EX-99.1 2 d848861dex991.htm EX-99.1 EX-99.1
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Exhibit 99.1

LOGO

[    ]

Dear Nielsen Shareholder:

You are cordially invited to attend a general meeting of shareholders of Nielsen Holdings plc (“Nielsen”) (the “Nielsen special meeting”) to be held on [                ] at [            ] (Eastern Time). You may attend online via live webcast at [nielsen.onlineshareholdermeeting.com] or in person at [            ].

Nielsen previously announced plans to separate its Global Connect business from its Global Media business. The separation and distribution will occur by means of the establishment of a newly formed company named [    ] (“SpinCo”), which will own and operate the Global Connect business. Nielsen, the existing publicly traded company in which you currently own ordinary shares, will continue to own and operate the Global Media business. The separation and distribution will create two independent publicly traded companies, each of which will have sharper strategic focus and greater opportunity to leverage its unique competitive advantages:

 

   

Nielsen will provide media and advertising clients with unbiased and reliable metrics that create the shared understanding required for markets to function, enabling its clients to grow and succeed across the global advertising market. Nielsen helps clients to define exactly who they want to reach, as well as optimize the outcomes they can achieve. Nielsen’s cross-platform measurement strategy brings together the best of television and digital measurement to ensure a more functional marketplace for the industry.

 

   

SpinCo will provide consumer packaged goods manufacturers and retailers with accurate, actionable information and a complete picture of the complex and changing marketplace that brands need to innovate and grow their businesses by providing data and building tools that use predictive models to turn observations in the marketplace into business decisions and winning solutions. SpinCo’s business data and insights, combined with the only open, cloud native measurement and analytics platform that democratizes the power of data, provides an essential foundation that makes markets possible in the evolving world of commerce. With SpinCo’s set of guiding truths, from market share to e-commerce trends, businesses have the tools to create new opportunities.

The separation and distribution is being undertaken to provide current Nielsen shareholders with equity ownership in and exposure to the performance of both Nielsen and SpinCo as independent publicly traded companies. We expect that the separation and distribution will be tax-free for U.S. federal income tax purposes to Nielsen shareholders. The separation will be effected by means of a pro rata distribution to Nielsen shareholders of all of the outstanding ordinary shares of SpinCo. The distribution will be effective at [                ] p.m. (Eastern Time) on [                ], subject to the satisfaction (or, where applicable, waiver) of the other conditions to the distribution described in this document. Following the distribution, SpinCo will be a separate public company initially owned by the shareholders of Nielsen. Each Nielsen shareholder will receive [                ] SpinCo ordinary shares for every Nielsen ordinary share held as of the close of business on [                ], the record date for the distribution (the “distribution record date”). SpinCo intends to apply to have its ordinary shares authorized for listing on the [                ] under the symbol “[                ].” Following the distribution, Nielsen will continue to trade on the New York Stock Exchange under the symbol “NLSN” but will no longer own the Global Connect business.

At the Nielsen special meeting, you will be asked to consider and vote upon the proposal to approve the separation of SpinCo and its business from Nielsen and the proposed interim distribution in specie (the “distribution”) of SpinCo ordinary shares to Nielsen shareholders, as well as related proposals, as set out in Proposal No. 1 in the Notice of the Special Meeting of Nielsen Shareholders (the “Resolution”). If the Resolution is approved by Nielsen shareholders and the other conditions to the distribution are satisfied, you will not need to


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take any action to receive the SpinCo ordinary shares to which you are entitled as a Nielsen shareholder. You will not be required to make any payments to Nielsen or to surrender or exchange your Nielsen ordinary shares in order to receive the SpinCo ordinary shares to which you are entitled as a Nielsen shareholder.

Nielsen’s board of directors considered a range of strategic options in relation to the future ownership of the Global Connect business and considered a number of factors in evaluating the separation and distribution. Based on its review, Nielsen’s board of directors determined that the separation and distribution are advisable, fair to and in the best interests of Nielsen and its shareholders as a whole. Accordingly, Nielsen’s board of directors has approved the separation and distribution, and recommends that you vote “FOR” the approval of the separation of SpinCo and its business from Nielsen and the distribution of SpinCo ordinary shares to Nielsen shareholders. The majority of Nielsen’s board of directors, to the extent that they own Nielsen ordinary shares, intend to vote “FOR” the approval of the separation of SpinCo and its business from Nielsen and the distribution of SpinCo ordinary shares to Nielsen shareholders.

Your vote is very important, regardless of the number of Nielsen ordinary shares you own. The Resolution must be approved by a simple majority of the votes cast at the Nielsen special meeting in person or by proxy. Only shareholders who owned Nielsen ordinary shares as of the close of business on [            ], the record date for the Nielsen special meeting (the “meeting record date”), will be entitled to vote at the Nielsen special meeting.

To vote your shares, you may return your proxy card by mail, submit a proxy via the Internet or by telephone (as specified in the Internet and telephone voting instructions contained in the proxy statement), or attend the Nielsen special meeting and vote online if you attend the Nielsen special meeting online, or in person if you attend the physical meeting. If your shares are held in the name of a brokerage firm, bank, trust or other nominee, you must instruct the brokerage firm, bank, trust or other nominee how to vote your shares or obtain a proxy, executed in your favor, from that record holder in order to vote at the Nielsen special meeting. Even if you plan to attend the Nielsen special meeting online or in person, we urge you to promptly submit a proxy for your shares via the Internet or by telephone or by completing, signing, dating and returning the enclosed proxy card by mail. If you attend the Nielsen special meeting and wish to vote either online or in person, you may revoke your proxy and vote either online or in person.

If you fail to return your proxy by mail, submit a proxy via the Internet or by telephone, attend the Nielsen special meeting and vote either online or in person, or give voting instructions to your brokerage firm, bank, trust or other nominee, then your shares will not be counted for determining whether a quorum is present at the Nielsen special meeting, and will not be counted as a vote for or against the Resolution.

The enclosed joint proxy statement/information statement provides detailed information about the separation and distribution and contains important business and financial information about SpinCo and Nielsen. We encourage you to read the joint proxy statement/information statement (and the documents incorporated by reference into the joint proxy statement/information statement) carefully in its entirety.

Thank you for your ongoing support of Nielsen.

Sincerely,

David Kenny

Chief Executive Officer, Chief Diversity

Officer

Nielsen Holdings plc


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NOTICE OF THE SPECIAL MEETING OF NIELSEN SHAREHOLDERS

Nielsen Holdings plc

Registered in England and Wales with registered no. 09422989

Notice is hereby given that a general meeting of Nielsen Holdings plc (“Nielsen”) will be held on [ ] at [ ] a.m. (Eastern Time) (such meeting, the “Nielsen special meeting”). Holders of ordinary shares of Nielsen (the “Nielsen shareholders”) will be asked to consider and, if thought fit, pass the following resolutions as ordinary resolutions:

 

1.

Separation and Distribution Resolution

THAT:

 

(A)

upon the recommendation of the members of the board of directors of Nielsen (the “Nielsen Board of Directors”) and subject to the final approval of the Nielsen Board of Directors and the satisfaction (or waiver by Nielsen) of certain other conditions contained in the separation and distribution agreement in connection with the separation of Nielsen SpinCo B.V. (“SpinCo”) and its business from Nielsen and the proposed distribution by Nielsen of shares in SpinCo to Nielsen shareholders (the “separation and distribution”), an interim distribution in specie of the shares of SpinCo be and is hereby declared payable to the Nielsen shareholders on the register of members of Nielsen as of the close of business on [            ] (or, such other time or date as the Nielsen Board of Directors may determine) (the “distribution record date”), credited as fully paid, in the proportion of [            ] shares of SpinCo per [            ] shares of Nielsen then held by each Nielsen shareholder, so that each Nielsen shareholder will hold an entitlement to [            ] SpinCo shares for each [            ] shares of Nielsen held at the distribution record date;

 

(B)

the separation and distribution be and is hereby approved for the purposes of Article 5.3 of the Articles of Association of Nielsen; and

 

(C)

each and any of the members of the Nielsen Board of Directors and the executive officers of Nielsen be and is hereby authorised to conclude and implement the separation and distribution and to do or procure to be done all such acts and things on behalf of Nielsen and each of its subsidiaries as they may, in their discretion, consider necessary or expedient for the purpose of giving effect to the separation and distribution with such amendments, modifications, variations or revisions thereto as are not of a material nature.

Notes

1. In accordance with Nielsen’s Articles of Association, all resolutions will be taken on a poll. Voting on a poll means that each share represented in person or by proxy will be counted in the vote. All resolutions will be proposed as ordinary resolutions, which under applicable law means that each resolution must be passed by a simple majority of the votes cast at the Nielsen special meeting in person or by proxy. Explanatory notes regarding the Resolution are set out in the relevant sections of the accompanying proxy materials relating to the Resolution.

2. The results of the polls taken on the Resolution at the Nielsen special meeting and any other information required by the UK Companies Act 2006 will be made available on Nielsen’s website as soon as reasonably practicable following the Nielsen special meeting and for a period of two years thereafter.

3. To be entitled to attend and vote at the Nielsen special meeting and any adjournment or postponement thereof, shareholders must be registered in the register of members of Nielsen at the close of business in New York on [        ] (the “meeting record date”). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. If you hold shares through a broker, bank or other nominee, you can attend the Nielsen special meeting and vote by following the instructions you receive from your bank, broker or other nominee.


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4. Shareholders are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the Nielsen special meeting. A shareholder may appoint more than one proxy in relation to the Nielsen special meeting; provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A corporate shareholder may appoint one or more corporate representatives to attend and to speak and vote on its behalf at the Nielsen special meeting. A proxy need not be a shareholder of Nielsen.

5. If you are a shareholder of record or hold shares through a broker, bank or other nominee and are voting by proxy through the internet or by telephone, your vote must be received by [        ] [a.m./p.m.] (Eastern Time) on [        ] to be counted. If you are a shareholder of record or hold shares through a broker, bank or other nominee and are voting by mail, your vote must be received by [        ] [a.m./p.m.] (Eastern Time) on [        ] to be counted. A shareholder who has returned a proxy instruction is not prevented from attending the Nielsen special meeting either online or in person and voting if he/she wishes to do so, but please note that only your vote last cast will count. If you hold shares through Nielsen’s 401(k) plan, the plan trustee, Fidelity Management Trust Company, will vote according to the instructions received from you provided that your instructions are received by [        ] [a.m./p.m.] (Eastern Time) on [        ]. Your instructions cannot be changed or revoked after that time, and the shares you hold through the 401(k) plan cannot be voted online at the Nielsen special meeting.

6. Unless you hold shares through Nielsen’s 401(k) plan, you may revoke a previously delivered proxy at any time prior to the Nielsen special meeting. You may vote online if you attend the Nielsen special meeting online, or in person if you attend the physical meeting, thereby cancelling any previous proxy.

7. Pursuant to the Securities and Exchange Commission rules, Nielsen’s proxy statement and related information prepared in connection with the Nielsen special meeting are available at: [        ] and [        ]. You will need the 16-digit control number included on your Notice of Internet Availability or proxy card in order to access the proxy materials on [        ]. These proxy materials will be available free of charge.

8. You may not use any electronic address provided in this Notice of the Special Meeting of Nielsen Shareholders or any related documentation to communicate with Nielsen for any purposes other than as expressly stated.


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[SpinCo Logo]

[                ]

Dear Future [                ] Shareholder:

I am pleased to welcome you as a future shareholder of [                ] (“SpinCo”). SpinCo is the Dutch incorporated holding company for the Global Connect business, which helps our clients enhance their interactions with consumers and make critical business decisions that we believe positively affect their sales and profitability. Our business is built on an extensive foundation of proprietary data assets designed to yield essential insights for our clients to successfully measure, analyze and grow their business and manage their performance. From measuring market share to consumer trends to predicting the impact of varying pricing and promoting decisions, SpinCo is the critical partner manufacturers and retailers need.

Our company provides consumer packaged goods manufacturers and retailers with accurate, actionable information and a complete picture of the complex and changing marketplace that brands need to innovate and grow their businesses. We provide data and build tools that use predictive models to turn observations in the marketplace into business decisions and winning solutions. Our data and insights, combined with the only open, cloud native measurement and analytics platform that democratizes the power of data, continue to provide an essential foundation that makes markets possible in the rapidly evolving world of commerce. With SpinCo’s set of guiding truths, from market share to e-commerce trends, businesses have the tools to create new opportunities.

As an independent [                ] listed public company, we believe we will be attractively positioned to drive results with a singular focus and an independent structure that allows faster decision-making; implement a distinct, fit-for-purpose capital structure and allocation strategy aligned with our growth plans; benefit from strategic flexibility to invest in growth opportunities; and create compelling pure-play investment opportunities for investors by driving accelerated growth and profits over time.

We intend to list SpinCo’s ordinary shares on [    ] under the symbol “[    ].” I encourage you to learn more about SpinCo by reading the attached document.

Sincerely,

David Rawlinson

Chief Executive Officer

[                ]


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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended.

 

PRELIMINARY AND SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 2020

JOINT PROXY STATEMENT/INFORMATION STATEMENT

Nielsen SpinCo B.V.

 

 

This joint proxy statement/information statement is being furnished in connection with the distribution by Nielsen Holdings plc (“Nielsen”) to its shareholders of all of the outstanding ordinary shares of [                ], a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), which will be converted into a Dutch public limited company (naamloze vennootschap) prior to the separation and distribution (“SpinCo”), currently a wholly owned subsidiary of Nielsen, that will hold Nielsen’s Global Connect business. To implement the distribution, Nielsen will distribute all of the outstanding ordinary shares of SpinCo on a pro rata basis to Nielsen shareholders in a manner that is intended to be tax-free for U.S. federal income tax purposes. Following the distribution, SpinCo will be a separately listed public company.

For every [                ] Nielsen ordinary share held of record by you as of the close of business on [                        ], the record date for the distribution (the “distribution record date”), you will receive [    ] SpinCo ordinary shares. You will receive cash in lieu of any fractional SpinCo ordinary shares that you would otherwise have been entitled to receive pursuant to the application of the above ratio. As discussed in the section entitled “The Separation and Distribution—Trading Between the Distribution Record Date and the Distribution Date,” if you sell your Nielsen ordinary shares in the “regular-way” market after the distribution record date and before the distribution, you also will be selling your right to receive SpinCo ordinary shares in the distribution. SpinCo expects the SpinCo ordinary shares to be distributed by Nielsen to you at [        ] p.m. (Eastern Time) on [                    ]. SpinCo refers to the date of the distribution of SpinCo ordinary shares as the “distribution date.”

The separation of SpinCo and its business from Nielsen and the proposed interim distribution in specie (the “distribution”) of SpinCo ordinary shares to Nielsen shareholders are subject to a number of conditions, including Nielsen shareholder approval and the final approval of the Nielsen Board of Directors. If the separation of SpinCo and its business from Nielsen and the interim distribution in specie of SpinCo ordinary shares to Nielsen shareholders are approved by Nielsen shareholders and the other conditions to the distribution are satisfied, you will not need to take any action to receive the SpinCo ordinary shares to which you are entitled as a Nielsen shareholder. You will not be required to make any payments to Nielsen or to surrender or exchange your Nielsen ordinary shares to receive the SpinCo ordinary shares to which you are entitled as a Nielsen shareholder.

There is no current trading market for SpinCo ordinary shares, although SpinCo expects that a limited market, commonly known as a “when-issued” trading market, will develop on or about the distribution record date, and SpinCo expects “regular-way” trading of SpinCo ordinary shares to begin on the first trading day following the completion of the distribution. SpinCo intends to apply to have its ordinary shares authorized for listing on [    ] under the symbol “[    ].” Following the distribution, Nielsen will continue to trade on the New York Stock Exchange under the symbol “NLSN.”

 

 

In reviewing this joint proxy statement/information statement, you should carefully consider the matters described in the section entitled “Risk Factors,” beginning on page 26.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this joint proxy statement/information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This joint proxy statement/information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities. The date of this joint proxy statement/information statement is [                ].

This joint proxy statement/information statement was first made available to Nielsen shareholders on or about [                ].


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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

     1  

JOINT PROXY STATEMENT/INFORMATION STATEMENT SUMMARY

     15  

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

     23  

RISK FACTORS

     26  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     47  

THE SEPARATION AND DISTRIBUTION

     49  

THE NIELSEN SPECIAL MEETING

     57  

NIELSEN SHAREHOLDER PROPOSAL

     61  

SPINCO DIVIDEND POLICY

     62  

SPINCO CAPITALIZATION

     63  

SELECTED HISTORICAL FINANCIAL DATA OF SPINCO

     64  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF SPINCO

     65  

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF NIELSEN

     71  

SPINCO BUSINESS

     78  

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

     86  

SPINCO MANAGEMENT

     112  

SPINCO DIRECTORS

     113  

SPINCO EXECUTIVE COMPENSATION

     117  

COMPENSATION DISCUSSION AND ANALYSIS

     118  

TABLES AND NARRATIVE DISCLOSURE

     138  

SPINCO EXECUTIVE COMPENSATION FOLLOWING THE SEPARATION AND DISTRIBUTION

     152  

SPINCO DIRECTOR COMPENSATION FOLLOWING THE SEPARATION AND DISTRIBUTION

     156  

SPINCO’S RELATIONSHIP WITH NIELSEN FOLLOWING THE SEPARATION AND DISTRIBUTION

     158  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     165  

TAXATION—THE UNITED KINGDOM

     169  

TAXATION—THE NETHERLANDS

     170  

DESCRIPTION OF MATERIAL INDEBTEDNESS OF SPINCO

     171  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SPINCO

     172  

DESCRIPTION OF SPINCO’S ORDINARY SHARES

     173  

COMPANY/CORPORATE LAW COMPARATIVE TABLE OF SPINCO AND NIELSEN

     180  

WHERE YOU CAN FIND MORE INFORMATION

     190  

INDEX TO FINANCIAL STATEMENTS OF SPINCO

     F-1  

Presentation of Information

Except as otherwise indicated or unless the context otherwise requires, the information included about SpinCo in this joint proxy statement/information statement assumes the completion of the separation and distribution. Unless the context otherwise requires and except in the historical financial statements included herein, references in this joint proxy statement/information statement to “SpinCo” refer to [                ], a public limited company incorporated under the laws of the Netherlands, and its consolidated subsidiaries after the distribution. References to “SpinCo” in the historical financial statements included herein refer to Nielsen’s Global Connect business, the predecessor to SpinCo. Unless the context otherwise requires, references in this joint proxy statement/information statement to “Nielsen” refer to Nielsen Holdings plc, a public limited company incorporated under the laws of England and Wales, and its consolidated subsidiaries (other than, after the distribution, SpinCo and its consolidated subsidiaries). References in this joint proxy statement/information statement to SpinCo’s historical business and operations refer to the business and operations of Nielsen’s Global Connect business that will be transferred to SpinCo in connection with the separation and distribution.


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References in this joint proxy statement/information statement to the “separation” refer to the separation of the Global Connect business from Nielsen’s other businesses and the creation of a separate company, [                ], to hold Nielsen’s Global Connect business. References in this joint proxy statement/information statement to the “distribution” refer to the interim distribution in specie of all of the outstanding ordinary shares of SpinCo to Nielsen’s shareholders on a pro rata basis, which will result in SpinCo becoming an independent, publicly traded company.


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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

 

What is SpinCo and why is Nielsen separating the Global Connect business and distributing SpinCo stock?

SpinCo, which is currently a wholly owned subsidiary of Nielsen, was formed on March 17, 2020 to own and operate Nielsen’s Global Connect business. The separation of SpinCo from Nielsen and the distribution of SpinCo ordinary shares are intended to provide you with equity ownership in two separate publicly traded companies that will be able to focus exclusively on each of their respective businesses. SpinCo and Nielsen expect that the separation and distribution will result in enhanced long-term performance of each business for the reasons discussed in the section entitled “The Separation and Distribution—Reasons for the Separation and Distribution.”

 

Why am I receiving this document?

To be entitled to attend and vote at the Nielsen special meeting and any adjournment or postponement thereof, shareholders must be registered in the register of members of Nielsen at the close of business in New York on [                    ] (the “meeting record date”). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. If you hold shares through a broker, bank or other nominee, you can attend the Nielsen special meeting and vote by following the instructions you receive from your bank, broker or other nominee.

 

  This document serves as a proxy statement of Nielsen in respect of the Nielsen special meeting as well as an information statement of SpinCo, and it provides detailed information about the Nielsen special meeting, the separation and distribution, Nielsen and SpinCo. Nielsen encourages you to read this document carefully in its entirety.

 

  To complete the distribution, in accordance with Nielsen’s Articles of Association, all resolutions will be taken on a poll. Voting on a poll means that each share represented in person or by proxy will be counted in the vote. All resolutions will be proposed as ordinary resolutions, which under applicable law means that each resolution must be passed by a simple majority of the votes cast at the Nielsen special meeting in person or by proxy. Explanatory notes regarding the Resolution are set out in the relevant sections of the accompanying proxy materials relating to the Resolution.

 

  If you are a holder of Nielsen ordinary shares as of the close of business on [                    ], the distribution record date, you will be entitled to receive [                    ] SpinCo ordinary shares for every [                    ] ordinary share of Nielsen that you held as of the close of business on such date. You will receive cash in lieu of any fractional SpinCo ordinary shares. This document will help you understand how the separation and distribution will affect your post-separation ownership in Nielsen and SpinCo, respectively.


 

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Why did I receive a one-page notice in the mail regarding the Internet availability of this joint proxy statement/information statement, instead of the full joint proxy statement/information statement?

Pursuant to U.S. Securities and Exchange Commission (the “SEC”) rules, Nielsen has elected to provide shareholders access to this joint proxy statement/information statement over the Internet. Nielsen believes that this process will expedite its shareholders’ receipt of materials, lower the costs and reduce its environmental impact. Accordingly, Nielsen sent a notice of Internet availability on or about [                     ] (the “notice of Internet availability”) to shareholders of record entitled to vote at the Nielsen special meeting.

 

  All shareholders will have the ability to access the joint proxy statement/information statement and other proxy materials on a website referred to in the notice of Internet availability and to download printable versions of these materials, or to request and receive a printed set of these materials from us. Instructions on how to access these materials over the Internet or to request a printed copy from Nielsen may be found in the notice of Internet availability. Nielsen encourages you to read the joint proxy statement/information statement carefully.

 

How will the separation and distribution of SpinCo from Nielsen work?

The separation and distribution is conditional upon, among other things, the approval of the Resolution, which under applicable law must be passed by a simple majority of the total voting rights of the shareholders of Nielsen who vote on such resolution, as well as the approval of the separation and distribution by the Nielsen Board of Directors.

 

  Details of other conditions to the separation and distribution that are contained in the separation and distribution agreement that Nielsen and SpinCo will enter into before the separation and distribution (such agreement, the “separation and distribution agreement”) are set out in more detail in the section of this joint proxy statement/information statement entitled “SpinCo’s Relationship with Nielsen Following the Separation and Distribution.”

 

  Assuming the conditions are satisfied (or, where applicable, waived), the separation and distribution will be effected by Nielsen declaring an interim distribution in specie of all of the outstanding ordinary shares of SpinCo to Nielsen shareholders on a pro rata basis that is intended to be tax-free for U.S. federal income tax purposes. As a result of the distribution, SpinCo will become an independent public company.

 

Why is the separation of SpinCo structured as a distribution?

Nielsen believes that a distribution that is tax-free for U.S. federal income tax purposes of SpinCo ordinary shares to Nielsen shareholders is an efficient way to separate its Global Connect business in a manner that will create long-term value for Nielsen, SpinCo and their respective shareholders.

 

What is the distribution record date?

The record date for the distribution will be [                    ].


 

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When will the distribution occur?

It is expected that all outstanding SpinCo ordinary shares will be distributed by Nielsen at [                    ] (Eastern Time) on [                    ] to holders of record of Nielsen ordinary shares as of the close of business on [                    ], the distribution record date, subject to the satisfaction (or, where applicable, waiver) of the other conditions to the distribution described in this document.

 

What do shareholders need to do to participate in the distribution?

Shareholder approval of the separation and distribution is required. For additional information, see the section entitled “Questions and Answers About the Nielsen Special Meeting.”

 

  Shareholders of Nielsen as of the distribution record date will not be required to take any action to receive SpinCo ordinary shares in the distribution assuming the requisite shareholder approval is obtained, but you are urged to read this entire joint proxy statement/information statement carefully. Assuming the requisite shareholder approval is obtained, you do not need to pay any consideration, exchange or surrender your existing Nielsen ordinary shares or take any other action to receive your SpinCo ordinary shares.

 

  The distribution will not affect the number of outstanding ordinary shares of Nielsen or any rights of Nielsen shareholders, although it will affect the market value of each outstanding ordinary share of Nielsen.

 

How will SpinCo ordinary shares be issued?

You will receive SpinCo ordinary shares through the same channels that you currently use to hold or trade Nielsen ordinary shares, whether through a brokerage account, 401(k) plan or other channel. Receipt of SpinCo ordinary shares will be documented for you in the same manner that you typically receive shareholder updates, such as monthly broker statements and 401(k) statements.

 

  If you own Nielsen ordinary shares as of the close of business on [                    ], the distribution record date, including shares owned in certificate form, Nielsen, with the assistance of [                    ] (“[                    ]” or the “distribution agent”), the distribution agent for the distribution, will electronically distribute SpinCo ordinary shares to you or to your brokerage firm on your behalf in book-entry form. [                    ] will mail you a book-entry account statement that reflects your SpinCo ordinary shares, or your bank or brokerage firm will credit your account for the shares.

 

How many SpinCo ordinary shares will I receive in the distribution?

Nielsen will distribute to you [                    ] SpinCo ordinary shares for every [                    ] ordinary share of Nielsen held by you as of the close of business on the distribution record date. You will receive cash in lieu of any fractional SpinCo ordinary shares. Based on approximately [                    ] ordinary shares of Nielsen outstanding as of [                    ], a total of approximately [                    ] SpinCo ordinary shares will be distributed. For additional information on the distribution, see the section entitled “The Separation and Distribution.”


 

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Will fractional SpinCo ordinary shares be issued in the distribution?

No. SpinCo will not issue fractional ordinary shares in the distribution. Fractional shares that Nielsen shareholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise have been entitled to receive) to those shareholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

 

What are the conditions to the distribution?

The distribution is subject to approval by a simple majority of the votes cast at the Nielsen special meeting in person or by proxy, as well as the satisfaction (or waiver by Nielsen in its sole discretion) of the following conditions:

 

   

the completion of the transfer of assets and liabilities from Nielsen to SpinCo in accordance with the separation and distribution agreement that Nielsen and SpinCo will enter into before the distribution;

 

   

works council, union or similar employee collective group and employee information and/or consultation processes have been completed, if and to the extent required under local laws;

 

   

the receipt by Nielsen and continued validity of a private letter ruling from the Internal Revenue Service (the “IRS”) with respect to certain requirements for qualification for tax-free treatment under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”), satisfactory to the Nielsen Board of Directors;

 

   

the receipt by Nielsen of an opinion from Nielsen’s outside tax advisor to the effect that the requirements for tax-free treatment under Section 355 of the Code will be satisfied, satisfactory to the Nielsen Board of Directors;

 

   

the receipt by the Nielsen Board of Directors from an independent appraisal firm acceptable to Nielsen of one or more opinions to the Nielsen Board of Directors at the time or times requested by the Nielsen Board of Directors confirming the solvency and financial viability of Nielsen before the consummation of the distribution and each of Nielsen and SpinCo after consummation of the distribution, and such opinions shall have been acceptable to Nielsen in form and substance in Nielsen’s sole discretion and such opinions shall not have been withdrawn or rescinded;

 

   

the SEC having declared effective the registration statement of which this joint proxy statement/information statement forms a part, no stop order suspending the effectiveness thereof being in effect and no proceedings for such purpose pending before or threatened by the SEC and this joint proxy statement/information statement having been made available to Nielsen shareholders;



 

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all actions or filings necessary or appropriate under applicable U.S. federal, U.S. state, U.K., Netherlands or other securities laws having been taken and, where applicable, having become effective or been accepted by the applicable governmental entity;

 

   

any governmental approvals and material consents necessary to consummate the separation and distribution having been obtained and remaining in full force and effect;

 

   

the transaction agreements relating to the separation and distribution having been duly executed and delivered by the parties;

 

   

the separation, distribution and related transactions having been duly approved by the Nielsen Board of Directors following the shareholder vote to approve the Resolution at the Nielsen special meeting;

 

   

no order, injunction or decree issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions, being in effect;

 

   

the SpinCo ordinary shares to be distributed having been approved for listing on the [                ], subject to official notice of distribution;

 

   

Nielsen having received the proceeds from the $[                ] cash transfer from SpinCo described in the section entitled “SpinCo’s Relationship with Nielsen Following the Separation and Distribution—Separation Agreement—Cash Transfer from SpinCo” and Nielsen being satisfied in its sole discretion that as of the effective time of the distribution, it shall have no further liability under any of the SpinCo financing arrangements described in the section entitled “Description of Material Indebtedness of SpinCo”;

 

   

Nielsen having prepared a balance sheet of Nielsen showing distributable reserves sufficient to cover the book value of SpinCo; and

 

   

no other event or development being in existence or having occurred that, in the judgment of the Nielsen Board of Directors, in its sole discretion, makes it inadvisable to effect the separation, distribution and other related transactions.

