SEC Form DEFA14A filed by Verso Corporation

---

 

Update Regarding Litigation Related to the Merger

 

As previously announced, on December 19, 2021, Verso Corporation, a Delaware corporation (the “Company” or “Verso”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BillerudKorsnäs Inc., a Delaware corporation (“Parent”), West Acquisition Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and, solely for purposes of certain sections thereof (as specified therein), BillerudKorsnäs AB, a Swedish limited company (“Guarantor” or “BillerudKorsnäs”). Parent is a wholly owned subsidiary of Guarantor. Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent.

 

Litigation Related to the Merger

 

Six complaints have been filed with respect to the Merger as of March 7, 2022—four in the United States District Court for the Southern District of New York, one in the United States District Court for the Eastern District of New York, and one in the District of Delaware. The complaints are captioned as follows: O’Dell v. Verso Corporation et al., Civil Action No. 1:21-cv-00575 (S.D.N.Y.) (“O’Dell”); Whitfield v. Verso Corporation et al., Case No. 1:22-cv-00715 (S.D.N.Y.) (“Whitfield”); Trinh v. Verso Corporation et al., Case No. 1:22-cv-00874 (S.D.N.Y.) (“Trinh”); Collins v. Verso Corporation et al., Case No. 1:22-cv-00875 (E.D.N.Y.) (“Collins”); Wheeler v. Verso Corporation et al., Case No. 1:22-cv-00283 (“Wheeler”); Thompson v. Verso Corporation et al., Civil Action No. 1:22-cv-01756 (S.D.N.Y.) (“Thompson” and together with O’Dell, Whitfield, Trinh, Collins and Wheeler, the “Stockholder Actions”).

 

The Stockholder Actions were filed by purported Company stockholders and assert claims against the Company and members of the board of directors (the “Board of Directors”) of the Company.

 

The Stockholder Actions generally allege that the Company and the Board of Directors violated Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), promulgated thereunder by omitting material information from the Company’s definitive proxy statement (the “Proxy Statement”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 8, 2022. The Trinh action also alleges that the Board of Directors breached their fiduciary duties in connection with the Merger and that the Company aided and abetted the Board of Directors’ breaches of fiduciary duty.  The Stockholder Actions seek injunctive relief enjoining the Merger and damages and costs, among other remedies.

 

On February 17, 2022, the Company received a letter on behalf of a purported stockholder of the Company requesting to inspect certain of the Company’s books and records pursuant to Section 220 of the Delaware General Corporation Law (the “Demand Letter”). The purported stockholder alleges concerns regarding the process that led to the Merger, the disclosures in the Proxy Statement filed in connection with the Merger, and the adequacy of the Merger consideration.

 

Although the Company cannot predict the outcome of or estimate the possible loss or range of loss from these matters, the Company believes that the allegations in the Stockholder Actions and the Demand Letter are meritless.

 

Supplemental Proxy Statement Disclosure

 

The Company does not believe, with respect to the complaints or demand letter in which the Company is named or addressed to, that supplemental disclosures are required or necessary under applicable laws. However, in order to minimize the expense of defending the Stockholder Actions and the Demand Letter, and without admitting any liability or wrongdoing, the Company is electing to make the supplemental disclosures to the Proxy Statement set forth below in response to the Stockholder Actions and the Demand Letter and solely for the purpose of mooting the allegations contained therein. The Company denies the allegations of the Stockholder Actions and the Demand Letter, and denies any violation of law. The Company believes that the Proxy Statement disclosed all material information required to be disclosed therein, and denies that the supplemental disclosures are material or are otherwise required to be disclosed. The Company is disclosing this information solely to eliminate the burden and expense of litigation. Nothing in the supplemental disclosures should be deemed an admission of the legal necessity or materiality of any supplemental disclosures under applicable laws.

SUPPLEMENT TO PROXY STATEMENT

 

This supplemental information should be read in conjunction with the Proxy Statement, which should be read in its entirety. Page references in the below disclosures are to the pages in the Proxy Statement, and defined terms used but not defined herein have the meanings set forth in the Proxy Statement. Without admitting in any way that the disclosures below are material or otherwise required by law, the Company makes the following amended and supplemental disclosures. For clarity, new text within amended and restated paragraphs from the Proxy Statement is highlighted with bold, underlined text.

 

The section of the Proxy Statement entitled “Background of the Merger Agreement; Reasons for Recommendation” is amended and supplemented as follows:

 

The disclosure on page 27 of the Proxy Statement is modified by amending and restating the tenth paragraph in its entirety as follows:

On the same day, the Company and BillerudKorsnäs executed a confidentiality agreement with a customary standstill provision that would automatically terminate upon the earliest to occur of: (i) the entry by the Company into a definitive acquisition agreement with a third party, (ii) the entry by the Company into a binding business combination or similar agreement pursuant to which the Company’s common stock would cease to represent 50% or more of the outstanding voting power or equity, or the Company’s directors would cease to represent 50% or more of the total directors, of the surviving parent entity and (iii) the commencement of a tender or exchange offer by a third party for shares of common stock (that the Board of Directors fails to recommend against).

