Adara Acquisition Corp.
PROPOSED BUSINESS COMBINATION: Alliance Entertainment Holding Corporation
ENTERPRISE VALUE: $591.15 million
ANTICIPATED SYMBOL: AENT
Adara Acquisition Corp. proposes to combine with Alliance Entertainment Holding Corporation, a distributor and wholesaler of a large stock selection of music, movies, video games, electronics, arcades, and collectibles.
- Alliance Entertainment Holding Corporation is a distributor of music, movies, and consumer electronics.
- The company offers 485,000 unique in stock SKU’s, including over 57,300 unique compact discs, vinyl LP records, DVDs, Blu-rays, and video games.
- Alliance Entertainment serves customers of every size, providing a robust suite of services to resellers and retailers worldwide.
TRANSACTION
- The business combination implies a proforma equity value of the combined company of approximately $479.75 million.
- Upon completion of the transaction, and assuming no redemptions by public shareholders of Adara, the current owners of Alliance Entertainment will hold approximately 78% of the combined company and current Adara shareholders will hold approximately 22% of the combined company.
- Alliance Entertainment will receive proceeds of $115 million of cash held in trust, less any deferred underwriting commissions, transaction expenses and redemptions by public shareholders of Adara exercising such rights.
PIPE
- There is no PIPE for this transaction.
PROMISSORY NOTE
- On June 22, 2022, Adara entered into promissory notes with each of Blystone & Donaldson, LLC and Thomas Finke, Adara’s Chief Executive Officer, providing for loans from each of such persons to Adara of up to $250,000 each ($500,000 in the aggregate).
- Such loans will be non-interest bearing and unsecured and will be due on the earlier of
- (a) the Closing
- (b) February 11, 2023.
LOCK-UP
Company Lock-Up:
- All of the stockholders of Alliance will enter into lock-up agreements pursuant to which they will agree not to sell any shares of Adara Common Stock held by them immediately after the Effective Time, until the earlier of 6 months after the closing date of the Merger.
- With respect to security holders of Adara, the Lock-Up Shares include only those shares of Adara Common Stock that were purchased or acquired by such security holder as part of the shares of Class B common stock issued by Adara prior to its initial public offering (“Founder Shares”).
Sponsor Lock-Up:
- In connection with the Closing, Adara Sponsor LLC (the “Sponsor”) and the Insiders will agree that it, he or she will not transfer any Founder Shares until the earlier of 6 months after the Closing.
- Pursuant to the Amended and Restated Insider Letter Agreement, at the Closing, the Sponsor and the Insiders will irrevocably and automatically forfeit and surrender to Adara for cancellation, for no additional consideration and without action on the part of any other person, an aggregate of between 875,000 and 1,375,000 Founder Shares, the number of which will be determined by Alliance.
EARNOUT
- Adara will issue to the holders of Alliance Common Stock immediately prior to the Closing, 60,000,000 shares of Adara Class E Common Stock in the aggregate (the “Contingent Shares”) held in escrow until certain price targets are achieved by Adara between the fifth anniversary and the tenth anniversary of the Closing.
- With respect to each price target, a triggering event occurs on the first date on which the Adara Class A Common Stock (as adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or the like) over any 20 day trading period during a 30 trading days during the Contingent Consideration Period trades with a VWAP greater than or equal to:
- $20.00, upon the occurrence of Triggering Event I prior to the fifth year anniversary of the Closing, an aggregate of 20,000,000 Contingent Shares will be released from escrow.
- $30.00, upon the occurrence of Triggering Event II prior to the seventh year anniversary of the Closing, an aggregate of 20,000,000 Contingent Shares will be released from escrow.
- $50.00, upon the occurrence of Triggering Event III prior to the tenth year anniversary of the Closing, an aggregate of 20,000,000 Contingent Shares will be released from escrow.
- Each Triggering Event shall only occur once, if at all, and in no event shall the Contingent Consideration Eligible Company Equityholders be entitled to receive an aggregate of more than 60,000,000 Contingent Shares.
- Triggering Event I, Triggering Event II and Triggering Event III may be achieved at the same time or over the same overlapping trading days.
- The Contingent Consideration Shares released as a result of a Triggering Event will automatically convert into the same number of shares of Adara Class A Common Stock.
- All Contingent Consideration Shares that are not earned on or before the expiration of the Contingent Consideration Period will be automatically forfeited and cancelled.
NOTABLE CONDITIONS TO CLOSING
- As of the Closing, after distribution of the Trust Fund, deducting all amounts to be paid pursuant to the exercise of Redemption Rights, Adara shall have cash on hand equal to or in excess of $15,000,000.
