Virgin Group Acquisition Corp. II

PROPOSED BUSINESS COMBINATION: Grove Collaborative

ENTERPRISE VALUE: $1.505 billion

ANTICIPATED SYMBOL: GROV

Virgin Group Acquisition Corp. II proposes to combine with Grove Collaborative, a leading sustainable consumer products company.

Grove is a leading sustainable consumer products company fueled by a mission to transform the consumer products industry into a force for human and environmental good. The largest independent, home and personal care brand focused on health and sustainability, the Company is at the forefront of the direct-to-consumer and natural products trends and has emerged as a leader in the category, with over 1.5 million active customers through its direct platform and millions of units of products sold at physical retail.

In addition to its flagship brand, Grove Co., Grove has built and launched several sustainable brands in the personal care, paper, and beauty categories such as the 100% plastic-free bar format body, hair and deodorant brand, Peach not Plastic. Grove’s customers have avoided over 4.9 million pounds of plastic being used by choosing Grove Co. and Peach not Plastic’s plastic-free and plastic-reducing products.

Grove is leading the consumer products industry out of plastic. Already plastic neutral and CarbonNeutral certified, the Company aims to become 100% plastic free by 2025. Beyond Plastic is Grove’s comprehensive plan to address the plastic crisis and to help the Company meet its ambitious goal. Today Grove also has 100% carbon neutral shipping and facilities and is committed to NetZero carbon emissions by 2030.

SUBSEQUENT EVENT – 4/4/22 – 8-K LINK

• Additional Subscription Agreement (Tranche 1)
  • On March 31, 2022, Grove entered into a Subscription Agreement with VGII and Corvina Holdings, Limited, to which Corvina has subscribed for and purchased from Grove shares of common stock for a purchase price of the quotient of $27,500,000 and $11.70.
    • The purchase price per share for the Tranche 1 Shares was based on an estimate of the Exchange Ratio, and each of the Investor and Grove have agreed to adjust the number of Tranche 1 Shares held by the Investor immediately prior to the closing of the Business Combination to reflect the final Exchange Ratio calculated pursuant to the terms of the Amended and Restated Merger Agreement such that at the closing of the Business Combination the Tranche 1 Shares will convert into VGAC Class B Common Shares at a ratio that reflects a purchase price of $10.00 for each VGAC Class B Common Share.
    • The Exchange Ratio is the quotient obtained by dividing (i) the Closing Payment Shares by (ii) the Fully Diluted Company Stock.
• Backstop Agreement (Tranche 2)
  • Corvina has also agreed to subscribe for and purchase shares of Class A common stock of the combined public company for a purchase price of up to $22,500,000 concurrently with the closing of the transaction in the event of potential redemptions by VGAC II stockholders.
    • To the extent the Available Cash exceeds $22,500,000, the Investor shall have the right to redeem all or a portion of the Tranche 1 Shares in cash for a purchase price per share equal to (x) the final Exchange Ratio calculated pursuant to the terms of the Amended and Restated Merger Agreement multiplied by (y) $10.00.
    • If the volume-weighted average price of VGAC Class A Common Shares is less than $10.00 during the 10 trading days commencing on the first trading day after VGAC II’s first quarterly earnings call for a fiscal quarter that ends following the closing of the Business Combination, then the Investor shall be entitled to receive a number of additional VGAC Class A Common Shares equal to the lesser of
      • (i) the product of (x) the sum of
        • (1) the shares of common stock of VGAC II issued to the Investor at the closing of the Business Combination pursuant to the Amended and Restated Merger Agreement (as defined below) as consideration for the Tranche 1 Shares and
        • (2) the Tranche 2 Shares multiplied by (y) a fraction
          • (A) the numerator of which is $10.00 minus the Measurement Period VWAP and
          • (B) the denominator of which is the Measurement Period VWAP and
      • (ii) the number of Post-Combination VGAC Shares outstanding as of immediately following the closing of the Business Combination.
• Additional Warrants
  • VGAC II shall issue to the Investor a number of warrants to purchase VGAC Class A Common Shares equal to
    • (i) the sum of (x) 0.75% and (y) the product of
      • (1) 1.25% multiplied by (2) the quotient of
        • (A) the number of Post-Combination VGAC Shares divided by
        • (B) 5,000,000 multiplied by
    • (ii) the number of shares of VGAC common stock, determined on a fully diluted basis, as of immediately following the closing of the Business Combination.
  • Such warrants will be exercisable by the Investor at any time for a period of five years from the date of issuance and otherwise be on terms customary for warrants of such nature.
• Amended Sponsor Agreement
  • The shares of common stock of VGAC II held by the Sponsor would not be subject to any earn-out provisions.
• Waived Minimum Cash
  • Grove has agreed to waive the minimum cash condition in the Agreement and Plan of Merger upon receipt of the backstop investment from Corvina