 

  Nielsen and SpinCo cannot assure you that any or all of these conditions will be met and Nielsen may also waive any of the conditions to the distribution that are subject to waiver. In addition, Nielsen can decline at any time to go forward with the separation and distribution. For a complete discussion of all of the conditions to the distribution, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”


 

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What will happen if the Resolution is not approved by the holders of Nielsen ordinary shares?

If the Resolution is not approved by the holders of Nielsen ordinary shares and the other conditions to the distribution and separation are not satisfied (or waived), Nielsen’s Global Connect business will continue to form part of Nielsen. As long as the Global Connect business remains a part of Nielsen, Nielsen’s ordinary shares will also represent an indirect interest in the Global Connect business, as they do today.

 

  If the separation and distribution does not proceed, the potential benefits of the separation and distribution will not be realized and there may be an adverse impact on Nielsen’s business, financial condition and operating results.

 

What is the expected date of completion of the distribution?

The completion and timing of the distribution are dependent upon the satisfaction (or, where applicable, waiver) of certain conditions. It is expected that the SpinCo ordinary shares will be distributed by Nielsen at [                    ] (Eastern Time) on [                    ], to the holders of record of Nielsen ordinary shares as of the close of business on [                    ], the distribution record date. However, no assurance can be provided as to the timing of the distribution or that all conditions to the distribution will be satisfied or, if applicable, waived. See the section entitled “The Separation and Distribution—Conditions to the Distribution.”

 

Can Nielsen decide to cancel the distribution of SpinCo ordinary shares even if all of the conditions have been met?

Yes. The distribution is subject to the satisfaction (or, where applicable, waiver) of certain conditions. See the section entitled “The Separation and Distribution—Conditions to the Distribution.” Until the distribution has occurred, Nielsen has the right to terminate the distribution, even if all of the conditions have been satisfied or, if applicable, waived.

 

What if I want to sell my Nielsen ordinary shares or my SpinCo ordinary shares?

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor.

 

What is “regular-way” and “ex-distribution” trading of Nielsen ordinary shares?

Beginning on or shortly before the distribution record date and continuing up to and through the distribution date, it is expected that there will be two markets in Nielsen ordinary shares: a “regular-way” market and an “ex-distribution” market. Nielsen ordinary shares that trade in the “regular-way” market will trade with an entitlement to SpinCo ordinary shares distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to SpinCo ordinary shares distributed pursuant to the distribution. If you hold Nielsen ordinary shares on the distribution record date and then decide to sell any Nielsen ordinary shares before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your Nielsen ordinary shares with or without your entitlement to SpinCo ordinary shares pursuant to the distribution.


 

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Where will I be able to trade SpinCo ordinary shares?

SpinCo intends to apply to list its ordinary shares on the [                    ] under the symbol “[                    ].” SpinCo anticipates that trading in its ordinary shares will begin on a “when-issued” basis on or about [                    ], the distribution record date, and will continue up to and through the distribution date, and that “regular-way” trading in SpinCo ordinary shares will begin on the first trading day following the completion of the distribution. If trading begins on a “when-issued” basis, you may purchase or sell SpinCo ordinary shares up to and through the distribution date, but your transaction will not settle until after the distribution date. SpinCo cannot predict the trading prices for its ordinary shares before, on or after the distribution date.

 

What will happen to the listing of Nielsen ordinary shares?

Nielsen ordinary shares will continue to trade on the New York Stock Exchange after the distribution under the symbol “NLSN.”

 

Will the number of Nielsen ordinary shares that I own change as a result of the distribution?

No. The number of Nielsen ordinary shares that you own will not change as a result of the distribution; provided, however, that the value of that holding is expected to change as a result of the separation and distribution.

 

Will the distribution affect the market price of my Nielsen ordinary shares?

Yes. As a result of the distribution, Nielsen expects the trading price of Nielsen ordinary shares immediately following the distribution to be lower than the “regular-way” trading price of such shares immediately before the distribution because the trading price will no longer reflect the value of its Global Connect business. There can be no assurance that the aggregate market value of the Nielsen ordinary shares and SpinCo ordinary shares following the distribution will be higher or lower than the market value of Nielsen ordinary shares if the separation and distribution did not occur. This means, for example, that the combined trading prices of [                ] Nielsen ordinary shares and [                ] SpinCo ordinary shares after the distribution may be equal to, greater than or less than the trading price of [                ] Nielsen ordinary shares before the distribution.

 

What are the material U.S. federal income tax consequences of the contribution and the distribution?

It is a condition to the completion of the distribution that Nielsen receive a private letter ruling from the IRS and an opinion from its outside tax advisor, in each case satisfactory to the Nielsen Board of Directors, with respect to certain requirements for qualification for tax-free treatment under Section 355 of the Code. Accordingly, it is expected that, except with respect to cash received in lieu of a fractional ordinary share of SpinCo, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of SpinCo ordinary shares in the distribution for U.S. federal income tax purposes. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional ordinary share of SpinCo. You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as non-U.S. tax laws. For



 

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additional information regarding the potential U.S. federal income tax consequences to SpinCo and to you of the contribution and the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”

 

How will I determine my tax basis in the SpinCo shares I receive in the distribution?

For U.S. federal income tax purposes, your aggregate basis in the ordinary shares that you hold in Nielsen and the new SpinCo ordinary shares received in the distribution (including any fractional share interest in SpinCo ordinary shares for which you receive cash) will equal the aggregate basis in Nielsen ordinary shares held by you immediately before the distribution, allocated between the Nielsen ordinary shares and SpinCo ordinary shares (including any fractional share interest in SpinCo ordinary shares for which you receive cash) you receive in the distribution in proportion to the relative fair market value of each on the distribution date. You should consult your tax advisor about the particular consequences of the distribution to you, including the application of the tax basis allocation rules and the application of state, local and non-U.S. tax laws.

 

What will SpinCo’s relationship be with Nielsen following the separation and distribution?

After the separation and distribution, Nielsen and SpinCo will be separate companies with separate management teams and separate boards of directors. Prior to the distribution, SpinCo will enter into a separation and distribution agreement with Nielsen to effect the separation and distribution and to provide a framework for SpinCo’s relationship with Nielsen after the separation and distribution. SpinCo and Nielsen will also enter into certain other agreements, such as a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property matters agreement, a trademark license agreement and a master services agreement. These agreements will provide for the allocation between SpinCo and Nielsen of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of Nielsen and its subsidiaries attributable to periods prior to, at and after the separation and distribution and will govern the relationship between SpinCo and Nielsen subsequent to the completion of the separation and distribution. For additional information regarding the separation and distribution agreement and other agreements between Nielsen and SpinCo, see the sections entitled “Risk Factors—Risks Related to the Separation and Distribution,” “The Separation and Distribution” and “SpinCo’s Relationship with Nielsen Following the Separation and Distribution.”

 

Who will manage SpinCo after the separation and distribution?

SpinCo will have a management team with an extensive background in the Global Connect business. For additional information regarding SpinCo’s management, see the section entitled “SpinCo Management.”


 

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Are there risks associated with owning SpinCo ordinary shares and, after the separation and distribution, with owning Nielsen ordinary shares?

Yes. Ownership of SpinCo ordinary shares is subject to both general and specific risks relating to SpinCo’s businesses, the industries in which it operates, the ongoing contractual relationships between SpinCo and Nielsen and SpinCo’s status as a separate, publicly traded company. Ownership of SpinCo ordinary shares is also subject to risks relating to the separation and distribution. These risks are described in the section entitled “Risk Factors.” You are encouraged to read that section carefully.

 

Where is SpinCo incorporated?

SpinCo is incorporated in the Netherlands.

 

Where can I find details about SpinCo’s board of directors and governance structure?

For details about SpinCo’s board of directors and governance structure, see the sections entitled “SpinCo Directors,” “SpinCo Director Compensation Following the Separation and Distribution,” “Description of SpinCo’s Ordinary Shares—Corporate Governance” and “Company/Corporate Law Comparative Table of SpinCo and Nielsen.”

 

Does SpinCo plan to pay dividends?

SpinCo has no current plans to pay dividends on its ordinary shares. However, SpinCo may decide to declare and pay a dividend in the future. The declaration and payment of any dividends in the future by SpinCo will be subject to the sole discretion of the board of directors of SpinCo (the “SpinCo Board of Directors”) and will depend upon many factors. See the section entitled “SpinCo Dividend Policy.”

 

What rights will attach to my SpinCo shares and how do these compare to the rights attaching to my Nielsen shares?

A comparative overview of the rights attached to the shares of SpinCo and the shares of Nielsen is included in the section entitled “Company/Corporate Law Comparative Table of SpinCo and Nielsen.”

 

Will SpinCo incur any indebtedness prior to, or at the time of, the distribution?

SpinCo intends to enter into certain financing arrangements prior to, or concurrently with, the separation and distribution, and expects to have approximately $[            ] of total outstanding indebtedness at the completion of the distribution. See the sections entitled “Description of Material Indebtedness of SpinCo” and “Risk Factors—Risks Related to the Separation and Distribution.”

 

Who will be the distribution agent, transfer agent and registrar for SpinCo ordinary shares?

The distribution agent, as well as the transfer agent and registrar for SpinCo ordinary shares following the distribution, will be [                ]. For questions relating to the mechanics of the distribution, you should contact [                ] toll free at [                ] or non-toll free at [                ].

 

Where can I find more information about Nielsen and SpinCo?

See the section entitled “Where You Can Find More Information.”

 

  Before the distribution, if you have any questions relating to Nielsen’s or SpinCo’s business, you should contact:

 

  Nielsen Holdings plc

675 6th Avenue, 3rd Floor

New York, NY 10010



 

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Attention: Investor Relations

+1 (646) 654-8153 ir@nielsen.com

 

  After the distribution, SpinCo shareholders who have any questions relating to SpinCo’s business should contact SpinCo at:

 

  [                ]

Attention: Investor Relations

 

Who can vote at the Nielsen special meeting?

Holders of Nielsen ordinary shares on the register of members as of the close of business on the meeting record date may vote at the Nielsen special meeting.

 

What will I need in order to attend the Nielsen special meeting?

Nielsen will be hosting the Nielsen special meeting live via the internet and in person. The Nielsen special meeting will be held on [ ] at [ ] a.m. (Eastern Time). You may attend online via live webcast at [nielsen.onlineshareholdermeeting.com] or in person at [ ].

 

  To attend online:

 

  You will need your 16-digit control number included on your notice of internet availability or proxy card. Instructions on how to attend and participate via the internet are posted at [www.proxyvote.com] (before the meeting) and [nielsen.onlineshareholdermeeting.com] (during the meeting). The online meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection if they intend to participate in the meeting online. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.

 

  To attend in person:

 

  You must have a government-issued photo identification along with either your admission ticket (which is included in your notice of internet availability or proxy card) or proof of ownership of Nielsen ordinary shares as of the meeting record date.

 

  Proof of ownership may be any of the following:

 

   

a brokerage statement or letter from a bank or broker indicating ownership on the meeting record date;

 

   

a printout of the proxy distribution email (if you received your materials electronically); or

 

   

a voting instruction form.

 

  For directions to attend the Nielsen special meeting in person, go to: [http://ir.nielsen.com/investor-relations/shareholder-information/special-meeting/default.aspx] or contact the Company Secretary at companysecretary@nielsen.com.


 

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  Nielsen will be unable to admit anyone who does not present valid identification or refuses to comply with its security procedures. Cameras, videotaping equipment and other recording devices and large packages, banners, placards and signs will not be permitted at the Nielsen special meeting.

 

What if during the check-in time or during the meeting I have technical difficulties or trouble accessing the meeting website online?

If you encounter any difficulties accessing the online meeting during the check-in or meeting time, please call the technical support number that will be posted online on the shareholder meeting login page.

 

 

What am I being asked to vote on at the Nielsen special meeting?

You are being asked to vote on the following proposals scheduled to be voted on at the Nielsen special meeting:

 

  1. The approval of an interim distribution in specie of ordinary shares in SpinCo to holders of ordinary shares in Nielsen in the proportion of [ ] ordinary shares in SpinCo for each [ ] ordinary shares of Nielsen held by such Nielsen shareholder at the distribution record date;

 

  2. The approval of the separation and distribution for the purposes of Article 5.3 of the Articles of Association of Nielsen; and

 

  3. The authorization of each member of the Nielsen Board of Directors, and each of the executive officers of Nielsen, to conclude and implement the separation and distribution and to do or procure to be done all such acts and things as they may consider necessary for the purpose of giving effect to the separation and distribution.

 

What is a quorum?

Two shareholders present at the meeting and entitled to vote are a quorum.

 

How many votes do I have?

You are entitled to one vote at the Nielsen special meeting for each share held by you on the register of members of Nielsen as of the close of business on the meeting record date. As of [    ], the meeting record date, Nielsen had [                ] ordinary shares outstanding.

 

What vote is required for Nielsen’s shareholders to approve the Resolution?

The Resolution scheduled to be voted on at the Nielsen special meeting will be proposed as an ordinary resolution and requires the vote of a simple majority of the votes cast at the Nielsen special meeting in person or by proxy.

 

How does the Nielsen Board of Directors recommend that I vote?

The Nielsen Board of Directors recommends that you vote “FOR” the Resolution.

 

How do I vote my shares without attending the Nielsen special meeting?

If you are a shareholder of record on the meeting record date, you may vote by granting a proxy:

 

  By Internet: You may submit your proxy by going to [www.proxyvote.com] (before the meeting) or at [nielsen.onlineshareholdermeeting.com] (during the meeting) and by following the instructions on how to complete an electronic proxy card. You will need the 16-digit control number included in your notice of internet availability or proxy card in order to vote by internet.


 

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  By telephone: You may submit your proxy by dialing [1-800-690-6903] and by following the recorded instructions. You will need the 16-digit control number included in your notice of internet availability or proxy card in order to vote by telephone.

 

  By mail: You may submit your proxy by completing, signing and dating your proxy card (if you received one) where indicated and sending it back in the envelope provided. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.

 

  For shares held in “street name,” you may vote by submitting voting instructions to your bank, broker or nominee.

 

  Internet and telephone voting facilities will close at 11:59 p.m. (Eastern Time) on [                ] for the voting of shares held by shareholders of record or held in “street name” and 11:59 p.m. (Eastern Time) on [                ] for the voting of shares held through Nielsen’s 401(k) plan. Mailed proxy cards with respect to shares held by shareholders of record or in “street name” must be received no later than 9:00 a.m. (Eastern Time) [                ]. Mailed proxy cards with respect to shares held through Nielsen’s 401(k) plan must be received no later than 11:59 p.m. (Eastern Time) on [                ].

 

May I vote at the Nielsen special meeting rather than by proxy?

Although Nielsen encourages you to vote through the internet or the telephone or to complete and return a proxy card (if you received one) by mail prior to the Nielsen special meeting to ensure that your vote is counted, you can attend the Nielsen special meeting online or in person and vote your shares during the meeting, unless you hold your shares through Nielsen’s 401(k) plan, which cannot be voted in person at the Nielsen special meeting.

 

  If you plan to vote in person, bring your printed proxy card if you received one by mail. Otherwise, Nielsen will give shareholders of record a ballot at the Nielsen special meeting. If you are a beneficial owner, you must obtain a legal proxy from the organization that holds your shares if you wish to attend the Nielsen special meeting in person and vote at the meeting.

 

What does it mean if I receive more than one notice or more than one set of proxy materials on or about the same time?

It generally means you hold shares registered in more than one account. To ensure that all your shares are voted, please sign and return each proxy card (if you received one) or, if you vote by internet or telephone, vote once for each notice of internet availability or proxy card you receive.

 

What is a proxy?

A proxy is your legal designation of another person to vote your shares. This written document describing the matters to be considered and voted on at the Nielsen special meeting includes a proxy statement. The document used to designate a proxy to vote your shares is called a proxy card.


 

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May I change or revoke my proxy?

Yes. Whether you have voted by internet, telephone or mail, if you are a shareholder of record, you may change your vote and revoke your proxy by:

 

   

Voting again by internet or telephone at a later time before the closing of those voting facilities at 11:59 p.m. (Eastern Time) on [                ];

 

   

Submitting a properly signed proxy card (if you received one) with a later date that is received no later than 9:00 a.m. (Eastern Time) on [                ];

 

   

Sending a written statement to that effect to the Company Secretary, provided such statement is received no later than 9:00 a.m. (Eastern Time) on [                ]; or

 

   

Attending the Nielsen special meeting, revoking your proxy and voting in person or online.

 

  If you hold shares through the Nielsen 401(k) plan, you may change your vote and revoke your proxy by any of the first three methods listed above if you do so no later than 11:59 p.m. (Eastern Time) on [                ]. You cannot, however, revoke or change your proxy with respect to shares held through the Nielsen 401(k) plan after that date, and you cannot vote those shares in person at the Nielsen special meeting.

 

  If you hold shares in “street name,” you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your proxy by attending the Nielsen special meeting online or in person.

 

  Nielsen will honor the proxy with the latest date. However, no revocation will be effective unless Nielsen receives notice of such revocation at or prior to the deadlines mentioned above. For those shareholders who submit a proxy electronically or by telephone, the date on which the proxy is submitted in accordance with the instructions listed on the notice of internet availability or the proxy card is the date of the proxy.

 

How are votes counted?

Abstentions: Votes may be cast in favor of or against or you may abstain from voting. If you intend to abstain from voting for the Resolution, you will need to check the abstention box for the Resolution. In determining whether the Resolution receives the requisite number of affirmative votes, an abstention will not be considered to be a vote in law and will not be counted in the calculation of the votes “FOR” and “AGAINST” the Resolution.

 

 

Broker non-votes: Broker non-votes occur when shares held by a bank, broker or other nominee are not voted with respect to a proposal because (1) the bank, broker or other nominee has not received voting instructions from the shareholder who beneficially owns the shares



 

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and (2) the bank, broker or other nominee lacks the authority to vote the shares at its/his/her discretion. The Resolution is considered to be a non-routine matter under New York Stock Exchange rules. Accordingly, any bank, broker or other nominee holding your shares will not be permitted to vote on the Resolution at the Nielsen special meeting without receiving voting instructions from you. Broker non-votes will not be counted in the calculation of the votes “FOR” and “AGAINST” the Resolution.

 

  If you sign and submit your proxy card (if you received one) without giving specific voting instructions, this will be construed as an instruction to vote the shares as recommended by the Nielsen Board of Directors, so your shares will be voted “FOR” the Resolution and in accordance with the discretion of the holders of the proxy with respect to any other matters that may be voted on.

 

Who will count the votes?

Representatives of [                 ] will tabulate the votes and act as inspectors of election.

 

Could other matters be decided at the Nielsen special meeting?

As of the date of this joint proxy statement/information statement, Nielsen is not aware of any matters to be raised at the Nielsen special meeting other than the matter referred to herein.

 

  If other matters are properly presented to be considered and voted on at the Nielsen special meeting and if you are a shareholder of record and have submitted a proxy card (if you received one), the persons named in your proxy card will have the discretion to vote on those matters for you.

 

Who will pay for the cost of this proxy solicitation?

Nielsen will pay the cost of soliciting proxies. Nielsen expects to pay approximately $[                 ] plus out-of-pocket expenses for [                    ] to assist in soliciting proxies.

 

Who can help answer my other questions?

If you have additional questions about the separation and distribution, need assistance in submitting your proxy or voting your shares, or need additional copies of the joint proxy statement/information statement or proxy card, please contact:

 

  [                ].

 

  Please note that [                 ] cannot provide advice on the merits of the proposal or any financial, legal or tax advice.


 

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JOINT PROXY STATEMENT/INFORMATION STATEMENT SUMMARY

Except as otherwise indicated or unless the context otherwise requires, the information included about SpinCo in this joint proxy statement/information statement assumes the completion of the separation and distribution. Unless the context otherwise requires and except in the historical financial statements included herein, references in this joint proxy statement/information statement to “SpinCo” refer to [                ], a public limited company incorporated under the laws of the Netherlands, and its consolidated subsidiaries after the distribution has become effective. References to “SpinCo” in the historical financial statements included herein refer to Nielsen’s Global Connect business, the predecessor to SpinCo. SpinCo is a wholly owned subsidiary of Nielsen, and this will continue to be the case until the distribution has become effective. Unless the context otherwise requires, references in this joint proxy statement/information statement to “Nielsen” refer to Nielsen Holdings plc, a public limited company incorporated under the laws of England and Wales, and its consolidated subsidiaries (other than, after the distribution, SpinCo and its consolidated subsidiaries). References in this joint proxy statement/information statement to the “separation” refer to the separation of the Global Connect business from Nielsen’s other businesses and the creation of a separate company, [                 ], to hold the Global Connect business. References in this joint proxy statement/information statement to the “distribution” refer to the in specie distribution of all of the outstanding ordinary shares of SpinCo to Nielsen’s shareholders on a pro rata basis, which will result in SpinCo becoming an independent, publicly traded company.

Overview

SpinCo is a global data analytics and measurement company, with a broad geographic presence in approximately 100 countries and services covering approximately 90% of the world’s population, according to population estimates published by the United Nations. Through its measurement, SpinCo believes that it has the best and most comprehensive understanding of the world’s consumer. It takes this understanding and delivers trusted data, advanced solutions and essential insights to manufacturers and retailers, so they can make more informed marketing and merchandising decisions. SpinCo’s information on consumer behavior allows its retail and consumer packaged goods (“CPG”) clients to quickly identify opportunities for growth, reduce inefficiencies and strengthen their position in the marketplace. SpinCo invented the concept of market share when, in 1935, its auditors first surveyed store shelves to determine sales patterns, and SpinCo builds upon that industry-defining innovation today.

SpinCo provides these trusted technology-driven products and services to over 20,000 clients:

 

   

Retail Measurement: SpinCo combines detailed sales data with online and offline partner data, in-house expertise and the latest technology to produce the most accurate view of the marketplace. Clients across nearly every retail industry use SpinCo’s information and insights to make manufacturing, marketing, distribution and sales decisions.

 

   

Consumer Panel Measurement: SpinCo’s consumer panels collect data from more than 250,000 household panelists across 24 countries, using a combination of in-home scanners and mobile applications to record purchases, to help its clients understand consumer purchasing trends.

 

   

Analytics: SpinCo’s Connect platform provides a growing selection of automated consumer intelligence and actionable insights that help clients identify unmet consumer needs, improve workflow and make smarter decisions throughout their development and marketing cycles.

 

   

Loyalty: A global leader in loyalty data processing, SpinCo allows its retail clients to understand and act on consumer data sets. SpinCo’s technology also allows retailers to easily share customer data and analytics with their manufacturer partners for mutual growth.



 

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Advisory Services: SpinCo provides its clients with a suite of customized research services as well as consumer and industry studies to better understand consumer attitudes and purchasing behavior, to evaluate and understand why marketing campaigns succeed or fail, and to address issues such as promotions, pricing and marketing mix.

SpinCo’s Strengths

SpinCo believes that it has several competitive advantages, including the following:

Global Scale. SpinCo’s information and insights about consumers cover approximately 90% of the global population, according to population estimates published by the United Nations. SpinCo tracks billions of transactions per month in approximately 100 countries around the world. This global presence gives clients a clear understanding of consumer needs, so they can sell to each market more effectively.

Strong, Diversified Client Relationships. SpinCo’s long-standing partnerships and client contracts with high renewal rates provide both a foundation for revenue and a platform for growth. Many of the world’s largest brands, including The Coca-Cola Company, Nestle S.A., Unilever and The Procter & Gamble Company, as well as leading retail chains like Tesco plc, Walgreens and Walmart and online retailers like JD.com, use SpinCo as their information and analytics provider. In addition, due to SpinCo’s presence in emerging markets, it has cultivated strong relationships with local market leaders that can benefit from SpinCo’s services as they expand.

Scalable Operating Model. SpinCo’s operating model allows it to scale its services and solutions across clients, markets and geographies rapidly and efficiently, to achieve high-quality outcomes in a cost-efficient manner. SpinCo’s flexible architecture also enables clients to use its technology and solutions on their own platforms. It also enables SpinCo to incorporate third-party data, giving it a greater view of the global marketplace.

Enhanced Data Assets and Data Measurement Science. SpinCo continues to enhance its core competency in measurement science by improving research approaches and investing in new methodologies. SpinCo has also invested significantly in its data architecture to enable the integration of distinct large-scale census data sets including those owned by third parties. SpinCo believes that its expertise, established standards and increasingly granular and comprehensive data assets provide it with a distinct advantage as it delivers more precise insights to its clients.

Innovation. While technology is changing the consumer’s path to purchase, SpinCo helps its clients navigate this changing landscape and answer critical questions through the innovative Connect platform. The Connect platform is a unique, open and cloud-based platform that allows SpinCo’s clients to quickly identify sales trends and inform everyday decisions around innovation, distribution, price, promotion and media. Both retailers and manufacturers have access to the Connect platform, enabling a high degree of collaboration. SpinCo has also further enhanced its information and analytics delivery platform to enable the management of consumer loyalty programs for retail clients. SpinCo’s e-commerce measurement solution, a combination of SpinCo’s retail data partners, consumer-sourced data and advanced analytics, will provide the industry a clear view of the “Total Consumer.” Today, SpinCo offers online measurement and analytic services via its Connect platform in over 30 major markets across the globe, with plans to expand to all markets where consumers have the ability to shop online.

SpinCo’s Strategies

SpinCo has developed the Connect platform to help its clients meet the challenges associated with increased customer access to product and pricing information, linking SpinCo’s data set, which is the largest, most



 

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comprehensive data set in the CPG and retail industries, with powerful analytics that drive built-in applications. With these applications, clients can see how they are performing against competitors, measure internal objectives across products and markets, test how marketing moves may affect sales and schedule improvements to their workflow, all made possible by the platform’s defining characteristics:

 

   

Open: The Connect platform integrates data from any source, extracts data to be used in other systems and keeps SpinCo’s team connected and in-synch.

 

   

Simple: Intuitive design and alerts makes the platform simple to use while focusing on the user’s key performance indicators.

 

   

Flexible: Utilities in the platform allow clients to enrich data, produce customized views and plug in their own tools and applications.

   

Actionable: The Connect platform supports an ecosystem of applications developed by SpinCo and its partners, so that clients can focus on execution. Guided workflows make collaboration across teams quicker and smoother.

This allows SpinCo to provide clients “one truth” through integrated data, access to analytics that inform everyday decisions and valuable consumer insights across all channels of trade, resulting in profitable growth.

SpinCo’s analytical solutions allow clients to identify consumer demands, improve workflow, manage their supply chain, drive merchandising effectiveness and identify operational efficiencies, making their marketing expenses, like pricing and promotion, more efficient and effective.

