's subsequent filings with the SEC. Should one or more of these
material risks occur, or should the underlying assumptions change or prove
incorrect, Nesco's actual results, performance, achievements or plans could
differ materially from those expressed or implied in any forward-looking
statement. The forward-looking statements contained herein speak only as of the
date hereof, and Nesco undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.
Exhibit No. Description
2.1† Purchase and Sale Agreement by and among Blackstone Energy Partners
NQ L.P., Blackstone Energy Family Investment Partnership SMD L.P.,
Blackstone Energy Family Investment Partnership NQ ESC L.P., Blackstone
Capital Partners VI-NQ L.P., Blackstone Family Investment Partnership
VI-NQ ESC L.P., Fred M. Ross, Jr. Irrevocable Trust, BEP UOS Feeder
Holdco L.P., BCP VI UOS Feeder Holdco L.P., Blackstone Energy
Management Associates NQ L.L.C., Blackstone Management Associates VI-NQ
L.L.C., Nesco Holdings II, Inc., Nesco Holdings, Inc., Blackstone
Capital Partners VI-NQ L.P., solely in its capacity as the
representative of Sellers, and PE One source Holdings, LLC, solely with
respect to Section 9.04, dated as of 3, 2020
10.1 Form of Rollover and Contribution Agreement
10.2† Common Stock Purchase Agreement by and between Nesco Holdings, Inc.
and PE One Source Holdings, LLC, dated as of December 3, 2020
10.3† Voting and Support Agreement by and between PE One Source Holdings,
LLC and certain Stockholders of NESCO Holdings, Inc. dated as of
December 3, 2020
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded
within the Inline XBRL document)
† Schedules and similar attachments have been omitted pursuant to Item 601(b)(2)
of Regulation S-K. Nesco agrees to furnish a supplemental copy of any omitted
schedule or attachment to the SEC upon request.
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