Section 8.01 Other Events.
As previously disclosed, on
December 22, 2021, Quidel Corporation(the "Company") entered into a Business Combination Agreement (the "BCA") by and among the Company, Ortho Clinical Diagnostics Holdings plc ("Ortho"), Coronado Topco, Inc.("Topco"), Orca Holdco, Inc.(" U.S.Holdco Sub") and Laguna Merger Sub, Inc.(" U.S.Merger Sub"), each a wholly owned subsidiary of Topco, and Orca Holdco 2, Inc., a wholly owned subsidiary of U.S.Holdco Sub, which provides for a business combination of the Company and Ortho under Topco, a new holding company (the "Combinations"). Pursuant to the BCA, the Combinations are expected to be implemented by way of (i) a scheme of arrangement to be undertaken by Ortho under Part 26 of the UKCompanies Act 2006 (the "Ortho Scheme"), pursuant to which each issued and outstanding share of Ortho will be acquired by a nominee of Topco, such that Ortho will become a wholly owned subsidiary of Topco, and (ii) a merger of U.S.Merger Sub with and into the Company immediately following consummation of the Ortho Scheme, with the Company surviving the merger as a wholly owned subsidiary of Topco. A definitive joint proxy statement/prospectus was filed with the Securities and Exchange Commissionby Topco on April 11, 2022, in connection with, among other things, the BCA (the "Registration Statement"). Certain Litigation As previously disclosed in the Registration Statement, a lawsuit was filed by and purportedly on behalf of an alleged Company stockholder: Lahey v. Quidel Corporation, et al., No. 1:22-cv-02071 on March 14, 2022in the United States District Court for the Southern District of New York(the "Lahey Action"). An additional lawsuit was filed by and purportedly on behalf of an alleged Company stockholder: Pryor v. Quidel Corporation, et al., No 1:22-cv-03404 on April 27, 2022in the United States District Court for the Southern District of New York(the "Pryor Action"). The Lahey Action and Pryor Actionname as defendants the Company and the members of the Company's board of directors. The Lahey Action and Pryor Actionallege, among other things, that the Registration Statement omits certain information regarding projections of Ortho, the Company and Topco, the analyses performed by the financial advisors of the Company and Ortho, and potential conflicts of interest involving a financial advisor and the Company's officers and directors. The Lahey Action and Pryor Actionseek, among other things, injunctive relief to prevent the Combinations from closing, damages if the Combinations close, declaratory relief in the form of an updated Registration Statement, and attorneys' fees. The Company believes these claims are entirely without merit and that the Registration Statement does not omit any material information about the Combinations. While the Company believes that the disclosures set forth in the Registration Statement comply fully with all applicable laws and denies the allegations in the pending actions described above, in order to moot plaintiffs' disclosure claims, avoid nuisance and possible expense and business delays, and provide additional information to its stockholders, the Company has determined voluntarily to supplement certain disclosures in Registration Statement related to plaintiffs' claims with the supplemental disclosures set forth below (the "Supplemental Disclosures"). Nothing in the Supplemental Disclosures shall be deemed an admission of the legal merit, necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, the Company specifically denies all allegations in the various litigation matters that any additional disclosure was or is required or material. SUPPLEMENTAL DISCLOSURES This supplemental information should be read in conjunction with the Registration Statement, including the balance of the sections entitled "Ortho Unaudited Forward-Looking Financial Information," "Quidel Unaudited Forward-Looking Financial Information," "Unaudited Pro Forma Synergy Estimates for Topco," and "Discounted Cash Flow Analysis." Defined terms used but not defined in the below disclosures have the meanings set forth in the Registration 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.
The section of the Registration Statement beginning on page 252 titled: “Discounted Cash Flow Analysis” is amended and supplemented as follows:
The fourth paragraph on page 253 is amended to add the following sentence at the end:
Perella Weinberg noted that, assuming a perpetuity growth rate of 2.5% and a 7.5% discount rate, the present value of the terminal value of Ortho was approximately
$7,748 millionand approximately $7,639 millionbased on the Ortho Forecasts and the Quidel Management Projections for Ortho, respectively.
