RRD says new Chatham bid is ‘Superior Proposal’

Richard Stuart-Turner
Thursday, December 2, 2021

The board of RR Donnelley (RRD) has unanimously determined that Chatham Asset Management’s revised proposal to acquire the business constitutes a ‘Superior Proposal’.

Chatham Asset Management is offering $10.25 per share in cash
Chatham Asset Management is offering $10.25 per share in cash

The bidding war over the future ownership of the US-headquartered multichannel marketing and business services group intensified earlier this week when it received an unsolicited proposal from Chatham – RRD’s largest investor – to acquire all of the RRD shares that it does not already own for $10.25 (£7.69) per share in cash.

Its prior offer for the business was $9.10 per share, while a deal for RRD to be taken over by affiliates of Atlas Holdings had already been agreed in early November at $8.52 per share.

In a new statement released late last night (1 December), the company’s board said the latest offer from Chatham constitutes a Superior Proposal, as defined in its definitive merger agreement with affiliates of Atlas Holdings – known as the Atlas Merger Agreement.

RRD said it has now notified Atlas of the board’s determination that the Chatham Proposal constitutes a Superior Proposal and that RRD intends to terminate the Atlas Merger Agreement for the purpose of entering into a definitive merger agreement with affiliates of Chatham.

Pursuant to the Atlas Merger Agreement, however, Atlas has the opportunity until 7 December 2021 – the ‘Negotiation Period’ – to negotiate an amendment of the Atlas Merger Agreement such that the Chatham Proposal would no longer constitute a Superior Proposal.

“RRD intends, and is required under the Atlas Merger Agreement, to negotiate in good faith any adjustments or revisions to the terms and conditions of the Atlas Merger Agreement proposed by Atlas. RRD is not permitted to terminate the Atlas Merger Agreement or enter into a definitive merger agreement with affiliates of Chatham during the Negotiation Period,” the company’s latest statement said.

Under the terms of the Atlas Merger Agreement, RRD would be required to pay a $20m termination fee and expense reimbursement to Atlas if RRD terminates the agreement to enter into a definitive merger agreement with affiliates of Chatham.

Chatham has agreed to pay the termination fee and expense reimbursement to Atlas on RRD’s behalf in such event. Under the terms of the Chatham Proposal, RRD would be required to repay Chatham for such termination fee and expense reimbursement under certain circumstances in connection with a termination of the proposed definitive merger agreement with affiliates of Chatham.

“At this time, the company remains subject to the Atlas Merger Agreement and is complying with the terms and conditions of the Atlas Merger Agreement, which remains in effect unless and until the Atlas Merger Agreement is terminated,” RRD’s statement added.

“Accordingly, subject to and as required by the Atlas Merger Agreement, the board has not made a 'Change of Recommendation' (as defined in the Atlas Merger Agreement), reaffirms its recommendation of the Atlas Merger Agreement and rejects all 'Alternative Acquisition Agreements' (as defined in the Atlas Merger Agreement).”

It added there can be no assurance that Atlas will seek to negotiate with RRD or will make a revised proposal.

Atlas Holdings also owns LSC Communications, one of three companies formed when the old RR Donnelley & Sons group was split up.

Shares in RRD were down by nearly 2% yesterday, closing at $10.35, though its pre-market share price at the time of writing was up 3.29% to $10.69.

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