PAE to Be Publicly Listed Company With $1.55
Billion Enterprise Value Upon Consummation of Transaction
Platinum Equity portfolio company PAE (“PAE” or the “Company”),
trusted provider of outsourced solutions for enduring missions of
the United States government and international partners for over 60
years, announced it has entered into a definitive agreement and
plan of merger with Gores Holdings III, Inc. (“Gores Holdings III”)
(NASDAQ CM: GRSH, GRSHU, and GRSHW), a special purpose acquisition
company sponsored by an affiliate of The Gores Group, LLC (“The
Gores Group” or “Gores”). Upon closing, this transaction will
introduce PAE as a publicly listed company, with an anticipated
initial enterprise value of approximately $1.55 billion or 8.9x the
Company’s estimated 2020 pro forma Adjusted EBITDA of approximately
$174 million.
The consideration payable to the stockholders of PAE will
consist of a combination of cash and shares of Gores Holdings III
common stock. In addition to the $400 million of cash held in Gores
Holdings III’s trust account, additional investors have committed
to participate in the transaction through a $220 million private
placement, led by Alec Gores, Chairman and CEO of The Gores Group.
Upon completion of the transaction, including the private
placement, Platinum Equity and other minority owners of PAE are
expected to hold approximately 28 percent of the newly public PAE,
subject to various purchase price adjustments.
Founded in 1955, PAE is a leading provider of mission-critical
services to the U.S. government, armed forces and international
customers, including the U.S. Department of State, Army, Navy, Air
Force, NASA and others. Headquartered in Falls Church, Virginia,
PAE operates in approximately 60 countries across all seven
continents.
“Thanks to Platinum Equity and the hard work of our employees
around the world, PAE has accomplished a lot over the past three
years and is well prepared to take advantage of the opportunities
ahead. With this next chapter, we will have the clear ability to
accelerate our strategic plan and invest in our continued growth,”
said PAE CEO John Heller. “This transaction will strengthen our
capacity to deliver the most valuable, innovative services to our
customers and expand into new national security markets.”
“John and the management team have been outstanding partners and
I’m proud of the work we have done together since acquiring the
business in 2016, deploying the full range of Platinum’s tool kit
to optimize the performance of the enterprise,” said Platinum
Equity Partner Louis Samson, who will become a board member of the
publicly traded company. “This transaction combines PAE’s strong
track record of successful M&A and a de-levered balance sheet
with the public company currency of a newly listed business, which
will position the company to participate in the ongoing
consolidation taking place in the government services sector. We
are excited to participate in the company’s continued value
creation through a meaningful remaining equity stake in the
business.”
Mark Stone, CEO of Gores Holdings III, said, “PAE is an industry
leader given its long history and extensive portfolio of
mission-critical services. At Gores, we pride ourselves in
maintaining high standards for our investments and this transaction
is well aligned with our business objectives. We are excited to
partner with the management team and Platinum as we embark on the
next chapter. Not only is PAE a differentiated leader, but the
overall government services sector continues to experience positive
momentum and PAE is well positioned to accelerate its growth and
margin expansion.”
Key Transaction Terms
The transaction will be effected pursuant to the Agreement and
Plan of Merger (the “Merger Agreement”), entered into by and among
Gores Holdings III, Shay Holding Corporation (PAE’s parent) and the
other parties thereto. Concurrently with the consummation of the
transaction, additional investors will purchase shares of common
stock of Gores Holdings III in a private placement. After giving
effect to any redemptions by the public stockholders of Gores
Holdings III, the balance of the approximately $400 million in cash
held in Gores Holdings III’s trust account, together with the $220
million in private placement proceeds, will be used to pay cash
consideration to the stockholders of the Company, pay transaction
expenses and reduce PAE’s existing indebtedness to 3.4x 2019
estimated Adjusted EBITDA. The remainder of the consideration
payable to the stockholders of PAE will consist of shares of Gores
Holdings III common stock.
The transaction has been unanimously approved by the boards of
directors of both Gores Holdings III and the Company, and is
expected to close in the first quarter of 2020, subject to
customary closing conditions, including the receipt of regulatory
approval, and approval of the stockholders of Gores Holdings III.
