| Item 1.01. | Entry into a Material Definitive Agreement. |
On August 23, 2021, Santander Consumer USA Holdings Inc. (“SC”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Santander Holdings USA, Inc. (“SHUSA”) and Max Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of SHUSA (“Merger Sub”), pursuant to which the parties have agreed that SHUSA will acquire all outstanding shares of common stock (“Common Stock”), par value $0.01 per share, of SC not already owned by SHUSA via an all-cash tender offer (the “Tender Offer”) for $41.50 per share (the “Offer Price”), followed by a second-step merger (the “Merger” and together with the Tender Offer, the “Transaction”), in which Merger Sub will be merged with and into SC, with SC surviving as a wholly owned subsidiary of SHUSA, and all outstanding shares of Common Stock not tendered in the Tender Offer (other than (i) shares of Common Stock held by SHUSA, (ii) shares of Common Stock owned by SC as treasury stock (other than shares in an employee benefit or compensation plan) or owned by any wholly owned subsidiary of either SC or SHUSA, in each case immediately prior to the effective time of the Merger, and (iii) shares of Common Stock outstanding immediately prior to the effective time of the Merger and held by a holder who is entitled to demand and properly demands appraisal for such shares in accordance with Section 262 of the Delaware General Corporation Law) will be converted into the right to receive the Offer Price in cash.
In addition, as of the effective time of the Merger (the “Effective Time”), (i) each Company Stock Option (as defined in the Merger Agreement) that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested or exercisable, will be canceled and converted into the right to receive a cash payment, less any required withholding, equal to the product of (A) the excess, if any, of the Offer Price per share over the applicable exercise price per share of such Company Stock Option and (B) the number of shares such holder could have purchased (assuming full vesting of all options) had such holder exercised such Company Stock Option in full immediately prior to the Effective Time, and (ii) each Company RSU (as defined in the Merger Agreement) that is outstanding immediately prior to the Effective Time, whether or not vested, will be canceled and replaced by an award providing the right to receive, on the date that such Company RSU otherwise would have been settled, a number of American Depositary Receipts of Banco Santander S.A. (“ADRs”) (or a cash-settled equivalent, in certain circumstances) equal to the quotient of (1) the product of (x) the number of shares underlying the applicable Company RSU multiplied by (y) the Offer Price, divided by (2) the closing price of an ADR on the New York Stock Exchange on the date the Merger Agreement was signed (the “Initial Price”), or if the Effective Time occurs more than six months after the date of the Merger Agreement and the closing price of an ADR on the New York Stock Exchange on the day prior to the Effective Time (the “Closing Price”) is not more than 75% of the Initial Price, then the Closing Price, which replacement award will generally be subject to the same terms (including vesting requirements and, as applicable, performance goals) as the underlying Company RSU.
The board of directors of SC, acting on the unanimous recommendation of a special committee (the “Special Committee”) consisting of the independent and disinterested directors of SC and formed to negotiate and evaluate a potential transaction with SHUSA, has unanimously determined to recommend the Tender Offer to SC’s shareholders (other than SHUSA). The board of directors of SHUSA has unanimously approved the Transaction.
The Merger Agreement contains customary representations and warranties from the parties, and each party has agreed to customary covenants, including, among others, covenants relating to (i) the conduct of business during the interim period between the execution of the Merger Agreement and the effective time of the Merger (including prohibition on certain actions, such as amendment to organizational documents, payment of dividends or distributions, incurrence of certain capital expenditures, entry into a new line of business, and incurrence of certain indebtedness, among others) and (ii) the obligation to use reasonable best efforts to take all actions and cause to be done all things necessary, proper or advisable to consummate the Transaction.
Consummation of the Tender Offer is subject to certain customary conditions, including that: (i) the Merger Agreement has not been terminated; (ii) SC and SHUSA must have obtained approval of the Transaction from the Board of Governors of the Federal Reserve System under Section 163(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) there is no law or injunction prohibiting the Transaction or imposing certain conditions or restrictions in connection with the Transaction or pending action or proceeding by a governmental entity seeking to impose such conditions or restrictions; (iv) SC’s representations and warranties are accurate, subject to customary materiality standards; and (v) SC shall have complied in all material respects with its obligations under the Merger Agreement.
If the Tender Offer is consummated, the only condition to the Merger is the absence of a legal prohibition.
The Merger Agreement provides for certain termination rights for both SHUSA and SC (and, in the case of SC, with the approval of its Special Committee), including in the event that: (i) the parties agree to terminate the Merger Agreement by mutual agreement; (ii) the Tender Offer has not been consummated prior to March 31, 2022 (which date may be extended twice, each time for a three-month period, at either party’s option if required to obtain Federal Reserve approval); (iii) there is a final and non-appealable law or order prohibiting or permanently enjoining the Transaction; (iv) the other party breaches its covenants or representations that would result in the failure of a closing condition (in the case of SC’s covenants or representations) or that would reasonably be expected to prevent SHUSA or Merger Sub from consummating the Transaction (in the case of SHUSA’s covenants or representations), in each case subject to a cure period. In addition, SC may terminate the Merger Agreement following a change in SC’s board of director’s recommendation in favor of the Tender Offer in connection with the receipt of a “Superior Proposal” (as defined in the Merger Agreement), and SHUSA may terminate the Merger Agreement if SC’s board of directors changes its recommendation in favor of the Tender Offer or fails to publicly reaffirm its recommendation within 10 business days of a request from SHUSA to do so following the public announcement of an alternative acquisition proposal.