Summary of Risk Factors

An investment in SpinCo is subject to a number of risks, including risks relating to its business, risks related to the distribution and risks related to its ordinary shares. Set forth below is a high-level summary of some, but not all, of these risks. Please read the information in the section entitled “Risk Factors,” beginning on page 26 of this joint proxy statement/information statement, for a more thorough description of these and other risks.

Risks Related to SpinCo’s Business

 

   

SpinCo may be unable to adapt to significant technological changes, which could adversely affect its business;

 

   

Consolidation in the industries in which SpinCo’s clients operate could put pressure on the pricing of its services, thereby leading to decreased earnings and cash flows;

 

   

Client procurement strategies could put additional pressure on the pricing of SpinCo’s services, thereby leading to decreased earnings and cash flows;

 

   

SpinCo’s operations are vulnerable to the effects of epidemics or pandemics, such as COVID-19, which has and is expected to continue to adversely affect SpinCo’s business;

 

   

Adverse economic conditions, a reduction in client spending, particularly in the consumer packaged goods and retailing industries, a deterioration in the credit markets or a delay in client payments could have a material effect on SpinCo’s business, results of operations and financial position;

 

   

Data protection laws and self-regulatory codes may restrict SpinCo’s activities and increase SpinCo’s costs;

 

   

SpinCo is exposed to risks related to cybersecurity and protection of confidential information;

 

   

SpinCo’s services involve the receipt, storage and transmission of proprietary information. If its security measures are breached and unauthorized access is obtained, SpinCo’s services may be



 

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perceived as not being secure, and regulators, panelists and survey respondents may hold it liable for disclosure of personal data, and clients and venture partners may hold it liable or reduce their use of its services;

 

   

Third parties may claim that SpinCo is infringing their intellectual property, and SpinCo could suffer significant litigation or licensing expenses, or be prevented from selling products or services, which may adversely impact its operating profits;

 

   

SpinCo relies on third parties, including Nielsen, to provide certain data and services in connection with the provision of its current services. The loss or limitation of access to that data could harm SpinCo’s ability to provide its products and services;

 

   

Hardware and software failures, delays in the operations of SpinCo’s data-gathering procedures, its computer and communications systems or the failure to implement system enhancements may harm its business;

 

   

The presence of Nielsen’s Global Technology and Information Center in Florida, which SpinCo subleases a portion of, heightens SpinCo’s exposure to climate-change-related risks, including hurricanes and tropical storms, which could disrupt SpinCo’s business;

 

   

SpinCo’s ability to successfully manage ongoing organizational changes could impact its business results;

 

   

Future legislation, regulations or policy changes under the current U.S. administration and Congress could have a material effect on SpinCo’s business and results of operations;

 

   

Inadvertent use of certain open source software could impose unanticipated limitations upon SpinCo’s ability to commercialize its products and services or subject its proprietary code to public disclosure if not properly managed; and

 

   

Design defects, errors, failures or delays associated with SpinCo’s products or services could negatively impact its business.

Risks Related to the Separation and Distribution

 

   

SpinCo has no recent history of operating as an independent company, and its historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results;

 

   

Following the distribution, SpinCo’s financial profile will change, and it will be a smaller, less diversified company than Nielsen prior to the separation and distribution;

 

   

There could be significant liability if the distribution is determined to be a taxable transaction;

 

   

SpinCo may be restricted from engaging in certain corporate transactions after the separation and distribution because such transactions could jeopardize the intended tax treatment of the distribution or related transactions;

 

   

Until the separation and distribution occur, Nielsen has sole discretion to change the terms of the separation and distribution in ways that may be unfavorable to SpinCo;

 

   

SpinCo may not achieve some or all of the expected benefits of the separation and distribution, and the separation and distribution may materially and adversely affect its business;

 

   

Nielsen or SpinCo may fail to perform under various transaction agreements that will be executed as part of the separation and distribution;



 

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After the separation and distribution, certain members of management and directors may hold stock in both Nielsen and SpinCo, and as a result may face actual or potential conflicts of interest;

 

   

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect SpinCo;

 

   

In connection with the separation and distribution, SpinCo will incur debt obligations that could adversely affect its business, profitability and ability to meet its obligations; and

 

   

Increases in interest rates could increase interest payable under SpinCo’s variable-rate indebtedness.

Risks Related to SpinCo’s Ordinary Shares

 

   

SpinCo cannot be certain that an active trading market for its ordinary shares will develop or be sustained after the distribution, and following the distribution, its stock price may fluctuate significantly;

 

   

There may be substantial changes to SpinCo’s shareholder base;

 

   

SpinCo does not expect to pay any cash dividends for the foreseeable future; and

 

   

SpinCo’s shareholders’ percentage of ownership in it may be diluted in the future.

The Separation and Distribution

On November 7, 2019, Nielsen announced the completion of its strategic review and its intention to separate its Global Connect business from its Global Media business. The separation and distribution will occur through a pro rata in specie distribution to the Nielsen shareholders of all of the outstanding ordinary shares of SpinCo, which was formed to hold the Global Connect business.

On [                    ], the Nielsen Board of Directors approved the distribution of all of SpinCo’s outstanding ordinary shares on the basis of [                    ] SpinCo ordinary shares for every Nielsen ordinary share held as of the close of business on [                    ], the distribution record date, subject to the receipt of Nielsen shareholder approval and the satisfaction (or, where applicable, waiver) of the other conditions to the distribution set forth in the separation and distribution agreement and described in this joint proxy statement/information statement. For a more detailed description of these conditions, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”

Nielsen’s Post-Separation and Distribution Relationship with SpinCo

After the distribution, Nielsen and SpinCo will be separately listed companies with separate management teams and separate boards of directors. Prior to the distribution, SpinCo will be a wholly owned subsidiary of Nielsen and will enter into the separation and distribution agreement. In connection with the separation and distribution, SpinCo will also enter into various other agreements to effect the separation and distribution and provide a framework for its relationship with Nielsen after the separation and distribution, such as a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property matters agreement, a trademark license agreement and a master services agreement. These agreements will provide for the allocation between SpinCo and Nielsen of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of Nielsen and its subsidiaries attributable to periods before, at and after the separation and distribution, will contain mutual cross-indemnities and will govern the relationship between SpinCo and Nielsen subsequent to the completion of the separation and distribution.



 

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For additional information regarding the separation and distribution agreement and other transaction agreements and the transactions contemplated thereby, see the sections entitled “Risk Factors—Risks Related to the Separation and Distribution,” “The Separation and Distribution” and “SpinCo’s Relationship with Nielsen Following the Separation and Distribution.”

Reasons for the Separation and Distribution

The Nielsen Board of Directors believes that the separation and distribution is in the best interest of Nielsen and its shareholders and approved the separation and distribution. A wide variety of factors were considered by the Nielsen Board of Directors in evaluating the separation and distribution. Among other things, the Nielsen Board of Directors considered the following potential benefits of the separation and distribution:

 

   

Distinct investment identity. The separation and distribution will allow investors to separately value Nielsen and SpinCo based on each company’s (and its subsidiaries’) distinct investment identities. SpinCo’s Global Connect business differs from Nielsen’s Global Media business in several respects, such as sources of revenue, client base and technology needs. The separation and distribution will enable investors to evaluate the merits, strategy, performance and future prospects of each company’s respective business and to invest in each company separately based on these distinct characteristics. The separation may attract new investors who may not have properly assessed the value of SpinCo’s Global Connect business relative to the value it is currently accorded as part of Nielsen.

 

   

Enhanced strategic and management focus. The separation and distribution will allow SpinCo and Nielsen and their subsidiaries to pursue and implement more effectively their distinct operating priorities and strategies and will improve management “fit and focus” at both companies and their subsidiaries, enabling the management of both companies and their subsidiaries to pursue their respective unique opportunities for long-term growth and profitability. Each company and its subsidiaries will also have the flexibility to develop a growth strategy that capitalizes on its distinct strengths, and consequently each company and its subsidiaries will be better positioned to capitalize on the available opportunity set in its specific market. SpinCo’s management will be able to focus exclusively on the Global Connect business, while the management of Nielsen will be dedicated to growing its Global Media businesses.

 

   

Growth opportunities. Following the separation and distribution, the equity of each company will be able to be used as a focused “acquisition currency,” and as such the separation and distribution will provide each company with greater opportunities to pursue value-enhancing acquisitions in industries with active M&A markets. Independent equity structures will also afford each company direct access to capital markets, facilitating each company’s ability to pursue its specific growth objectives.

 

   

More efficient allocation of capital. The separation and distribution will permit each company to concentrate its financial resources solely on its own operations, providing each company with greater flexibility to invest capital in its business at a time and in a manner appropriate for its distinct strategy and business needs without having to compete with each other for investment capital. This will facilitate a more efficient allocation of capital based on each company’s profitability, cash flow and growth opportunities, and allow each company to pursue an optimal mix of return of capital to shareholders, reinvestment in leading-edge technology and value-enhancing investment and M&A opportunities.

 

   

Alignment of incentives with performance objectives. The separation and distribution will facilitate incentive compensation arrangements with respect to equity of each of SpinCo and Nielsen and align employee incentives with those of the shareholders of each respective company.

Neither SpinCo nor Nielsen can assure you that, following the separation and distribution, any of the benefits described above or any other benefits will be realized to the extent anticipated, or at all. In addition,



 

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among other things, the Nielsen Board of Directors considered the following potential negative factors of the separation and distribution:

 

   

Increased costs. The separation will result in incremental costs related to operating as a public company, such as compensating an independent board of directors, increased personnel costs, compliance with regulatory and stock exchange requirements, increased auditing and insurance fees and development of internal infrastructure and support functions, which costs were preliminarily estimated to be approximately $[        ] million to $[        ] million on an annual basis. The separation will also result in one-time separation costs, such as costs of legal counsel, financial advisors, consultants, debt issuance costs, the audit of SpinCo’s historical financial statements and accounting and valuation advisory work related to the separation, which costs were preliminarily estimated to be approximately $[        ] million to $[        ] million and will be paid by Nielsen.

 

   

Potential post-separation and distribution volatility in the price for SpinCo ordinary shares. Many investors holding Nielsen ordinary shares may hold such shares because of a decision to invest in a company with Nielsen’s profile. Following the distribution, the SpinCo ordinary shares held by those investors will represent an investment in a company with a different profile from Nielsen. This profile may not align with such investors’ investment strategies and may cause such holders to sell their shares. As a result, SpinCo’s stock price may decline or experience volatility as SpinCo’s shareholder base changes.

 

   

Management focus and attention. Before the completion of the separation and distribution, it is expected that the separation and distribution will require significant time and effort from Nielsen and SpinCo’s respective management teams and consequently may result in the diversion of management attention away from operation of their respective businesses and potentially negative effects on Nielsen and SpinCo’s existing business relationships.

 

   

Future limitations on SpinCo’s operations to preserve the tax-free nature of the separation and distribution. The tax matters agreement that Nielsen and SpinCo will enter into before the distribution will include restrictions that may limit SpinCo’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its shareholders or that might increase the value of its business. Under the tax matters agreement, for a period of time following the distribution, SpinCo will be restricted from entering into certain transactions, including mergers, consolidations or liquidations; issuing equity securities beyond certain thresholds; repurchasing its capital stock beyond certain thresholds; ceasing to actively conduct its business; and other strategic transactions.

 

   

Failure to achieve the anticipated benefits of the separation and distribution. SpinCo may be unable to achieve the full strategic and financial benefits expected to result from the separation and distribution as described above in this section for a variety of reasons, including, among others: (i) following the separation and distribution, SpinCo may be more susceptible to market fluctuations and other adverse events than if it were still a part of Nielsen; (ii) following the separation and distribution, SpinCo’s business will be less diversified than Nielsen’s business before the separation and distribution; and (iii) the other actions required to separate Nielsen’s and SpinCo’s respective businesses could disrupt SpinCo’s operations.

The Nielsen Board of Directors concluded that the potential benefits of the separation and distribution outweighed these potential negative factors. For additional information, see the section entitled “Risk Factors.”

The above discussion is not intended to be exhaustive. In view of the wide variety of factors considered in connection with its evaluation of the separation and distribution, and the complexity of these matters, the Nielsen Board of Directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the separation and distribution.



 

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Rather, the Nielsen Board of Directors viewed its decisions as being based on the totality of the factors it considered. In addition, individual members of the Nielsen Board of Directors may have given differing weights to different factors. The Nielsen Board of Directors conducted an overall review of the factors described above.

For additional information, see the section entitled “The Separation and Distribution—Reasons for the Separation and Distribution” included elsewhere in this joint proxy statement/information statement.

Corporate Information

SpinCo was incorporated in the Netherlands on March 17, 2020, for the purpose of holding Nielsen’s Global Connect business in connection with the separation and distribution described herein. The current legal and commercial name of SpinCo is Nielsen SpinCo B.V. SpinCo is a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), but will be converted into a Dutch public limited company (naamloze vennootschap) prior to the separation and distribution.

Before the transfer of the Global Connect business to SpinCo by Nielsen, which will occur before the distribution, SpinCo will have no operations other than those incidental to the separation and distribution. Prior to the completion of the distribution, SpinCo will be a wholly owned subsidiary of Nielsen. The address of SpinCo’s principal executive offices will be [                ] and SpinCo is registered with the Dutch Commercial Register (Handelsregister) under number 7769923. SpinCo’s telephone number after the distribution will be [                ]. SpinCo maintains an Internet site at www.[                ].com.

SpinCo’s website and the information contained therein or connected thereto are not incorporated into this joint proxy statement/information statement or the registration statement of which this joint proxy statement/information statement forms a part, or in any other filings with, or any information furnished or submitted to, the SEC.

Reason for Furnishing this Joint Proxy Statement/Information Statement

This joint proxy statement/information statement is being furnished solely to provide information to shareholders of Nielsen in connection with the Nielsen special meeting and the receipt of SpinCo ordinary shares in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of SpinCo’s securities. The information contained in this joint proxy statement/information statement is believed by Nielsen and SpinCo to be accurate as of the date set forth on the cover of this joint proxy statement/information statement. Changes may occur after that date, and neither Nielsen nor SpinCo will update the information, except in the normal course of their respective disclosure obligations and practices, or as required by applicable law.



 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary historical financial data reflects the combined operations of SpinCo. SpinCo derived the summary Combined Statement of Operations data for the years ended December 31, 2019, 2018 and 2017, and summary Combined Balance Sheet data as of December 31, 2019 and 2018, as set forth below, from the audited SpinCo Combined Financial Statements, which are included in the “Index to Financial Statements of SpinCo” section of this joint proxy statement/information statement. SpinCo derived the summary Condensed Combined Statement of Operations data for the six months ended June 30, 2020 and 2019 and summary Condensed Combined Balance Sheet data as of June 30, 2020, as set forth below, from the Unaudited Condensed Combined Financial Statements, which are included in the “Index to Financial Statements of SpinCo” section of this joint proxy statement/information statement. SpinCo derived the selected balance sheet data as of June 30, 2019 from SpinCo’s unaudited underlying financial records, which were derived from the financial records of Nielsen and are not included in this joint proxy statement/information statement. The historical results do not necessarily indicate the results expected for any future period.

The following summary unaudited pro forma condensed combined financial data of SpinCo for the six months ended June 30, 2020 and year ended December 31, 2019 has been prepared to reflect the separation and distribution, including the incurrence of indebtedness by SpinCo of approximately $[                ] million, the transfer of approximately $[                ] million of cash by SpinCo to Nielsen and the approximately $[             ] of cash expected to be held by the subsidiaries that will be contributed to SpinCo in connection with the separation and distribution. The Unaudited Pro Forma Condensed Combined Statement of Operations of SpinCo presented for the six months ended June 30, 2020 and year ended December 31, 2019 assumes the separation and distribution occurred on January 1, 2019. The Unaudited Pro Forma Condensed Combined Balance Sheet of SpinCo assumes the separation and distribution occurred on June 30, 2020. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information, and SpinCo believes such assumptions are reasonable under the circumstances.

The unaudited pro forma condensed combined financial data of SpinCo is not necessarily indicative of SpinCo’s results of operations or financial condition had the distribution and SpinCo’s anticipated post-separation and distribution capital structure been completed on the dates assumed. It may not reflect the results of operations or financial condition that would have resulted had SpinCo been operating as an independent, publicly traded company during such periods. In addition, it is not necessarily indicative of SpinCo’s future results of operations or financial condition.

A reconciliation of net income/(loss) to Adjusted EBITDA can be found below. Adjusted EBITDA is defined as net income or loss from SpinCo’s Combined Statements of Operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, impairment of goodwill and other long-lived assets, share-based compensation expense, and other non-operating items from SpinCo’s Combined Statements of Operations, as well as certain other items considered outside the normal course of operations. To ensure a full understanding of this reconciliation of net income/(loss) to Adjusted EBITDA, you should read the reconciliation of net income/(loss) to Adjusted EBITDA presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo.”

You should read the following summary financial data of SpinCo together with “Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo,” “SpinCo Capitalization,” “Selected Historical Financial Data of SpinCo,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo”, the “Combined Financial Statements of SpinCo” and “Unaudited Condensed Combined Financial Statements of SpinCo”, including their respective accompanying notes thereto, included or incorporated by reference elsewhere in this joint proxy statement/information statement.



 

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Summary Combined Financial Data of SpinCo

 

     Six Months Ended
June 30,
     Year Ended December 31,  

(in millions)

   2020     2019      2019     2018     2017  

Statement of Operations Data:

           

Revenues

   $ 1,402     $ 1,509      $ 3,057     $ 3,138     $ 3,278  

Depreciation and amortization

     140       123        249       212       214  

Operating income/(loss)

     (122     (17      (985     (1,424     216  

Interest expense

     —         1        1       2       2  

Net income/(loss)

     (126     10        (896     (1,437     182  

 

     As of June 30,      As of December 31,  

(in millions)

   2020      2019      2019      2018  

Balance Sheet Data:

           

Total assets

   $ 3,823      $ 5,085      $ 3,910      $ 4,805  

Long term debt including finance leases

     14        18        17        20  

Summary Unaudited Pro Forma Condensed Combined Financial Data of SpinCo

 

(in millions, except per share amounts)    Six Months Ended
June 30, 2020
    Year Ended
December 31, 2019
 
Unaudited Pro Forma Condensed Combined Statement of Operations Information:     

Revenues

   $ [               $ [            

Depreciation and amortization

     [                 [            

Operating income/(loss)

     [                 [            

Interest expense

     [                 [            

Net income/(loss)

     [                 [            

Unaudited Pro Forma Earnings Per Share

     [                 [            
(in millions)          As of June 30,
2020
 
Unaudited Pro Forma Condensed Combined Balance Sheet Information:             

Total assets

     $ [            

Long-term debt including finance leases

       [            

Reconciliation From Net Income/(Loss) to Adjusted EBITDA of SpinCo

 

     Six Months
Ended June 30,
     Year Ended December 31,  
(in millions)    2020      2019      2019      2018      2017  

Net income/(loss) attributable to SpinCo

   $ (127    $ 10      $ (896    $ (1,437    $ 180  

Interest expense, net

     —          1        1        2        2  

(Benefit)/provision for income taxes

     8        (27      (185      15        39  

Depreciation and amortization

     140        123        249        212        214  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     21        107        (831      (1,208      435  

Other non-operating (income)/expense, net(a)

     (3      (1      95        (4      (5

Restructuring charges

     63        26        50        100        55  

Impairment of goodwill and other long-lived assets

     4        —          1,004        1,412        —    

Share-based compensation expense

     15        15        30        19        27  

Other items(b)

     17        7        4        23        23  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 117      $ 154      $ 352      $ 342      $ 535  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


 

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(a)

For the year ended December 31, 2019, the Other non-operating (income)/expense, net, included non-cash expense of $165 million for pension settlements, which included plan transfers to third parties in the Netherlands, where SpinCo terminated its responsibility for future defined benefit obligations and transferred that responsibility to the third parties. This was partially offset by income from chargebacks to Nielsen for nonservice and settlement costs of $63 million. See Note 14 (“Pensions and Other Post-Retirement Benefits”) to the Combined Financial Statements of SpinCo for more information.

(b)

For the six months ended June 30, 2020, Other items primarily consists of business optimization costs and transaction-related costs. For the six months ended June 30, 2019 and years ended December 31, 2019 and 2018, Other items primarily consists of business optimization costs, including strategic review costs, and transaction-related costs. For the year ended December 31, 2017, Other items primarily consists of transaction-related costs and business optimization costs.

The following summary unaudited pro forma condensed consolidated financial data of Nielsen for the six months ended June 30, 2020 and years ended December 31, 2019 and 2018 has been prepared to reflect the separation and distribution, including the retirement of approximately $1,000 million of debt with the debt financing proceeds transferred from SpinCo in connection with the separation and distribution.The Unaudited Pro Forma Condensed Consolidated Statement of Operations of Nielsen for the fiscal years ended December 31, 2019 and December 31, 2018 and six month period ended June 30, 2020 have been prepared as though the separation and distribution occurred on January 1, 2018. The Unaudited Pro Forma Condensed Consolidated Balance Sheet of Nielsen has been prepared as though the separation and distribution occurred on June 30, 2020. The pro forma adjustments reflected below are based on available information and assumptions that Nielsen’s management believes are reasonable.

The unaudited pro forma condensed consolidated financial data of Nielsen is for illustrative purposes only, does not reflect what Nielsen’s financial position and results of operations would have been had the separation and distribution occurred on the dates indicated, is not necessarily indicative of Nielsen’s future financial position and future results of operations and does not reflect all actions that may be taken by Nielsen after the separation and distribution.

You should read the following summary pro forma financial data of Nielsen together with the “Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen” and the Consolidated Financial Statements of Nielsen, including their respective accompanying notes thereto, included or incorporated by reference elsewhere in this joint proxy statement/information statement.

Summary Unaudited Pro Forma Condensed Consolidated Financial Data of Nielsen

 

(in millions, except per share amounts)    Six Months
Ended June 30,
2020
    Year Ended
December 31,
2019
    Year Ended
December 31,
2018
 

Unaudited Pro Forma Condensed Consolidated Statement of Operations Information:

      

Revenues

   $ [               $ [               $ [            

Depreciation and amortization

     [                 [                 [            

Operating income/(loss)

     [                 [                 [            

Interest expense

     [                 [                 [            

Net income/(loss) from continuing operations

     [                 [                 [            

Unaudited Pro Forma Earnings Per Share

     [                 [                 [            

 

(in millions)    As of
June 30,
2020
 

Unaudited Pro Forma Condensed Consolidated Balance Sheet Information:

  

Total assets

   $ [            

Long-term debt including finance leases

     [            


 

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RISK FACTORS

You should carefully consider the following risks and other information in this joint proxy statement/information statement in evaluating SpinCo and SpinCo ordinary shares. Any of the following risks could materially and adversely affect SpinCo’s business, results of operations and financial condition. The risk factors have been separated into three general groups: risks related to SpinCo’s business, risks related to the separation and distribution and risks related to SpinCo ordinary shares.

Risks Related to SpinCo’s Business

SpinCo may be unable to adapt to significant technological changes, which could adversely affect its business.

SpinCo operates in businesses that require sophisticated data collection, processing systems, software and other technology. Some of the technologies supporting the industries it serves are changing rapidly. SpinCo has been and will be required to adapt to changing technologies and industry standards, either by developing and marketing new services or enhancing its existing services to meet client demand.

Moreover, accelerating technology turnover in businesses, the introduction of new services embodying new technologies and the emergence of new industry standards could render existing services technologically or commercially obsolete. SpinCo’s ongoing success will depend on its ability to adapt to changing technologies, manage and process ever-increasing amounts of data and information and improve the performance, features and reliability of its existing services in response to changing client and industry demands. SpinCo may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of its services. New services, or enhancements to existing services, may not adequately meet the requirements of current and prospective clients or achieve any degree of significant market acceptance.

Consumption of consumer packaged goods is growing in new and different channels, such as discount stores and e-commerce. If SpinCo is unable to continue to successfully adapt its consumer measurement systems to new consumption habits, its business, results of operations and financial condition could be adversely affected. Traditional methods of shopping are evolving and the emergence and growth of omni-channel e-commerce as well as direct-to-consumer continues to grow. This fragmentation requires SpinCo to develop new methodologies to procure, cleanse, enrich and connect data at the individual level.

Consolidation in the industries in which SpinCo’s clients operate could put pressure on the pricing of its services, thereby leading to decreased earnings and cash flows.

Consolidation in the industries in which SpinCo’s clients operate could reduce aggregate demand for its services in the future and could limit the amounts it earns for its services. When companies merge, the services they previously purchased separately are often purchased by the combined entity in the aggregate in a lesser quantity than before, leading to volume and price compression and loss of revenue. While SpinCo is attempting to mitigate the revenue impact of any consolidation by expanding its range of services and pricing strategies, there can be no assurance as to the degree to which it will be able to do so as industry consolidation continues, which could adversely affect its business, results of operations and financial condition. In addition, consolidation among SpinCo’s retailer data partners might put pressure on SpinCo’s cost of data acquisition.

Client procurement strategies could put additional pressure on the pricing of SpinCo’s services, thereby leading to decreased earnings and cash flows.

Certain of SpinCo’s clients have sought and may continue to seek price concessions. This puts pressure on the pricing of SpinCo’s services, which could reduce SpinCo’s revenue, earnings and cash flows and adversely affect its business, results of operations and financial condition.

 

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SpinCo’s operations are vulnerable to the effects of epidemics or pandemics, such as COVID-19, which has and is expected to continue to adversely affect SpinCo’s business.

SpinCo is vulnerable to the general economic effects of epidemics, pandemics and other public health crises, including the ongoing novel coronavirus (“COVID-19”) outbreak that has spread throughout the world and has been declared a pandemic by the World Health Organization. Due to the recent outbreak of COVID-19, there has been a substantial curtailment of business activities in many countries around the world, which is affecting and may continue to affect SpinCo’s ability to conduct fieldwork, operate call centers, and provide other services that require manual data collection. In addition, SpinCo has closed numerous offices and personnel are working from home where possible, which is and may continue to affect overall business performance. SpinCo’s teams need to visit traditional stores to collect information where electronic data transmission is not possible, where the services rely on call centers, and where SpinCo needs to conduct face to face consumer research interviews. Further, the COVID-19 pandemic has had and could continue to have a negative impact on SpinCo’s business as clients cut back on services that are not already contracted, delay their spending, or declare bankruptcy in light of poor business performance due to the pandemic. If the pandemic is not contained or otherwise continues, it will continue to have an adverse effect on SpinCo’s business, results of operations and financial position.

Adverse economic conditions, a reduction in client spending, particularly in the consumer packaged goods and retailing industries, a deterioration in the credit markets or a delay in client payments could have a material effect on SpinCo’s business, results of operations and financial condition.

Adverse economic conditions could affect markets both in the United States and internationally, impacting the demand for SpinCo’s customers’ products and services. Those reduced demands could adversely affect the ability of some of SpinCo’s customers to meet their current obligations, hinder their ability to incur new obligations until the economy and their businesses strengthen or cause them to reduce or cease using SpinCo’s services. The inability of SpinCo’s customers to pay for its services and/or decisions by current or future customers to forgo or defer purchases may adversely impact SpinCo’s business, financial condition and results of operations and may present risks for an extended period of time. SpinCo cannot predict the impact of economic slowdowns on its future financial performance.

To the extent that the businesses SpinCo services, especially its clients in the consumer packaged goods industry, are subject to the financial pressures of, for example, increased costs or reduced demand for their products, the demand for SpinCo’s services, or the prices its clients are willing to pay for those services, may decline.

During challenging economic times, clients, typically advertisers, may reduce their discretionary advertising expenditures and may be less likely to purchase SpinCo’s analytical services, which would have an adverse effect on its revenue.

Adverse credit and financial market events and conditions could, among other things, impede access to or increase the cost of financing, which could have a material adverse impact on SpinCo’s business, results of operations and financial condition.