TRANSACTION

• The business combination includes an implied combined company pro forma enterprise valuation for Grove of $1.5 billion.
• The transaction will provide up to $435 million in net proceeds to the Company, including an $87 million fully committed common stock PIPE at $10.00 per share from:
  • An affiliate of the sponsor of VGII and new and existing Grove investors, including Lone Pine Capital, Sculptor Capital Management, General Atlantic and Paul Polman, and $348 million in proceeds from VGII’s trust account net of estimated transaction expenses (and subject to reduction based upon the exercise of any redemption rights by VGII’s public shareholders in connection with the transaction).
• The transaction is expected to close in late Q1 or early Q2 2022.
• Upon the closing of the transaction, and assuming none of VGII’s public shareholders elect to redeem their shares, existing Grove shareholders are expected to own 72% of the combined company, VGII’s sponsor is expected to own 3% of the combined company, the PIPE investors are expected to own 4% of the combined company, and public stockholders are expected to own 21% of the combined company. Additionally, VGII will nominate an appointee to the Grove board once the transaction closes.
• In connection with the Business Combination, VGAC II will adopt a dual class stock structure pursuant to which:
  • (i) all stockholders of Grove will hold shares of Class B common stock of New Grove (the “New Grove Class B Common Stock”), which will have ten votes per share.
• The New Grove Class B Common Stock will be subject to conversion to New Grove Class A Common Stock
  • (i) upon any transfers of New Grove Class B Common Stock (except for certain permitted transfers)
  • (ii) on the date that is the earliest to occur of
    • (A) the fifth anniversary of the closing date and
    • (B) the forty-fifth day (or, if such day is not a business day in the United States, the next such business day) after the end of the first fiscal quarter of New Grove in which the number of shares of New Grove Class B Common Stock outstanding or subject to outstanding securities convertible into or exercisable therefor, or otherwise underlying outstanding equity compensation awards, represents, in the aggregate, less than ten percent (10%) of all shares of common stock outstanding or subject to outstanding securities convertible into or exercisable therefor, or otherwise underlying outstanding equity compensation awards, in each case, measured on the last day of such fiscal quarter.

PIPE

• In connection with the signing of the Merger Agreement, VGAC II entered into subscription agreements with an affiliate of the Sponsor and certain existing equity holders of Grove. Pursuant to the Subscription Agreements, the PIPE Investors agreed to subscribe for and purchase, and VGAC II agreed to issue and sell to such investors, on the closing date, an aggregate of 8,707,500 shares of New Grove Class A Common Stock for a purchase price of $10.00 per share, for aggregate gross proceeds of $87,075,000 (the “PIPE Financing”) from:
  • An affiliate of the sponsor of VGII and new and existing Grove investors, including Lone Pine Capital, Sculptor Capital Management, General Atlantic, and Paul Polman, and $348 million in proceeds from VGII’s trust account net of estimated transaction expenses (and subject to reduction based upon the exercise of any redemption rights by VGII’s public shareholders in connection with the transaction).
• Additional Subscription Agreement
  • On March 31, 2022, Grove entered into a Subscription Agreement with VGII and Corvina Holdings, Limited, to which Corvina has subscribed for and purchased from Grove shares of common stock for a purchase price of $27,500,000.

EARNOUT

• The Grove Earnout Shares will equal, in the aggregate, 14 million shares of New Grove Class B Common Stock and be subject to an earnout period of ten years (the “Earnout Period”), with such shares vesting effective
  • (i) with respect to 50% of the Grove Earnout Shares, if the daily volume weighted average price of the shares of New Grove Class A Common Stock is greater than or equal to $12.50 for any 20 trading days (which may be consecutive or not consecutive) within any 30-trading-day period that occurs after the closing date and prior to the expiration of the Earnout Period
  • (ii) with respect to the other 50% of the Grove Earnout Shares, if the daily volume weighted average price of the shares of New Grove Class A Common Stock is greater than or equal to $15.00 for any 20 trading days (which may be consecutive or not consecutive) within any 30-trading-day period that occurs after the closing date and prior to expiration of the Earnout Period.
    • In addition, in the event that (x) there is a Change of Control (as defined in the Merger Agreement) (or a definitive agreement providing for a Change of Control has been entered into) after the closing of the Business Combination and prior to the expiration of the Earnout Period or
    • (y) there is a liquidation, dissolution, bankruptcy, reorganization, assignment for the benefit of creditors or similar event with respect to New Grove after the closing date and prior to the expiration of the Earnout Period, the Grove Earnout Shares will automatically vest (to the extent such Grove Earnout Shares have not already vested in accordance with the Merger Agreement).
• If, upon the expiration of the Earnout Period, any Grove Earnout Shares shall have not vested, then such Grove Earnout Shares shall be automatically forfeited by the holders thereof and canceled by New Grove.
• Amended Sponsor Agreement
  • The shares of common stock of VGAC II held by the Sponsor would not be subject to any earn-out provisions.

