This morning, Far Point Acquisition Corp. (FPAC) finally filed a new preliminary proxy for a shareholder vote for their intended combination with Global Blue.  However, “intended” is a funny word and it no longer really applies since the FPAC board is still recommending shareholders vote against this transaction.  A vote date and record date have not been set as of yet, but today’s proxy filing did include quite a bit of additional material.

Nonetheless, Global is still not providing any estimates or updated financials to their current condition since they cite “the global and evolving nature of the Covid-19 pandemic” making any kind of estimates too challenging right now.  However, FPAC’s management does estimate “that under a range of scenarios it believes are reasonable respecting the timing of any resumption of Global Blue’s business, New Global Blue’s financing needs during the 18 months following a Closing would be significant, and FPAC cannot be certain that New Global Blue would have access to adequate debt or equity financing during this period.” So while we can ascertain that the impact is big, unfortunately, we’re all still looking at financials from September 30, 2019, which clearly no longer apply.

However, what was enlightening in today’s filing was the timeline of events.  In the interest of space here, only a few significant items have been provided below, but you can read the full timeline in the filing.  However, the selected items below are taken directly from the proxy:

• On April 27, 2020, Mr. Farley spoke with Mr. Osnoss regarding potential changes to the terms of the Business Combination. With respect to liquidity, Mr. Osnoss advised Mr. Farley that the Seller Parties might consider various actions, including a restructuring or delayed payment of a portion of the pre-closing cash dividend, to address liquidity needs of New Global Blue post-Closing. Mr. Farley did not present a specific proposal to Mr. Osnoss, but noted that, even if New Global Blue’s short-term liquidity issues were addressed, FPAC’s board was unlikely to continue to recommend that FPAC stockholders vote for the Business Combination unless the longer-term liquidity issues, capital structure, and valuation issues were also addressed as part of a comprehensive package. Mr. Farley and Mr. Osnoss had a subsequent conversation on this matter on May 2, 2020.
• On the evenings of May 5 and May 6, 2020, FPAC’s board of directors met again, at which time Messrs. Farley and Bonanno presented a further updated assessment of Global Blue’s financial condition. Representatives of ML and counsel for the independent directors attended. At the May 6, 2020 meeting, the FPAC board unanimously resolved to change its recommendation to FPAC’s stockholders to “AGAINST” the Business Combination. The board based its decision on the reasons described below under “—FPAC’s Board of Directors” Reasons for the Change in Recommendation to AGAINST the Business Combination.” The board discussed with counsel and approved a form of press release announcing its decision and directing FPAC management to share a draft with STB, consider STB’s comments in good faith and then issue the final press release before stock markets opened on May 7, 2020.
• On May 17, 2020, Globetrotter began acquiring Public Shares from institutional investors with the intention of supporting the Transactions, including by voting the shares of the FPAC Class A Common Stock beneficially owned by them in favor of the Business Combination Proposal and the Adjournment Proposal at the Special Meeting.
• On May 29, 2020, FPAC management and ML met with representatives of Third Point to discuss the proposal and potential responses. Between May 30, 2020 and June 8, 2020, FPAC management and ML shared information with respect to Global Blue with Third Point and worked with them to formulate a response to Globetrotter. In formulating the response, FPAC management considered changes to the Transaction that were intended to enhance New Global Blue’s position as a public company, address what FPAC management believed to be short- and longer-term liquidity issues for New Global Blue, enhance deal certainty and create value for all stockholders. FPAC management acknowledged, after consulting with Third Point, that in formulating any such response they would have to be willing to accept compromises on various points, including on value.
• In a conversation between Mr. Osnoss and Mr. Farley on June 9, 2020, Mr. Farley presented a portion of the proposal to Mr. Osnoss. The response was not fully presented as before all its components could be conveyed it became clear that the framework was not acceptable to Globetrotter.

Interestingly, Globetrotter did not begin acquiring Public Shares until May 17th, which is ten days after the original press release from FPAC stating that their Board recommended voting against the transaction.

However, let’s take a look at the proposal FPAC presented to Mr. Osnoss on June 9th, “that was not acceptable to Globetrotter“.

