8-KAcquisitions & DispositionsMaterial AgreementsFinancial Events+2

F5, INC. 8-K Report, Material Agreement (Jan 24, 2020)

Filed January 24, 2020For Securities:FFIV

Summary

F5, Inc. (FFIV) filed an 8-K on January 24, 2020, to report the completion of its acquisition of Shape Security, Inc. and the entry into a new credit facility. The acquisition, structured as a merger, was finalized on this date, with F5 acquiring Shape for approximately $1.028 billion in cash, subject to adjustments. Shape Security will become a wholly-owned subsidiary of F5, with its outstanding equity and vested options converted to cash payments, while unvested options held by continuing Shape employees were assumed by F5. Concurrently, F5 secured a $400 million senior unsecured term loan facility. The proceeds from this facility were primarily used to finance the Shape Security acquisition and related transaction costs. The loan bears interest based on either LIBOR or a base rate, plus a margin tied to F5's leverage ratio, and matures on January 24, 2023. The facility includes customary covenants and a financial covenant requiring F5 to maintain a specific quarterly leverage ratio.

Key Highlights

  • 1F5, Inc. successfully completed the acquisition of Shape Security, Inc. on January 24, 2020, for approximately $1.028 billion in cash.
  • 2The acquisition was structured as a merger, with Shape Security becoming a wholly-owned subsidiary of F5.
  • 3F5 secured a new $400 million senior unsecured term loan facility to partly finance the Shape Security acquisition and associated expenses.
  • 4The term loan facility has a maturity date of January 24, 2023, and includes amortization of 5.00% of the principal amount annually.
  • 5Interest rates on the term loan are variable, based on either LIBOR or a base rate, plus a margin determined by F5's leverage ratio.
  • 6The Term Credit Agreement includes standard representations, warranties, covenants (affirmative and negative), events of default, and indemnification provisions.
  • 7A key financial covenant requires F5 to maintain a quarterly leverage ratio, subject to certain exceptions and definitions within the agreement.

Frequently Asked Questions

The primary purpose of the $400 million term loan facility was to finance, in part, the acquisition of Shape Security, Inc. and to cover fees and expenses associated with the merger and related transactions.

The term loan facility is for $400 million, is senior unsecured, and matures on January 24, 2023. It will amortize in equal quarterly installments, with annual principal repayments equal to 5.00% of the original amount. Interest rates are variable, based on either LIBOR or a base rate, plus a margin tied to F5's leverage ratio.

The acquisition was structured as a merger where Shape Security became a wholly-owned subsidiary of F5. At closing, F5 paid approximately $1.028 billion in cash for Shape's equity, with adjustments as outlined in the merger agreement. Vested options were converted to cash, and unvested options held by continuing Shape employees were assumed by F5.

The Term Credit Agreement contains customary negative covenants that restrict F5 regarding subsidiary indebtedness, the incurrence of liens, and fundamental changes like asset sales, subject to certain exceptions. It also includes a key financial covenant requiring F5 to meet a specific quarterly leverage ratio.