DEF 14A 1 d230057ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Information Required in Proxy Statement

Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  x                             Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

GORES HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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GORES HOLDINGS, INC.

9800 Wilshire Blvd.

Beverly Hills, California 90212

Dear Gores Holdings, Inc. Stockholder:

We cordially invite you to attend a special meeting in lieu of the 2016 annual meeting of the stockholders of Gores Holdings, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), which will be held on November 3, 2016, at 9:00 a.m., Eastern Time, at the offices of Weil, Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, NY 10153 (the “Special Meeting”).

On July 5, 2016, the Company, Homer Merger Sub, Inc. (“Company Merger Sub”), AP Hostess Holdings, L.P. (“AP Hostess LP”), Hostess CDM Co-Invest, LLC (“Hostess CDM Co-Invest”), CDM Hostess Class C, LLC (“CDM Hostess” and, together with AP Hostess LP and Hostess CDM Co-Invest, the “Selling Equityholders”), and AP Hostess LP, in its capacity as the sellers’ representative, entered into a Master Transaction Agreement (as it may be amended from time to time, the “Master Transaction Agreement”), which provides for, among other things, (i) the mergers of: (A) Hostess Management, LLC, a Delaware limited liability company owned, directly or indirectly, by certain of the Selling Equityholders and certain members of Hostess’ management, with and into Hostess Holdings, L.P., a Delaware limited partnership owned, directly or indirectly, by certain of the Selling Equityholders (“Hostess Holdings”), with Hostess Holdings continuing as the surviving entity (the “Management Merger”); (B) Company Merger Sub with and into AP Hostess Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of AP Hostess LP (“AP Hostess Holdings”), with AP Hostess Holdings continuing as the surviving entity (the “Subsidiary Merger”); and (C) immediately thereafter, AP Hostess Holdings with and into the Company, with the Company continuing as the surviving entity (the “Company Merger” and, together with the Management Merger and the Subsidiary Merger, the “Mergers”); and (ii) the purchase by the Company of certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Equityholders (the “Purchase” and, together with the Mergers and the other transactions contemplated by the Master Transaction Agreement, the “Business Combination”). As a result of the foregoing, we will acquire the privately-held Hostess companies, which we collectively refer to as “Hostess.” You are being asked to vote on the Business Combination between us and Hostess.

At the Special Meeting, our stockholders will be asked to consider and vote upon a proposal (the “Business Combination Proposal” or “Proposal No. 1”) to adopt the Master Transaction Agreement, a copy of which is attached to the accompanying proxy statement as Annex A, and approve the transactions contemplated thereby, including the Business Combination. Subject to the terms of the Master Transaction Agreement and customary adjustments set forth therein, the aggregate purchase price for the Business Combination and related transactions is expected to be approximately $2.3 billion, which amount will be increased by the amount of cash held by Hostess as of the closing of the Business Combination, and which amount will be decreased by the amount of Hostess’ outstanding indebtedness under its existing credit facilities, certain transaction fees and expenses, and certain payments to Hostess management under the Hostess Long Term Incentive Plan (the “Hostess LTIP”). The consideration to be paid to the Selling Equityholders will be funded through a combination of cash and stock consideration. The amount of cash consideration payable to the Selling Equityholders is the sum of (i) cash available to us from the trust account (the “Trust Account”) that holds the proceeds (including interest) of our initial public offering that closed on August 19, 2015 (the “IPO”), and after giving effect to taxes payable, any redemptions that may be elected by any of our public stockholders for their pro rata share of the aggregate amount of funds on deposit in the Trust Account as of two business days prior to closing the Business Combination (which instructions to redeem are further discussed in the accompanying proxy statement), plus (ii) the anticipated gross proceeds of approximately $300,000,000 from the sale of shares of newly issued Class A Common Stock of the Company, par value $0.0001 per share (the “Class A Stock”), in a private placement (the “Private Placement”), as further discussed in the accompanying proxy statement, less (iii) certain transaction fees and expenses, including the payment of deferred underwriting commissions agreed to at the time of our IPO, less (iv) certain payments to Hostess management under the Hostess LTIP, less (v) approximately $173,000,000 that

 

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will be used to repay a portion of the existing indebtedness of Hostess. The remainder of the consideration to be paid to the Selling Equityholders will be stock consideration, consisting of approximately 22,136,188 newly issued shares of our publicly-traded Class A Stock and approximately 29,912,742 shares of our newly established Class B Common Stock, par value $0.0001 per share (the “Class B Stock”), which includes approximately 5,446,429 shares of Class B Stock representing the partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, which shares will be valued at approximately $9.73 per share for purposes of determining the aggregate number of shares payable to Selling Equityholders for their ownership interests therein (the “Stock Consideration”). In addition, Mr. C. Dean Metropoulos will receive 2,496,000 Class B limited partnership units in Hostess Holdings (the “Class B Units”) and an equivalent number of shares of Class B Stock pursuant to his Executive Chairman Employment Agreement. The foregoing consideration to be paid to the Selling Equityholders and Mr. Metropoulos may be further increased by amounts payable under the Tax Receivable Agreement (as defined and further discussed below) and amounts payable as earn-out shares of Class A Stock or Class B Stock and an equivalent number of Class B Units, as applicable and as more fully described in the accompanying proxy statement. The number of shares of Class A Stock and Class B Stock (and a corresponding number of Class B Units) issued to the Selling Equityholders as Stock Consideration is subject to adjustment, depending on, among other things, the level of redemptions of shares of Class A Stock by our public stockholders. AP Hostess LP will receive shares of Class A Stock, and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos will receive shares of Class B Stock and shall hold an equivalent number of Class B Units. The Class B Units (including the Class B Units issued to Mr. Metropoulos under the Executive Chairman Employment Agreement) may be exchanged (together with the cancellation of an equivalent number of shares of Class B Stock) by the holders thereof for, at the election of the Company, shares of Class A Stock or the cash equivalent of such shares, in accordance with the Exchange Agreement to be entered into at the closing of the Business Combination by the Company, Mr. Metropoulos, Hostess CDM Co-Invest, CDM Hostess and Hostess Holdings, which is further discussed in the accompanying proxy statement. Approximately $173,000,000 of the proceeds from the Trust Account and the Private Placement will be used to repay a portion of Hostess’ existing indebtedness. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination.

In order to facilitate the Business Combination, our sponsor, Gores Sponsor LLC (the “Sponsor”), has agreed to the cancellation of a portion of the shares of Class F Common Stock of the Company, par value $0.0001 per share (the “Class F Stock”), issued to it prior to our IPO (the “Founder Shares”) and to the acquisition of shares of Class A Stock and Class B Stock by the Selling Equityholders (pursuant to the Master Transaction Agreement) and the participants in the Private Placement (pursuant to subscription agreements entered into in connection therewith) at a discount. The remaining Founder Shares will automatically convert into shares of Class A Stock on a one-for-one basis at the closing of the transactions contemplated by the Master Transaction Agreement and will continue to be subject to the transfer restrictions applicable to the Founder Shares.

In addition, Mr. Metropoulos has entered into an agreement with our Sponsor that provides for the potential transfer of certain private placement warrants and Founder Shares held by our Sponsor to Mr. Metropoulos. In the event that our Sponsor transfers its commitment to purchase 12,308,929 shares of Class A Stock pursuant to the Private Placement, representing an aggregate subscription amount of approximately $113,000,000 (the “Bridge Shares”), to third parties prior to the closing of the Business Combination, then our Sponsor will, immediately prior to the closing, transfer 2,000,000 private placement warrants and 500,000 Founder Shares to Mr. Metropoulos. To the extent that the Sponsor transfers less than all of the Bridge Shares, then the Sponsor will transfer a proportionally reduced portion of such private placement warrants and Founder Shares to Mr. Metropoulos.

At the closing of the Business Combination, the Company will also enter into the Tax Receivable Agreement, substantially in the form attached as Annex G to this proxy statement (the “Tax Receivable Agreement”), with Hostess CDM Co-Invest, CDM Hostess, AP Hostess LP and Mr. Metropoulos. The Tax Receivable Agreement will generally provide for the payment by the Company to the Selling Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a

 

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result of: (i) certain increases in tax basis resulting from the Business Combination; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the Business Combination; (iii) certain increases in tax basis resulting from exchanges of Class B Units; (iv) imputed interest deemed to be paid by the Company as a result of payments that it makes under the Tax Receivable Agreement; and (v) certain increases in tax basis resulting from payments that the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash savings. Certain payments under the Tax Receivable Agreement will be made to the Selling Equityholders in accordance with specified percentages, regardless of the source of the applicable tax attribute.

At the Special Meeting, Company stockholders will be asked to adopt the Master Transaction Agreement and approve the transactions contemplated thereby, including the Business Combination. In addition, you are being asked to consider and vote upon (i) a proposal to approve, for purposes of complying with applicable NASDAQ listing rules, the issuance of more than 20% of the Company’s issued and outstanding common stock pursuant to the Business Combination, the Private Placement and the Executive Chairman Employment Agreement entered into with Mr. Metropoulos (the “NASDAQ Proposal” or “Proposal No. 2”), (ii) five separate proposals to approve and adopt amendments to the Company’s current certificate of incorporation to: (A) provide for the classification of our board of directors (our “Board”) into three classes of directors with staggered terms of office and to make certain related changes (“Proposal No. 3”); (B) authorize an additional 40,000,000 shares of common stock, which would consist of (x) establishing 50,000,000 shares of a newly designated class of Class B Stock, in order to provide for our “Up-C” structure, which allows certain of the Selling Equityholders to continue to hold their ownership interest in Hostess in a tax efficient manner, and (y) decreasing the post-combination company’s shares of Class F Stock from 20,000,000 shares to 10,000,000 shares (“Proposal No. 4”); (C) change the stockholder vote required to amend certain provisions of the post-combination company’s certificate of incorporation and bylaws (“Proposal No. 5”); (D) elect not to be governed by Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes The Gores Group, Apollo Global Management, LLC, (“Apollo”), Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos, each of their respective successors, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes (“Proposal No. 6”); and (E) provide for certain additional changes, including changing the post-combination company’s corporate name from “Gores Holdings, Inc.” to “Hostess Brands, Inc.,” providing that certain transactions are not “corporate opportunities” and that certain persons, including the Selling Equityholders and their affiliates, are not subject to the doctrine of corporate opportunity, and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (“Proposal No. 7”) (each of which Proposal Nos. 3 through 7 is referred to as a “Charter Amendment Proposal” and collectively the “Charter Amendment Proposals”), (iii) a proposal to elect seven directors to serve staggered terms on our Board until the 2017, 2018 and 2019 annual meeting of stockholders, respectively, and until their respective successors are duly elected and qualified (the “Director Election Proposal” or “Proposal No. 8”), (iv) a proposal to approve the Hostess Brands, Inc. 2016 Equity Incentive Plan, a copy of which is attached to this proxy statement as Annex L (the “Incentive Plan”), including the authorization of the initial share reserve under the Incentive Plan and also for purposes of complying with Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Incentive Plan Proposal” or “Proposal No. 9”), (v) a proposal to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 (the “Ratification Proposal” or “Proposal No. 10) and (vi) a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals (the “Adjournment Proposal” or “Proposal No. 11”). A copy of our proposed second amended and restated certificate of incorporation reflecting the Charter Amendment Proposals, assuming the consummation of the Business Combination, is attached as Annex B to the accompanying proxy statement.

Each of these proposals is more fully described in this proxy statement, which each stockholder is encouraged to read carefully.

 

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Our publicly-traded common stock, units and warrants are currently listed on the NASDAQ Capital Market under the symbols “GRSH,” “GRSHU” and “GRSHW,” respectively. We intend to apply to continue the listing of our publicly-traded common stock and warrants on NASDAQ under the symbols “TWNK” and “TWNKW,” respectively, upon the closing of the Business Combination. Our publicly-traded units will automatically separate into the component securities upon consummation of the Business Combination and, as a result, will no longer trade as a separate security.

Pursuant to our current certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of Class A Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the Business Combination) in our Trust Account that holds the proceeds (including interest, which shall be net of taxes payable) of our IPO. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $13,125,000 that we will pay to the underwriters of our IPO or transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the fair value of marketable securities held in our Trust Account of approximately $375,234,320 as of June 30, 2016, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Class A Stock included in the units sold in our IPO. We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 15% threshold. Each redemption of shares of Class A Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $375,234,320 as of June 30, 2016. The Master Transaction Agreement provides that our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the Private Placement, together with the $50,000,000 representing a partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, equaling or exceeding $537,500,000. The obligations of the Selling Equityholders to consummate the Business Combination is conditioned on the amount of the Trust Account and the proceeds from the Private Placement, together with the $50,000,000 representing a partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, equaling or exceeding $600,000,000. These conditions to closing in the Master Transaction Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Stock by our public stockholders, these conditions are not met (or waived), then we or the Selling Equityholders (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would cause our net tangible assets to be less than $5,000,001. Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the information in the accompanying proxy statement assumes that none of our public stockholders exercise their redemption rights with respect to their shares of Class A Stock.

Our Sponsor and current independent directors (our “Initial Stockholders”), as well as our officers and other current directors, have agreed to waive their redemption rights with respect to any shares of our common stock they may hold in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of common stock, including all of the Founder Shares. Our Initial Stockholders, directors and officers have agreed to vote any shares of the Company’s common stock owned by them in favor of the Business Combination. The Founder Shares are subject to transfer restrictions. Our current certificate of incorporation includes a conversion adjustment which provides that the Founder Shares will automatically convert at the time of the Business Combination into a number of shares of Class A Stock at the closing of the transactions contemplated by the Master Transaction Agreement, at a conversion rate that entitles the holders of such Founder Shares to continue to own, in the aggregate, 20% of our issued and outstanding shares of common stock after giving effect to the Private Placement. However, our Initial Stockholders have agreed to waive such conversion adjustment and, instead, will receive upon conversion one share of Class A Stock for each Founder Share converted as of the closing of the Business Combination, such

 

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that the Initial Stockholders will hold, after giving effect to the cancellation of approximately 4,062,500 Founder Shares held by our Sponsor, approximately 8% of the total number of all shares of common stock outstanding after consummation of the Business Combination, consisting of the Founder Shares that will be automatically converted into shares of Class A Stock at the closing of the Business Combination and the shares of Class A Stock subscribed for by our Sponsor pursuant to its subscription agreement, but excluding any Bridge Shares.

We are providing the accompanying proxy statement and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be voted at the Special Meeting and at any adjournments or postponements of the Special Meeting. Information about the Special Meeting, the Business Combination and other related business to be considered by the Company’s stockholders at the Special Meeting is included in this proxy statement. Whether or not you plan to attend the Special Meeting, we urge all Company stockholders to read this proxy statement, including the Annexes and the accompanying financials statements of the Company and Hostess, carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 65 of this proxy statement.

After careful consideration, our Board has unanimously approved the Master Transaction Agreement and the transactions contemplated therein, and unanimously recommends that our stockholders vote “FOR” adoption of the Master Transaction Agreement and approval of the transactions contemplated thereby, including the Business Combination, and “FOR” all other proposals presented to our stockholders in the accompanying proxy statement. When you consider the Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — Interests of Certain Persons in the Business Combination” for additional information.

Approval of the Business Combination Proposal requires the affirmative vote of holders of a majority of our outstanding shares of common stock entitled to vote thereon at the Special Meeting. Approval of the NASDAQ Proposal requires the affirmative vote of holders of a majority of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Approval of each of the Charter Amendment Proposals requires the affirmative vote of holders of a majority of our outstanding shares of common stock entitled to vote thereon at the Special Meeting. Approval of the Director Election Proposal requires the affirmative vote of the holders of a plurality of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Approval of the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in this proxy statement to make sure that your shares are represented at the Special Meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. The transactions contemplated by the Master Transaction Agreement will be consummated only if the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals are approved at the Special Meeting. Unless waived by the parties to the Master Transaction Agreement, the closing of the Business Combination is conditioned upon the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals. Each of the proposals other than the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals, is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals, other than the Ratification Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement.

 

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If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the Special Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special Meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record and you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT THE COMPANY REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT SUCH MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

On behalf of our Board, I would like to thank you for your support of Gores Holdings, Inc. and look forward to a successful completion of the Business Combination.

Sincerely,

 

October 21, 2016

LOGO

 

Alec E. Gores

Chairman of the Board of Directors

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy statement is dated October 21, 2016, and is expected to be first mailed to Company stockholders on or about October 21, 2016.

 

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NOTICE OF SPECIAL MEETING IN LIEU OF 2016 ANNUAL MEETING OF

STOCKHOLDERS OF GORES HOLDINGS, INC.

TO BE HELD NOVEMBER 3, 2016

To the Stockholders of Gores Holdings, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting in lieu of 2016 annual meeting of the stockholders of Gores Holdings, Inc., a Delaware corporation (the “Company”), will be held on November 3, 2016, at 9:00 a.m., Eastern Time, at the offices of Weil, Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, NY 10153 (the “Special Meeting”). You are cordially invited to attend the Special Meeting to conduct the following items of business:

 

1.

Business Combination Proposal — To consider and vote upon a proposal to adopt the Master Transaction Agreement, dated as of July 5, 2016 (as it may be amended from time to time, the “Master Transaction Agreement”), by and among the Company, Homer Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Company Merger Sub”), AP Hostess Holdings, L.P. (“AP Hostess LP”), Hostess CDM Co-Invest, LLC (“Hostess CDM Co-Invest”), CDM Hostess Class C, LLC (“CDM Hostess” and, together with AP Hostess LP and Hostess CDM Co-Invest, the “Selling Equityholders”), and AP Hostess LP, in its capacity as the sellers’ representative thereunder (in such capacity, the “Sellers’ Representative”), a copy of which is attached to this proxy statement as Annex A, and approve the transactions contemplated thereby, including, (i) the mergers of: (A) Hostess Management, LLC, a Delaware limited liability company owned, directly or indirectly, by certain of the Selling Equityholders and certain members of Hostess’ management, with and into Hostess Holdings, L.P., a Delaware limited partnership owned, directly or indirectly, by certain of the Selling Equityholders (“Hostess Holdings”), with Hostess Holdings continuing as the surviving entity (the “Management Merger”); (B) Company Merger Sub with and into AP Hostess Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of AP Hostess LP (“AP Hostess Holdings”), with AP Hostess Holdings continuing as the surviving entity (the “Subsidiary Merger”); and (C) immediately thereafter, AP Hostess Holdings with and into the Company, with the Company continuing as the surviving entity (the “Company Merger” and, together with the Management Merger and the Subsidiary Merger, the “Mergers”); and (ii) the purchase by the Company of certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Equityholders (the “Purchase” and, together with the Mergers and the other transactions contemplated by the Master Transaction Agreement, the “Business Combination”) (Proposal No. 1);

 

2.

NASDAQ Proposal — To consider and vote upon a proposal to approve, for purposes of complying with applicable NASDAQ listing rules, the issuance of more than 20% of the Company’s issued and outstanding common stock in connection with the Business Combination, the Private Placement (as defined below) and the Executive Chairman Employment Agreement entered into with Mr. C. Dean Metropoulos (Proposal No. 2);

 

3.

Charter Amendment Proposals — To consider and act upon five separate proposals to amend the Company’s current certificate of incorporation to:

 

   

provide for the classification of our board of directors (our “Board”) into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 3);

 

   

authorize an additional 40,000,000 shares of common stock, which would consist of (i) establishing 50,000,000 shares of a newly designated class of Class B Common Stock of the Company, par value $0.0001 per share (the “Class B Stock”), in order to provide for our “Up-C” structure, which allows certain of the Selling Equityholders to continue to hold their ownership interest in Hostess in a tax efficient manner, and (ii) decreasing the post-combination company’s shares of Class F Common Stock, par value $0.0001 per share (the “Class F Stock”) from 20,000,000 shares to 10,000,000 shares (Proposal No. 4);

 

   

change the stockholder vote required to amend certain provisions of the post-combination company’s proposed certificate of incorporation and bylaws (Proposal No. 5);

 

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elect not to be governed by Section 203 of the DGCL and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes The Gores Group LLC, an affiliate of our sponsor, Gores Sponsor LLC (our “Sponsor”), Apollo Global Management, LLC (“Apollo”), Hostess CDM Co-Invest, CDM Hostess and Mr. C. Dean Metropoulos, each of their successors, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes (Proposal No. 6); and

 

   

provide for certain additional changes, including changing the post-combination company’s corporate name from “Gores Holdings, Inc.” to “Hostess Brands, Inc.,” providing that certain transactions are not “corporate opportunities” and that certain persons, including the Selling Equityholders and their affiliates, are not subject to the doctrine of corporate opportunity, and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company, subject to approval by our stockholders at the Special Meeting (Proposal No. 7).

 

4.

Director Election Proposal — To consider and vote upon a proposal to elect seven directors to serve staggered terms on our Board until the 2017, 2018 and 2019 annual meeting of stockholders, respectively and until their respective successors are duly elected and qualified (Proposal No. 8);

 

5.

Incentive Plan Proposal — To consider and vote upon a proposal to approve the Hostess Brands, Inc. 2016 Equity Incentive Plan, a copy of which is attached to this proxy statement as Annex L, including the authorization of the initial share reserve under the Incentive Plan and also for purposes of complying with Section 162(m) of the Internal Revenue Code of 1986, as amended (Proposal No. 9);

 

6.

Ratification Proposal — To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 (Proposal No. 10); and

 

7.

Adjournment Proposal — To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals (Proposal No. 11).

The above matters are more fully described in this proxy statement, which also includes, as Annex A, a copy of the Master Transaction Agreement. We urge you to read carefully this proxy statement in its entirety, including the Annexes and accompanying financial statements of the Company and Hostess.

The record date for the Special Meeting is September 29, 2016. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment thereof. A complete list of our stockholders of record entitled to vote at the Special Meeting will be available for ten days before the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting.

Our Sponsor and current independent directors (our “Initial Stockholders”), officers and other current directors have agreed to vote any shares of Class F Stock (the “Founder Shares”) held by them and any public shares purchased during or after our initial public offering (our “IPO”) in favor of our Business Combination. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of common stock, including all of the Founder Shares.

Pursuant to our current certificate of incorporation, we will provide our public stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of the Company’s Class A Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the Business Combination) in our trust account that holds the proceeds (including interest, which shall be net of taxes payable) of our IPO (the “Trust Account”). The per-share amount we will

 

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distribute to our stockholders who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $13,125,000 that we will pay to the underwriters of our IPO, as well as other transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the fair value of marketable securities held in our Trust Account of approximately $375,234,320 as of June 30, 2016, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote “FOR” the Business Combination. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of common stock included in the units sold in our IPO. We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 15% threshold. Each redemption of shares of Class A Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $375,234,320 as of June 30, 2016. The Master Transaction Agreement provides that our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the Private Placement (as defined below), together with the $50,000,000 representing a partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, equaling or exceeding $537,500,000. The obligations of the Selling Equityholders to consummate the Business Combination is conditioned on the amount of the Trust Account and the proceeds from the Private Placement (as defined below), together with the $50,000,000 representing a partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, equaling or exceeding $600,000,000. These conditions to closing in the Master Transaction Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Stock by our public stockholders, these conditions are not met (or waived), then we or the Selling Equityholders (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would cause our net tangible assets to be less than $5,000,001. Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination.

Our Initial Stockholders, current officers and other current directors have agreed to waive their redemption rights with respect to any shares of our common stock they may hold in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of common stock, including all of the Founder Shares. Our Initial Stockholders, directors and officers have agreed to vote any shares of the Company’s common stock owned by them in favor of the Business Combination. The Founder Shares are subject to transfer restrictions. Our current certificate of incorporation includes a conversion adjustment which provides that the Founder Shares will automatically convert at the time of the Business Combination into a number of shares of Class A Stock at the closing of the transactions contemplated by the Master Transaction Agreement, at a conversion rate that entitles the holders of such Founder Shares to continue to own, in the aggregate, 20% of our issued and outstanding shares of common stock after giving effect to the Private Placement (as defined below). However, our Initial Stockholders have agreed to waive such conversion adjustment and, instead, will receive upon conversion one share of Class A Stock for each Founder Share converted as of the closing of the Business Combination, such that the Initial Stockholders will hold, after giving effect to the cancellation of approximately 4,062,500 Founder Shares held by our Sponsor, approximately 8% of the total number of all shares of common stock outstanding after consummation of the Business Combination, consisting of the Founder Shares that will be automatically converted into shares of Class A Stock at the closing of the Business Combination and the shares of Class A Stock subscribed for by our Sponsor pursuant to its subscription agreement, but excluding any Bridge Shares.

The Business Combination is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals at the Special Meeting. Each of the proposals other than the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals, other than the Ratification Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement.

 

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We anticipate raising additional proceeds to fund the Business Combination and related transactions, including the repayment of approximately $173,000,000 of Hostess’ existing indebtedness, through a private placement of our Class A Stock (the “Private Placement”). The Private Placement was offered to a limited number of accredited investors (as defined by Rule 501 of Regulation D) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. In order to facilitate the Business Combination, our Sponsor has agreed to the cancellation of a portion of the Founder Shares held by it and to the acquisition of shares of Class A Stock and Class B Stock by the Selling Equityholders (pursuant to the Master Transaction Agreement) and the participants in the Private Placement (pursuant to subscription agreements entered into in connection therewith) at a discount. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination. The issuance of 20% or more of our outstanding common stock in connection with the Master Transaction Agreement, the Private Placement and the Executive Chairman Employment Agreement requires stockholder approval of the NASDAQ Proposal.

The approval of the proposal to adopt the Master Transaction Agreement and approve the transactions contemplated thereunder, including the Business Combination, requires the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote thereon at the Special Meeting. The approval of the NASDAQ Proposal requires the affirmative vote of holders of a majority of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. The approval of each of the Charter Amendment Proposals requires the affirmative vote of holders of a majority of our outstanding shares of common stock entitled to vote thereon at the Special Meeting. The approval of the Director Election Proposal requires the affirmative vote of the holders of a plurality of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. The approval of the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. The Board unanimously recommends that you vote “FOR” each of these proposals.

By Order of the Board of Directors

 

LOGO

Alec E. Gores

Chairman of the Board of Directors

Beverly Hills, California

October 21, 2016

 

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TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1   

FREQUENTLY USED TERMS

     8   

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

     13   

SUMMARY OF THE PROXY STATEMENT

     31   

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

     53   

SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF HOSTESS HOLDINGS

     55   

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     60   

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     63   

RISK FACTORS

     65   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (NO REDEMPTION SCENARIO)

     95   

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (NO REDEMPTION SCENARIO)

     101   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (MAXIMUM REDEMPTION SCENARIO)

     113   

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (MAXIMUM REDEMPTION SCENARIO)

     119   

COMPARATIVE SHARE INFORMATION

     129   

SPECIAL MEETING IN LIEU OF 2016 ANNUAL MEETING OF COMPANY STOCKHOLDERS

     132   

PROPOSAL NO. 1 — APPROVAL OF THE BUSINESS COMBINATION

     141   

PROPOSAL NO. 2 — APPROVAL OF THE ISSUANCE OF MORE THAN 20% OF THE COMPANY’S ISSUED AND OUTSTANDING COMMON STOCK IN CONNECTION WITH THE BUSINESS COMBINATION, THE PRIVATE PLACEMENT AND THE EXECUTIVE CHAIRMAN EMPLOYMENT AGREEMENT

     191   

PROPOSAL NO. 3 — CLASSIFICATION OF THE BOARD OF DIRECTORS

     194   

PROPOSAL NO. 4 — APPROVAL OF AMENDMENTS TO CURRENT CERTIFICATE TO AUTHORIZE ADDITIONAL SHARES OF COMMON STOCK

     196   

PROPOSAL NO. 5 — APPROVAL OF AMENDMENTS TO CURRENT CERTIFICATE TO CHANGE THE STOCKHOLDER VOTE REQUIRED TO AMEND THE CERTIFICATE OF INCORPORATION OF THE COMPANY

     204   

PROPOSAL NO. 6 — APPROVAL OF AMENDMENTS TO CURRENT CERTIFICATE TO ELECT NOT TO BE GOVERNED BY SECTION 203 OF THE DGCL

     206   

PROPOSAL NO. 7 — APPROVAL OF ADDITIONAL AMENDMENTS TO CURRENT CERTIFICATE IN CONNECTION WITH THE BUSINESS COMBINATION

     214   

PROPOSAL NO. 8 — ELECTION OF DIRECTORS TO THE BOARD OF DIRECTORS

     229   

 

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     Page  

PROPOSAL NO. 9 — APPROVAL OF THE INCENTIVE PLAN, INCLUDING THE AUTHORIZATION OF THE INITIAL SHARE RESERVE UNDER THE INCENTIVE PLAN AND ALSO FOR PURPOSES OF COMPLYING WITH SECTION 162(M) OF THE CODE

     233   

PROPOSAL NO. 10 — RATIFICATION OF APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     241   

PROPOSAL NO. 11 — THE ADJOURNMENT PROPOSAL

     243   

INFORMATION ABOUT THE COMPANY

     244   

THE COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     257   

INFORMATION ABOUT HOSTESS

     264   

HOSTESS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     280   

HOSTESS MANAGEMENT

     309   

EXECUTIVE COMPENSATION

     311   

MANAGEMENT AFTER THE BUSINESS COMBINATION

     321   

DESCRIPTION OF SECURITIES

     329   

BENEFICIAL OWNERSHIP OF SECURITIES

     341   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     345   

PRICE RANGE OF SECURITIES AND DIVIDENDS

     350   

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     351   

APPRAISAL RIGHTS

     351   

HOUSEHOLDING INFORMATION

     351   

TRANSFER AGENT AND REGISTRAR

     351   

SUBMISSION OF STOCKHOLDER PROPOSALS

     351   

FUTURE STOCKHOLDER PROPOSALS

     351   

WHERE YOU CAN FIND MORE INFORMATION

     353   

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

     F-1   

ANNEX A — MASTER TRANSACTION AGREEMENT

     A-1   

ANNEX B — SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF HOSTESS BRANDS, INC.

     B-1   

ANNEX C — AMENDED AND RESTATED BYLAWS OF HOSTESS BRANDS, INC.