 

The disclosure on page 28 of the Proxy Statement is modified by amending and restating the first sentence appearing in the fourth paragraph in its entirety as follows:

On the same day, the Company and Atlas entered into a confidentiality agreement, which contained customary standstill provisions that would automatically terminate upon the earliest to occur of: (i) the entry by the Company into a definitive acquisition agreement with a third party, (ii) the commencement of a tender or exchange offer by a third party for shares of common stock (that the Board of Directors fails to recommend against), (iii) the entry by the Company into a definitive agreement to effectuate a transaction that requires the approval of the Company’s stockholders and (iv) the Company or any of its subsidiaries filing for protection pursuant to bankruptcy or similar laws for the protections of debtors.

 

The disclosure on page 33 of the Proxy Statement is modified by adding the following paragraph following the second full paragraph:

 

The section of the Proxy Statement entitled “Financial Forecasts” is amended and supplemented as follows:

The Financial Forecasts include certain non-GAAP measures (including adjusted EBITDA, operating cash flow and total cash flow) because the Company believed such measures would be useful to the Special Committee and the Board of Directors in evaluating the prospects of the Company. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with generally accepted accounting principles (’’GAAP’’), including net income from continuing operations. The Company’s calculations of these non-GAAP measures may differ from others in its industry and are not necessarily comparable with information presented under similar sounding captions used by other companies. Financial measures provided to a company’s financial advisors are excluded from the definition of non-GAAP financial measures under applicable SEC rules and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure.

($ in millions) (unaudited)

Six Months Ending December 31,

Fiscal Year Ending December 31,

​

2021E

2022E

2023E

2024E

2025E

2026E

Unlevered Free Cash Flow(1)

​86

144

(3)

59

84

83

(1) “Unlevered Free Cash Flow” is defined as net operating profit after taxes, plus depreciation and amortization, less increases in net working capital, less capital expenditures, less net pension income and cash contributions, less restructuring activities and idled mill costs and strategic project costs, plus net proceeds from asset sales, adjusted for certain other items.  The calculation of Unlevered Free Cash Flow was not expressly included in the Preliminary Financial Forecasts but was derived from the Preliminary Financial Forecasts and is included for reference.

 

This Current Report on Form 8-K contains “forward-looking statements” regarding Verso, BillerudKorsnäs or their respective management’s future expectations, beliefs, intentions, goals, strategies, plans and prospects, which, in the case of Verso, are made in reliance on the “safe harbor” provisions within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial risks, known and unknown, uncertainties, assumptions and other factors that may cause actual results, performance or achievements to differ materially from future results expressed or implied by such forward-looking statements including, but not limited to, the occurrence of any event, change or other circumstances that could give rise to the right of one or both of Verso or BillerudKorsnäs to terminate the merger agreement; the ability to obtain regulatory approvals and/or meet other closing conditions to the Merger on a timely basis or at all; the ability to obtain approval by Verso stockholders; difficulties and delays in integrating Verso’s and BillerudKorsnäs’ businesses; risks that the Merger disrupts Verso or BillerudKorsnäs current plans and operations; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger; the risk that unexpected costs will be incurred; the ability of Verso or BillerudKorsnäs to retain and hire key personnel; the diversion of management’s attention from ongoing business operations; uncertainty as to the price of Verso common stock; the outcome of any legal proceedings that may be instituted against Verso, BillerudKorsnäs or their respective directors and officers; changes in global, political, economic, business, competitive, market and regulatory forces; changes in laws and regulations or the interpretation or enforcement thereof; changes in rates and policies; future business acquisitions or disposals; competitive developments; and the timing and occurrence (or non-occurrence) of other events or circumstances that may be beyond Verso’s and BillerudKorsnäs’ control. These and other risks, uncertainties, assumptions and other factors may be amplified or made more uncertain by the COVID-19 pandemic, which has caused significant economic uncertainty. The extent to which the COVID-19 pandemic impacts Verso’s and BillerudKorsnäs’ businesses, operations and financial results, including (without limitation) the duration and magnitude of such effects, will depend on numerous factors, which are unpredictable, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Forward-looking statements generally relate to future events or Verso’s and BillerudKorsnäs’ future financial or operating performance and include, without limitation, statements relating to the Merger and the potential impact of the COVID-19 outbreak on Verso’s and BillerudKorsnäs’ businesses and operations. In some cases, you can identify forward-looking statements because they contain words such as “anticipates,” “believes,” “contemplates,” “could,” “seeks,” “estimates,” “intends,” “targets”, “expects”, “allows”, “enables”, “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

In connection with the Merger, on February 8, 2022, Verso filed with the SEC and furnished to its stockholders the Proxy Statement and accompanying WHITE proxy card, as well as other relevant documents regarding the Merger. On or about February 8, 2022, Verso commenced mailing the Proxy Statement and a proxy card to Verso’s stockholders entitled to vote at a special meeting relating to the Merger, seeking their approval of the respective merger-related proposals. The Proxy Statement contains important information about the Merger and related matters. STOCKHOLDERS OF VERSO ARE URGED TO READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE MERGER THAT VERSO HAS FILED OR MAY FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT VERSO, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT THAT HOLDERS OF VERSO’S SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING VOTING. This Current Report on Form 8-K is not a substitute for the Proxy Statement, or for any other document that Verso has filed or may file with the SEC or send to its stockholders in connection with the Merger.

---