FPAC PROPOSAL

• Global Blue and FPAC would initiate discussions with the lenders under the New Facilities with the goal of modifying the financial covenant contained in the New Facilities when such covenant will first be measured in September 2021.
• The Seller Parties would waive the approximately €154 million (approximately $168 million) cash dividend to which they were entitled under the terms of the Merger Agreement concurrently with the Closing (and not receive any New Global Blue Shares in place of the cash), and FPAC would waive the post-closing working capital adjustment under the Merger Agreement (which FPAC management estimated would be approximately €87 million in FPAC’s favor and would have been settled in the form of New Global Blue Shares valued at $10.00 per share).
• The Seller Parties would agree to a shift of €100.0 million of Cash Consideration to Share Consideration in the form of New Global Blue Shares valued at $10.00 per share.
• The maximum amount of Series A Preferred Shares that could be issued would be reduced from €200.0 million to €100.0 million, with the difference in Share Consideration being delivered to the Seller Parties in the form of New Global Blue Shares.
• Globetrotter would agree to not redeem the 9,487,500 shares of FPAC’s Class A Common Stock that it had acquired since May 17, 2020.
• The maximum amount of the Backstop would be reduced to $250.0 million (under the Maximum Redemption Scenario, the Backstop Provider would be obligated to purchase shares of FPAC Class Common Stock for approximately $392.5 million).
• The enterprise value on which the Cash Consideration and Share Consideration was based under the terms of the Merger Agreement would be reduced from €2.3 billion to €1.9 billion and the Cash and Share Consideration would be adjusted accordingly.
• Globetrotter and Founder would each agree to have 1.5 million New Global Blue Shares to be received by them convert to earn-out shares that would have vesting conditions to be agreed.
• The parties would discuss appropriate steps to enhance the value of the New Global Blue Warrants post-Closing.

So as you can see, Global Blue would get a LOT less cash and receive shares instead.  Plus, all those shares that Globetrotter purchased in the open market (nearly $100 million worth), they would not be able to redeem for the cash in trust value.  That was an expensive purchase to ensure that this transaction gets voted through, but the ability to redeem for the cash in trust made that expensive purchase make sense.  If the redemption feature is taken away, that’s a far riskier position since their average cost on those shares was approximately $10.31.  However, if Global Blue truly believes this company can survive and thrive post-pandemic and further to that, believe Global Blue should go public, then it’s not an unreasonable proposal from FPAC.  Basically, it would mean that Globetrotter invested nearly $100 million in it’s own newly formed public company.  But clearly, FPAC is trying to make a point and conversely, Global Blue would prefer cash.

There were a few other nuggets included in the proxy, such as Exclusivity. The Merger Agreement includes an exclusivity provision that restricts FPAC’s ability to consider other potential business combinations until the Merger Agreement is terminated.  So even if FPAC wants to bust this deal and start looking for a new one, they need to bust it quickly since they can’t start looking until this deal is terminated.  But their clock runs out on September 14, 2020, so they need to get going.

Also, regarding a Material Adverse Effect, which you would think would have given FPAC the ability to get out of this deal, looks to be a non-starter here. Again, per the proxy:

The definition of Material Adverse Effect provides that the effects of a pandemic, contagious disease outbreaks and travel restrictions, among other things, shall not be taken into account in determining whether a Material Adverse Effect shall have occurred, or be reasonably expected to occur, except to the extent the impact of such matters on Global Blue are, or would reasonably be expected to be, disproportionate as compared to other participants in the industries in which Global Blue conducts business. 

However, in summary, FPAC is still boxed into a corner with this transaction.  Global Blue still controls the vote and public shareholders will redeem en masse.  Whether those public shareholders vote yes or no is still unclear, but it kind of doesn’t matter with Global Blue having such a large position. So there still appear to only be three paths this deal can take: let the clock run out so this terminates, re-negotiate the deal with Global Blue (which would still most likely have mass redemptions), or this goes to a vote and is approved with a nearly complete redemption of the trust. So while today’s proxy was interesting, it’s probably FPAC going through the motions because they have to. However, after a more thorough read, maybe a new angle appears.