M3 Brigade II (NYSE:MBAC) announced this morning that it and Syniverse have mutually agreed to terminate their business combination on the day that the deal would have gone to a completion vote.
The press release cited market conditions for the break down, noting that redemptions would have made it unable to meet the deal’s minimum cash condition.
Donald E. Morgan III, founder and CIO of M3 Brigade II-backer Brigade Capital Management, said that the parties “collaboratively sought potential solutions in anticipation of high redemptions as a result of the recent turbulence in capital markets and growth stocks, [but] these same conditions prevented the parties from reaching agreement on modifying the transaction terms.”
In other words, the supplemental financing instruments that, as we have seen, are coming with lots of sweeteners for investors were not acceptable to both sides. Even without accounting for M3 Brigade II’s $400 million trust, the transaction still included a $265 million PIPE, which is still a lot of cash to leave on the table even if it did not meet the $375 million minimum cash condition.
Twilio (NYSE:TWLO) had also pledged to invest as much as $750 million in Syniverse had the minimum cash condition be met. Syniverse would have also raised a new $1 billion term loan through the deal, so it may be able to make funding arrangements with Twilio and other private investors separate from this deal.
M3 Brigade II’s team was unusually (and refreshingly) candid about their disappointment in the termination.
“Nobody on the MBAC team is happy to have a failed deal and rest assured that we will have alternative sources of financing in hand for our next proposed combination,” Morgan III said in the release, adding “Syniverse is a great company with a strong management team and we are confident that it has a very bright future.”
The SPAC has plenty of time for a second try with its transaction deadline not coming until March 8, 2023.
M3 Brigade III initially announced its $2.8 billion combination with Syniverse on August 17. Tampa, Florida-based Syniverse provides telecom device connectivity and services to both phone carriers and enterprise clients seeking to set up internal networks.
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