Item 1.01 Entry into a Material Definitive Agreement.
On January 22, 2023, Xylem Inc. ("Xylem") and Fore Merger Sub, Inc., a wholly
owned subsidiary of Xylem ("Merger Sub"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Evoqua Water Technologies Corp. ("Evoqua").
The Merger Agreement provides, among other things, that on the terms and subject
to the conditions set forth therein, Merger Sub will merge with and into Evoqua,
with Evoqua surviving as a wholly owned subsidiary of Xylem (the "Merger").
In the Merger, upon the terms and conditions of the Merger Agreement, (i) each
share of Evoqua common stock issued and outstanding immediately prior to the
effective time of the Merger (the "Effective Time") (other than certain excluded
shares as described in the Merger Agreement) will automatically be converted
into the right to receive 0.48 (the "Exchange Ratio") of a share of the common
stock of Xylem and (ii) cash in lieu of fractional shares. Upon the closing of
the Merger, legacy Evoqua stockholders will own approximately 25% and legacy
Xylem shareholders will own approximately 75% of the combined company.
Following the closing of the Merger, shares of Xylem common stock will continue
to be listed on the New York Stock Exchange (the "NYSE"). Subject to the terms
and conditions set forth in the Merger Agreement, at the Effective Time, (i) all
outstanding options to purchase Evoqua common stock will be converted into
options to purchase shares of Xylem common stock, (ii) all outstanding unvested
restricted stock units with respect to Evoqua common stock will be converted
into corresponding restricted stock units with respect to shares of Xylem common
stock, (iii) all outstanding unvested performance stock units with respect to
Evoqua common stock will be converted into restricted stock units with respect
to shares of Xylem common stock, with performance criteria deemed satisfied
based on the achievement levels set forth in the Merger Agreement, and (iv) all
outstanding vested and unvested cash-settled stock appreciation rights with
respect to Evoqua common stock will be converted into corresponding cash-settled
stock appreciation rights with respect to Xylem common stock ((i), (ii), (iii)
and (iv) collectively, the "Converted Awards"), in each case, based on the
Exchange Ratio and with respect to such converted stock options, the exercise
price of which shall be equal to the exercise price of such option in effect
immediately prior to the Effective Time, divided by the Exchange Ratio, rounded
up to the nearest whole cent. Following the Effective Time, the Converted Awards
will otherwise continue to be governed by substantially the same general terms
and conditions as applicable to such Converted Awards as in effect immediately
prior to the Effective Time.
The respective boards of directors of Xylem and Evoqua have unanimously approved
the Merger Agreement, and the board of directors of Xylem has agreed to
recommend that Xylem's shareholders approve the issuance of the shares of Xylem
common stock in connection with the Merger. In addition, the board of directors
of Evoqua has agreed to recommend that Evoqua's stockholders adopt the Merger
Agreement. Xylem and Evoqua each have agreed not to directly or indirectly
solicit alternative proposals and to terminate all existing discussions,
negotiations and communications with any persons with respect to any alternative
proposal. However, (i) the board of directors of Xylem may, subject to certain
conditions, respond to unsolicited proposals from third parties and withdraw its
recommendation in favor of approval of the issuance of Xylem common stock in
connection with the Merger or terminate the Merger Agreement, and (ii) the
Evoqua board of directors may, subject to certain conditions, respond to
unsolicited proposals from third parties and withdraw its recommendation in
favor of adoption of the Merger Agreement or terminate the Merger Agreement, in
each case, if, in connection with the receipt of an alternative proposal,
Xylem's board of directors or Evoqua's board of directors, as the case may be,
determines in good faith, after consultation with its outside counsel, that
(A) such alternative proposal constitutes or is reasonably likely to lead to a
superior proposal and (B) a failure (1) to furnish information and provide
access with respect to such corporation and its subsidiaries and (2) to
participate in discussions or negotiations with the person making an alternative
proposal would be reasonably likely to be inconsistent with its fiduciary
duties. In addition, Xylem's board of directors or Evoqua's board of directors,
as the case may be, may withdraw its recommendation (but not terminate the
Merger Agreement) if, in connection with a material event or circumstance
occurring after the date of the Merger Agreement that was not known or
reasonably foreseeable as of the date of the Merger Agreement, it determines in
good faith, after consultation with its outside legal and financial advisor,
that a failure to effect such a withdrawal of recommendation would be reasonably
likely to be inconsistent with its fiduciary duties.
