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Gores Metropoulos II, Inc.

Gores Metropoulos II, Inc.

Dec 23, 2020 by Kristi Marvin

PROPOSED BUSINESS COMBINATION: Sonder

ENTERPRISE VALUE: $1.925 billion
ANTICIPATED SYMBOL: SOND

Gores Metropoulos II, Inc. proposes to combine with Sonder, a leading next-generation hospitality company. Sonder is expected to have a pro forma enterprise value of $2.2 billion and over $700 million of net cash at closing.

Sonder officially launched in 2014 and was co-founded by Francis Davidson, Chief Executive Officer, and Martin Picard, Global Head of Real Estate. Sonder currently operates more than 300 properties across 35 markets in eight countries. They work directly with real estate developers and property owners to lease, manage and operate spaces, providing guests with exceptionally designed accommodations at affordable prices on a nightly, weekly or monthly basis.

Driven by Sonder’s differentiated digital service model, the Company can reduce operating costs by as much as 50% compared to traditional hotels. Found in 35 markets spanning eight countries and three continents. Sonder’s innovative App empowers guests by making self-service features and 24/7 on-the-ground support.

Together with GM II, Sonder will be able to further capitalize on opportunities within the growing $800+ billion global lodging market and strengthen its position as a differentiated, rapidly growing innovator in the hospitality industry. Sonder expects to achieve approximately $4 billion of revenue in 2025, driven by significant real estate supply growth, global travel market recovery and revenue enhancement initiatives.

SUBSEQUENT EVENT – (PR LINK) 10/28/21

On October 27, 2021, Sonder Holdings Inc. and Gores Metropoulos II, Inc. announced strategic amendments to the terms of their previously announced definitive agreement (the “Merger Agreement”) to combine.

These amendments and associated incremental investments by leading institutional investors to adapt to current market conditions.

  • As part of the amended terms of the transaction, the combined company’s implied pro forma enterprise value will be $1.925 billion.
  • On October 27, 2021, the Company entered into subscription agreements (the “New Subscription Agreements”) with certain investors, including the Sponsor (the “New Subscribers”), pursuant to which the New Subscribers have agreed to purchase an aggregate of 11,507,074 shares of Company Common Stock in a private placement for $8.89 per share (the “New PIPE”), resulting in an aggregate $102,297,888 in additional PIPE from affiliates of Gores Metropoulos II and other leading investors, including Fidelity Management & Research LLC, funds and accounts managed by BlackRock, Atreides Management, LP, and Senator Investment Group (the “New PIPEs”), in addition to the $200 million previously announced PIPE (the “Existing PIPE”).
  • On October 27, 2021, the Company entered into a subscription agreement (the “Additional Sponsor Commitment Subscription Agreement”) with the Sponsor, substantially similar to the Sponsor’s Existing Subscription Agreement (as amended), whereby the Sponsor separately agreed to purchase an additional 709,711 shares of Company Common Stock in a private placement for $10.00 per share for an aggregate purchase price of $7,097,110.
  • The New PIPE combined with the Additional Sponsor Commitment Subscription Agreement results in total additional capital of $109,394,998.
  • Moreover, Sonder has signed a non-binding term sheet for Delayed Draw Notes of $220 million with existing PIPE investors, to be available following the closing of the proposed business combination, which enables the Company to fund its growth over the next several years.
  • Subject to any redemptions by the public stockholders of Gores Metropoulos II and the payment of transaction expenses at the closing, the $200 million in Existing PIPE proceeds and $109,394,998 million in proceeds from the New PIPEs will be used together with up to $450 million in cash in Gores Metropoulos II’s trust account and Delayed Draw Notes of $220 million to fund operations and support new and existing growth initiatives.
  • On October 27, 2021, the Company entered into a share surrender agreement (the “Share Surrender Agreement”), by and between the Company and the Sponsor, pursuant to which the Sponsor agreed to surrender 1,277,285 shares of Class F Common Stock immediately prior to the effective time of the First Merger, contingent on the satisfaction of the conditions to closing set forth in the Merger Agreement.