NOTABLE CONDITIONS TO TERMINATION
- The Business Combination Agreement may be terminated by the stockholders of Alliance or the Adara Stockholders if the Effective Time will not have occurred prior to the date that is 240 days after the date of the Business Combination Agreement (the “Outside Date”).
- Or if any governmental authority in the United States has enacted any law or ruling (whether temporary, preliminary, or permanent) which has become final and non-appealable and has the effect of making consummation of the Proposed Transactions illegal or otherwise preventing or prohibiting consummation of the Proposed Transactions, including the Merger.
ADVISORS
- ThinkEquity LLC is serving as financial advisor to Adara.
- Loeb & Loeb LLP is serving as legal advisor to Alliance Entertainment.
- Blank Rome LLP is serving as legal advisor to Adara.
MANAGEMENT & BOARD
Executive Officers
Martin A. Sumichrast, 54 [Resigned 6/1/22]
Chief Executive Officer and director
Mr. Sumichrast has served as Chairman of the board of directors of cbdMD, Inc. (NYSE American: YCBD), a nationally recognized producer and distributor of consumer cannabidiol (CBD) products, since April 2015. Mr. Sumichrast served as the Chief Executive Officer of cbdMD, Inc. from September 2016 until July 2019 and as Co-Chief Executive Officer of cbdMD, Inc. since July 2019. Since 2012, Mr. Sumichrast has served as Managing Director of Washington Capital, LLC, a family office. In addition, since 2018 he has been the Managing Director over SFT1, LLC, a private investment company owned by a family trust. From September 2013 to June 2020, he served as a Managing Member of Stone Street Capital, LLC, a Charlotte, North Carolina-based private investment company. Mr. Sumichrast serves as a Trustee and Chairman of the Nominating and Governance Committees of the Barings Global Short Duration High Yield Fund, Inc. (NYSE: BGH) and the Barings Capital Funds Trust, Inc. From January 2015 until January 2016, he was also a member of the board of directors of Social Reality, Inc. (Nasdaq: SRAX) and served as a member of the Audit Committee.
Paul G. Porter, 56
Chief Financial Officer
From April 2015 to January 2017, Mr. Porter served as the Managing Director of Stone Street Partners, LLC, a private equity firm based in Charlotte, North Carolina, where he was in charge of business acquisitions and other related legal matters. Prior to that, Mr. Porter served as a Corporate and Transactional Partner intermittently since the 1990s at McGuireWoods LLP, a national law firm. He graduated from the University of Notre Dame Law School with a Juris Doctor degree in 1989. He graduated from the University of Arkansas with a Bachelor’s degree in Accounting in 1986 and passed the Certified Public Accountant examination in the late 1980s.
Board of Directors
Thomas Finke, 56 [Appointed 6/1/22]
Chief Executive Officer & Chairman
Mr. Finke has served the Chairman and Chief Executive Officer of Barings LLC since December 2008, a global financial services firm and a subsidiary of Massachusetts Mutual Life Insurance Company. Following his scheduled retirement from Baring LLC on November 30, 2020, Mr. Fink will serve as a director of Invesco Ltd., a global independent investment management firm, effective December 1, 2020. From December 2008 to May 2011, Mr. Finke also served as the Executive Vice President and Chief Investment Officer for the Massachusetts Mutual Life Insurance Company. Mr. Finke served as the Managing Director from June 2002 to December 2008 and the President from August 2007 to December 2008 of Babson Capital Management LLC which merged with Baring Asset Management Limited in 2016. He received a Master of Business Administration from Duke University’s Fuqua School of Business and holds a bachelor’s degree from the University of Virginia’s McIntire School of Commerce.
W. Tom Donaldson III, 43
Director
Mr. Donaldson has been the Founder and Managing Partner of Blystone & Donaldson since October 2018, a Charlotte, NC-based investment firm that focuses on middle-market companies. From January 2016 to December 2018, Mr. Donaldson served as an executive at Investors Management Corporation where he focused on investment decisions, managing risk and developing relationships with companies of interest. From around September 2013 to December 2015, he served as a Partner of Morehead Capital Management, LLC before it was merged into Investors Management Corporation in January 2016. From around June 2003 to August 2013, he practiced law as an associate and then a Partner at McGuireWoods LLP where he represented private funds and their portfolio companies in corporate governance, structuring and financing transactions and operating businesses in a wide variety of industries. Mr. Donaldson received his Master of Business Administration degree and Juris Doctor degree from Villanova University. He earned his undergraduate degree in Political Science from North Carolina State University.
