As we previously discussed, Calvin Coolidge of Green Mountain Capital (your good client) has just acquired Maple Syrup in an LBO. Green Mountain is a private equity firm and Maple Syrup is a privately held corporation. Green Mountain financed the LBO with the proceeds from Maple Syrup’s high yield bond offering with registration rights. Maple Syrup is now preparing for the A/B exchange offer.
To effect the A/B exchange, Maple Syrup will file a registration statement on Form S-4 to exchange the restricted “A” notes for identical “B” notes that have been registered with the SEC. When the Form S-4 becomes effective, Maple Syrup will become a public reporting company, as we covered in our earlier installment.
As you’re busy preparing the registration statement, Cal calls with some exciting news regarding Maple Syrup. Maple Syrup has decided to acquire The Whipped Cream Company, creating a formidable new integrated player in the waffle and pancake topping industry. The Whipped Cream Company will fall between the 40% and 50% significance levels described under Rule 1-02(w), and the deal is expected to close at some point after the Form S-4 goes effective.
No, because the acquisition is below the 50% significance level. Under Paragraph (b)(4)(i) of S-X Rule 3-05, at less than 50% significance audited financial statements are not required in the registration statement for probable acquisitions or for completed acquisitions consummated up to 74 days before the date of the offering. Note, however, that in underwritten offerings the deal team may want to discuss whether to take advantage of this accommodation–some commitment committees look for at least a one-year audit together with historical pro forma financial information, even if the 74-day grace period has not yet expired.
No, if the acquisition is completed within the 74-day grace period. In other words, if Maple Syrup acquires Whipped Cream less than 74 days before the date of the final prospectus, no separate financial statements or pro formas will be needed.
What happens once Maple Syrup becomes public?
The answer depends on whether the Whipped Cream acquisition was completed before or after the Form S-4 is declared effective by the SEC.
If the acquisition closes after effectiveness, then Maple Syrup would file its Form 8-K reporting the acquisition under Item 2.01 within four business days after closing, and an amended 8-K with required historical and pro forma financial information no later than 71 calendar days plus four business days after closing (i.e., the 71-day clock runs from the due date of the original 8-K rather than its actual filing date). As a reminder, here is our handy flowchart that shows when a Form 8-K must be filed in connection with an acquisition. In addition, the summary of Rule 3-05 in the section "Recent and Probable Acquisitions" of our publication Financial Statement Requirements in US Securities Offerings reminds us that two years of audited financials (plus financials for any required interim periods) of Whipped Cream will need to be filed since the acquisition of Whipped Cream exceeds the 40% significance threshold. And since Rule 3-05 financials are required, pro forma financials will also be required under Regulation S-X Article 11 (see the section "Pro Forma Financial Information" of Financial Statement Requirements in US Securities Offerings).
If the deal closed before effectiveness, the timing of the Form 8-K filing is different, although its content would be the same. Paragraph (b)(4)(ii) of Rule 3-05 provides that an issuer that omits from its initial registration statement the required financial statements of a recently acquired business shall furnish those financial statements under cover of Form 8-K “not more than 74 calendar days” after consummation of the acquisition – i.e., by the 75th day. But recall that Form 8-K Item 2.01/9.01 requires the financials to be filed within four business days plus 71 calendar days, which in some instances may be more than 75 calendar days. So which controls? In practice, the SEC Staff will let you go with 71 calendar days plus four business days. See the Note to Section 2050.1 of the Financial Reporting Manual.