     C-1   

ANNEX D — OPINION OF MOELIS

     D-1   

ANNEX E — CONTRIBUTION AND PURCHASE AGREEMENT

     E-1   

ANNEX F — EXCHANGE AGREEMENT

     F-1   

ANNEX G — TAX RECEIVABLE AGREEMENT

     G-1   

ANNEX H — AMENDED AND RESTATED REGISTRATION RIGHTS AND LOCK-UP AGREEMENT

     H-1   

 

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     Page  

ANNEX I-1 — FORM OF SUBSCRIPTION AGREEMENT

     I-1-1   

ANNEX I-2 — CANYON SUBSCRIPTION AGREEMENT

     I-2-1   

ANNEX I-3 — SPONSOR SUBSCRIPTION AGREEMENT

     I-3-1   

ANNEX J-1 — EXECUTIVE CHAIRMAN EMPLOYMENT AGREEMENT

     J-1-1   

ANNEX J-2 — EXECUTIVE CHAIRMAN AGREEMENT

     J-2-1   

ANNEX K — SPONSOR LETTER

     K-1   

ANNEX L — HOSTESS BRANDS, INC. 2016 EQUITY INCENTIVE PLAN

     L-1   

 

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SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the Special Meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

Gores Holdings, Inc., a Delaware corporation, which we refer to as “we,” “us,” “our,” or the “Company,” is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

   

There are currently 46,875,000 shares of Common Stock, par value $0.0001 per share, of the Company, issued and outstanding, consisting of (i) 37,500,000 shares of Class A Stock originally sold as part of the IPO, and (ii) 9,375,000 shares of Class F Stock that were initially issued to our Sponsor, prior to our IPO. There are currently no shares of Company preferred stock issued and outstanding. In addition, we issued 37,500,000 public warrants to purchase Class A Stock (originally sold as part of the units issued in our IPO) as part of our IPO along with 19,000,000 Private Placement Warrants issued to our Sponsor in a private placement prior to our IPO. Each warrant entitles its holder to purchase one-half of one share of our Class A Stock at an exercise price of $5.75 per half share, to be exercised only for a whole number of shares of our Class A Stock. The warrants will become exercisable on the later of 30 days after the completion of our initial business combination or August 19, 2016, and they expire five years after the completion of our initial business combination or earlier upon redemption or liquidation. Once the warrants become exercisable, the Company may redeem the outstanding warrants at a price of $0.01 per warrant, if the last sale price of the Company’s Common Stock equals or exceeds $24.00 per share for any 20 trading days within a 30 trading day period ending on the third business day before the Company sends the notice of redemption to the warrant holders. The Private Placement Warrants, however, are non-redeemable so long as they are held by our Sponsor or its permitted transferees. On July 27, 2016, our Sponsor loaned us $500,000 to fund our on-going operational expenses and certain transaction costs in connection with the Business Combination. At the option of our Sponsor, any amounts outstanding under any loan made by our Sponsor or an affiliate of our Sponsor to the Company in an aggregate amount up to $1,500,000, may be converted into warrants to purchase Class A Stock of the post-combination company. For more information regarding the warrants, please see the section entitled “Description of the Securities.”

 

   

Hostess, America’s Original Snack Cake, has been an iconic American brand for generations. Hostess offers a variety of new and classic treats like Twinkies®, Cupcakes, Ding Dongs®, Ho Hos®, Donettes®, and Fruit Pies that it believes delight snack fans across the nation. In 2013, the Selling Equityholders acquired the Hostess brand out of the bankruptcy liquidation proceedings of its prior owners, free and clear of all past liabilities. After a brief hiatus in production, Hostess began providing Hostess products to consumers and retailers across the nation in July 2013. By combining Hostess’ beloved brands’ established reputation with an innovative business model, Hostess rapidly recaptured market share. Three years after launching “The Sweetest Comeback in the History of Ever”® campaign, Hostess has reestablished a leading premium brand position in the $6.8 billion U.S. Sweet Baked Goods category. For more information about Hostess, please see the sections entitled “Information About Hostess,” “Hostess Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management after the Business Combination.”

 

   

Subject to the terms of the Master Transaction Agreement and customary adjustments set forth therein, the aggregate purchase price for the Business Combination and related transactions is expected to be approximately $2.3 billion, which amount will be increased by the amount of cash held by Hostess as of the closing of the Business Combination, and which amount will be decreased by the amount of

 

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Hostess’ outstanding indebtedness under its existing credit facilities, certain transaction fees and expenses, and certain payments to Hostess management under the Hostess LTIP. The consideration to be paid to the Selling Equityholders will be funded through a combination of cash and stock consideration. The amount of cash consideration payable to the Selling Equityholders is the sum of (i) cash available to us from the Trust Account, after giving effect to taxes payable, any redemptions that may be elected by any of our public stockholders for their pro rata share of the aggregate amount of funds on deposit in the Trust Account as of two business days prior to the closing of the Business Combination (which instructions to redeem such public shares are further discussed in this proxy statement), plus (ii) the anticipated gross proceeds of approximately $300,000,000 from the Private Placement, less (iii) certain transaction fees and expenses, including the payment of deferred underwriting commissions agreed to at the time of our IPO, less (iv) certain payments to Hostess management under the Hostess LTIP, less (v) approximately $173,000,000 that will be used to repay a portion of the existing indebtedness of Hostess. The remainder of the consideration paid to the Selling Equityholders will be stock consideration, consisting of approximately 22,136,188 newly issued shares of our publicly-traded Class A Stock and approximately 29,912,742 shares of our newly established Class B Stock, which includes approximately 5,446,429 shares of Class B Stock representing the partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, which shares will be valued at approximately $9.73 per share for purposes of determining the aggregate number of shares payable to the Selling Equityholders for their ownership interests therein. In addition, Mr. Metropoulos will receive 2,496,000 Class B Units (and an equivalent number of shares of Class B Stock) pursuant to the Executive Chairman Employment Agreement. The foregoing consideration to be paid to the Selling Equityholders and Mr. Metropoulos may be further increased by amounts payable under the Tax Receivable Agreement and amounts payable as earn-out shares of Class A Stock or Class B Stock and an equivalent number of Class B Units, as applicable. The number of shares of Class A Stock and Class B Stock (and a corresponding number of Class B Units) issued to the Selling Equityholders as Stock Consideration is subject to adjustment, depending on, among other things, the level of redemptions of shares of Class A Stock by our public stockholders. AP Hostess LP will receive shares of Class A Stock, and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos will receive shares of Class B Stock and shall hold an equivalent number of Class B Units. The Class B Units (including the Class B Units issued to Mr. Metropoulos under the Executive Chairman Employment Agreement) may be exchanged (together with the cancellation of an equivalent number of shares of Class B Stock) by the holders thereof for, at the election of the Company, shares of Class A Stock or the cash equivalent of such shares, in accordance with the Exchange Agreement. In order to facilitate the Business Combination, our Sponsor has agreed to the cancellation of approximately 4,062,500 of the Founder Shares held by it and to the acquisition of shares of Class A Stock and Class B Stock by the Selling Equityholders (pursuant to the Master Transaction Agreement) and the participants in the Private Placement (pursuant to subscription agreements entered into in connection therewith) at a discount. The remaining Founder Shares will automatically convert into shares of Class A Stock on a one-for-one basis at the closing of the transactions contemplated by the Master Transaction Agreement and will continue to be subject to the transfer restrictions applicable to the Founder Shares. For more information about the Master Transaction Agreement, please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Master Transaction Agreement.”

 

   

In addition, Mr. Metropoulos has entered into an agreement with our Sponsor that provides for the potential transfer of Private Placement Warrants and Founder Shares held by our Sponsor to Mr. Metropoulos. In the event that our Sponsor transfers its commitment to purchase 12,308,929 shares of Class A Stock pursuant to the Private Placement, representing an aggregate subscription amount of approximately $113,000,000, to third parties prior to the closing of the Business Combination, then our Sponsor will, immediately prior to the closing, transfer 2,000,000 Private Placement Warrants and 500,000 Founder Shares to Mr. Metropoulos. To the extent that the Sponsor transfers less than all of the Bridge Shares, then the Sponsor will transfer a proportionally reduced portion of such Private Placement Warrants and Founder Shares to Mr. Metropoulos.

 

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It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 29% in the post-combination company; (ii) the Private Placement Investors (other than our Sponsor) will own approximately 21% of the post-combination company (such that public stockholders, including Private Placement Investors other than our Sponsor, will own approximately 50% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor, and the shares of Class A Stock purchased by it in the Private Placement) will own approximately 8% of the post-combination company, after giving effect to the cancellation of approximately 4,062,500 Founder Shares held by our Sponsor; (iv) AP Hostess LP will own approximately 17% of the post-combination company; (v) Hostess CDM Co-Invest will own approximately 21% of the post-combination company; (vi) CDM Hostess will own approximately 2% of the post-combination company and (vii) Mr. Metropoulos and/or his designee will own approximately 2% of the post-combination company (and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos, collectively, will own approximately 25% of the post-combination company). 100% of the shares of Class B Stock will be owned by the CDM Holders. These levels of ownership interest assume that no shares are elected to be redeemed, that all Bridge Shares have been transferred to third parties prior to the closing of the transactions contemplated by the Master Transaction Agreement and that our Sponsor and Mr. Metropoulos have not exercised any of the Private Placement Warrants. The Private Placement Investors have agreed to purchase in the aggregate approximately 32,678,576 shares of Class A Stock, for approximately $300,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $97,000,000 of the gross proceeds from the Private Placement, in addition to $375,000,000 of the funds from the Trust Account, will be used to fund the cash consideration payable to the Selling Equityholders, the repayment of approximately $173,000,000 of Hostess’ existing indebtedness and the payment of certain transaction expenses. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares of Class A Stock under the Exchange Agreement, a copy of which is attached to this proxy statement as Annex F, upon the exchange of Class B Units (and the cancellation of shares of Class B Stock), or (c) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, a copy of which is attached to this proxy statement as Annex L, but does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis (after giving effect to the cancellation of approximately 4,062,500 of such shares and even though such shares of Class A Stock will be subject to transfer restrictions). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information.”

 

   

Our management and Board considered various factors in determining whether to approve the Master Transaction Agreement and the transactions contemplated thereby, including the Business Combination, including that Hostess is an iconic American brand with very strong brand awareness and a significant market share in the sweet baked goods market. For more information about our decision-making process, see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”

 

   

Pursuant to our current certificate of incorporation, in connection with the Business Combination, holders of our public shares may elect to have their Class A Stock redeemed for cash at the applicable redemption price per share calculated in accordance with our current certificate of incorporation. As of June 30, 2016, this would have amounted to approximately $10.00 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Class A Stock for cash and will no longer own shares of the post-combination company and will not participate in the future growth of the post-combination company, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our transfer

 

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agent at least two business days prior to the Special Meeting. Please see the section entitled “Special Meeting in Lieu of 2016 Annual Meeting of the Company’s Stockholders — Redemption Rights.

 

   

In addition to voting on the proposal to adopt the Master Transaction Agreement and approve the transactions contemplated thereunder, including the Business Combination, at the Special Meeting, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable NASDAQ Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock in connection with the Business Combination, the Private Placement and the Executive Chairman Employment Agreement, which we refer to as the “NASDAQ Proposal” (Proposal No. 2);

 

   

five separate proposals to approve and adopt amendments to the Company’s current certificate of incorporation to:

 

   

provide for the classification of our Board into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 3);

 

   

authorize an additional 40,000,000 shares of common stock, which would consist of (i) establishing 50,000,000 shares of a newly designated class of Class B Stock, in order to provide for our “Up-C” structure, which allows certain of the Selling Equityholders to continue to hold their ownership interest in Hostess in a tax efficient manner, and (ii) decreasing the post-combination company’s shares of Class F Stock from 20,000,000 shares to 10,000,000 shares (Proposal No. 4);

 

   

change the stockholder vote required to amend certain provisions of the post-combination company’s proposed certificate of incorporation and bylaws (Proposal No. 5);

 

   

elect not to be governed by Section 203 of the DGCL and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes (Proposal No. 6); and

 

   

provide for certain additional changes, including changing the post-combination company’s corporate name from “Gores Holdings, Inc.” to “Hostess Brands, Inc.,” providing that certain transactions are not “corporate opportunities” and that certain persons, including the Selling Equityholders and their affiliates, are not subject to the doctrine of corporate opportunity, and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company, subject to approval by our stockholders at the Special Meeting (Proposal No. 7).

 

   

a proposal to elect seven directors to serve staggered terms on our Board until the 2017, 2018 and 2019 annual meeting of stockholders, respectively and until their respective successors are duly elected and qualified, which we refer to as the “Director Election Proposal” (Proposal No. 8);

 

   

a proposal to approve the Incentive Plan, including the authorization of the initial share reserve under the Incentive Plan and also for purposes of complying with Section 162(m) of the Code, which we collectively refer to as the “Incentive Plan Proposal” (Proposal No. 9);

 

   

a proposal to ratify the appointment of KPMG as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 (Proposal No. 10); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals (Proposal No. 11).

 

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Please see the sections entitled “Proposal No. 1 — Approval of the Business Combination,” Proposal No. 2 — Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination, the Private Placement and the Executive Chairman Employment Agreement,” “Proposal No. 3 — Classification of the Board of Directors,” “Proposal No. 4 — Approval of Amendments to Current Certificate to Authorize Additional Shares of Common Stock,” “Proposal No. 5 — Approval of Amendments to Current Certificate to Change the Stockholder Vote Required to Amend the Certificate of Incorporation and Bylaws of the Company,” “Proposal No. 6 — Approval of Amendments to Current Certificate to Elect not to be Governed by Section 203 of the DGCL,” “Proposal No. 7 — Approval of Additional Amendments to Current Certificate in Connection with the Business Combination,” “Proposal No. 8 — Election of Directors to the Board of Directors,” “Proposal No. 9 — Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan and Also for Purposes of Complying with Section 162(m) of the Code,” “Proposal No. 10 — Ratification of Appointment of the Company’s Independent Registered Public Accounting Firm” and “Proposal No. 11 — The Adjournment Proposal.” The Business Combination is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals at the Special Meeting. Each of the proposals other than the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals, other than the Ratification Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement.

 

   

Upon the closing of the Business Combination, we anticipate increasing the initial size of our Board from four to seven directors, each of whom will be voted upon by our stockholders at the Special Meeting. If all director nominees are elected and the Business Combination is consummated, our Board will consist of seven directors. Please see the sections entitled “Proposal No. 8 — Election of Directors to the Board of Directors” and “Management after the Business Combination.”

 

   

Unless waived by the parties to the Master Transaction Agreement, and subject to applicable law, the closing of the Business Combination is subject to a number of conditions set forth in the Master Transaction Agreement including, among others, termination of the waiting period under the HSR Act and receipt of certain stockholder approvals contemplated by this proxy statement. For more information about the closing conditions to the Business Combination, please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Master Transaction Agreement — Conditions to Closing of the Business Combination.”

 

   

The Master Transaction Agreement may be terminated at any time prior to the consummation of the Business Combination upon agreement of the parties thereto, or by the Company or the Selling Equityholders, upon notice from the Sellers’ Representative to the Company, in specified circumstances. For more information about the termination rights under the Master Transaction Agreement, please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Master Transaction Agreement — Termination.”

 

   

The proposed Business Combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

 

   

In considering the recommendation of our Board to vote for the proposals presented at the Special Meeting, including the Business Combination Proposal, you should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, the interests of our stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and transaction agreements and in recommending to our stockholders that they vote in favor of the proposals presented at the Special Meeting, including the Business Combination Proposal. Stockholders should take these interests into account in deciding

 

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whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $53,125,000 (after giving effect to the cancellation of approximately 4,062,500 Founder Shares) but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by August 19, 2017;

 

   

the fact that our Sponsor paid an aggregate of $9,500,000 for its 19,000,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 19, 2017;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

the fact that, at the option of our Sponsor, any amounts outstanding under any loan made by our Sponsor or an affiliate of our Sponsor to the Company in an aggregate amount up to $1,500,000, may be converted into warrants to purchase Class A Stock of the post-combination company;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, The Gores Group, an affiliate of our Sponsor, has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the anticipated election of our Chief Executive Officer, Mr. Mark R. Stone, as a director of the post-combination company;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors may not participate in the formation of, or become a director or officer of, any other blank check company until we (i) have entered into a definitive agreement regarding an initial business combination or (ii) fail to complete an initial business combination by August 19, 2017; provided that, in the case of clause (i), such other blank check company does not consummate its initial public offering prior to the consummation of the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 19, 2017;

 

   

that, as described in the Charter Amendment Proposals and reflected in Annex B, our proposed certificate of incorporation will be amended to exclude The Gores Group, Apollo and the CDM Holders and each of their successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations not in compliance with Section 203 of the DGCL;

 

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that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees and provides that our Initial Stockholders will vote all of their shares of Class A Stock in favor of the election to the Board of Mr. Metropoulos (or his designee for so long as Mr. Metropoulos is entitled to serve on the Board or appoint a member of the Board, as applicable, pursuant to the terms of the Executive Chairman Director Agreement); and

 

   

that our Sponsor has entered into the Sponsor Subscription Agreement with the Company, pursuant to which our Sponsor has committed to purchase up to 17,755,358 shares of Class A Stock in the Private Placement for an aggregate commitment of $163,000,000. Pursuant to the terms of the Sponsor Subscription Agreement, our Sponsor may transfer or assign its rights to purchase shares of Class A Stock to third parties in compliance with the Securities Act, so long as our Sponsor, together with any controlled affiliates or employees of The Gores Group or Platinum Equity LLC or their respective controlled affiliates party to any other Subscription Agreement, maintains a subscription level of at least $50,000,000.

 

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FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Gores” refer to Gores Holdings, Inc., and the term “post-combination company” refers to the Company following the consummation of the Business Combination.

In this proxy statement:

AP Hostess Holdings” means AP Hostess Holdings, Inc., a Delaware corporation and wholly owned subsidiary of AP Hostess LP controlled by Apollo.

AP Hostess LP” means AP Hostess Holdings, L.P., a Delaware limited partnership controlled by Apollo.

Apollo” means Apollo Global Management, LLC, a Delaware limited liability company.

Board” means the board of directors of the Company.

Business Combination” means the transactions contemplated by the Master Transaction Agreement, including: (i) the mergers of: (A) Hostess Management with and into Hostess Holdings, with Hostess Holdings continuing as the surviving entity; (B) Company Merger Sub with and into AP Hostess Holdings, with AP Hostess Holdings continuing as the surviving entity; and (C) immediately thereafter, the merger of AP Hostess Holdings with and into the Company, with the Company continuing as the surviving entity; and (ii) the purchase by the Company of certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Equityholders.

Bridge Shares” means the up to 12,308,929 shares of Class A Stock constituting a portion of the shares of Class A Stock our Sponsor committed to purchase pursuant to the Sponsor Subscription Agreement that our Sponsor may transfer to third parties in compliance with the Securities Act prior to the closing of the Business Combination.

CDM Holders” means CDM Hostess, Hostess CDM Co-Invest and Mr. Metropoulos, collectively.

CDM Hostess” means CDM Hostess Class C, LLC, a Delaware limited liability company controlled by Mr. Metropoulos and owned by certain trusts for the benefit of Mr. Metropoulos and other members of the Metropoulos family and associates of Mr. Metropoulos.

CDM Rollover Amount” means $50,000,000, which represents a partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess.

CDM Rollover Shares” means 5,446,429 shares of Class B Stock, which represents a partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess.

Class A Stock” means the shares of Class A Common Stock, par value $0.0001 per share, of the Company.

Class A Units” means the Class A Units of Hostess Holdings.

Class B Stock” means the shares of Class B Common Stock, par value $0.0001 per share, of the Company.

Class B Units” means the Class B Units of Hostess Holdings.

Class F Stock” means the shares of Class F Common Stock, par value $0.0001 per share, of the Company.

Code” means the Internal Revenue Code of 1986, as amended.

Common Stock” means the shares of common stock, par value $0.0001 per share, of the Company.

 

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Company” means Gores Holdings, Inc., a Delaware corporation.

Company Merger Sub” means Homer Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company.

Contribution Agreement” means that certain Contribution and Purchase Agreement to be entered into at the closing of the transactions contemplated by the Master Transaction Agreement, including the Business Combination, by the Company, Hostess CDM Co-Invest and CDM Hostess.

current certificate of incorporation” or “current certificate” means our amended and restated certificate of incorporation, dated August 13, 2015.

DGCL” means the General Corporation Law of the State of Delaware.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Exchange Agreement” means that certain Exchange Agreement to be entered into at the closing of the transactions contemplated by the Master Transaction Agreement, including the Business Combination, by the Company, Hostess Holdings, the CDM Holders and such other holders of Class B Units from time to time party thereto.

Executive Chairman Arrangement” means our arrangement with Mr. Metropoulos, as set forth in the Executive Chairman Director Agreement and the Executive Chairman Employment Agreement.

Executive Chairman Director Agreement” means that certain Executive Chairman Agreement, dated July 28, 2016, by and between the Company and Mr. Metropoulos.

Executive Chairman Employment Agreement” means that certain Executive Chairman Employment Agreement, dated July 28, 2016, by and among Hostess Brands, Hostess Holdings, and in a limited capacity, the Company, and Mr. Metropoulos.

Founder Shares” means the 9,375,000 shares of Class F Stock that are currently owned by our Initial Stockholders, of which 9,300,000 shares are held by our Sponsor and 25,000 shares are held by each of Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea.

Gores Restricted Stock” means that portion of the shares of Class A Stock acquired by our Sponsor at the closing of the Business Combination for an aggregate purchase price of $50,000,000 or less.

Hostess” means the Hostess Companies and their subsidiaries.

Hostess Board” means the board of directors of Hostess Holdings GP.

Hostess Brands” means Hostess Brands, LLC, a Delaware limited liability company.

Hostess Companies” means each of AP Hostess Holdings, Hostess Holdings GP and Hostess Holdings.

Hostess CDM Co-Invest” means Hostess CDM Co-Invest, LLC, a Delaware limited liability company controlled by Mr. Metropoulos and owned by certain trusts for the benefit of Mr. Metropoulos and other members of the Metropoulos family and associates of Mr. Metropoulos.

Hostess Holdings” means Hostess Holdings, L.P., a Delaware limited partnership.

Hostess Holdings GP” means Hostess Holdings GP, LLC, a Delaware limited liability company and the general partner of Hostess Holdings.

Hostess LTIP” means Hostess Brand’s Long Term Incentive Plan.

 

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Hostess Management” means Hostess Management, LLC, a Delaware limited liability company.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Incentive Plan” means the Hostess Brands, Inc. 2016 Equity Incentive Plan.

Initial Stockholders” means our Sponsor and Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea, the Company’s independent directors.

Investment Company Act” means the Investment Company Act of 1940, as amended.

Investor Subscription Agreements” means those certain subscription agreements entered into on July 5, 2016 between the Company and each of Canyon Capital Advisors LLC, Northwestern Mutual Life Insurance Company and certain of its affiliates, Teachers’ Retirement System of the State of Illinois and certain other accredited investors relating to the Private Placement.

IPO” means the Company’s initial public offering, consummated on August 19, 2015, through the sale of 37,500,000 public units (including 2,500,000 units sold pursuant to the underwriters’ partial exercise of their over-allotment option) at $10.00 per unit.

KPMG” means KPMG LLP, an independent registered public accounting firm.

Master Transaction Agreement” means that certain Master Transaction Agreement, dated as of July 5, 2016, by and among the Company, Company Merger Sub, AP Hostess LP, Hostess CDM Co-Invest, CDM Hostess and AP Hostess LP, in its capacity as the Sellers’ Representative thereunder.

Moelis” means Moelis & Company LLC.

Morgan Lewis” means Morgan, Lewis & Bockius LLP, counsel to Hostess.

Morrow” means Morrow Sodali, proxy solicitor to the Company.

Mr. Metropoulos” means Mr. C. Dean Metropoulos, in his individual capacity.

NASDAQ” means the National Association of Securities Dealers Automated Quotations Capital Market.

Paul Weiss” means Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the CDM Holders.

Private Placement” means the private placement of approximately 32,678,576 shares of Class A Stock with a limited number of accredited investors (as defined by Rule 501 of Regulation D) pursuant to Section 4(a)(2) of the Securities Act, for gross proceeds to the Company in an aggregate amount of approximately $300,000,000.

Private Placement Investors” means, our Sponsor, Canyon Capital Advisors LLC (on behalf of one or more managed funds or accounts), The Northwestern Mutual Life Insurance Company and certain of its affiliates, Teachers’ Retirement System of the State of Illinois and certain other “accredited investors” (as defined in Rule 501 under the Securities Act).

Private Placement Shares” means the shares of Class A Stock subscribed for by the Private Placement Investors pursuant to the Subscription Agreements.

Private Placement Warrants” means the warrants held by our Sponsor that were issued to our Sponsor prior to our IPO, each of which is exercisable for one-half of one share of Class A Stock, in accordance with its terms.

 

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proposed certificate of incorporation” or “proposed certificate” means the proposed second amended and restated certificate of incorporation of the Company, a form of which is attached hereto as Annex B, which will become the post-combination company’s certificate of incorporation upon the approval of the Charter Amendment Proposals, assuming the consummation of the Business Combination.

public shares” means shares of Class A Stock included in the units issued in the Company’s IPO.

public stockholders” means holders of public shares, including our Initial Stockholders to the extent our Initial Stockholders hold public shares, provided, that our Initial Stockholders will be considered a “public stockholder” only with respect to any public shares held by them.

public units” or “units” means one share of Class A Stock and one public warrant of the Company, whereby each public warrant entitles the holder thereof to purchase one-half of a share of Class A Stock at an exercise price of $5.75 per half share of Class A Stock, sold in the IPO.

public warrants” means the warrants included in the units issued in the Company’s IPO, each of which is exercisable for one-half of one share of Class A Stock, in accordance with its terms.

Registration Rights Agreement” means that certain Amended and Restated Registration Rights and Lock-Up Agreement to be entered into at the closing of the transactions contemplated by the Master Transaction Agreement, including the Business Combination, by Hostess Brands, Inc. (formerly the Company), AP Hostess LP, Hostess CDM Co-Invest, CDM Hostess, Mr. Metropoulos, the Sponsor, Mr. Randall Bort, Mr. William Patton and Mr. Jeffrey Rea.

Related Agreements” means the Contribution Agreement, the Exchange Agreement, the Tax Receivable Agreement, the Registration Rights Agreement, the Subscription Agreements, the Executive Chairman Arrangement, the Sponsor Letter Agreement and the Incentive Plan.

Restricted Stockholders” means our Sponsor, the Selling Equityholders, Mr. Metropoulos, Mr. Randall Bort, Mr. William Patton and Mr. Jeffery Rea.

“Restricted Stock” means any shares of Class A Stock, shares of Class B Stock, Private Placement Warrants, Class A Units, Class B Units, Gores Restricted Stock, or any options or warrants to purchase any shares of Class A Stock, shares of Class B Stock, Private Placement Warrants, Class A Units, Class B Units, Gores Restricted Stock or any securities convertible into, exercisable for, exchangeable for or that represent the right to receive shares of Class A Stock, shares of Class B Stock, Private Placement Warrants, Class A Units, Class B Units or Gores Restricted Stock held by the Restricted Stockholders; provided, that, the Restricted Stock will not include any shares of Class A Stock acquired pursuant to a subscription agreement entered into with the Company in connection with the Business Combination (other than Gores Restricted Stock), any of the CDM Rollover Shares (together with a corresponding number of Class B Units) and any of the Class B Stock (together with a corresponding number of Class B Units) that are issued to Mr. Metropoulos pursuant to the Executive Chairman Employment Agreement at the time of the closing of the Business Combination.

Rollover Credit Agreements” means, collectively (i) that certain First Lien Credit Agreement, dated as of August 3, 2015, by and among HB Holdings, LLC, Hostess Brands, the lenders party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent, and (ii) that certain Second Lien Credit Agreement, dated as of August 3, 2015, by and among HB Holdings, LLC, Hostess Brands, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent.

SEC” means the United States Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended.

 

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Sellers’ Representative” means AP Hostess LP, in its capacity as the sellers’ representative.

Selling Equityholders” means AP Hostess LP, Hostess CDM Co-Invest and CDM Hostess.

Special Meeting” means the special meeting in lieu of the 2016 annual meeting of the stockholders of the Company that is the subject of this proxy statement.

Sponsor” means Gores Sponsor LLC, a Delaware limited liability company.

Sponsor Letter Agreement” means that certain Letter Agreement, dated as of July 5, 2016, by and among the Company, Mr. Metropoulos, our Sponsor and Platinum Equity, LLC.

Sponsor Shares” means the 17,755,358 shares of Class A Stock subscribed for by our Sponsor pursuant to the Sponsor Subscription Agreement.

Sponsor Subscription Agreement” means the subscription agreement entered into on July 5, 2016 between us and our Sponsor.

Stock Consideration” means the Class A Stock and the Class B Stock to be issued to the Selling Equityholders pursuant to the terms of the Master Transaction Agreement.

Subscription Agreements” means the Investor Subscription Agreements and the Sponsor Subscription Agreement.

Tax Receivable Agreement” means that certain Tax Receivable Agreement to be entered into at the closing of the transactions contemplated by the Master Transaction Agreement, including the Business Combination, by the Company, Hostess CDM Co-Invest, CDM Hostess, AP Hostess LP and Mr. Metropoulos.

The Gores Group” means The Gores Group LLC, an affiliate of our Sponsor.

Transfer Agent” means Continental Stock Transfer & Trust Company.

Trust Account” means the trust account of the Company that holds the proceeds from the Company’s IPO.

Trustee” means Continental Stock Transfer & Trust Company.

Weil” means Weil, Gotshal & Manges LLP, counsel to the Company.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the Special Meeting, which will be held on November 3, 2016, at 9:00 a.m., Eastern Time, at the offices of Weil, Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, NY 10153.

 

Q:

Why am I receiving this proxy statement?

