Item 8.01 Other Events.
Business Combination Agreement
As previously announced, on October 18, 2020, South Mountain Merger Corp., a
Delaware corporation ("South Mountain") entered into a Business Combination
Agreement ("BCA") by and among South Mountain, BT Merger Sub I, Inc., a Delaware
corporation and a direct, wholly owned subsidiary of South Mountain ("First
Merger Sub"), BT Merger Sub II, LLC, a Delaware limited liability company and a
direct, wholly owned subsidiary of South Mountain ("Second Merger Sub") and
Factor Systems, Inc. (d/b/a Billtrust), a Delaware corporation ("Billtrust").
Pursuant to the terms of the BCA, (i) First Merger Sub will be merged with and
into Billtrust (the "First Merger"), with Billtrust surviving the First Merger
as a wholly owned subsidiary of South Mountain (the "Surviving Corporation") and
(ii) as soon as practicable, but in any event within ten (10) days following the
First Merger and as part of the same overall transaction as the First Merger,
the Surviving Corporation will merge with and into Second Merger Sub (the
"Second Merger" and together with the First Merger, the "Mergers"), with Second
Merger Sub surviving the Second Merger as a wholly owned subsidiary of South
Mountain (such Mergers, collectively with the other transactions described in
the BCA, the "Business Combination").
South Mountain filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-4 on October 26, 2020, which was subsequently
amended and declared effective by the SEC on December 22, 2020 (the "Form S-4")
which includes a document that serves as a proxy statement and prospectus of
South Mountain and a consent solicitation statement of Billtrust (the "proxy
statement/consent solicitation statement/prospectus") in connection with the
Business Combination. As is common in these types of transactions, South
Mountain received a letter (the "Stockholder Letter") from a purported
stockholder of South Mountain claiming certain allegedly material omissions in
its proxy statement/consent solicitation statement/prospectus in connection with
the Business Combination.
While South Mountain believes that the disclosures set forth in the proxy
statement/consent solicitation statement/prospectus comply fully with applicable
law, to avoid nuisance, cost and distraction of possible litigation, and to
preclude any efforts to delay the closing of the Business Combination, and
without admitting any liability or wrongdoing, South Mountain has determined to
voluntarily supplement the proxy statement/consent solicitation
statement/prospectus with the supplemental disclosures set forth below (the
"Supplemental Disclosures"). Nothing in the Supplemental Disclosures shall be
deemed an admission of the legal necessity or materiality under applicable laws
of any of the disclosures set forth herein. To the contrary, South Mountain
specifically denies all allegations in the Stockholder Letter that any
additional disclosure was or is required. South Mountain believes the
Stockholder Letter is without merit.
Supplemental Disclosures
The following Supplemental Disclosures should be read in conjunction with the
proxy statement/consent solicitation statement/prospectus, which is available on
the Internet site maintained by the SEC at http://www.sec.gov, along with
periodic reports and other information South Mountain files with the SEC. To the
extent that the information set forth herein differs from or updates information
contained in the proxy statement/consent solicitation statement/prospectus, the
information set forth herein shall supersede or supplement the information in
the proxy statement/consent solicitation statement/prospectus. All page
references are to the pages in the proxy statement/consent solicitation
statement/prospectus, and terms used below, unless otherwise defined, have the
meanings set forth in the proxy statement/consent solicitation
statement/prospectus. Underlined text shows text being added to a referenced
disclosure in the proxy statement/consent solicitation statement/prospectus.
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The following disclosure replaces the fifth paragraph on page 115 of the proxy
statement/consent solicitation statement/prospectus under the heading
"Background of the Business Combination".
From the date of the IPO through the signing of the LOI (as defined below),
members of the South Mountain Board and management contacted, and were contacted
by, a number of individuals and entities with respect to business combination
opportunities. As part of this process, representatives of South Mountain
considered and evaluated over fifty potential acquisition targets in a wide
variety of industry sectors (including both privately held companies and assets
or divisions owned by publicly traded companies) and entered into non-disclosure
agreements with sixteen of such potential acquisition targets (including
Billtrust). The non-disclosure agreements generally contained customary terms
for non-disclosure agreements between special purpose acquisition companies and
private company targets, including confidentiality and use restrictions with
respect to information provided by the potential acquisition targets to South
Mountain and customary exceptions to such provisions. None of the non-disclosure
agreements entered into with potential acquisition targets contained standstill
obligations restricting the potential acquisition targets from acquiring debt or
equity securities of South Mountain. South Mountain conducted additional due
diligence and/or held detailed discussions with the management teams of ten out
of the sixteen potential acquisition targets that entered into non-disclosure
agreements with South Mountain and submitted valuation presentations to eight of
those potential acquisition targets, including Billtrust. Each of the valuation
presentations included a summary of the non-binding terms of a potential
transaction and generally included, among other things, a summary of the
applicable potential transaction structure, an analysis of the estimated
transaction enterprise and equity value, an illustrative pro forma ownership
table of the combined company on a pre-dilution and post-dilution basis, a brief
overview of the South Mountain management and shareholder base and a potential
transaction timeline.