The total amount to be raised under in the aggregate under all of the Existing Subscription Agreements, all of the New Subscription Agreements and the Additional Sponsor Commitment Subscription Agreement is $309,394,998.

Additionally, on October 27, 2021, the parties agreed to extend the Merger Agreement end date from October 28, 2021 to January 31, 2022, after which Gores Metropoulos II and Sonder would have the right to terminate the Merger Agreement if the proposed business combination has not been consummated by January 31, 2022.

TRANSACTION

The combined company is expected to have an estimated pro forma enterprise value of approximately $2.2 billion at closing, representing 3.6x Sonder’s projected 2022 revenue. Existing Sonder stockholders will retain 74% ownership in the pro forma company.

Concurrently with the consummation of the transaction, additional investors have committed to participate in the proposed business combination by purchasing shares of common stock of GM II in a private placement (PIPE).

The balance of the $450 million in cash is held in GM II’s trust account, in addition to $165 million raised as part of a March 2021 convertible notes offering led by Moore Strategic Ventures, the privately held investment company for Louis M. Bacon, Founder and CEO of Moore Capital Management, LP, together with the approximately $200 million in PIPE proceeds, excluding transaction expenses, will be used to fund operations and support new and existing growth initiatives.

Following the closing of the proposed business combination, Sonder will retain its experienced management team. Mr. Davidson will continue to serve as CEO and Sanjay Banker will continue to serve as President and CFO.

The proposed business combination, which has been unanimously approved by GM II’s Board of Directors and Sonder’s Board of Directors, is expected to close in the second half of 2021.

PIPE

  • Subsequent event – On October 27. 2021, Sonder will receive $109,394,998 million in additional capital from affiliates of Gores Metropoulos II and other leading investors, including Fidelity Management & Research LLC, funds and accounts managed by BlackRock, Atreides Management, LP, and Senator Investment Group (the “New PIPEs”), in addition to the $200 million previously announced PIPE (the “Existing PIPE”).
  • Moreover, Sonder has signed a non-binding term sheet for Delayed Draw Notes of $220 million with existing PIPE investors, to be available following the closing of the proposed business combination, which enables the Company to fund its growth over the next several years.
  • The total amount to be raised under in the aggregate under all of the Existing Subscription Agreements, all of the New Subscription Agreements and the Additional Sponsor Commitment Subscription Agreement is $309,394,998.
  • PIPE of $200 million fully committed at $10/share led by an affiliate of The Gores Group, with participation from top-tier institutional investors, including Fidelity Management & Research Company LLC, funds and accounts managed by BlackRock, Atreides Management, LP, entities affiliated with Moore Capital Management, Principal Global Investors, LLC, and Senator Investment Group.

EARNOUT

A total of 14,500,00 earnout shares can be issued with 6 different price trigger events up to 5 years after the closing of the combination. At each triggering event, 2,416,667 shares will be issued:

  • Triggering Event I means the date on which the Common Share Price is equal to or greater than $13.00 after the Closing Date, but within the Earn Out Period
  • Triggering Event II means the date on which the Common Share Price is equal to or greater than $15.50 after the Closing Date, but within the Earn Out Period
  • Triggering Event III means the date on which the Common Share Price is equal to or greater than $18.00 after the Closing Date, but within the Earn Out Period
  • Triggering Event IV means the date on which the Common Share Price is equal to or greater than $20.50 after the Closing Date, but within the Earn Out Period
  • Triggering Event V means the date on which the Common Share Price is equal to or greater than $23.00 after the Closing Date, but within the Earn Out Period
  • Triggering Event VI means the date on which the Common Share Price is equal to or greater than $25.50 after the Closing Date, but within the Earn Out Period

LOCK-UP

  • The lockup expiration date is 180 days after closing of the business combination

SPONSOR SHARE SURRENDER AGREEMENT (8-K LINK)

  • Subsequent event – On October 27, 2021, the Company entered into a share surrender agreement (the “Share Surrender Agreement”), by and between the Company and the Sponsor, pursuant to which the Sponsor agreed to surrender 1,277,285 shares of Class F Common Stock immediately prior to the effective time of the First Merger, contingent on the satisfaction of the conditions to closing set forth in the Merger Agreement.