 

A:

Our stockholders are being asked to consider and vote upon a proposal to adopt the Master Transaction Agreement and approve the transactions contemplated thereby, among other proposals. We have entered into the Master Transaction Agreement providing for, among other things: (i) the mergers of: (A) Hostess Management with and into Hostess Holdings, with Hostess Holdings continuing as the surviving entity; (B) Company Merger Sub with and into AP Hostess Holdings, with AP Hostess Holdings continuing as the surviving entity; and (C) immediately thereafter, AP Hostess Holdings with and into the Company, with the Company continuing as the surviving entity; and (ii) the purchase by the Company of certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Equityholders, which we refer to herein as the “Business Combination.” As a result of the foregoing, we will acquire Hostess. You are being asked to vote on the Business Combination between us and Hostess. Subject to the terms of the Master Transaction Agreement and customary adjustments set forth therein, the aggregate purchase price for the Business Combination and related transactions is expected to be approximately $2.3 billion. A copy of the Master Transaction Agreement is attached to this proxy statement as Annex A.

This proxy statement and its Annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Special Meeting. You should read this proxy statement and its Annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its Annexes.

 

Q:

When and where is the Special Meeting?

 

A:

The Special Meeting will be held on November 3, 2016, at 9:00 a.m., Eastern Time, at the offices of Weil, Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, NY 10153.

 

Q:

What are the specific proposals on which I am being asked to vote at the Special Meeting?

 

A:

The Company’s stockholders are being asked to approve the following proposals:

 

  1.

Business Combination Proposal — To adopt the Master Transaction Agreement and approve the transactions contemplated thereby, including the Business Combination (Proposal No. 1);

 

  2.

NASDAQ Proposal — To approve, for purposes of complying with applicable NASDAQ Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock in connection with the Business Combination, the Private Placement and the Executive Chairman Employment Agreement (Proposal No. 2);

 

  3.

Charter Amendment Proposals — To consider and act upon five separate proposals to amend the Company’s current certificate of incorporation to:

 

   

provide for the classification of our Board into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 3);

 

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authorize an additional 40,000,000 shares of Common Stock, which would consist of (i) establishing 50,000,000 shares of a newly designated class of Class B Stock, in order to provide for our “Up-C” structure, which allows certain of the Selling Equityholders to continue to hold their ownership interest in Hostess in a tax efficient manner, and (ii) decreasing the post-combination company’s shares of Class F Stock from 20,000,000 shares to 10,000,000 shares (Proposal No. 4);

 

   

change the stockholder vote required to amend certain provisions of the post-combination company’s proposed certificate of incorporation and bylaws (Proposal No. 5);

 

   

elect not to be governed by Section 203 of the DGCL and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes (Proposal No. 6); and

 

   

provide for certain additional changes, including changing the post-combination company’s corporate name from “Gores Holdings, Inc.” to “Hostess Brands, Inc.,” providing that certain transactions are not “corporate opportunities” and that certain persons, including the Selling Equityholders and their affiliates, are not subject to the doctrine of corporate opportunity, and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company, subject to approval by our stockholders at the Special Meeting (Proposal No. 7);

 

  4.

Director Election Proposal — To elect seven directors to serve staggered terms on our Board until the 2017, 2018 and 2019 annual meeting of stockholders, respectively and until their respective successors are duly elected and qualified (Proposal No. 8);

 

  5.

Incentive Plan Proposal — To approve the Incentive Plan, including the authorization of the initial share reserve under the Incentive Plan and also for purposes of complying with Section 162(m) of the Code (Proposal No. 9);

 

  6.

Ratification Proposal — To ratify the appointment of the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 (Proposal No. 10); and

 

  7.

Adjournment Proposal — To approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals. (Proposal No. 11).

 

Q:

Are the proposals conditioned on one another?

 

A:

Yes. The Business Combination is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals at the Special Meeting. Each of the proposals other than the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals, other than the Ratification Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement. It is important for you to note that in the event that the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals do not receive the requisite vote for approval, then we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by August 19, 2017, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the public stockholders.

 

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Q:

Why is the Company providing stockholders with the opportunity to vote on the Business Combination?

 

A:

Under our current certificate of incorporation, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the Business Combination Proposal in order to allow our public stockholders to effectuate redemptions of their public shares in connection with the closing of our Business Combination. The adoption of the Master Transaction Agreement is required under Delaware law and the approval of the Business Combination is required under our current certificate of incorporation. In addition, such approval is also a condition to the closing of the Business Combination under the Master Transaction Agreement.

 

Q:

What revenues and profits/losses has Hostess generated in the last three years?

 

A:

For the fiscal years ended December 31, 2015, December 31, 2014 and for the period from February 6, 2013 (inception) through December 31, 2013, Hostess had total net revenue of $620,815,000, $554,695,000 and $237,418,000, and net income (loss) including non-controlling interest of $88,760,000, $81,464,000 and ($5,594,000), respectively. At the end of fiscal year 2015, Hostess’ total assets were $613,871,000 and its total liabilities were $1,273,992,000. In connection with the Business Combination, the Company will repay approximately $173,000,000 of Hostess’ existing indebtedness. For additional information, please see the sections entitled “Selected Historical Financial Information of Hostess Holdings” and “Hostess Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Q:

What will happen in the Business Combination?

 

A:

Pursuant to the Master Transaction Agreement, and upon the terms and subject to the conditions set forth therein, the Company will acquire Hostess through a series of mergers and equity purchases, which transactions we collectively refer to as the “Business Combination.” First, Hostess Management will merge with and into Hostess Holdings, with Hostess Holdings continuing as the surviving entity with certain of the Selling Equityholders as its sole owners. Second, Company Merger Sub will merge with and into AP Hostess Holdings, with AP Hostess Holdings continuing as the surviving entity with the Company as its sole owner. Third, immediately following the effectiveness of the merger of Company Merger Sub with and into AP Hostess Holdings, AP Hostess Holdings will merge with and into the Company, with the Company continuing as the surviving entity. In addition, the Company will purchase certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Equityholders in exchange for shares of Common Stock of the Company. After giving effect to the foregoing transactions, Hostess Holdings will continue as a subsidiary of the Company and the Selling Equityholders will hold a portion of the Company’s Common Stock and certain Class B Units of Hostess Holdings.

 

Q:

Following the Business Combination, will the Company’s securities continue to trade on a stock exchange?

 

A:

Yes. We intend to apply to continue the listing of the post-combination company’s Class A Stock and public warrants on NASDAQ under the symbols “TWNK” and “TWNKW,” respectively, upon the closing of the Business Combination. Our public units will automatically separate into the component securities upon consummation of the Business Combination and, as a result, will no longer trade as a separate security.

 

Q:

How has the announcement of the Business Combination affected the trading price of the Company’s Class A Stock?

 

A:

On July 1, 2016, the trading date before the public announcement of the Business Combination, the Company’s public units, Class A Stock and warrants closed at $10.00, $9.7799 and $0.25, respectively. On October 20, 2016, the trading date immediately prior to the date of this proxy statement, the Company’s public units, Class A Stock and warrants closed at $13.39, $11.47 and $1.30, respectively.

 

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Q:

How will the Business Combination impact the shares of the Company outstanding after the Business Combination?

 

A:

After the Business Combination, the amount of Common Stock outstanding will increase by approximately 177.4% to approximately 130,036,006 shares of Common Stock (assuming that no shares of Class A Stock are redeemed), consisting of approximately 97,627,264 shares of Class A Stock (including the conversion of the Founder Shares into Class A Stock) and approximately 32,408,742 shares of Class B Stock (including the CDM Rollover Shares and shares of Class B Stock issued to Mr. Metropoulos pursuant to the Executive Chairman Employment Agreement). The Class B Units are exchangeable (together with the cancellation of shares of Class B Stock) by the holders thereof for, at the Company’s election, shares of Class A Stock or the cash equivalent of such shares. Additional shares of Common Stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding, including: (i) issuance of shares of Class A Stock or Class B Stock as earn-out shares for achievement of specified thresholds in the Master Transaction Agreement, and (ii) issuance of shares of Class A Stock upon exercise of the public warrants and Private Placement Warrants after the Business Combination. The issuance and sale of such shares in the public market could adversely impact the market price of our Common Stock, even if our business is doing well.

 

Q:

What are the principal differences between Class A Stock and Class B Stock?

 

A:

The Class B Stock will be established to provide for the “Up-C” structure, which allows the CDM Holders to continue to hold their ownership interest in Hostess in a tax efficient manner. After the Business Combination, the Class A Stock and Class B Stock will constitute all of the classes of Common Stock of the Company and will possess all voting power for the election of directors of the Company and all other matters requiring stockholder action. The Class A Stock and Class B Stock will at all times vote together as one class on all matters submitted to a vote of the stockholders of the Company, which shares of Class A Stock and Class B Stock each are entitled to one vote per share. The principal difference between the Class A Stock and Class B Stock is that the Class B Stock will not be entitled to receive dividends, if declared by the Board, or to receive any portion of any assets in respect of such shares upon the liquidation, dissolution, distribution of assets or winding-up of the post-combination company. In addition, the Class B Stock may only be issued to and held by the CDM Holders and their respective permitted transferees and any other transferee of Class B Units (to the extent permitted by the limited partnership agreement of Hostess Holdings then in effect) (collectively, the “Permitted Holders”).

At any time Hostess Holdings issues a Class B Unit to a Permitted Holder, the Company will issue a share of Class B Stock to such Permitted Holder. Upon the conversion or cancellation of any Class B Units pursuant to the Exchange Agreement for shares of Class A Stock (or the cash value thereof), the corresponding share of Class B Stock automatically will be cancelled for no consideration. Shares of Class B Stock may only be transferred to a person other than the Company or Hostess Holdings if the transferee is a Permitted Holder and an equal number of Class B Units are simultaneously transferred to such transferee.

 

Q:

Is the Business Combination the first step in a “going private” transaction?

 

A:

No. The Company does not intend for the Business Combination to be the first step in a “going private” transaction. One of the primary purposes of the Business Combination is to provide a platform for Hostess to access the U.S. public markets.

 

Q:

Will the management of Hostess change in the Business Combination?

 

A:

We anticipate that all of the executive officers of Hostess will remain with the post-combination company. The current directors of Hostess will resign at the time of the Business Combination. Messrs. C. Dean Metropoulos, Andrew Jhawar, Mark R. Stone, Laurence Bodner, Neil P. DeFeo, Jerry D. Kaminski and Craig D. Steeneck have been nominated to serve as directors of the post-combination company upon completion of the Business Combination.” Please see the sections entitled “Proposal No. 8 — Election of Directors to the Board of Directors” and “Management After the Business Combination” for additional information.

 

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Q:

What equity stake will current stockholders of the Company, Private Placement Investors and the Selling Equityholders hold in the post-combination company after the closing?

 

A:

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 29% in the post-combination company; (ii) the Private Placement Investors (other than our Sponsor) will own approximately 21% of the post-combination company (such that public stockholders, including Private Placement Investors other than our Sponsor, will own approximately 50% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor, and the shares of Class A Stock purchased by it in the Private Placement) will own approximately 8% of the post-combination company, after giving effect to the cancellation of approximately 4,062,500 Founder Shares held by our Sponsor; (iv) AP Hostess LP will own approximately 17% of the post-combination company; (v) Hostess CDM Co-Invest will own approximately 21% of the post-combination company; (vi) CDM Hostess will own approximately 2% of the post-combination company and (vii) Mr. Metropoulos and/or his designee will own approximately 2% of the post-combination company (and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos, collectively, will own approximately 25% of the post-combination company). 100% of the shares of Class B Stock will be owned by the CDM Holders. These levels of ownership interest assume that no shares are elected to be redeemed, that all Bridge Shares have been transferred to third parties prior to the closing of the transactions contemplated by the Master Transaction Agreement and that our Sponsor and Mr. Metropoulos have not exercised any of the Private Placement Warrants. The Private Placement Investors have agreed to purchase in the aggregate approximately 32,678,576 shares of Class A Stock, for approximately $300,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $97,000,000 of the gross proceeds from the Private Placement, in addition to $375,000,000 of the funds from the Trust Account, will be used to fund the cash consideration payable to the Selling Equityholders, the repayment of approximately $173,000,000 of Hostess’ existing indebtedness and the payment of certain transaction expenses. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares of Class A Stock under the Exchange Agreement, a copy of which is attached to this proxy statement as Annex F, upon the exchange of Class B Units (and the cancellation of shares of Class B Stock), or (c) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, a copy of which is attached to this proxy statement as Annex L, but does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis (after giving effect to the cancellation of approximately 4,062,500 of such shares and even though such shares of Class A Stock will be subject to transfer restrictions). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

 

Q:

Will the Company obtain new financing in connection with the Business Combination?

 

A:

Yes. The Company will obtain new equity financing through a private placement of Class A Stock in the Private Placement. The Company will use the proceeds from the Private Placement, together with the funds in the Trust Account, to fund the cash consideration payable to the Selling Equityholders in the Business Combination, to repay approximately $173,000,000 of the existing indebtedness of Hostess and to pay certain transaction expenses. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination. In addition, the Company will be assuming approximately $991,800,000 of the existing net indebtedness of Hostess. The Company does not anticipate obtaining any new debt financing to fund the Business Combination.

 

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Q:

What conditions must be satisfied to complete the Business Combination?

 

A:

There are a number of closing conditions in the Master Transaction Agreement, including the expiration of the applicable waiting period under the HSR Act and the approval by the stockholders of the Company of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Master Transaction Agreement.”

 

Q:

Are there any arrangements to help ensure that the Company will have sufficient funds, together with the proceeds in its Trust Account and from the Private Placement, to fund the aggregate purchase price?

 

A:

Unless waived by the Company or the Selling Equityholders, as applicable, the Master Transaction Agreement provides that (i) our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $537,500,000, and (ii) the obligation of the Selling Equityholders to consummate the Business Combination is conditioned on the amount of the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $600,000,000.

The Private Placement Investors have agreed to purchase approximately 32,678,576 shares of Class A Stock in the aggregate in the Private Placement at $9.18 per share (subject to customary terms and conditions, including the closing of the Business Combination) for gross proceeds to the Company of approximately $300,000,000 pursuant to Subscription Agreements entered into at the signing of the Master Transaction Agreement.

The Company will use the proceeds of the Private Placement, together with the funds in the Trust Account, to fund the cash consideration in the Business Combination, to repay approximately $173,000,000 of the existing indebtedness of Hostess and to pay certain transaction expenses. In order to facilitate the Business Combination, our Sponsor agreed to the cancellation of approximately 4,062,500 of the Founder Shares held by it and to the acquisition of shares of Class A Stock and Class B Stock by the Selling Equityholders (pursuant to the Master Transaction Agreement) and the participants in the Private Placement (pursuant to Subscription Agreements entered into in connection therewith) at a discount. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination.

 

Q:

Why is the Company proposing the NASDAQ Proposal?

 

A:

We are proposing the NASDAQ Proposal in order to comply with NASDAQ Listing Rules 5635(a) and (d), which require stockholder approval of certain transactions that result in the issuance of 20% or more of the outstanding voting power or shares of Common Stock outstanding before the issuance of stock or securities.

In connection with the Business Combination, we expect to issue: (i) approximately 22,136,188 shares of Class A Stock and approximately 29,912,742 shares of Class B Stock as Stock Consideration (including the CDM Rollover Shares) in the Business Combination; (ii) approximately 32,678,576 shares of Class A Stock in the Private Placement; and (iii) approximately 2,496,000 shares of Class B Stock in connection with the Executive Chairman Employment Agreement. Because we may issue 20% or more of our outstanding Common Stock when considering together the Stock Consideration, the Private Placement and the Executive Chairman Employment Agreement, we are required to obtain stockholder approval of such issuance pursuant to NASDAQ Listing Rules 5635(a) and (d). For more information, please see the section entitled “Proposal No. 2 — Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination, the Private Placement and the Executive Chairman Employment Agreement.”

 

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Q:

Why is the Company proposing the Charter Amendment Proposals?

 

A:

The proposed certificate of incorporation that we are asking our stockholders to approve in connection with the Business Combination provides for: (i) the classification of our Board into three separate classes; (ii) the authorization of additional shares of Common Stock, including establishing a newly designated class of Class B Stock and decreasing the authorized amount of Class F Stock; (iii) the election not to be governed by Section 203 of the DGCL and, instead, includes a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and makes certain related changes; (iv) changes to the stockholder vote required to amend the post-combination company’s proposed certificate of incorporation and bylaws; and (v) certain additional changes, including changing the post-combination company’s corporate name from “Gores Holdings, Inc.” to “Hostess Brands, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company. Pursuant to Delaware law and the Master Transaction Agreement, we are required to submit the Charter Amendment Proposals to the Company’s stockholders for approval. For additional information please see the sections entitled “Proposal No. 3 — Classification of the Board of Directors,” “Proposal No. 4 — Approval of Amendments to Current Certificate to Authorize Additional Shares of Common Stock,” “Proposal No. 5 — Approval of Amendments to Current Certificate to Change the Stockholder Vote Required to Amend the Certificate of Incorporation and Bylaws of the Company,” “Proposal No. 6 — Approval of Amendments to Current Certificate to Elect Not to be Governed by Section 203 of the DGCL,” and “Proposal No. 7 — Approval of Additional Amendments to Current Certificate in Connection with the Business Combination” for more information.

 

Q:

Why is the Company proposing the Director Election Proposal?

 

A:

Upon consummation of the Business Combination, and assuming Proposal No. 3 is approved to classify the Board into three classes instead of two, each comprising as nearly as possible one-third of the directors to serve three-year terms, our Board anticipates increasing its initial size from four directors to seven directors, with each Class I director having a term that expires at the post-combination company’s annual meeting of stockholders in 2017, each Class II director having a term that expires at the post-combination company’s annual meeting of stockholders in 2018 and each Class III director having a term that expires at the post-combination company’s annual meeting of stockholders in 2019, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. The Company believes it is in the best interests of stockholders to allow stockholders to vote upon the election of newly appointed directors. Please see the section entitled “Proposal No. 8 — Election of Directors to the Board of Directors” for additional information.

 

Q:

Why is the Company proposing the Incentive Plan Proposal?

 

A:

The purpose of the Incentive Plan is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the performance of the Company. Please see the section entitled “Proposal No. 9 — Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan and Also for Purposes of Complying with Section 162(m) of the Code” for additional information.

 

Q:

Why is the Company proposing the Ratification Proposal?

 

A:

We are proposing the Ratification Proposal in order to ratify the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending December 31, 2016. KPMG has audited our financial statements for the fiscal year ended December 31, 2015. Our Audit Committee of our Board is directly responsible for appointing the Company’s independent registered public accounting firm. Our Audit

 

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Committee is not bound by the outcome of this vote. Please see the section entitled “Proposal No. 10 — Ratification of Appointment of the Company’s Independent Registered Public Accounting Firm” for more information.

 

Q:

Why is the Company proposing the Adjournment Proposal?

 

A:

We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals, but no other proposal if the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals are approved. In no event will our Board adjourn the Special Meeting or consummate the Business Combination beyond November 22, 2016. Please see the section entitled “Proposal No. 11 — The Adjournment Proposal” for additional information.

 

Q:

What happens if I sell my shares of Class A Stock before the Special Meeting?

 

A:

The record date for the Special Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Class A Stock after the record date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of Class A Stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of Class A Stock prior to the record date, you will have no right to vote those shares at the Special Meeting or redeem those shares for a pro rata portion of the proceeds held in our Trust Account.

 

Q:

What vote is required to approve the proposals presented at the Special Meeting?

 

A:

The approval of the Business Combination Proposal requires the affirmative vote of holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or an abstention from voting with regard to the Business Combination Proposal will have the same effect as a vote “AGAINST” the Business Combination Proposal. Our Initial Stockholders have agreed to vote their Founder Shares and any public shares purchased during or after the IPO in favor of the Business Combination Proposal.

The approval of the NASDAQ Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting will not be counted towards the number of shares of Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the NASDAQ Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established and will have the same effect as a vote “AGAINST” the NASDAQ Proposal.

The approval of the Charter Amendment Proposals requires the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or an abstention from voting with regard to any of the Charter Amendment Proposals will have the same effect as a vote “AGAINST” such Charter Amendment Proposal.

Directors are elected by a plurality of all of the votes cast by holders of shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. This means that the seven director nominees will be elected if they receive more affirmative votes than any other nominee for

 

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the same position. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions will have no effect on the election of directors.

The approval of the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting will not be counted towards the number of shares of Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Incentive Plan Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established and will have the same effect as a vote “AGAINST” the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal.

 

Q:

What happens if the Business Combination Proposal is not approved?

 

A:

If the Business Combination Proposal is not approved and we do not consummate a business combination by August 19, 2017, we will be required to dissolve and liquidate our trust account.

 

Q:

May the Company, its Sponsor or the Company’s directors or officers or their affiliates purchase shares in connection with the Business Combination?

 

A:

In connection with the stockholder vote to approve the proposed Business Combination, our Sponsor, directors or officers or their respective affiliates may privately negotiate transactions to purchase shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the Trust Account. None of our directors or officers or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such selling stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such selling stockholder to vote such shares in a manner directed by the purchaser. In the event that our Sponsor, directors or officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per-share pro rata portion of the Trust Account.

 

Q:

How many votes do I have at the Special Meeting?

 

A:

Our stockholders are entitled to one vote on each proposal presented at the Special Meeting for each share of Common Stock held of record as of September 29, 2016, the record date for the Special Meeting. As of the close of business on the record date, there were 46,875,000 outstanding shares of our Common Stock.

 

Q:

What constitutes a quorum at the Special Meeting?

 

A:

A majority of the issued and outstanding shares of the Company’s Common Stock entitled to vote as of the record date at the Special Meeting must be present, in person or represented by proxy, at the Special Meeting to constitute a quorum and in order to conduct business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. Our Initial Stockholders, who currently own 20% of our issued and outstanding shares of Common Stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the record date for the Special Meeting, 23,437,501 shares of our Common Stock would be required to achieve a quorum.

 

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Q:

How will the Company’s Sponsor, directors and officers vote?

 

A:

Prior to our IPO, we entered into agreements with our Sponsor and each of our directors and officers, pursuant to which each agreed to vote any shares of Common Stock owned by them in favor of the Business Combination Proposal. None of our Sponsor, directors or officers has purchased any shares of our Common Stock during or after our IPO and, as of the date of this proxy statement, neither we nor our Sponsor, directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination. Currently, our Initial Stockholders own 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares, and will be able to vote all such shares at the Special Meeting.

 

Q:

What interests do the Sponsor and the Company’s current officers and directors have in the Business Combination?

 

A:

Our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination. These interests include:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $53,125,000 (after giving effect to the cancellation of approximately 4,062,500 Founder Shares) but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by August 19, 2017;

 

   

the fact that our Sponsor paid an aggregate of $9,500,000 for its 19,000,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 19, 2017;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

the fact that, in connection with the Business Combination, we shortened the lock-up period on the Founder Shares from one year following the Business Combination to six months;

 

   

the fact that, on July 27, 2016, our Sponsor loaned us $500,000 to fund our on-going operational expenses and certain transaction costs incurred by us in connection with the Business Combination and that, at the option of our Sponsor, any amounts outstanding under any loan made by our Sponsor or an affiliate of our Sponsor to the Company in an aggregate amount up to $1,500,000, may be converted into warrants to purchase Class A Stock of the post-combination company;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, The Gores Group, an affiliate of our Sponsor, has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the anticipated election of our Chief Executive Officer, Mr. Mark R. Stone, as a director of the post-combination company;

 

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the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors may not participate in the formation of, or become a director or officer of, any other blank check company until we (i) have entered into a definitive agreement regarding an initial business combination or (ii) fail to complete an initial business combination by August 19, 2017; provided that, in the case of clause (i), such other blank check company does not consummate its initial public offering prior to the consummation of the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 19, 2017;

 

   

that, as described in the Charter Amendment Proposals and reflected in Annex B, our proposed certificate of incorporation will be amended to exclude The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations not in compliance with Section 203 of the DGCL;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees and provides that our Initial Stockholders will vote all of their shares of Class A Stock in favor of the election to the Board of Mr. Metropoulos (or his designee for so long as Mr. Metropoulos is entitled to serve on the Board or appoint a member of the Board, as applicable, pursuant to the terms of the Executive Chairman Director Agreement); and

 

   

that our Sponsor has entered into the Sponsor Subscription Agreement with the Company, pursuant to which our Sponsor has committed to purchase up to 17,755,358 shares of Class A Stock in the Private Placement for an aggregate commitment of $163,000,000. Pursuant to the terms of the Sponsor Subscription Agreement, our Sponsor may transfer or assign its rights to purchase shares of Class A Stock to third parties in compliance with the Securities Act, so long as our Sponsor, together with any controlled affiliates or employees of The Gores Group or Platinum Equity LLC or their respective controlled affiliates party to any other Subscription Agreement, maintains a subscription level of at least $50,000,000.

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination.

 

Q:

Did the Company’s Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:

Yes. Although our current certificate of incorporation does not require our Board to seek a third-party valuation or fairness opinion in connection with a business combination unless the target business is affiliated with our Sponsor, directors or officers, the Company’s Board received a fairness opinion from Moelis as to the fairness, from a financial point of view and as of the date of such opinion, of the consideration to be paid by the Company to the Selling Equityholders in the Business Combination. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — Opinion of the Company’s Financial Advisor” and the opinion of Moelis attached hereto as Annex D for additional information.

 

Q:

What happens if I vote against the Business Combination Proposal?

 

A:

If you vote against the Business Combination Proposal but the Business Combination Proposal still obtains the affirmative vote of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting, then the Business Combination Proposal will be approved and, assuming the approval

 

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of the NASDAQ Proposal and the Charter Amendment Proposals and the satisfaction or waiver of the other conditions to closing, the Business Combination will be consummated in accordance with the terms of the Master Transaction Agreement.

If you vote against the Business Combination Proposal and the Business Combination Proposal does not obtain the affirmative vote of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting, then the Business Combination Proposal will fail and we will not consummate the Business Combination. If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until August 19, 2017. If we fail to complete an initial business combination by August 19, 2017, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.

 

Q:

Do I have redemption rights?

 

A:

If you are a holder of public shares, you may redeem your public shares for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable), by (ii) the total number of then-outstanding public shares; provided that the Company will not redeem any shares of Class A Stock issued in the IPO to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Class A Stock included in the units sold in our IPO. Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Our Sponsor, directors and officers have agreed to waive their redemption rights with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account of approximately $375,234,320 as of June 30, 2016, the estimated per share redemption price would have been approximately $10.00. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including interest but net of franchise and income taxes payable) in connection with the liquidation of the Trust Account, unless we complete an alternative business combination prior to August 19, 2017.

 

Q:

Can the Company’s Initial Stockholders redeem their Founder Shares in connection with consummation of the Business Combination?

 

A:

No. Our Initial Stockholders, officers and directors have agreed to waive their redemption rights with respect to their Founder Shares and any public shares they may hold in connection with the consummation of our Business Combination.

 

Q:

Is there a limit on the number of shares I may redeem?

 

A:

Yes. A public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), is restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our IPO. Accordingly, all shares in excess of 15% owned by a holder will not be redeemed for cash. On the other hand, a public stockholder who holds less than 15% of the public shares of Class A Stock may redeem all of the public shares held by such stockholder for cash.

 

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In no event is your ability to vote all of your shares (including those shares held by you in excess of 15% of the shares sold in our IPO) for or against our Business Combination restricted.

We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 15% threshold. Each redemption of shares of Class A Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $375,234,320 as of June 30, 2016. The Master Transaction Agreement provides that our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $537,500,000. The obligations of the Selling Equityholders to consummate the Business Combination is conditioned on the amount of the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $600,000,000. These conditions to closing in the Master Transaction Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Stock by our public stockholders, these conditions are not met (or waived), then we or the Selling Equityholders (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would cause our net tangible assets to be less than $5,000,001.

 

Q:

Is there a limit on the total number of shares that may be redeemed?

 

A:

Yes. Our current certificate of incorporation provides that we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Master Transaction Agreement. Other than this limitation, our current certificate of incorporation does not provide a specified maximum redemption threshold. In addition, the Master Transaction Agreement provides that our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $537,500,000, and the obligations of the Selling Equityholders to consummate the Business Combination is conditioned on the amount of the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $600,000,000. In the event the aggregate cash consideration we would be required to pay for all shares of Class A Stock that are validly submitted for redemption plus the amounts required to satisfy closing cash conditions pursuant to the terms of the Master Transaction Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of Class A Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate Business Combination.

 

Q:

Will how I vote affect my ability to exercise redemption rights?

 

A:

No. You may exercise your redemption rights whether you vote your shares of Common Stock for or against, or whether you abstain from voting on the Business Combination Proposal or any other proposal described by this proxy statement. As a result, the Master Transaction Agreement can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of NASDAQ.

 

Q:

How do I exercise my redemption rights?

 

A:

In order to exercise your redemption rights, you must (i) check the box on the enclosed proxy card to elect redemption, (ii) check the box on the enclosed proxy card marked “Stockholder Certification,” (iii) if you hold public units, separate the underlying public shares and public warrants, and (iv) prior to 5:00 p.m.,

 

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Eastern Time, on November 1, 2016 (two business days before the Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your public shares for cash to Continental Stock Transfer & Trust Company, our Transfer Agent, at the following address:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

Please check the box on the enclosed proxy card marked “Stockholder Certification” if you are not acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of Common Stock. Notwithstanding the foregoing, a holder of the public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) will be restricted from seeking redemption rights with respect to more than 15% of the shares of Class A Stock included in the units sold in our IPO, which we refer to as the “15% threshold.” Accordingly, all public shares in excess of the 15% threshold beneficially owned by a public stockholder or group will not be redeemed for cash.

Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to our Transfer Agent prior to the date set forth in these proxy materials, or up to two business days prior to the vote on the proposal to approve the Business Combination at the Special Meeting, or to deliver their shares to the Transfer Agent electronically using Depository Trust Company’s (DTC) Deposit/Withdrawal At Custodian (DWAC) system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the Business Combination is approved.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether or not we require stockholders seeking to exercise redemption rights to tender their shares, as the need to deliver shares is a requirement to exercising redemption rights, regardless of the timing of when such delivery must be effectuated.