The following disclosure replaces the first full paragraph on page 116 of the
proxy statement/consent solicitation statement/prospectus under the heading
"Background of the Business Combination".
On July 23, 2020, Mr. Bernicker submitted by electronic mail an illustrative
transaction structure for a potential business combination between South
Mountain and Billtrust to representatives of Billtrust. The illustrative
transaction structure and accompanying materials generally summarized the terms
of the potential transaction, including the applicable potential transaction
structure, initial indications of enterprise value and equity value of
Billtrust, an overview of the transaction marketing process and other
transaction terms (including that the board of directors of the post-closing
company would include Mr. Bernicker).
The following sentences are added to the end of the fifth full paragraph on page
116 of the proxy statement/consent solicitation statement/prospectus under the
heading "Background of the Business Combination".
On October 2, 2020, South Mountain entered into an engagement letter with
Citigroup with respect to the proposed transaction. Prior to the execution of
the October 2, 2020 engagement letter, South Mountain and Citigroup previously
engaged in ordinary course discussions in connection with Citigroup's role as
underwriter in South Mountain's IPO and/or discussions regarding potential
acquisition targets. Citigroup did not provide services to Billtrust during the
two years preceding the execution of the BCA. In connection with the
consummation of the Business Combination, Citigroup will be entitled to deferred
underwriting compensation as set forth in South Mountain's IPO registration
statement, with payment due at Closing.
The following disclosure replaces the second sentence of the fourth full
paragraph on page 117 of the proxy statement/consent solicitation
statement/prospectus under the heading "Background of the Business Combination".
From September 21, 2020 to September 22, 2020, South Mountain and Billtrust
finalized and executed the LOI, which set forth a summary of the material terms
of a potential business combination between South Mountain and Billtrust for
aggregate consideration that would be based on an equity valuation of Billtrust
of $1.19 billion and provided for, among other things, (i) a private placement
of South Mountain Class A Common Stock in an amount of $125 million, (ii) the
appointment of Mr. Bernicker, as the one representative of our Sponsor, to the
board of directors of the post-closing company, (iii) a condition to the closing
of the Business Combination in favor of Billtrust providing that South
Mountain's cash at closing (after giving effect to the redemption offer in
relation to the Public Shares) would equal or exceed $225 million and (iv) that
the entry into definitive agreements with respect to the proposed business
combination would be subject to the completion of due diligence.
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Important Information and Where to Find It
This communication is being made in respect of the proposed business combination
transaction involving SMMC and Billtrust. A full description of the terms of the
transaction is included in the registration statement on Form S-4, which
includes a proxy statement of SMMC, a consent solicitation statement of
Billtrust and prospectus of SMMC, filed by SMMC with the SEC on October 26, 2020
and amended in filings by SMMC with the SEC on November 25, December 14 and
December 18, 2020. SMMC urges investors, stockholders and other interested
persons to read the preliminary proxy statement/consent solicitation
statement/prospectus as well as other documents filed with the SEC because these
documents contain important information about SMMC, Billtrust and the
transaction. The definitive proxy statement/consent solicitation
statement/prospectus included in the registration statement was mailed to
stockholders of record of SMMC as of December 17, 2020. Stockholders are also
able to obtain a copy of the proxy statement/consent solicitation
statement/prospectus, without charge, by directing a request to: South Mountain
Merger Corp., 767 Fifth Avenue, 9th Floor, New York, NY 10153. The preliminary
and definitive proxy statement/consent solicitation statement/prospectus
included in the registration statement, can also be obtained, without charge, at
the SEC's website (www.sec.gov). The information contained on, or that may be
accessed through, the websites referenced in this communication is not
incorporated by reference into, and is not a part of, this communication.