Disruptions in credit or financial markets, including as a result of the coronavirus (COVID-19) pandemic and related significant market volatility, could make it more difficult for SpinCo to obtain, or increase its cost of obtaining, financing for its operations or investments or to refinance its proposed indebtedness, or cause the proposed lenders to depart from prior credit industry practice and not give technical or other waivers under credit facility or other agreements to the extent it may seek them in the future, thereby causing SpinCo to be in default.

Data protection laws and self-regulatory codes may restrict SpinCo’s activities and increase its costs.

Various statutes and rules regulate conduct in areas, such as privacy and data protection, which may affect SpinCo’s collection, use, storage and transfer of information both abroad and in the United States. The

 

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definitions of “personally identifiable information” and “personal data” continue to evolve and broaden, and new laws and regulations are being enacted (for example, recently passed data protection laws in Brazil and California, and proposed laws in India and Indonesia), so that this area remains in a state of flux. Changes in these laws (including newly released interpretations of these laws by courts and regulatory bodies) may limit SpinCo’s data access, use and disclosure, and may require increased expenditures by it or may dictate that it may not offer certain types of services. Compliance with these laws may require it to make certain investments or may dictate that it not offer certain types of services or only offer such services after making necessary modifications. Failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity, restrictions on further use of data and/or liability under contractual warranties.

The California Consumer Privacy Act of 2018 (“CCPA”) took effect on January 1, 2020, and imposed new and more stringent requirements regarding the handling of personal data of persons in California. Because SpinCo does not typically segregate products and services on a state-by-state basis, SpinCo must generally adopt the requirements of the CCPA across its U.S. business operations. Failure to meet CCPA requirements could result in penalties of up to $7,500 per violation. CCPA also provides individuals with a limited private right of action in the case of certain breaches of personal data.

SpinCo is exposed to risks related to cybersecurity and protection of confidential information.

In the ordinary course of its business, SpinCo relies extensively on its people, technology and business operations as well as trusted strategic partners and vendors to provide it with access to data and technology as well as related professional services. SpinCo uses several third-party service providers, including cloud providers, to access, store, transmit and process sensitive data. It receives, stores and transmits large volumes of proprietary information and data that may contain personal information of SpinCo’s customers, employees, consumers and suppliers or sensitive client data entrusted to SpinCo. SpinCo’s sensitive data may include its own or a client’s intellectual property, financial information and business operations data.

Any actual or perceived security or privacy breach could affect SpinCo in many ways, including:

 

   

risk of loss of SpinCo and/or client proprietary data or data protected by law, statute or regulation;

 

   

loss of control of how SpinCo and/or client proprietary data or data protected by law, statute or regulation is re-purposed, shared or disseminated;

 

   

exposure of SpinCo to potential litigation;

 

   

exposure of SpinCo to liability;

 

   

harm to SpinCo’s reputation;

 

   

loss of confidence in security and accuracy of products;

 

   

deterrence of customers from using SpinCo’s products or services;

 

   

deterrence of retailers from sharing their sales data;

 

   

making it more difficult and expensive to effectively recruit panelists and survey respondents;

 

   

loss of investor confidence;

 

   

official sanctions or statutory penalties; and

 

   

significant increases in cybersecurity costs.

Any of the foregoing could have a material adverse effect on SpinCo’s business, financial condition or results of operations.

 

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Owing to new and emerging technology risks, hackers or unauthorized users who successfully breach SpinCo’s network security could misappropriate or misuse its proprietary information or cause interruptions in its services. Given the relatively fast pace of changes in new and emerging technology risks, SpinCo may not be able to effectively anticipate and/or respond in a timely manner to all foreseeable and/or unforeseeable cybersecurity risks and events, thereby resulting in a potentially significant loss of client and investor confidence. Such cybersecurity risks include, but are not limited to, computer viruses, cybersecurity breaches, cyber attacks (including malicious codes, worms, phishing and denial of services attacks and ransomware), as well as software upgrade failures, code defects or human error that increase vulnerability to cyber attacks. Although SpinCo has taken steps designed to reduce the risk of such risks, there can be no guarantee that SpinCo or a third party on which SpinCo relies will not suffer one of these events.

Notwithstanding SpinCo’s due diligence for new hires and employee training initiatives, SpinCo is at risk for employee malfeasance, inadvertent employee errors and other “insider risks” that may breach one or more of its information security provisions or policies. SpinCo’s response in remediation of these data breaches or interruptions of service may require substantial commitments of resources, and it may incur additional, unbudgeted operating and/or capital expenses, such as for specialized cybersecurity vendors as part of its response.

SpinCo has taken and is taking reasonable steps to prevent future unauthorized access to its systems, including implementation of system security measures, information back-up and disaster recovery processes. However, these steps may not be effective and there can be no assurance that any such steps can be effective against all possible risks.

SpinCo’s services involve the receipt, storage and transmission of proprietary information. If its security measures are breached and unauthorized access is obtained, its services may be perceived as not being secure, and regulators, panelists and survey respondents may hold SpinCo liable for disclosure of personal data, and clients and venture partners may hold SpinCo liable or reduce their use of its services.

SpinCo receives, stores and transmits large volumes of proprietary information and data, including data that contains personal information about individuals and companies. Security breaches could expose SpinCo to a risk of loss or misuse of this information, regulatory fines and penalties, litigation and possible liability, and its reputation could be damaged. It may also make it more difficult to recruit panelists and survey respondents. For example, hackers or individuals who attempt to breach SpinCo’s network security could, if successful, misappropriate proprietary information or cause interruptions in its services. If SpinCo experiences any breaches of its security or sabotage, it might be required to expend significant capital and resources to protect against or to alleviate problems and to respond to regulators’ inquiries. SpinCo may not be able to remedy any problems caused by hackers or saboteurs in a timely manner, or at all. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, and as a result, SpinCo may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of SpinCo’s security occurs, the perception of the effectiveness of its security measures could be harmed and it could lose current and potential clients. In addition, SpinCo may be subject to investigation and fines by jurisdictions that have data protection laws.

If SpinCo is unable to protect its intellectual property rights, its business could be adversely affected.

SpinCo’s business relies on a combination of patented and patent-pending technologies, systems, processes, and methodologies, trademarks, copyrights, other proprietary rights and contractual arrangements, including licenses, to establish and protect its technology and intellectual property. SpinCo believes its proprietary technologies and intellectual property rights are important to its continued success and competitive position. Any impairment of any such intellectual property could adversely impact SpinCo’s business, results of operations and financial condition.

 

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SpinCo relies on a combination of contractual and confidentiality provisions and procedures, licensing arrangements and the intellectual property laws of the United States and other countries to protect its intellectual property, as well as the intellectual property rights of third parties whose content, data and technology it licenses. These legal measures afford only limited protection and may not provide sufficient protection to prevent the infringement, misuse or misappropriation of its intellectual property. Although SpinCo’s employees, consultants, clients and collaborators all enter into confidentiality agreements, its trade secrets, data and know-how could be subject to unauthorized use, misappropriation or unauthorized disclosure.

 

   

SpinCo’s business success depends, in part, on:

 

   

obtaining patent protection for its technology and services;

 

   

enforcing and defending its patents, copyrights, trademarks, service marks and other intellectual property;

 

   

preserving its trade secrets and maintaining the security of its know-how and data; and

 

   

operating its business without infringing intellectual property rights held by third parties.

SpinCo’s ability to establish, maintain and protect its intellectual property and proprietary rights against theft or infringement could be materially and adversely affected by insufficient and/or changing proprietary rights and intellectual property legal protections in some jurisdictions and markets. Intellectual property law in several foreign jurisdictions is subject to considerable uncertainty. SpinCo’s pending patent and trademark applications may not be allowed in certain jurisdictions, and inadequate intellectual property laws may limit SpinCo’s rights and ability to detect unauthorized uses or take appropriate, timely and effective steps to remedy unauthorized conduct and to protect or enforce its rights. Such limitations may allow SpinCo’s competitors to design around its intellectual property rights, and to independently develop non-infringing competing technologies, products or services similar or identical to those of SpinCo, thereby potentially eroding its competitive position, enabling competitors with a greater opportunity to capture market share, and consequently adversely impacting SpinCo’s business, results of operations and financial condition. The expiration of certain of SpinCo’s patents may also lead to increased competition. As such, SpinCo’s patents, copyrights, trademarks and other intellectual property may not adequately protect its rights, provide significant competitive advantages or prevent third parties from infringing or misappropriating its proprietary rights.

The growing need for global data, along with increased competition and technological advances, puts increasing pressure on SpinCo to share its intellectual property for client applications with others. In this way, competitors may gain access to SpinCo’s intellectual property and proprietary information. Third parties that license SpinCo’s intellectual property and proprietary rights may take actions or create incidents that may diminish the value of its rights, harm its business, reduce revenue, increase expenses and/or harm its reputation.

To prevent or respond to unauthorized uses of SpinCo’s intellectual property, SpinCo may be required to enforce its intellectual property rights to protect its confidential and proprietary information by engaging in costly and time-consuming litigation or other proceedings that may be distracting to management, could result in the impairment or loss of portions of its intellectual property rights and may not result in SpinCo ultimately prevailing.

Third parties may claim that SpinCo is infringing their intellectual property, and SpinCo could suffer significant litigation or licensing expenses, or be prevented from selling products or services, which may adversely impact its business, results of operations and financial condition.

SpinCo cannot be certain that it does not and will not infringe the intellectual property rights of others in operating its business. In the ordinary course of business, third parties may claim, with or without merit, that one or more of SpinCo’s products or services infringe their intellectual property rights and may engage in legal proceedings against SpinCo. In some jurisdictions, plaintiffs can also seek injunctive relief that may limit the

 

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operation of SpinCo’s business or prevent the marketing and selling of its services that allegedly infringe a plaintiff’s intellectual property rights.

Certain agreements with suppliers or clients contain provisions where SpinCo indemnifies, subject to certain limitations, the counterparty for damages suffered as a result of claims related to intellectual property infringement based on SpinCo’s data or technology. Infringement claims covered by such indemnity provisions could be expensive to litigate and may result in significant settlement payments. In certain businesses, SpinCo relies on third-party intellectual property licenses, and depending upon the outcome of any intellectual property dispute, it cannot ensure that these licenses will be available in the future on favorable terms or at all.

Any such claims of intellectual property infringement, even those without merit, could:

 

   

be expensive and time-consuming to defend;

 

   

result in SpinCo’s being required to pay possibly significant damages;

 

   

cause SpinCo to cease providing its products or services that allegedly incorporate a third party’s intellectual property;

 

   

require SpinCo to redesign or rebrand its services; and/or

 

   

require SpinCo to enter into potentially costly royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property, although royalty or licensing agreements may not be available to it on acceptable terms or at all.

SpinCo analyzes and takes action in response to such claims on a case-by-case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of SpinCo’s business and technology and the uncertainty of intellectual property litigation and could divert its management and key personnel from its business operations.

If SpinCo does not resolve these claims in advance of a trial, there is no guarantee that it will be successful in court. A claim of intellectual property infringement could compel SpinCo to enter into a license agreement with restrictive terms and/or significant fees, which may or may not be available under acceptable terms or at all, and an adverse judgment could subject it to significant damages or to an injunction against development and/or sale of certain of its products or services. SpinCo may be required to implement costly redesigns to the affected product or services, or pay damages to satisfy contractual obligations to others.

Any of the above could have a negative impact on SpinCo’s business, results of operations and financial condition.

Currency exchange rate fluctuations may negatively impact SpinCo’s business, results of operations and financial condition.

SpinCo operates globally, deriving approximately 71% of revenues for the year ended December 31, 2019 in currencies other than U.S. dollars, with approximately 17% of revenues deriving in Euros. SpinCo’s U.S. operations earn revenues and incur expenses primarily in U.S. dollars, while its European operations earn revenues and incur expenses primarily in Euros. Outside the United States and the Eurozone, SpinCo generates revenues and expenses predominantly in local currencies. Because of fluctuations (including possible devaluations) in currency exchange rates, SpinCo is subject to currency translation exposure on the revenues and profits of these operations, as well as on the value of balance sheet items (including cash) not denominated in U.S. dollars. In addition, SpinCo is subject to currency transaction exposure in those instances where transactions are not conducted in the relevant local currency. In certain instances, it may not be able to freely convert foreign currencies into U.S. dollars due to governmental limitations placed on such conversions.

 

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SpinCo’s international operations are exposed to risks which could impede growth in the future.

SpinCo continues to explore opportunities in major international markets around the world, including China, Russia, India and Brazil. International operations expose SpinCo to various additional risks, which could adversely affect its business, including:

 

   

costs of customizing services for clients outside of the United States;

 

   

increased local privacy regulations;

 

   

reduced protection for intellectual property rights in some countries;

 

   

the burdens of complying with a wide variety of foreign laws;

 

   

difficulties in managing international operations;

 

   

longer sales and payment cycles;

 

   

exposure to foreign currency exchange rate fluctuation;

 

   

exposure to local economic conditions;

 

   

limitations on the repatriation of funds from foreign operations;

 

   

exposure to local political conditions, including adverse tax and other government policies and positions, civil unrest and seizure of assets by a foreign government;

 

   

the risks of an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which SpinCo operates; and

 

   

the risks of epidemics, pandemics or other outbreaks of contagious diseases, such as Ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu, Zika virus and coronavirus (COVID-19).

In particular, due to the impact of the coronavirus (COVID-19) pandemic, many U.S. federal, state and foreign governments around the world have imposed quarantines, border controls, lockdowns and restrictions on travel that have had a significant adverse impact on the international markets in which SpinCo currently operates or is exploring opportunities.

In countries where there has not been a historical practice of using consumer packaged goods retail information in the buying and selling of advertising, it may be difficult for SpinCo to maintain subscribers.

Additionally, SpinCo is subject to complex U.S., European and other regional and local laws and regulations that are applicable to its operations abroad, including trade sanctions laws, anti-corruption and anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, anti-money laundering laws and other financial crimes laws. Although SpinCo has implemented a compliance program that includes internal controls, policies and procedures and employee training to deter such prohibited practices, such measures may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies and violating applicable laws and regulations. Given SpinCo’s operations in the United Kingdom and continental Europe, it faces uncertainty surrounding the implementation and effects of the United Kingdom’s June 2016 referendum in which voters approved the United Kingdom’s exit from the European Union, commonly referred to as “Brexit.” It is likely that Brexit will cause increased regulatory and legal complexities and create uncertainty surrounding SpinCo’s business, including its relationships with existing and future clients, suppliers and employees, which could have an adverse effect on its business, results of operations and financial condition.

A loss or decrease in business of one or more of SpinCo’s largest clients could adversely impact its business, results of operations and financial condition.

SpinCo’s top 10 clients collectively accounted for approximately 25% of its total revenues for the year ended December 31, 2019. SpinCo cannot assure you that any of its largest clients will continue to use its

 

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services to the same extent, or at all, in the future. A loss or decrease in business of one or more of SpinCo’s largest clients, if not replaced by a new client or an increase in business from existing clients, would adversely affect its business, results of operations and financial condition.

SpinCo relies on third parties, including Nielsen, to provide certain data and services in connection with the provision of its current services. The loss or limitation of access to that data could harm its ability to provide its products and services.

SpinCo relies on third parties, including Nielsen, to provide certain data and services for use in connection with the provision of its current services, and its reliance on third-party data providers is growing, including pursuant to the separation and distribution agreement, the intellectual property matters agreement, the trademark license agreement and the master services agreement. For example, it enters into agreements with third parties to obtain data from which it creates products and services. These suppliers of data may increase restrictions on SpinCo’s use of such data due to factors such as the increasing attention on consumer privacy, rigor of privacy regulation or cybersecurity risk, failure to adhere to its quality control standards or otherwise satisfactorily perform services, increase the price they charge SpinCo for this data, or refuse altogether to license the data to SpinCo (in some cases because of exclusive agreements they may have entered into with SpinCo’s competitors). Consolidation of such data suppliers could increase the cost of such data. In addition, SpinCo may need to enter into agreements with third parties to assist with the marketing, technical and financial aspects of expanding its current products and services offerings. In the event SpinCo is unable to use such third-party data and services or if it is unable to enter into agreements with third parties, when necessary, its business and/or its potential growth could be adversely affected. In the event that such data and services are unavailable for SpinCo’s use or the cost of acquiring such data and services increases, SpinCo’s business, results of operations and financial condition could be adversely affected.

SpinCo relies on third parties for the performance of a significant portion of its worldwide information technology and operations functions. A failure to provide these functions in a satisfactory manner could have an adverse effect on its business.

SpinCo is dependent upon third parties for the performance of a significant portion of its information technology and operations functions worldwide. The success of its business depends in part on maintaining its relationships with these third parties and their continuing ability to perform these functions in a timely and satisfactory manner, many of which have been adversely affected by the coronavirus (COVID-19) pandemic. These include disruptions from the temporary closure of third-party suppliers, interruptions in product supply and restrictions on the export of SpinCo’s products and services. Furthermore, performance delays or interruptions, payment defaults or bankruptcy of SpinCo’s counterparties may adversely affect SpinCo’s business. If SpinCo experiences a loss or disruption in the provision of any of these functions, or if they are not performed in a satisfactory manner, it may have difficulty in finding alternate providers on terms favorable to it, or at all, and its business could be adversely affected.

Long-term disruptions in the mail, telecommunication infrastructure and/or air service could adversely affect SpinCo’s business.

SpinCo’s business is dependent on the use of the mail, telecommunication infrastructure and air service. Long-term disruptions in one or more of these services, which could be caused by events, such as natural disasters, pandemics (including the coronavirus (COVID-19) pandemic), the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism, could adversely affect its business, results of operations and financial condition.

Hardware and software failures, delays in the operations of SpinCo’s data gathering procedures, its computer and communications systems or the failure to implement system enhancements may harm its business.

SpinCo’s success depends on the efficient and uninterrupted operation of its computer and communications systems and its data gathering procedures. A failure of its network or data gathering procedures could impede the

 

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processing of data, delivery of databases and services, client orders and day-to-day management of its business and could result in the corruption or loss of data. While many of SpinCo’s services have appropriate disaster recovery plans in place, it currently does not have full back-up facilities everywhere in the world to provide redundant network capacity in the event of a system failure. Despite any precautions SpinCo may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at its various computer facilities, or delays in its data gathering or panel maintenance operations due to weather events, including those related to climate change, pandemics or other acts of nature, could result in interruptions in the flow of data to its servers and to its clients. In addition, any failure by SpinCo’s computer environment to provide its required data communications capacity could result in interruptions in its service. In the event of a delay in the delivery of data, SpinCo could be required to transfer its data collection operations to an alternative provider. Such a transfer could result in significant delays in its ability to deliver its services to its clients and could be costly to implement. Additionally, significant delays in the planned delivery of system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage SpinCo’s reputation and harm its business. Finally, long-term disruptions in infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism (particularly involving cities in which SpinCo has offices) could adversely affect its services. SpinCo’s property and business interruption insurance coverage may not be adequate to compensate it for all losses that may occur.

The presence of Nielsen’s Global Technology and Information Center in Florida, which SpinCo leases a portion of, heightens SpinCo’s exposure to climate-change related risks, including hurricanes and tropical storms, which could disrupt SpinCo’s business.

The technological data processing functions for certain of SpinCo’s U.S. operations are concentrated at Nielsen’s Global Technology and Information Center (“GTIC”) at a single location in Florida, a portion of which is subleased by SpinCo. This geographic concentration in Florida heightens its exposure to a hurricane, tropical storm or other severe weather events specific to this region. These weather events, in Florida and elsewhere, could cause severe damage to the property SpinCo subleases from Nielsen and could cause major disruptions to its operations. For example, a hurricane or other similar event could lead to business interruption and other adverse consequences, such as penalty fees, business interruption claims or lost business. Although Nielsen’s GTIC facility was built in anticipation of severe weather events and insurance coverage is in place, if it were to experience a catastrophic loss, it may exceed its policy limits and/or it may have difficulty obtaining similar insurance coverage in the future. As such, a hurricane or tropical storm could have an adverse effect on SpinCo’s business. With the increase occurrence of climate change-related natural disasters globally, such as droughts, record snowfalls, heat waves and fires, SpinCo recognizes the wide-ranging risks this poses to its business continuity in certain locations as well as on a global scale.

Changes in tax laws and the continuing ability to apply the provisions of various international tax treaties may adversely affect SpinCo’s financial results and increase its tax expense.

SpinCo operates in over 100 countries, and changes in tax laws, international tax treaties, regulations, related interpretations and tax accounting standards in the United States, the Netherlands and other countries in which it operates may adversely affect its financial results, particularly its income tax expense, liabilities and cash flow. SpinCo’s effective tax rate could also be affected by changes in its business (including acquisitions or dispositions), intercompany transactions, the applicability of special tax regimes and the relative amount of foreign earnings in jurisdictions with high statutory tax rates or where losses are incurred for which SpinCo is not able to realize tax benefits. As a result of the Tax Cuts and Jobs Act of 2017 (“TCJA”), effective January 1, 2018, SpinCo’s U.S. federal corporate income tax rate was reduced from 35% to 21%. However, the actual tax rate is likely to exceed 21% due to other TCJA provisions that offset the benefit of such rate reduction, such as limits on the deduction for business interest expense, limiting the deduction for certain net operating losses to 80% of the current year taxable income, modifying or repealing many business deductions and credits, as well as other new taxes on certain types of foreign income. In particular, SpinCo may be subject to tax on Global Intangible

 

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Low-Taxed Income as well as to the Base Erosion and Anti-Abuse Tax. A number of states in the United States have not fully conformed to the new provisions of the TCJA, which may also lead to a higher effective tax rate.

In addition, the Organization for Economic Cooperation and Development (“OECD”) is issuing guidelines that may be different from long-standing international tax principles. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and has the potential to adversely impact SpinCo’s income taxes.

Finally, governments are resorting to more aggressive tax audit tactics and are increasingly considering changes to tax law regimes or policies as a means to cover budgetary shortfalls resulting from the current economic environment. SpinCo is subject to direct and indirect taxes in numerous jurisdictions, and the amount of tax SpinCo pays is subject to its interpretation of applicable tax laws in the jurisdictions in which it files. SpinCo has taken and will continue to take tax positions based on its interpretation of tax laws, but tax accounting often involves complex matters and judgment. Although SpinCo believes that it has complied with all applicable tax laws, it has been and expects to continue to be subject to ongoing tax audits in various jurisdictions, and tax authorities have disagreed, and may in the future disagree, with some of its interpretations of applicable tax law. SpinCo regularly assesses the likely outcomes of these audits to determine the appropriateness of its tax provisions. However, its judgments may not be sustained on completion of these audits, and the amounts ultimately paid could be different from the amounts previously recorded, which could have a material adverse effect on its business, results of operations and financial condition.

SpinCo may be subject to shareholder litigation, antitrust litigation or government investigation, which may result in an award of money damages or injunctive relief or force it to change the way it does business.

In the past, certain of SpinCo’s business practices have been investigated by government antitrust or competition agencies and have been the subject of shareholder litigation, and SpinCo has been sued by private parties for alleged violations of the antitrust and competition laws of certain jurisdictions. SpinCo has changed certain of its business practices to reduce the likelihood of future litigation. Although each of these material prior legal actions have been resolved, there is a risk that it could, in the future, be the target of investigation by government entities or actions by private parties challenging the legality of its business practices. In addition, SpinCo is subject to allegations, claims and legal actions arising in the ordinary course of business. The outcome of many of these proceedings cannot be predicted. If any proceedings, inspections or investigations were to be determined adversely against SpinCo or result in legal actions, claims, regulatory proceedings, enforcement actions, or judgments, fines, or settlements involving a payment of material sums of money, or if injunctive relief were issued against SpinCo, it may be required to change the way it does business, and its business, results of operations and financial condition could be materially adversely affected. Even the successful defense of legal proceedings may cause SpinCo to incur substantial legal costs and may divert management’s attention and resources.

SpinCo’s ability to successfully manage ongoing organizational changes could impact its business results.

As SpinCo has in prior years, it continues to execute a number of significant business and organizational changes, including operating reorganizations, acquisition integration and divestitures to improve productivity and create efficiencies to support its growth strategies. SpinCo expects these types of changes, which may include many staffing adjustments as well as employee departures, to continue for the foreseeable future. Successfully managing these changes, including the identification, engagement and development and retention of key employees to provide uninterrupted leadership and direction for SpinCo’s business, is critical to SpinCo’s success. This includes developing organization capabilities in specific markets, businesses and functions where there is increased demand for specific skills or experiences. Finally, SpinCo’s financial targets assume a consistent level of productivity improvement. If it is unable to deliver expected productivity improvements, while continuing to invest in business growth, its financial results could be adversely impacted.

 

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If SpinCo is unable to attract, retain and engage employees, it may not be able to compete effectively and will not be able to expand its business.

SpinCo’s success and ability to grow is dependent, in part, on its ability to hire, retain and engage sufficient numbers of talented people, with the increasingly diverse skills needed to serve clients and expand its business, in many locations around the world. Competition for highly qualified, specialized technical, managerial and particularly consulting personnel is intense. Changes to U.S. or other countries’ immigration policies that restrain the flow of professional talent may also inhibit SpinCo’s ability to staff its offices or projects. Further, as a result of its review of the separation and distribution, SpinCo may suffer increased attrition. Recruiting, training and retention costs and benefits place significant demands on SpinCo’s resources. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of SpinCo’s employees could have an adverse effect on it, including its ability to execute on growth initiatives as well as obtain and successfully complete important client engagements and partnerships and thus maintain or increase its revenues.

SpinCo’s results of operations and financial condition could be negatively impacted by its U.S. and non-U.S. pension plans.

The performance of the financial markets and interest rates impact SpinCo’s plan expenses, plan assets and funding obligations. Changes in market interest rates, decreases in its pension trust assets or investment losses could increase its funding obligations, which would negatively impact its results of operations and financial condition. In addition, some pension regulators routinely monitor significant corporate transactions by companies that sponsor defined benefit pension plans to ensure that the ongoing viability of such plans will not be impaired as a result of such transactions. As a result, SpinCo may be subject to potential pressure from pension regulators to accelerate contribution funding in light of the separation and distribution.

Ineffective internal controls could impact SpinCo’s business, results of operations and financial condition.

SpinCo’s internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If SpinCo fails to maintain the adequacy of its internal controls, including any failure to implement required new or improved controls, or if it experiences difficulties in the implementation of new or improved controls, SpinCo’s business, results of operations and financial condition could be harmed, and it could fail to meet its financial reporting obligations.

Future legislation, regulations or policy changes under the current U.S. administration and Congress could have a material effect on SpinCo’s business, results of operations and financial condition.

Future legislation, regulatory changes or policy shifts under the current U.S. administration and Congress, could impact SpinCo’s business. Trade issues between the United States and several countries, including existing trade tensions with China and other countries, provide a changing and sometimes challenging landscape and marketplace uncertainty to SpinCo and SpinCo’s clients.

Other possible U.S. legislation and regulation that could have an impact on SpinCo include comprehensive state and federal privacy legislation and regulation, artificial intelligence policy and government restrictions on manufacturers within SpinCo’s existing supply chain.

The U.S. Treasury will continue to develop rules and regulations emanating from the TCJA. It is still uncertain to what extent many of its provisions could affect SpinCo. Many members of Congress and Presidential candidates have also indicated a desire to roll back the recently reduced corporate tax rate.

 

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Some policy issues, such as tax, privacy and trade, will be risks that span the globe. At this time, SpinCo cannot predict the scope or nature of these changes or assess what the overall effect of such potential changes could be on its results of operations or cash flows.

Inadvertent use of certain open source software could impose unanticipated limitations upon SpinCo’s ability to commercialize its products and services or subject its proprietary code to public disclosure if not properly managed.

SpinCo uses certain open source software in its technologies, most often as small components supporting a larger product or service, and open source software is also contained in some third-party software that SpinCo licenses. SpinCo also contributes to the open source community in certain circumstances, which then may make it difficult or impossible to maintain proprietary rights in such contributions. There are many types of open source licenses, some of which are quite complex, and most have not been interpreted or adjudicated by U.S. or other courts. Although SpinCo does have an open source use policy and practice, inadvertent use of certain open source licenses could impose unanticipated limitations upon its ability to commercialize its products and services or subject its proprietary code to public disclosure if not properly managed. Remediation of such issues may involve licensing the software on less than favorable terms or require remedial actions, including a need to re-engineer SpinCo’s products and services, either of which could have a material adverse effect on its business, results of operations and financial condition.