 

Q:

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

Whether the redemption is subject to U.S. federal income tax depends on the particular facts and circumstances. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — U.S. Federal Income Tax Considerations.” We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

 

Q:

If I am a Company warrant holder, can I exercise redemption rights with respect to my public warrants?

 

A:

No. The holders of our public warrants have no redemption rights with respect to our public warrants.

 

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Q:

Do I have appraisal rights if I object to the proposed Business Combination?

 

A:

No. Appraisal rights are not available to holders of our Common Stock in connection with the Business Combination.

 

Q:

What happens to the funds held in the Trust Account upon consummation of the Business Combination?

 

A:

If the Business Combination is consummated, the funds held in the Trust Account (together with the proceeds from the Private Placement) will be used to: (i) pay the cash consideration payable to the Selling Equityholders pursuant to the Master Transaction Agreement; (ii) pay Company stockholders who properly exercise their redemption rights; (iii) pay $13,125,000 in deferred underwriting commissions to the underwriters of our IPO, in connection with the Business Combination; (iv) pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Master Transaction Agreement in connection with the transactions contemplated by the Master Transaction Agreement, including the Business Combination, and pursuant to the terms of the Master Transaction Agreement; and (v) repay approximately $173,000,000 of Hostess’ existing indebtedness.

 

Q:

What happens if the Business Combination is not consummated?

 

A:

There are certain circumstances under which the Master Transaction Agreement may be terminated. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Master Transaction Agreement” for information regarding the parties’ specific termination rights.

If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until August 19, 2017. If we fail to complete an initial business combination by August 19, 2017, then we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem our public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish our public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the IPO. Please see the section entitled “Risk Factors — Risks Related to the Company and the Business Combination.”

Holders of our Founder Shares have waived any right to any liquidation distribution with respect to such shares. In addition, if we fail to complete a business combination by August 19, 2017, there will be no redemption rights or liquidating distributions with respect to our outstanding warrants, which will expire worthless.

 

Q:

When is the Business Combination expected to be completed?

 

A:

The closing of the Business Combination is expected to take place on or prior to the third business day following the satisfaction or waiver of the conditions described below in the subsection entitled “Proposal No. 1 — Approval of the Business Combination — Conditions to Closing of the Business Combination.” The closing is expected to occur in the third quarter of 2016. The Master Transaction Agreement may be terminated by the Company or the Selling Equityholders if the closing of the Business Combination has not occurred by November 30, 2016.

 

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For a description of the conditions to the completion of the Business Combination, see the section entitled “Proposal No. 1 — Approval of the Business Combination — Conditions to Closing of the Business Combination.”

 

Q:

What do I need to do now?

 

A:

You are urged to read carefully and consider the information contained in this proxy statement, including the Annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

Q:

How do I vote?

 

A:

If you were a holder of record of our Common Stock on September 29, 2016, the record date for the Special Meeting, you may vote with respect to the proposals in person at the Special Meeting, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Voting by Mail. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Votes submitted by mail must be received by 9:00 a.m., Eastern Time, on November 3, 2016.

Voting in Person at the Meeting. If you attend the Special Meeting and plan to vote in person, we will provide you with a ballot at the Special Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Special Meeting. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Special Meeting and vote in person, you will need to bring to the Special Meeting a legal proxy from your broker, bank or nominee authorizing you to vote these shares. For additional information, please see the section entitled “Special Meeting in Lieu of 2016 Annual Meeting of Company Stockholders” beginning on page 132 of this proxy statement.

 

Q:

What will happen if I abstain from voting or fail to vote at the Special Meeting?

 

A:

At the Special Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, a failure to vote or an abstention will have the same effect as a vote “AGAINST” the Business Combination Proposal and each of the Charter Amendment Proposals, while only an abstention (and not a failure to vote) will have the same effect as a vote “AGAINST” the NASDAQ Proposal, the Incentive Plan Proposal, the Ratification Proposal or the Adjournment Proposal. A failure to vote will have no effect on the Director Election Proposal.

 

Q:

What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A:

Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.

 

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Q:

If I am not going to attend the Special Meeting in person, should I return my proxy card instead?

 

A:

Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. Other than the Ratification Proposal, we believe the proposals presented to the stockholders at this Special Meeting will be considered non-discretionary and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Special Meeting, other than the Ratification Proposal. If you do not provide instructions with your proxy, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the Special Meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q:

May I change my vote after I have mailed my signed proxy card?

 

A:

Yes. You may change your vote by sending a later-dated, signed proxy card to our Secretary at the address listed below so that it is received by our Secretary prior to the Special Meeting or attend the Special Meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to our Secretary, which must be received by our Secretary prior to the Special Meeting.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q:

Who will solicit and pay the cost of soliciting proxies for the Special Meeting?

 

A:

The Company will pay the cost of soliciting proxies for the Special Meeting. The Company has engaged Morrow to assist in the solicitation of proxies for the Special Meeting. The Company has agreed to pay Morrow a fee of $25,000, plus disbursements, and will reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of the Company’s Common Stock for their expenses in forwarding soliciting materials to beneficial owners of the Company’s Common Stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Q:

Who can help answer my questions?

 

A:

If you have questions about the proposals or if you need additional copies of this proxy statement or the enclosed proxy card you should contact:

Gores Holdings, Inc.

9800 Wilshire Blvd.

Beverly Hills, California 90212

(310) 209-3010

Attention: Jennifer Kwon Chou

Email: jchou@gores.com

You may also contact our proxy solicitor at:

Morrow Sodali

470 West Avenue

Stamford, Connecticut 06902

Individuals, please call toll-free: (800) 662-5200

Banks and brokerage, please call: (203) 658-9400

Email: GRSH.info@morrowco.com

To obtain timely delivery, our stockholders must request the materials no later than five business days prior to the Special Meeting.

You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to our Transfer Agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact our Transfer Agent:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information contained in this proxy statement and does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the Annexes and accompanying financial statements of the Company and Hostess, to fully understand the proposed Business Combination (as described below) before voting on the proposals to be considered at the Special Meeting (as described below). Please see the section entitled “Where You Can Find More Information” beginning on page 353 of this proxy statement.

Unless otherwise specified, all share calculations assume (i) no exercise of redemption rights by the Company’s public stockholders; (ii) no inclusion of any shares of Class A Stock issuable upon the exercise of the Company’s warrants; (iii) an equity raise of approximately $300,000,000 of gross proceeds from the Private Placement at $9.18 per share will fund a portion of the cash consideration payable to the Selling Equityholders pursuant to the Master Transaction Agreement for the Business Combination and related transactions; (iv) cancellation of approximately 4,062,500 Founder Shares by our Sponsor; and (v) transfer of all Bridge Shares to third parties prior to the closing of the Business Combination.

The historical financial statements of Hostess have been presented herein, as opposed to those of the various entities of the Selling Equityholders. The Selling Equityholders entities are holding companies without any operations, and no material assets beyond their investment in Hostess. The Selling Equityholders entities are not permitted to consolidate Hostess under U.S. GAAP. As such, the historical Hostess Holdings financial statements represent the highest level of consolidated financial statements that presents the full financial position and results of operations of the underlying business.

Parties to the Business Combination

The Company

The Company is a blank check company incorporated on June 1, 2015 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The Company’s securities are traded on NASDAQ under the ticker symbols “GRSH”, “GRSHU” and “GRSHW”. The Company intends to apply to continue the listing of its Class A Stock and public warrants on NASDAQ under the symbols “TWNK” and “TWNKW,” respectively, upon the closing of the Business Combination. The Company’s public units will automatically separate into the component securities upon consummation of the Business Combination and, as a result, will no longer trade as a separate security.

The mailing address of the Company’s principal executive office is 9800 Wilshire Blvd., Beverly Hills, California 90212.

Company Merger Sub

Company Merger Sub, a Delaware corporation, is a wholly-owned subsidiary of the Company, formed by the Company on June 23, 2016, to consummate the Business Combination. In the Business Combination, Company Merger Sub will merge with and into AP Hostess Holdings, with AP Hostess Holdings continuing as the surviving entity.

The mailing address of Company Merger Sub’s principal executive office is 9800 Wilshire Blvd., Beverly Hills, California 90212.

 



 

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AP Hostess LP and Sellers’ Representative

AP Hostess LP is a Delaware limited partnership that was formed in 2013 for the purpose of indirectly acquiring and holding interests in Hostess Holdings and Hostess Holdings GP through its wholly-owned subsidiary, AP Hostess Holdings. AP Hostess LP is owned and controlled by certain funds managed by affiliates of Apollo.

AP Hostess LP is acting as Sellers’ Representative pursuant to the terms of the Master Transaction Agreement.

The mailing address of AP Hostess LP’s principal executive office is 9 West 57th Street, 43rd Floor, New York, New York 10019.

Hostess CDM Co-Invest

Hostess CDM Co-Invest is a Delaware series limited liability company that was formed in 2013 for the purpose of acquiring and holding interests in Hostess Holdings and Hostess Holdings GP. Hostess CDM Co-Invest is controlled by Mr. Metropoulos and owned by certain trusts for the benefit of Mr. Metropoulos and other members of the Metropoulos family and associates of Mr. Metropoulos.

CDM Hostess

CDM Hostess is a Delaware limited liability company that was formed in 2013 for the purpose of acquiring and holding interests in Hostess Management. CDM Hostess is controlled by Mr. Metropoulos and owned by certain trusts for the benefit of Mr. Metropoulos and other members of the Metropoulos family and associates of Mr. Metropoulos.

Hostess’ Business

Hostess, America’s Original Snack Cake, has been an iconic American brand for generations. Hostess offers a variety of new and classic treats like Twinkies®, Cupcakes, Ding Dongs®, Ho Hos®, Donettes®, and Fruit Pies that it believes delight snack fans across the nation. In 2013, the Selling Equityholders acquired the Hostess brand out of the bankruptcy liquidation proceedings of its prior owners, free and clear of all past liabilities. After a brief hiatus in production, Hostess began providing Hostess products to consumers and retailers across the nation in July 2013. By combining Hostess’ beloved brands’ established reputation with an innovative business model, Hostess rapidly recaptured market share. Three years after launching “The Sweetest Comeback in the History of Ever”®, Hostess has reestablished a leading premium brand position in the $6.8 billion U.S. Sweet Baked Goods, or “SBG,” category.

Since the relaunch, Hostess has:

 

   

grown from a business with zero sales to one that generated $620.8 million in net revenue, $88.8 million in net income (including noncontrolling interest) and $177.9 million in Adjusted EBITDA1 (as defined below in the section entitled “Summary of the Proxy Statement — Selected Consolidated Historical Financial and Other Information of Hostess Holdings”) for the year ended December 31, 2015. Adjusted EBITDA is not based on the accounting principles generally accepted in the U.S. (“non-GAAP financial measures”) and such measure is defined and reconciled to the most directly comparable U.S. GAAP measure in footnote 7 to the section entitled “Summary of the Proxy

 

1 

Adjusted EBITDA does not exclude related party expenses of $4.3 million for the year ended December 31, 2015, which are the annual expenses relating to the employment arrangement with Mr. Metropoulos as the Chief Executive and/or Executive Chairman. Upon consummation of the Business Combination, these expenses will be approximately $0.3 million annually.

 



 

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Statement — Selected Consolidated Historical Financial and Other Information of Hostess Holdings” below in this proxy statement;

 

   

increased market share from 0% at relaunch, to over 17.4%, for the 4 weeks ended August 13, 2016 per Nielsen’s U.S. SBG category;

 

   

improved manufacturing and distribution through Hostess’ new simplified, industry redefining operating model;

 

   

expanded channel and geographic reach to include the portion of the 160,000 convenience, drug and dollar store universe previously not fully available under the Direct-Store-Delivery (“DSD”) model;

 

   

enhanced in-store merchandising capabilities enabling industry leading display levels and the ability to launch nationally coordinated promotion campaigns via the Direct-To-Warehouse (“DTW”) model; and

 

   

acquired the stock of Superior Cake Products, Inc. (“Superior”) to expand its platform into the “In-Store Bakery” section of grocery and club retailers.

When Hostess products returned to shelves in July 2013, the relaunch was met with substantial media attention and a strong consumer response. The initial demand surpassed Hostess’ expectations, and it had to manage its production levels as it ramped up its supply chain. Since April 2013, Apollo and Metropoulos & Co. have invested $138 million to upgrade Hostess’ manufacturing footprint, implement new IT systems and enhance production efficiency via the installation of automated baking and packaging lines. These investments, coupled with Hostess’ DTW distribution model, have paved new opportunities for Hostess and increased Hostess’ distribution channels.

Hostess’ DTW distribution model uses centralized distribution centers and common carriers to fill orders, with products generally delivered to Hostess’ customers’ warehouses. This model has eliminated the need for DSD truck routes and drivers. Once limited by the previous DSD model, Hostess has since been able to expand its core distribution while gaining access to new channels (e.g., further penetration into convenience, drug, dollar, foodservice, and cash & carry stores). Hostess has both renewed and added relationships with trusted retailers around the country, once again stocking shelves with Hostess products.

As a highly fragmented category in both the U.S. and internationally, SBG represents a significant opportunity for further consolidation. The new Hostess business model and efficient route-to-market strategy, along with highly sophisticated and modern systems, provide an ideal platform for eventually adding other branded snacks to the Hostess portfolio. Hostess maintains a highly-disciplined outlook on M&A, focusing on opportunities with large addressable markets. In addition, Hostess believes its expertise in managing brands (led by Mr. Metropoulos) and experience in operating packaged food businesses (under Mr. Bill Toler’s leadership) gives Hostess the specialized tools to position itself as an attractive vehicle for future growth within the snacking universe.

For more information about Hostess, please see the sections entitled “Information About Hostess,” “Hostess Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management after the Business Combination.”

The Business Combination Proposal

On July 5, 2016, the Company entered into the Master Transaction Agreement, by and among the Company, Company Merger Sub, a wholly-owned subsidiary of the Company, AP Hostess LP, Hostess CDM Co-Invest, CDM Hostess, and Sellers’ Representative, solely in its capacity as the sellers’ representative thereunder. The Master Transaction Agreement provides for, among other things: (i) the mergers of: (A) Hostess Management with and into Hostess Holdings, with Hostess Holdings continuing as the surviving entity; (B) Company Merger Sub with and into AP Hostess Holdings, with AP Hostess Holdings continuing as the surviving entity; and (C) immediately thereafter, AP Hostess Holdings with and into the Company, with the Company continuing as

 



 

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the surviving entity; and (ii) the purchase by the Company of certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Equityholders. For more information about the transactions contemplated in the Master Transaction Agreement, please see the section entitled “Proposal No. 1 – Approval of the Business Combination.” A copy of the Master Transaction Agreement is attached to this proxy statement as Annex A.

Consideration to Selling Equityholders in the Business Combination

Subject to the terms of the Master Transaction Agreement and customary adjustments set forth therein, the aggregate purchase price for the Business Combination and related transactions is expected to be approximately $2.3 billion, which amount will be increased by the amount of cash held by Hostess as of the closing of the Business Combination, and which amount will be decreased by the amount of Hostess’ outstanding indebtedness under its existing credit facilities, certain transaction fees and expenses, and certain payments to Hostess management under the Hostess LTIP. The consideration to be paid to the Selling Equityholders will be funded through a combination of cash and stock consideration. The amount of cash consideration payable to the Selling Equityholders is the sum of (i) cash available to us from the Trust Account, after giving effect to taxes payable, any redemptions that may be elected by any of our public stockholders for their pro rata share of the aggregate amount of funds on deposit in the Trust Account as of two business days prior to the closing of the Business Combination (which instructions to redeem such public shares are further discussed in this proxy statement), plus (ii) the anticipated gross proceeds of approximately $300,000,000 from the Private Placement, less (iii) certain transaction fees and expenses, including the payment of deferred underwriting commissions agreed to at the time of our IPO, less (iv) certain payments to Hostess management under the Hostess LTIP, less (v) approximately $173,000,000 that will be used to repay a portion of the existing indebtedness of Hostess. The remainder of the consideration paid to the Selling Equityholders will be stock consideration, consisting of approximately 22,136,188 newly issued shares of our publicly-traded Class A Stock and approximately 29,912,742 shares of our newly established Class B Stock, which includes approximately 5,446,429 shares of Class B Stock representing the partial rollover of Hostess CDM Co-Invest’s equity investment in Hostess, which shares will be valued at approximately $9.73 per share for purposes of determining the aggregate number of shares payable to the Selling Equityholders for their ownership interests therein. In addition, Mr. Metropoulos will receive 2,496,000 Class B Units (and an equivalent number of shares of Class B Stock) pursuant to the Executive Chairman Employment Agreement. The foregoing consideration to be paid to the Selling Equityholders and Mr. Metropoulos may be further increased by amounts payable under the Tax Receivable Agreement and amounts payable as earn-out shares of Class A Stock or Class B Stock and an equivalent number of Class B Units, as applicable. The number of shares of Class A Stock and Class B Stock (and a corresponding number of Class B Units) issued to the Selling Equityholders as Stock Consideration is subject to adjustment, depending on, among other things, the level of redemptions of shares of Class A Stock by our public stockholders. AP Hostess LP will receive shares of Class A Stock, and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos will receive shares of Class B Stock and shall hold an equivalent number of Class B Units. The Class B Units (including the Class B Units issued to Mr. Metropoulos under the Executive Chairman Employment Agreement) may be exchanged (together with the cancellation of an equivalent number of shares of Class B Stock) by the holders thereof for, at the election of the Company, shares of Class A Stock or the cash equivalent of such shares, in accordance with the Exchange Agreement. In order to facilitate the Business Combination, our Sponsor has agreed to the cancellation of approximately 4,062,500 of the Founder Shares held by it and to the acquisition of shares of Class A Stock and Class B Stock by the Selling Equityholders (pursuant to the Master Transaction Agreement) and the participants in the Private Placement (pursuant to subscription agreements entered into in connection therewith) at a discount. The remaining Founder Shares will automatically convert into shares of Class A Stock on a one-for-one basis at the closing of the transactions contemplated by the Master Transaction Agreement and will continue to be subject to the transfer restrictions applicable to the Founder Shares. For more information about the consideration to the Selling Equityholders, please see the section entitled “Proposal No. 1 — Approval of the Business Combination.”

 



 

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Related Agreements

Contribution Agreement

At the closing of the Business Combination, the Company, Hostess CDM Co-Invest and CDM Hostess will enter into the Contribution Agreement, substantially in the form attached as Annex E to this proxy statement. Pursuant to the Contribution Agreement, (i) Hostess CDM Co-Invest will sell certain limited partnership interests in Hostess Holdings to the Company in exchange for Hostess CDM Co-Invest’s pro rata portion of the cash consideration, less certain deductions, as set forth in the Master Transaction Agreement, (ii) CDM Hostess will sell certain limited partnership interests in Hostess Holdings to the Company in exchange for CDM Hostess’ pro rata portion of the cash consideration, less certain deductions, as set forth in the Master Transaction Agreement, and (iii) Hostess CDM Co-Invest will contribute all of its Class C general partner interests in Hostess Holdings GP to the Company in exchange for (x) approximately 22,136,188 shares of Class B Stock, plus approximately 5,446,429 rollover shares of the Class B Stock, as set forth in the Master Transaction Agreement, less certain shares of Class B Stock to be held in escrow, and (y) approximately 2,330,125 shares of Class B Stock, less certain shares of Class B Stock to be held in escrow, as set forth in the Master Transaction Agreement, which Hostess CDM Co-Invest shall direct the Company to issue and deliver to CDM Hostess.

Exchange Agreement

At the closing of the Business Combination, the Company, the CDM Holders and Hostess Holdings will enter into the Exchange Agreement, substantially in the form attached as Annex F to this proxy statement. Pursuant to the Exchange Agreement, the CDM Holders and such other holders of Class B Units from time to time party thereto will be entitled to exchange Class B Units, and surrender shares of the Company’s Class B Stock for cancellation, in exchange for, at the option of the Company, a number of shares of the Company’s Class A Stock or the cash equivalent of such shares.

Tax Receivable Agreement

At the closing of the Business Combination, the Company will enter into the Tax Receivable Agreement, substantially in the form attached as Annex G to this proxy statement, with the Selling Equityholders and Mr. Metropoulos. The Tax Receivable Agreement will generally provide for the payment by the Company to the Selling Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination (which periods may extend, unless the Tax Receivable Agreement is terminated early in accordance with its terms, for more than 15 years following any exchange of Class B Units of Hostess Holdings for shares of the Company’s Class A Stock or the cash equivalent thereof) as a result of: (i) certain increases in tax basis resulting from the Business Combination; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the Business Combination; (iii) certain increases in tax basis resulting from exchanges of Class B Units of Hostess Holdings; (iv) imputed interest deemed to be paid by the Company as a result of payments it makes under the Tax Receivable Agreement; and (v) certain increases in tax basis resulting from payments the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash savings. Certain payments under the Tax Receivable Agreement will be made to the Selling Equityholders in accordance with specified percentages, regardless of the source of the applicable tax attribute.

Registration Rights Agreement

At the closing of the Business Combination, the Company will enter into the Registration Rights Agreement, substantially in the form attached as Annex H to this proxy statement, with the Restricted Stockholders. Pursuant to the terms of the Registration Rights Agreement, the Restricted Stockholders will be

 



 

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bound by restrictions on the transfer of their shares of Class A Stock, Class B Stock and other securities of the Company and its subsidiaries until the later of (i) six months following the date of the Registration Rights Agreement, and (ii) the date that is the earlier of (A) 60 days after a registration statement registering the resale of shares of Class A Stock issued pursuant to the subscription agreements entered into in connection with the Business Combination has been filed with the SEC and declared effective and (B) 270 days after the closing of the transactions contemplated by the Master Transaction Agreement, except for transfers as bona fide gifts, to a trust, to wholly owned subsidiaries or other equity holders (in the case of entities), pursuant to any acquisition or sale involving the Company, pursuant to an indemnity transfer, or with the prior written consent of the Company and each holder of Restricted Stock.

Upon the consummation of the Business Combination, the Restricted Stockholders and their permitted transferees will be entitled to certain registration rights described in the Registration Rights Agreement. Among other things, pursuant to the Registration Rights Agreement, the Restricted Stockholders will each be entitled to participate in six demand registrations, and will also have certain “piggyback” registration rights with respect to registration statements filed by the Company subsequent to the Business Combination.

In addition, the Registration Rights Agreement provides that our Initial Stockholders will vote all of their shares of Class A Stock in favor of the election to the Board of Mr. Metropoulos (or his designees for so long as Mr. Metropoulos is entitled to serve on the Board or appoint a member of the Board, as applicable, pursuant to the terms of the Executive Chairman Director Agreement).

Subscription Agreements

Concurrently with the execution of the Master Transaction Agreement, the Company entered into the Investor Subscription Agreements with Canyon Capital Advisors LLC, Northwestern Mutual Life Insurance Company and certain of its affiliates, Teachers’ Retirement System of the State of Illinois and certain other accredited investors, pursuant to which the Private Placement Investors agreed to purchase up to 14,923,218 shares of Class A Stock for an aggregate commitment amount of approximately $137,000,000, subject to certain conditions, including the closing of the Business Combination.

On the same date, the Company entered into a separate Sponsor Subscription Agreement with our Sponsor, pursuant to which our Sponsor agreed to purchase up to 17,755,358 shares of Class A Stock for an aggregate commitment amount of approximately $163,000,000, subject to certain conditions, including the closing of the Business Combination. The Sponsor Subscription Agreement provides our Sponsor with the right to transfer up to $113,000,000 of its obligation to purchase the Sponsor Shares to any party or parties in compliance with the Securities Act, provided that our Sponsor, together with any controlled affiliates or employees of The Gores Group or Platinum Equity LLC or their respective controlled affiliates, maintain a subscription level of at least $50,000,000 in the aggregate. Upon any such transfer, our Sponsor’s commitment to purchase the Sponsor Shares will be correspondingly reduced, and our Sponsor will be fully and unconditionally released from its obligation to purchase the Sponsor Shares subject to the transferred commitment amount.

The Private Placement Shares to be issued pursuant to the Subscription Agreements have not been registered under the Securities Act in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Subscription Agreements provide that the Company must register the resale of the Private Placement Shares pursuant to a registration statement that must be filed within thirty calendar days after consummation of the Business Combination.

The Subscription Agreements will be terminated, and be of no further force and effect, upon the earlier to occur of (i) the termination of the Master Transaction Agreement in accordance with its terms, (ii) the mutual written agreement of the parties thereto or (iii) if any of the conditions to the closing are not satisfied on or prior to the closing and which make the consummation of the Business Combination fail to occur.

 



 

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Executive Chairman Arrangement

Pursuant to the terms of the Executive Chairman Employment Agreement, attached hereto as Annex J-1, Hostess will employ Mr. Metropoulos as the Executive Chairman of certain subsidiaries of Hostess, effective as of the closing date of the Business Combination and until December 31, 2018 (or until December 31, 2019 by mutual agreement of the parties). The Executive Chairman Employment Agreement provides that Mr. Metropoulos will receive an annual base salary of $30,000 as well as a one-time issuance of 2,496,000 Class B Units (and an equivalent number of shares of Class B Stock), which units and shares will be subject to a one-year holding period subject to certain exceptions. Mr. Metropoulos will also be entitled to (i) participate in any of Hostess’ employee benefit plans, (ii) continued access to and use of the automobile currently being provided to him by Hostess, and (iii) reimbursement of up to $25,000 per month for the cost of business travel using his personal aircraft consistent with past practice. The post-combination company will enter into an aircraft service contract with a third party in respect of Mr. Metropoulos’ aircraft and make such reimbursements of up to $25,000 per month by direct payments to such third party under such contract. Subject to his continued employment through December 31, 2018, Mr. Metropoulos will be entitled to shares of Class A Stock (or, upon his written request, an equivalent number of shares of Class B Stock and Class B Units) upon achievement of earn-out targets for the 2018 fiscal year, as specified in the Executive Chairman Employment Agreement. The Executive Chairman Employment Agreement will supersede all prior agreements between Mr. Metropoulos and Hostess regarding compensation for Mr. Metropoulos’ services to Hostess that are in effect immediately prior to the consummation of the Business Combination.

Pursuant to the terms of the Executive Chairman Director Agreement, attached hereto as Annex J-2, Mr. Metropoulos will serve as the Executive Chairman of the Board, effective as of the closing date of the Business Combination and until December 31, 2018 (or until December 31, 2019 by mutual agreement of the parties). The Executive Chairman Director Agreement provides that, for so long as the CDM Holders in the aggregate hold at least 7.5% of the capital stock of the Company on a fully diluted basis, Mr. Metropoulos will have the right to designate one member for election to the Board, which designee will be Mr. Metropoulos himself so long as he is employed as the Executive Chairman of the Board.

Sponsor Letter Agreement

Mr. Metropoulos has entered into the Sponsor Letter Agreement, attached hereto as Annex K, with our Sponsor that provides for the potential transfer of Private Placement Warrants and Founder Shares held by our Sponsor to Mr. Metropoulos. In the event that our Sponsor transfers the Bridge Shares to third parties prior to the closing of the Business Combination, then our Sponsor will, immediately prior to the closing, transfer 2,000,000 Private Placement Warrants and 500,000 Founder Shares to Mr. Metropoulos. To the extent that our Sponsor transfers less than all of the Bridge Shares, then our Sponsor will transfer a proportionally reduced portion of such Private Placement Warrants and Founder Shares to Mr. Metropoulos.

Incentive Plan

Our Board approved the Incentive Plan on July 26, 2016, subject to stockholder approval of the Incentive Plan at the Special Meeting. The purpose of the Incentive Plan is to further align the interests of eligible participants with those of the Company’s stockholders post-Business Combination by providing long-term incentive compensation opportunities tied to the performance of the Company and the Class A Stock. The Incentive Plan is intended to advance the interests of the Company and increase stockholder value by attracting, retaining and motivating key personnel through the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and/or other stock-based awards consistent with the terms of the Incentive Plan. For more information about the Incentive Plan, please see the section entitled “Proposal No. 9 — Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan and Also for Purposes of Complying with Section 162(m) of the Code — Description of the Incentive Plan.”

 



 

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Organizational Structure

The following diagram depicts the current ownership structure of Hostess Holdings:

 

LOGO

 

1 

Pursuant to the Master Transaction Agreement, the Class B Units are entitled to approximately $9,355,486.

2 

Pursuant to the Master Transaction Agreement, Class B-1 Units and Class B-2 Units are together entitled to approximately $3,669,322.

3 

Pursuant to the Master Transaction Agreement, the Class A Units, the Class A-1 Units and the Class A-2 Units collectively have an economic value of 44.57172% ownership of Hostess Management, LLC, minus, approximately $3,669,322.

4 

Pursuant to the Master Transaction Agreement, the Class C Units have an economic value of 55.42828% ownership of Hostess Management, LLC, minus, approximately $9,355,486.

 



 

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The following diagram, which is subject to change based upon any redemptions by the Company’s current public stockholders in connection with the Business Combination, illustrates the ownership structure of the post-combination company immediately following the Business Combination:(1)

 

LOGO

 

(1) 

The post-closing ownership positions of each of the referenced entities assumes the following: (i) no exercise of redemption rights by the Company’s public stockholders; (ii) no inclusion of any shares of Class A Stock issuable upon the exercise of the Company’s warrants; (iii) cancellation of approximately 4,062,500 Founder Shares by our Sponsor; and (iv) transfer of all Bridge Shares to third parties prior to the closing of the Business Combination.

(2) 

The post-closing ownership position of the Company’s public stockholders in the Company’s Class A Stock includes the ownership interest held by the Private Placement Investors. The Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 38% of the Company’s outstanding shares of Class A Stock and approximately 29% of the total equity of the post-combination company. The Private Placement Investors will own approximately 28% of the Company’s outstanding shares of Class A Stock and approximately 21% of the total equity of the post-combination company.