Upon closing of the transaction, the name of Gores Holdings III
will be changed to PAE Incorporated.
Deutsche Bank Securities Inc. and Evercore acted as lead
financial advisors to Gores Holdings III. Deutsche Bank Securities
Inc. also acted as lead capital markets advisor, while Evercore,
BofA Securities and Morgan Stanley & Co, LLC acted as capital
markets advisors and Moelis & Company LLC as financial advisor.
Weil, Gotshal & Manges LLP acted as legal advisor to Gores
Holdings III. Latham & Watkins LLP acted as legal advisor to
Platinum Equity and PAE.
Conference Call Information
Investors may listen to a presentation regarding the proposed
transaction on Friday, November 1, 2019, starting at 10:00 a.m. ET.
The call can be accessed by dialing +1 470 279 3876 and providing
the conference ID: 275056, or asking for the Gores transaction
announcement call.
A replay of the teleconference and webcast will also be
available from November 1, 2019 at 12:00 p.m. ET to November 30,
2019 at 11:59 p.m. ET. The replay can be accessed by dialing +1 571
982 7683 and providing the conference ID: 275056#.
About PAE
For more than 60 years, PAE has tackled the world’s toughest
challenges to deliver agile and steadfast solutions to the U.S.
government and its allies. With a global workforce of more than
20,000 on all seven continents and in approximately 60 countries,
PAE delivers a broad range of operational support services to meet
the critical needs of our clients. Our headquarters is in Falls
Church, Virginia. Find us online at pae.com, on Facebook, Twitter
and LinkedIn.
About Platinum Equity
Founded in 1995 by Tom Gores, Platinum Equity is a global
investment firm with more than $19 billion of assets under
management and a portfolio of approximately 40 operating companies
that serve customers around the world. Platinum Equity specializes
in mergers, acquisitions and operations – a trademarked strategy it
calls M&A&O® – acquiring and operating companies in a broad
range of business markets, including manufacturing, distribution,
transportation and logistics, equipment rental, metals services,
media and entertainment, technology, telecommunications and other
industries. Over the past 24 years Platinum Equity has completed
more than 250 acquisitions.
About Gores Holdings III, Inc.
Gores Holdings III is a special purpose acquisition company
sponsored by an affiliate of The Gores Group, for the purpose of
effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with
one or more businesses. Gores Holdings III completed its initial
public offering in September 2018, raising approximately $400
million in cash proceeds. Gores Holdings III’s officers and certain
of its directors are affiliated with The Gores Group. Founded in
1987 by Alec Gores, The Gores Group is a global investment firm
focused on acquiring controlling interests in mature and growing
businesses which can benefit from the firm's operating experience
and flexible capital base. Over its 31-year history, The Gores
Group has become a leading investor having demonstrated a reliable
track record of creating value in its portfolio companies alongside
management. Headquartered in Los Angeles, The Gores Group maintains
offices in Boulder, CO, and London. For more information, please
visit www.gores.com.
Forward-Looking Statements
This press release may contain a number of “forward-looking
statements” as defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements include information
concerning Gores Holdings III’s or the Company’s possible or
assumed future results of operations, business strategies, debt
levels, competitive position, industry environment, potential
growth opportunities and the effects of regulation, including
whether this transaction will generate returns for stockholders.
These forward-looking statements are based on Gores Holdings III’s
or the Company’s management’s current expectations, estimates,
projections and beliefs, as well as a number of assumptions
concerning future events. When used in this press release, the
words “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 Gores Holdings III’s or the
Company’s management’s control, that could cause actual results to
differ materially from the results discussed in the forward-looking
statements. These risks, uncertainties, assumptions and other
important factors include, but are not limited to: (1) the
occurrence of any event, change or other circumstances that could
give rise to the termination of the Merger Agreement and the
proposed transaction contemplated thereby; (2) the inability to
complete the transaction contemplated by the Merger Agreement due
to the failure to obtain approval of the stockholders of Gores
Holdings III or other conditions to closing in the Merger
Agreement; (3) the ability to meet NASDAQ’s listing standards
following the consummation of the transaction contemplated by the
Merger Agreement; (4) the inability to complete the private
placement; (5) the risk that the proposed transaction disrupts
current plans and operations of the Company as a result of the
announcement and consummation of the transaction described herein;
(6) the ability to recognize the anticipated benefits of the
proposed transaction, which may be affected by, among other things,
competition, the ability of the combined company to grow and manage
growth profitably, maintain relationships with customers and
suppliers and retain its management and key employees; (7) costs
related to the proposed transaction; (8) changes in applicable laws
or regulations; (9) the possibility that the Company may be
adversely affected by other economic, business, and/or competitive
factors; and (10) other risks and uncertainties indicated from time
to time in the final prospectus of Gores Holdings III, including
those under “Risk Factors” therein, and other documents filed or to
be filed with the Securities and Exchange Commission (“SEC”) by
Gores Holdings III.