If SpinCo’s clients experience financial distress, or seek to change or delay payment terms, it could negatively affect SpinCo’s business, results of operations and financial condition.

SpinCo has a large and diverse client and partner base and, at any given time, one or more of its clients or partners may experience financial difficulty, file for bankruptcy protection or go out of business. Unfavorable economic and financial conditions could result in an increase in client financial difficulties that affect SpinCo. The direct impact on SpinCo could include reduced revenues and write-offs of accounts receivable and expenditures billable to clients, and if these effects were severe, the indirect impact could include impairments of intangible assets, credit facility covenant violations and reduced liquidity.

Design defects, errors, failures or delays associated with SpinCo’s products or services could negatively impact its business.

Despite testing, software, products and services that SpinCo develops, licenses or distributes may contain errors or defects when first released or when major new updates or enhancements are released that cause the product or service to operate incorrectly or less effectively. Many of SpinCo’s products and services also rely on data and services provided by third-party providers, including Nielsen, over which SpinCo has no control and which may be provided to it with defects, errors or failures. In addition, SpinCo’s data integrity and quality relies on human-led, manual data collection and management processes that may be vulnerable due to human error and complexity of systems, resulting in the need for increased field support to ensure sample representation and prevent unauthorized or excessive access. SpinCo may also experience delays while developing and introducing new products and services for various reasons, such as difficulties in licensing data inputs or adapting to particular operating environments. Defects, errors or delays in its products or services that are significant, or that are perceived to be significant, could result in rejection or delay in market acceptance, damage to its reputation, loss of revenue, a lower rate of license renewals or upgrades, diversion of development resources, product liability claims or regulatory actions or increases in service and support costs. SpinCo may also need to expend significant capital resources to eliminate or work around defects, errors, failures or delays. In each of these ways, SpinCo’s business, results of operations and financial condition could be materially adversely impacted.

 

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Risks Related to the Separation and Distribution

SpinCo has no history of operating as an independent company, and its historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results.

The historical information about SpinCo included in this joint proxy statement/information statement refers to SpinCo’s business as operated by and integrated with Nielsen. SpinCo’s historical and pro forma financial information included in this joint proxy statement/information statement is derived from the consolidated financial statements and accounting records of Nielsen. Accordingly, the historical and pro forma financial information included in this joint proxy statement/information statement does not necessarily reflect the financial condition, results of operations and cash flows that SpinCo would have achieved as a separate, publicly traded company during the periods presented, or those that SpinCo will achieve in the future, including as a result of the factors described below:

 

   

Generally, SpinCo’s working capital requirements and capital for its general corporate purposes, including acquisitions and capital expenditures, have in the past been satisfied as part of Nielsen’s corporate-wide cash management policies. Following the completion of the separation and distribution, SpinCo will need to obtain separate financing from banks or through other arrangements, which may or may not be available and may be more costly.

 

   

Prior to the distribution and since the combination of AC Nielsen and Nielsen Media Research in 2001, SpinCo’s business has been operated by Nielsen as part of Nielsen’s broader corporate organization, rather than as an independent company. Nielsen performed various corporate functions for SpinCo, such as legal, treasury, accounting, auditing, human resources, investor relations and finance. SpinCo’s historical and pro forma financial results reflect allocations of corporate expenses from Nielsen for such functions, which are likely to be less than the expenses SpinCo would have incurred had it operated as a separate publicly traded company.

 

   

After the completion of the separation and distribution, the cost of capital for SpinCo’s business may be higher than Nielsen’s cost of capital prior to the separation and distribution.

 

   

As a result of the separation and distribution, SpinCo will become a stand-alone public company that will be required to prepare its financial statements according to the rules and regulations promulgated by the SEC and laws of the Netherlands. SpinCo will also be subject to the Sarbanes-Oxley Act, the Dodd-Frank Act and the reporting requirements of the Exchange Act as a separate public company. Complying with these laws, rules and regulations could result in significant costs to SpinCo and require it to divert substantial resources, including management time, from other activities.

Other significant changes may occur in SpinCo’s cost structure, management, financing and business operations as a result of operating as a separate company from Nielsen. For additional information about the past financial performance of SpinCo’s business and the basis of presentation of the historical financial statements and the Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo, see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo,” “Selected Historical Financial Data of SpinCo” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo,” as well as the Combined Financial Statements of SpinCo and accompanying notes included or incorporated by reference elsewhere in this joint proxy statement/information statement.

Following the separation and distribution, SpinCo’s financial profile will change, and it will be a smaller, less diversified company than Nielsen prior to the separation and distribution.

The separation and distribution will result in Nielsen and SpinCo being smaller, less diversified companies with more limited businesses concentrated in their respective industries. As a result, SpinCo may be more vulnerable to changing market conditions, which could have a material adverse effect on its business, results of operation and financial condition. In addition, the diversification of SpinCo’s revenues, costs and cash flows will diminish as a stand-alone company, such that its results of operations, cash flows, working capital and financing

 

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requirements may be subject to increased volatility, and its ability to fund capital expenditures and investments, pay dividends and service debt may be diminished.

There could be significant liability if the distribution is determined to be a taxable transaction.

It is a condition to the distribution that, among other things, Nielsen receives a private letter ruling from the IRS and an opinion of its outside tax advisor, in each case, regarding certain U.S. federal income tax matters relating to the separation and the distribution. The IRS private letter ruling and opinion will rely on, among other things, certain facts, assumptions, representations and undertakings from Nielsen and SpinCo, including those relating to the past and future conduct of the companies’ respective businesses. If any of these facts, assumptions, representations or undertakings is, or becomes, incorrect or is not satisfied, the IRS private letter ruling and/or the opinion may be invalid and the conclusions reached therein could be jeopardized.

Notwithstanding receipt of the IRS private letter ruling and the opinion of Nielsen’s outside tax advisor, the IRS could determine that the distribution should be treated as a taxable transaction for U.S. federal income tax purposes if it determines that any of the facts, assumptions, representations or undertakings upon which the IRS private letter ruling or the opinion was based are incorrect or have been violated. In addition, the IRS private letter ruling does not address all of the issues that are relevant to determining whether the distribution qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes. The opinion of Nielsen’s outside tax advisor represents the judgment of such tax advisor and is not binding on the IRS or on any court, and the IRS or a court may disagree with the conclusions in the opinion. Accordingly, notwithstanding receipt by Nielsen of the IRS private letter ruling and the opinion, there can be no assurance that the IRS will not assert that the distribution does not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail with such challenge, Nielsen’s shareholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities, and SpinCo or its subsidiaries could incur significant liabilities. For a description of the sharing of Nielsen’s and SpinCo’s liabilities in respect of taxes, see the section entitled “SpinCo’s Relationship with Nielsen Following the Separation and Distribution—Tax Matters Agreement.”

In addition, as part of the separation, and prior to the distribution, Nielsen and its subsidiaries expect to complete the internal reorganization, and Nielsen, SpinCo and their respective subsidiaries expect to incur certain tax costs in connection with the internal reorganization, including non-U.S. tax costs resulting from transactions in non-U.S. jurisdictions, which may be material. With respect to certain transactions undertaken as part of the internal reorganization, Nielsen has requested and intends to obtain tax rulings and/or opinions of external tax advisors, in each case, regarding the tax treatment of such transactions. Such tax rulings and opinions will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Nielsen, SpinCo or their respective subsidiaries. If any of these representations or statements is, or becomes, inaccurate or incomplete, or if Nielsen, SpinCo or any of their respective subsidiaries do not fulfill or otherwise comply with any such undertakings or covenants, such tax rulings and/or opinions may be invalid or the conclusions reached therein could be jeopardized. Further, notwithstanding receipt of any such tax rulings and/or opinions, there can be no assurance that the relevant taxing authorities will not assert that the tax treatment of the relevant transactions differs from the conclusions reached in the relevant tax rulings and/or opinions. In the event any such tax rulings and/or opinions cannot be obtained or the relevant tax authorities prevail with any challenge in respect of any relevant transaction, SpinCo, as well as Nielsen and their respective subsidiaries could be subject to significant tax liabilities.

SpinCo may be unable to engage in certain corporate transactions after the separation and distribution because such transactions could jeopardize the intended tax treatment of the distribution or related transactions.

To preserve the tax-free treatment of the separation and distribution, under the tax matters agreement that SpinCo will enter into with Nielsen, SpinCo will be restricted from taking any action that prevents the

 

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distribution or related transactions from being tax-free for U.S. federal income tax purposes. Under the tax matters agreement, for a period of time following the distribution, SpinCo will be restricted from entering into certain transactions, including:

 

   

mergers, consolidations or liquidations;

 

   

issuing equity securities beyond certain thresholds;

 

   

repurchasing its capital stock beyond certain thresholds;

 

   

ceasing to actively conduct its business; and

 

   

other strategic transactions.

These restrictions may limit SpinCo’s ability to pursue certain equity issuances, strategic transactions, repurchases or other transactions that it may otherwise believe to be in the best interests of its shareholders or that might increase the value of its business. In addition, under the tax matters agreement, SpinCo will be required to indemnify Nielsen against any such tax liabilities as a result of the acquisition of SpinCo’s stock or assets, even if SpinCo did not participate in or otherwise facilitate the acquisition.

Until the separation and distribution occur, Nielsen has sole discretion to change the terms of the separation and distribution in ways that may be unfavorable to SpinCo.

Until the separation and distribution occur, SpinCo will be a wholly owned subsidiary of Nielsen. Accordingly, Nielsen will have the sole discretion to determine and change the terms of the separation and distribution. These changes could be unfavorable to SpinCo. In addition, Nielsen may decide at any time not to proceed with the separation and distribution.

SpinCo may not achieve some or all of the expected benefits of the separation and distribution, and the separation and distribution may materially and adversely affect its business.

SpinCo may be unable to achieve the full strategic and financial benefits expected to result from the separation and distribution, or such benefits may be delayed or not occur at all. The separation and distribution are expected to provide the following benefits, among others:

 

   

a distinct investment identity allowing investors to evaluate the merits, strategy, performance and future prospects of SpinCo separately from Nielsen;

 

   

improved management “fit and focus” at SpinCo;

 

   

ability to pursue value-enhancing acquisitions and other growth opportunities;

 

   

more efficient allocation of capital for SpinCo and Nielsen; and

 

   

facilitating incentive compensation arrangements for employees that are more directly tied to the performance of the relevant company’s business, and enhancing employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives, while at the same time creating an independent equity structure that will facilitate SpinCo’s ability to effect future acquisitions utilizing SpinCo ordinary shares.

SpinCo may not achieve these or other anticipated benefits for a variety of reasons, including, among others: (a) the separation and distribution will require significant amounts of management time and effort, which may divert management attention from operating and growing SpinCo’s business; (b) following the separation and distribution, SpinCo may be more susceptible to market fluctuations and other adverse events than if it were still a part of Nielsen; (c) following the separation and distribution, SpinCo’s business will be less diversified than Nielsen’s business prior to the separation and distribution; (d) the other actions required to separate Nielsen’s and SpinCo’s respective businesses could disrupt SpinCo’s operations; and (e) under the terms of the tax matters

 

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agreement that SpinCo will enter into with Nielsen, SpinCo will be restricted from taking certain actions that could cause the distribution (or certain transactions undertaken as part of the internal reorganization) to fail to qualify as a tax-free transaction and these restrictions may limit SpinCo for a period of time from pursuing certain strategic transactions and equity issuances or engaging in other transactions that might increase the value of the SpinCo business. If SpinCo fails to achieve some or all of the benefits expected to result from the separation and distribution, or if such benefits are delayed, SpinCo’s business, results of operations and financial condition could be materially and adversely affected.

Nielsen or SpinCo may fail to perform under various transaction agreements that will be executed as part of the separation.

In connection with the separation, and prior to the distribution, SpinCo and Nielsen will enter into the separation agreement as well as various other agreements, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property matters agreement, a trademark license agreement and a master services agreement. The separation agreement, the tax matters agreement, the employee matters agreement, the intellectual property matters agreement and the trademark license agreement will determine the allocation of assets and liabilities between Nielsen and SpinCo following the separation and distribution for those respective areas and will include indemnifications related to certain liabilities. The transition services agreement will provide for the performance of select services by Nielsen for the benefit of SpinCo, and by SpinCo for the benefit of Nielsen, for a limited period of time after the separation and distribution. The master services agreement will provide for mutual licensing of data and the provision of certain services by SpinCo to Nielsen. All of these agreements will also govern SpinCo’s relationship with Nielsen following the separation and distribution.

SpinCo will rely on Nielsen to satisfy its performance obligations under these agreements. If Nielsen is unable to satisfy its obligations under these agreements, including its indemnification obligations, SpinCo’s business, results of operations and financial condition could be materially and adversely affected.

The allocation of intellectual property rights between Nielsen and SpinCo as part of the separation and distribution could adversely affect SpinCo’s competitive positions and its ability to develop and commercialize certain future products and services.

In connection with the separation and distribution, SpinCo and Nielsen will enter into an intellectual property matters agreement governing, among other things, the allocation of intellectual property rights related to their respective businesses. As a result of the separation and distribution and such allocation, SpinCo may no longer have an ownership interest in certain intellectual property rights, but will become a non-exclusive licensee of such rights. This loss of ownership of certain intellectual property rights could adversely affect its ability to maintain its competitive positions through the enforcement of these rights against third parties that infringe these rights. In addition, Nielsen may lose its ability to license these rights to third parties in exchange for a license to such third parties’ rights which SpinCo may need in order to operate its business.

The terms of the intellectual property matters agreement will also include cross-licenses between the parties of certain intellectual property rights needed for the continuation of the operations of Nielsen’s business and SpinCo’s business. The licenses granted are non-exclusive and, accordingly, Nielsen could license such licensed intellectual property rights to the other’s respective competitors, which could adversely affect its respective competitive position in its industry. Moreover, the use of the licensed intellectual property rights may be restricted to certain fields of use. The limited nature of such licenses, and the other rights granted pursuant to the intellectual property matters agreement, the separation and distribution agreement and the trademark license agreement, may not provide SpinCo with all of the intellectual property rights that it currently hold that it needs as its business changes in the future. Accordingly, if SpinCo were to expand its business to include new products and services outside of its current fields of use, it might not have the benefit of such licenses for such new products or services. As a result, it may be necessary for it to develop its technology independently of such

 

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licensed rights, which could make it more difficult, time-consuming and/or expensive for SpinCo to develop and commercialize certain new products and services.

After the separation and distribution, certain members of management and directors may hold stock in both Nielsen and SpinCo, and as a result may face actual or potential conflicts of interest.

After the separation and distribution, the management and directors of each of Nielsen and SpinCo may own both Nielsen ordinary shares and SpinCo ordinary shares. This ownership overlap could create, or appear to create, potential conflicts of interest when SpinCo management and directors and Nielsen’s management and directors face decisions that could have different implications for SpinCo and Nielsen. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between SpinCo and Nielsen regarding the terms of the agreements governing the separation and distribution and SpinCo’s relationship with Nielsen following the separation and distribution. These agreements include the separation agreement, the transition services agreement, the tax matters agreement, the employee matters agreement, the intellectual property matters agreement, the trademark license agreement and the master services agreement. Potential conflicts of interest may also arise out of any commercial arrangements that SpinCo or Nielsen may enter into in the future.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect SpinCo.

As a public company, SpinCo will become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and will be required to prepare its financial statements according to the rules and regulations required by the SEC. In addition, the Exchange Act requires that SpinCo file annual, quarterly and current reports. SpinCo’s failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject it to penalties under federal securities laws, expose it to lawsuits and restrict its ability to access financing.

In addition, the Sarbanes-Oxley Act requires that, among other things, SpinCo establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in SpinCo’s business or changes in applicable accounting rules. SpinCo cannot assure you that its internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which it had previously believed that internal controls were effective. If SpinCo is not able to maintain or document effective internal control over financial reporting, its independent registered public accounting firm will not be able to certify as to the effectiveness of SpinCo’s internal control over financial reporting.

Matters affecting SpinCo’s internal controls may cause it to be unable to report its financial information on a timely basis, or may cause it to restate previously issued financial information, and thereby subject SpinCo to adverse regulatory consequences, including penalties or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in SpinCo and the reliability of its financial statements. Confidence in the reliability of SpinCo’s financial statements is also likely to suffer if SpinCo or its independent registered public accounting firm reports a material weakness in SpinCo’s internal control over financial reporting. This could have a material and adverse effect on SpinCo by, for example, leading to a decline in SpinCo’s share price or impairing its ability to raise additional capital.

In connection with the separation and distribution, SpinCo will incur debt obligations that could adversely affect its business, profitability and ability to meet its obligations.

As of June 30, 2020, on a pro forma basis after giving effect to the new financing arrangements that SpinCo expects to enter into in connection with the separation and distribution and after giving effect to the application of the net proceeds of such financing, SpinCo’s total combined indebtedness would have been $[            ].

 

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This debt could potentially have important consequences to SpinCo and its debt and equity investors, including:

 

   

requiring that a portion of SpinCo’s cash flow from operations be used to service this debt following the separation and distribution, which would reduce cash flow available for other corporate purposes, including capital expenditures and acquisitions, and to grow SpinCo’s business;

 

   

making it more difficult to satisfy SpinCo’s debt service and other obligations;

 

   

increasing SpinCo’s vulnerability to shifts in interest rates and to general adverse economic and industry conditions;

 

   

limiting SpinCo’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; and

 

   

limiting SpinCo’s ability to borrow additional funds as needed to take advantage of business opportunities as they arise, pay cash dividends, repurchase ordinary shares or otherwise, or increasing the costs of any such borrowing, including as a result of a future credit ratings downgrade.

To the extent that SpinCo incurs additional indebtedness, the foregoing risks could increase. In addition, SpinCo’s actual cash requirements in the future may be greater than expected. SpinCo’s cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and SpinCo may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance SpinCo’s debt.

A lowering or withdrawal of the ratings, outlook or watch assigned to SpinCo’s new debt securities by rating agencies may increase its future borrowing costs and reduce its access to capital.

SpinCo’s indebtedness has a non-investment grade rating, and any rating, outlook or watch assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, current or future circumstances relating to the basis of the rating, outlook or watch such as adverse changes to SpinCo’s business, so warrant. Any future lowering of SpinCo’s ratings, outlook or watch likely would make it more difficult or more expensive for SpinCo to obtain additional debt financing.

SpinCo’s ability to generate the significant amount of cash needed to pay interest and principal on its new indebtedness and its ability to refinance all or a portion of its indebtedness or obtain additional financing depends on many factors beyond its control.

SpinCo is a holding company and, as such, has no material operations or assets other than ownership of equity interests in its subsidiaries. SpinCo depends on its subsidiaries to distribute funds to it so that it may pay obligations and expenses, including satisfying obligations with respect to its new proposed indebtedness. SpinCo’s ability to make scheduled payments on, or to refinance its obligations under, its indebtedness depends on the financial and operating performance of its subsidiaries and their ability to make distributions and dividends to SpinCo, which, in turn, depends on their results of operations, cash flows, cash requirements, financial position and general business conditions and any legal and regulatory restrictions on the payment of dividends to which they may be subject, many of which may be beyond SpinCo’s control.

Increases in interest rates could increase interest payable under SpinCo’s variable rate indebtedness.

It is expected that a significant portion of SpinCo’s outstanding indebtedness immediately following the separation and distribution will include variable rate indebtedness under certain financing arrangements that SpinCo enters into in connection with the separation and distribution. As a result of this indebtedness, SpinCo will be subject to interest rate risk. It is expected that some interest rates under these financing arrangements will be based on a floating rate index, and changes in interest rates could increase the amount of SpinCo’s interest

 

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payments and thus negatively impact its future earnings and cash flows. If SpinCo does not have sufficient cash flow to make interest payments, it may be required to refinance all or part of its outstanding debt, sell assets, borrow additional money or sell securities, none of which SpinCo can guarantee it would be able to complete on acceptable terms or at all.

In addition, it is expected that a portion of such variable rate indebtedness of SpinCo will bear interest at rates equal to the London Interbank Offering Rate (“LIBOR”) plus a margin. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include changes in the cost of SpinCo’s variable rate indebtedness.

SpinCo may be exposed to certain risks pursuant to the master services agreement.

In connection with the separation and prior to the distribution, SpinCo and Nielsen will enter into, among others, a master services agreement that will provide for the mutual licensing of data and the provision of certain services by SpinCo to Nielsen. The master services agreement is intended to permit SpinCo and its subsidiaries and Nielsen and its subsidiaries to continue using certain data and services in the operation of their respective businesses after the separation and distribution and during the term of such agreement. Notwithstanding the foregoing, the data licensed and services provided under the master services agreement may be discontinued in the event such data or services cease to be processed or performed, as applicable, by the licensor or the service provider, as applicable, for its own business or the business of its affiliates. Accordingly, the execution of the master services agreement does not guarantee that SpinCo (and its subsidiaries) will receive the data that the Global Connect business requires for its operation during the entire term of the master services agreement. In the event data provided to SpinCo under the master services agreement is discontinued, SpinCo´s business may be adversely affected.

Risks Related to SpinCo Ordinary Shares

SpinCo cannot be certain that an active trading market for its ordinary shares will develop or be sustained after the distribution, and following the distribution, its stock price may fluctuate significantly.

A public market for SpinCo’s ordinary shares does not currently exist. SpinCo anticipates that on or about the distribution record date, trading of its ordinary shares will begin on a “when-issued” basis, which will continue through the distribution date. However, SpinCo cannot guarantee that an active trading market for its ordinary shares will develop or be sustained after the distribution, nor can SpinCo predict the prices at which its ordinary shares may trade after the distribution. Similarly, SpinCo cannot predict whether the combined market value of the SpinCo ordinary shares and Nielsen ordinary shares will be less than, equal to or greater than the market value of Nielsen ordinary shares prior to the distribution.

The market price of SpinCo ordinary shares may decline or fluctuate significantly due to a number of factors, many of which may be beyond SpinCo’s control, including:

 

   

actual or anticipated fluctuations in SpinCo’s operating results;

 

   

flat or slow growth in online or mobile advertising spending;

 

   

declining operating revenues derived from SpinCo’s core business;

 

   

the gain or loss of significant advertisers or other customers;

 

   

the operating and stock price performance of comparable companies;

 

   

changes in the regulatory and legal environment under which SpinCo operates; and

 

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market conditions in the consumer packaged goods industry, e-commerce industry, and domestic and worldwide economy as a whole.

There may be substantial changes in SpinCo’s shareholder base.

Many investors holding Nielsen ordinary shares may hold such stock because of a decision to invest in a company with Nielsen’s profile. Following the distribution, the SpinCo ordinary shares held by those investors will represent an investment in a company with a different profile from Nielsen. This profile may not align with such investors’ investment strategies and may cause such holders to sell their shares. As a result, SpinCo’s stock price may decline or experience volatility as SpinCo’s shareholder base changes.

SpinCo does not expect to pay any cash dividends for the foreseeable future.

SpinCo currently intends to retain future earnings to finance and grow its business. As a result, SpinCo does not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by SpinCo will be made in the sole discretion of the SpinCo Board of Directors from time to time in accordance with applicable law. There can be no assurance that SpinCo will have sufficient surplus under applicable law to be able to pay any dividends at any time in the future. This may result from extraordinary cash expenses, actual costs exceeding contemplated costs, funding of capital expenditures or increases in reserves. If SpinCo does not pay dividends, the price of SpinCo ordinary shares that you receive in the distribution must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of SpinCo ordinary shares in order to generate cash flow from your investment.

Your percentage of ownership in SpinCo may be diluted in the future.

In the future, your percentage ownership in SpinCo may be diluted because of equity awards that SpinCo grants to SpinCo’s directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions. SpinCo’s employees will receive ordinary shares in it after the distribution as a result of conversion of their Nielsen equity awards (in whole or in part) to SpinCo equity awards. SpinCo anticipates that its compensation committee will grant additional stock-based awards to its employees after the distribution. Such awards will have a dilutive effect on SpinCo’s earnings per share, which could adversely affect the market price of SpinCo ordinary shares.

In addition, SpinCo’s articles of association allow for the issuance of one or more classes or series of preferred stock that have powers, preferences and/or other special rights, including preferences over SpinCo ordinary shares respecting dividends and distributions. The terms of such preferred stock could dilute the voting power or reduce the value of SpinCo ordinary shares. Similarly, the repurchase or redemption rights or liquidation preferences that SpinCo could assign to holders of preferred stock could affect the residual value of the ordinary shares. For additional information, see the section entitled “Description of SpinCo’s Ordinary Shares.”

Anti-takeover provisions could enable the SpinCo Board of Directors to resist a takeover attempt by a third party and limit the power of SpinCo’s shareholders.

SpinCo’s articles of association will contain, and Dutch law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage potential acquirers to negotiate with the SpinCo Board of Directors rather than attempt a hostile takeover. These provisions are expected to include, among other things, a provision that the removal or suspension of a member of SpinCo’s Board of Directors must be adopted by at least a two-thirds majority of the votes cast representing more than half of SpinCo’s issued share capital unless proposed by the SpinCo Board of Directors; and the requirement that certain matters, including an amendment to SpinCo’s articles of association, may only be brought to SpinCo’s shareholders for a vote upon a proposal by the SpinCo Board of Directors.

 

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The SpinCo Board of Directors believes these provisions will protect SpinCo’s shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the SpinCo Board of Directors and by providing the SpinCo Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make SpinCo immune from takeovers; however, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the SpinCo Board of Directors determines is not in the best interests of SpinCo and its shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. See “Description of SpinCo’s Ordinary Shares.”

If securities or industry analysts do not publish research or publish misleading or unfavorable research about SpinCo’s business, SpinCo’s share price and trading volume could decline.

The trading market for SpinCo ordinary shares will depend in part on the research and reports that securities or industry analysts publish about it or its business. SpinCo does not currently have and may never obtain separate research coverage for its ordinary shares. If there is no research coverage, SpinCo ordinary shares may be negatively impacted. If SpinCo obtains research coverage for its ordinary shares and if one or more of the analysts downgrades SpinCo’s ordinary shares or publishes unfavorable research about SpinCo’s business, its stock price may decline. If one or more of the analysts ceases coverage of SpinCo ordinary shares or fails to publish reports on it regularly, demand for SpinCo ordinary shares could decrease, which could cause the price or trading volume of SpinCo ordinary shares to decline.

The rights and obligations of a SpinCo shareholder are governed by Dutch law and may differ from the rights and obligations of shareholders of companies organized under the laws of other jurisdictions.

