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Rotor Acquisition Corp.

Rotor Acquisition Corp.

Dec 18, 2020 by Matt Cianci

PROPOSED BUSINESS COMBINATION: Sarcos Robotics

ENTERPRISE VALUE: $1.314 billion
ANTICIPATED SYMBOL: STRC

Rotor Acquisition Corp. proposes to combine with Sarcos Robotics a leader in the development of robots that augment humans to enhance productivity and safety.The transaction represents an enterprise value of $1.3 billion for the combined company, plus a potential earnout of an additional $281 million based on the combined company’s future share trading price.

Sarcos is developing mobile, highly dexterous robotic systems designed for dynamic or unstructured environments. With a focus on augmenting humans for non-repetitive tasks where human decision making is essential, Sarcos’ robotic solutions are designed to enhance individual productivity, making physically demanding jobs safer and more accessible to more people, alleviating skilled worker shortages, and reducing the economic and social impact of occupational injuries, while also equalizing job opportunities for tasks that previously required significant strength and stamina.

Leveraging more than thirty years of development efforts and its robust patent portfolio, Sarcos expects to commercially release its Guardian® XO® full-body wearable industrial exoskeleton robot in mid-2022, followed later in the year by its Guardian® XT™ highly dexterous force feedback industrial teleoperated robot. The Guardian® XO® and Guardian® XT™ robots are expected to join the Company’s highly versatile multi-purpose inspection robot in its commercial lineup, with the aim of delivering a full suite of robots capable of performing physically demanding work that requires human-like skill, dexterity, and range of motion.

Upon completion of the transaction, Sarcos expects to have up to $496 million in cash, before expenses and assuming no Rotor shareholder redemptions, to fund growth initiatives and enhance shareholder value, including:

  • Completing the commercialization and launch of its Guardian XO and XT products;
  • Ramping up production to drive scale and growth;
  • Increasing its capabilities through bolt-on acquisitions; and
  • Developing the Company’s AI platform to enhance the value proposition of its core products.

TRANSACTION

  • At the closing and as a result of the transaction, it is expected that the combined company will have up to $496 million in cash, prior to payment of transaction expenses, including approximately $276 million of cash held in Rotor’s trust account from its initial public offering (assuming no shareholder redemptions) and approximately $220 million from a committed PIPE investment, at $10.00 per share.
    • Key PIPE investors include funds and accounts managed by BlackRock, Millennium Management LLC, Palantir Technologies Inc., Caterpillar Venture Capital Inc., Schlumberger, Michael F. Price, JAWS Estates Capital, LLC, Sarcos Chairman and CEO, Ben Wolff, and founders of Rotor Acquisition Corp.
  • Sarcos’ existing shareholders will exchange 100 percent of their equity of Sarcos for 120 million shares of common stock of Rotor to own approximately 68 percent of the outstanding shares of the combined company at closing.
    • They also will be entitled to receive up to an additional 28.1 million common shares, subject to the trading price of the combined company’s common stock reaching certain levels in the future, as specified in the merger agreement.

Rotor trans overview

PIPE

  • $220 million from a committed PIPE investment, at $10.00 per share.
    • Key PIPE investors include funds and accounts managed by BlackRock, Millennium Management LLC, Palantir Technologies Inc., Caterpillar Venture Capital Inc., Schlumberger, Michael F. Price, JAWS Estates Capital, LLC, Sarcos Chairman and CEO, Ben Wolff, and founders of Rotor Acquisition Corp.

EARNOUT

  • Each holder of Sarcos capital stock (including any capital stock subject to restricted stock awards) will be entitled to a right to receive additional contingent consideration following the Closing in the form of an earn-out. This earnout will become payable as follows:
    • (a) 14,062,500 shares of common stock of the Company if the closing share price of a share of common stock of the Company is equal to or exceeds $15.00 for 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the Closing and ending on the fourth anniversary of the Closing, and
    • (b) 14,062,500 shares of common stock of the Company if the closing share price of a share of common stock of the Company is equal to or exceeds $20.00 for 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the Closing and ending on the fifth anniversary of the Closing.

LOCK-UP

Holders of shares of Sarcos preferred stock agreed that:

  • (a) 50% of their shares may not be transferred, until the earlier to occur of
    • (x) six months following Closing, and
    • (y) 120 days following the Closing if the stock price of the Company’s common stock exceeds $13.00 for 20 trading days in any 30 consecutive trading day period, and
  • (b) the remaining 50% of such shares may not be transferred for a period of one year following the Closing.