SUPPORT AGREEMENTS

  • A majority of Sonder shareholders have agreed to approve the business combination and are prohibited from soliciting a competing acquisition proposal

NOTABLE CONDITIONS TO CLOSING

  • Minimum cash required in trust plus PIPE proceeds must equal or exceed $500 million

NOTABLE CONDITIONS TO TERMINATION

  • Subsequent event – On October 28, 2021, the parties agreed to extend the Merger Agreement end date from October 28, 2021 to January 31, 2022, after which Gores Metropoulos II and Sonder would have the right to terminate the Merger Agreement if the proposed business combination has not been consummated by January 31, 2022.
  • The merger can be terminated by either party if the Business Combination has not been consummated by October 28, 2021

ADVISORS

  • Goldman Sachs & Co. LLC is serving as exclusive financial advisor to Sonder
  • Wilson Sonsini Goodrich & Rosati is serving as legal advisor to Sonder
  • Morgan Stanley & Co. LLC is serving as lead financial advisor to GM II
  • Moelis & Company LLC acted as additional financial advisor to GM II
  • Deutsche Bank Securities Inc. and Citigroup are serving as capital markets advisors to GM II
  • Weil, Gotshal & Manges LLP is serving as legal advisor to GM II
  • Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Citigroup and Deutsche Bank Securities Inc. are serving as joint lead placement agents on the PIPE
  • Latham & Watkins LLP is serving as legal advisor to the co-placement agents

MANAGEMENT & BOARD

Executive Officers

Alec Gores, 67
Chief Executive Officer and Director

Mr. Gores is the Founder, Chairman and Chief Executive Officer of The Gores Group, a global investment firm focused on acquiring businesses that can benefit from the firm’s operating expertise. Mr. Gores implemented an operational approach to private equity investing when he founded The Gores Group in 1987 by operating businesses alongside management, or in some cases in lieu of management, to build value in those entities. Since then, the firm has acquired more than 120 businesses including a current portfolio of 8 active companies worldwide. Mr. Gores began his career as a self-made entrepreneur and operating executive. In 1978, he self-funded and founded Executive Business Systems (EBS), a developer and distributor of vertical business software systems. Within seven years, EBS had become a leading value-added reseller in Michigan and employed over 200 people. In 1986, CONTEL purchased EBS, and Mr. Gores subsequently began acquiring and operating non-core businesses from major corporations and building value in those entities, a decision that ultimately led to the founding of what has evolved into The Gores Group today. Under his leadership, The Gores Group has continued to acquire businesses in need of operational and financial resources, while creating value and working with management teams to establish an entrepreneurial environment as a foundation for sustainable growth. This philosophy has served the firm well. Mr. Gores served as the Chairman of the Board of Directors of Gores Holdings I from its inception in June 2015 until completion of the Hostess acquisition in November 2016, as the Chairman of the Board of Directors of Gores Holdings II since its inception in August 2016 until completion of the Verra acquisition in October 2018 and as the Chairman of the Board of Directors of Gores Holdings III since its inception in October 2017 until the completion of the PAE acquisition in February 2020. Additionally, Mr. Gores has served as the Chief Executive Officer and Director of Gores Metropoulos since its inception in August 2018 until the completion of the Luminar acquisition in December 2020 and has served as a director of Luminar since December 2020. In addition, Mr. Gores has served as the Chairman of the Board of Directors of Gores Holdings IV since June 2019 and will continue to do so until the pending completion of the UWM acquisition, which is expected to be consummated during the first quarter of 2021. Mr. Gores has served as the Chairman of the board of directors of Gores Holdings V since June 2020 and Gores Holdings VI since June 2020. Mr. Gores holds a degree in Computer Science from Western Michigan University.

