- KPS agrees to increase stalking horse bid by $500 million to
$2.6 billion and offer co-investment opportunity in new public
parent company to Garrett stockholders
- Garrett also received preliminary proposal that the Company
sell its business to certain stockholders in lieu of further
marketing process
Garrett Motion Inc. (“Garrett”) today announced that it has
received an improved stalking horse bid from KPS Capital Partners,
LP (“KPS”) with respect to a potential purchase of its business.
The Company is continuing with its competitive bidding process, and
seeking approval of bidding procedures and stalking horse bid
protections from the bankruptcy court.
Garrett also responded today to an October 16, 2020, non-binding
proposal from a group of institutional investors and Honeywell
International Inc. that the Company sell control to the
institutional investors without a further marketing process.
Improved Stalking Horse Bid From KPS
On September 20, 2020, Garrett and certain affiliates of KPS
entered into a share and asset purchase agreement (the “Purchase
Agreement”) in connection with the proposed purchase of Garrett’s
business. The purchase would be implemented through voluntary
Chapter 11 cases with the United States Bankruptcy Court for the
Southern District of New York also commenced by Garrett and certain
of its subsidiaries on September 20, 2020 (In re: Garrett Motion,
Inc., et al., No. 20-12212 (MEW) (Bankr. S.D.N.Y.).
Under the terms and conditions of the revised stalking horse bid
received from KPS:
- KPS would increase the base purchase price for the Garrett
business by $500 million, from $2.1 billion to $2.6 billion (in
each case subject to adjustment as provided in the Purchase
Agreement). KPS would also purchase an entity that directly holds
(and after the closing will retain) the claims of Garrett and its
affiliates against Honeywell International Inc. in connection with
the disputed subordinated asbestos indemnity agreement and tax
matters agreement.
- Upon completion of the sale, KPS would list the new parent
company on a recognized U.S. stock exchange.
- KPS would make available to existing Garrett stockholders an
equity co-investment opportunity on the same economic terms as KPS,
allowing Garrett stockholders to continue to hold shares in the
publicly-listed reorganized business. KPS would offer co-investment
in an aggregate amount of up to $350 million, $100 million of which
would be available to all shareholders on a pro rata basis. KPS has
indicated that it expects existing shareholders would own
approximately 24% of outstanding common equity assuming maximum
co-investment (subject to adjustment).
- The anticipated dates for Garrett’s competitive process would
be extended to provide Garrett with additional time to assess
higher or better offers. The anticipated auction date would be
December 18, 2020 rather than November 24, 2020, with other dates
adjusted accordingly.
The revised bid from KPS is conditioned on court approval of
Garrett’s proposed bidding procedures. The Purchase Agreement would
remain subject to higher or better offers in the bankruptcy case.
Closing of the transaction is subject to customary regulatory
approvals, as well as court approval and other customary
conditions. Following court approval of Garrett’s proposed bid
procedures, Garrett would work with KPS to amend the Purchase
Agreement and other transaction documentation to reflect the terms
of the revised bid.
Alternative Proposal Would Discontinue Auction and Sell
Control to Certain Institutional Investors
On October 16, 2020, Honeywell International Inc., Centerbridge
Partners, L.P. and Oaktree Management L.P. (collectively, the
“Bidding Group”) publicly announced that they had entered into a
coordination agreement in anticipation of submitting to Garrett an
alternative proposal for a plan of reorganization (the “Alternative
Proposal”). Garrett received a letter on behalf of the Bidding
Group regarding the Alternative Proposal after the public
announcement.
The Alternative Proposal was prepared with public information
only and had not been negotiated with Garrett. It followed
invitations from Garrett to the members of the Bidding Group to
join the competitive process alongside other bidders. Garrett
understands that the terms of the Alternative Proposal prohibit any
participating parties from discussing alternative transactions with
Garrett or other third parties during the bankruptcy case. The
Alternative Proposal also requests that Garrett agree to stop the
competitive process altogether and not seek, solicit or support any
alternative to the Alternative Proposal.
The substantive terms of the Alternative Proposal also include a
settlement with Honeywell, the cash sale of virtually all equity
value of Garrett to the institutional investors party to the
Alternative Proposal and special participation rights offered to
select institutional investors in return for their support of the
Alternative Proposal.
Garrett responded to the Bidding Group today by raising initial
questions about the content of the Alternative Proposal, including
its impact on the competitive process, the availability and terms
of financing and its treatment of remaining Garrett stockholders.
Garrett again invited the members of the Bidding Group to
participate in what is intended to be an ongoing competitive
process, and Garrett intends to continue discussions with the
Bidding Group regarding the Alternative Proposal as well.
Information about the Chapter 11 Process
Garrett anticipates emerging from Chapter 11 and completing the
sale process in early 2021.
Morgan Stanley & Co. LLC and Perella Weinberg Partners are
serving as financial advisors, Sullivan & Cromwell LLP and
Quinn Emanuel Urquhart & Sullivan LLP are serving as legal
advisors, and AlixPartners are serving as restructuring advisor to
Garrett Motion.
Court filings and other documents related to the Chapter 11
process are available at http://www.kccllc.net/garrettmotion or by
calling Garrett’s claims agent, KCC, at 866-812-2297 (U.S.
toll-free) or +800 3742 6170 (international toll-free) or sending
an email to Garrettinfo@kccllc.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended. All statements, other than statements of fact, that
address activities, events or developments that we or our
management intend, expect, project, believe or anticipate will or
may occur in the future are forward-looking statements including
without limitation our statements regarding our Chapter 11 process
and the ongoing competitive process. Although we believe
forward-looking statements are based upon reasonable assumptions,
such statements involve known and unknown risks, uncertainties, and
other factors, which may cause the actual results or performance of
the company to be materially different from any future results or
performance expressed or implied by such forward-looking
statements. Such risks and uncertainties include, but are not
limited to those described in our annual report on Form 10-K for
the year ended December 31, 2019, as updated by our quarterly
report on Form 10-Q for the period ended June 30, 2020, as well as
our other filings with the Securities and Exchange Commission,
under the headings “Risk Factors” and “Cautionary Statement
Concerning Forward-Looking Statements.” You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this document. Forward-looking
statements are not guarantees of future performance, and actual
results, developments and business decisions may differ from those
envisaged by our forward-looking statements.
About Garrett Motion Inc.
Garrett Motion is a differentiated technology leader, serving
customers worldwide for more than 65 years with passenger vehicle,
commercial vehicle, aftermarket replacement and performance
enhancement solutions. Garrett’s cutting-edge technology enables
vehicles to become safer, and more connected, efficient and
environmentally friendly. Our portfolio of turbocharging, electric
boosting and automotive software solutions empowers the
transportation industry to redefine and further advance motion. For
more information, please visit www.garrettmotion.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20201019005846/en/
Garrett Motion: Michael Cimini Garrett Motion Inc. T:
973.216.3986 Michael.Cimini@garrettmotion.com
Arielle Patrick Edelman T: 917.624.3004
arielle.patrick@edelman.com
Garrett Motion (NYSE:GTX)
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