SpinCo is incorporated and exists under the laws of the Netherlands. Accordingly, its corporate structure as well as the rights and obligations of the holders of SpinCo ordinary shares may be different from the rights and obligations of shareholders of companies incorporated or organized under the laws of other jurisdictions. For example, resolutions of a general meeting may be approved with majorities different from the majorities required for approval of equivalent resolutions for companies organized under the laws of other jurisdictions. Additionally, in fulfilling their responsibilities, the directors must act in the interest of SpinCo and give specific attention to the relevant interests of all of its stakeholders, which, in addition to holders of SpinCo ordinary shares, include clients, employees, lenders and suppliers. Any action to contest any of SpinCo’s corporate actions must be filed with, and will be reviewed by, a Dutch court, in accordance with Dutch law. As such, the exercise of certain shareholders’ rights by shareholders outside the Netherlands may be more costly than the exercise of rights in a company organized under the laws of other jurisdictions.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This joint proxy statement/information statement and other materials that Nielsen and SpinCo have filed or will file with the SEC contain, or will contain, certain forward-looking statements regarding business strategies, market potential, future financial performance, the recent coronavirus (COVID-19) pandemic and other matters. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. In particular, information included under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo,” “SpinCo Business,” “The Separation and Distribution” and other sections of this joint proxy statement/information statement contain forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Nielsen or SpinCo management, as the case may be, and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Whether or not any such forward-looking statement is in fact achieved will depend on future events, some of which are beyond Nielsen’s or SpinCo’s control. Except as may be required by law, Nielsen or SpinCo undertakes no obligation to modify or revise any forward-looking statement to reflect new information, events or circumstances occurring after the date of this joint proxy statement/information statement. Factors, risks, trends and uncertainties that could cause actual results or events to differ materially from those anticipated include the matters described under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo,” in addition to the following other factors, risks, trends and uncertainties:

 

   

uncertainties relating to the impact of the coronavirus (COVID-19) pandemic on SpinCo’s and Nielsen’s businesses;

 

   

SpinCo’s and Nielsen’s ability to adapt to significant technological changes;

 

   

consolidation in the industries in which SpinCo’s and Nielsen’s clients operate, putting pressure on the pricing of their services, thereby leading to decreased earnings and cash flow;

 

   

the risks related to the coronavirus (COVID-19) pandemic on the global economy and financial markets;

 

   

client procurement strategies putting additional pressure on the pricing of SpinCo’s and Nielsen’s services, thereby leading to decreased earnings and cash flow;

 

   

adverse market conditions adversely impacting SpinCo’s and Nielsen’s revenues;

 

   

SpinCo’s and Nielsen’s respective indebtedness adversely impacting SpinCo’s and Nielsen’s businesses, results of operations and financial conditions, and the risk of increased interest rates on variable rate indebtedness of SpinCo and Nielsen;

 

   

SpinCo’s and Nielsen’s respective cash requirements and access to the capital markets to service their indebtedness, fund capital expenditures and meet their other capital needs;

 

   

SpinCo’s and Nielsen’s respective abilities to recruit sample participants to participate in their research samples;

 

   

data protection laws and self-regulatory codes;

 

   

cybersecurity and protection of confidential information;

 

   

the receipt, storage and transmission of proprietary information;

 

   

the protection of SpinCo’s and Nielsen’s respective intellectual property rights;

 

   

currency exchange rate fluctuations negatively impacting SpinCo’s and Nielsen’s respective business, results of operations and financial condition;

 

   

risks related to SpinCo’s and Nielsen’s respective international operations;

 

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changes in tax laws and the continuing ability to apply provisions of various international tax treaties;

 

   

SpinCo’s and Nielsen’s respective abilities to retain clients;

 

   

an inability to realize benefits or synergies from acquisitions of new businesses or dispositions of existing businesses or to operate businesses effectively following acquisitions or divestitures;

 

   

the ability to attract and retain employees;

 

   

reliance on third-party service providers;

 

   

adverse outcomes in proceedings with governmental authorities or administrative agencies or other litigation;

 

   

a decline in operating results and enterprise value that could lead to non-cash goodwill, other intangible asset, investment or property, plant and equipment impairment charges;

 

   

SpinCo’s inability to engage in certain corporate transactions following the separation and distribution under transaction agreements entered into with Nielsen in connection with the separation and distribution;

 

   

the additional costs of SpinCo operating as a stand-alone, public company;

 

   

any failure to realize expected benefits from the separation and distribution;

 

   

natural disasters, war or terrorist activities, or pandemics or similar outbreaks, and their effects on economic and business environments in which SpinCo and Nielsen operate; and

 

   

other uncertainties relating to general economic, political, business, industry, regulatory and market conditions.

 

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THE SEPARATION AND DISTRIBUTION

Overview

On November 7, 2019, Nielsen announced the completion of its strategic review and its intention to separate its Global Connect business from its Global Media business. The separation will occur through a pro rata distribution to Nielsen shareholders of all of the outstanding ordinary shares of SpinCo, which was formed to hold the Global Connect business.

On [                    ], the Nielsen Board of Directors approved the distribution of all of SpinCo’s outstanding ordinary shares on the basis of [                    ] SpinCo ordinary shares for every Nielsen ordinary share held as of the close of business on [                    ], the distribution record date, subject to the receipt of Nielsen shareholder approval and the satisfaction (or, where applicable, waiver) of the other conditions to the distribution set forth in the separation and distribution agreement and described in this joint proxy statement/information statement. Any fractional entitlements to SpinCo ordinary shares will be aggregated into whole shares and sold in the open market by [        ] at prevailing market prices and the aggregate cash proceeds of the sales (net of discounts and commissions) will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional SpinCo ordinary share in the distribution. At [                    ] (Eastern Time) on [                    ], the distribution date, each Nielsen shareholder will receive [                    ] SpinCo ordinary shares for every Nielsen ordinary share held as of the close of business on the distribution record date and with any fractional entitlements to SpinCo ordinary shares being treated as described above. Upon completion of the separation and distribution, each Nielsen shareholder as of the distribution record date will continue to own shares of Nielsen and will receive a proportionate share of the outstanding ordinary shares of SpinCo to be distributed in the distribution. If the separation and distribution is approved by Nielsen shareholders and the other conditions to the distribution are satisfied (or, where applicable, waived), you will not need to take any action to receive the SpinCo ordinary shares to which you are entitled as a Nielsen shareholder. You will not be required to make any payments to Nielsen or to surrender or exchange your Nielsen ordinary shares in order to receive the SpinCo ordinary shares to which you are entitled as a Nielsen shareholder. The distribution of SpinCo ordinary shares as described in this joint proxy statement/information statement is subject to the satisfaction (or, where applicable, waiver) of certain conditions. For a more detailed description of these conditions, see “The Separation and Distribution—Conditions to the Distribution.”

Background of the Separation and Distribution

A description of the background of the separation and distribution will be included in an amendment to this joint proxy statement/information statement.

Reasons for the Separation and Distribution

The Nielsen Board of Directors believes that the separation and distribution is in the best interest of Nielsen and its shareholders and approved the separation and distribution. A wide variety of factors were considered by the Nielsen Board of Directors in evaluating the separation and distribution. Among other things, the Nielsen Board of Directors considered the following potential benefits of the separation and distribution:

 

   

Distinct investment identity. The separation and distribution will allow investors to separately value Nielsen and SpinCo based on each company’s (and its subsidiaries’) distinct investment identities. SpinCo’s Global Connect business differs from Nielsen’s Global Media business in several respects, such as sources of revenue, client base and technology needs. The separation and distribution will enable investors to evaluate the merits, strategy, performance and future prospects of each company’s respective business and to invest in each company separately based on these distinct characteristics. The separation may attract new investors who may not have properly assessed the value of SpinCo’s Global Connect business relative to the value it is currently accorded as part of Nielsen.

 

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Enhanced strategic and management focus. The separation and distribution will allow SpinCo and Nielsen and their subsidiaries to pursue and implement more effectively their distinct operating priorities and strategies and will improve management “fit and focus” at both companies and their subsidiaries, enabling the management of both companies and their subsidiaries to pursue their respective unique opportunities for long-term growth and profitability. Each company and its subsidiaries will also have the flexibility to develop a growth strategy that capitalizes on its distinct strengths, and consequently each company and its subsidiaries will be better positioned to capitalize on the available opportunity set in its specific market. SpinCo’s management will be able to focus exclusively on the Global Connect business, while the management of Nielsen will be dedicated to growing its Global Media businesses.

 

   

Growth opportunities. Following the separation and distribution, the equity of each company will be able to be used as a focused “acquisition currency,” and as such the separation and distribution will provide each company with greater opportunities to pursue value-enhancing acquisitions in industries with active M&A markets. Independent equity structures will also afford each company direct access to capital markets, facilitating each company’s ability to pursue its specific growth objectives.

 

   

More efficient allocation of capital. The separation and distribution will permit each company to concentrate its financial resources solely on its own operations, providing each company with greater flexibility to invest capital in its business at a time and in a manner appropriate for its distinct strategy and business needs without having to compete with each other for investment capital. This will facilitate a more efficient allocation of capital based on each company’s profitability, cash flow and growth opportunities, and allow each company to pursue an optimal mix of return of capital to shareholders, reinvestment in leading-edge technology and value-enhancing investment and M&A opportunities.

 

   

Alignment of incentives with performance objectives. The separation and distribution will facilitate incentive compensation arrangements with respect to equity of each of SpinCo and Nielsen and align employee incentives with those of the shareholders of each respective company.

Neither SpinCo nor Nielsen can assure you that, following the separation and distribution, any of the benefits described above or any other benefits will be realized to the extent anticipated, or at all.

 

   

Increased costs. The separation will result in incremental costs related to operating as a public company, such as compensating an independent board of directors, increased personnel costs, compliance with regulatory and stock exchange requirements, increased auditing and insurance fees and development of internal infrastructure and support functions, which costs were preliminarily estimated to be approximately $[             ] million to $[             ] million on an annual basis. The separation will also result in one-time separation costs, such as costs of legal counsel, financial advisors, consultants, debt issuance costs, the audit of SpinCo’s historical financial statements and accounting and valuation advisory work related to the separation, which costs were preliminarily estimated to be approximately $[             ] million to $[             ] million and will be paid by Nielsen.

 

   

Potential post-separation and distribution volatility in the price for SpinCo ordinary shares. Many investors holding Nielsen ordinary shares may hold such shares because of a decision to invest in a company with Nielsen’s profile. Following the distribution, the SpinCo ordinary shares held by those investors will represent an investment in a company with a different profile from Nielsen. This profile may not align with such investors’ investment strategies and may cause such holders to sell their shares. As a result, SpinCo’s stock price may decline or experience volatility as SpinCo’s shareholder base changes.

 

   

Management focus and attention. Before the completion of the separation and distribution, it is expected that the separation and distribution will require significant time and effort from Nielsen’s and SpinCo’s respective management teams and consequently may result in the diversion of management attention away from operation of their respective businesses and potentially negative effects on Nielsen’s and SpinCo’s existing business relationships.

 

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Future limitations on SpinCo’s operations to preserve the tax-free nature of the separation and distribution. The tax matters agreement that Nielsen and SpinCo will enter into before the distribution will include restrictions that may limit SpinCo’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its shareholders or that might increase the value of its business. Under the tax matters agreement, for a period of time following the distribution, SpinCo will be restricted from entering into certain transactions including mergers, consolidations or liquidations; issuing equity securities beyond certain thresholds; repurchasing its capital stock beyond certain thresholds; ceasing to actively conduct its business; and other strategic transactions.

 

   

Failure to achieve the anticipated benefits of the separation and distribution. SpinCo may be unable to achieve the full strategic and financial benefits expected to result from the separation and distribution as described above in this section for a variety of reasons, including, among others: (i) following the separation and distribution, SpinCo may be more susceptible to market fluctuations and other adverse events than if it were still a part of Nielsen; (ii) following the separation and distribution, SpinCo’s business will be less diversified than Nielsen’s business before the separation and distribution; and (iii) the other actions required to separate Nielsen’s and SpinCo’s respective businesses could disrupt SpinCo’s operations.

The Nielsen Board of Directors concluded that the potential benefits of the separation and distribution outweighed these negative factors. For additional information, see the section entitled “Risk Factors.”

In view of the wide variety of factors considered in connection with its evaluation of the separation and distribution, and the complexity of these matters, the Nielsen Board of Directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the separation and distribution. Rather, the Nielsen Board of Directors viewed its decisions as being based on the totality of the factors it considered. In addition, individual members of the Nielsen Board of Directors may have given differing weights to different factors. The Nielsen Board of Directors conducted an overall review of the factors described above.

Interests of Nielsen’s Directors and Executive Officers in the Separation and Distribution

Prior to the effectiveness of the registration statement of which this joint proxy statement/information statement is a part, SpinCo will disclose, in accordance with the rules and regulations of the SEC, information regarding the compensation of SpinCo’s directors.

Formation of SpinCo and Internal Reorganization

SpinCo was formed as a private limited company under the laws of the Netherlands on March 17, 2020, for the purpose of holding Nielsen’s Global Connect business in connection with the separation and distribution described herein. SpinCo is currently a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), but will be converted into a Dutch public limited company (naamloze vennootschap) prior to the separation and distribution.

As part of the plan to separate the Global Connect business from the Global Media business, pursuant to the separation and distribution agreement, Nielsen plans to transfer the equity interests of certain entities that operate the Global Connect business, as well as other assets and liabilities of the Global Connect business, to SpinCo prior to the distribution. The distribution will not affect Nielsen’s continued ownership of its Global Media business and other businesses.

When and How Will You Receive the Distribution?

With the assistance of [                    ], the distribution agent for the distribution, Nielsen expects to distribute SpinCo ordinary shares at [                    ] (Eastern Time) on [                    ], the distribution date, to all holders of

 

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outstanding Nielsen ordinary shares as of the close of business on [                    ], the distribution record date. [                    ], will serve as the distribution agent in connection with the distribution and the transfer agent and registrar for SpinCo ordinary shares.

If you own Nielsen ordinary shares as of the close of business on the distribution record date, SpinCo ordinary shares that you are entitled to receive in the distribution will be issued electronically, as of the distribution date, to you in direct registration form or to your bank or brokerage firm on your behalf. If you are a shareholder of record, [            ] will then mail you a direct registration account statement that reflects your SpinCo ordinary shares. If you hold your Nielsen shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the SpinCo shares. “Direct registration form” refers to a method of recording share ownership when no physical share certificates are issued to shareholders, as is the case in this distribution. If you sell Nielsen ordinary shares in the “regular-way” market up to and including the distribution date, you will be selling your right to receive SpinCo ordinary shares in the distribution.

Most Nielsen shareholders hold their ordinary shares through a bank or brokerage firm. In such cases, your shares are said to be held in “street name,” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your Nielsen ordinary shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the SpinCo ordinary shares that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.

Transferability of Shares You Receive

SpinCo ordinary shares distributed to holders in connection with the distribution will be transferable without registration under the Securities Act, except for shares received by persons who may be deemed to be SpinCo affiliates. Persons who may be deemed to be SpinCo affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with SpinCo, which may include certain SpinCo executive officers, directors or principal shareholders. Securities held by SpinCo affiliates will be subject to resale restrictions under the Securities Act. SpinCo affiliates will be permitted to sell SpinCo ordinary shares only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Number of SpinCo Ordinary Shares You Will Receive

For every one Nielsen ordinary share that you own as of the close of business on [                ], the distribution record date, you will receive [                    ] SpinCo ordinary shares on the distribution date. Nielsen will not distribute any fractional SpinCo ordinary shares to its shareholders, and all entitlements to SpinCo ordinary shares will be rounded down to the nearest whole number. If you are a shareholder of record who would otherwise have been entitled to receive a fraction of SpinCo ordinary shares, the fractional entitlement to which you would otherwise have been entitled will be aggregated with all other fractional entitlements of SpinCo ordinary shares into whole shares, and [                ] will sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional SpinCo ordinary share in the distribution. The distribution agent, in its sole discretion, without any influence by Nielsen or SpinCo, will determine when, how, and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either Nielsen or SpinCo, and the distribution agent is not an affiliate of either Nielsen or SpinCo. Neither Nielsen nor SpinCo will be able to guarantee any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts paid in lieu of fractional shares.

 

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The net cash proceeds of these sales of fractional shares will be taxable for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences” for an explanation of certain material U.S. federal income tax consequences of the distribution. If you hold your Nielsen ordinary shares through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the net cash proceeds of the sales of the aggregated fractional SpinCo ordinary shares and will electronically credit your account for your share of such proceeds. Nielsen estimates that it will take approximately two weeks from the distribution date for the distribution agent to complete the distribution of the net cash proceeds of the sales of the aggregated fractional SpinCo ordinary shares.

Treatment of Equity-Based Compensation

Stock Options.    Each unvested option to purchase Nielsen ordinary shares held by Nielsen employees will convert into an option to purchase ordinary shares of the applicable company (Nielsen or SpinCo, as the case may be) to which the applicable employee provides services following the distribution, with adjustments to the number of ordinary shares subject to the option, the option exercise price and any applicable stock price goal based on (1) the value of a Nielsen ordinary share prior to the distribution and (2) the value of an ordinary share of the applicable company (Nielsen or SpinCo, as the case may be) after giving effect to the distribution.

Each vested option to purchase Nielsen ordinary shares held by Nielsen employees and each option to purchase Nielsen ordinary shares held by Nielsen directors will convert into an option to purchase Nielsen ordinary shares and an option to purchase SpinCo ordinary shares, with adjustments to the number of ordinary shares subject to each option and the option exercise price based on (1) the value of a Nielsen ordinary share prior to the distribution and (2) the value of an ordinary share of the applicable company (Nielsen or SpinCo, as the case may be) after giving effect to the distribution.

Except as otherwise described above and except to the extent otherwise provided under local law, following the distribution, the options to purchase ordinary shares of the applicable company generally will have the same terms and conditions, including the same vesting provisions and exercise periods, as the options to purchase Nielsen ordinary shares had immediately prior to the distribution.

Restricted Stock Units.    All unvested Nielsen restricted stock units (“RSUs”) held by Nielsen employees will convert into RSUs of the company (Nielsen or SpinCo, as the case may be) to which the applicable employee provides services following the distribution, with adjustments to the number of RSUs based on (1) the value of a Nielsen ordinary share prior to the distribution and (2) the value of an ordinary share of the applicable company (Nielsen or SpinCo, as the case may be) after giving effect to the distribution. In the case of any performance-based RSUs, the adjusted awards will no longer be subject to performance conditions, and the adjustment to the number of ordinary shares covered by the award will be based on the number of ordinary shares covered by the original Nielsen award based on actual performance prior to the distribution, pro-rated to reflect the portion of the performance period elapsed through the date of the distribution.

All vested Nielsen RSUs held by Nielsen employees will remain outstanding immediately following the distribution. In addition, upon completion of the distribution, Nielsen employees will receive [                    ] SpinCo RSUs in respect of each vested Nielsen RSU held by the employee immediately prior to the distribution.

Except as otherwise described above and except to the extent otherwise provided under local law, following the distribution, the RSUs of the applicable company generally will have the same terms and conditions, including the same vesting provisions, as the Nielsen RSUs had immediately prior to the date of the distribution.

Deferred Stock Units.    Each Nielsen deferred stock unit (“DSUs”) held by outside directors will remain outstanding immediately following the distribution. In addition, upon completion of the distribution, Nielsen outside directors will receive [                    ] SpinCo DSUs in respect of each Nielsen DSU held by the outside director immediately prior to the distribution. Except as otherwise described above, following the distribution,

 

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the Nielsen DSUs and the SpinCo DSUs generally will have the same terms and conditions, including the same vesting provisions, as the Nielsen DSUs had immediately prior to the date of the distribution.

 

Results of the Distribution

After the distribution, SpinCo will be an independent, publicly traded [                    ] listed company. The actual number of SpinCo ordinary shares to be distributed will be determined as of the close of business on [                    ], the distribution record date, and will reflect any settlement of Nielsen stock-based awards prior to the distribution record date. The distribution will not affect the number of outstanding Nielsen ordinary shares or any rights of Nielsen shareholders. Nielsen will not distribute any fractional SpinCo ordinary shares.

SpinCo will enter into a separation agreement and other related agreements, including a tax matters agreement, a transition services agreement, an employee matters agreement, an intellectual property matters agreement, a trademark license agreement and a master services agreement with Nielsen before the distribution to effect the separation and distribution and provide a framework for SpinCo’s relationship with Nielsen after the separation. These agreements will provide for the allocation between Nielsen and SpinCo of Nielsen’s assets, liabilities and obligations (including its investments, property, employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the separation and distribution, and will govern the relationship between Nielsen and SpinCo after the separation and distribution. For a more detailed description of these agreements, see the sections entitled “Risk Factors—Risks Related to the Separation and Distribution,” “The Separation and Distribution” and “SpinCo Relationship with Nielsen Following the Separation and Distribution.”

Market for SpinCo Ordinary Shares

There is currently no public trading market for SpinCo ordinary shares. SpinCo expects to have its ordinary shares approved to be listed on the [            ] under the symbol “[            ].” SpinCo has not and will not set the initial price of its ordinary shares. The initial price will be established by the public markets.

SpinCo cannot predict the price at which its ordinary shares will trade after the distribution. In fact, the combined trading prices, after the distribution, of the SpinCo ordinary shares that each Nielsen shareholder will receive in the distribution and Nielsen ordinary shares held at the distribution record date may not equal the “regular-way” trading price of Nielsen ordinary shares immediately prior to the distribution. The price at which SpinCo ordinary shares trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for SpinCo ordinary shares will be determined in the public markets and may be influenced by many factors. See the section entitled “Risk Factors—Risks Related to SpinCo Ordinary Shares.”

Trading Between the Distribution Record Date and the Distribution Date

Beginning on or about the distribution record date and continuing up to and including the distribution date, Nielsen expects that there will be two markets in Nielsen ordinary shares: a “regular-way” market and an “ex-distribution” market. Nielsen ordinary shares that trade on the “regular-way” market will trade with an entitlement to SpinCo ordinary shares distributed pursuant to the distribution. Nielsen ordinary shares that trade on the “ex-distribution” market will trade without an entitlement to SpinCo ordinary shares distributed pursuant to the distribution. Therefore, if you sell Nielsen ordinary shares in the “regular-way” market up to and including the distribution date, you will be selling your right to receive SpinCo ordinary shares in the distribution. If you own Nielsen ordinary shares as of the close of business on the distribution record date and sell those shares on the “ex-distribution” market up to and including the distribution date, you will receive the SpinCo ordinary shares that you are entitled to receive pursuant to your ownership of Nielsen ordinary shares as of the distribution record date.

Furthermore, beginning on or about the distribution record date and continuing up to and including the distribution date, SpinCo expects that there will be a “when-issued” market in its ordinary shares. “When-issued”

 

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trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for SpinCo ordinary shares that will be distributed to holders of Nielsen ordinary shares on the distribution date. If you owned Nielsen ordinary shares as of the close of business on the distribution record date, you would be entitled to SpinCo ordinary shares distributed pursuant to the distribution. You may trade this entitlement to SpinCo ordinary shares, without Nielsen ordinary shares you own, on the “when-issued” market, but your transaction will not settle until after the distribution date. On the first trading day following the distribution date, “when-issued” trading with respect to SpinCo ordinary shares will end, and “regular-way” trading will begin.

Conditions to the Distribution

The distribution will be effective at [                    ] (Eastern Time) on [                    ], which is the distribution date, subject to approval by a simple majority of the votes cast at the Nielsen special meeting in person or by proxy, as well as the satisfaction (or waiver by Nielsen in its sole discretion) of the following conditions:

 

   

the completion of the transfer of assets and liabilities from Nielsen to SpinCo in accordance with the separation and distribution agreement that Nielsen and SpinCo will enter into prior to the distribution;

 

   

works council, union or similar employee collective group and employee information and/or consultation processes have been completed, if and to the extent required under local laws;

 

   

the receipt and continued validity of a private letter ruling received by Nielsen from the IRS with respect to certain requirements for qualification for tax-free treatment under Section 355 of the Code;

 

   

the receipt by Nielsen of an opinion from Nielsen’s outside tax advisor to the effect that the requirements for tax-free treatment under Section 355 of the Code will be satisfied;

 

   

the receipt by the Nielsen Board of Directors from an independent appraisal firm acceptable to Nielsen of one or more opinions to the Nielsen Board of Directors at the time or times requested by the Nielsen Board of Directors confirming the solvency and financial viability of Nielsen before the consummation of the distribution and each of Nielsen and SpinCo after consummation of the distribution, and such opinions shall be acceptable to Nielsen in form and substance in Nielsen’s sole discretion, and such opinions shall not have been withdrawn or rescinded;

 

   

the SEC’s having declared effective SpinCo’s registration statement on Form 10, of which this joint proxy statement/information statement forms a part, no stop order suspending the effectiveness thereof being in effect and no proceedings for such purpose pending before or threatened by the SEC and this joint proxy statement/information statement’s having been made available to Nielsen shareholders;

 

   

all actions and filings necessary or appropriate under applicable U.S. federal, U.S. state, U.K., Netherlands or other securities laws having been taken and, where applicable, having become effective or been accepted by the applicable governmental authority;

 

   

any governmental approvals and material consents necessary to consummate the separation and distribution having been obtained and remaining in full force and effect;

 

   

the transaction agreements relating to the separation and distribution that Nielsen and SpinCo will enter into prior to the distribution having been duly executed and delivered by the parties;

 

   

the separation, distribution and related transactions having been duly approved by the Nielsen Board of Directors following the shareholder vote to approve the Resolution;

 

   

no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions being in effect;

 

   

the SpinCo ordinary shares to be distributed having been approved for listing on the [                ], subject to official notice of distribution;

 

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Nielsen having prepared a balance sheet of Nielsen showing distributable reserves sufficient to cover the book value of SpinCo; and

 

   

no event or development having occurred or existing that, in the judgment of the Nielsen Board of Directors, in its sole discretion, makes it inadvisable to effect the separation, the distribution and other related transactions.

Nielsen and SpinCo cannot assure you that any or all of these conditions will be met, and Nielsen may also waive any of the conditions to the distribution that are subject to waiver. In addition, Nielsen will have the sole discretion to determine and change the terms of, and whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the distribution record date, the distribution date and the distribution ratio. Nielsen may rescind or delay its declaration of the distribution even after the distribution record date regardless of whether the conditions to the distribution have been satisfied. Nielsen does not intend to notify its shareholders of any modifications to the terms of the separation and distribution that, in the judgment of the Nielsen Board of Directors, are not material. To the extent that the Nielsen Board of Directors determines that any modifications by Nielsen materially change the terms of the separation and distribution or if Nielsen decides to abandon the distribution, Nielsen will notify Nielsen shareholders in a manner reasonably calculated to inform them about the modification or abandonment as may be required by law, by, for example, publishing a press release, filing a current report on Form 8-K or making available a supplement to this joint proxy statement/information statement.

Data Privacy and Protection

In order to: (i) effect the separation and distribution and ensure that Nielsen shareholders receive the SpinCo shares to which they are entitled; and (ii) ensure that SpinCo is able to register, communicate with, and appropriately manage the shareholdings of SpinCo shareholders, Nielsen will transfer certain personal data of Nielsen shareholders to SpinCo.

SpinCo will act as a separate data controller with regard to this information. There will be no change in how Nielsen processes Nielsen shareholders’ personal data insofar as this relates to their Nielsen shares.

 

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THE NIELSEN SPECIAL MEETING

This joint proxy statement/information statement is being provided to Nielsen shareholders as part of a solicitation of proxies by the Nielsen Board of Directors for use at the Nielsen special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This joint proxy statement/information statement provides Nielsen shareholders with information they need to know to be able to vote or instruct their vote to be cast at the Nielsen special meeting.

Date, Time and Place

Nielsen will be hosting a special meeting live via the Internet and in person. The Nielsen special meeting will be held on [                ] at [    ] a.m. (Eastern Time). You may attend online via live webcast at [nielsen.onlineshareholdermeeting.com] or in person at [            ].

Attendance at the Nielsen Special Meeting

To attend online:

You will need your 16-digit control number included on your Notice of Internet Availability or proxy card. Instructions on how to attend and participate via the Internet are posted at [www.proxyvote.com] (before the meeting) and [nielsen.onlineshareholdermeeting.com] (during the meeting).

The online meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection if they intend to participate in the meeting online. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.

To attend in person:

You must have a government-issued photo identification along with either your admission ticket (which is included in your Notice of Internet Availability or proxy card) or proof of ownership of Nielsen ordinary shares as of the meeting record date.

Proof of ownership may be any of the following:

 

   

a brokerage statement or letter from a bank or broker indicating ownership on the meeting record date;

 

   

a printout of the proxy distribution email (if you received your materials electronically); or

 

   

a voting instruction form.

For directions to attend the Nielsen special meeting in person, go to: [http://ir.nielsen.com/investor-relations/shareholder-information/special-meeting/default.aspx] or contact Nielsen’s Company Secretary at companysecretary@nielsen.com.

Nielsen will be unable to admit anyone who does not present valid identification or refuses to comply with its security procedures. Cameras, videotaping equipment and other recording devices and large packages, banners, placards and signs will not be permitted at the Nielsen special meeting.