Holders of Sarcos’ common stock, options, restricted stock awards and restricted stock unit awards agreed that:

  • (1) 20% of such securities may not be transferred until the earlier to occur of
    • (a) 120 days after Closing if the stock price of the Company’s common stock exceeds $13.00 for 20 trading days in any 30 consecutive trading day period, and
    • (b) 6 months after closing; and
  • (2) the remaining 80% can be transferred at the earlier of
    • (A) delivery to customers of at least twenty Guardian® XO® and/or Guardian® XT commercial units to customers of the Constituent Corporations (but in no event prior to the close of business on the one year anniversary of the date of Closing) and
    • (B) the close of business on the second anniversary of the date of Closing.

The Rotor Sarcos Holders, including the holders of all outstanding Company Warrants, entered into a lock-up agreement (the “Other Lock-up Agreement”) with the Company. Such stockholders agreed:

  • To certain transfer restrictions for a period of one year following the Closing.

NOTABLE CONDITIONS TO CLOSING

  • That the sum of the amount in the Company’s trust account (calculated net of any stockholder redemptions but prior to the payment of any Company transaction expenses), plus the proceeds of the PIPE Financing, equals or exceeds $200 million

NOTABLE CONDITIONS TO TERMINATION

  • By either party if the Closing has not occurred on or prior to six months following the execution of the Merger Agreement

ADVISORS

  • Jefferies and PJT Partners are acting as financial advisors to Sarcos
  • Wilson Sonsini Goodrich & Rosati, Professional Corporation is acting as legal counsel to Sarcos.
  • Gibson, Dunn & Crutcher LLP is acting as legal counsel to Rotor Acquisition.
  • Credit Suisse is acting as sole financial and capital markets advisor to Rotor Acquisition.
  • Credit Suisse, Jeffries, and PJT Partners are acting as joint placement agents with respect to the private placement.
  • Milbank LLP is acting as legal counsel to the Special Committee of Rotor’s Board of Directors
  • Houlihan Lokey is acting as financial advisor to the Special Committee.

MANAGEMENT & BOARD

Executive Officers

Brian D. Finn, 60
Chief Executive Officer, Secretary, Treasurer and Director

Mr. Finn has over 35 years of experience in the financial services industry as well as a variety of corporate and philanthropic board roles. From 2008 until he retired in 2013, Mr. Finn served as Chairman and Chief Executive Officer of Asset Management Finance Corp (AMF) and as a Senior Advisor to Credit Suisse. From 2004 to 2008, Mr. Finn was Chairman and Head of Alternative Investments (AI) at Credit Suisse. During his tenure at Credit Suisse, the firm launched a series of alternative investment management firms, including GSO (now Blackstone-GSO), Global Infrastructure Partners (partnership with General Electric), China Renaissance Capital (China Private Equity), Gulf Capital (Middle East-North Africa PE), Mubadala Infrastructure Partners (Middle East Infrastructure in partnership with Mubadala and GE), Ospraie Special Opportunities (Commodities PE), Hudson Clean Energy (Alternative Energy PE) and Matlin Patterson (distressed). From 2002 to 2005, Mr. Finn held senior managements positions within Credit Suisse, including President of Credit Suisse First Boston (CSFB), President of Investment Banking, Co-President of Institutional Securities, CEO of Credit Suisse USA and a member of the Office of the Chairman of CSFB. He was also a member of the Executive Board of Credit Suisse Group. Mr. Finn began his career in 1982 as a member of the Mergers & Acquisitions Group (M&A) at The First Boston Corporation, ultimately becoming Co-Head of M&A in 1993. He has advised on dozens of transactions worth well over $100 billion. In 1997, he joined the private equity firm Clayton, Dubilier & Rice as a partner and then later rejoined Credit Suisse in 2002. Mr. Finn is a member of the boards of Scotts Miracle Gro and Owl Rock Capital. He is currently Chairman of Star Mountain Capital, Chairman of Covr Financial Technologies, an Investment Partner at Nyca Partners (fintech VC) as well as a board member of a number of early stage companies. He has previously been a Strategic Advisor to KKR, member of the boards of Baxter International, Telemundo, MGM Pictures, and a number of other public and private companies. Mr. Finn is past Chairman of the Undergraduate Executive Board of The Wharton School of the University of Pennsylvania, Vice Chairman of the Board of the City Kids Foundation and a member of the Boards of the Intrepid Fallen Heroes Fund, the Gordon A. Rich Memorial Foundation and the Starmar Foundation. Mr. Finn received a Bachelor of Science Degree in Economics from The Wharton School of the University of Pennsylvania.