Participants in the Solicitation
SMMC and Billtrust, and their respective directors and executive officers, may
be considered participants in the solicitation of proxies with respect to the
potential transaction described in this communication under the rules of the
SEC. Information about the directors and executive officers of SMMC is set forth
in SMMC's proxy statement/consent solicitation statement/prospectus included in
the registration statement on Form S-4, its Annual Report on Form 10-K for the
fiscal year ended December 31, 2019, which was filed with the SEC on March 20,
2020, and its Current Report on Form 8K, which was filed with the SEC on June
29, 2020. These documents can be obtained free of charge from the sources
indicated above.
Non-Solicitation
This communication is not a proxy statement or solicitation of a proxy, consent
or authorization with respect to any securities or in respect of the potential
transaction and shall not constitute an offer to sell or a solicitation of an
offer to buy the securities of SMMC or Billtrust, nor shall there be any sale of
any such securities in any state or jurisdiction in which such offer,
solicitation, or sale would be unlawful prior to registration or qualification
under the securities laws of such state or jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the requirements of the
Securities Act of 1933, as amended.
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Forward-Looking Statements
This communication includes, and oral statement made from time to time by
representatives of SMMC and Billtrust may contain, statements that are not
historical facts but are forward looking statements for purposes of the safe
harbor provisions under the United States Private Securities Litigation Reform
Act of 1995. Forward-looking statements are generally are accompanied by words
such as "believe," "may," "could," "will," "estimate," "continue," "anticipate,"
"intend," "target," "goal," "expect," "should," "would," "plan," "predict,"
"project," "forecast," "potential," "seem," "seek," "future," "outlook," and
similar expressions that predict or indicate future events or trends or that are
not statements of historical matters. These forward-looking statements include,
but are not limited to, SMMC's and Billtrust's ability to consummate the
transaction between them and the capabilities and benefits to customers of
Billtrust's technology platform, Billtrust's ability to scale and grow its
business. These statements are based on various assumptions and on the current
expectations of SMMC's and Billtrust's management and are not predictions of
actual performance. These forward-looking statements are provided for
illustrative purposes only and are not intended to serve as, and must not be
relied on by any investor as, a guarantee, an assurance, a prediction or a
definitive statement of fact or probability. Actual events and circumstances are
difficult or impossible to predict and will differ from assumptions. Many actual
events and circumstances are beyond the control of SMMC and Billtrust. These
forward looking statements are subject to a number of risks and uncertainties,
including Billtrust's ability to attract and retain customers and expand
customers' use of Billtrust's products or services; market, financial, political
and legal conditions; the impact of the COVID-19 pandemic on Billtrust's
business and the global economy; the inability of the parties to successfully or
timely consummate the proposed business combination, including the risk that any
required regulatory approvals are not obtained, are delayed or are subject to
unanticipated conditions that could adversely affect the combined company or the
expected benefits of the proposed business combination or that the approval of
the stockholders of SMMC or Billtrust is not obtained; failure to realize the
anticipated benefits of the proposed business combination; risks related to
future market adoption of Billtrust's offerings; risks related to Billtrust's
market strategy and subscription business model; the effects of competition on
Billtrust's future business; the ability of SMMC or the combined company to
issue equity or equity-linked securities in connection with the proposed
business combination or in the future, and those factors discussed in SMMC's
final prospectus filed on June 21, 2019, Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 and Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2020, June 30, 2020, and September 30, 2020, in each
case, under the heading "Risk Factors," and other documents of SMMC filed, or to
be filed, with the SEC. If the risks materialize or assumptions prove incorrect,
actual results could differ materially from the results implied by these
forward-looking statements. There may be additional risks that SMMC and
Billtrust presently do not know or that they currently believe are immaterial
that could also cause actual results to differ from those contained in the
forward-looking statements. In addition, forward-looking statements reflect
SMMC's and Billtrust's expectations, plans or forecasts of future events and
views as of the date of this communication. SMMC and Billtrust anticipate that
subsequent events and developments will cause their assessments to change.
However, while SMMC and Billtrust may elect to update these forward-looking
statements at some point in the future, SMMC and Billtrust specifically disclaim
any obligation to do so. These forward-looking statements should not be relied
upon as representing SMMC's or Billtrust's assessments as of any date subsequent
to the date of this communication. Accordingly, undue reliance should not be
placed upon the forward-looking statements.
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