Purpose of the Nielsen Special Meeting

The purpose of the Nielsen special meeting is for Nielsen ordinary shareholders to consider, and if thought fit, approve the separation and distribution, which would (i) separate the Global Connect subsidiaries and

 

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business from Nielsen’s other businesses and transfer its ownership to a separate company, [                    ], a wholly-owned subsidiary of Nielsen, which will be the holding company of the Global Connect business and (ii) distribute all of the outstanding SpinCo ordinary shares to Nielsen’s shareholders on a pro rata basis. Further information can be found in the section entitled “The Separation and Distribution.”

Recommendation of the Nielsen Board of Directors

The Nielsen Board of Directors recommends that you vote “FOR” the Resolution.

Meeting Record Date; Nielsen Shareholders Entitled to Vote

Holders of Nielsen ordinary shares as of the close of business on the meeting record date, [                    ], may vote at the Nielsen special meeting.

Voting by Nielsen’s Directors and Executive Officers

As of the close of business on the meeting record date, the directors and executive officers of Nielsen were entitled to vote [                ] ordinary shares, or approximately [            ]% of Nielsen’s ordinary shares issued and outstanding on that date and entitled to vote at the Nielsen special meeting. Nielsen’s directors and executive officers have informed Nielsen that they intend to vote their shares “FOR” the Resolution, although they have no obligation to do so.

Quorum

Two shareholders present at the Nielsen special meeting and entitled to vote constitute a quorum.

Required Vote

The Resolution scheduled to be voted on at the Nielsen special meeting will be proposed as an ordinary resolution and requires the vote of a simple majority of the votes cast at the Nielsen special meeting in person or by proxy.

Voting by Internet, Telephone or Mail

If you are a shareholder of record on the meeting record date, you may vote by granting a proxy:

 

   

By Internet: You may submit your proxy by going to [www.proxyvote.com] (before the meeting) or at [nielsen.onlineshareholdermeeting.com] (during the meeting) and by following the instructions on how to complete an electronic proxy card. You will need the 16-digit control number included in your Notice of Internet Availability or proxy card in order to vote by Internet.

 

   

By Telephone: You may submit your proxy by dialing [1-800-690-6903] and by following the recorded instructions. You will need the 16-digit control number included in your Notice of Internet Availability or proxy card in order to vote by telephone.

 

   

By Mail: You may submit your proxy by completing, signing and dating your proxy card (if you received one) where indicated and sending it back in the envelope provided. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.

Internet and telephone voting facilities will close at 11:59 p.m. (Eastern Time) on [            ] for the voting of shares held by shareholders of record or held in “street name” and 11:59 p.m. (Eastern Time) on [            ] for the

 

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voting of shares held through Nielsen’s 401(k) plan. Mailed proxy cards with respect to shares held by shareholders of record or in “street name” must be received no later than 9:00 a.m. (Eastern Time) on [            ]. Mailed proxy cards with respect to shares held through Nielsen’s 401(k) plan must be received no later than 11:59 p.m. (Eastern Time) on [            ].

Voting in Person

Although Nielsen encourages you to vote through the Internet or the telephone or to complete and return a proxy card (if you received one) by mail prior to the Nielsen special meeting to ensure that your vote is counted, you can attend the Nielsen special meeting online or in person and vote your shares during the meeting, unless you hold your shares through Nielsen’s 401(k) plan, which cannot be voted in person at the Nielsen special meeting.

If you plan to vote in person, bring your printed proxy card if you received one by mail. Otherwise, Nielsen will give shareholders of record a ballot at the Nielsen special meeting. If you are a beneficial owner, you must obtain a legal proxy from the organization that holds your shares if you wish to attend the Nielsen special meeting and vote in person.

Treatment of Abstentions; Failure to Vote

Abstentions: Votes may be cast in favor of or against or you may abstain from voting. If you intend to abstain from voting for the Resolution, you will need to check the abstention box for the Resolution. In determining whether the Resolution receives the requisite number of affirmative votes, an abstention will not be considered to be a vote in law and will not be counted in the calculation of the votes “FOR” and “AGAINST” the Resolution.

Broker Non-Votes: Broker non-votes occur when shares held by a bank, broker or other nominee are not voted with respect to a proposal because (1) the bank, broker or other nominee has not received voting instructions from the shareholder who beneficially owns the shares and (2) the bank, broker or other nominee lacks the authority to vote the shares at its/his/her discretion. The Resolution is considered to be a non-routine matter under New York Stock Exchange rules. Accordingly, any bank, broker or other nominee holding your shares will not be permitted to vote on the Resolution at the Nielsen special meeting without receiving voting instructions from you.

Broker non-votes will not be counted in the calculation of the votes “FOR” and “AGAINST” the Resolution.

If you sign and submit your proxy card (if you received one) without giving specific voting instructions, this will be construed as an instruction to vote the shares as recommended by the Nielsen Board of Directors, so your shares will be voted “FOR” the Resolution and in accordance with the discretion of the holders of the proxy with respect to any other matters that may be voted on.

Shares Held in Street Name

For shares held in “street name,” you may vote by submitting voting instructions to your bank, broker or nominee.

Revocability of Proxies

Whether you have voted by Internet, telephone or mail, if you are a shareholder of record, you may change your vote and revoke your proxy by:

 

   

Voting again by Internet or telephone at a later time before the closing of those voting facilities at 11:59 p.m. (Eastern Time) on [            ];

 

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Submitting a properly signed proxy card (if you received one) with a later date that is received no later than 9:00 a.m. (Eastern Time) on [            ];

 

   

Sending a written statement to that effect to Nielsen’s Company Secretary, provided such statement is received no later than 9:00 a.m. (Eastern Time) on [            ]; or

 

   

Attending the Nielsen special meeting, revoking your proxy and voting in person or online.

If you hold shares through the Nielsen 401(k) plan, you may change your vote and revoke your proxy by any of the first three methods listed above if you do so no later than 11:59 p.m. (Eastern Time) on [            ]. You cannot, however, revoke or change your proxy with respect to shares held through the Nielsen 401(k) plan after that date, and you cannot vote those shares in person at the Nielsen special meeting. If you hold shares in “street name,” you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your proxy by attending the Nielsen special meeting online or in person.

Nielsen will honor the proxy with the latest date. However, no revocation will be effective unless Nielsen receives notice of such revocation at or prior to the deadlines mentioned above. For those shareholders who submit a proxy electronically or by telephone, the date on which the proxy is submitted in accordance with the instructions listed on the Notice of Internet Availability or the proxy card is the date of the proxy.

Solicitation

Nielsen will pay the cost of soliciting proxies. Nielsen expects to pay approximately $[            ] plus out-of-pocket expenses for [                ] to assist in soliciting proxies.

Assistance

If you encounter any difficulties accessing the meeting online during the check-in or meeting time, please call the technical support number that will be posted online on the Shareholder Meeting login page.

Tabulation of Votes

Representatives of [                ] will tabulate the votes and act as inspectors of election.

Adjournments

If the persons attending the Nielsen special meeting within thirty (30) minutes of the time at which the Nielsen special meeting was due to start (or such longer time as the chairman of the Nielsen special meeting decides to wait) do not constitute a quorum, or if during the Nielsen special meeting a quorum ceases to be present, the chairman of the Nielsen special meeting must adjourn it.

 

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NIELSEN SHAREHOLDER PROPOSAL

Proposal No. 1: The Separation and Distribution Proposal (the “Resolution”)

The Proposal

THAT:

(a)    upon the recommendation of the members of the board of directors of Nielsen (the “Nielsen Board of Directors”) and subject to the final approval of the Nielsen Board of Directors and the satisfaction (or waiver by the parties) of certain other conditions contained in the separation and distribution agreement in connection with the separation of Nielsen SpinCo B.V. (“SpinCo”) and its business from Nielsen and the proposed distribution by Nielsen of shares in SpinCo to Nielsen shareholders (the “separation and distribution”), an interim distribution in specie of the shares of SpinCo be and is hereby declared payable to the Nielsen shareholders on the register of members of Nielsen as of the close of business on [                ] (or, such other time or date as the Nielsen Board of Directors may determine) (the “distribution record date”), credited as fully paid, in the proportion of [            ] shares of SpinCo per [            ] shares of Nielsen then held by each Nielsen shareholder, so that each Nielsen shareholder will hold an entitlement to [            ] SpinCo shares for each [            ] shares of Nielsen held at the distribution record date;

(b)    the separation and distribution be and is hereby approved for the purposes of Article 5.3 of the Articles of Association of Nielsen; and

(c)    each and any of the members of the Nielsen Board of Directors and the executive officers of Nielsen be and is hereby authorized to conclude and implement the separation and distribution and to do or procure to be done all such acts and things on behalf of Nielsen and each of its subsidiaries as they may, in their discretion, consider necessary or expedient for the purpose of giving effect to the separation and distribution with such amendments, modifications, variations or revisions thereto as are not of a material nature.

Vote Required and Board Recommendation

The approval of the Resolution will be proposed as an ordinary resolution and requires the vote of a simple majority of the votes cast at the Nielsen special meeting in person or by proxy.

The Nielsen Board of Directors recommends that you vote “FOR” the Resolution.

 

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SPINCO DIVIDEND POLICY

SpinCo currently intends to retain future earnings to finance and grow its business. As a result, SpinCo does not currently expect to pay any cash dividends. However, SpinCo may decide to declare and pay dividends in the future. All decisions regarding the payment of dividends by SpinCo will be made by the SpinCo Board of Directors and otherwise in accordance with applicable law.

 

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SPINCO CAPITALIZATION

The following table sets forth SpinCo’s capitalization as of June 30, 2020, on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in the Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo, as if the separation, distribution and related financing transactions had occurred on June 30, 2020.

The capitalization table below is for informational purposes only. It should not be construed to be indicative of SpinCo’s capitalization or financial condition had the separation, distribution and related financing transactions been completed on the date assumed. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had SpinCo operated as a stand-alone public company at that date and is not necessarily indicative of SpinCo’s future capitalization or financial position. This table should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo,” “Selected Historical Financial Data of SpinCo,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo,” and “Combined Financial Statements of SpinCo,” “Unaudited Condensed Combined Financial Statements of SpinCo” and accompanying notes in the “Index to Financial Statements of SpinCo” section of this joint proxy statement/information statement.

 

     As of June 30, 2020  
(in millions)    Historical      Pro Forma  

Cash

     

Cash and cash equivalents

   $ —        $ [             ](1) 

Capitalization:

     

Debt Outstanding

     

Current portion of long-term debt

   $ —        $ [             ](1) 

Long-term debt

   $ —        $ [             ](1) 
  

 

 

    

 

 

 

Total indebtedness

   $ —        $ [            
  

 

 

    

 

 

 

Equity

     

Total equity

   $ 2,059      $ [            
  

 

 

    

 

 

 

Total capitalization

   $ 2,059      $ [            
  

 

 

    

 

 

 

 

(1)

SpinCo expects to enter into a debt financing arrangement of $[        ] million aggregate principal amount outstanding offset by anticipated financing fees of approximately $[        ] million, which is primarily intended to finance a cash transfer to Nielsen and support the operating cash flow needs of the SpinCo business. The financing fees are shown as an adjustment to long-term debt. SpinCo plans to transfer $[        ] million of the proceeds to Nielsen in connection with the separation and distribution. SpinCo also intends to enter into a $[        ] million revolving credit facility to be drawn on in the event that our working capital and other cash needs are not supported by our operating cash flow and cash available from the debt financing arrangement, which is not reflected in the capitalization table above. Additionally, the subsidiaries that will be contributed to SpinCo in connection with the separation and distribution are anticipated to have approximately $[        ] million of cash when contributed. The tax effects of the pro forma adjustments are not reflected in total equity above.

 

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SELECTED HISTORICAL FINANCIAL DATA OF SPINCO

The following table presents the selected historical combined financial data for SpinCo. SpinCo derived the selected statement of operations data for the years ended December 31, 2019, 2018 and 2017, and the selected balance sheet data as of December 31, 2019 and 2018, as set forth below, from its audited Combined Financial Statements, which are included in the “Index to Financial Statements of SpinCo” section of this joint proxy statement/information statement. SpinCo derived the selected statement of operations data for the six months ended June 30, 2020 and 2019 and the selected balance sheet data as of June 30, 2020, as set forth below, from its Unaudited Condensed Combined Financial Statements, which are included in the “Index to Financial Statements of SpinCo” section of this joint proxy statement/information statement. SpinCo derived the selected statement of operations data for the years ended December 31, 2016 and 2015 and the selected balance sheet data as of June 30, 2019 and December 31, 2017, 2016 and 2015 from SpinCo’s unaudited underlying financial records, which were derived from the financial records of Nielsen and are not included in this joint proxy statement/information statement.

The historical results do not necessarily indicate the results expected for any future period. You should read the selected historical combined financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo,” the Combined Financial Statements of SpinCo and Unaudited Condensed Combined Financial Statements of SpinCo, including their respective accompanying notes thereto, included or incorporated by reference elsewhere in this joint proxy statement/information statement. Per share data has not been presented since SpinCo was wholly owned by Nielsen during the periods presented.

 

     Six Months Ended
June 30,
    Year Ended December 31,  
(in millions of U.S. dollars, unless otherwise indicated)    2020(1)     2019(2)     2019(3)     2018(4)     2017(5)      2016(6)      2015(7)  

Statement of Operations Data:

                

Revenues

   $ 1,402     $ 1,509     $ 3,057     $ 3,138     $ 3,278      $ 3,387      $ 3,428  

Depreciation and amortization

     140       123       249       212       214        214        215  

Operating income/(loss)

     (122     (17     (985     (1,424     216        220        192  

Interest expense

     —         1       1       2       2        1        1  

Net income/(loss)

     (126     10       (896     (1,437     182        78        39  

 

     As of June 30,      As of December 31,  
(in millions)    2020      2019      2019      2018      2017      2016      2015  

Balance Sheet Data:

                    

Total assets

   $ 3,823      $ 5,085      $ 3,910      $ 4,805      $ 6,293      $ 6,118      $ 6,248  

Long-term debt including finance leases

     14        18        17        20        22        17        10  

 

(1)

Loss for the six months ended June 30, 2020 included $4 million in impairment charges and $63 million in restructuring charges. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo” for the impairment charges.

(2)

Income for the six months ended June 30, 2019 included $26 million in restructuring charges.

(3)

Loss for the year ended December 31, 2019 included $1,004 million in impairment charges, a non-cash expense of $165 million for the settlement of certain pension plans and $50 million in restructuring charges. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo” for the impairment charges. See Note 14 (“Pensions and Other Post-Retirement Benefits”) to the Combined Financial Statements of SpinCo for further discussion on the pension settlement charge.

(4)

Loss for the year ended December 31, 2018 included $1,412 million in impairment charges and $100 million in restructuring charges. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo.”

(5)

Income for the year ended December 31, 2017 included $55 million in restructuring charges.

(6)

Income for the year ended December 31, 2016 included $62 million in restructuring charges.

(7)

Income for the year ended December 31, 2015 included $35 million in restructuring charges.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF SPINCO

The Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo presented below have been derived from the historical Combined Financial Statements of SpinCo and Unaudited Condensed Combined Financial Statements of SpinCo included or incorporated by reference elsewhere in this joint proxy statement/information statement. While the historical Combined Financial Statements and Unaudited Condensed Combined Financial Statements of SpinCo reflect the past financial results of the SpinCo business, this pro forma information gives effect to the separation and distribution, the incurrence of debt and other related transactions outlined below. The pro forma adjustments include but are not limited to:

 

   

the effect of SpinCo’s anticipated post-separation capital structure, including the incurrence of indebtedness of approximately $[        ] million, the transfer of approximately $[        ] million of cash to Nielsen and the approximately $[        ] million of cash expected to be held by the subsidiaries that will be contributed to SpinCo in connection with the separation and distribution;

 

   

the distribution of SpinCo’s ordinary shares by Nielsen to its shareholders and the elimination of historical net Parent investment; and

 

   

the impact of, and transactions contemplated by, the separation agreement and the other transaction agreements to be entered into by Nielsen and SpinCo in connection with the separation and distribution.

It is preliminarily estimated that the separation costs to be incurred during SpinCo’s transition to being a stand-alone public company will be approximately $[        ] million to $[        ] million and will be paid by Nielsen.

The pro forma adjustments are based on available information and assumptions that SpinCo’s management believes are reasonable; however, such adjustments are subject to change as the costs of operating as a stand-alone company are determined. In addition, such adjustments are estimates and may not prove to be accurate. The Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo include certain adjustments to give effect to events that are (1) directly attributable to the separation, distribution and related transaction agreements, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on SpinCo, as applicable. With respect to SpinCo, any change in costs or expenses associated with operating as a stand-alone company would constitute projected amounts based on estimates and, therefore, are not factually supportable; as such, the Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo have not been adjusted for any such estimated changes. Only costs that SpinCo’s management have determined to be factually supportable and recurring are included as pro forma adjustments, including the items described above.

The Unaudited Pro Forma Condensed Combined Statements of Operations of SpinCo for the six months ended June 30, 2020 and year ended December 31, 2019 have been prepared as though the separation and distribution occurred on January 1, 2019. The Unaudited Pro Forma Condensed Combined Balance Sheet of SpinCo as of June 30, 2020 has been prepared as though the separation and distribution occurred on June 30, 2020. The Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo are for illustrative purposes only, and do not reflect what SpinCo’s financial position and results of operations would have been had the separation and distribution occurred on the dates indicated and are not necessarily indicative of SpinCo’s future financial position and future results of operations.

The Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo should be read in conjunction with the Combined Financial Statements of SpinCo and Unaudited Condensed Combined Financial Statements of SpinCo and accompanying notes, “SpinCo Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo” included or incorporated by reference elsewhere in this joint proxy statement/information statement. The Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See the sections entitled “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” included or incorporated by reference elsewhere in this joint proxy statement/information statement.

 

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Unaudited Pro Forma Condensed Combined Statement of Operations of SpinCo

For The Six Months Ended June 30, 2020

 

(in millions, except per share amounts)    Historical     Pro Forma
Adjustments
    Notes    Pro Forma
SpinCo
 

Revenues

   $ 1,402     $ [               (D)    $ [            
  

 

 

   

 

 

      

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown separately below

     791       [               (D)      [            

 

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     526      

[            

[            

[            


  (B)

(E)

(F)

     [            

Depreciation and amortization

     140       [                    [            

Impairment of goodwill and other long-lived assets

     4       [                    [            

Restructuring charges

     63       [                    [            
  

 

 

   

 

 

      

 

 

 

Operating income/(loss)

     (122     [                    [            
  

 

 

   

 

 

      

 

 

 

Interest expense

     —         [               (A)      [            

Foreign currency exchange transaction gains/(losses), net

     —         [                    [            

Other income/(expense), net

     4       [               (L)      [            
  

 

 

   

 

 

      

 

 

 

Income/(loss) before income taxes

     (118     [                    [            

Benefit/(provision) for income taxes

     (8     [               (G)      [            
  

 

 

   

 

 

      

 

 

 

Net income/(loss)

   $ (126   $ [                  $ [            
  

 

 

   

 

 

      

 

 

 

Pro forma earnings per share:

         

Basic

       (H)    $ [            
         

 

 

 

Diluted

       (H)    $ [            
         

 

 

 

Pro forma weighted average ordinary shares outstanding:

         

Basic

       (H)      [            
         

 

 

 

Diluted

       (H)      [            
         

 

 

 

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo.

 

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Unaudited Pro Forma Condensed Combined Statement of Operations of SpinCo

For The Year Ended December 31, 2019

 

(in millions, except per share amounts)    Historical     Pro Forma
Adjustments
    Notes      Pro Forma
SpinCo
 

Revenues

   $ 3,057     $ [                 (D)      $ [            
  

 

 

   

 

 

      

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown separately below

     1,653       [                 (D)        [            

 

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     1,086      

[            

[            

[            


   

(B)

(E)

(F)

 

 

 

     [            

Depreciation and amortization

     249       [                    [            

Impairment of goodwill and other long-lived assets

     1,004       [                    [            

Restructuring charges

     50       [                    [            
  

 

 

   

 

 

      

 

 

 

Operating income/(loss)

     (985     [                    [            
  

 

 

   

 

 

      

 

 

 

Interest expense

     (1     [                 (A)        [            

Foreign currency exchange transaction gains/(losses), net

     (1     [                    [            

Other income/(expense), net

     (94     [                 (L)        [            
  

 

 

   

 

 

      

 

 

 

Income/(loss) before income taxes

     (1,081     [                    [            

Benefit/(provision) for income taxes

     185       [                 (G)        [            
  

 

 

   

 

 

      

 

 

 

Net income/(loss)

   $ (896   $ [                  $ [            
  

 

 

   

 

 

      

 

 

 

Pro forma earnings per share:

         

Basic

         (H)      $ [            
         

 

 

 

Diluted

         (H)      $ [            
         

 

 

 

Pro forma weighted average ordinary shares outstanding:

         

Basic

         (H)        [            
         

 

 

 

Diluted

         (H)        [            
         

 

 

 

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo.

 

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Unaudited Pro Forma Condensed Combined Balance Sheet of SpinCo

As of June 30, 2020

 

(in millions)    Historical     Pro Forma
Adjustments
    Notes      Pro Forma
SpinCo
 

Assets:

         

Current assets:

         

Cash

   $ —       $ [                 (C)      $ [            

Trade and other receivables, net of allowances for doubtful accounts and sales returns of $16 million as of June 30, 2020

     660       [                    [            

Prepaid expenses and other current assets

     171       [                    [            
  

 

 

   

 

 

      

 

 

 

Total current assets

     831       [                    [            

Non-current assets:

         

Property, plant and equipment, net

     104       [                    [            

Operating lease right-of-use asset

     157       [                    [            

Goodwill

     343       [                    [            

Other intangible assets, net

     2,068       [                    [            

Deferred tax assets

     195       [                 (K)        [            

Other non-current assets

     125       [                    [            
  

 

 

   

 

 

      

 

 

 

Total assets

   $ 3,823     $ [                  $ [            
  

 

 

   

 

 

      

 

 

 

Liabilities and equity:

         

Current liabilities:

         

Accounts payable and other current liabilities

   $ 594     $ [                  $ [            

Deferred revenues

     227       [                    [            

Current of portion of debt and finance lease obligations

     5       [                 (C)        [            
  

 

 

   

 

 

      

 

 

 

Total current liabilities

     826       [                    [            

Non-current liabilities:

         

Long-term debt and finance lease obligations

     9       [                 (C)        [            

Deferred tax liabilities

     535       [                 (K)        [            

Operating lease liabilities

     132       [                    [            

 

Other non-current liabilities

     257      

[            

[            


   

(K)

(M)

 

 

     [            
  

 

 

   

 

 

      

 

 

 

Total liabilities

     1,759       [                    [            
  

 

 

   

 

 

      

 

 

 

Equity:

         

Ordinary shares

     —         [                 (I)        [            

 

Capital in excess of par value

     —        

[            

[            

[            

[            


   

(C)

(J)

(K)

(M)

 

 

 

 

     [            

Net Parent investment

     2,392       [                 (J)        [            

Accumulated other comprehensive loss, net of income taxes

     (333     [                    [            
  

 

 

   

 

 

      

 

 

 

Total equity

     2,059       [                    [            

Noncontrolling interests

     5       [                    [            
  

 

 

   

 

 

      

 

 

 

Total liabilities, equity and noncontrolling interests

   $ 3,823     $ [                  $ [            
  

 

 

   

 

 

      

 

 

 

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo.

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF SPINCO

 

(A)

Reflects interest expense related to $[        ] million of variable- and fixed-rate indebtedness that SpinCo expects to enter into in connection with the separation and distribution and amortization of anticipated financing fees of $[        ] million to be paid by SpinCo. The expected weighted-average interest rate on the debt is approximately [    ]% per annum, inclusive of the amortization of the anticipated financing fees. SpinCo estimates that interest expense would have been $[        ] million and $[        ] million for the six months ended June 30, 2020 and year ended December 31, 2019, respectively. A change of one-eighth of 1% to the assumed annual interest rate for the variable-rate indebtedness would change interest expense by approximately $[        ] million on an annual basis. SpinCo estimates that amortization of the financing fees would have been $[        ] million and $[        ] million for the six months ended June 30, 2020 and year ended December 31, 2019, respectively. The amount and nature of indebtedness and associated interest and other costs are based upon current estimates which may differ materially from the amounts and terms agreed prior to the separation and distribution.

 

(B)

Reflects an adjustment to selling, general and administrative expenses, exclusive of depreciation and amortization that removes $[        ] million and $[        ] million of transaction-related costs incurred for the six months ended June 30, 2020 and year ended December 31, 2019, respectively, which are directly related to the separation and distribution. As these costs represent material, nonrecurring costs directly related to the separation and distribution, a pro forma adjustment was performed to reverse the costs.

 

(C)

Reflects $[        ] million of borrowings expected to be incurred in connection with the separation and distribution offset by anticipated financing fees to be paid by SpinCo of $[        ] million. The financing fees related to the debt are shown as an adjustment to long-term debt. SpinCo plans to transfer $[        ] million of the proceeds to Nielsen in connection with the separation and distribution. SpinCo also intends to enter into a $[        ] million revolving credit facility to support our business post separation and distribution. Additionally, the subsidiaries that will be contributed to SpinCo are anticipated to have approximately $[        ] million of cash when contributed.

 

(D)

Reflects the revenue to be earned and expenses to be incurred by SpinCo for the data and services to be provided to Nielsen and the data to be obtained from Nielsen, respectively, under the master services agreement. The master services agreement will provide for the mutual licensing of data and the provision of certain services by SpinCo to Nielsen. The master services agreement is intended to enable the parties and their respective subsidiaries to continue using certain data and services in the operation of their businesses after the separation and distribution. The agreed-upon fees for the licensed data and the related services are generally intended to (i) allow the providing party to recover all costs and expenses of providing such services or licensing such data plus a mark-up over those costs and expenses or (ii) provide for a profit-sharing approach, in both cases so that the data and services will be provided on an arm’s-length basis. The pro forma adjustments for the revenue to be earned and expenses to be incurred by SpinCo are based on historical experience with the relevant data to be licensed and services to be provided, along with the retrospective application of agreed-upon pricing models as described above.

 

(E)

Reflects the income to be earned and expenses to be incurred by SpinCo for the services to be provided to Nielsen and obtained from Nielsen, respectively, on an interim, transitional basis under the transition services agreement by and between Nielsen and SpinCo. The services to be provided under the transition services agreement relate primarily to technology functions such as infrastructure and cybersecurity. The agreed-upon charges for such services are generally intended to allow the service provider to recover all costs and expenses of providing such services. The transition services agreement will terminate on the date on which the service provider no longer has any obligation to provide any service under the transition services agreement. The service recipient generally may terminate a particular service prior to the scheduled expiration date, subject generally to a minimum notice period of thirty (30) calendar days.

 

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Table of Contents
(F)

Reflects the net of the income to be earned and expenses to be incurred by SpinCo for the subleased properties to be provided to and by Nielsen, respectively. The pro forma adjustment is based on historical costs incurred at each relevant property and charges the prospective sublessee according to its pro rata utilization of the space.

 

(G)

Reflects the tax effects of the pro forma adjustments to pre-tax book income at the applicable statutory income tax rates in the respective jurisdictions. The effective tax rate of SpinCo could be different (either higher or lower) depending on activities subsequent to the distribution.

 

(H)

The number of SpinCo ordinary shares used to compute basic earnings per share for the six months ended June 30, 2020 and year ended December 31, 2019, is based on the number of Nielsen ordinary shares outstanding on June 30, 2020 and December 31, 2019, respectively, assuming a distribution ratio of [            ] ordinary shares of SpinCo for every [            ] ordinary share of Nielsen. The number of Nielsen ordinary shares used to determine the assumed distribution reflects the Nielsen ordinary shares outstanding as of the balance sheet date, which is the most current information as of the date of those financial statements. While the actual future impact of potential dilution from SpinCo ordinary shares related to equity awards granted to SpinCo’s employees under Nielsen’s share-based plans will depend on various factors, pro forma diluted shares outstanding were not adjusted as SpinCo does not currently have an estimate of the future dilutive impact.

