United States securities and exchange commission logo
June 5, 2023
Gregg S. Hymowitz
Chief Executive Officer
EG Acquisition Corp.
375 Park Avenue, 24th Floor
New York, NY 10152
Re: EG Acquisition
Corp.
Preliminary Proxy
Statement on Schedule 14A
Filed May 5, 2023
File No. 001-40444
Dear Gregg S. Hymowitz:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14A filed May 5, 2023
Letter to EG Acquisition Corp. Stockholders / Cover Page, page 0
1. Due to the level of
redemptions by public stockholders and founder share conversions
disclosed in the Form
8-K that EG Acquisition filed on May 25, 2023, the Sponsor now
appears to control a
majority of the outstanding Class A common stock. Please revise
your proxy statement to
reflect the impact of this control on the approval of the various
proposals, including
the Transaction Proposal.
2. We note that following
the business combination, PubCo will have two classes of
common stock. Please
revise the cover page to disclose this dual class structure and
briefly describe the
material features of each class.
3. We note your disclosure
that following the Closing, regardless of the percentage of
redemptions, the
Existing Equityholders will hold a majority of the PubCo Class B
Common Stock and as a
result, will control a majority of the voting power of PubCo. We
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
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FirstName LastName
further note you disclose that, as a result of the Existing
Equityholders holdings after
Closing, you will qualify as a controlled company within the
meaning of the corporate
governance standards of the NYSE. Please disclose that you will be a
controlled company
following the Closing on your cover page. Also disclose that upon the
completion of the
Business Combination, Thomas James Segrave, Jr., who will serve as
PubCo's CEO, will
control PubCo through his holdings of a percentage of outstanding
PubCo Class A
Common Stock and PubCo Class B Common Stock constituting approximately
54.2%,
assuming no shares of EGA Class A Common Stock are redeemed and 78.4%,
assuming
the maximum shares of EGA Class A Common Stock are redeemed.
Questions and Answers About the Business Combination
What voting interests will EGA's current stockholders, Sponsor, Bridge Note
Lenders, and the
Existing Equityholders hold in PubCo, page 14
4. Please revise your disclosures here and elsewhere to include a third
scenario reflecting an
interim redemption level.
5. Revise your disclosure to show the potential impact of redemptions on
the per share value
of the shares owned by non-redeeming stockholders by including a
sensitivity analysis
showing a range of redemption scenarios, including minimum, maximum,
and interim
redemption levels. Also include disclosure regarding your underwriting
fees on a
percentage basis for shares at each redemption level.
Summary of the Proxy Statement
Interests of Certain Persons in the Business Combination, page 46
6. Please clarify if the sponsor and its affiliates can earn a positive
rate of return on their
investment, even if other SPAC shareholders experience a negative rate
of return in the
post-business combination company.
Risk Factors
Significant increases in fuel costs could have a material adverse effect on our
business, financial
condition and results of operations, page 68
7. We note you disclose that the majority of your contractual service
obligations allow you
to make rate adjustments to account for changes in fuel prices. Please
update your
disclosure to identify actions planned or taken, if any, to mitigate
inflationary pressures in
the other cases. We also note you disclose on page 227 that your cost
of revenue increased
by 60% for the year ended December 31, 2022 compared to the year ended
December 31,
2021 in part due to cost of revenue associated with aircraft
management and increased
average fuel prices. Provide updated risk factor disclosure if recent
inflationary pressures
have materially impacted your operations. In this regard, identify the
types of inflationary
pressures you are facing and how your business has been affected.
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
Page 3 2023 Page 3
FirstName LastName
For the past two years, a significant portion of our total revenues has been
derived from one
customer., page 76
8. You disclose that for the years ended December 31, 2022 and 2021, one
customer has
accounted for 39% and 23% of total revenue and such customer accounted
for
approximately $8.7 million of accounts receivable for the year ended
December 31, 2022,
which represented approximately 91% of your total accounts receivable
at that time.
Please describe the material terms of any agreement(s) or
arrangement(s) that LGM or its
subsidiaries has entered into with this customer.
If the Business Combination is not completed, potential target businesses may
have leverage
over EGA in negotiating, page 84
9. Update your disclosure here and elsewhere to reflect the amendment to
your Amended
and Restated Certificate of Incorporation to extend the date by which
you must
consummate your initial business combination, up to 5 times, initially
from May 28, 2023
to August 28, 2023, and thereafter for additional one month periods
commencing on
August 28, 2023 through and until December 28, 2023 (or such earlier
date after May 28,
2023 as determined by the Company s board of directors). Also
describe any extension
payment(s) agreed to by the sponsor.