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Xylem and Evoqua each made certain representations and warranties and agreed to
certain covenants in the Merger Agreement, including, among other things,
(i) covenants by Xylem and Evoqua to use their respective reasonable best
efforts to conduct their businesses in all material respects in the ordinary
course during the period between the execution of the Merger Agreement and
consummation of the Merger, (ii) the efforts of the parties to cause the Merger
to be completed, and (iii) obligations to cooperate with each other to prepare
and file a registration statement on Form S-4 and joint proxy statement with the
SEC.
The Merger Agreement provides that, at the closing of the Merger, the size of
the board of directors of Xylem will be increased to a total of 12 directors,
with two individual members of Evoqua's board of directors to be appointed to
the Xylem board of directors to serve alongside the Xylem directors then
currently serving on the board. Patrick K. Decker, currently the President and
Chief Executive Officer of Xylem, will continue to serve as President and Chief
Executive Officer of the combined company and Sandra Rowland, currently the
Chief Financial Officer of Xylem, will continue to serve as Chief Financial
Officer of the combined company.
Completion of the Merger is subject to the satisfaction or waiver of customary
closing conditions, including (1) the adoption of the Merger Agreement by the
requisite vote of Evoqua's stockholders, (2) approval of the issuance of the
shares of Xylem's common stock to be issued in the Merger by the requisite vote
of Xylem's shareholders, (3) approval for listing on the NYSE of the shares of
Xylem's common stock to be issued in the Merger, (4) the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the approval of the Merger
under, or the expiration or termination of any applicable waiting period in
respect of, the antitrust and/or foreign investment laws of other specified
jurisdictions, (5) the accuracy of the other party's representations and
warranties, subject to certain materiality standards set forth in the Merger
Agreement, (6) the absence of a material adverse effect with respect to each of
Xylem and Evoqua, (7) the delivery of an officer's closing certificate by both
parties, (8) compliance in all material respects with the other party's
obligations under the Merger Agreement and (9) Evoqua's receipt of a tax opinion
reflecting certain tax representations as set forth in the Merger Agreement. The
completion of the Merger is not conditioned on receipt of financing by Xylem.
The Merger Agreement provides that Evoqua may be required to pay Xylem a
termination fee equal to $225 million if the Merger Agreement is terminated
(i) by Xylem following an adverse recommendation change of Evoqua's board of
directors or any material violation by Evoqua of the non-solicitation covenant
and (ii) by Evoqua to enter into an agreement in respect of a superior proposal,
and (iii) (a) by Xylem due to a breach of a covenant or agreement by Evoqua that
causes the failure of a condition to closing, (b) by either party if the Merger
has not been consummated prior to January 22, 2024 (the "Outside Date") or
(c) by either party due to failure to obtain the approval of Evoqua
stockholders, if, in the case of clauses (a), (b) or (c), within 12 months of
such termination an alternative proposal has been recommended or submitted to
Evoqua's stockholders for adoption, or Evoqua consummates an alternative
proposal.
The Merger Agreement provides that Xylem may be required to pay Evoqua a
termination fee equal to $225 million if the Merger Agreement is terminated
(i) by Evoqua following an adverse recommendation change of Xylem's board of
directors or any material violation by Xylem of the non-solicitation covenant,
(ii) by Xylem to enter into an agreement in respect of a superior proposal, and
(iii) (a) by Evoqua due to a breach of a covenant or agreement by Xylem that
causes the failure of a condition to closing, (b) by either party if the Merger
has not been consummated prior to the Outside Date or (c) by either party due to
failure to obtain the approval of Xylem shareholders, if, in the case of clauses
(a), (b) or (c), within 12 months of such termination an alternative proposal
has been recommended or submitted to Xylem's shareholders for adoption, or Xylem
consummates an alternative proposal. In addition, Xylem may be required to pay
. . .
Item 8.01 Other Events
On January 23, 2023, Xylem and Evoqua issued a joint press release announcing
they had entered into the Merger Agreement. A copy of the press release is
attached hereto as Exhibit 99.1 and is incorporated by reference herein.
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Forward-Looking Statements
This filing contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Generally, the words "anticipate," "estimate,"
"expect," "project," "intend," "plan," "contemplate," "predict," "forecast,"
"likely," "believe," "target," "will," "could," "would," "should," "potential,"
"may" and similar expressions or their negative, may, but are not necessary to,
identify forward-looking statements.