Andrew McBride, 40
Chief Financial Officer and Secretary

Mr. McBride has served as Director, Finance and Tax at The Gores Group since February 2010, where he is responsible for tax due diligence and structuring of acquisitions, compliance, planning, financial management and portfolio company reporting. Mr. McBride also served as the Chief Financial Officer and Secretary of Gores Holdings I from January 2016 until completion of the Hostess acquisition in November 2016. Additionally, Mr. McBride served as the Chief Financial Officer and Secretary of Gores Holdings II since its inception in August 2016 until completion of the Verra acquisition in October 2018 and as the Chief Financial Officer and Secretary of Gores Holdings III since its inception in October 2017 until the completion of the PAE acquisition in February 2020. Mr. McBride has also served as the Chief Financial Officer of Gores Metropoulos since its inception in August 2018, until the completion of the Luminar acquisition in December 2020. In addition, Mr. McBride has served as the Chief Financial Officer of Gores Holdings IV since June 2019, and will continue to do so until the pending completion of the UWM acquisition, which is expected to be consummated during the first quarter of 2021. Mr. McBride has also served as the Chief Financial Officer of Gores Holdings V since June 2020 and Gores Holdings VI since June 2020. Previously, from January 2008 to January 2010, Mr. McBride worked in the High Net Worth group at Ehrhardt, Keefe, Steiner, and Hottman, P.C. From January 2004 to January 2008, Mr. McBride was with KPMG, LLP, assisting international corporations with tax planning, structuring and compliance issues. Mr. McBride holds a B.S. in Accounting and Finance from the University of Notre Dame and is licensed as a Certified Public Accountant in the State of Colorado.

Board of Directors

Dean Metropoulos, 74
Chairman

Mr. Metropoulos has served as Executive Chairman of the Board of Directors of Hostess since November 2016. Since 2013, Mr. Metropoulos has served as the Executive Chairman of certain subsidiaries of Hostess and a member of the Board of Directors of Hostess. Mr. Metropoulos also served on the Board of Directors of Pabst Brewing Company until 2014. Mr. Metropoulos has over 30 years of experience in acquiring and restructuring businesses in the U.S., Mexico and Europe, focusing on the food and consumer sectors. Mr. Metropoulos has been involved in approximately 84 transactions, including investments in Pabst Brewing, Utz Quality Foods, Pinnacle Foods (Swanson/Hungry-Man, Vlasic Pickles, Open Pit Barbeque Sauce, Duncan Hines, Log Cabin Syrup, Mrs. Butterworth’s Syrup, Aunt Jemima Frozen Breakfast, Mrs. Paul’s Seafood, Van De Kamp’s Seafood, Celeste Pizza and Lender’s Bagels), Aurora Foods, Stella Foods, The Morningstar Group, International Home Foods (Chef Boyardee, Pam Cooking Spray, Gulden’s Mustard and Bumble Bee Tuna), Ghirardelli Chocolate, Mumm and Perrier Jouet Champagnes, Hillsdown Holdings, PLC (Premier International Foods, Burtons Biscuits and Christie Tyler Furniture), National Waterworks and Hostess, among others. Mr. Metropoulos served as the Chairman of the Board of Directors of Gore Metropoulos from its inception in August 2018 until the completion of the Luminar acquisition in December 2020. Mr. Metropoulos holds a B.S. and an M.B.A. from Babson College.