The A&R PubCo Charter contains forum limitations for certain disputes between
us and our
stockholders that could limit the ability, page 97
10. We note your disclosure here that your exclusive forum provisions do
not apply to claims
arising under the Securities Act, the Exchange Act or other federal
securities laws for
which there is exclusive federal or concurrent federal and state
jurisdiction, and that the
A&R PubCo Charter also provides that, unless you consent in writing to
the selection of
an alternative forum, the federal district courts of the United States
of America are the
sole and exclusive forum for the resolution of any complaint asserting
a cause of action
arising under the Securities Act. This disclosure is inconsistent with
Section 14 of your
A&R PubCo Charter attached as Annex B and your disclosures on pages
148 and
286, which state that unless PubCo consents in writing to the
selection of an alternative
forum, the federal district courts of the United States will be the
exclusive forum for
resolving any complaint asserting a cause of action arising under the
Securities Act, the
Exchange Act and the rules and regulations thereunder. Please revise
your disclosure to
reconcile this inconsistency.
Background of the Business Combination, page 154
11. Revise your disclosure throughout this section to discuss in greater
detail the substance of
meetings and discussions among representatives of the parties,
including the material
issues that were discussed, how parties' positions differed, and how
issues were resolved.
For example, please further discuss how the parties determined the
transaction structure of
LMG. In addition, expand the discussion of the meetings and
negotiations among
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
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FirstName LastName
"representatives" of the parties to name the individuals involved. For
example, if the
"employee of EnTrust Global" who suggested that EGA consider a
potential business
combination with LGM is a member of management or an affiliate of the
sponsor or EGA,
name the individual and discuss the affiliation(s).
12. We note you state generally that "[t]he Equity Purchase Agreement was
principally
negotiated between June 14, 2022 and October 16, 2022, and several
drafts were
exchanged between Willkie and Wyrick during such time," and that
"[t]opics negotiated
included the closing conditions, the representations and warranties of
EGA and LGM
respectively, certain interim operating covenants of EGA and LGM
respectively, and
certain tax matters." Please expand your disclosure to include a more
detailed description
of the negotiations surrounding the material terms of the Equity
Purchase Agreement and
related transactions.
13. Where information was exchanged between the parties during
negotiations, clarify
whether such information included any forecasts by LMG or its
advisors.
14. It appears that negotiations regarding the Bridge Notes and the
business combination had
been ongoing and several special board meetings had taken place before
a Transaction
Committee of the Board was directed to separately meet to review the
proposed business
combination and various other related matters and make recommendations
to the Board
with respect thereto. Revise to clarify when potential interests in
the transactions by
certain of its officers and directors were first disclosed to all
independent members of the
board, and when the Transaction Committee, which is first mentioned on
page 159, was
formed.
15. You disclose that EGA reviewed over 100 target candidates in different
industries and had
substantive discussions with over 20 potential targets, which included
signing non-
disclosure agreements, conducting preliminary due diligence, and/or
meetings with senior
executives and other senior members of management of, or investors in,
those potential
targets. However, your disclosure in this section appears to focus
almost exclusively on
the business combination with LGM. Please expand your discussion in
this section
to describe the process utilized to evaluate the other potential
targets. Please discuss
the information gathered, how and by whom it was evaluated, the
negotiations
which occurred, and any alternative offers that were made or received.
Your disclosure
should clearly describe the reasons you did not further consider any
alternative proposal
and explain why EGA deems the business combination with LGM to be
superior
to available alternatives.
16. You disclose that on April 26, 2022, the parties agreed to and
executed the non-
binding letter of intent, which provided, among other things, that the
potential business
combination with LGM would be based on a total enterprise value of LGM
of
$600 million. Please expand your disclosure to discuss how this
valuation was
determined.
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
Page 5 2023 Page 5
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17. You disclose on page 246 that you agreed not to enter into a
definitive agreement
regarding the Business Combination without the prior consent of your
sponsor. Please
expand your disclosure in this section to discuss whether the
sponsor's prior consent
right impacted your search for an acquisition target.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of
LGM
Overview of Our Business, page 220
18. We note that you describe the company as having a diversified and
evolving business
model that generates charter revenue through wholesale and retail ad
hoc flights and a jet
club membership program, guaranteed revenue program, fractional
program, partnership
program and other services.
However, on page F-39, you indicate that revenue is derived mainly
from the jet club,
guaranteed revenue, and fractional programs along with maintenance,
repair and overhaul
services, and in your revenue details on page F-58 you associate 98%
or more of total
revenues for all periods with the category of flights.