Frank Quintero, 49
Director
Mr. Quintero has been the Principal of the Yucaipa Companies, LLC since July 2003, a Los Angeles, CA-based investment firm, where he is actively involved in deal origination, negotiating transactions, real estate development, public company proxy activism, investor relations and corporate communications. Mr. Quintero has served as a member of the Advisory Board of BioSig Technologies, Inc. (Nasdaq: BSGM), a medical technology company focused on advanced signal processing solutions for Atrial Fibrillation (A-fib) operations, since April 2019. He has also served on the board of directors of Independent Sports & Entertainment, a U.S.-based sports agency, since January 2016. Mr. Quintero served as a member on the State of California Personnel Board in 2004. From February 1999 to June 2003, Mr. Quintero served as a Special Assistant to former Governor Gray Davis of the State of California, where he liaised with labor and businesses groups. Mr. Quintero served as a member of the board of directors of KPFK 90.7 FM, a California-based radio station, during 1997. Mr. Quintero received his Bachelor of Art degree in Political Science from the University of California at Los Angeles.
Dylan Glenn, 51
Director
Mr. Glenn has been the Chief Executive Officer of KBBO Americas, L.P., the U.S.-based investment vehicle for the KBBO Group, a diversified investment company headquartered in the United Arab Emirates since December 2018. Since March 2020, Mr. Glenn has served as a Director of Intellicheck, Inc. (Nasdaq: IDN), a provider of authentication services for companies primarily in the area of financial services. From January 2005 to December 2018, Mr. Glenn served as a Senior Managing Director of Guggenheim Partners, a global investment and advisory financial services firm that engages in investment banking, asset management, capital markets services, and insurance services. From January 2003 to January 2004, Mr. Glenn served as Deputy Chief of Staff to former Governor Sonny Perdue of Georgia, responsible for all external affairs. From January 2001 to January 2003, Mr. Glenn also served in the White House in Washington, D.C. as Special Assistant for President George W. Bush for Economic Policy. He was a member of the National Economic Council team from January 2001 to January 2003, advising former President Bush on various economic issues. He was one of the founders, as well as Chairman from 1990 to present, of The Earth Conservation Corps, a White House initiative under President George H. W. Bush that provides opportunity to at-risk youth through serious environmental conservation work. Since 2015, Mr. Glenn also serves as member of the Board of Directors for the American Action Network, a Washington-based “action tank” promoting pro-growth, limited government and strong national security and a Trustee of the Episcopal High School at Alexandria, Virginia and Davidson College in Davidson, North Carolina. Mr. Glenn received his Bachelor of Arts degree from Davidson College in North Carolina.
Beatriz Acevedo-Greiff, 52
Director
She has served as the Chief Executive Officer and Co-Founder of Suma Wealth, a Los Angeles based Fin-tech company with the mission to help close the wealth gap for the Latino community since May 2020. She has also served as a Partner and board member of 9th Wonder Agency, an international marketing agency group since January 2019. Ms. Acevedo-Greiff has served as the Founding Partner of LA COLLAB since January 2020 along with Co-founder Los Angeles Mayor Eric Garcetti, a non-profit organization with the goal to double Latino representation in Hollywood by 2030. She has also served as the President and Executive Director of the Acevedo Foundation, a family foundation with the mission to advance Latinos in the areas of entrepreneurship, education and economic mobility both in the United States and Mexico, since August 2018. Ms. Acevedo-Greiff served as the Co-Chair and President of MITU, Inc., a Los Angeles based company with a focus on Latino digital media entertainment from April 2012 to July 2018. She served as the Founder and President of HIP Entertainment Group, an Emmy Award Winning full-service entertainment company, from June 1995 to January 2016. Ms. Acevedo-Greiff has served on the boards of multiple organizations, including the 2028 Los Angeles Olympic Committee since March 2019; Homeboy Industries, a non-profit organization with a mission to train and support the formerly gang-involved and previously incarcerated people since March 2019; Latino Community Foundation, the largest giving circle philanthropic organization in California since January 2020; and PocketWatch, a digital media studio since July 2020. Ms. Acevedo-Greiff also serves on many advisory boards, including Anneberg Foundation’s Pledge LA, Delta Airlines, Los Angles Mayor Eric Garcetti, Tech Council & MEXLA, Latino Donor Collaborative and Encantos Media. She received a Bachillerato in Communications from the Universidad Iberoamericana 1988, a Marketing Communications degree from the University of California San Diego in 1990, a Stanford Graduate Business School Scaling Professional Certificate in 2019 and a Fin-tech Professional Certificate from Harvard Graduate Business School in 2020.