GTY Technology Holdings (GTYH) Amends eCivis Agreement and Gets a PIPE

Herding a deal is tough work.

GTY Technology released an 8-K this morning outlining recent changes to their merger agreement with one of their six targets (eCivis) as well an amendment to the underwriting agreement with Citigroup.  Additionally, GTY also went and rounded up a $66.6 million PIPE to backstop their combination.

These changes come on the heels of GTY also announcing they had amended their combination transaction documents right after the New Year. In particular, they amended the necessary cash amount to close, which was lowered to $270 million, from $325 million.  Additionally, they reduced the amount of cash and increased the number of shares of common stock payable to the targets and this is subject to adjustment depending on how much cash is left in trust post-redemptions.  However, the total aggregate value of the consideration  ($365 million) remains unchanged – they just changed the mix.

It can’t be easy trying to close six different companies while under a deadline, but it sounds like the GTY team have planted themselves in the saddle trying to make it work. Let’s see if any of the other five companies need to amend too.

Below is a summary of the changes:

Amendment to eCivis Agreement

GTY has amended their agreement with eCivis so that $1 million of the cash consideration payable to eCivis Holders will be deposited into an escrow account in order to cover certain obligations of eCivis owed to a third party.

The eCivis Amendment also revises the calculation to determine the number of shares to be paid pursuant to the earn-out (see screenshot of eCivis earnout table below) if certain tiers of revenues and EBITDA are met for the year ending December 31, 2020.

As amended, the number of shares to be paid will be determined by dividing either $10,000,000, $20,000,000, $30,000,000, $40,000,000 or $50,000,000 (depending on the tier of revenues and EBITDA achieved) by $10.00, rather by the volume weighted average closing price for the shares of New GTY common stock as of December 31, 2020.

GTY gets a PIPE

The Company also entered into subscription agreements with certain institutional and accredited investors (the “Investors”), in which the Investors have agreed to purchase, immediately prior to the closing of the Business Combination, 6,656,238 Class A ordinary shares of the Company at a price of  $10.00 per share, or an aggregate cash purchase price of  $66,562,380.

Additionally, GTY Investors, LLC, the Company’s sponsor, will surrender to the Company, for cancellation at no cost, 124,214 Class B ordinary shares (founders shares) and will then issue 124,214 Class A ordinary shares to the Investors (effectively transferring founders shares to the investors). The Class A ordinary shares will be converted into shares of common stock of New GTY at the Business Combination. These additional shares that investors will receive means that their cost basis is reduced to $9.82.

Amendment to Underwriting Agreement

GTY also amended the Underwriting agreement with Citigroup.  Citigroup, per the original underwriting agreement, was to receive deferred underwriting fees of $19.32 million upon completion of the Business Combination.  However, this has now been revised to reflect only $3.25 million in cash and $16.1 million in shares instead.  However, the $16.1 million can be payable in cash or shares, at the company’s discretion.