We also note that you provide essentially the same discussion and
analysis of the 54% and
72% increases in revenue for 2022 and 2021 on pages 226-229, in which
you attribute the
increases to growth in the aircraft fleet and higher airfare rates,
without any discussion of
revenues associated with the various programs or the extent to which
revenues increased
due to increases in flights or flight hours and to increases in
prices.
Please revise your disclosures in MD&A as necessary to clarify the
relative significance
of the various revenue programs and services and the extent to which
changes in revenues
are attributable to changes in participation, flight hours, services
and prices to comply
with Item 303(a) and (b)(2)(iii) of Regulation S-K.
Please also expand or revise your revenue disaggregation disclosures
to more clearly
associate the revenue categories with the various revenue generating
activities and
programs described in MD&A to comply with FASB ASC 606-10-55-89, 90
and 91, and
to clarify the extent to which revenues that are presently
characterized as flights are
derived from participants in your various programs.
19. We note your disclosure of the fractional ownership revenue program,
under
which customers agree to purchase an ownership interest in an aircraft
for a contractual
term of up to five years, and thereby gain access to your entire
fleet, although also
indicating the arrangement involves two stages, the first of which
appears to convey
access to the fleet before any change in ownership occurs.
Please expand your accounting policy disclosures as necessary to
clarify your rationale for
presenting sales of fractional ownership interests as revenue, to
explain how the benefits
associated with the fractional ownership interests change at the end
of the contractual
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
Page 6 2023 Page 6
FirstName LastName
term, and to describe the terms of any arrangements to repurchase the
fractional
ownership interests.
Please also describe the timeline between enrollment and participation
in the program and
conveyance of the ownership interests, and the circumstances under
which the
arrangement would be established and maintained in the absence of
having a designated
aircraft, as you have indicated occurs.
Tell us the total number of participants in the program at the end of
each period and the
number of such participants who had not yet acquired the ownership
interests, along with
the reasons and your expectations for completing the sales. Tell us
the specific accounting
guidance that you have relied upon in formulating your accounting
policy.
20. Please expand your discussion and analysis of cost of revenues on
pages 227 and 229 as
necessary to clarify the extent to which the 60% and 86% increases for
2022 and 2021
were attributable to increases in the number of flight legs, costs of
aircraft operation or
management, and fuel prices to comply with Item 303(a) and (b)(2)(ii)
of Regulation S-K.
This guidance requires that you provide descriptions and amounts of
matters that have had
a material impact on reported operations, matters that are reasonably
likely to have a
material impact on future operations, and that you address any
material change in the
relationship between costs and revenues.
Please include the number of flight legs and changes therein along
with this disclosure and
incrementally in your tabulation of key operating metrics on page 224.
Key Operating Metrics, page 223
21. We note that you disclose total member counts, hours per aircraft, and
customers per
aircraft and indicate that you have considered all customers with
active accounts, and
using either an average or end-of-period count of the number of
aircraft on your operating
certificates in compiling these measures.
Please expand your disclosures to clarify your definition of active
accounts and if your
total member counts include members from whom no revenues were derived
for any
period in which the customer has been included in the total count for
the period, also
disclose the number of customers that contributed to revenues.
Please also disclose the total number of flight hours that are
associated with revenues for
each period and the number of aircraft on you operating certificates
that are reflected in
your measure and the number of such aircraft that were utilized in
generating any portion
of the revenues for each period if these are not the same.
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
Page 7 2023 Page 7
FirstName LastName
Management's Discussion and Analysis of Financial Condition and Results of
Operations of
LGM
Liquidity and Capital Resources, page 230
22. You disclose that you believe that your existing cash on hand, cash
generated from
operations and available borrowings under your term loan will be
sufficient for at least the
next 12 months to meet working capital requirements and anticipated
capital
expenditures. Please expand your disclosure to describe all material
cash requirements,
including commitments for capital expenditures, as of the end of the
latest fiscal period.
Refer to Item 303(b)(1)(ii)(A) of Regulation S-K.
Conflicts of Interest, page 242
23. At page 245, you disclose that your charter waived the corporate
opportunities doctrine.
Please expand your discussion of this conflict of interest to address
whether it impacted
your search for an acquisition target. If so, please also discuss it
in the Background of the
Business Combination section.
Beneficial Ownership of Securities, page 257
24. Please update your beneficial ownership table to provide information
as of the most recent
practicable date. Refer to Item 6(d) of Schedule 14A.
