Tortoise Acquisition (SHLL) Responds To a Lawsuit by Revealing Additional Material Information Just 4 Days Ahead of the Crucial Vote by Its Shareholders To Approve the Merger With Hyliion

Sep 24, 2020 08:33 EDT

Tortoise Acquisition (NYSE:SHLL), a Special Purpose Acquisition Company (SPAC) about to undergo a merger with Hyliion, has been forced to take remedial action in light of a lawsuit initiated by a stockholder. Through this litigation, the purported stockholder alleges that the SPAC’s proxy statement does not reveal sufficient material information.

In response, Tortoise Acquisition has filed a new Form 8-K with the U.S. Securities and Exchange Commission in order to provide additional information, thereby, attempting to allay the concern of the stockholder. The company noted in its filing today:

Hyliion (HYLN) Looks Very Attractive at the Current Price Levels but the Stock Is Not Out of the Woods Yet

“A purported stockholder of TortoiseCorp has filed a complaint against TortoiseCorp and the board of directors of TortoiseCorp in the U.S. District Court for the Southern District of New York, Matthew Martinez v. Tortoise Acquisition Corp., et al., Case No. 1:20-cv-07595 (S.D.N.Y.). The complaint generally alleges that the Proxy Statement fails to disclose material information about the Proposed Transactions. Another purported stockholder, Jack Wolf, has submitted a demand letter to TortoiseCorp making substantially similar allegations.”

Tortoise Acquisition then goes on to state:

“In order to moot what TortoiseCorp considers to be unmeritorious disclosure claims, alleviate the costs, risks and uncertainties inherent in litigation and provide additional information to its stockholders, TortoiseCorp has determined to voluntarily supplement the Proxy Statement as described in this Current Report on Form 8-K.”

Bear in mind that Tortoise Acquisition has incorporated 6 key changes to its original proxy statement. While readers can peruse these amendments in detail by following this link, we will attempt to summarize some of this new information in this post.

  • Amendment to the disclosure in the first paragraph on page 103 of the proxy statement: Tortoise Acquisition has revealed that it negotiated with several parties ahead of its deal with Hyliion. To wit, some of these negotiations graduated to a stage where the other parties executed a confidentiality agreement but that no standstill agreement was signed in these instances. Similarly, no term sheet or letter of intent was signed.
  • Amendment to the disclosure in the fourth paragraph on page 104 of the proxy statement: Hyliion’s non-binding letter of intent, delivered on the 21st of March 2020, called for “unspecified numbers of directors being designated by each of Tortoise Borrower and the Historical Rollover Stockholders, and additional independent directors being jointly designated by each of Tortoise Borrower and the Historical Rollover Stockholders”.
  • Amendment to the disclosure in the tenth paragraph on page 105 of the proxy statement: In a special meeting of the management of Tortoise Acquisition on the 10th of April 2020, it was decided to engage Barclays as the company’s exclusive financial advisor owing to the bank’s expertise in executing mergers as well as its role as the lead underwriter in Tortoise Acquisition’s IPO. The bank will receive a customary fee for its services. Moreover, Barclays has not engaged with Hyliion over the two-year period preceding the merger announcement.
  • Amendment to the disclosure in the sixth and seventh paragraphs on page 106 of the proxy statement: On the 4th of May 2020, Tortoise Acquisition board members discussed Hyliion’s pre-money valuation based on estimates provided by Hyliion itself. Between the 8th and 15th of May 2020, the board members held two meetings attended by Barclays representatives. In these meetings, Barclays provided its own estimate of Hyliion’s pre-money valuation “based on the market valuation of comparable companies as well as discounted enterprise value sensitivity modeling”.
  • Amendment to the disclosure in the ninth paragraph on page 106 of the proxy statement: On the 20th of May 2020, Vinson & Elkins delivered to Cooley a term sheet draft. “The initial draft of the term sheet provided for an undetermined board size and Messrs. Cubbage and Pang serving as directors. The draft term sheet also provided for director nomination rights for Messrs. Cubbage and Pang based on their ownership of New Hyliion after the closing of the business combination. Thereafter, Hyliion and TortoiseCorp exchanged drafts of the term sheet and engaged in discussions regarding the terms, including regarding potential director nomination rights for Tortoise Borrower after the closing of the business combination and which classes and committees Messrs. Cubbage and Pang would initially serve on”. The term sheet draft was eventually finalized through negotiation with Hyliion.
  • Amendment to the disclosure in the second paragraph on page 108 of the proxy statement: Tortoise Acquisition’s due diligence vis-à-vis Hyliion included a detailed analysis of its valuation. Some of this analysis has been included on “pages 29-30 of the Investor Presentation attached as Exhibit 99.3 to the DEFA14A filed on June 19, 2020”.

As a refresher, Tortoise Acquisition and Hyliion – the company that designs and develops hybrid suspension systems and electrified powertrain solutions for Heavy Duty Class 8 trucks – had announced their plans to undergo a merger back in June 2020. The combined company is expected to be worth around $1.5 billion. Moreover, the company will receive $560 million in proceeds from an upsized PIPE investment.

As per the Form DEFM14A filed by Tortoise Acquisition on the 8th of September, a special meeting of the shareholders is now scheduled for 09:30 a.m. ET on the 28th of September 2020. The main purpose of the meeting is to deliberate and vote upon the merger with Hyliion.

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Tortoise Acquisition shares are currently down over 3 percent in today’s pre-market trading session. This follows a loss of nearly 7 percent yesterday amid broader equity market turmoil. However, year to date, the stock is still up a healthy 335 percent, based on the current pre-market price level.