Amy Salerno, 45
Chief Financial Officer

From 2016 to 2020, Ms. Salerno served as the Chief Financial Officer and Chief Operating Officer of Covr Financial Technologies, a leading insurance technology firm, where she is currently a member of its Board of Directors. Since retiring from her executive positions with Covr, she has been a private advisor and consultant. Prior to Covr, she was the Chief Operating Officer of Pioneer Wealth Partners, a multi-family office and wealth advisory boutique catering to high-net worth families, from 2009 to 2016. Previous operational management roles include Greentech Capital Advisors where she was a Principal in the operations and business development area from 2008 to 2009 and BroadStreet Capital Partners where she was Head of Operations from 2005 to 2009. Ms. Salerno began her career in 1997 at Lehman Brothers in the structured products origination and mortgage backed securities groups. Ms. Salerno received a B.A. in Economics with Distinction from Cornell University and an M.B.A. from the Tuck School of Business at Dartmouth.

Sam S. Potter, 36
Vice President of Corporate Development

Mr. Potter has spent the past six years working with early stage companies where he has led such companies in fundraising, strategy, operations, financial planning and analysis, corporate development and investor relations. Since November 2019, Mr. Potter has been Managing Member of BMB Capital LLC, a consulting firm he founded, which provides its clients with a range of corporate development services including deal sourcing, diligence, and execution work. Beginning in November 2016, Mr. Potter has served in a variety of roles for WVC Holdings and its predecessor, Wolf Venture Capital, LLC, a holding company that is active in founding and investing in early stage companies across a range of industries. From April 2015 to September 2016, Mr. Potter was in corporate development and finance at Ebbu, an early stage hemp and cannabis research company. Prior to that, Mr. Potter was a consultant to GoHydrate, a direct to consumer beverage company, from June 2014 to April 2015. Before starting his work with early stage companies, Mr. Potter served as an investment professional in Ares Management’s Direct Lending business from July 2010 to June 2014. While at Ares Management, Mr. Potter led transaction diligence, structuring and execution as well as provided ongoing portfolio company monitoring and support primarily with respect to middle market financings for companies in a wide variety of industries including healthcare, software, specialty distribution, commercial laundry, broadband communications, specialty manufacturing, waste services and education. Mr. Potter started his career in June 2007 at Deutsche Bank in the Global Industrials Group providing M&A, equity and debt financing services to paper and packaging companies throughout North America. Mr. Potter received a B.S. from the Kelley School of Business at Indiana University.

Board of Directors

Stefan M. Selig, 57
Director (Chairman)

Mr. Selig is an accomplished banker and senior executive who has served in prominent leadership roles in both the private and public sectors. During his nearly 30-year Wall Street career, Mr. Selig built a reputation as a trusted counselor to his clients, and he is recognized for his experience and judgment in providing strategic and financial advice to leading companies and investors. In 2017, Mr. Selig founded, and has since served as Managing Partner of, BridgePark Advisors LLC to provide personalized strategic advice on a broad range of critical business and financial issues and transaction execution to a select group of CEOs, boards of directors, and institutional and high net worth investors. Mr. Selig served as President Obama’s Under Secretary of Commerce for International Trade at the U.S. Department of Commerce from 2014 to 2016. As one of the nation’s most senior commercial diplomats, Mr. Selig headed the International Trade Administration, a bureau of 2,200 trade and investment professionals in over 75 countries. Mr. Selig also served as the Executive Director of the Travel and Tourism Advisory Board, sat on the board of directors of the Overseas Private Investment Corporation (OPIC), the U.S. government’s development finance institution, was a Commissioner for the Congressional Executive Commission on China, and was the Executive Director of the President’s Advisory Council on Doing Business in Africa. Before joining the Obama Administration, Mr. Selig was at Bank of America Merrill Lynch from 1999 to 2014, most recently as the Executive Vice Chairman of Global Corporate & Investment Banking. At BAML, Mr. Selig built and maintained critical relationships at the CEO and board level with important clients of the bank. He previously served as Vice Chairman of Global Investment Banking and Global Head of Mergers & Acquisitions with responsibilityfor Global Technology, Media and Telecommunications and Global Financial Sponsors Groups; Chairman, Fairness Opinion Review Committee, and Member of Risk and Reputation and New York Market Committees. Prior to joining Bank of America, Mr. Selig held various senior investment banking positions, including Co-Head of Mergers & Acquisitions for UBS Securities. He began his investment banking career in the Mergers & Acquisitions Group at The First Boston Corporation in 1984, and subsequently was an original member of Wasserstein Perella & Co. Mr. Selig currently serves as a director of a number of public and private companies including: Tuscan Holdings Corp. (Nasdaq: THCB), a blank check company searching for an initial business combination; Simon Property Group (NYSE: SPG), an S&P 100 company and a global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations; Entercom Communications Corp. (NYSE: ETM), one of the top two radio broadcasters in the U.S., reaching more than 100 million people weekly via its 235 radio stations and its digital platforms and live events. Mr. Selig also serves as lead director of Safehold Inc. (NYSE: SAFE), which acquires, owns, manages and capitalizes ground net leases and of Drive DeVilibiss Healthcare, a leading manufacturer of medical products controlled by Clayton, Dubilier & Rice. He is a member of the Council on Foreign Relations, The Economic Club of New York, the Bretton Woods Committee and the Atlantic Council Councilors Program. Mr. Selig is a graduate received a B.A. from Wesleyan University and an MBA from Harvard Business School.

