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Basics of the Solera Holdings Transaction

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The transaction

The Solera Holdings (SLH) merger is a private equity transaction wherein the buyer is buying out the target for cash. In this case, the buyer is a consortium of private equity firms, including:

  • Vista Equity Partners
  • Koch Industries
  • Goldman Sachs

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The terms and conditions

As a result of the Solera merger, shareholders will receive $55.85 in cash per share.

But the following conditions need to be satisfied in order for the deal to close:

  • Solera’s shareholders must vote.
  • Hart-Scott-Rodino antitrust filing must go through.
  • Any other necessary government approvals must pass.
  • The US Securities and Exchange Commission must approve of the proxy statement.

Non-solicitation

Solera has a non-solicitation agreement with a fiduciary out, which means that, prior to shareholder approval of the transaction, Solera could discuss another merger if approached by another suitor.

To do that, the Solera Holdings board of directors would have to determine that such new discussions could lead to a bona fide offer, and that such an offer would likely result in a higher bid for the company.

Solera is not, however, permitted to shop itself around.

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Breakup fee and financing

In the event that another bidder comes in and tops the consortium bid, Solera would owe a breakup fee. The consortium has delivered executed commitment letters to Solera covering the expected debt financing as well as the equity commitments on the part of the private equity buyers.

Merger arbitrage resources

Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL) and the merger between Freescale Semiconductor (FSL) and NXP Semiconductor (NXPI). For a primer on risk arbitrage investing, read the series Merger Arbitrage Must-Knows: A Key Guide for Investors.

Investors interested in trading in the technology sector should look at the S&P SPDR Tech ETF (XLK).

In the next part of this series, we’ll look at the rationales behind the Solera transaction.

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