Description of EGA Securities
Registration and Stockholder Rights, page 278
25. We note your disclosure here that the holders of the Founder Shares,
Private Placement
Warrants and EGA Warrants that may be issued upon conversion of
working capital loans
(and any shares of EGA Class A Common Stock issuable upon the exercise
of the Private
Placement Warrants and EGA Warrants that may be issued upon conversion
of working
capital loans and upon conversion of the Founder Shares) are entitled
to registration rights
pursuant to a registration and stockholder rights agreement dated May
25, 2021, between
EGA and certain security holders, requiring you to register such
securities for resale (in
the case of the Founder Shares, only after conversion to your EGA
Class A Common
Stock). Please revise to disclose the amount of shares of common stock
which will
be subject to resale registration rights and discuss related risks in
the Risk Factors section.
Financial Statements, page F-1
26. Please update the Schedule 14A to include financial statements of EGA
and LGM
covering the quarter ended March 31, 2023 to comply with Rule 8-08 of
Regulation S-X.
Please also update the pro forma financial information on pages
105-122 to also
encompass the recently completed interim period.
27. Please revise the financial statements on pages F-29, F-31 and F-32 as
necessary to clarify
Gregg S. Hymowitz
FirstName LastNameGregg S. Hymowitz
EG Acquisition Corp.
Comapany
June 5, 2023NameEG Acquisition Corp.
June 5,
Page 8 2023 Page 8
FirstName LastName
whether the numerical data is presented in thousands of dollars, as
appears to be the basis
of presentation utilized on pages F-28 and F-30. Please similarly
clarify all numerical
details in the narratives and tabulations on pages F-33 through F-61.
General
28. We note your disclosure on page 17 and in your Definitive Proxy
Statement on Form 14A
you filed on April 21, 2023 that your sponsor is affiliated with
EnTrust Global Partners
LLC ( EnTrust Global ) and EnTrust Global Management GP LLC, has
sole voting and
dispositive power over the Founder Shares owned by your sponsor. You
further disclose
that Gregg Hymowitz is the Chairman, Chief Executive Officer, Founder
and Managing
Partner of EnTrust Global and is a U.S. citizen. Please revise to
clarify whether your
sponsor, including EnTrust Global Management GP LLC, is, is controlled
by, or has
substantial ties with a non-U.S. person. Please also tell us whether
anyone or any entity
associated with or otherwise involved in the transaction, is, is
controlled by, or has
substantial ties with a non-U.S. person. If so, also include risk
factor disclosure that
addresses how this fact could impact your ability to complete your
initial business
combination. For instance, discuss the risk to investors that you may
not be able to
complete an initial business combination should the transaction be
subject to review by a
U.S. government entity, such as the Committee on Foreign Investment in
the United
States (CFIUS), or ultimately prohibited. Further, disclose that the
time necessary for
government review of the transaction or a decision to prohibit the
transaction could
prevent you from completing an initial business combination and
require you to liquidate.
Disclose the consequences of liquidation to investors, such as the
losses of the investment
opportunity in a target company, any price appreciation in the
combined company, and the
warrants, which would expire worthless. We note some of this risk
factor disclosure is
included on page 17.
29. Quantify the value of warrants, based on recent trading prices, that
may be retained by
redeeming stockholders assuming maximum redemptions and identify any
material
resulting risks.
30. We note that BTIG was the underwriter for the initial public offering
of EGA and it is
advising on the business combination transaction with LGM. Please tell
us, with a view to
disclosure, whether you have received notice, or any other indication,
from BTIG or any
other firm engaged in connection with your initial public offering
that it will cease
involvement in your transaction and how that may impact your deal or
the deferred
underwriting compensation owed for EGA's initial public offering.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Mark Wojciechowski, Staff Accountant, at (202) 551-3759
or Karl
Hiller, Accounting Branch Chief, at (202) 551-3686 if you have questions
regarding comments
Gregg S. Hymowitz
EG Acquisition Corp.
June 5, 2023
Page 9
on the financial statements and related matters. Please contact Timothy S.
Levenberg, Special
Counsel, at (202) 551-3707 or Irene Barberena-Meissner, Staff Attorney, at
(202) 551-6548 with
any other questions.
Sincerely,
FirstName LastNameGregg S. Hymowitz
Division of
Corporation Finance
Comapany NameEG Acquisition Corp.
Office of Energy &
Transportation
June 5, 2023 Page 9
cc: Sean M. Ewen, Esq., of Willkie Farr & Gallagher LLP
FirstName LastName