Such forward-looking statements, including those regarding the timing,
consummation and anticipated benefits of the transaction described herein,
involve risks and uncertainties. Xylem's and Evoqua's experience and results may
differ materially from the experience and results anticipated in such
statements. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions including, but are not limited to, the following
factors: the risk that the conditions to the closing of the transaction are not
satisfied, including the risk that required approvals of the transaction from
the shareholders of Xylem or stockholders of Evoqua or from regulators are not
obtained; litigation relating to the transaction; uncertainties as to the timing
of the consummation of the transaction and the ability of each party to
consummate the transaction; risks that the proposed transaction disrupts the
current plans or operations of Xylem or Evoqua; the ability of Xylem and Evoqua
to retain and hire key personnel; competitive responses to the proposed
transaction; unexpected costs, charges or expenses resulting from the
transaction; potential adverse reactions or changes to relationships with
customers, suppliers, distributors and other business partners resulting from
the announcement or completion of the transaction; the combined company's
ability to achieve the synergies expected from the transaction, as well as
delays, challenges and expenses associated with integrating the combined
company's existing businesses; the impact of overall industry and general
economic conditions, including inflation, interest rates and related monetary
policy by governments in response to inflation; geopolitical events, including
the war between Russia and Ukraine, and regulatory, economic and other risks
associated therewith; and continued uncertainty around the ongoing impacts of
the COVID-19 pandemic, as well as broader macroeconomic conditions. Other
factors that might cause such a difference include those discussed in Xylem's
and Evoqua's filings with the Securities and Exchange Commission (the "SEC"),
which include their Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, and in the joint proxy statement/prospectus on
Form S-4 to be filed in connection with the proposed transaction. For more
information, see the section entitled "Risk Factors" and the forward-looking
statements disclosure contained in Xylem's and Evoqua's Annual Reports on Form
10-K and in other filings. The forward-looking statements included in this
filing are made only as of the date hereof and, except as required by federal
securities laws and rules and regulations of the SEC, Xylem and Evoqua undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, Xylem intends to file with the SEC
a registration statement on Form S-4 that will include a joint proxy statement
of Xylem and Evoqua that also constitutes a prospectus of Xylem. Each of Xylem
and Evoqua also plan to file other relevant documents with the SEC regarding the
proposed transaction. No offer of securities shall be made, except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended. Any definitive joint proxy statement/prospectus (if and when
available) will be mailed to shareholders of Xylem and stockholders of Evoqua.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT,
JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE
SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and shareholders will be able to obtain free copies of these documents
(if and when available), and other documents containing important information
about Xylem and Evoqua, once such documents are filed with the SEC through the
website maintained by the SEC at http://www.sec.gov. Copies of the documents
filed with the SEC by Xylem will be available free of charge on Xylem's website
at www.xylem.com or by contacting Xylem's Investor Relations Department by email
at andrea.vanderberg@xylem.com or by phone at +1 (914) 260-8612. Copies of the
documents filed with the SEC by Evoqua will be available free of charge on
Evoqua's internet website at www.evoqua.com or by contacting Evoqua Water
Technologies Corp., 210 Sixth Avenue, Suite 3300, Pittsburgh, PA 15222, ATTN:
General Counsel and Secretary.
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Participants in the Solicitation
Xylem, Evoqua and certain of their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies in respect of
the proposed transaction. Information about the directors and executive officers
of Xylem is set forth in Xylem's proxy statement for its 2022 annual meeting of
shareholders, which was filed with the SEC on March 29, 2022, and Xylem's Annual
Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed
with the SEC on February 25, 2022. Information about the directors and executive
officers of Evoqua is set forth in its proxy statement for its 2023 annual
meeting of stockholders, which was filed with the SEC on December 23, 2022, and
Evoqua's Annual Report on Form 10-K for the fiscal year ended September 30,
2022, which was filed with the SEC on November 16, 2022. Other information
regarding the participants in the proxy solicitations and a description of their
direct and indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other relevant materials
to be filed with the SEC regarding the proposed transaction when such materials
become available. Investors should read the joint proxy statement/prospectus
carefully when it becomes available before making any voting or investment
decisions. You may obtain free copies of these documents from Xylem or Evoqua
using the sources indicated above.
No Offer or Solicitation
This filing is not intended to and shall not constitute an offer to buy or sell
or the solicitation of an offer to buy or sell any securities, or a solicitation
of any vote or approval, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
No offer of securities shall be made, except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit
No. Description
2.1 Agreement and Plan of Merger, dated as of January 22, 2023, among
Xylem Inc., Fore Merger Sub, Inc. and Evoqua Water Technologies Corp.
99.1 Joint Press Release issued by Xylem Inc. and Evoqua on January 23,
2023
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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