(3) 

Includes 2,496,000 shares of Class B Stock issued to Mr. Metropoulos pursuant to the Executive Chairman Employment Agreement (approximately 8% of the outstanding shares of Class B Stock and approximately 1.9% of the total equity of the post-combination company).

Redemption Rights

Pursuant to our current certificate of incorporation, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable), by (ii) the total number of

 



 

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then-outstanding public shares; provided that the Company will not redeem any shares of Class A Stock issued in the IPO to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001. As of June 30, 2016, this would have amounted to approximately $10.00 per share. Notwithstanding the foregoing, a holder of the public shares, together with any affiliate of his or her or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)-(3) of the Exchange Act) will be restricted from seeking redemption rights with respect to more than 15% of the shares of Class A Stock included in the units sold in our IPO.

If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Class A Stock for cash and will no longer own shares of the post-combination company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent in accordance with the procedures described herein. Please see the section entitled “Special Meeting in Lieu of 2016 Annual Meeting of Company Stockholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Impact of the Business Combination on the Company’s Public Float

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 29% in the post-combination company; (ii) the Private Placement Investors (other than our Sponsor) will own approximately 21% of the post-combination company (such that public stockholders, including Private Placement Investors other than our Sponsor, will own approximately 50% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor, and the shares of Class A Stock purchased by it in the Private Placement) will own approximately 8% of the post-combination company, after giving effect to the cancellation of approximately 4,062,500 Founder Shares held by our Sponsor; (iv) AP Hostess LP will own approximately 17% of the post-combination company; (v) Hostess CDM Co-Invest will own approximately 21% of the post-combination company; (vi) CDM Hostess will own approximately 2% of the post-combination company and (vii) Mr. Metropoulos and/or his designee will own approximately 2% of the post-combination company (and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos, collectively, will own approximately 25% of the post-combination company). 100% of the shares of Class B Stock will be owned by the CDM Holders. These levels of ownership interest assume that no shares are elected to be redeemed, that all Bridge Shares have been transferred to third parties prior to the closing of the transactions contemplated by the Master Transaction Agreement and that our Sponsor and Mr. Metropoulos have not exercised any of the Private Placement Warrants. The Private Placement Investors have agreed to purchase in the aggregate approximately 32,678,576 shares of Class A Stock, for approximately $300,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $97,000,000 of the gross proceeds from the Private Placement, in addition to $375,000,000 of the funds from the Trust Account, will be used to fund the cash consideration payable to the Selling Equityholders, the repayment of approximately $173,000,000 of Hostess’ existing indebtedness and the payment of certain transaction expenses. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares of Class A Stock under the Exchange Agreement, a copy of which is attached to this proxy statement as Annex F, upon the exchange of Class B Units (and the cancellation of shares of Class B Stock), or (c) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, a copy of which is attached to this proxy statement as Annex L, but does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis (after giving effect to the cancellation of approximately 4,062,500 of such shares and even though such shares of Class A Stock will be subject to transfer restrictions). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different.

 



 

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The following table illustrates varying ownership levels in the Company, assuming varying levels of redemptions by the Company’s public stockholders:(1)

 

    No
Redemptions
    12.5 Million
shares of Class A
Stock

Redeemed
 
    No Exercise of
Private Placement
Warrants
    Assuming Exercise
of Private
Placement
Warrants
    No Exercise of
Private Placement
Warrants
    Assuming Exercise
of Private
Placement
Warrants
 

The Company’s public stockholders

    29%        26%        19%        18%   

The Private Placement Investors

    21%        20%        21%        20%   

Initial Stockholders

    8%        14%        8%        14%   

AP Hostess LP

    17%        16%        22%        20%   

Hostess CDM Co-Invest(2)

    21%        20%        26%        24%   

CDM Hostess(3)

    2%        2%        2%        2%   

Mr. Metropoulos

    2%        2%        2%        2%   
 

 

 

   

 

 

   

 

 

   

 

 

 
    100%        100%        100%        100%   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

This table, other than the maximum redemption scenario wherein 12.5 million shares of Class A Stock are redeemed and the scenario in which our Sponsor exercises all of its Private Placement Warrants for an additional 8.5 million shares of Class A Stock (after giving effect to the transfer of 2,000,000 Private Placement Warrants to Mr. Metropoulos in connection with the transfer of all of the Bridge Shares to third parties), reflects the assumptions as set forth in the preceding paragraph.

(2) 

The shares of Class B Stock (and a corresponding number of Class B Units in Hostess Holdings) held by Hostess CDM Co-Invest are beneficially owned by Mr. Metropoulos.

(3) 

The shares of Class B Stock (and a corresponding number of Class B Units in Hostess Holdings) held by CDM Hostess are beneficially owned by Mr. Metropoulos.

The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination. The issuance of 20% or more of our outstanding shares of Common Stock in connection with the Master Transaction Agreement, the Private Placement and the Executive Chairman Employment Agreement requires stockholder approval of the NASDAQ Proposal.

Board of Directors of the Company Following the Business Combination

Upon consummation of the Business Combination, our Board anticipates increasing its initial size from four directors to seven directors, with each Class I director having a term that expires at the post-combination company’s annual meeting of stockholders in 2017, each Class II director having a term that expires at the post-combination company’s annual meeting of stockholders in 2018 and each Class III director having a term that expires at the post-combination company’s annual meeting of stockholders in 2019, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. Please see the sections entitled “Proposal No. 8 — Election of Directors to the Board of Directors” and “Management After the Business Combination” for additional information.

The Charter Amendment Proposals

Upon the closing of the Business Combination, our current certificate of incorporation will be amended promptly to reflect the Charter Amendment Proposals to:

 

   

provide for the classification of our Board into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 3);

 

   

authorize an additional 40,000,000 shares of Common Stock, which would consist of (i) establishing 50,000,000 shares of a newly designated class of Class B Stock, in order to provide for our “Up-C” structure, which allows certain of the Selling Equityholders to continue to hold their ownership interest

 



 

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in Hostess in a tax efficient manner, and (ii) decreasing the post-combination company’s shares of Class F Common Stock from 20,000,000 shares to 10,000,000 shares (Proposal No. 4);

 

   

change the stockholder vote required to amend certain provisions of the post-combination company’s proposed certificate of incorporation and bylaws (Proposal No. 5);

 

   

elect not to be governed by Section 203 of the DGCL and, instead, include a provision in our certificate of incorporation that is substantially similar to Section 203 of the DGCL, but excludes The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees from the definition of “interested stockholder,” and to make certain related changes (Proposal No. 6); and

 

   

provide for certain additional changes, including changing the post-combination company’s corporate name from “Gores Holdings, Inc.” to “Hostess Brands, Inc.,” providing that certain transactions are not “corporate opportunities” and that certain persons, including the Selling Equityholders and their affiliates, are not subject to the doctrine of corporate opportunity, and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company, subject to approval by our stockholders at the Special Meeting (Proposal No. 7).

Please see the sections entitled “Proposal No. 3 — Classification of the Board of Directors,” “Proposal No. 4 — Approval of Amendments to Current Certificate to Authorize Additional Shares of Common Stock,” “Proposal No. 5 — Approval of Amendments to Current Certificate to Change the Stockholder Vote Required to Amend the Certificate of Incorporation and Bylaws of the Company,” “Proposal No. 6 — Approval of Amendments to Current Certificate to Elect Not to be Governed by Section 203 of the DGCL,” and “Proposal No. 7 — Approval of Additional Amendments to Current Certificate in Connection with the Business Combination” for more information.

Other Proposals

In addition, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable NASDAQ Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock pursuant to the Business Combination, the Private Placement and the Executive Chairman Employment Agreement (Proposal No. 2);

 

   

a proposal to elect seven directors to our Board, effective upon the closing of the Business Combination, with each Class I director having a term that expires at the post-combination company’s annual meeting of stockholders in 2017, each Class II director having a term that expires at the post-combination company’s annual meeting of stockholders in 2018 and each Class III director having a term that expires at the post-combination company’s annual meeting of stockholders in 2019, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death (Proposal No. 8);

 

   

a proposal to approve and adopt the Incentive Plan, a copy of which is attached to this proxy statement as Annex L, including the authorization of the initial share reserve under the Incentive Plan and also for purposes of complying with Section 162(m) of the Code (Proposal No. 9);

 

   

a proposal to ratify the appointment of KPMG as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016 (Proposal No. 10); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the

 



 

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approval of the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals (Proposal No. 11).

Please see the sections entitled “Proposal No. 2 — Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination, the Private Placement and the Executive Chairman Employment Agreement,” “Proposal No. 8 — Election of Directors to the Board of Directors,” “Proposal No. 9 — Approval of the Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan and Also for Purposes of Complying with Section 162(m) of the Code,” “Proposal No. 10 — Ratification of Appointment of the Company’s Independent Registered Public Accounting Firm” and “Proposal No. 11 — The Adjournment Proposal” for more information.

Date, Time and Place of Special Meeting

The Special Meeting will be held on November 3, 2016, at 9:00 a.m., Eastern Time, at the offices of Weil, Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, NY 10153, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

Voting Power; Record Date

Only Company stockholders of record at the close of business on September 29, 2016, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of Company Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 46,875,000 shares of Company Common Stock outstanding and entitled to vote, of which 37,500,000 are shares of Class A Stock and 9,375,000 are Founder Shares held by our Initial Stockholders.

Accounting Treatment

The Business Combination will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”), with the Company treated as the acquirer, assuming that the public stockholder redemptions do not exceed a level whereby the Selling Equityholders would retain control of Hostess Holdings. The ultimate determination of the accounting acquirer is a qualitative and quantitative assessment that requires careful consideration, of which the final determination will occur after the consummation of the Business Combination. However, the Company generally believes that if the Selling Equityholders retain greater than 50% of the voting control of the post-combination company, the Company would not be considered the accounting acquirer. Under the acquisition method of accounting, the Company will allocate the purchase price of this acquisition to tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition-date fair values. These estimates will be determined through established and generally accepted valuation techniques. Transaction costs will be expensed as incurred.

If the public stockholder redemptions exceed the level whereby the Selling Equityholders retain control of Hostess Holdings, then Hostess Holdings will be considered the acquirer for accounting purposes, notwithstanding the legal form of the Business Combination. This is referred to as reverse merger accounting. If Hostess Holdings is the acquirer for accounting purposes, the Company will be considered the acquired entity, and the assets and liabilities of the Company, as opposed to Hostess Holdings, will be recorded at fair value. As displayed in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information,” the resulting accounting treatment differs materially if reverse merger accounting is applied.

Appraisal Rights

Appraisal rights are not available to our stockholders in connection with the Business Combination.

 



 

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Proxy Solicitation

Proxies may be solicited by mail. The Company has engaged Morrow to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section entitled “Special Meeting in Lieu of 2016 Annual Meeting of Company Stockholders — Revoking Your Proxy.”

Interests of Certain Persons in the Business Combination

In considering the recommendation of our Board to vote in favor of the Business Combination, stockholders should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination.

These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $53,125,000 (after giving effect to the cancellation of approximately 4,062,500 Founder Shares) but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by August 19, 2017;

 

   

the fact that our Sponsor paid an aggregate of $9,500,000 for its 19,000,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 19, 2017;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

the fact that, at the option of our Sponsor, any amounts outstanding under any loan made by our Sponsor or an affiliate of our Sponsor to the Company in an aggregate amount up to $1,500,000, may be converted into warrants to purchase Class A Stock of the post-combination company;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, The Gores Group, an affiliate of our Sponsor, has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 



 

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the anticipated election of our Chief Executive Officer, Mr. Mark R. Stone, as a director of the post-combination company;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors may not participate in the formation of, or become a director or officer of, any other blank check company until we (i) have entered into a definitive agreement regarding an initial business combination or (ii) fail to complete an initial business combination by August 19, 2017; provided that, in the case of clause (i), such other blank check company does not consummate its initial public offering prior to the consummation of the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 19, 2017;

 

   

that, as described in the Charter Amendment Proposals and reflected in Annex B, our proposed certificate of incorporation will be amended to exclude The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations not in compliance with Section 203 of the DGCL;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees and provides that our Initial Stockholders will vote all of their shares of Class A Stock in favor of the election to the Board of Mr. Metropoulos (or his designee for so long as Mr. Metropoulos is entitled to serve on the Board or appoint a member of the Board, as applicable, pursuant to the terms of the Executive Chairman Director Agreement); and

 

   

that our Sponsor has entered into the Sponsor Subscription Agreement with the Company, pursuant to which our Sponsor has committed to purchase up to 17,755,358 shares of Class A Stock in the Private Placement for an aggregate commitment of $163,000,000. Pursuant to the terms of the Sponsor Subscription Agreement, our Sponsor may transfer or assign its rights to purchase shares of Class A Stock to third parties in compliance with the Securities Act, so long as our Sponsor, together with any controlled affiliates or employees of The Gores Group or Platinum Equity LLC or their respective controlled affiliates party to any other Subscription Agreement, maintains a subscription level of at least $50,000,000.

Reasons for the Approval of the Business Combination

We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We sought to do this by utilizing the networks and industry experience of both our Sponsor and our Board to identify, acquire and operate one or more businesses within or outside of the United States, although we were not limited to a particular industry or sector.

In particular, our Board considered the following positive factors, although not weighted or in any order of significance:

 

   

Iconic Brand. Hostess is an iconic American brand with very strong brand awareness. Hostess has significant market share in the sweet baked goods market and is a category leader in the single serve market and bagged donuts market.

 

   

Business and Financial Condition and Prospects. The knowledge and familiarity of the Board and the Company’s management with Hostess’ business, financial condition, results of operations (including

 



 

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Hostess’ favorable margins) and future growth prospects. The Board discussed Hostess’ current prospects for growth in executing upon and achieving Hostess’ business plans, and noted that the U.S. sweet baked goods industry is highly fragmented and represents a significant opportunity for further consolidation. The Board believed that Hostess’ additional market share gain and growth rates could outpace the underlying market, given that Hostess demonstrated above-market growth post-bankruptcy and that Hostess had not yet reached the sweet baked goods market share it held prior to its bankruptcy. In addition, the Board believed that there is expected market growth overall in the $6.8 billion sweet baked goods category and that Hostess is in a premium position to capitalize on such growth with its brand power and market position.

 

   

Acquisition of Hostess Assets by the Selling Equityholders. The Board considered the fact that the assets of Hostess were acquired, free and clear of all past liabilities, out of bankruptcy in 2013 by Apollo and the CDM Holders.

 

   

Apollo and CDM Holder’s Investment in Hostess. Following the acquisition of Hostess out of bankruptcy in 2013, Apollo and the CDM Holders invested significant capital in Hostess transforming Hostess to a competitively advantaged direct to warehouse model with extended shelf life technology, an upgraded manufacturing footprint, implementation of new IT systems and enhanced production efficiency through the installation of automated baking and packaging lines. The Board viewed these investments as improving Hostess’ operating model, allowing flexibility to innovate and quickly bring to market new products and ideas.

 

   

Experienced and Proven Management Team. The Board considered the fact that the post-combination company will be led by the senior management team of Hostess which, with an average of 19 years of industry experience, has successfully transformed the business since it was acquired out of bankruptcy in 2013 and has delivered industry leading profitability margins. In addition, the Board considered the fact that Mr. Metropoulos, who has more than 30 years of successful experience revamping iconic brands throughout the consumer space and a strong track record of growing revenues, reducing costs and enhancing capital efficiency, would continue on as the Executive Chairman of the post-combination company.

 

   

Opinion of Moelis. The opinion of Moelis, dated July 4, 2016, addressed to the Board as to the fairness, from a financial point of view and as of the date of such opinion, of the consideration to be paid by the Company in the Business Combination which opinion was based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications set forth in such opinion as more fully described below under the caption “Proposal No. 1 — Approval of the Business Combination — Opinion of the Company’s Financial Advisor.”

 

   

Other Alternatives. The Board’s belief, after a thorough review of other business combination opportunities reasonably available to the Company, that the proposed Business Combination represents the best potential business combination for the Company based upon the process utilized to evaluate and assess other potential acquisition targets, and the Board’s and management’s belief that such processes had not presented a better alternative.

 

   

Terms of the Master Transaction Agreement. The Board considered the terms and conditions of the Master Transaction Agreement and the transactions contemplated thereby, including the Business Combination.

 

   

Independent Director Role. The Board is comprised of a majority of independent directors who are not affiliated with our Sponsor and its affiliates, including The Gores Group. In connection with the Business Combination, our independent directors, Messrs. Randall Bort, William Patton and Jeffrey Rea, took an active role in evaluating and negotiating the proposed terms of the Business Combination, including the Master Transaction Agreement, the Related Agreements and the amendments to our

 



 

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current certificate of incorporation to take effect upon the completion of the Business Combination. Our independent directors evaluated and unanimously approved, as members of the Board, the Master Transaction Agreement and the transactions contemplated therein, including the Business Combination.

For more information about our decision-making process, please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”

Conditions to Closing of the Business Combination

The respective obligations of the Company and the Selling Equityholders to consummate the transactions contemplated by the Master Transaction Agreement, including the Business Combination, are subject to the satisfaction or written waiver by both the Company and the Selling Equityholders, of each of the following conditions:

 

   

the waiting period applicable to the transactions contemplated by the Master Transaction Agreement under the HSR Act must have expired or early termination must have been granted;

 

   

there must not be in effect any order by a governmental entity of competent jurisdiction enjoining, restricting or otherwise making illegal the consummation of the Business Combination or any law or regulations that makes the consummation of the Business Combination illegal or otherwise prohibited; and

 

   

the required vote of the Company’s stockholders to approve the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals shall have been duly obtained in accordance with the DGCL, the Company’s current certificate of incorporation and bylaws and the rules and regulations of NASDAQ.

The obligations of the Company to affect the Business Combination are subject to fulfillment, on or prior to the closing date, of certain conditions (any or all of which may be waived in writing by the Company), including, among others:

 

   

the Selling Equityholders must have performed and complied in all material respects with all obligations required to be performed or complied with by the Selling Equityholders under the Master Transaction Agreement at or prior to closing; and

 

   

the amount in the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, must equal or exceed $537,500,000.

The obligations of the Selling Equityholders to affect the Business Combination are subject to fulfillment, on or prior to the closing date, of certain conditions (any or all of which may be waived in writing by the Selling Equityholders), including, among others:

 

   

the Company must have performed and complied in all material respects with all obligations required to be performed or complied with by it under the Master Transaction Agreement at or prior to closing;

 

   

the Company’s current certificate must be amended to reflect the Charter Amendment Proposals; and

 

   

the amount in the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, must equal or exceed $600,000,000.

Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — Conditions to Closing of the Business Combination” for additional information.

 



 

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Regulatory Matters

Under the HSR Act and the rules that have been promulgated thereunder by the U.S. Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The Business Combination is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. On July 19, 2016, the Company and Hostess filed the required forms under the HSR Act with the Antitrust Division and the FTC. Early termination of the HSR waiting period was granted on July 29, 2016.

At any time before or after consummation of the Business Combination, notwithstanding termination of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result. Neither the Company nor Hostess is aware of any material regulatory approvals or actions that are required for completion of the Business Combination other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Company’s Common Stock outstanding and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

The approval of the Business Combination Proposal requires the affirmative vote of holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or an abstention from voting with regard to the Business Combination Proposal will have the same effect as a vote “AGAINST” the Business Combination Proposal. Our Initial Stockholders have agreed to vote their Founder Shares and any public shares purchased during or after the IPO in favor of the Business Combination Proposal.

The approval of the NASDAQ Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting will not be counted towards the number of shares of Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the NASDAQ Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established and will have the same effect as a vote “AGAINST” the NASDAQ Proposal.

The approval of the Charter Amendment Proposals requires the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or an abstention from voting with regard to any of the Charter Amendment Proposals will have the same effect as a vote “AGAINST” such Charter Amendment Proposal.

 



 

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Directors are elected by a plurality of all of the votes cast by holders of shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. This means that the seven director nominees will be elected if they receive more affirmative votes than any other nominee for the same position. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions will have no effect on the election of directors.

The approval of the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting will not be counted towards the number of shares of Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Incentive Plan Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established and will have the same effect as a vote “AGAINST” the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal.

The Business Combination is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals at the Special Meeting. Each of the proposals other than the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals is conditioned on the approval of the Business Combination Proposal, the NASDAQ Proposal and the Charter Amendment Proposals, other than the Ratification Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement. It is important for you to note that in the event that the Business Combination Proposal, the NASDAQ Proposal or the Charter Amendment Proposals do not receive the requisite vote for approval, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by August 19, 2017, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our public stockholders.

Opinion of the Company’s Financial Advisor

In connection with the Board’s approval of the Master Transaction Agreement, the Board received a written opinion, dated July 4, 2016, from the Company’s financial advisor, Moelis, as to the fairness, from a financial point of view and as of the date of such opinion, of the consideration to be paid by the Company. The full text of Moelis’ written opinion, dated July 4, 2016, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion (which are also summarized herein), is attached as Annex D to this proxy statement and is incorporated herein by reference. Stockholders are urged to read Moelis’ written opinion carefully and in its entirety. Moelis’ opinion was provided for the use and benefit of the Board (in its capacity as such) in its evaluation of the Business Combination (and, in its engagement letter, Moelis provided its consent to the inclusion of the text of its opinion as part of this proxy statement). Moelis’ opinion is limited solely to the fairness, from a financial point of view to the Company, of the consideration to be paid by the Company in the Business Combination, and does not address the Company’s underlying business decision to effect the Business Combination or the relative merits of the Business Combination as compared to any alternative business strategies or transactions that might be available with respect to the Company. Moelis’ opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote or act with respect to the Business Combination or any other matter.

Independent Director Oversight

Our Board is comprised of a majority of independent directors who are not affiliated with our Sponsor and its affiliates, including The Gores Group. In connection with the Business Combination, our independent

 



 

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directors, Messrs. Randall Bort, William Patton and Jeffrey Rea, took an active role in evaluating and negotiating the proposed terms of the Business Combination, including the Master Transaction Agreement, the Related Agreements and the amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination. As part of their evaluation of the Business Combination, our independent directors were aware of the potential conflicts of interest with our Sponsor and its affiliates, including The Gores Group, that could arise with regard to the proposed terms of the (i) Master Transaction Agreement, (ii) the Private Placement and (iii) amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination (including a provision that certain transactions are not “corporate opportunities” and that certain persons, including the Selling Equityholders and their affiliates, are not subject to the doctrine of corporate opportunity and the exclusion of The Gores Group, Apollo, the CDM Holders and their affiliates and transferees as “interested stockholders” from the restrictions in our proposed certificate of incorporation that are similar to Section 203 of the DGCL). Our independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the Board, the Master Transaction Agreement and the transactions contemplated therein, including the Business Combination. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — Independent Director Oversight.”

Recommendation to Company Stockholders

Our Board believes that each of the Business Combination Proposal, the NASDAQ Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal, the Ratification Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and unanimously recommends that its stockholders vote “FOR” each of the proposals.

When you consider the recommendation of our Board in favor of approval of the Business Combination Proposal, you should keep in mind that our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a stockholder. Stockholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $53,125,000 (after giving effect to the cancellation of approximately 4,062,500 Founder Shares) but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by August 19, 2017;

 

   

the fact that our Sponsor paid an aggregate of $9,500,000 for its 19,000,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 19, 2017;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

the fact that, in connection with the Business Combination, we shortened the lock-up period on the Founder Shares from one year following the Business Combination to six months;

 



 

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the fact that, on July 27, 2016, our Sponsor loaned us $500,000 to fund our on-going operational expenses and certain transaction costs incurred by us in connection with the Business Combination and that, at the option of our Sponsor, any amounts outstanding under any loan made by our Sponsor or an affiliate of our Sponsor to the Company in an aggregate amount up to $1,500,000, may be converted into warrants to purchase Class A Stock of the post-combination company;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, The Gores Group, an affiliate of our Sponsor, has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the anticipated election of our Chief Executive Officer, Mr. Mark R. Stone, as a director of the post-combination company;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors may not participate in the formation of, or become a director or officer of, any other blank check company until we (i) have entered into a definitive agreement regarding an initial business combination or (ii) fail to complete an initial business combination by August 19, 2017; provided that, in the case of clause (i), such other blank check company does not consummate its initial public offering prior to the consummation of the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 19, 2017;

 

   

that, as described in the Charter Amendment Proposals and reflected in Annex B, our proposed certificate of incorporation will be amended to exclude The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations not in compliance with Section 203 of the DGCL;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees and provides that our Initial Stockholders will vote all of their shares of Class A Stock in favor of the election to the Board of Mr. Metropoulos (or his designee for so long as Mr. Metropoulos is entitled to serve on the Board or appoint a member of the Board, as applicable, pursuant to the terms of the Executive Chairman Director Agreement); and

 

   

that our Sponsor has entered into the Sponsor Subscription Agreement with the Company, pursuant to which our Sponsor has committed to purchase up to 17,755,358 shares of Class A Stock in the Private Placement for an aggregate commitment of $163,000,000. Pursuant to the terms of the Sponsor Subscription Agreement, our Sponsor may transfer or assign its rights to purchase shares of Class A Stock to third parties in compliance with the Securities Act, so long as our Sponsor, together with any controlled affiliates or employees of The Gores Group or Platinum Equity LLC or their respective controlled affiliates party to any other Subscription Agreement, maintains a subscription level of at least $50,000,000.

 



 

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Risk Factors

In evaluating the Business Combination and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 65 of this proxy statement. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company and Hostess to complete the Business Combination, and (ii) the business, cash flows, financial condition and results of operations of the Company following consummation of the Business Combination.

 



 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table contains summary historical financial data for the Company as of and for the six months ended June 30, 2016 and as of and for the periods from June 1, 2015 (inception) through June 30, 2015 and from June 1, 2015 (inception) through December 31, 2015. Such data for the period from June 1, 2015 through December 31, 2015 and as of December 31, 2015 have been derived from the audited financial statements of the Company, which are included elsewhere in this proxy statement. Such data as of and for the six months ended June 30, 2016 have been derived from the unaudited financial statements of the Company included elsewhere in this proxy statement. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the sections entitled “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About the Company” and in our financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement.

 

     For the Six
Months Ended
June 30, 2016
   

For the period from

June 1, 2015
(inception) to

June 30, 2015

    For the period from
June 1, 2015
(inception) to
December 31, 2015
 
     (unaudited)     (unaudited)        
Statement of Operations Data:       

Revenues

   $ —        $ —        $ —     

Professional fees and other expenses

     (2,325,835     (12,000     (411,207

State franchise taxes, other than income tax

     (90,000     —          (69,917
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (2,415,835     (12,000     (481,124

Other income — Interest and dividend income

     225,069       
—  
  
    11,205   

Net loss

   $ (2,190,766   $
(12,000

  $ (469,919
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding

(Basic and diluted)

     11,027,712       
9,375,000
  
    10,856,156   

Net loss per common share:

(Basic and diluted)

   $ (0.20   $ (0.00   $ (0.04

 

     As of
June 30, 2016
     As of
December 31, 2015
 
     (unaudited)      (audited)  

Condensed Balance Sheet Data:

     

ASSETS:

     

Current assets:

     

Cash and cash equivalents

   $ 452,181       $ 790,635   

Prepaid expenses

     211,526         259,149   
  

 

 

    

 

 

 

Total current assets

     663,707         1,049,785   

Investments and cash held in Trust Account

     375,234,320         375,010,481   
  

 

 

    

 

 

 

Total assets

   $ 375,898,027       $ 376,060,265   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accrued expenses, formation and offering costs

   $ 2,253,767       $ 217,384   

State franchise tax accrual

     62,062         69,917   
  

 

 

    

 

 

 

Total current liabilities(1)

     2,315,829         287,301   

Deferred underwriting compensation

     13,125,000         13,125,000   
  

 

 

    

 

 

 

Total liabilities

     15,440,829         13,412,301   

 



 

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     As of
June 30, 2016
    As of
December 31, 2015
 
     (unaudited)     (audited)  

Commitments and Contingencies

    

Shares of Class A common stock subject to possible redemption; 35,545,719 and 35,764,796 shares at June 30, 2016 and December 31, 2015, respectively, at a value of $10.00 per share

     355,457,190        357,647,960   

Stockholders’ equity:

    

Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding

     —          —     

Common stock

    

Class A common stock, $0.0001 par value; 200,000,000 shares authorized, 1,954,281 and 1,735,204 shares issued and outstanding (excluding 35,545,719 and 35,764,796 shares subject to possible redemption) at June 30, 2016 and December 31, 2015, respectively

     195        174   

Class F common stock, $0.0001 par value; 20,000,000 shares authorized, 9,375,000 shares issued and outstanding

     938        938   

Additional paid-in-capital

     7,659,560        5,468,811   

Retained earnings

     —          —     

Deficit accumulated

     (2,660,685     (469,919
  

 

 

   

 

 

 

Total stockholders’ equity

     5,000,008        5,000,004   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 375,898,027      $ 376,060,265   
  

 

 

   

 

 

 

 

(1) 

Subsequent to June 30, 2016, our Sponsor loaned us $500,000 to be used to fund our on-going operational expenses and certain transaction costs incurred by us in connection with the Business Combination.

 



 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF HOSTESS HOLDINGS

The following table contains summary historical consolidated financial and other data for Hostess Holdings for the six months ended June 30, 2016 and June 30, 2015 and for the years ended December 31, 2015, December 31, 2014 and for the period from February 6, 2013 (inception) through December 31, 2013. Such data as of December 31, 2015 and December 31, 2014 and for the years ended December 31, 2015 and December 31, 2014 and for the period from February 6, 2013 (inception) through December 31, 2013 have been derived from the audited consolidated financial statements of Hostess Holdings included elsewhere in this proxy statement. Such data as of June 30, 2016 and for the six months ended June 30, 2016 and June 30, 2015 have been derived from the unaudited consolidated financial statements of Hostess Holdings included elsewhere in this proxy statement. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The data for the twelve months ended June 30, 2016, which are unaudited, have been calculated by adding the six months ended June 30, 2016 to the year ended December 31, 2015, and subtracting the six months ended June 30, 2015. This presentation is not in accordance with U.S. GAAP. Hostess believes this presentation provides useful information to investors regarding Hostess Holdings’ recent financial performance. The information below is only a summary and should be read in conjunction with the information contained under the headings “Hostess Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About Hostess” and in Hostess Holdings’ audited consolidated financial statements and unaudited interim condensed consolidated financial statements and the related notes included elsewhere in this proxy statement.

