| ITEM 1.01 | Entry into a Material Definitive Agreement. |
Stock Purchase Agreement
On August 12, 2022, Crane Holdings, Co. (the “Company”), Crane Company, a wholly-owned subsidiary of the Company (the “Seller”), and Redco Corporation (“Redco”), a wholly-owned subsidiary of the Seller that holds liabilities, including asbestos liabilities and related insurance assets, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Spruce Lake Liability Management Holdco LLC (the “Buyer”), a long-term liability management company specializing in the acquisition and management of legacy corporate liabilities.
Pursuant to the terms set forth in the Purchase Agreement, the Seller transferred to the Buyer all of the issued and outstanding shares of Redco (the “Sale”) on August 12, 2022. In connection with, and immediately prior to the completion of, the Sale, the Seller contributed approximately $550 million in cash to Redco. Concurrently with the completion of the Sale, the Buyer contributed $83 million in cash to Redco. Redco has agreed to indemnify the Seller and its affiliates for all claims arising out of asbestos liabilities, and the Seller has agreed to indemnify Redco for all other historical liabilities of Redco, which include certain potential environmental liabilities. These indemnification obligations are not subject to any cap or time limitation. In connection with the Sale, the board of directors of the Company received a solvency opinion from an independent advisory firm that Redco is solvent and adequately capitalized immediately after and giving effect to the Sale and on a pro forma basis. The Purchase Agreement contains customary representations and warranties with respect to Redco, the Seller and the Buyer. Pursuant to the terms of the Purchase Agreement, the Seller and the Buyer will each indemnify the other for breaches of representations and warranties and breaches of covenants, subject to certain limitations as set forth in the Purchase Agreement.
The Company has guaranteed the full payment and performance of the Seller’s indemnification obligations under the Purchase Agreement. As previously announced, the Company is evaluating a potential transaction pursuant to which, among other things, shares of the Seller would be distributed to the Company’s stockholders. Upon consummation of such distribution, the Company will be released from its guarantee of the Seller’s indemnification obligations under the Purchase Agreement.
As a result of the Sale, the Company will remove all asbestos obligations and liabilities, related insurance assets and associated deferred tax assets from the Company’s consolidated balance sheet. The Sale will result in an estimated one-time after-tax loss of approximately $170 million that will be recorded in the third quarter of 2022 and will be excluded from adjusted earnings per share.
The foregoing description of the Purchase Agreement and the Sale does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated into this Item 1.01 by reference.
A copy of the Purchase Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about the parties. In particular, the Purchase Agreement contains representations, warranties and covenants that were made as of specific dates and only for the benefit of the parties to the Purchase Agreement and are qualified by information included in confidential disclosure schedules. Moreover, certain representations, warranties and covenants in the Purchase Agreement were made for the purpose of allocating risk between the parties rather than establishing matters as facts. Accordingly, the representations, warranties and covenants in the Purchase Agreement should not be relied upon as characterizations of the actual state of facts about the parties to the agreement.
2
