8-KMaterial AgreementsRegulation FDExhibits & Filings

Vertiv Holdings Co 8-K Report, Material Agreement (Jan 6, 2022)

Filed January 6, 2022For Securities:VRT

Summary

Vertiv Holdings Co (VRT) announced a significant update to its Tax Receivable Agreement (TRA) through a TRA Repurchase Agreement entered into on December 31, 2021. This agreement effectively replaces the Company's future payment obligations under the original TRA, which was established in connection with the 2019 business combination. Instead of contingent payments based on future tax savings realized by the Company from certain pre-closing tax attributes, Vertiv will make a fixed cash payment of $100 million to VPE Holdings, LLC, an affiliate of Platinum Equity, LLC. This transaction is a positive development for investors as it provides greater certainty regarding future cash outflows related to the TRA. The original agreement involved variable payments tied to the realization of tax benefits, making future cash requirements less predictable. The new structure crystallizes the remaining obligation into a fixed amount, payable in two installments by September 15, 2022. This $100 million payment is subject to acceleration in the event of a change of control, a common provision in such agreements.

Key Highlights

  • 1Vertiv Holdings Co has entered into a TRA Repurchase Agreement to settle its remaining obligations under the original Tax Receivable Agreement.
  • 2The Company will pay a fixed sum of $100 million in cash, replacing previously contingent future payments.
  • 3The payment will be made in two equal installments, with the final payment due by September 15, 2022.
  • 4This transaction eliminates future variable tax receivable payments, providing greater cash flow certainty for the Company.
  • 5The agreement was approved by the Audit Committee of the Board of Directors.
  • 6In case of a change of control, all remaining unpaid TRA Repurchase payments will accelerate and become immediately due.

Frequently Asked Questions

The original TRA was established in 2019 and required Vertiv to pay a portion of future tax savings to VPE Holdings, LLC (an affiliate of Platinum Equity) that arose from certain pre-closing tax attributes. The Company is amending this agreement to replace the uncertain future payments with a fixed cash settlement of $100 million. This provides greater predictability for Vertiv's cash flows and financial planning.

Vertiv will pay a total of $100 million in cash to settle the TRA. This amount will be paid in two equal installments. The first installment is due on or before June 15, 2022, and the second is due on or before September 15, 2022. Upon the second payment, the agreement will terminate.

If a change of control occurs before Vertiv makes the second installment payment, all remaining unpaid installments, along with any accrued interest, will accelerate and become immediately payable upon the consummation of the change of control.

This settlement is a financial transaction related to past tax attributes and does not directly impact the ownership structure or the rights associated with Vertiv's outstanding common stock. VPE Holdings, LLC, an affiliate of Platinum Equity, was a significant shareholder (around 10% as of November 2021) and the counterparty to the TRA.