The historical financial statements of Hostess Holdings have been presented herein, as opposed to those of the various entities of the Selling Equityholders. The Selling Equityholders entities are holding companies without any operations, and no material assets beyond their investment in Hostess Holdings. The Selling Equityholders entities are not permitted to consolidate Hostess Holdings under GAAP. As such, the historical Hostess Holdings financial statements represent the highest level of consolidated financial statements that presents the full financial position and results of operations of the underlying business.

 



 

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Statement of Operations Data

The following table sets forth Hostess Holdings’ net revenues, operating costs and expenses attributable to Hostess Holdings’ operations:

 

(In thousands)

  Twelve Months
Ended

June 30,
2016
    Six Months
Ended

June 30,
2016
    Six Months
Ended

June 30,
2015
    Year Ended
December 31,
2015
    Year Ended
December 31,

2014
    February 6,
2013

(Inception)
through
December 31,
2013
 
   

(Unaudited)

    (Unaudited)     (Unaudited)                    

Net revenue

  $ 657,800      $ 352,561      $ 315,576      $ 620,815      $ 554,695      $ 237,418   

Cost of goods sold

    377,751        195,843        174,055        355,963        320,763        145,498   

Recall costs related to flour(1)

    4,000        4,000        —          —          —          —     

Special employee incentive compensation(2)

    2,649        —          —          2,649        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    273,400        152,718        141,521        262,203        233,932        91,920   

Operating costs and expenses:

           

Advertising and marketing

    33,110        17,148        16,005        31,967        32,197        19,354   

Selling expenses

    28,847        14,904        15,541        29,484        25,664        10,544   

General and administrative

    36,692        21,505        17,195        32,382        33,745        21,850   

Special employee incentive compensation(2)

    1,274        —          —          1,274        —          —     

Impairment of property and equipment

    9,575        7,300        425        2,700        13,241        —     

Acquisition and bakery start-up costs(3)

    —          —          —          —          —          14,029   

Loss on sale/abandonment of property and equipment and bakery shutdown costs(4)

    3,494        227        915        4,182        5,150        —     

Related party expenses

    4,216        2,374        2,464        4,306        4,468        2,813   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

    117,208        63,458        52,545        106,295        114,465        68,590   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    156,192        89,260        88,976        155,908        119,467        23,330   

Other expense:

           

Interest expense, net

    68,085        35,744        17,670        50,011        37,447        27,766   

Loss on debt extinguishment(5)

    18,121        —          7,759        25,880        —          —     

Other (income) expense(6)

    8,570        5,189        (12,124     (8,743     556        1,158   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

    94,776        40,933        13,305        67,148        38,003        28,924   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes

    61,416        48,327        75,671        88,760        81,464        (5,594

Income tax provision

    317        317        —          —          —          —     

Net income (loss)

    61,099        48,010        75,671        88,760        81,464        (5,594
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Net income attributable to the non-controlling interest

    2,504        1,781        3,784        4,507        4,267        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Hostess Holdings, L.P.

  $ 58,595      $ 46,229      $ 71,887      $ 84,253      $ 77,197      $ (5,594
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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Statement of Cash Flows Data

The following table sets forth selected elements of Hostess Holdings’ Consolidated Statements of Cash Flows:

 

(In thousands)

   Six
Months
Ended

June 30,
2016
    Six
Months
Ended

June 30,
2015
    Year Ended
December 31,
2015
    Year Ended
December 31,
2014
    February 6,
2013
(Inception)
through
December 31,
2013
 
     (Unaudited)     (Unaudited)                    

Net cash provided by (used in) operating activities

   $ 54,193      $ 62,108      $ 132,972      $ 108,329      $ (29,672

Net cash provided by (used in) investing activities

     (62,030     25,828        17,880        (91,393     (422,498

Net cash provided by (used in) financing activities

     (9,862     (239,450     (296,002     (9,769     654,626   

Balance Sheet Data (at period end)

The following table sets forth selected attributes of Hostess Holdings’ Consolidated Balance Sheets:

 

(In thousands)

   June 30,
2016
     December 31,
2015
     December 31,
2014
 
     (Unaudited)                

Cash and cash equivalents

   $ 46,774       $ 64,473       $ 209,623   

Property and equipment, net

     140,130         128,078         112,732   

Total assets

     682,257         613,871         765,494   

Long-term debt and capital lease obligation

     1,191,155         1,193,667         473,175   
  

 

 

    

 

 

    

 

 

 

Total liabilities and partners’ equity

     682,257         613,871         765,494   

Other Financial Data

The following table sets forth Adjusted EBITDA(7):

 

(In thousands)

   Twelve Months
Ended

June 30,
2016
     Six Months
Ended

June 30,
2016
     Six Months
Ended

June 30,
2015
     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
     February 6,
2013

(Inception)
through
December 31,
2013
 
     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Adjusted EBITDA

   $ 189,546       $ 106,828       $ 95,212       $ 177,930       $ 145,343       $ 40,285   

 

(1) 

On June 3, 2016, Hostess voluntarily recalled approximately 710,000 cases of snack cakes and donuts as a direct result of the recall by Hostess’ supplier, Grain Craft, of certain lots of its flour for undeclared peanut residue. The components of the estimated recall costs of $4.0 million recorded in the Consolidated Statements of Operations for the six months ended June 30, 2016, consisted of the net revenue loss of approximately $3.1 million related to customer deductions and customer payments and cost of goods sold of $0.9 million for the write-off and destruction of finished product and flour. See Note 9. Commitments and Contingencies of the Notes to Hostess Holdings’ unaudited consolidated financial statements elsewhere in this proxy statement for further information regarding the product recall.

(2) 

For the year ended December 31, 2015, a one-time special bonus payment of $2.6 million and $1.3 million was paid to employees at Hostess Holdings’ bakery facilities and corporate employees, respectively, as compensation for their efforts in the successful recapitalization of Hostess.

(3) 

In April 2013, Hostess Holdings began the process of bringing four of its acquired bakeries into operation and completed this process in July 2013. For the period from inception through December 31, 2013, Hostess Holding incurred bakery start-up costs totaling $6.7 million, including repairs, materials and supplies, labor costs, and ingredients used in testing, and acquisition-related costs of approximately $7.3 million.

 



 

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(4) 

For the six months ended June 30, 2016, Hostess Holdings incurred bakery shutdown costs of $0.2 million associated with utilities, insurance, maintenance, and taxes related to the assets that were held for sale. For the six months ended June 30, 2015, Hostess Holdings incurred bakery shutdown costs of $0.9 million associated with the closure and relocation of assets. For the years ended December 31, 2015 and December 31, 2014, Hostess Holdings incurred bakery shutdown costs associated with the closure and relocation of assets of $1.2 million and $1.4 million, respectively. Also, for the year ended December 31, 2014, Hostess Holdings incurred bakery shutdown costs associated with employee severance and Worker Adjustment and Retraining Notification (WARN) Act payments of $2.9 million. Hostess Holdings recorded a loss on sale and abandonment of property and equipment of $3.0 million and $0.8 million for the years ended December 31, 2015 and December 31, 2014, respectively.

(5) 

For the six months ended June 30, 2015, Hostess Holdings recorded a loss on a partial extinguishment of Hostess Holdings’ original Term Loan of $7.8 million, which consisted of prepayment penalties of $3.0 million and write-off of deferred financing costs of $4.8 million. For the year ended December 31, 2015, Hostess Holdings recorded a loss on extinguishment related to Hostess Holdings’ original term loan dated April 9, 2013 of $25.9 million, which consisted of prepayment penalties of $9.9 million and write-off of deferred financing costs of $16.0 million.

(6) 

For the six months ended June 30, 2016, other expense primarily consisted of legal and professional fees of $5.2 million, related to Hostess Holdings’ business combination agreement with Gores Holdings, Inc., transaction costs attributable to the acquisition of Superior, and the pursuit of a potential acquisition. Other income for the six months ended June 30, 2015, primarily consisted of $12.0 million of proceeds from the sale of foreign trademark rights and perpetual irrevocable licenses to certain “know how” in certain countries in the Middle East. For the year ended December 31, 2015, other income consisted of $12.0 million of proceeds from the sale of foreign trademark rights and perpetual irrevocable licenses to certain “know how” in certain countries in the Middle East, partially offset by $3.3 million for professional service fees related to Hostess Holdings’ pursuit of a potential sale of Hostess. For the year ended December 31, 2014 and the period February 6, 2013 (inception) through December 31, 2013, other expense was $0.6 million and $1.2 million, respectively.

(7) 

Adjusted EBITDA is a non-GAAP financial measure commonly used in Hostess Holdings’ industry and should not be construed as an alternative to net income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Hostess Holdings has included Adjusted EBITDA because it believe it provides management and investors with additional information to measure Hostess Holdings’ performance and liquidity, estimate Hostess Holdings’ value and evaluate Hostess Holdings’ ability to service debt.

Hostess Holdings defines Adjusted EBITDA as net income adjusted to exclude (i) interest expense, net, (ii) depreciation and amortization and (iii) as further adjusted to eliminate the impact of certain items that Hostess Holdings does not consider indicative of its ongoing operating performance. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons Hostess Holdings considers them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future Hostess Holdings may incur expenses that are the same as or similar to some of the adjustments set forth below. Hostess Holdings’ presentation of Adjusted EBITDA should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.

Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of Hostess Holdings’ results as reported under GAAP. For example, Adjusted EBITDA:

 

   

does not reflect Hostess Holdings’ capital expenditures, future requirements for capital expenditures or contractual commitments;

 

   

does not reflect changes in, or cash requirements for, Hostess Holdings’ working capital needs;

 

   

does not reflect the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on Hostess Holdings’ debt; and

 

   

does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future.

Hostess Holdings’ presentation of Adjusted EBITDA does not exclude related party expenses associated with its employment agreement with Mr. Metropoulos as the Chief Executive Officer and/or Executive Chairman. The amounts of such related party expenses were: $4.2 million for the twelve months ended June 30, 2016, $2.4 million for the six months ended June 30, 2016, $2.5 million for the six months ended June 30, 2015, $4.3 million for the year ended December 31, 2015, $4.5 million for the year ended December 31, 2014 and $2.8 million for February 6, 2013 (Inception) through December 31, 2013. Following completion of the Business Combination, these expenses will be approximately $0.3 million annually.

 



 

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The following table sets forth Hostess Holdings’ reconciliation of Adjusted EBITDA (unaudited):

 

(In thousands)

  Twelve Months
Ended
June 30,

2016
    Six Months
Ended

June 30,
2016
    Six Months
Ended

June 30,
2015
    Year
Ended
December 31,
2015
    Year
Ended
December 31,
2014
    February 6,
2013
(Inception)

through
December 31,
2013
 

Net income (loss)

  $ 61,099      $ 48,010      $ 75,671      $ 88,760      $ 81,464      $ (5,594

Plus non-GAAP adjustments:

           

Income tax provision

    317        317        —          —          —          —     

Interest expense, net

    68,085        35,744        17,670        50,011        37,447        27,766   

Loss on debt extinguishment(i)

    18,121        —          7,759        25,880        —          —     

Depreciation and amortization

    10,954        5,628        4,510        9,836        7,113        2,611   

Unit-based compensation

    1,408        413        386        1,381        372        315   

Acquisition and bakery start-up costs

    —          —          —          —          —          14,029   

Other (income) expense(ii).

    8,570        5,189        (12,124     (8,743     556        1,158   

Impairment of property and equipment

    9,575        7,300        425        2,700        13,241        —     

Loss on sale/abandonment of property and equipment and bakery shutdown costs(iii)

    3,494        227        915        4,182        5,150        —     

Recall costs of flour(iv)

    4,000        4,000        —          —          —          —     

Special employee incentive compensation(v)

    3,923        —          —          3,923        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 189,546      $ 106,828      $ 95,212      $ 177,930      $ 145,343      $ 40,285   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(i) 

For the six months ended June 30, 2015, Hostess Holdings recorded a loss on a partial extinguishment of Hostess Holdings’ original Term Loan of $7.8 million, which consisted of prepayment penalties of $3.0 million and write-off of deferred financing costs of $4.8 million. For the year ended December 31, 2015, Hostess Holdings recorded a loss on extinguishment related to Hostess Holdings’ original Term Loan of $25.9 million, which consisted of prepayment penalties of $9.9 million and write-off of deferred financing costs of $16.0 million.

(ii)

For the six months ended June 30, 2016, other expense primarily consisted of legal and professional fees of $5.2 million, related to Hostess Holdings’ business combination agreement with Gores Holdings, Inc., transaction costs attributable to the acquisition of Superior, and the pursuit of a potential acquisition. Other income for the six months ended June 30, 2015, primarily consisted of $12.0 million of proceeds from the sale of foreign trademark rights and perpetual irrevocable licenses to certain “know how” in certain countries in the Middle East. For the year ended December 31, 2015, other income consisted of $12.0 million of proceeds from the sale of foreign trademark rights and perpetual irrevocable licenses to certain “know how” in certain countries in the Middle East, partially offset by $3.3 million for professional service fees related to Hostess Holdings’ pursuit of a potential sale of Hostess. For the year ended December 31, 2014 and the period February 6, 2013 (inception) through December 31, 2013, other expense was $0.6 million and $1.2 million, respectively.

(iii) 

For the six months ended June 30, 2016, Hostess Holdings incurred bakery shutdown costs of $0.2 million associated with utilities, insurance, maintenance, and taxes related to the assets that were held for sale. For the six months ended June 30, 2015, Hostess Holdings incurred bakery shutdown costs of $0.9 million associated with the closure and relocation of assets. For the years ended December 31, 2015 and December 31, 2014, Hostess Holdings incurred bakery shutdown costs associated with the closure and relocation of assets of $1.2 million and $1.4 million, respectively. Also, for the year ended December 31, 2014, Hostess Holdings incurred bakery shutdown costs associated with employee severance and Worker Adjustment and Retraining Notification (WARN) Act payments of $2.9 million. Hostess Holdings recorded a loss on sale and abandonment of property and equipment of $3.0 million and $0.8 million for the years ended December 31, 2015 and December 31, 2014, respectively.

(iv) 

On June 3, 2016, Hostess voluntarily recalled approximately 710,000 cases of snack cakes and donuts as a direct result of the recall by Hostess’ supplier, Grain Craft, of certain lots of its flour for undeclared peanut residue. The components of the estimated recall costs of $4.0 million recorded in the Consolidated Statements of Operations for the six months ended June 30, 2016, consisted of the net revenue loss of approximately $3.1 million related to customer deductions and customer payments and cost of goods sold of $0.9 million for the write-off and destruction of finished product and flour. See Note 9. Commitments and Contingencies of the Notes to Hostess Holdings’ unaudited consolidated financial statements elsewhere in this proxy statement for further information regarding the product recall.

(v) 

For the year ended December 31, 2015, a one-time special bonus payment of $2.6 million and $1.3 million was paid to employees at Hostess Holdings’ bakery facilities and corporate employees, respectively, as compensation for their efforts in the successful recapitalization of Hostess.

 



 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The selected unaudited pro forma condensed combined financial information for the period ended December 31, 2015 and the six months ended June 30, 2016 combines the historical consolidated statement of operations of the Company and Hostess Holdings, giving effect to the Business Combination as if it had been consummated on January 1, 2015. The selected unaudited pro forma condensed combined balance sheet as of June 30, 2016 combines the historical consolidated balance sheet of the Company and Hostess Holdings, giving effect to the Business Combination as if it had been consummated on June 30, 2016. The selected unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with the unaudited pro forma condensed combined financial information, including the notes thereto, which is included in this proxy statement under the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

The selected unaudited pro forma condensed combined financial information is presented for informational purposes only. The selected unaudited pro forma condensed combined financial information does not purport to represent what the combined company’s results of operations or financial condition would have been had the Business Combination actually occurred on the dates indicated, and does not purport to project the combined company’s results of operations or financial condition for any future period or as of any future date. The selected unaudited pro forma condensed combined financial information does not reflect any potential divestitures that may occur prior to, or subsequent to, the completion of the Business Combination, cost savings that may be realized as a result of the Business Combination, or any potential changes in compensation plans. Further, as explained in the notes accompanying the unaudited pro forma condensed combined financial information included under the section entitled “Unaudited Pro Forma Condensed Combined Financial Information,” the pro forma allocation of purchase consideration reflected in the selected unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual allocation of purchase consideration that will be recorded at the time the Business Combination is completed. Additionally, the unaudited pro forma adjustments made in the selected unaudited condensed combined pro forma financial information, which are described in those notes, are preliminary and may be revised.

Combined Financial Information (Assuming No Redemptions)

 

    Company     Hostess
Holdings, LP
    Pro Forma
Assuming No
Redemptions
 

Statement of Operations Data - For the Six Months Ended June 30, 2016

     

Net revenue

  $ —        $ 352,561      $ 352,561   

Gross profit

  $ —        $ 152,718      $ 152,272   

Operating expenses

  $ 2,416      $ 63,458      $ 75,320   

Operating (loss) income

  $ (2,416   $ 89,260      $ 76,952   

Net (loss) income attributed to common stockholders

  $ (2,191   $ 46,229      $ 22,231   

Net income per common share - basic and diluted

  $ —          $ 0.23   

 



 

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     Company     Hostess
Holdings, LP
     Pro Forma
Assuming No
Redemptions
 

Statement of Operations Data - For the Year Ended December 31, 2015

       

Net revenue

   $ —        $ 620,815       $ 620,815   

Gross profit

   $ —        $ 262,203       $ 261,347   

Operating expenses

   $ 481      $ 106,295       $ 130,001   

Operating (loss) income

   $ (481   $ 155,908       $ 131,346   

Net (loss) income attributed to common stockholders

   $ (470   $ 84,253       $ 37,276   

Net income per common share - basic and diluted

   $ —           $ 0.38   

 

     Company      Hostess
Holdings, LP
    Pro Forma
Assuming No
Redemptions
 

Balance Sheet Data - As of June 30, 2016

       

Total current assets

   $ 664       $ 142,945      $ 107,132   

Total assets

   $ 375,898       $ 682,257      $ 2,505,202   

Total current liabilities

   $ 2,316       $ 79,581      $ 87,702   

Total liabilities

   $ 15,441       $ 1,299,181      $ 1,378,194   

Total common stock subject to possible redemption

   $ 355,457       $ —        $ —     

Total partners’ / stockholders’ equity

   $ 5,000       $ (616,924   $ 1,127,008   

Combined Financial Information (Assuming Maximum Redemptions)

 

     Company     Hostess
Holdings, LP
     Pro Forma
Assuming
Maximum
Redemptions
 

Statement of Operations Data - For the Six Months Ended June 30, 2016

       

Net revenue

   $ —        $ 352,561       $ 352,561   

Gross profit

   $ —        $ 152,718       $ 152,718   

Operating expenses

   $ 2,416      $ 63,458       $ 63,903   

Operating (loss) income

   $ (2,416   $ 89,260       $ 88,815   

Net (loss) income attributed to common stockholders

   $ (2,191   $ 46,229       $ 25,885   

Net income per common share - basic and diluted

   $ —           $ 0.28   

 



 

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     Company     Hostess
Holdings, LP
     Pro Forma
Assuming
Maximum
Redemptions
 

Statement of Operations Data - For the Year Ended December 31, 2015

       

Net revenue

   $ —        $ 620,815       $ 620,815   

Gross profit

   $ —        $ 262,203       $ 262,203   

Operating expenses

   $ 481      $ 106,295       $ 106,776   

Operating (loss) income

   $ (481   $ 155,908       $ 155,427   

Net (loss) income attributed to common stockholders

   $ (470   $ 84,253       $ 45,222   

Net income per common share - basic and diluted

   $ —           $ 0.50   

 

     Company      Hostess
Holdings, LP
    Pro Forma
Assuming
Maximum
Redemptions
 

Balance Sheet Data - As of June 30, 2016

       

Total current assets

   $ 664       $ 142,945      $ 104,559   

Total assets

   $ 375,898       $ 682,257      $ 772,452   

Total current liabilities

   $ 2,316       $ 79,581      $ 87,702   

Total liabilities

   $ 15,441       $ 1,299,181      $ 1,207,673   

Total common stock subject to possible redemption

   $ 355,457       $ —        $ —     

Total partners’ / stockholders’ equity

   $ 5,000       $ (616,924   $ (435,220

 



 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business, and the timing and ability for us to complete the Business Combination. Specifically, forward-looking statements may include statements relating to:

 

   

the benefits of the Business Combination;

 

   

the future financial performance of the post-combination company following the Business Combination;

 

   

changes in the market for Hostess products;

 

   

expansion plans and opportunities; and

 

   

other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

These forward-looking statements are based on information available as of the date of this proxy statement and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You should not place undue reliance on these forward-looking statements in deciding how your vote should be cast or in voting your shares on the proposals set forth in this proxy statement. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

   

the occurrence of any event, change or other circumstances that could delay the Business Combination or give rise to the termination of the Master Transaction Agreement;

 

   

the outcome of any legal proceedings that may be instituted against Hostess or the Company following announcement of the proposed Business Combination and transactions contemplated thereby;

 

   

the inability to complete the transactions contemplated by the proposed Business Combination due to the failure to obtain approval of the stockholders of the Company, or other conditions to closing in the Master Transaction Agreement;

 

   

the inability to obtain or maintain the listing of the post-combination company’s Class A Stock on NASDAQ following the Business Combination;

 

   

the risk that the proposed Business Combination disrupts current plans and operations as a result of the announcement and consummation of the transactions described herein;

 

   

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability to integrate the Hostess and the Company businesses, and the ability of the combined business to grow and manage growth profitably;

 

   

costs related to the Business Combination;

 

   

changes in applicable laws or regulations;

 

   

the inability to launch new Hostess products or to profitably expand into new markets;

 



 

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the possibility that Hostess or the Company may be adversely affected by other economic, business, and/or competitive factors; and

 

   

other risks and uncertainties indicated in this proxy statement, including those set forth under the section entitled “Risk Factors.”

 



 

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals to be voted on at the Special Meeting. The following risk factors apply to the business and operations of Hostess and its consolidated subsidiaries and will also apply to the business and operations of the post-combination company following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, cash flows, financial condition and results of operations of the post-combination company. You should carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Risks Related to Hostess Operations

Maintaining, extending and expanding Hostess’ reputation and brand image are essential to Hostess’ business success.

Hostess has many iconic brands with long-standing consumer recognition. Hostess’ success depends on its ability to maintain its brand image for its existing products, extend its brands to new platforms, and expand its brand image with new product offerings.

Hostess seeks to maintain, extend, and expand its brand image through marketing investments, including advertising and consumer promotions, and product innovation. Increasing attention on the role of food marketing could adversely affect Hostess’ brand image. It could also lead to stricter regulations and greater scrutiny of marketing practices. Existing or increased legal or regulatory restrictions on Hostess’ advertising, consumer promotions and marketing, or Hostess’ response to those restrictions, could limit Hostess’ efforts to maintain, extend and expand Hostess’ brands. Moreover, adverse publicity about regulatory or legal action against Hostess could damage Hostess’ reputation and brand image, undermine Hostess’ customers’ confidence and reduce long-term demand for Hostess’ products, even if the regulatory or legal action is unfounded or not material to Hostess’ operations.

In addition, Hostess’ success in maintaining, extending, and expanding Hostess’ brand image depends on Hostess’ ability to adapt to a rapidly changing media environment. Hostess increasingly relies on social media and online dissemination of advertising campaigns. The growing use of social and digital media increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about Hostess, Hostess’ brands or Hostess’ products on social or digital media, whether or not valid, could seriously damage Hostess’ brands and reputation. If Hostess does not maintain, extend, and expand its brand image, then its product sales, financial condition and operating results could be materially and adversely affected.

Hostess’ intellectual property rights are valuable, and Hostess’ failure to protect them could reduce the value of its products and brands.

Hostess considers its intellectual property rights, particularly and most notably its trademarks, but also its trade secrets and copyrights, to be a significant and valuable part of its business. Hostess attempts to protect its intellectual property rights by taking advantage of a combination of trademark, copyright and trade secret laws, third-party nondisclosure and assignment agreements and policing of third-party misuse of Hostess’ intellectual property. Hostess’ failure to obtain or adequately protect Hostess’ intellectual property rights, or any change in law or other changes that serve to lessen or remove the current legal protections of Hostess’ intellectual property, may diminish Hostess’ competitiveness and could materially harm Hostess’ business.

 

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Hostess may be unaware of third-party claims of intellectual property infringement relating to Hostess brands or products. Any litigation regarding intellectual property could be costly and time-consuming and could divert management’s and other key personnel’s attention from Hostess’ business operations. Third-party claims of intellectual property infringement might require Hostess to pay monetary damages or enter into costly license agreements. Hostess also may be subject to injunctions against development and sale of certain of its products. Any of these occurrences could materially and adversely affect Hostess’ reputation, product sales, financial condition and operating results.

Hostess must leverage its brand value to compete against lower-priced alternative brands.

In nearly all of Hostess’ product categories, Hostess competes with lower-priced alternative products. Hostess’ products must provide higher value and/or quality to its consumers than alternatives, particularly during periods of economic uncertainty. Consumers may not buy Hostess’ products if relative differences in value and/or quality between its products and retailer or other economy brands change in favor of competitors’ products or if consumers perceive this type of change. If consumers choose the lower-priced brands, then Hostess could lose market share or sales volumes, which could materially and adversely affect Hostess’ product sales, financial condition, and operating results.

Hostess must correctly predict, identify and interpret changes in consumer preferences and demand and offer new products to meet those changes.

Consumer preferences for food and snacking products change continually. Hostess’ success will depend on its ability to predict, identify and interpret the tastes, dietary habits, packaging and other preferences of consumers and to offer products that appeal to these preferences. Moreover, weak economic conditions, recession or other factors could affect consumer preferences and demand. If Hostess does not offer products that appeal to consumers or if Hostess misjudges consumer demand for its products, its sales and market share will decrease and its profitability could suffer.

Hostess continually introduces new products or product extensions and its operating results and growth will depend upon the market reception of such new products. There can be no assurance that new products will find widespread acceptance among consumers, and unsuccessful product launches may decrease Hostess’ profitability and damage Hostess’ brands’ reputation.

In addition, prolonged negative perceptions concerning the health implications of certain food products could influence consumer preferences and acceptance of some of Hostess’ products and marketing programs. For example, consumers are increasingly focused on health and wellness, including weight management and reducing sugar consumption. Hostess might be unsuccessful in its efforts to effectively respond to changing consumer preferences and social expectations. Continued negative perceptions and failure to satisfy consumer preferences could materially and adversely affect Hostess’ reputation, product sales, financial condition and operating results.

Hostess operates in a highly competitive industry.

The sweet baked goods business is highly competitive. Numerous brands and products compete for shelf space and sales, with competition based primarily on product quality, brand recognition and loyalty, price, trade promotion, consumer promotion, customer service, and the ability to identify and satisfy emerging consumer preferences. Hostess faces competition from other large national bakeries, smaller regional operators, supermarket chains with their own private labeled brands, grocery stores with their own in-store bakery departments and diversified food companies. Hostess’ competitors include a significant number of companies of varying sizes, including divisions, subdivisions, or subsidiaries of larger companies. Many of these competitors have multiple product lines, substantially greater financial and other resources available to them, and may be substantially less leveraged than Hostess. Hostess may not be able to compete successfully with these companies. Competitive pressures or other factors could cause Hostess to lose market share, which may require Hostess to

 

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lower prices, increase marketing and advertising expenditures, or increase the use of discounting or promotional campaigns, each of which would materially and adversely affect Hostess’ margins and could result in a decrease in Hostess’ operating results and profitability.

Hostess’ growth may be limited by its inability to add additional shelf or retail space for its products.

Hostess’ results will depend on its ability to drive revenue growth, in part, by expanding the distribution channels for its products. However, Hostess’ ability to do so may be limited by its inability to secure additional shelf or retail space for its products. Shelf and retail space for sweet baked goods is limited and subject to competitive and other pressures, and there can be no assurance that retail operators will provide Hostess sufficient shelf space for its products to enable Hostess to meet its growth objectives.

Hostess’ success will depend on its continued ability to produce and successfully market products with extended shelf life.

Hostess has invested to extend its product shelf life, while maintaining its products’ taste, texture and quality. The extended shelf life is an important component of Hostess’ direct-to-distribution model. Hostess’ ability to produce and successfully market existing and new products with this extended shelf life, while maintaining taste, texture and quality, is essential to Hostess’ success. If Hostess is unable to continue to produce products with extended shelf life or if the products are not accepted by consumers, Hostess could be forced to make changes to its distribution model and that could have an adverse effect on product sales, financial condition and operating results.

Hostess may be unable to drive revenue growth in its key products or add products that are faster-growing and more profitable.

The sweet baked goods industry’s overall growth is linked to population growth. Hostess’ future results will depend on its ability to drive revenue growth in its key products. Because Hostess’ operations are concentrated in North America, where growth in the sweet baked goods industry has been moderate, Hostess’ success also depends in part on Hostess’ ability to enhance its portfolio by adding innovative new products. There can be no assurance that new products will find widespread acceptance among consumers. Hostess’ failure to drive revenue growth in its key products or develop innovative new products could materially and adversely affect its profitability, financial condition and operating results.

Commodity, energy, and other input prices are volatile and may rise significantly.

Hostess purchases and uses large quantities of commodities, including flour, sweeteners, edible oils and cocoa to manufacture its products. In addition, Hostess purchases and uses significant quantities of paper, corrugate, films and plastics to package its products. Hostess is also exposed to changes in energy prices, which impact both its manufacturing and distribution costs. Prices for commodities, other supplies and energy are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, currency fluctuations, severe weather or global climate change, consumer, industrial or investment demand, and changes in governmental regulation and trade, alternative energy, and agricultural programs. Rising commodity, energy, and other input costs could materially and adversely affect Hostess’ cost of operations, including the manufacture, transportation, and distribution of its products, which could materially and adversely affect its financial condition and operating results.

