| Item 1.01 | Entry into a Material Definitive Agreement. |
Jabil Inc. (the “Company” or “Jabil”) announced on September 26, 2023 that, through its indirect subsidiary, Jabil Circuit (Singapore) Pte. Ltd., a Singapore private limited company (“Seller”), it has agreed to sell to BYD Electronic (International) Co. Ltd., a Hong Kong limited liability company (“Purchaser” or “BYDE”), its product manufacturing business in Chengdu, including its supporting component manufacturing in Wuxi (the “Business”) for cash consideration of $2.2 billion, subject to certain customary purchase price adjustments. The sale is being made pursuant to a definitive agreement (the “Purchase Agreement”) for the sale and purchase of certain assets of the Seller and the shares of Juno Singapore Target Newco Pte. Ltd. (the “Target”). Following a pre-closing reorganization (the “Reorganization”), the Target will hold, indirectly or directly, the Business.
Pursuant to the Preliminary Acquisition Agreement, dated August 26, 2023, by and between Purchaser and Seller and the Purchase Agreement, Purchaser paid an aggregate deposit in the amount of $440 million, of which $132 million was paid to an escrow agent and $308 million was paid to the Company. Seller is entitled to retain the deposits in all circumstances, except in the event of a termination of the Purchase Agreement by Purchaser due to Seller’s breach of any warranty or failure to comply with any covenant applicable to it that would cause any closing condition of Purchaser to not be satisfied. Purchaser is entitled to repayment of $390 million of the deposit if on April 1, 2024 (i) the Reorganization has not been completed in all material respects, other than as a result of the failure to obtain regulatory approvals in the People’s Republic of China, and (ii) all other mutual conditions and conditions of Seller to closing have been satisfied.
The transaction is anticipated to close within the first two quarters of the Company’s current fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024). The closing of the transaction is subject to certain customary closing conditions set forth in the Purchase Agreement that include, among other things, receipt of regulatory approvals, accuracy of the warranties of the parties (subject to certain materiality standards set forth in the Purchase Agreement), completion of the Reorganization in all material respects, and material performance of certain respective obligations. The closing of the transaction is not conditioned on the receipt of financing.
The Purchase Agreement also contains customary warranties made by the parties, and customary pre-closing covenants, including (i) by Seller to operate the Business in the ordinary course consistent with past practice, subject to actions required or permitted by the Purchase Agreement and (ii) by the parties to use commercially reasonable endeavors to cause to be done all things necessary, proper or advisable to consummate the transactions set forth in the Purchase Agreement as promptly as practicable.
Seller’s liability for claims arising out of or related to the Purchase Agreement is limited to contract damages up to a cap of $110 million, with exceptions for certain tax matters which are subject to indemnification by Seller. The Purchase Agreement contains customary termination rights.
The parties have agreed to enter into a customary intellectual property license agreement and a customary transition services agreement.
In connection with the execution of the Purchase Agreement, Purchaser also entered into a loan agreement (the “Loan Agreement”) with BYD Company Limited (比亚迪股份有限公司), a joint stock company incorporated in the People’s Republic of China with limited liability, as lender (“Lender”), and Seller. Under the Loan Agreement, Lender, which is the indirect majority shareholder of Purchaser, has agreed to provide Purchaser with $2,150,000,000 of debt financing (or any other amount as agreed among Purchaser, Lender and Seller) (the “Facility”). The purchase price of the transaction will be financed using proceeds from the Facility. The commitment of Lender to fund the loan amounts under the Loan Agreement is subject only to the satisfaction or waiver of the conditions to closing under the Purchase Agreement. In the event that Lender does not fund such loan amount to Purchaser upon the closing of the transaction, Seller may demand Lender disburse such loan amount directly to Seller on the closing date.
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