Kingswood Significantly Retools Wentworth Management Merger Agreement

Kingswood Holdings and merger partner Wentworth Management Services in an 8-K disclosed a wide array of changes to their business combination agreement, which was announced in July 2022. Less than a week later, the NYSE began delisting the SPAC's stock from the exchange. Kingswood now trades on the OTC Pink Sheets.

At deal announcement, the combined entity was expected to encompass over 1,900 advisors, $25 billion AUM and over $285 billion in affiliated AUM.

The business combination was projected to generate approximately $30 million, which assumed no redemptions and an anticipated $15 million capital raise, which would be used to pay transaction expenses and provide growth capital for the business.

The implied pro forma equity value of the combined company was cited at approximately $165 million, with a pro forma enterprise value of approximately $208 million.

The transaction had been expected to close in the fourth quarter of 2022.

The second amendment to the agreement includes these modifications:

  • To add definitions for (x) “Additional Sponsor Loans” to mean an additional $250,000 to be loaned to Kingswood by Sponsor or an Affiliate of Sponsor between the date of the Second Amendment and the Closing Date; and (y) “Additional Shares of Holdings Common Stock” to mean 1,100,000 shares of Holdings Common Stock to be issued to those certain holders of Continuing Company Units in the amounts determined by the Company and provided to Kingswood and Holdings in writing prior to the filing of the final amendment to the Form S-4;
  • To amend the definition of “Company Merger Consideration” to mean (i) 12,000,000 shares of Holdings Common Stock at the Per Share Price (excluding any amount of Holdings Warrants issued or issuable to Continuing Company Unit Holders), plus (ii) the Additional Shares of Holdings Common Stock;
  • To delete the definitions of “Converted Company Debt Amount” and “Minimum Company Share Amount” and references to such terms in the Existing Merger Agreement;
  • Provide for the forfeiture by Kingswood Global Sponsor, LLC (“Sponsor”) of 3,084,450 SPAC Private Placement Warrants immediately prior to the Effective Time;
  • Provide for the escrow (or at Sponsor's option, forfeiture) of 1,100,000 shares of Holdings Common Stock that would otherwise be issued to Sponsor in respect of its SPAC Common Stock at Closing and the release of such shares (or in the case of forfeiture, reissuance of an equal number of shares) to Sponsor if the VWAP of Holdings Common Stock exceeds $12 for 20 trading days within any 30-day trading period during the four-year period following Closing;
  • Provide that (i) the Additional Shares of Holdings Common Stock will not be subject to the Lock-Up Agreement (as defined in the Merger Agreement), and (ii) (Wentworth President) Craig Gould has the ability to release PPD Group and/or Wentworth Funding (or any of their ultimate beneficial owners who receive Holdings Common Stock) and the Holdings Common Stock owned by such holders from the obligations under the Lock-Up Agreement to the extent necessary to cause Holdings to satisfy the initial listing requirements of the National Exchange upon which the Holdings Common Stock has applied to be listed;
  • To provide that if the closing does not occur then SPAC shall promptly reimburse Wentworth the amount of such SPAC Extension Costs and if closing does not occur due to the SPAC's failure to satisfy any of the conditions precedent to closing that are reasonably with the control of SPAC, SPAC shall reimburse and pay to the company up to $150,000 of costs and other expenses actually reimbursed by Wentworth to the prospective purchaser of the Series A PIPE;
  • Provide Wentworth with the option to cause the outstanding Sponsor Loans and Additional Sponsor Loans to be repaid by Holdings at the Closing either (A) through the issuance of shares of Holdings Common Stock of equal value, or (B) in immediately available funds, provided, however, that in case of clause (B) Sponsor will be required to surrender a number of shares of Holdings Common Stock of equal value otherwise issuable to it in connection with the Closing;
  • To require the outstanding SPAC expenses incurred by Kingswood in connection with any prior business combination not consummated by Kingswood to be allocated to the holders of shares of SPAC Class B common stock on a pro-rata basis, and be repaid by (A) the founder in exchange for the issuance to the founder a number of shares of Holdings Common Stock of equal value, or (B) Holdings in exchange for such founder's surrender of a number of shares of stock of equal value;
  • To provide Wentworth the option (subject to the prior written consent of Kingswood) to pay any outstanding company expenses owed to unrelated third parties prior to the Closing, in exchange for the issuance of number of additional shares of Holdings Common Stock of equal value;
  • To amend and restate the covenants and agreements requiring Wentworth and Kingswood to use their commercially reasonable best efforts to enter into and consummate subscription agreements with investors relating to a private placement of shares in Wentworth, Kingswood and/or Holdings, and/or the entry into backstop arrangements with potential investors, and (B) acknowledge and agree that the proposed issuance and sale by holdings at closing of up to 1.5 million Series A Convertible Preferred Stock has been agreed upon by each of Wentworth, Kingswood and Holdings;
  • To require the sponsor loans and additional sponsor loans be paid in full prior to or substantially concurrently with the Closing;
  • To amend the closing condition to require the available closing cash be no less than $14 million;
  • To amend and restate the closing condition to require the company merger consideration to be issued prior to or substantially concurrently with the closing;
  • To extend the “Termination Date” to Nov. 24; and
  • Allow for the termination of the merger agreement if the conditions are not capable of being satisfied. Read more.

Source: Kingswood Significantly Retools Wentworth Management Merger Agreement