Although Hostess monitors its exposure to commodity prices as an integral part of its overall risk management program, and seeks to utilize forward buying strategies through short-term and long-term advance purchase contracts, to lock in prices for certain high-volume raw materials, packaging components and fuel inputs, these strategies may not protect Hostess from increases in specific raw materials costs. Continued volatility or sustained increases in the prices of commodities and other supplies Hostess purchases could increase

 

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the costs of its products, and its profitability could suffer. Moreover, increases in the prices of Hostess’ products to cover these increased costs may result in lower sales volumes. If Hostess is not successful in its hedging activities, or if Hostess is unable to price its products to cover increased costs, then commodity and other input price volatility or increases could materially and adversely affect its financial condition and operating results.

If Hostess loses one or more of its major customers, or if any of Hostess’ major customers experience significant business interruption, its operating results could be adversely affected.

Hostess has several large customers that account for a significant portion of its sales. Wal-Mart and its affiliates are Hostess’ largest customers and represented approximately 20.8% of net revenues for both the six months ended June 30, 2016 and the year ended December 31, 2015. Cumulatively, including Wal-Mart, Hostess’ top ten customers accounted for 60.9% and 59.1% of net revenues for the six months ended June 30, 2016 and the year ended December 31, 2015, respectively.

Hostess does not have long-term supply contracts with any of its major customers. The loss of one or more major customers, a material reduction in sales to these customers as a result of competition from other food manufacturers, or the occurrence of a significant business interruption of Hostess’ customers’ operations would result in a decrease in Hostess’ revenues, operating results, and earnings.

Hostess’ geographic focus makes it particularly vulnerable to economic and other events and trends in North America.

Hostess operates in North America and, therefore, is particularly susceptible to adverse regulations, economic climate, consumer trends, market fluctuations, including commodity price fluctuations or supply shortages of Hostess’ key ingredients, and other adverse events. The concentration of Hostess’ businesses in North America could present challenges and may increase the likelihood that an adverse event in North America would materially and adversely affect Hostess’ product sales, financial condition and operating results.

The consolidation of retail customers could adversely affect Hostess.

Retail customers may continue to consolidate, resulting in fewer customers for Hostess’ business. Consolidation also produces larger retail customers that may seek to leverage their position to improve their profitability by demanding improved efficiency, lower pricing, increased promotional programs, or specifically tailored products. In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own retailer brands. Retail consolidation and increasing retailer power could materially and adversely affect Hostess’ product sales, financial condition, and operating results.

Retail consolidation also increases the risk that adverse changes in Hostess’ customers’ business operations or financial performance will have a corresponding material and adverse effect on Hostess. For example, if Hostess’ customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of Hostess’ products, or delay or fail to pay Hostess for previous purchases, which could materially and adversely affect Hostess’ product sales, financial condition, and operating results.

Hostess’ results could be adversely impacted as a result of increased labor and employee-related expenses.

Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material adverse effect on Hostess’ consolidated operating results or financial condition. Hostess’ labor costs include the cost of providing employee benefits, including health and welfare, and severance benefits. The annual costs of benefits vary with increased costs of health care and the outcome of collectively-bargained wage and benefit agreements.

 

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Higher health care costs and labor costs due to statutory and regulatory changes could adversely affect Hostess’ business.

With the passage in 2010 of the U.S. Patient Protection and Affordable Care Act (the “ACA”), Hostess is required to provide affordable coverage, as defined in the ACA, to all employees, or otherwise be subject to a payment per employee based on the affordability criteria in the ACA. Many of these requirements are being phased in over a period of time. Additionally, some states and localities have passed state and local laws mandating the provisions of certain levels of health benefits by some employers. Increased health care and insurance costs could have a material adverse effect on Hostess’ business, financial condition and operating results. In addition, changes in federal or state workplace regulations could adversely affect Hostess’ ability to meet Hostess’ financial targets.

Various federal and state labor laws govern Hostess’ relationships with Hostess’ employees and affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, overtime, family leave, safety standards, payroll taxes, citizenship requirements and other wage and benefit requirements for employees classified as non-exempt. As Hostess’ employees are paid at rates set above, but related to, the applicable minimum wage, further increases in the minimum wage could increase Hostess’ labor costs. Significant additional government regulations could materially adversely affect Hostess’ business, financial condition and operating results.

A portion of Hostess’ workforce belongs to unions. Failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages could cause Hostess’ business to suffer.

Approximately 30% of Hostess’ employees, as of June 30, 2016, are covered by collective bargaining agreements and other employees may seek to be covered by collective bargaining agreements. Strikes or work stoppages or other business interruptions could occur if Hostess is unable to renew these agreements on satisfactory terms or enter into new agreements on satisfactory terms, which could impair manufacturing and distribution of Hostess’ products or result in a loss of sales, which could adversely impact Hostess’ business, financial condition or operating results. The terms and conditions of existing, renegotiated or new collective bargaining agreements could also increase Hostess’ costs or otherwise affect Hostess’ ability to fully implement future operational changes to enhance Hostess’ efficiency or to adapt to changing business needs or strategy.

Hostess may be subject to product liability claims should the consumption of any of Hostess’ products cause injury, illness or death.

Hostess sells food products for human consumption, which involves risks such as product contamination or spoilage, misbranding, product tampering and other adulteration of food products. Consumption of a misbranded, adulterated, contaminated or spoiled product may result in personal illness or injury. Hostess could be subject to claims or law suits relating to an actual or alleged illness or injury, and Hostess could incur liabilities that are not insured or exceed its insurance coverage. Even if product liability claims against Hostess are not successful or fully pursued, these claims could be costly and time consuming and may require Hostess’ management to spend time defending the claims rather than operating the business. In addition, publicity regarding these claims could adversely affect Hostess’ reputation.

Hostess’ recent product recall increased its costs and may negatively impact Hostess’ brands’ reputation, and future recalls could adversely affect Hostess’ business.

On June 3, 2016, Hostess announced the recall of approximately 710,000 cases of various products that Hostess believes may contain peanut residue from flour. These products could pose a risk to consumers with peanut allergies because the products potentially contained low levels of undeclared peanut residue. While Hostess believes it has taken all appropriate steps to address this issue, the recall resulted in increased costs and could negatively affect Hostess’ brands’ reputation.

 

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In the future, a product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals or recalls, destruction of product inventory, negative publicity, temporary plant closings, substantial cost of compliance or remediation, and potentially significant product liability judgments against Hostess. Any of these events could result in a loss of demand for Hostess’ products, which would have a material adverse effect on Hostess’ financial condition, operating results or cash flows. Hostess could also be adversely affected if consumers lose confidence in Hostess’ product quality, safety and integrity generally.

Unanticipated business disruptions could adversely affect Hostess’ ability to provide its products to its customers.

Factors that are hard to predict or beyond Hostess’ control, like weather, natural disasters, fire, explosions, terrorism, political unrest, generalized labor unrest or health pandemics could damage or disrupt Hostess’ operations. In addition, Hostess’ operations could be disrupted by a material equipment failure. Hostess does not have significant redundant operating equipment to allow for such disruptions. Accordingly, if Hostess does not effectively respond to disruptions in its operations, for example, by replacing capacity at its manufacturing locations, or cannot quickly repair damage to its information, production or supply systems, Hostess may be late in delivering or unable to deliver products to its customers. If that occurs, Hostess may lose its customers’ confidence, and long-term consumer demand for its products could decline. These events could materially and adversely affect Hostess’ product sales, financial condition and operating results.

Hostess relies on third parties for significant services that are important to its business, and their failure to perform could adversely affect Hostess’ business, financial condition and operating results.

Hostess operates a direct-to-warehouse distribution system that utilizes third-party centralized distribution centers and common carriers to transport a substantial majority of Hostess’ products. While this has expanded Hostess’ distribution reach and reduced delivery costs, Hostess is dependent upon third parties to effectively distribute its products. Any failure by Hostess to deliver its products in a timely manner would have an adverse impact on Hostess’ sales and its reputation. In addition, Hostess relies on third parties for sales and marketing services. Hostess does not have long-term contracts with any of these third party service providers. Accordingly, any termination by a third party provider of their services to Hostess, or any failure by these third parties to perform their obligations to Hostess, would have a material adverse impact on Hostess’ business and operating results.

Legal claims or other regulatory enforcement actions could subject Hostess to civil and criminal penalties.

As a large food company, Hostess operates in a highly regulated environment with constantly evolving legal and regulatory frameworks. Various laws and regulations govern food production, storage, distribution, sales, advertising and marketing, as well as licensing, trade, labor, tax and environmental matters, and health and safety practices. Government authorities regularly change laws and regulations and their interpretations. Consequently, Hostess is subject to heightened risk of legal claims or other regulatory enforcement actions. Although Hostess has implemented policies and procedures designed to ensure compliance with existing laws and regulations, there can be no assurance that Hostess’ employees, contractors, or agents will not violate its policies and procedures. Moreover, a failure to maintain effective control processes could lead to violations, unintentional or otherwise, of laws and regulations. Legal claims or regulatory enforcement actions arising out of Hostess’ failure or alleged failure to comply with applicable laws and regulations could subject Hostess to civil and criminal penalties that could materially and adversely affect Hostess’ product sales, reputation, financial condition, and operating results.

Hostess’ insurance may not provide adequate levels of coverage against claims.

Hostess believes that it maintains insurance customary for businesses of Hostess’ size and type. However, there are types of losses Hostess may incur that cannot be insured against or that Hostess believes are not economically reasonable to insure. Such losses could have a material adverse effect on Hostess’ business and operating results.

 

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Hostess is subject to laws and regulations relating to protection of the environment, worker health, and workplace safety. Costs to comply with these laws and regulations, or claims with respect to environmental, health and safety matters, could have a significant negative impact on Hostess’ business.

Hostess’ operations are subject to various federal, state and local laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water, the management and disposal of solid and hazardous materials and wastes, employee exposure to hazards in the workplace and the cleanup of contaminated sites. Hostess is required to obtain and comply with environmental permits for many of its operations, and sometimes Hostess is required to install pollution control equipment or to implement operational changes to limit air emissions or wastewater discharges and/or decrease the likelihood of accidental releases of hazardous materials. Hostess could incur substantial costs, including cleanup costs, civil or criminal fines or penalties, and third-party claims for property damage or personal injury as a result of any violations of environmental laws and regulations, noncompliance with environmental permit conditions or contamination for which Hostess may be responsible that is identified or that may occur in the future. Such costs may be material.

Under federal and state environmental laws, Hostess may be liable for the costs of investigation, removal or remediation of certain hazardous or toxic substances, as well as related costs of investigation and damage to natural resources, at various properties, including Hostess’ current and former properties and the former properties of Hostess’ predecessors, as well as offsite waste handling or disposal sites that Hostess or its predecessors have used. Liability may be imposed upon Hostess without regard to whether Hostess knew of or caused the presence of such hazardous or toxic substances. Any such locations, or locations that Hostess may acquire in the future, may result in liability to Hostess under such laws or expose Hostess to third-party actions such as tort suits based on alleged conduct or environmental conditions. In addition, Hostess may be liable if hazardous or toxic substances migrate from properties for which Hostess may be responsible to other properties.

In addition to regulations applicable to Hostess’ operations, failure by any of Hostess’ suppliers to comply with regulations, or allegations of compliance failure, may disrupt Hostess’ operations and could result in potential liability. Even if Hostess was able to obtain insurance coverage or compensation for any losses or damages resulting from the noncompliance of a supplier with applicable regulations, Hostess’ brands and reputation may be adversely affected by negative perceptions of Hostess’ brands stemming from such compliance failures.

Hostess cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted. Hostess also cannot predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to environmental claims.

Hostess’ operations are subject to regulation by the U.S. Food and Drug Administration (“FDA”), Federal Trade Commission (“FTC”) and other governmental entities, and such regulations are subject to change from time to time which could impact how Hostess manages its production and sale of products.

Hostess’ operations are subject to extensive regulation by the FDA, the FTC and other national, state, and local authorities. For example, Hostess is subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging, and safety of food. Under this program, the FDA regulates manufacturing practices for foods through, among other things, its current “good manufacturing practices” regulations, or cGMPs, and specifies the recipes for certain foods. Hostess’ processing facilities and products are subject to periodic inspection by federal, state, and local authorities. In January 2011, the FDA’s Food Safety Modernization Act was signed into law. The law increased the number of inspections at food facilities in the U.S. in an effort to enhance the detection of food-borne illness outbreaks and order recalls of tainted food products. The FTC and other authorities regulate how Hostess markets and advertises its products, and Hostess could be the target of claims relating to alleged false or deceptive advertising under federal, state,

 

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and foreign laws and regulations. Changes in these laws or regulations or the introduction of new laws or regulations could increase the costs of doing business for Hostess or its customers or suppliers or restrict Hostess’ actions, causing its operating results to be adversely affected.

Hostess seeks to comply with applicable regulations through a combination of employing internal personnel to ensure quality-assurance compliance and contracting with third-party laboratories that conduct analysis of products for the nutritional-labeling requirements. Compliance with regulations is costly and time-consuming. Failure to comply with applicable laws and regulations or maintain permits and licenses relating to Hostess’ operations could subject Hostess to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material adverse effect on Hostess’ operating results and business.

Hostess’ business operations could be disrupted if its information technology systems fail to perform adequately.

The efficient operation of Hostess’ business depends on Hostess’ information technology systems, some of which are managed by third-party service providers. Hostess relies on its information technology systems to effectively manage its business data, communications, supply chain, order entry and fulfillment, and other business processes. The failure of Hostess’ information technology systems to perform as Hostess anticipates could disrupt Hostess’ business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing Hostess’ business and operating results to suffer. In addition, Hostess’ information technology systems may be vulnerable to damage or interruption from circumstances beyond its control, including fire, natural disasters, power outages, systems failures, security breaches, cyber-attacks and viruses. Any such damage or interruption could have a material adverse effect on Hostess’ business.

Hostess may not successfully identify or complete strategic acquisitions, alliances, divestitures or joint ventures.

From time to time, Hostess may evaluate acquisition candidates, alliances or joint ventures that may strategically fit Hostess’ business objectives or Hostess may consider divesting businesses that do not meet Hostess’ strategic objectives or growth or profitability targets. On May 10, 2016, Hostess acquired Superior Cake Products, Inc., located in Southbridge, Massachusetts. These activities may present financial, managerial, and operational risks including, but not limited to, diversion of management’s attention from existing core businesses, difficulties integrating or separating personnel and financial and other systems, inability to effectively and immediately implement control environment processes across a diverse employee population, adverse effects on existing or acquired customer and supplier business relationships, and potential disputes with buyers, sellers or partners. In addition, to the extent Hostess undertakes acquisitions, alliances or joint ventures or other developments outside Hostess’ core geography or in new categories, Hostess may face additional risks related to such developments. Any of these factors could materially and adversely affect Hostess’ product sales, financial condition, and operating results.

Hostess may be unable to hire or retain and develop key personnel or a highly skilled and diverse workforce or manage changes in Hostess’ workforce.

Hostess must hire, retain and develop a highly skilled and diverse workforce. Hostess competes to hire new personnel in the many regions in which Hostess manufactures and markets its products and then to develop and retain their skills and competencies. Unplanned turnover or failure to develop adequate succession plans for leadership positions or hire and retain a diverse workforce with the skills and in the locations Hostess needs to operate and grow Hostess’ business could deplete Hostess’ institutional knowledge base and erode Hostess’ competitiveness.

Hostess also faces increased personnel-related risks. These risks could lead to operational challenges, including increased competition for employees with the skills Hostess require to achieve Hostess’ business goals,

 

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and higher employee turnover, including of employees with key capabilities. Furthermore, Hostess might be unable to manage changes in, or that affect, Hostess’ workforce appropriately or satisfy the legal requirements associated with how Hostess manages and compensates Hostess’ employees.

These risks could materially and adversely affect Hostess’ reputation, ability to meet the needs of Hostess’ customers, product sales, financial condition and operating results.

Hostess’ substantial leverage could adversely affect Hostess’ ability to raise additional capital to fund its operations, limit Hostess’ ability to react to changes in the economy or its industry, expose Hostess to interest rate risk to the extent of its variable rate debt, and prevent Hostess from meeting its obligations under its indebtedness.

Hostess is highly leveraged. As of June 30, 2016, Hostess’ total principal balance on long term debt, excluding deferred financing charges and capital lease obligations, was approximately $1,218,063,000. On a pro forma basis, giving effect to the Business Combination and the projected net debt balance on the date of the Business Combination, as of June 30, 2016, Hostess’ total principal balance on long term debt, excluding deferred financing charges and capital lease obligations, would have been approximately $1,005,504,000. Hostess’ high degree of leverage could have important consequences, including:

 

   

requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on Hostess’ indebtedness, thereby reducing Hostess’ ability to use its cash flow to fund its operations, capital expenditures, and future business opportunities or to pay dividends;

 

   

exposing Hostess to the risk of increased interest rates because certain of Hostess’ borrowings, including certain borrowings under Hostess’ credit facilities, are at variable rates;

 

   

making it more difficult for Hostess to make payments on its indebtedness;

 

   

increasing Hostess’ vulnerability to general economic and industry conditions;

 

   

restricting Hostess from making strategic acquisitions or causing Hostess to make non-strategic divestitures;

 

   

subjecting Hostess to restrictive covenants that may limit Hostess’ flexibility in operating its business;

 

   

limiting Hostess’ ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and

 

   

placing Hostess at a competitive disadvantage compared to its competitors who are less highly leveraged.

Despite Hostess’ significant leverage, Hostess may be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with its significant leverage.

Risks Related to the Company and the Business Combination

Our Initial Stockholders have agreed to vote in favor of the Business Combination, regardless of how our public stockholders vote.

Unlike many other blank check companies in which the founders agree to vote their Founder Shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, our Initial Stockholders have agreed to vote any shares of Common Stock owned by them in favor the Business Combination. As of the date hereof, our Initial Stockholders own shares equal to 20% of our issued and outstanding shares of Common Stock. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if our Initial Stockholders agreed to vote any shares of Common Stock owned by them in accordance with the majority of the votes cast by our public stockholders.

 

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Our Sponsor, certain members of our Board and our officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement.

When considering our Board’s recommendation that our stockholders vote in favor of the approval of the Business Combination Proposal, our stockholders should be aware that the directors and officers of the Company have interests in the Business Combination that may be different from, or in addition to, the interests of our stockholders. These interests include:

 

   

the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $53,125,000 (after giving effect to the cancellation of approximately 4,062,500 Founder Shares) but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by August 19, 2017;

 

   

the fact that our Sponsor paid an aggregate of $9,500,000 for its 19,000,000 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 19, 2017;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

the fact that, in connection with the Business Combination, we shortened the lock-up period on the Founder Shares from one year following the Business Combination to six months;

 

   

the fact that, on July 27, 2016, our Sponsor loaned us $500,000 to fund our on-going operational expenses and certain transaction costs incurred by us in connection with the Business Combination and that, at the option of our Sponsor, any amounts outstanding under any loan made by our Sponsor or an affiliate of our Sponsor to the Company in an aggregate amount up to $1,500,000, may be converted into warrants to purchase Class A Stock of the post-combination company;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, The Gores Group, an affiliate of our Sponsor, has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the anticipated election of our Chief Executive Officer, Mr. Mark R. Stone, as a director of the post-combination company;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors may not participate in the formation of, or become a director or officer of, any other blank check company until we (i) have entered into a definitive agreement regarding an initial business combination or (ii) fail to complete an initial business combination by

 

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August 19, 2017; provided that, in the case of clause (i), such other blank check company does not consummate its initial public offering prior to the consummation of the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 19, 2017;

 

   

that, as described in the Charter Amendment Proposals and reflected in Annex B, our proposed certificate of incorporation will be amended to exclude The Gores Group, Apollo and the CDM Holders, each of their successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations not in compliance with Section 203 of the DGCL;

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees and provides that our Initial Stockholders will vote all of their shares of Class A Stock in favor of the election to the Board of Mr. Metropoulos (or his designee for so long as Mr. Metropoulos is entitled to serve on the Board or appoint a member of the Board, as applicable, pursuant to the terms of the Executive Chairman Director Agreement); and

 

   

that our Sponsor has entered into the Sponsor Subscription Agreement with the Company, pursuant to which our Sponsor has committed to purchase up to 17,755,358 shares of Class A Stock in the Private Placement for an aggregate commitment of $163,000,000. Pursuant to the terms of the Sponsor Subscription Agreement, our Sponsor may transfer or assign its rights to purchase shares of Class A Stock to third parties in compliance with the Securities Act, so long as our Sponsor, together with any controlled affiliates or employees of The Gores Group or Platinum Equity LLC or their respective controlled affiliates party to any other Subscription Agreement, maintains a subscription level of at least $50,000,000.

Our Initial Stockholders, including our Sponsor and our independent directors, hold a significant number of shares of our Common Stock. They will lose their entire investment in us if a business combination is not completed.

Our Initial Stockholders hold in the aggregate 9,375,000 Founder Shares, representing 20% of the total outstanding shares upon completion of our IPO. The Founder Shares will be worthless if we do not complete a business combination by August 19, 2017. In addition, our Sponsor holds an aggregate of 19,000,000 Private Placement Warrants that will also be worthless if we do not complete a business combination by August 19, 2017.

The Founder’s Shares are identical to the shares of Class A Stock included in the units, except that (i) the Founder Shares are subject to certain transfer restrictions, (ii) our Initial Stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (a) to waive their redemption rights with respect to their Founder Shares and public shares owned in connection with the completion of our Business Combination, (b) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete our Business Combination by August 19, 2017 (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete our Business Combination by August 19, 2017) and (iii) the Founder Shares are automatically convertible into shares of our Class A Stock at the time of our Business Combination, as described herein.

The personal and financial interests of our officers and directors may have influenced their motivation in identifying and selecting Hostess, completing a business combination with Hostess and may influence their operation of the post-combination company following the Business Combination.

 

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Our Sponsor, officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses if a business combination is not completed.

At the closing of a business combination (including this Business Combination), our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred in connection with activities on our behalf. These financial interests of our Sponsor, officers and directors may influence their motivation in identifying and selecting a target business combination and completing our Business Combination.

Our Sponsor, directors or officers or their affiliates may elect to purchase shares from public stockholders, which may influence a vote on a proposed Business Combination and reduce the public “float” of our Class A Stock.

Our Sponsor, directors or officers or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy closing conditions in the Master Transaction Agreement regarding required amounts in the Trust Account and the proceeds from the Private Placement and the CDM Rollover Amount equaling or exceeding certain thresholds where it appears that such requirements would otherwise not be met. This may result in the completion of our Business Combination that may not otherwise have been possible.

In addition, if such purchases are made, the public “float” of our Class A Stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on the NASDAQ or another national securities exchange or reducing the liquidity of the trading market for our Class A Stock.

Our public stockholders may experience dilution as a consequence of, among other transactions, the issuance of Class A Stock as consideration in the Business Combination, the Private Placement and the Executive Chairman Employment Agreement. Having a minority share position may reduce the influence that our current stockholders have on the management of the post-combination company.

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 29% in the post-combination company; (ii) the Private Placement Investors (other than our Sponsor) will own approximately 21% of the post-combination company (such that public stockholders, including Private Placement Investors other than our Sponsor, will own approximately 50% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor, and the shares of Class A Stock purchased by it in the Private Placement) will own approximately 8% of the post-combination company, after giving effect to the cancellation of approximately 4,062,500 Founder Shares held by our Sponsor; (iv) AP Hostess LP will own approximately 17% of the post-combination company; (v) Hostess CDM Co-Invest will own approximately 21% of the post-combination company; (vi) CDM Hostess will own approximately 2% of the post-combination company and (vii) Mr. Metropoulos and/or his designee will own approximately 2% of the post-combination company (and Hostess CDM Co-Invest, CDM Hostess and Mr. Metropoulos, collectively, will own approximately 25% of the post-combination company). 100% of the shares of Class B Stock will be owned by the CDM Holders. These levels of ownership interest assume that no shares are elected to be redeemed, that all Bridge Shares have been transferred

 

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to third parties prior to the closing of the transactions contemplated by the Master Transaction Agreement and that our Sponsor and Mr. Metropoulos have not exercised any of the Private Placement Warrants. The Private Placement Investors have agreed to purchase in the aggregate approximately 32,678,576 shares of Class A Stock, for approximately $300,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $97,000,000 of the gross proceeds from the Private Placement, in addition to $375,000,000 of the funds from the Trust Account, will be used to fund the cash consideration payable to the Selling Equityholders, the repayment of approximately $173,000,000 of Hostess’ existing indebtedness and the payment of certain transaction expenses. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (a) warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares of Class A Stock under the Exchange Agreement, a copy of which is attached to this proxy statement as Annex F, upon the exchange of Class B Units (and the cancellation of shares of Class B Stock), or (c) the issuance of any shares upon completion of the Business Combination under the Incentive Plan, a copy of which is attached to this proxy statement as Annex L, but does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis (after giving effect to the cancellation of approximately 4,062,500 of such shares and even though such shares of Class A Stock will be subject to transfer restrictions). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for further information. To the extent that any shares of Class A Stock are issued pursuant to the earn-out contemplated by the Master Transaction Agreement or upon exercise of the public warrants or the Private Placement Warrants or the Incentive Plan, current stockholders may experience substantial dilution. Such dilution could, among other things, limit the ability of our current stockholders to influence management of the post-combination company through the election of directors following the Business Combination.

There can be no assurance that our Class A Stock that will be issued in connection with the Business Combination will be approved for listing on NASDAQ following the closing of the Business Combination, or that we will be able to comply with the continued listing standards of NASDAQ.

Our Class A Stock, public units and public warrants are currently listed on NASDAQ. Our continued eligibility for listing may depend on, among other things, the number of our shares that are redeemed. If, after the Business Combination, NASDAQ delists our Class A Stock from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that our Class A Stock is a “penny stock” which will require brokers trading in our Class A Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Class A Stock, public units and public warrants are listed on NASDAQ, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the state of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these

 

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powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on NASDAQ, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

Resales of the shares of Class A Stock included in the Stock Consideration could depress the market price of our Class A Stock.

There may be a large number of shares of Class A Stock sold in the market following the completion of the Business Combination or shortly thereafter. The shares held by the Company’s public stockholders will be freely tradeable, and the shares held by the Private Placement Investors other than our Sponsor and its affiliates will be freely tradeable following the registration of the resale thereof pursuant to a registration statement that we have agreed to file within 30 days after the completion of the Business Combination. Unless such registration statement is not declared effective within four months after the completion of the Business Combination, subject to certain exceptions, beginning at least six months after the completion of the Business Combination, the holders of Restricted Stock will also be permitted to sell their shares of Class A Stock (including shares of Class A Stock received in exchange for Class B Units (together with the cancellation of shares of Class B Stock) in accordance with the Exchange Agreement) in transactions not requiring registration under the Securities Act or pursuant to a demand registration.

We will have approximately 97,627,264 shares of Class A Stock outstanding after the Business Combination, including the Restricted Stock. We also intend to register all shares of Class A Stock that we may issue under the Incentive Plan. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

Such sales of shares of Class A Stock or the perception of such sales may depress the market price of our Class A Stock.

We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement. As such, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by August 19, 2017. If we are unable to effect a business combination by August 19, 2017, we will be forced to liquidate and our warrants will expire worthless.

We are a blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by August 19, 2017. Unless we amend our current certificate of incorporation to extend the life of the Company and certain other agreements into which we have entered, if we do not complete an initial business combination by August 19, 2017, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per public unit in the IPO. In addition, if we fail to complete an initial business combination by August 19, 2017, there will be no redemption rights or liquidating distributions with respect to our public warrants or the Private Placement Warrants, which will expire worthless, unless we amend our current certificate of incorporation to extend the life of the Company and certain other agreements into which we have entered.

 

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Even if we consummate the Business Combination, there is no guarantee that the public warrants will ever be in the money, and they may expire worthless and the terms of our warrants may be amended.

The exercise price for our warrants is $11.50 per whole share of Class A Stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of our key personnel, including the key personnel of Hostess whom we expect to stay with Hostess following the Business Combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business and its financial condition could suffer as a result.

Our ability to successfully effect our Business Combination is dependent upon the efforts of our key personnel, including the key personnel of Hostess. Although some of our key personnel may remain with Hostess in senior management or advisory positions following our Business Combination, it is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of our post-combination business. We anticipate that some or all of the management of Hostess will remain in place.

Hostess’ success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of Hostess’ officers could have a material adverse effect on Hostess’ business, financial condition, or operating results. Hostess does not maintain key-man life insurance on any of its officers. The services of such personnel may not continue to be available to Hostess.

The Company and Hostess will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.

Uncertainty about the effect of the Business Combination on employees and third parties may have an adverse effect on the Company and Hostess. These uncertainties may impair our or Hostess’ ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our or Hostess’ business could be harmed.

We may waive one or more of the conditions to the Business Combination.

We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the Business Combination, to the extent permitted by our current certificate of incorporation and bylaws and applicable laws. For example, it is a condition to our obligations to close the Business Combination that there be an amount from the Trust Account, the proceeds of the Private Placement and the CDM Rollover Amount that equals or exceeds $537,500,000. However, if our Board determines that a breach of this obligation is not material, then the Board may elect to waive that condition and close the Business Combination. We may not waive the condition that our stockholders approve the Business Combination. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Master Transaction Agreement — Conditions to Closing of the Business Combination” for additional information.

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Master Transaction Agreement may result in a conflict of interest when determining whether such changes to the terms of the Master Transaction Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.

In the period leading up to the closing of the Business Combination, other events may occur that, pursuant to the Master Transaction Agreement, would require the Company to agree to amend the Master Transaction

 

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Agreement, to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of Hostess’ business, a request by the Selling Equityholders or Hostess to undertake actions that would otherwise be prohibited by the terms of the Master Transaction Agreement or the occurrence of other events that would have a material adverse effect on Hostess’ business and would entitle the Company to terminate the Master Transaction Agreement. In any of such circumstances, it would be in the discretion of the Company, acting through its Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the Company and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the Business Combination has been obtained. While certain changes could be made without further stockholder approval, if there is a change to the terms of the Business Combination that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement or supplement thereto and resolicit the vote of our stockholders with respect to the Business Combination Proposal.