SPONSOR AGREEMENT

• The Sponsor has agreed that 35% of the shares of common stock of VGAC II held by the Sponsor as of the date of the Sponsor Agreement (together with the shares of New Grove Class A Common Stock issued upon conversion of such shares in connection with the Domestication, the “Sponsor Earnout Shares”) will be subject to certain earn-out provisions set forth in the Sponsor Agreement. Pursuant to such earn-out provisions, the Sponsor Earnout Shares will be subject to the Earnout Period with such shares vesting effective
  • (i) with respect to 50% of the Sponsor Earnout Shares, if the daily volume weighted average price of the shares of New Grove Class A Common Stock is greater than or equal to $12.50 for any 20 trading days (which may be consecutive or not consecutive) within any 30-trading-day period that occurs after the closing date and prior to the expiration of the Earnout Period
  • (ii) with respect to the other 50% of the Sponsor Earnout Shares, if the daily volume weighted average price of the shares of New Grove Class A Common Stock is greater than or equal to $15.00 for any 20 trading days (which may be consecutive or not consecutive) within any 30-trading-day period that occurs after the closing date and prior to expiration of the Earnout Period.
    • In addition, in the event that (x) there is a Change of Control (as defined in the Sponsor Agreement) (or a definitive agreement providing for a Change of Control has been entered into) after the closing of the Business Combination and prior to the expiration of the Earnout Period or
    • (y) there is a liquidation, dissolution, bankruptcy, reorganization, assignment for the benefit of creditors or similar event with respect to New Grove after the closing date and prior to the expiration of the Earnout Period, the Sponsor Earnout Shares will automatically vest (to the extent such Sponsor Earnout Shares have not already vested in accordance with the Sponsor Agreement).
• If, upon the expiration of the Earnout Period, any Sponsor Earnout Shares shall have not vested, then such Sponsor Earnout Shares shall be automatically forfeited by the Sponsor and canceled by New Grove.

NOTABLE CONDITIONS TO CLOSING

• In addition, the obligation of Grove to consummate the Business Combination is subject to the fulfillment of other closing conditions, including, but not limited to, the aggregate cash proceeds from VGAC II’s trust account, together with the proceeds from the PIPE Financing (as defined below), equaling no less than $175,000,000 (after deducting any amounts paid to VGAC II shareholders that exercise their redemption rights in connection with the Business Combination).
• Waived Minimum Cash
  • Grove has agreed to waive the minimum cash condition in the Agreement and Plan of Merger upon receipt of the backstop investment from Corvina

NOTABLE CONDITIONS TO TERMINATION

• Subject to certain limited exceptions, by either VGAC II or Grove if the Business Combination is not consummated by July 31, 2022

ADVISORS

• Morgan Stanley & Co. LLC is acting as exclusive financial advisor to Grove
• Credit Suisse Securities (USA) LLC is acting as financial advisor and capital markets advisor to VGII.
• Sidley Austin LLP is acting as the legal advisor to Grove
• Davis Polk & Wardwell LLP is acting as the legal advisor to VGII.
• Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are serving as co-placement agents to VGII with respect to the portion of the PIPE financing raised from qualified institutional buyers and institutional accredited investors.
• Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are not acting as agents or participating in any role with respect to, and will not earn any fees from, the portion of the PIPE financing raised from individual investors.
• Credit Suisse Securities (USA) LLC previously acted as sole book-running manager for VGII’s IPO.

MANAGEMENT & BOARD

Executive Officers

Josh Bayliss, 47
Chief Executive Officer and Director

Mr. Bayliss currently is a member of the board of directors and the Chief Executive Officer of VGAC I. Since 2011, Mr. Bayliss has served as the Chief Executive Officer of the Virgin Group and has been responsible for the Virgin Group’s strategic development, licensing of the brand globally, and management of direct investments on behalf of the Virgin Group in various branded and unbranded companies around the world. From 2005 to 2011, Mr. Bayliss served as General Counsel of the Virgin Group. Prior to joining Virgin, Mr. Bayliss was a senior associate at Slaughter and May, a leading international law firm. Mr. Bayliss has extensive experience as a director of a large number of companies across the Virgin Group globally, and currently serves as a director of Virgin Red (2018 – present), Virgin’s group-wide loyalty program that is currently in development. Mr. Bayliss holds a Bachelor of Laws and Bachelor of Arts from the University of Auckland, New Zealand.