Randall Bort, 56
Director

Mr. Bort is a Co-Founder of SandTree Holdings, LLC, a private commercial real estate investment firm, and has been a partner at SandTree since November 2012. Previously, Mr. Bort was an investment banker at Drexel Burnham Lambert, BT Securities, Donaldson, Lufkin & Jenrette, Credit Suisse First Boston, The Mercanti Group and Imperial Capital. Mr. Bort has significant financial, transactional and capital markets experience across multiple industries and has worked both domestically and in Asia. Mr. Bort earned a B.A. in Economics and Mathematics from Claremont McKenna College and an M.B.A. in Finance and Entrepreneurial Management from The Wharton School of the University of Pennsylvania. Mr. Bort served as a member of the board of directors of Gores Holdings I from August 2015 until completion of the Hostess acquisition in November 2016, as a member of the board of directors of Verra Mobility Corp. (formerly Gores Holdings II) from January 2017 until June 2019, as a member of the board of directors of Gores Holdings III from September 2018 until the completion of the PAE acquisition in February 2020, and as a member of the board of directors of Gores Metropoulos, from February 2019 until the completion of the Luminar acquisition in December 2020. In addition, Mr. Bort has served as a member of the board of directors of Gores Holdings IV since January 2020, and will continue to do so until the pending completion of the UWM acquisition, which is expected to be consummated during the first quarter of 2021. Mr. Bort has also served as a member of the board of directors of Gores Holdings V since August 2020 and Gores Holdings VI since December 2020. Mr. Bort also is a member of the Board of Trustees of Children’s Bureau, a non-profit organization based in Los Angeles focused on foster care and the prevention of child abuse.

Michael Cramer, 68
Director 

Mr. Cramer has been the Chief administrative Officer & Executive VP at Hostess Brands, Inc. since 2013 and the Founding Director-Texas Program in Sports and Media at The University of Texas at Austin since 2010. Additionally, Mr. Cramer served as a Director of Gores Metropoulos since its inception in August 2018 until the completion of the Luminar acquisition in December 2020. Mr. Cramer was employed as a Director, SVP-Business Planning & Development by The Pabst Brewing Co. from 2010 to 2014, and was previously employed as an Associate Professor by New York University, a Chief Administrative Officer & Executive VP by Pinnacle Foods Corp., a President & Chief Operating Officer by Hicks Sports Group LLC and President of the Texas Rangers Baseball Club and Dallas Stars Hockey team, an Executive Vice President & General Counsel by Morningstar Group, Inc., an Executive VP-Administration & General Counsel by Stella Foods, Inc., a Vice President by CDM Hostess Class C LLC, a Vice President by Fairmont Aviation LLC, a Principal by Ghirardelli Chocolate Co., and a Director & Executive Vice President by International Home Foods, Inc. He also practiced law for approximately 10 years in Wisconsin. He received his undergraduate degree from State University of New York at Albany and a J.D. from Marquette University Law School.

Joseph Gatto, 63
Director 

Mr. Gatto was a partner at Perella Weinberg Partners, L.P., a leading independent global financial services firm providing corporate advisory and asset management services (“PWP”) from 2012 through 2018. Prior to his employment at PWP, Mr. Gatto was an investment banker holding senior roles in mergers and acquisitions and corporate finance at Goldman, Sachs & Co., Lehman Brothers Inc. and Barclays plc. Mr. Gatto served as a Director of Gores Metropoulos since its inception in August 2018 until the completion of the Luminar acquisition in December 2020. Mr. Gatto has significant financial, transactional and capital markets experience, particularly in the consumer products and retail industries, and has worked with clients in the Americas, Europe and Asia. Mr. Gatto has also served as an Adjunct Professor of Law at the University of Pennsylvania Law School and a Fellow at Harvard University’s Advanced Leadership Initiative. Mr. Gatto holds an A.B. in economics and international affairs from the Woodrow Wilson School at Princeton University. He also holds an M.B.A. from the Wharton School of the University of Pennsylvania and a J.D. from the University of Pennsylvania Law School.

 

ByKristi Marvin