We will incur significant transaction and transition costs in connection with the Business Combination.

We have incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We may incur additional costs to retain key employees. All expenses incurred in connection with the Master Transaction Agreement and the transactions contemplated thereby (including the Business Combination), including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs.

The Company’s transaction expenses as a result of the Business Combination are currently estimated at approximately $30,000,000, including $13,125,000 in deferred underwriting commissions to the underwriters of our IPO.

If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that The Gores Group is unable to indemnify), and our warrants will expire worthless.

If we are unable to complete an initial business combination by August 19, 2017, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third-party brings a claim against us that The Gores Group is unable to indemnify (as described herein)) and our warrants will expire worthless.

If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.

Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

 

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Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our public shares, if we are unable to complete our Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors. The Gores Group has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, The Gores Group will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether The Gores Group has sufficient funds to satisfy its indemnity obligations and we have not asked The Gores Group to reserve for such indemnification obligations. Therefore, we cannot assure you that The Gores Group would be able to satisfy those obligations.

Our directors may decide not to enforce the indemnification obligations of The Gores Group, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per share or (ii) other than due to the failure to obtain such waiver, such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and The Gores Group asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against The Gores Group to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against The Gores Group to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in our Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

 

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Following the consummation of the Business Combination, our only significant asset will be our ownership interest in Hostess and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations, including our obligations under the Tax Receivable Agreement.

Following the consummation of the Business Combination, we will have no direct operations and no significant assets other than our ownership interest in Hostess. We and certain investors, certain of the Selling Equityholders, and directors and officers of Hostess and its affiliates will become stockholders of the post-combination company at that time. We will depend on Hostess for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, to pay any dividends with respect to our Common Stock, and to satisfy our obligations under the Tax Receivable Agreement. The financial condition and operating requirements of Hostess may limit our ability to obtain cash from Hostess. The earnings from, or other available assets of, Hostess may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations, including our obligations under the Tax Receivable Agreement.

The ability of Hostess Brands and its subsidiaries (other than subsidiaries which have been designated as unrestricted pursuant to the ability of Hostess Brands to do so in certain limited circumstances) to make distributions, loans and other payments to us for the purposes described above and for any other purpose will be governed by the terms of the Rollover Credit Agreements, and will be subject to the negative covenants set forth therein. Any loans or other extensions of credit will be subject to the investment covenants under the Rollover Credit Agreements, which provide for several exceptions including, among others (i) a general investment basket equal to the greater of a fixed dollar amount and a percentage of EBITDA and (ii) an unlimited investment basket based on satisfying a total net leverage ratio on a pro forma basis. Similarly, any dividends, distributions or similar payments will be subject to the dividends and distributions covenant under the Rollover Credit Agreements, which also provide for several exceptions including, among others (i) for payment of overhead and certain fees and expenses of parent companies, (ii) for tax distributions, subject to certain limitations, (iii) a general dividend and distribution basket equal to the greater of a fixed dollar amount and a percentage of EBITDA and (iv) an unlimited dividend and distribution basket based on satisfying a total net leverage ratio of a pro forma basis.

If our dividend policy is materially different than the distribution policy of Hostess Holdings, upon the exchange of any Class B Units, the limited partners of Hostess Holdings could receive a disproportionate interest in the aggregate distributions by our operating subsidiaries that have not been distributed by us.

Both the Company and the CDM Holders are limited partners of Hostess Holdings. To the extent Hostess Holdings distributes to its limited partners a greater share of income received from our operating subsidiaries than we distribute to our stockholders, then any of the CDM Holders who participate in such distribution by Hostess Holdings and subsequently exercise their rights to exchange limited partnership units in Hostess Holdings for Class A Stock may receive a disproportionate interest in the aggregate distributions by our operating subsidiaries that have not been distributed by us. The reason is that such CDM Holder could receive both (i) the benefit of a distribution by Hostess Holdings to its limited partners, including such CDM Holder, and (ii) the benefit of a distribution by the Company to the holders of Class A Stock, including such CDM Holder. Consequently, if our dividend policy does not match the distribution policy of Hostess Holdings, other holders of Class A Stock as of the date of an exchange could experience a reduction in their interest in the profits previously distributed by our operating subsidiaries that have not been distributed by us. Our current dividend policy could result in distributions to our common stockholders that are different from the distributions made by Hostess Holdings to its limited partners.

 

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We may be required to pay the Selling Equityholders for a significant portion of the tax benefit relating to any additional tax depreciation or amortization deductions we claim as a result of any step up in the tax basis of the assets of our operating subsidiaries resulting from the CDM Holders’ exchange of shares of Class B Stock and Class B Units for shares of our Class A Stock.

Class B Units in Hostess Holdings may be exchanged (together with the cancellation of shares of Class B Stock) by the holders thereof for, at the Company’s election, shares of Class A Stock, on a one-for-one basis (subject to customary anti-dilution adjustments), or the cash equivalent of such shares. The exchanges may result in increases to our share of the tax basis of the tangible and intangible assets of our operating subsidiaries that otherwise would not have been available, although the U.S. Internal Revenue Service may challenge all or part of that tax basis increase, and a court could sustain such a challenge by the U.S. Internal Revenue Service. These increases in tax basis, if sustained, may reduce the amount of tax that we would otherwise be required to pay in the future.

Upon the completion of the Business Combination, we will enter into the Tax Receivable Agreement that will provide for the payment by us to the Selling Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination (which periods may extend, unless the Tax Receivable Agreement is terminated early in accordance with its terms, for more than 15 years following any exchange of Class B Units of Hostess Holdings for shares of the Company’s Class A Stock or the cash equivalent thereof) as a result of: (i) certain increases in tax basis resulting from the Business Combination; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the Business Combination; (iii) certain increases in tax basis resulting from exchanges of Class B Units; (iv) imputed interest deemed to be paid by the Company as a result of payments that it makes under the Tax Receivable Agreement; and (v) certain increases in tax basis resulting from payments that the Company makes under the Tax Receivable Agreement. It is expected that we will benefit from the remaining 15% cash savings, if any, in income tax that we realize.

Subsequent to our completion of our Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although we have conducted due diligence on Hostess, we cannot assure you that this diligence will surface all material issues that may be present in Hostess’ business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Hostess’ business and outside of our and Hostess’ control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the post-combination company or its securities. Accordingly, any of our stockholders who choose to remain stockholders following our Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that this proxy statement relating to the Business Combination contained an actionable material misstatement or material omission.

We have no operating or financial history and our results of operations may differ significantly from the unaudited pro forma financial data included in this proxy statement.

We are a blank check company and we have no operating history and no revenues. This proxy statement includes unaudited pro forma condensed combined financial statements for the post-combination company. The unaudited pro forma condensed combined statement of operations of the post-combination company combines

 

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the historical audited results of operations of the Company for the period ended December 31, 2015 and the unaudited results of the Company for the six months ended June 30, 2016, with the historical audited results of operations of Hostess Holdings for the year ended December 31, 2015 and the unaudited results of Hostess Holdings for the six months ended June 30, 2016, respectively, and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2015. The unaudited pro forma condensed combined balance sheet of the post-combination company combines the historical balance sheets of the Company as of June 30, 2016 and of Hostess Holdings as of June 30, 2016 and gives pro forma effect to the Business Combination as if it had been consummated on June 30, 2016.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the post-combination company. Accordingly, the post-combination company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of our deferred tax assets and liabilities;

 

   

expected timing and amount of the release of any tax valuation allowances;

 

   

tax effects of stock-based compensation;

 

   

costs related to intercompany restructurings;

 

   

changes in tax laws, regulations or interpretations thereof; and

 

   

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

Following the Business Combination, the price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, NASDAQ for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on NASDAQ or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

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If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities prior to the closing of the Business Combination may decline. The market values of our securities at the time of the Business Combination may vary significantly from their prices on the date the Master Transaction Agreement was executed, the date of this proxy statement, or the date on which our stockholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Immediately prior to the Business Combination, there has not been a public market for Hostess’ stock and trading in the shares of our Class A Stock has not been active. Accordingly, the valuation ascribed to Hostess and our Class A Stock in the Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for our securities develops and continues, the trading price of our securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

Factors affecting the trading price of the post-combination company’s securities following the Business Combination may include:

 

   

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

   

changes in the market’s expectations about our operating results;

 

   

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

 

   

speculation in the press or investment community;

 

   

success of competitors;

 

   

our operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning the post-combination company or the market in general;

 

   

operating and stock price performance of other companies that investors deem comparable to the post-combination company;

 

   

our ability to market new and enhanced products on a timely basis;

 

   

changes in laws and regulations affecting our business;

 

   

commencement of, or involvement in, litigation involving the post-combination company;

 

   

changes in the post-combination company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of our Class A Stock available for public sale;

 

   

any major change in our Board or management;

 

   

sales of substantial amounts of Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur; and

 

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general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and NASDAQ have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to the post-combination company could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A Stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of Class A Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A Stock. After the Business Combination, our Initial Stockholders, including our Sponsor, as well as Apollo and the CDM Holders will hold approximately 50% of our Common Stock, including approximately 33% of our Class A Stock and 100% of our Class B Stock. Pursuant to the terms of the Registration Rights Agreement, the Restricted Stockholders will be bound by restrictions on the transfer of their shares of Class A Stock and Class B Stock for at least six months following the closing of the Business Combination. In addition, our Initial Stockholders entered into a letter agreement with us, pursuant to which they agreed that the Founder Shares (which will be converted into shares of Class A Stock at the closing of the Business Combination) may not be transferred until six months after the closing of the Business Combination.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

Our quarterly operating results may fluctuate significantly because of several factors, including:

 

   

labor availability and costs for hourly and management personnel;

 

   

profitability of our products, especially in new markets and due to seasonal fluctuations;

 

   

changes in interest rates;

 

   

impairment of long-lived assets;

 

   

macroeconomic conditions, both nationally and locally;

 

   

negative publicity relating to products we serve;

 

   

changes in consumer preferences and competitive conditions;

 

   

expansion to new markets; and

 

   

fluctuations in commodity prices.

 

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If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the post-combination company, its business, or its market, or if they change their recommendations regarding our Class A Stock adversely, then the price and trading volume of our Class A Stock could decline.

The trading market for our Class A Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company or the post-combination company. If no securities or industry analysts commence coverage of the post-combination company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-combination company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Class A Stock would likely decline. If any analyst who may cover the Company were to cease coverage of the post-combination company or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

We may be unable to obtain additional financing to fund the operations and growth of the post-combination company.

We may require additional financing to fund the operations or growth of the post-combination company. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the post-combination company. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our Business Combination.

Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.

We are subject to laws, regulations and rules enacted by national, regional and local governments and NASDAQ. In particular, we are required to comply with certain SEC, NASDAQ and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

Our Sponsor, Apollo and the CDM Holders will have significant influence over us after completion of the Business Combination.

Upon completion of the Business Combination, our Sponsor, Apollo and the CDM Holders will beneficially own approximately 50% of our Common Stock, including approximately 33% of our Class A Stock and 100% of our Class B Stock. Holders of our Class B Stock are entitled to vote on all matters presented to the Company’s stockholders, but do not have any economic rights to the distributions of the Company. As long as our Sponsor, Apollo and the CDM Holders own or control a significant percentage of our outstanding voting power, they will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our Board, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.

Pursuant to the Executive Chairman Director Agreement entered into with Mr. Metropoulos, Mr. Metropoulos will serve as the Executive Chairman of our Board after completion of the Business Combination. The Executive Chairman Director Agreement provides that, for so long as the CDM Holders in the aggregate hold at least 7.5% of the capital stock of the Company on a fully-diluted basis, Mr. Metropoulos will have the right to designate one member for election to the Board, which designee will be Mr. Metropoulos himself so long as he is employed as Executive Chairman.

 

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Our Sponsor’s, Apollo’s and the CDM Holders’ interests may not align with the interests of our other stockholders. Our Sponsor, The Gores Group, an affiliate of our Sponsor, Apollo and the CDM Holders are all in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Our Sponsor, The Gores Group, Apollo and the CDM Holders may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, our proposed certificate of incorporation provides that certain transactions will not be “corporate opportunities” and that our directors and officers, and Apollo and the CDM Holders are not subject to the doctrine of corporate opportunity and do not have any obligation to offer us a corporate opportunity unless presented to one of our directors or officers in his or her capacity as a director or officer. Our proposed certificate of incorporation also provides that the Selling Equityholders and their affiliates, and their respective partners, directors, officers members, managers, equityholders and employees, do not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Company or any of its subsidiaries. Please see the section entitled “Proposal No. 7 — Approval of Additional Amendments to Current Certificate of Incorporation in Connection with the Business Combination” for additional information.

We have not registered the shares of Class A Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.

We have not registered the shares of Class A Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed, as soon as practicable, but in no event later than 15 business days after the closing of the Business Combination, to use our best efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the Class A Stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption is available. Notwithstanding the above, if our Class A Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of warrants who exercise their warrants to do so a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A Stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A Stock for sale under all applicable state securities laws.

 

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The exercise price for our warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the warrants are more likely to expire worthless.

The exercise price of our warrants is higher than is typical with many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our warrants is $5.75 per half share, or $11.50 per whole share, subject to adjustment as provided herein. As a result, the warrants are less likely to ever be in the money and more likely to expire worthless.

We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then-outstanding warrants.

Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of Class A Stock purchasable upon exercise of a warrant.

We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Stock equals or exceeds $24.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force the warrant holders (i) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by our Sponsor or its permitted transferees.

Because each warrant is exercisable for only one-half of one share of our Class A Stock, the units may be worth less than units of other blank check companies.

Each warrant is exercisable for one-half of one share of Class A Stock. Warrants may be exercised only for a whole number of shares of Class A Stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Class A Stock to be issued to the warrant holder. As a result, warrant holders who did not purchase an even number of warrants must sell any odd number of warrants in order to obtain full value from the fractional interest that will not be issued. This is different from other companies similar to ours whose units include one share of common stock and one warrant to purchase one whole share. This unit structure may cause our units to be worth less than if it included a warrant to purchase one whole share.

 

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Warrants will become exercisable for our Class A Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

We issued warrants to purchase 18,750,000 shares of Class A Stock as part of our IPO and prior to our IPO, we issued Private Placement Warrants to our Sponsor to purchase 9,500,000 shares of our Class A Stock, in each case at $11.50 per share. In addition, prior to consummating an initial business combination, nothing prevents us from issuing additional securities in a private placement so long as they do not participate in any manner in the Trust Account or vote as a class with the Common Stock on a business combination. We expect to issue approximately 32,678,576 shares of our Class A Stock to the Private Placement Investors in the Private Placement upon consummation of the Business Combination. The shares of Class A Stock issued in the Private Placement and additional shares of our Class A Stock issued upon exercise of our warrants will result in dilution to the then existing holders of Class A Stock of the Company and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A Stock.

The Private Placement Warrants are identical to the warrants sold as part of the units issued in our IPO except that, so long as they are held by our Sponsor or its permitted transferees, (i) they will not be redeemable by us, (ii) they (including the Class A Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of an initial business combination and (iii) they may be exercised by the holders on a cashless basis.

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by August 19, 2017 may be considered a liquidation distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following August 19, 2017 in the event we do not complete an initial business combination and, therefore, we do not intend to comply with those procedures.

Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the ten years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by August 19, 2017 is not considered a

 

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liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our Board may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our Board and us to claims of punitive damages.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.

Anti-takeover provisions contained in our proposed certificate of incorporation and proposed bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Assuming the passage of Proposal Nos. 1 through 7 of this proxy statement, the post-combination company’s proposed certificate of incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:

 

   

a staggered Board providing for three classes of directors, which limits the ability of a stockholder or group to gain control of our Board;

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

   

a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

   

the requirement that changes or amendments to certain provisions of our certificate of incorporation or bylaws must be approved by holders of at least two-thirds of the Common Stock of the post-combination company; and

 

   

advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

 

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The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following August 19, 2020, the fifth anniversary of our IPO, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A Stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Because Hostess had net revenues during its last fiscal year of approximately $620.8 million, if we expand our business or increase our revenues post-Business Combination, we may cease to be an emerging growth company prior to August 19, 2020.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We cannot predict if investors will find our Class A Stock less attractive because we will rely on these exemptions. If some investors find our Class A Stock less attractive as a result, there may be a less active trading market for our Class A Stock and our stock price may be more volatile.

Risks Related to the Redemption

We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a Business Combination with which a substantial majority of our stockholders do not agree.

Our current certificate of incorporation does not provide a specified maximum redemption threshold, except that we will not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules). However, the Master Transaction Agreement provides that our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $537,500,000, and the obligations of the Selling Equityholders to consummate the Business Combination is conditioned on the amount of the Trust Account and the proceeds from the Private Placement, together with the CDM Rollover Amount, equaling or exceeding $600,000,000. As a result, we may

 

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be able to complete our Business Combination even though a substantial portion of our public stockholders do not agree with the transaction and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to our Sponsor, directors or officers or their affiliates. As of the date of this proxy statement, no agreements with respect to the private purchase of public shares by the Company or the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement) at the Special Meeting.

In the event the aggregate cash consideration we would be required to pay for all shares of Class A Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Master Transaction Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of Class A Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate Business Combination.

If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of more than fifteen percent (15%) of our Class A Stock issued in the IPO, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 15% of our Class A Stock issued in the IPO.

A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Class A Stock included in the units sold in our IPO. In order to determine whether a stockholder is acting in concert or as a group with another stockholder, the Company will require each public stockholder seeking to exercise redemption rights to certify to the Company whether such stockholder is acting in concert or as a group with any other stockholder. Such certifications, together with other public information relating to stock ownership available to the Company at that time, such as Section 13D, Section 13G and Section 16 filings under the Exchange Act, will be the sole basis on which the Company makes the above-referenced determination. Your inability to redeem any such excess shares will reduce your influence over our ability to consummate the Business Combination and you could suffer a material loss on your investment in us if you sell such excess shares in open market transactions. Additionally, you will not receive redemption distributions with respect to such excess shares if we consummate the Business Combination. As a result, you will continue to hold that number of shares aggregating to more than 15% of the shares sold in our IPO and, in order to dispose of such excess shares, would be required to sell your stock in open market transactions, potentially at a loss. We cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of our Class A Stock will exceed the per-share redemption price. Notwithstanding the foregoing, stockholders may challenge the Company’s determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.

However, our stockholders’ ability to vote all of their shares (including such excess shares) for or against the Business Combination is not restricted by this limitation on redemption.

There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

We can give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in our share price, and may result in a lower value realized now than a stockholder of the Company might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation

 

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of any initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement. A stockholder should consult the stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

Stockholders of the Company who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline. If stockholders fail to comply with the redemption requirements specified in this proxy statement, they will not be entitled to redeem their shares of our Class A Stock for a pro rata portion of the funds held in our Trust Account.

Public stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must, among other things (i) submit a request in writing and (ii) tender their certificates to our Transfer Agent or deliver their shares to the Transfer Agent electronically through the DWAC system at least two business days prior to the Special Meeting. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our Transfer Agent will need to act to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, because we do not have any control over this process or over the brokers, which we refer to as “DTC,” it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.

Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account less franchise and income taxes payable, calculated as of two business days prior to the anticipated consummation of the Business Combination. Please see the section entitled “Special Meeting in Lieu of 2016 Annual Meeting of Company Stockholders — Redemption Rights” for additional information on how to exercise your redemption rights.

If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

If, despite our compliance with the proxy rules, a stockholder fails to receive our proxy materials, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy materials that we are furnishing to holders of our public shares in connection with our Business Combination describes the various procedures that must be complied with in order to validly redeem public shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (NO REDEMPTION SCENARIO)

The following unaudited pro forma condensed combined balance sheet as of June 30, 2016 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the six months ended June 30, 2016 are based on the historical financial statements of the Company and Hostess Holdings giving effect to the Business Combination. The Company and Hostess Holdings shall collectively be referred to herein as theCompanies.” The Companies, subsequent to the Business Combination, shall be referred to herein as theCombined Company.”

The historical financial statements of Hostess Holdings have been presented herein, as opposed to those of the various entities of the Selling Equityholders. The Selling Equityholders entities are holding companies without any operations, and no material assets beyond their investment in Hostess Holdings. The Selling Equityholders entities are not allowed to consolidate Hostess Holdings under U.S. generally accepted accounting principles. As such, the historical Hostess Holdings financial statements represent the highest level of consolidated financial statements that presents the full financial position and results of operations of the underlying business.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and for the six months ended June 30, 2016 give pro forma effect to the Business Combination as if it had occurred on January 1, 2015. The unaudited pro forma condensed combined balance sheet as of June 30, 2016 assumes that the Business Combination was completed on June 30, 2016.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 was derived from Hostess Holdings’ audited consolidated statement of operations for the year ended December 31, 2015 and the Company’s audited statement of operations for the period from June 1, 2015 (inception) to December 31, 2015. The unaudited pro forma condensed combined balance sheet and statement of operations as of and for the six months ended June 30, 2016 were derived from Hostess Holdings’ unaudited consolidated financial statements as of and for the six months ended June 30, 2016 and the Company’s condensed unaudited financial statements as of and for the six months ended June 30, 2016.

On July 5, 2016 the Company entered into the Master Transaction Agreement with Company Merger Sub, AP Hostess LP, Hostess CDM Co-Invest, CDM Hostess and AP Hostess LP, in its capacity as the Sellers’ Representative, pursuant to which, among other things and subject to the terms and conditions contained in the Master Transaction Agreement, the Company will acquire a controlling interest in Hostess Holdings. After giving effect to the Business Combination, Hostess Holdings will continue as a subsidiary of the Company and the Selling Equityholders will hold a portion of the Company’s Common Stock. In addition, the CDM Holders will retain a significant interest in Hostess Holdings through their ownership of Class B Units.

The pro forma information contained herein assumes the Company’s stockholders approve the proposed Business Combination. The Company’s stockholders may elect to redeem their shares of Class A Stock even if they approve the proposed Business Combination. The Company cannot predict how many of its public stockholders will elect to convert their shares of Class A Stock to cash. As a result it has elected to provide pro forma financial statements under two different assumptions which produce significantly different allocations of total Company equity between common shareholders and noncontrolling interests. The actual results will be within the scenarios described below, however, there can be no assurance regarding which scenario will be closest to the actual results. The Company believes that redemptions of up to approximately 10 million shares of Class A Stock will result in the Company being considered the accounting acquirer, as further discussed in Note 1 of the Notes To The Unaudited Pro Forma Condensed Combined Financial Information (No Redemption Scenario). The threshold of approximately 10 million redeemed shares of Class A Stock is the level of ownership above which the Selling Equityholders would retain at least 50% of the equity and voting rights after the Business Combination. The Company believes that for redemptions from approximately 10 million to 12.50

 

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million shares of Class A Stock, Hostess Holdings will be considered the accounting acquirer as discussed in Note 1 of the Notes To The Unaudited Pro Forma Condensed Combined Financial Information (Maximum Redemption Scenario). A redemption of approximately 10 million shares of Class A Stock would result in 92.4 million shares of Class A Stock and 37.6 million shares of Class B Stock issued and outstanding immediately following the Business Combination. A redemption of 12.5 million shares would result in 91.1 million shares of Class A Stock and 38.9 million shares of Class B Stock issued and outstanding immediately following the Business Combination. A redemption of 12.5 million shares represents the maximum number of shares that could be redeemed by Company stockholders and leave sufficient cash to fund the minimum required cash consideration payable to the Selling Equityholders under the terms of the Master Transaction Agreement.

The following unaudited pro forma condensed combined financial statements assume that none of the Company’s stockholders exercise redemption rights with respect to their shares of Class A Stock for a pro rata portion of the funds contained in the Trust Account.

 

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GORES HOLDINGS, INC.

(ASSUMING NO REDEMPTIONS)

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

JUNE 30, 2016

(dollars in thousands, except share and per share amounts)

 

    Historical
As of June 30, 2016
    Pro Forma
Adjustments
for Equity
Offering
        As Adjusted
for Equity
Offering
    Pro Forma
Adjustments For
Business
Combination
        Pro Forma
Combined
 
                             
    Company     Hostess
Holdings, LP
                 

ASSETS

               

Current assets

               

Cash and cash equivalents

  $ 452      $ 46,774      $ 300,000      (a)   $ 347,226      $ 375,234      (a)   $ 8,186   
              (714,274   (a)  

Restricted cash

    —          10        —            10        (10   (b)     —     

Accounts receivable, net

    —          61,274        —            61,274        —            61,274   

Inventories

    —          30,165        —            30,165        2,573      (c)     32,738   

Assets held for sale

    —          —          —            —          —            —     

Prepaids and other current assets

    212        4,722        —            4,934        —            4,934   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current assets

    664        142,945        300,000          443,609        (336,477       107,132   

Property and equipment, net

    —          140,130        —            140,130        15,965      (d)     156,095   

Restricted cash

    —          17,225        —            17,225        (17,225   (b)     —     

Investments and cash held in Trust Account

    375,234        —          —            375,234        (375,234   (e)     —     

Intangible assets, net

    —          292,377        —            292,377        1,279,368      (f)     1,571,745   

Goodwill

    —          81,185        —            81,185        582,164      (g)     663,349   

Deferred finance charges

    —          1,514        —            1,514        (1,514   (h)     —     

Other assets, net

    —          6,881        —            6,881        —            6,881   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total assets

  $ 375,898      $ 682,257      $ 300,000        $ 1,358,155      $ 1,147,047        $ 2,505,202   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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GORES HOLDINGS, INC.

(ASSUMING NO REDEMPTIONS)

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

JUNE 30, 2016 (CONTINUED)

(dollars in thousands, except share and per share amounts)

 

    Historical
As of June 30, 2016
                                     
    Company     Hostess
Holdings, LP
    Pro Forma
Adjustments
for Equity
Offering
          As Adjusted
for Equity
Offering
    Pro Forma
Adjustments
For Business
Combination
          Pro forma
Combined
 

LIABILITIES AND PARTNERS’ / STOCKHOLDERS’ EQUITY (DEFICIT)

               

Current liabilities

               

Long-term debt payable within one year

  $ —        $ 9,401      $ —          $ 9,401      $                     $  9,401   

Accounts payable

    —          43,052        —            43,052        —            43,052   

Accrued expenses

    2,254        26,310        —            28,564        —            28,564   

Deferred distributions to partners

    —          10        —            10        (10     (b)        —     

State franchise tax accrual

    62        —          —            62        —            62   

Other liabilities

    —          808        —            808        5,815        (j)        6,623   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current liabilities

 

 

 

 

2,316

 

  

 

 

 

 

79,581

 

  

    —            81,897        5,805          87,702   

Long-term debt

    —          1,191,155        —            1,191,155        (212,559     (i)        978,596   

Deferred distributions to partners

    —          17,225        —            17,225        (17,225     (b)        —     

Deferred tax liabilities

    —          11,220        —            11,220        127,905        (k)        139,125   

Deferred underwriting compensation

    13,125        —          —            13,125        (13,125     (l)        —     

Other liabilities

    —          —          —            —          172,771        (j)        172,771   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities

    15,441        1,299,181        —            1,314,622        63,572          1,378,194   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Common stock subject to possible redemption; 35,545,719 shares (at redemption value of $10.00 per share)

    355,457        —          —            355,457        (355,457     (m)        —     

Partners’ equity (deficit)

    —          (580,474     —            (580,474     580,474        (n)        —     

Noncontrolling interest

    —          (36,450     —            (36,450     36,450        (o)        291,063   
              227,752        (p)     
              23,462        (q)     
              49,999        (r)     
              (10,150     (u)     

Class F common stock, $0.0001 par value; 20,000,000 shares authorized, 9,375,000 shares issued and outstanding

    1        —          —            1        (1     (s)        —     

Class A common stock, $0.0001 par value; 200,000,000 shares authorized, 97,627,264 shares issued and outstanding

    —          —          3        (a)        3        4        (m)        10   
              2        (t)     
              1        (s)     
              2        (p)        3   

Class B common stock, $0.0001 par value; 50,000,000 shares authorized, 32,408,742 shares issued and outstanding

              1        (r)     

Additional paid-in capital

    7,660        —          299,997        (a)        307,657        355,453        (m)        869,171   
              206,061        (t)     

Retained earnings

    (2,661     —          —            (2,661     (30,578     (u)        (33,239
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total partners’ / stockholders’ equity (deficit)

    5,000        (616,924     300,000          (311,924     1,438,932          1,127,008   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities and partners’ / stockholders’ equity (deficit)

  $ 375,898      $ 682,257      $ 300,000        $ 1,358,155      $ 1,147,047        $ 2,505,202   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

 

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GORES HOLDINGS, INC.

(ASSUMING NO REDEMPTIONS)

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(dollars in thousands, except share and per share amounts)

 

    Historical
For the Six Months
Ended June, 2016
    Pro Forma
Adjustments
For Equity
Offering
        As
Adjusted
For Equity
Offering
    Pro Forma
Adjustments
For Business
Combination
        Pro Forma
Combined
 
    Company     Hostess
Holdings, LP
                 

Net revenue

  $ —        $ 352,561      $ —          $ 352,561      $          $ 352,561   

Cost of goods sold

    —          199,843        —            199,843        446      (a)     200,289   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Gross profit

    —          152,718        —            152,718        (446       152,272   

Advertising and marketing

    —          17,148        —            17,148        —            17,148   

Selling expenses

    —          14,904        —            14,904        —            14,904   

General and administrative

    2,416        21,505        —            23,921        11,417      (a)     33,367   
              (1,971   (b)  

Impairment of property and equipment

    —          7,300        —            7,300        —            7,300   

Bakery shutdown costs

    —          227        —            227        —            227   

Related party expenses

    —          2,374        —            2,374        —            2,374   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Operating income (loss)

    (2,416     89,260        —            86,844        (9,892       76,952