Relevant Document:
Merger Agreement
Takeaways
- Microsoft Corp. and Nuance Communications Inc. filed a definitive merger agreement with the SEC today, Tuesday, April 13, reflecting the agreement under which Microsoft will acquire Nuance in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt.
- Antitrust approval pursuant to the HSR Act will be required. The agreement also contemplates that certain approvals under foreign antitrust and investment laws identified in Nuance’s private disclosure letter may also be required. Under the terms of the merger agreement, Microsoft’s divestiture obligations are capped at a material adverse effect.
- There is a $515 million termination fee payable by Nuance in connection with certain terminations of the agreement.
- The companies state that they expect to close the transaction by the end of 2021.
Microsoft Corp. and Nuance Communications Inc. filed a definitive merger agreement with the SEC today, Tuesday, April 13, reflecting the agreement under which Microsoft will acquire Nuance in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt. The transaction is intended to bolster Microsoft’s industry-specific cloud offerings within the broader healthcare industry.
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Nuance stockholders will receive $56 per share in cash for each share held. The all-cash consideration implies a 23% premium to the closing price of Nuance on Friday, April 9. The transaction is subject to approval by Nuance’s stockholders and the satisfaction of certain regulatory approvals.
Antitrust approval pursuant to the HSR Act. The agreement also contemplates that certain additional approvals under foreign antitrust and investment laws identified in Nuance’s private disclosure letter may be required.
Under the terms of the merger agreement, Microsoft’s divestiture obligations are capped at a material adverse effect. Microsoft is not obligated to agree to any divestitures to the extent that any such action(s) would reasonably be expected to have a material adverse effect on the business, assets, liabilities, financial condition or results of the operations of Nuance.
The agreement also provides for a $515 million termination fee payable by Nuance in connection with certain terminations of the agreement.
The companies state that they expect to close the transaction by the end of 2021.
Transaction Details
Consideration
Under the terms of the definitive agreement, Nuance stockholders will receive $56 per share in cash for each share held.
The all-cash consideration implies a 23% premium to the closing price of Nuance on Friday, April 9.
Closing Conditions
The merger agreement includes customary closing conditions, including required regulatory approvals:
- Nuance stockholder approval. The transaction will require the affirmative vote of the holders of a majority of the outstanding shares of Nuance common stock entitled to vote.
- HSR waiting period. The waiting period applicable to the transaction under the HSR Act needs to expire or be terminated.
- Foreign antitrust and/or investment laws approvals. The agreement contemplates that certain approvals under the foreign antitrust and/or foreign investment laws identified in Nuance’s private disclosure letter may be required.
The merger agreement also lists the following closing conditions: no burdensome condition, no regulatory restraint, representations and warranties, covenants, no Nuance material adverse effect and tax opinion.
Limitations on Divestitures / Regulatory Best Efforts
Under the terms of the merger agreement, Microsoft’s divestiture obligations are capped at a material adverse effect. Microsoft is not obligated to agree to any divestitures to the extent that any such action(s) (1) with respect to Nuance and its respective businesses, product lines and assets would reasonably be expected to have a material adverse effect on the business, assets, liabilities, financial condition or results of the operations of Nuance and (2) with respect to Microsoft and its respective businesses, product lines and assets would reasonably be expected to (a) have a material impact on the benefits expected to be derived from the merger by Microsoft or (b) have more than an immaterial impact on any business or product line of Microsoft and its subsidiaries.
The agreement defines the cap on Microsoft’s divestiture obligations as a “burdensome condition.”
Microsoft and Nuance are to file their respective HSR paperwork no later than 20 business days following the date of the agreement and promptly file comparable pre-merger or post-merger notification filings with any governmental authority that are required by other applicable antitrust laws or any foreign investment laws.
Timing
The closing is to take place no later than the third business day after the satisfaction of the last to be satisfied or waived of the conditions set forth in article VII.