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Evan Lovell, 51
Chief Financial Officer and Director

Mr. Lovell currently is a member of the board of directors and the Chief Financial Officer of VGAC I. Since 2012, Mr. Lovell has served as the Chief Investment Officer of the Virgin Group, where he has been responsible for managing the Virgin Group’s portfolio and investments in North America. From 2008 to 2012, Mr. Lovell was the Founding Partner of Virgin Green Fund, a private equity fund investing in the renewable energy and resource efficiency sectors. From 1998 to 2008, Mr. Lovell served as an investment professional at TPG Capital, where he also served on the board of directors of a number of TPG portfolio companies. Mr. Lovell currently serves on the boards of several companies including Virgin Hotels (2012 – present), Virgin Voyages (2014 – present), BMR Energy (2016 – present), Virgin Galactic (2017 – present), and Virgin Orbit (2017 – present). Mr. Lovell previously served on the board of Virgin America (NASDAQ: VA) from 2013 until its acquisition by Alaska Air in 2016. Mr. Lovell holds a Bachelor’s Degree from the University of Vermont.

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Rayhan Arif, 33
Chief Operating Officer

Mr. Arif is an Investment Director at the Virgin Group, where he has worked since 2017. He is responsible for investing the Virgin Group’s capital across a range of opportunities and supporting the strategic development of Virgin’s portfolio companies in the Americas. Mr. Arif currently serves on the boards of Virgin Mobile Latin America and BMR Energy. From 2013 to 2015, Mr. Arif served as an investment professional at AEA Investors, a global private equity firm focused on leveraged buyouts and growth capital investments. From 2012 to 2013, Mr. Arif worked on the strategy team of Zipcar, a leading car-sharing network. Prior thereto, Mr. Arif was a management consultant at Bain & Company. Mr. Arif received a B.A. in Economics from Harvard College and an M.B.A from Columbia Business School. We believe that Mr. Arif’s investment and operational experience make him a valuable addition to our management team.

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Board of Directors

Latif Peracha, 40
Director

Mr. Peracha is a General Partner at M13 Ventures, a venture capital firm focused on early-stage consumer technology companies. He currently serves as a director on the boards of Feelmore Labs, Rho Technologies, and Emerge. Prior to joining M13 in 2019, Latif was a Managing Director at the Virgin Group, where he was responsible for both supporting the Virgin Group’s portfolio as well as direct venture investments in the Americas. Latif joined Virgin in 2011 and during his tenure he was a board observer at Ring, Virgin Galactic, Virgin Orbit and Virgin Hotels and served on the boards of Virgin Mobile Latin America and The Hard Rock Hotel Las Vegas. Before Virgin, Latif worked at IAC where he focused on corporate and business development for Ticketmaster, their biggest operating company at the time. Mr. Peracha holds an M.B.A. from Columbia Business School and a B.B.A. from the University of Michigan.

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Elizabeth Nelson, 60
Director

Ms. Nelson is an advisor and investor in emerging growth technology companies who has served on many public and private company boards.  She currently serves on the boards of BerkeleyLights Inc (NASDAQ: BLI) since 2019, Nokia Corporation (NYSE: NOK) since 2012, and Upwork Inc. (NASDAQ: UPWK) since 2015. From 2012 to 2019 she served as Lead Independent Director on the board of Zendesk, Inc (NYSE: ZEN), and from 2013 – 2017 she served on the board of Pandora Media, Inc. (NYSE: P). From 1996 until 2006, Ms. Nelson served as the Executive Vice President and Chief Financial Officer of Macromedia, Inc. (NASDAQ: MACR), a software development company acquired by Adobe Systems. Ms. Nelson holds an M.B.A. in Finance from the Wharton School at the University of Pennsylvania and a B.S. in Foreign Service from Georgetown University.

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Chris Burggraeve, 56
Director

Mr. Burggraeve served as Global Chief Marketing Officer of AB InBev, the leading global brewer (2007-2012). Previously he worked for The Coca-Cola Company (1995-2007), where he became Group Marketing Director for the European Union Group, having started his early brand career at P&G. He has served on a number of marketing industry and non-profit boards, most notably the World Federation of Advertisers. Since 2013, he has operated Vicomte LLC, his own CEO/Board marketing strategy advisory. He is an active angel investor and serves on the boards of several private and public consumer and tech companies: Seaters (2014-present), Toast Holdings (2016-present), AYR Wellness, Inc. (CSE: AYR.A) (2019-present). From 2012-2018 he served as an Operating Advisor to Verlinvest, a leading family owned evergreen investment group. He has been an adjunct faculty member at the NYU Stern School of Business since 2012, and is an active author (“Marketing is Finance is Business”) and speaker. Mr. Burggraeve holds degrees in Economics and Business (KU Leuven – Belgium, CEU Nancy – France), and is a TRIUM Global MBA (NYU Stern/London School of Economics/HEC Paris).

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