The fourth paragraph on page 254 is amended to add the following sentence at the end:
Perella Weinberg noted that, assuming a perpetuity growth rate of 2.5% and a 7.5% discount rate, the present value of the terminal value of Quidel was approximately
$7,120 million, approximately $6,031 millionand approximately $2,659 millionbased on the Quidel Management Projections for Quidel (Case 1), the Quidel Management Projections for Quidel (Case 2) and the Consensus Estimates, respectively.
The section of the registration statement beginning on page 262 entitled: “Quidel Management Projections for Quidel” is amended and supplemented as follows:
Footnote 2 on page 263 is amended and reworded in its entirety to read as follows:
(2) Unleveraged free cash flow is calculated as EBITDA minus the following estimates of taxes and capital expenditures, and adjusted for the following estimates of changes in net working capital.
Terminal 2021E 2022E 2023E 2024E 2025E 2026E 2026E Case I Projections of Quidel Taxes (140 ) (78 ) (103 ) (149 ) (197 ) (191 ) (135 ) Capital Expenditures (266 ) (150 ) (100 ) (100 ) (100 ) (80 ) (80 ) Change in Net Working Capital 109 85 33 (27 ) (32 ) 19 6 Case 2 Projections of Quidel Taxes (140 ) (78 ) (83 ) (112 ) (150 ) (150 ) (116 ) Capital Expenditures (266 ) (150 ) (100 ) (100 ) (100 ) (80 ) (80 ) Change in Net Working Capital 109 85 56 (8 ) (16 ) 3 1
The section of the registration statement beginning on page 264 titled: “Ortho Management Projections for Ortho” is amended and supplemented as follows:
Footnote three on page 265 is amended and reworded in its entirety to read as follows:
(3) Unlevered Free Cash Flow was calculated by J.P. Morgan, for purposes of its discounted cash flow analysis and based on estimates provided by Ortho management, as future cash flows generated by an asset without including in such calculation any debt servicing costs. Specifically, unlevered free cash flow for this purpose represents Adjusted EBITDA less the following estimates of public company addbacks, taxes, capital expenditures, increases in net working capital and reagent rental instruments: 2022E 2023E 2024E 2025E 2026E Public Company Addbacks 44 19 10 10 10 Taxes 44 58 71 84 105 Capital Expenditures 60 60 60 60 60
10 Reagent Rental Instruments 135 140 140 140 140 For purposes of its discounted cash flow analyses and based on estimates provided by Ortho management, Perella Weinberg calculated Unlevered Free Cash Flow of Ortho for this purpose as EBITDA less taxes, plus depreciation and amortization, and less capital expenditures and increases in net working capital, resulting in Unlevered Free Cash Flow of approximately
$313 million, $284 million, $337 million, $382 million, $425 million, $476 millionand $523 millionfor 2021E, 2022E, 2023E, 2024E, 2025E, 2026E and the terminal year, respectively.
The second paragraph on page 266 is amended and rephrased in its entirety as follows:
January 3, 2021, Ortho's net operating losses were approximately $830 millionin the United States. In connection with commercial diligence, Ortho management provided to Quidel its initial estimates of the ability to utilize Ortho's net operating losses over the projection period, which amounts were calculated as a tax benefit equal to $49 millionin 2022, $53 millionin 2023, $61 millionin 2024, less than $1 millionin 2025, and $0thereafter. Perella Weinberg utilized these initial estimates for purposes of its financial analyses. After further internal review, Ortho management updated its estimates for purposes of the Ortho Management Projections for Ortho, calculating such tax benefit as the amount equal to, $16 millionin 2022, $36 millionin 2023, $50 millionin 2024, $56 millionin 2025 and $29 millionin 2026. The updated estimates of tax benefits, which were not provided to Quidel or Perella Weinberg, were utilized by J.P. Morgan for purposes of its financial analyses.
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