The termination date is
Jan. 31, 2022; provided that (1) if as of the initial termination date, all conditions to the agreement are satisfied, other than HSR approval, all other applicable regulatory approvals and/or no regulatory restraint (solely in connection with an antitrust law or foreign investment law), then the termination date is automatically extended to
April 30, 2022, and (2) if as of April 30, 2022, all conditions to the agreement are satisfied, other than HSR approval, all other applicable regulatory approvals and/or no regulatory restraint (solely in connection with an antitrust law or foreign investment law), then the termination date is automatically extended to
July 31, 2022.
Company Termination Fee
Nuance will be obligated to pay Microsoft a
$515 million termination fee in the event that the merger agreement is terminated (1) by Nuance to enter into a superior proposal or (2) by Microsoft for a Nuance company board recommendation change.
Nuance will also be obligated to pay Microsoft the $515 million termination fee in the event that the merger agreement is terminated (1) by either party for the termination date or failure to obtain Nuance stockholder approval or (2) by Microsoft for Nuance’s breach, where (a) an acquisition proposal was announced prior to such termination, and (b) within one year of such termination, Nuance enters into an agreement with respect to an acquisition proposal.
Parent Termination Fee
There is no reverse termination fee payable by Microsoft under the terms of the merger agreement.
Material Adverse Effects
The carve-outs from the definition of any Nuance material adverse effect look standard and include: (1) changes in general economic conditions or changes in conditions in the global economy generally; (2) changes in conditions in the financial, credit or capital markets; (3) general changes in conditions in the industries in which Nuance and its subsidiaries conduct business; (4) changes in regulatory, legislative or political conditions in the United States or any other country or region in the world; (5) any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, terrorism or military actions; (6) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, pandemics or contagious disease outbreaks, including Covid-19, weather conditions and other similar
force majeure events, including, in each case, the response of governmental entities such as Covid-19 measures; (7) changes in the price or trading volume of Nuance’s common stock or indebtedness, in and of itself; and (8) any failure, in and of itself, by Nuance and its subsidiaries to meet any public estimates or expectations of the company’s revenue, earnings or other financial performance or results of operations for any period.
The agreement defines “Covid-19 measures” as any quarantine, shelter in place, stay at home, workforce reduction, social distancing, shutdown, closure, sequester, safety or similar laws, directives, restrictions, guidelines, responses or recommendations of or promulgated by any governmental authority, including the CDC and WHO, in each case, in connection with or in response to Covid-19.
Nonsolicitation / Change in Recommendation
There is a standard nonsolicitation provision prohibiting Nuance from soliciting or initiating an acquisition proposal or engaging in any discussions or negotiations with respect thereto. There is a standard fiduciary-out provision enabling Nuance to furnish information to and/or engage in discussions with any third party that makes a bona fide written acquisition proposal to Nuance at any time prior to the time the Nuance requisite stockholder vote is obtained.
The Nuance board is permitted to effect a company board recommendation change in connection with Nuance’s receipt of a superior proposal and/or an intervening event. There is a standard three-business-day matching period for Microsoft in connection with any proposed company board recommendation change by the Nuance board.
The definition of intervening event looks standard and refers to any positive change, effect, development, circumstance, condition, event or occurrence that (1) as of the date of the agreement was not known to the Nuance board, or the consequences of which were not reasonably foreseeable as of the date of the agreement, and (2) is not related to an acquisition proposal.
Financing
Microsoft has acknowledged that it has available and will have available at the effective time the funds necessary for the payment of all amounts payable in connection with or as a result of the merger.
Governing Law / Jurisdiction
Delaware law governs the merger agreement, and the parties submit to the jurisdiction of the Delaware courts.
Advisors
Evercore is serving as exclusive financial advisor to Nuance, and Paul Weiss is its legal advisor.
Goldman Sachs is serving as exclusive financial advisor to Microsoft, and Simpson Thacher is its legal advisor.
Reorg’s previous coverage of this transaction can be found
HERE.