| Item 1.01 | Entry into a Material Definitive Agreement |
Merger Agreement
On November 4, 2023, BigBear.ai Holdings, Inc. (“BigBear.ai” or the “Company”) entered into an agreement and plan of mergers (the “Merger Agreement”) with Pangiam Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Company (“Merger Sub”), Pangiam Purchaser, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (“Pangiam Purchaser”), Pangiam Ultimate Holdings, LLC, a Delaware limited liability company (the “Seller”), and Pangiam Intermediate Holdings, LLC, a Delaware limited liability company (“Pangiam Intermediate”), pursuant to which, among other matters, (i) Merger Sub will merge with and into Pangiam Intermediate, with Merger Sub ceasing to exist and Pangiam Intermediate surviving as a wholly-owned subsidiary of the Company (the “First Merger”), and (ii) immediately following the First Merger, Pangiam Intermediate will merge with and into Pangiam Purchaser, with Pangiam Intermediate ceasing to exist and Pangiam Purchaser continuing as a wholly-owned subsidiary of the Company (the “Second Merger”, together with the First Merger, the “Mergers”). AE Industrial Partners, LP (“AEIP”) and certain of its affiliates beneficially own a majority of both BigBear.ai and the Seller.
The purchase price is $70 million, subject to customary adjustments for indebtedness, cash, working capital, and transaction expenses (“Purchase Price”) and will be payable solely in shares of BigBear.ai common stock, $0.0001 per share (the “Common Stock”). $3.5 million of shares of Common Stock will be held back at the time of the closing of the Mergers (the “Closing”) to cover any post-Closing adjustments to the Purchase Price.
A special committee of the board of directors of the Company (the “Committee”) has approved the Merger Agreement and the transactions contemplated thereby, and the Company intends to hold a stockholders meeting to consider and vote upon the approval of the issuance of Common Stock as consideration in the Mergers (the “Share Issuance”) and the transactions contemplated by the Merger Agreement.
As provided in the Merger Agreement, in connection with and at the time of the closing of the First Merger, each unit of Pangiam Intermediate issued and outstanding immediately prior to the closing of the First Merger and all rights in respect thereof will cease to exist and be converted into and represent solely the right to receive, without interest, a number of shares of Common Stock equal to the Purchase Price (based on a price per share of Common Stock of $1.3439 which represents the 20-day VWAP for Common Stock ending on the trading day immediately prior to the date of the Merger Agreement), subject to the terms and conditions of the Merger Agreement.
The obligations of each of BigBear.ai and the Seller are subject to specified conditions, including, among other matters: (i) the United Kingdom Secretary of the State shall have granted approval of the transactions contemplated by the Merger Agreement or otherwise provided written confirmation to the parties that such approval is not required, (ii) no final, binding and non-appealable injunction, order, judgment, decision, decree or ruling shall have been issued, promulgated, enacted or enforced by any governmental entity after the date of the Merger Agreement enjoining or otherwise prohibiting the performance of the Merger Agreement or the consummation of any of the transactions contemplated thereby, and (iii) the approval of the Share Issuance and the transactions contemplated by the Merger Agreement by BigBear.ai’s stockholders.
The Merger Agreement contains customary representations and warranties from BigBear.ai, Pangiam Intermediate, Pangiam Purchaser, Merger Sub and the Seller. It also contains customary covenants, including covenants providing for each of BigBear.ai, Pangiam Intermediate and the Seller to use commercially reasonable efforts to cause the Mergers to be consummated, and covenants requiring Pangiam Intermediate to use commercially reasonable efforts to carry on its business in the ordinary course of business consistent with past practices during the period between the execution of the Merger Agreement and the Closing and not to knowingly initiate, facilitate, participate, solicit or engage in discussions or negotiations with respect to alternate transactions. BigBear.ai has also obtained representation and warranty insurance which provides coverage for certain breaches of representations and warranties made by Pangiam Intermediate and the Seller in the Merger Agreement, subject to exclusions, deductibles, and other terms and conditions.
The Merger Agreement contains termination rights for each of BigBear.ai and the Seller, including in the event that (i) the Mergers are made illegal or any governmental entity issues a non-appealable final order enjoining the Mergers, (ii) the Merger is not consummated by August 4, 2024 (the “Outside Date”), or (iii) the BigBear.ai stockholders do not approve the transactions contemplated by the Merger Agreement and the Share Issuance.
Each of BigBear.ai and the Seller may also terminate the Merger Agreement if the other party breaches its representations, warranties or covenants in a manner that would lead to the failure of a condition, subject to a 30-day cure period.
The Merger Agreement also provides that the Committee is required to recommend to BigBear.ai’s stockholders to approve the transactions contemplated by the Merger Agreement, including the Share Issuance (the “Recommendation”). The Committee may change its Recommendation as a result of an intervening event that arises after the date of the Merger Agreement if the failure to make such change would be inconsistent with the fiduciary duties of BigBear.ai’s board of directors. In the event of a change in Recommendation, the Seller is entitled to expense reimbursement of up to a maximum of $1.25 million.
