National Research Corporation (NASDAQ:NRCIA) and (NASDAQ:NRCIB)
today announced that its Board of Directors unanimously approved a
recapitalization plan that will exchange each share of class B
common stock for one share of class A common stock plus $19.59 in
cash, for total value of $53.44 per class B share. This
recapitalization plan replaces the previously announced
transaction.
The new class B common stock recapitalization plan is intended
to address shareholder concerns with public market trading
confusion related to the Company’s existing two classes of common
stock (the class A common stock and class B common stock) and to
provide a timely and cost-effective liquidity event for the holders
of the Company’s class B common stock. In addition, the plan allows
the Company to maintain conservative financial leverage.
Following the Company’s announcement of the originally proposed
transaction, the Nasdaq Stock Market and the Company had
discussions that resulted in Nasdaq agreeing to allow the Company
to exchange shares of common stock as part of the consideration
provided to class B shareholders. Contemporaneously, Michael Hays
informed the remaining directors that, in his shareholder capacity,
he was willing to consider transactions that resulted in a
disposition of shares held by him. Mr. Hays also indicated that he
expected holders of his family trust shares would have a similar
point of view. In view of these developments, the
Company’s Board of Directors unanimously adopted the new
recapitalization plan.
Commenting on the Board’s action, lead independent director,
John N. Nunnelly, said, “Our discussions with Nasdaq led to a more
preferred method of dealing with the Company’s dual class structure
which will completely eliminate the class B common stock and reduce
the amount of total borrowing required to fund the plan. Assuming
the new recapitalization plan is approved, we expect the single
class of stock, with additional shares trading, will also afford
our shareholders with greater liquidity.”
Recapitalization Overview
Under the new recapitalization plan, each share of class B
common stock will be exchanged for value of $53.44 (the value per
class B share that was to be paid under the originally proposed
reverse stock split), consisting of (a) one share of the Company’s
class A common stock plus (b) $19.59 in cash, which is equal to the
difference between $53.44 and the value of one share of class A
common stock. The Board of Directors determined the value of the
class A common stock to be issued in the new recapitalization plan
as the greater of (i) the volume weighted average price of the
class A common stock on the trading day immediately preceding this
announcement and (ii) the volume weighted average price of the
class A common stock during the 20 trading days immediately
preceding this announcement.
The mechanics of the new recapitalization plan will consist of a
1-for-3,000,000 reverse stock split of the Company’s class B common
stock. No forward stock split will be involved. After the
plan is consummated, there will be no remaining holders of the
Company’s class B shares and, accordingly, the class B common stock
will be delisted from trading on the Nasdaq Stock Market.
The cash portion of the new recapitalization plan will be funded
by approximately $32 million of cash on hand and $40 million senior
debt. The Company has received a commitment from First National
Bank of Omaha consisting of up to $70 million of senior credit
facilities to fund the transaction, in addition to providing
working capital for general business purposes. The commitment is
subject to customary closing conditions.
After the new recapitalization plan, class A common stock will
become the sole Nasdaq traded security of the Company. The new plan
will increase the outstanding number of class A shares by
approximately 3.7 million shares. Due to the elimination of the
class B disparate dividend rights and associated calculation of
earnings per share under generally accepted accounting principles
in the United States, we expect the new plan will result in pro
forma earnings per share accretion of approximately 61% for the
class A common stock for the twelve months ending December 31,
2016. In addition, the percentage of total net income and dividends
allocable to the class A shares will rise from approximately 50% to
100% after the new plan.
The new recapitalization plan will result in an approximate 24%
decrease in the total voting power of Michael Hays, from
approximately 54% today to approximately 30%. The total voting
power of all other shareholders of the Company (including the
Michael and Karen Hays Grandchildren’s Trust dated March 9, 2009,
which will have approximately 24%, and certain other family trusts)
will increase from approximately 46% today to approximately 70% as
a result of the new plan.
The Board of Directors currently anticipates maintaining the
aggregate amount of cash dividends paid by the Company following
consummation of the new recapitalization, thereby resulting in an
increase in the amount of cash dividends paid on each share of
class A common stock. The payment and amount of future dividends,
if any, is at the discretion of the Board and will depend on the
Company’s future earnings, financial condition, general business
conditions, alternative uses of the Company’s earnings and other
factors.
The new recapitalization plan is subject to customary closing
conditions, including financing and approval by the holders of the
Company’s class A common stock, class B common stock and both
classes of stock voting together as a group. Anyone desiring more
information about the new plan, please understand that the Company
will not be taking select calls; rather, we refer you to the
Company’s preliminary proxy or registration statement to be filed
with the Securities and Exchange Commission in the coming
weeks.
Forward‑Looking Statements
This press release includes “forward-looking” statements related
to the Company that can generally be identified as describing the
Company’s future plans, objectives or goals. Such forward-looking
statements are subject to risks and uncertainties that could cause
actual results or outcomes to differ materially from those
currently anticipated. These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. For further information about the
factors that could affect the Company’s future results, please see
the Company’s filings with the Securities and Exchange
Commission.
Additional Information and Where to Find It
The proposed new recapitalization plan of National Research
Corporation will be submitted to the shareholders of the Company
for their consideration. The Company will prepare a preliminary
proxy statement and, if necessary, a registration statement on Form
S-4, to be filed with the Securities and Exchange Commission (the
“SEC”) in connection with the proposed plan. The Company also
intends to file with the SEC and mail to its shareholders a
definitive proxy statement. The Company urges investors and
shareholders to read the definitive proxy statement when it becomes
available, as well as other documents filed with the SEC, because
they will contain important information. Investors and
security holders will be able to receive the definitive proxy
statement and other documents (when they are available) free of
charge at the SEC’s web site, http://www.sec.gov, or from the
Company’s web site
https://nrchealth.com/about/investor-relations/.
Participants in the Solicitation
This communication is not a solicitation of a proxy from any
investor or shareholder. However, the Company and certain of
its directors and executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies in connection with the proposed plan under
the rules of the SEC. Information regarding the persons who may,
under the rules of the SEC, be deemed participants in the
solicitation of the shareholders of the Company in connection with
the proposed plan will be set forth in the definitive proxy
statement when it is filed with the SEC. You can find information
about the Company’s directors and executive officers in Annual
Report on Form 10-K for the year ended December 31, 2016, filed
with the SEC on March 3, 2017, and the definitive proxy statement
relating to its 2017 Annual Meeting of Shareholders filed with the
SEC on April 3, 2017. These documents can be obtained free of
charge from the sources indicated above.
Non-Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended, or pursuant to an exemption from the
registration requirements of such Act.
About National Research Corporation
For more than 36 years, National Research Corporation has been a
leading provider of analytics and insights that facilitate
measurement and improvement of the patient and employee experience
while also increasing patient engagement and customer loyalty for
healthcare providers, payers and other healthcare organizations in
the United States and Canada. The Company’s solutions enable its
clients to understand the voice of the customer with greater
clarity, immediacy and depth.
Contact: Michael D.
Hays402-475-2525
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