Forward-looking statements included in this release speak only
as of the date of this release. Neither Gores Holdings III nor the
Company undertakes any obligation to update its forward-looking
statements to reflect events or circumstances after the date of
this release. Additional risks and uncertainties are identified and
discussed in Gores Holdings III’s reports filed with the SEC and
available at the SEC’s website at www.sec.gov.
Non-GAAP Financial Measures
Pro forma Adjusted EBITDA is a non-GAAP financial measure and
should not be construed as an alternative to net income as an
indicator of operating performance or as an alternative to cash
flow provided by operating activities as a measure of liquidity
(each as determined in accordance with GAAP).
Additional Information about the Transaction and Where to
Find It
Gores Holdings III intends to file with the SEC a preliminary
proxy statement of Gores Holdings III in connection with the
proposed transaction and will mail a definitive proxy statement and
other relevant documents to its stockholders. This press release
does not contain all the information that should be considered
concerning the proposed transaction and the other matters to be
voted upon at the special meeting and is not intended to provide
the basis for any investment decision or any other decision in
respect of such matters. Gores Holdings III’s stockholders and
other interested persons are advised to read, when available, the
preliminary proxy statement, the amendments thereto, and the
definitive proxy statement in connection with Gores Holdings III’s
solicitation of proxies for the special meeting to be held to
approve the proposed transaction and other related matters, as
these materials will contain important information about the
Company and Gores Holdings III and the proposed transaction. The
definitive proxy statement will be mailed to the stockholders of
Gores Holdings III as of a record date to be established for voting
on the proposed transaction and the other matters to be voted upon
at the special meeting. Such stockholders will also be able to
obtain copies of the proxy statement, without charge, once
available, at the SEC’s website at http://www.sec.gov, or by
directing a request to: Gores Holdings III, 9800 Wilshire
Boulevard, Beverly Hills, CA 90212, attention: Jennifer Kwon Chou
(jchou@gores.com).
Participants in the Solicitation
Gores Holdings III and its directors and officers may be deemed
participants in the solicitation of proxies of Gores Holdings III
stockholders in connection with the proposed transaction. Gores
Holdings III stockholders and other interested persons may obtain,
without charge, more detailed information regarding the directors
and officers of Gores Holdings III in Gores Holdings III’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2018,
which was filed with the SEC on March 18, 2019.
Information regarding the persons who may, under SEC rules, be
deemed participants in the solicitation of proxies to Gores
Holdings III stockholders in connection with the proposed
transaction will be set forth in the proxy statement for the
transaction when available. Additional information regarding the
interests of participants in the solicitation of proxies in
connection with the proposed transaction and the other matters to
be voted upon at the special meeting will be included in the proxy
statement that Gores Holdings III intends to file with the SEC.
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version on businesswire.com: https://www.businesswire.com/news/home/20191101005339/en/
For investor inquiries regarding PAE, please contact:
Regina Galvin Vice President Marketing & Communications PAE
703-717-6192 Regina.Galvin@pae.com
For inquiries regarding Platinum Equity, please
contact:
Dan Whelan Platinum Equity 310-282-9202
dwhelan@platinumequity.com
For inquiries regarding The Gores Group and affiliates,
please contact:
Jennifer Kwon Chou Managing Director The Gores Group
310-209-3010 jchou@gores.com
Michael Sitrick Sitrick & Company 310-432-4150
Mike_Sitrick@sitrick.com
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