Divestitures

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

Divestiture of Southwest Wire Rope reporting unit

On January 13, 2021, the Company entered into an asset purchase agreement with Southern Rigging Companies, LLC. to sell the Southwest Wire Rope reporting unit, other than accounts receivable. The sale was complete on March 12, 2021 and the Company received $3.4 million in cash, subject to the final working capital adjustments. An additional $0.8 million is being held in escrow and will be released no later than one year following the close of the transaction. At March 31, 2021, the Company recorded a pre-tax loss on divestiture of $1.0 million related to the transaction in its consolidated statements of income. The loss recognized included less than $0.1 million of selling costs.

Agreement and Plan of Merger

On March 25, 2021, the Company announced that it entered into an Agreement and Plan of Merger with Omni Cable, LLC (“OmniCable”) and a subsidiary of OmniCable pursuant to which, subject to the satisfaction of customary closing conditions, the subsidiary will be merged with and into the Company, and the Company will become a wholly-owned subsidiary of OmniCable. Under the terms of the merger agreement, at the effective time of the merger, each share of the Company’s common stock will be converted into the right to receive $5.30 in cash, without interest. In addition, each of the 300,461 stock-based equity awards outstanding under the Company’s stock and deferred compensation plan will be cancelled in exchange for $5.30. No consideration will be paid for stock option, all of which have exercise prices above the merger price.

Following the filing of the preliminary proxy statement, four separate lawsuits were filed related to the proxy statement. All four lawsuits assert a cause of action against the Company and the Company’s directors under Section 14(a) of the Exchange Act and its implementing regulations and a “control person” claim against the directors under Section 20(a) of the Exchange Act based on the alleged Section 14(a) violations, and one of the lawsuits includes a claim against the directors for breach of their fiduciary duty of candor/disclosure. Certain of the lawsuits also seek judgement directing the individual defendants to disseminate a proxy statement that complies with Section 14(a) and Rule 14a-9 promulgated thereunder and declaring that defendants violated Sections 14(a) and/or 20(a) and Rule 14a-9. The Company believes the allegations in these actions are without merit.

The merger is subject to the satisfaction or waiver of certain closing conditions, including, among other things: (1) the adoption of the merger agreement by the holders of a majority of the outstanding shares of Company common stock; (2) the absence of certain legal impediments preventing the completion of the merger; (3) the accuracy of the representations and warranties of the parties and the compliance of the parties with their respective covenants, subject to customary qualifications, including with respect to materiality; and (4) conditions relating to the Company’s tangible net book value and indebtedness. The Company expects the merger to be completed in the second quarter of 2021.

Houston Wire & Cable CO 10-Q