John Howard, 68
Director

Mr. Howard has served as the founder and Co-Managing Partner of Irving Place Capital, an investment firm, since its formation in 1997. Mr. Howard has 35 years of private equity investing experience in the consumer products, retail, and industrial industries. Prior to founding Irving Place Capital (as Bear Stearns Merchant Banking), he was the co-Chief Executive Officer of Vestar Capital Partners, a private investment firm specializing in management buyouts. Previously, Mr. Howard was a Senior Vice President and Partner of Wesray Capital Corporation, one of the foremost private equity sponsors and a pioneer in the leveraged buyout business. His board experience includes Bendon, New York & Company, rag & bone, AERO SAFETY, Aéropostale, Dots, Integrated Circuit Systems, Multi Packaging Solutions, Nice-Pak Holdings, NRT Incorporated, Safety 1st, Seven For All Mankind, Standard Holdings, Stuart Weitzman, Universal Hospital Services, Vitamin Shoppe. Mr. Howard received a BA from Trinity College and an MBA from Yale School of Management.

David J. Berkman, 58
Director

Since January 2000, Mr. Berkman has served as the Managing Partner of Associated Partners, LP, a private equity firm primarily engaged in telecommunications infrastructure operations and investments. He serves on the boards (or equivalent bodies) of Hamilton Lane Inc. (NASDAQ: HLNE), Entercom Communications Corp. (NYSE: ETM), as Lead Director, and on its audit, compensation (Chair), nominating/corporate governance and executive committees, Franklin Square Holdings, LP and Chemimage, Inc. and on the advisory committee of First Round Capital, a venture firm. Mr. Berkman also serves on the board of overseers of the University of Pennsylvania School of Engineering and Applied Science. He previously served on the boards of Actua Corporation until 2018 and Diamond Resorts International, Inc. until 2016. He received a B.S. in Economics from the Wharton School of the University of Pennsylvania.

Kim S. Fennebresque, 70
Director

Mr. Fennebresque has served as a senior advisor to Cowen Group Inc., a diversified financial services firm, since 2008, where he also served as its chairman, president and chief executive officer from 1999 to 2008. Mr. Fennebresque serves on the board of directors of Albertsons Companies, a grocery retailer, since March 2015, Ally Financial Inc. (NYSE: ALLY), a financial services company, since May 2009, BlueLinx Holdings Inc. (NYSE: BXC), a distributor of building products, since May 2013, and as its Chairperson since May 2016. Mr. Fennebresque has served as a member of the Supervisory Board of BAWAG P.S.K., one of Austria’s largest banks, since 2017, and as Deputy Chairman since 2019. Mr. Fennebresque previously served as a director of Ribbon Communications Inc. (NASDAQ: RBBN), a provider of network communications solutions, from October 2017 to February 2020, and as a director of Delta Tucker Holdings, Inc. (the parent of DynCorp International, a provider of defense and technical services and government outsourced solutions) from May 2015 to July 2017. From 2010 to 2012, Mr. Fennebresque served as chairman of Dahlman Rose & Co., LLC, an investment bank. He has also served as head of the corporate finance and mergers and acquisitions departments at UBS and was a general partner and co-head of investment banking at Lazard Frères & Co. He has also held various positions at First Boston Corporation, an investment bank acquired by Credit Suisse. Mr. Fennebresque received a B.A. from Trinity College and a J.D. from Vanderbilt Law School where he was Associate Editor of the Law Review.

 

ByMatt Cianci