 

(I)

Reflects [            ] ordinary shares with a par value of €0.01 per share. This number of ordinary shares is based on the number of Nielsen ordinary shares outstanding as of June 30, 2020 and an expected distribution ratio of [            ] ordinary shares of SpinCo for every [            ] ordinary shares of Nielsen.

 

(J)

Represents the elimination of net Parent investment and adjustments to capital in excess of par value.

 

(K)

Reflects the tax effects of pro forma adjustments on tax-sensitive assets and liabilities based on the applicable statutory income tax rates in the respective jurisdictions. Further, it reflects adjustments to (i) net operating loss carryforwards which will not transfer with SpinCo upon the separation and distribution and (ii) uncertain tax positions for which Nielsen will continue to be legally liable upon the separation and distribution.

 

(L)

Reflects the removal of pension plan and other post-retirement employee benefit plan charges incurred during the historical periods for plans that will remain with Nielsen per the employee matters agreement. These plans were accounted for as both multi-employer and single-employer plans of SpinCo within the Combined Financial Statements of SpinCo. This results in an adjustment to Other income/(expense), net of $[        ] million for the year ended December 31, 2019 and $[        ] million for the six months ended June 30, 2020.

 

(M)

Reflects the true-up for the portion of certain non-U.S. defined benefit pension and other post-retirement employee benefit plans that will be legally separated and created as new plans to be assumed by SpinCo, as well as plans where Nielsen will retain the full liability, per the employee matters agreement. On a carve-out basis, these plans were accounted for as single-employer plans of SpinCo within the Combined Financial Statements of SpinCo. Accordingly, the liability for these plans is expected to be reduced by $[        ] million to reflect only SpinCo’s portion of certain plans based on employees of SpinCo and to reflect plans where Nielsen will retain the full liability. The benefit plan expenses associated with these pension obligations were previously recognized by SpinCo, including a cross-charge to Nielsen for their participation in the plans, within the Combined Statement of Operations.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF NIELSEN

The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen presented below have been derived from the historical Consolidated Financial Statements of Nielsen included or incorporated by reference elsewhere in this joint proxy statement/information statement. While the historical Consolidated Financial Statements of Nielsen reflect the past financial results of the Nielsen business, this pro forma information gives effect to the separation and distribution. The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen should be read in conjunction with the accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen. The pro forma adjustments to reflect the separation and distribution include but are not limited to:

 

   

the separation of the operations, assets (including the equity interests of certain subsidiaries) and liabilities related to Nielsen’s Global Connect business from Nielsen and the transfer of those assets (including the equity interests of certain subsidiaries) and liabilities to SpinCo;

 

   

the impact of, and transactions contemplated by, the separation agreement and the other transaction agreements to be entered into by Nielsen and SpinCo in connection with the separation and distribution; and

 

   

the effect of Nielsen’s anticipated capital structure after the separation and distribution, including the retirement of approximately $1,000 million of debt with the debt financing proceeds transferred from SpinCo in connection with the separation and distribution.

The pro forma adjustments reflected below are based on available information and assumptions that Nielsen’s management believes are reasonable. However, such adjustments are estimates and may not prove to be accurate. The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen include certain adjustments to give effect to events that are (1) directly attributable to the separation, distribution and related transaction agreements, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on Nielsen, as applicable. The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen do not reflect future events that may occur after the separation and distribution, including any restructuring activities or the tax impacts of such transactions.

The Unaudited Pro Forma Condensed Consolidated Statements of Operations of Nielsen for the fiscal years ended December 31, 2019 and December 31, 2018 and six month period ended June 30, 2020 have been prepared as though the separation and distribution occurred on January 1, 2018. The Unaudited Pro Forma Condensed Consolidated Balance Sheet of Nielsen as of June 30, 2020 has been prepared as though the separation and distribution occurred on June 30, 2020. The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen are for illustrative purposes only, do not reflect what Nielsen’s financial position and results of operations would have been had the separation and distribution occurred on the dates indicated, are not necessarily indicative of Nielsen’s future financial position and future results of operations and do not reflect all actions that may be taken by Nielsen after the separation and distribution.

The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen were derived from and should be read in conjunction with Nielsen’s historical financial information incorporated by reference into this joint proxy statement/information statement. The Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See the sections entitled “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” included or incorporated by reference elsewhere in this joint proxy statement/information statement.

 

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Unaudited Pro Forma Condensed Consolidated Statement of Operations of Nielsen

For The Six Months Ended June 30, 2020

 

(in millions, except per share amounts)    Historical     Disposition of
Global
Connect
Business
(A)
    Pro Forma
Adjustments
    Notes    Pro Forma
Nielsen
 

Revenues

   $ 3,055     $ (1,402   $ [               (C)    $ [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown separately below

     1,385       (759     [               (C)      [            

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     966       (597    

[            

[            


  (B)

(D)

     [            

Depreciation and amortization

     438       (156     [                    [            

Impairment of goodwill and other long-lived assets

     45       (4     [                    [            

Restructuring charges

     95       (63     [                    [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating income/(loss)

     126       177       [                    [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Interest income

     1       —         [                    [            

Interest expense

     (185     21       [                    [            

Foreign currency exchange transaction gains/(losses), net

     (3     —         [                    [            

Other income/(expense), net

     (5     (2     [               (E)      [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Income/(loss) from continuing operations before income taxes

     (66     196       [                    [            

Benefit/(provision) for income taxes

     27       (70     [               (F)      [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income/(loss) from continuing operations

     (39     126       [                    [            

Net income/(loss) from continuing operations attributable to noncontrolling interests

     9       (1     [                    [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income/(loss) from continuing operations attributable to Nielsen shareholders

   $ (48   $ 127     $ [                  $ [            
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income/(loss) per share of common stock, basic

           

Net income/(loss) attributable to Nielsen shareholders

   $ (0.13          $ [            

Net income/(loss) per share of common stock, diluted

           

Net income/(loss) attributable to Nielsen shareholders

   $ (0.13          $ [            

Weighted-average shares of common stock outstanding, basic

     356,532,069              356,532,069  

Dilutive shares of common stock

     —                [            
  

 

 

          

 

 

 

Weighted-average shares of common stock outstanding, diluted

     356,532,069              [            
  

 

 

          

 

 

 

Refer to accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen

 

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Unaudited Pro Forma Condensed Consolidated Statement of Operations of Nielsen

For The Year Ended December 31, 2019

 

(in millions, except per share amounts)    Historical     Disposition of
Global
Connect
Business
(A)
    Pro Forma
Adjustments
    Notes   Pro Forma
Nielsen
 

Revenues

   $ 6,498     $ (3,057   $ [               (C)   $ [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown separately below

     2,822       (1,632     [               (C)     [            

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     1,929       (1,051    

[            

[            


  (B)
(D)
    [            

Depreciation and amortization

     756       (293     [                   [            

Impairment of goodwill and other long-lived assets

     1,004       (1,004     [                   [            

Restructuring charges

     80       (50     [                   [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Operating income/(loss)

     (93     973       [                   [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Interest income

     6       —         [                   [            

Interest expense

     (397     46       [                   [            

Foreign currency exchange transaction gains/(losses), net

     (10     1       [                   [            

Other income/(expense), net

     (169     92       [               (E)     [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Income/(loss) from continuing operations before income taxes

     (663     1,112       [                   [            

Benefit/(provision) for income taxes

     260       (93     [               (F)     [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income/(loss) from continuing operations

     (403     1,019       [                   [            

Net income/(loss) from continuing operations attributable to noncontrolling interests

     12       —         [                   [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income/(loss) from continuing operations attributable to Nielsen shareholders

   $ (415   $ 1,019     $ [                 $ [            
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income/(loss) per share of common stock, basic

          

Net income/(loss) attributable to Nielsen shareholders

   $ (1.17         $ [            

Net income/(loss) per share of common stock, diluted

          

Net income/(loss) attributable to Nielsen shareholders

   $ (1.17         $ [            

Weighted-average shares of common stock outstanding, basic

     355,731,862             355,731,862  

Dilutive shares of common stock

     —               [            
  

 

 

         

 

 

 

Weighted-average shares of common stock outstanding, diluted

     355,731,862             [            
  

 

 

         

 

 

 

Refer to accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen

 

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Unaudited Pro Forma Condensed Consolidated Statement of Operations of Nielsen

For The Year Ended December 31, 2018

 

(in millions, except per share amounts)    Historical     Disposition of
Global
Connect
Business
(A)
    Pro Forma
Adjustments
    Notes     Pro Forma
Nielsen
 

Revenues

   $ 6,515     $ (3,138   $ [                 (C   $ [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown separately below

     2,805       (1,578     [                 (C     [             ]  

Selling, general and administrative
expenses, exclusive of depreciation and amortization shown separately below

     1,958       (1,183    

[            

[            


   

(B

(D


    [             ]  

Depreciation and amortization

     675       (245     [                   [             ]  

Impairment of goodwill and other long-lived assets

     1,413       (1,412     [                   [             ]  

Restructuring charges

     139       (100     [                   [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Operating income/(loss)

     (475     1,380       [                   [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Interest income

     8       —         [                   [             ]  

Interest expense

     (394     48       [                   [             ]  

Foreign currency exchange transaction gains/(losses), net

     (16     (1     [                   [             ]  

Other income/(expense), net

     (5     (5     [                 (E     [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Income/(loss) from continuing operations before income taxes

     (882     1,422       [                   [             ]  

Benefit/(provision) for income taxes

     182       199       [                 (F     [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income/(loss) from continuing operations

     (700     1,621       [                   [             ]  

Net income/(loss) from continuing operations attributable to noncontrolling interests

     12       (1     [                   [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income/(loss) from continuing operations attributable to Nielsen shareholders

   $ (712   $ 1,622     $ [                 $ [             ]  
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income/(loss) per share of common stock, basic

          

Net income/(loss) attributable to Nielsen shareholders

   $ (2.00         $ [             ]  

Net income/(loss) per share of common stock, diluted

          

Net income/(loss) attributable to Nielsen shareholders

   $ (2.00         $ [             ]  

Weighted-average shares of common stock outstanding, basic

     355,601,564             355,601,564  

Dilutive shares of common stock

     —               [            
  

 

 

         

 

 

 

Weighted-average shares of common stock outstanding, diluted

     355,601,564             [            
  

 

 

         

 

 

 

Refer to accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen

 

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Unaudited Pro Forma Condensed Consolidated Balance Sheet of Nielsen

As of June 30, 2020

 

(in millions)    Historical      Disposition of
Global
Connect
Business
(A)
    Pro Forma
Adjustments
    Notes   Pro Forma
Nielsen
 

Assets:

           

Current assets

           

Cash and cash equivalents

   $ 438      $ —       $ [                 $ [            

Trade and other receivables, net of allowances for doubtful accounts and sales returns

     1,131        (660     [                   [            

Prepaid expenses and other current assets

     504        (205     [                   [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Total current assets

     2,073        (865     [                   [            

Non-current assets

           

Property, plant and equipment, net

     402        (159     [                   [            

Operating lease right-of-use asset

     377        (209     [                   [            

Goodwill

     5,984        (343     [                   [            

Other intangible assets, net

     4,698        (854     [                   [            

Deferred tax assets

     276        (241     [               (G)     [            

Other non-current assets

     312        (123     [                   [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Total assets

   $ 14,122      $ (2,794   $ [                 $ [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Liabilities and equity:

           

Current liabilities

           

Accounts payable and other current liabilities

   $ 1,100      $ (596   $ [                 $ [            

Deferred revenues

     361        (227     [                   [            

Income tax liabilities

     —          10       [                   [            

Current portion of long-term debt, finance lease obligations and short-term borrowings

     291        (16     [                   [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Total current liabilities

     1,752        (829     [                   [            

Non-current Liabilities:

           

Long-term debt and finance lease obligations

     8,130        (1,024     [                   [            

Deferred tax liabilities

     1,016        (322     [               (G)     [            

Operating lease liabilities

     372        (216     [                   [            
          [               (E)  

Other non-current liabilities

     645        (223     [               (G)     [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Total liabilities

     11,915        (2,614     [                   [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Equity:

           
          [               (E)  

Nielsen shareholders’ equity

     2,021        (175     [               (G)     [            

Noncontrolling interests

     186        (5     [                   [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Total equity

     2,207        (180     [                   [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Total liabilities and equity

   $ 14,122      $ (2,794   $ [                 $ [            
  

 

 

    

 

 

   

 

 

     

 

 

 

Refer to accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements of Nielsen

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS OF NIELSEN

 

(A)

Reflects the separation of the operations, assets, liabilities and equity of Nielsen’s Global Connect business in accordance with ASC 205, Discontinued Operations. This also includes transaction costs specific to the separation and distribution of $2 million, $0 million and $61 million for the years ended December 31, 2019 and 2018 and six month period ended June 30, 2020, respectively.

This also reflects a reduction of $1,000 million in long-term debt to bring the total debt level to $7,299 million expected at the completion of the separation and distribution from the receipt of approximately $1,000 million of cash transferred from SpinCo. Interest expense decreased by $44 million, $47 million and $20 million for the years ended 2019 and 2018 and six months ended June 30, 2020, respectively. The decrease in interest expense for the reduction in debt was calculated utilizing the weighted-average interest rate of Nielsen’s outstanding debt as of June 30, 2020, December 31, 2019 and December 31, 2018, respectively. The anticipated post-separation debt balance was determined based on internal capital planning and considered the following factors and assumptions: anticipated business plans, operating activities, general economic conditions and certain contingencies, optimal debt levels and desired financial capacity.

 

(B)

Reflects the net of the income to be earned and expenses to be incurred by Nielsen for the subleased properties to be provided to and by SpinCo, respectively. The pro forma adjustment is based on historical costs incurred at each relevant property and charges the prospective sublessee according to its pro rata utilization of the space.

 

(C)

Reflects the revenue to be earned and expenses to be incurred by Nielsen for the data to be provided to SpinCo and the data and services to be obtained from SpinCo, respectively, under the master services agreement. The master services agreement will provide for the mutual licensing of data and the provision of certain services by SpinCo to Nielsen. The master services agreement is intended to enable the parties and their respective subsidiaries to continue using certain data and services in the operation of their businesses after the separation and distribution. The agreed-upon fees for the licensed data and the related services are generally intended to (i) allow the providing party to recover all costs and expenses of providing such services or licensing such data plus a mark-up over those costs and expenses or (ii) provide for a profit-sharing approach, in both cases so that the data and services will be provided on an arm’s-length basis. The pro forma adjustments for the revenue to be earned and expenses to be incurred by Nielsen are based on historical experience with the relevant data to be licensed and services to be provided, along with the retrospective application of agreed-upon pricing models as described above.

 

(D)

Reflects the income to be earned and expenses to be incurred by Nielsen for the services to be provided to SpinCo and obtained from SpinCo, respectively, on an interim, transitional basis under the transition services agreement by and between Nielsen and SpinCo. The services to be provided under the transition services agreement relate primarily to technology functions such as infrastructure and cybersecurity. The agreed-upon charges for such services are generally intended to allow the service provider to recover all costs and expenses of providing such services. The transition services agreement will terminate on the date on which the service provider no longer has any obligation to provide any service under the transition services agreement. The service recipient generally may terminate a particular service prior to the scheduled expiration date, subject generally to a minimum notice period of thirty (30) calendar days.

 

(E)

Reflects an adjustment to liabilities in certain non-U.S. defined benefit pension and other post-retirement employee benefit plans that are predominantly SpinCo-related but include certain Nielsen employees whose liabilities will be retained by Nielsen after the separation and distribution in accordance with the terms of the employee matters agreement. Accordingly, Nielsen’s liability for these plans is expected to increase by $[    ] million to reflect only Nielsen’s portion of the plans based on employees of Nielsen after the legal separation of the plans. Nielsen’s expense for these plans is expected to increase by $[    ] million, $[    ] million and $[    ] million within Other income/(expense) for the years ended December 31, 2019 and 2018 and the six month period ended June 30, 2020, respectively.

 

(F)

Reflects the tax effects of the pro forma adjustments to pre-tax book income at the applicable statutory income tax rates in the respective jurisdictions. Income tax related adjustments represent current estimates

 

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  on a discontinued operations basis which could materially change as Nielsen finalizes its discontinued operations accounting to be reported in future Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K post-separation.

 

(G)

Reflects a $[    ] million decrease to deferred tax assets for net operating loss carryforwards and tax reserves that will be transferred to SpinCo upon the separation and distribution. Reflects a $[    ] million increase to deferred tax liabilities for U.S. federal and certain foreign net operating loss carryforwards that will be transferred to SpinCo upon the spin-off.

 

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SPINCO BUSINESS

Overview

SpinCo is a global data analytics and measurement company, with a broad geographic presence in approximately 100 countries and services covering approximately 90% of the world’s population, according to population estimates published by the United Nations. Through its measurement, SpinCo believes that it has the best and most comprehensive understanding of the world’s consumer. SpinCo takes this understanding and delivers trusted data, advanced solutions and essential insights to manufacturers and retailers, so they can make more informed marketing and merchandising decisions. SpinCo’s information on consumer behavior allows its retail and CPG clients to quickly identify opportunities for growth, reduce inefficiencies and strengthen their position in the marketplace. SpinCo invented the concept of market share when, in 1935, its auditors first surveyed store shelves to determine sales patterns, and SpinCo builds upon that industry-defining innovation today.

SpinCo provides these trusted technology-driven products and services to over 20,000 clients:

 

   

Retail Measurement: SpinCo combines detailed sales data with online and offline partner data, in-house expertise and the latest technology to produce the most accurate view of the marketplace. Clients across nearly every retail industry use SpinCo’s information and insights to make manufacturing, marketing, distribution and sales decisions.

 

   

Consumer Panel Measurement: SpinCo’s consumer panels collect data from more than 250,000 household panelists across 24 countries, using a combination of in-home scanners and mobile applications to record purchases, to help its clients understand consumer purchasing trends.

 

   

Analytics: SpinCo’s Connect platform provides a growing selection of automated consumer intelligence and actionable insights that help clients identify unmet consumer needs, improve workflow and make smarter decisions throughout their development and marketing cycles.

 

   

Loyalty: A global leader in loyalty data processing, SpinCo allows its retail clients to understand and act on consumer data sets. SpinCo’s technology also allows retailers to easily share customer data and analytics with their manufacturer partners for mutual growth.

 

   

Advisory Services: SpinCo provides its clients with a suite of customized research services as well as consumer and industry studies to better understand consumer attitudes and purchasing behavior, to evaluate and understand why marketing campaigns succeed or fail, and to address issues such as promotions, pricing and marketing mix.

SpinCo has two major product offerings: Measure and Predict/Activate. The Measure product offering consists of SpinCo’s Retail Measurement and Consumer Panel Measurement products, and the Predict/Activate product offering includes Analytics, Loyalty and Advisory Services products. SpinCo presents these operations in the Combined Financial Statements of SpinCo in one reportable segment.

SpinCo holds leading positions in all major developed markets, as well as emerging markets, including China, India, Russia and Latin America. In 2019, 62% of SpinCo’s revenues came from developed markets and 38% came from emerging markets.

The material terms of SpinCo’s client agreements vary between its Measure product offering and its Predict/Activate product offering.

Approximately 80% of SpinCo’s Measure revenue pertains to continuous services with long-cycle contracts. Of these long-cycle contracts, approximately 60% are multi-year contracts of between three to five years, approximately 30% are annual and approximately 10% are perpetual or evergreen, in each case with high contract renewal rates. Subject to certain customary exceptions, such multi-year and annual contracts are

 

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generally only terminable by either party for cause. The perpetual and evergreen contracts are generally terminable for convenience (without any termination fees) upon prior notice. The remaining approximately 20% of SpinCo’s Measure revenue corresponds to short-term, ad hoc services (generally less than 12 months in duration) with short-cycle contracts and varying termination rights.

Approximately 70% of SpinCo’s Predict/Activate revenue pertains to short-term, ad hoc services (generally less than 12 months in duration) with short-cycle contracts. The remaining approximately 30% pertain to long-cycle services with a duration of 12 months or more. In SpinCo’s Predict/Activate contracts (across both long-cycle and short-cycle contracts), clients typically may terminate their contracts for convenience (with varying notice requirements) but must either pay a termination fee to SpinCo and/or compensate SpinCo for the value of the work it performed prior to such termination.

Across all of its revenue streams, SpinCo’s pricing is generally based on standard rate cards, which are generally updated annually. Furthermore, in multiple markets, SpinCo’s long-cycle contracts across its Measure revenue stream generally permit SpinCo to automatically adjust the contract price annually to account for changes in consumer price indices.

At the beginning of each year, approximately 60% of SpinCo’s revenue base for the upcoming year is typically committed under existing client agreements. SpinCo’s top five clients represented approximately 16% of its revenues for the year ended December 31, 2019, and the average length of relationship with these clients is over 30 years. No single client accounted for 5% or more of SpinCo’s revenues in 2019. Subscription revenue made up approximately 60% of SpinCo’s revenue for the year ended December 31, 2019, and non-subscription revenue represented approximately 40%.

SpinCo’s investments in developing markets with a rising middle class, as well as its trusted reputation and breadth of solutions make it particularly suited to take advantage of future growth opportunities in consumer behavior measurement. SpinCo invested approximately $14 million in 2019 to grow its business in emerging markets, including increasing the breadth and depth of its retail measurement services business and its data-sharing partnerships with retailers in those markets. Also, in 2019, SpinCo acquired a leading retail measurement services business in Latin America, which expanded SpinCo’s retail measurement footprint in the region and also enabled SpinCo to strengthen its partnerships with retailers in the region.

Strengths

Demographic and social shifts are constantly altering consumer preferences, causing companies to reevaluate their marketing strategies. Rapid population growth creates new consumer groups, the availability of brand information creates new consumer values and e-commerce expansion drives the need for companies to reshape the online experience for their customers.

Brands looking to take advantage of these opportunities face fragmentation and competition from local businesses, e-commerce players and discount retailers. In addition, the sheer amount of consumer information available online makes it increasingly difficult for companies to pinpoint the insights they need.

This presents an opportunity for SpinCo to help companies manage, integrate and analyze large amounts of information, and quickly extract meaningful, real-time insights that lead to growth. Clients look to SpinCo for precise, actionable consumer behavior data, so that they can create the ideal products and marketing strategies for the marketplace today.

SpinCo has the largest, most comprehensive data set in the CPG and retail industries. This asset, in addition to SpinCo’s investments in data science, machine learning and artificial intelligence and the other strengths described below, perfectly position SpinCo to take on the challenges of the market today.

 

   

Global Scale: SpinCo’s information and insights about consumers cover approximately 90% of the global population, according to population estimates published by the United Nations. SpinCo tracks

 

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billions of transactions per month in approximately 100 countries around the world. This global presence gives clients a clear understanding of consumer needs, so they can sell to each market more effectively.

 

   

Strong, Diversified Client Relationships: SpinCo’s long-standing partnerships and client contracts with high renewal rates provide both a foundation for revenue and a platform for growth. Many of the world’s largest brands, including The Coca-Cola Company, Nestle S.A., Unilever and The Procter & Gamble Company, as well as leading retail chains like Tesco plc, Walgreens and Walmart and online retailers like JD.com, use SpinCo as their information and analytics provider. In addition, due to SpinCo’s presence in emerging markets, it has cultivated strong relationships with local market leaders that can benefit from SpinCo’s services as they expand.

 

   

Scalable Operating Model: SpinCo’s operating model allows it to scale its services and solutions across clients, markets and geographies rapidly and efficiently, to achieve high-quality outcomes in a cost-efficient manner. SpinCo’s flexible architecture also enables clients to use its technology and solutions on their own platforms. It also enables SpinCo to incorporate third-party data, giving it a greater view of the global marketplace.

 

   

Enhanced Data Assets and Data Measurement Services: SpinCo continues to enhance its core competency in measurement science by improving research approaches and investing in new methodologies. SpinCo has also invested significantly in its data architecture to enable the integration of distinct large-scale census data sets including those owned by third parties. SpinCo believes that its expertise, established standards and increasingly granular and comprehensive data assets provide it with a distinct advantage as it delivers more precise insights to its clients.

 

   

Innovation: While technology is changing the consumer’s path to purchase, SpinCo helps its clients navigate this changing landscape and answer critical questions through the innovative Connect platform. The Connect platform is a unique, open and cloud-based platform that allows SpinCo’s clients to quickly identify sales trends and inform everyday decisions around innovation, distribution, price, promotion and media. Both retailers and manufacturers have access to the Connect platform, enabling a high degree of collaboration. SpinCo has also further enhanced its information and analytics delivery platform to enable the management of consumer loyalty programs for retail clients. SpinCo’s e-commerce measurement solution, a combination of SpinCo’s retail data partners, consumer-sourced data and advanced analytics, will provide the industry a clear view of the “Total Consumer.” Today, SpinCo offers online measurement and analytic services via its Connect platform in over 30 major markets across the globe, with plans to expand to all markets where consumers have the ability to shop online.

Services and Solutions

Consumers have access to more product and pricing information than ever before. Assets that were previously a competitive advantage for CPG companies, like global reach and physical stores, can turn into liabilities that hamper their ability to compete with new models.

But the technology that underpins these changes also holds opportunities. Harnessing this mass of data demands new approaches and connectivity.

To help clients meet these challenges, SpinCo developed the Connect platform to link SpinCo’s data with powerful analytics that drive built-in applications. With these applications, clients can see how they are performing against competitors, measure internal objectives across products and markets, test how marketing moves may affect sales and schedule improvements to their workflow, all made possible by the platform’s defining characteristics:

 

   

Open: The Connect platform integrates data from any source, extracts data to be used in other systems and keeps SpinCo’s team connected and in-synch.

 

   

Simple: Intuitive design and alerts makes the platform simple to use while focusing on the user’s key performance indicators.

 

   

Flexible: Utilities in the platform allow clients to enrich data, produce customized views and plug in their own tools and applications.

 

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Actionable: The Connect platform supports an ecosystem of applications developed by SpinCo and its partners, so that clients can focus on execution. Guided workflows make collaboration across teams quicker and smoother.

This allows SpinCo to provide clients “one truth” through integrated data, access to analytics that inform everyday decisions and valuable consumer insights across all channels of trade, resulting in profitable growth.

SpinCo’s analytical solutions allow clients to identify consumer demands, improve workflow, manage their supply chain, drive merchandising effectiveness and identify operational efficiencies, making their marketing expenses, like pricing and promotion, more efficient and effective.

Retail Measurement

SpinCo is a pioneer and innovator in global retail measurement services. SpinCo invented the concept of market share when, in 1935, its auditors first surveyed store shelves to determine sales patterns, and SpinCo builds upon that industry-defining innovation today. SpinCo’s global retail measurement services provide information on market share and competitive sales volumes, as well as insights into activities such as distribution, pricing, merchandising and promotion across all trades and channels, including e-commerce and omni-channel measurement. By combining this information with SpinCo’s professional consultative services and in-house expertise, including world-class data science and granular location reference data, SpinCo produces insights that help its clients make better manufacturing, marketing, distribution and sales decisions, and grow their market share.

A signature aspect of SpinCo’s retail measurement service is its use of data-sharing partnerships with retailers. SpinCo receives sales information from stores using electronic point-of-sale transactions to augment its data, and, in return, the organizations gain access to SpinCo’s advanced retail solutions and software. This is especially useful in emerging markets where electronic sales information is unavailable or limited.

SpinCo’s stringent quality control systems validate and confirm source data for all information SpinCo collects. This data is then processed into databases that allow clients to query information, conduct customized analysis and generate reports that help them make smarter decisions around assortment, pricing and promotion.

Consumer Panel Measurement

SpinCo collects data from more than 250,000 household panelists across 24 countries, using a combination of in-home scanners and mobile applications to record purchases from each shopping trip. Each household is an individual “panelist” and data received from household panelists undergoes a quality control process, including universal product code verification and validation, before being processed into databases. These global panels help clients understand consumer purchasing variables and gain insights into shopper behavior, such as repeat purchases, brand loyalty and customer segmentation.

SpinCo’s services extend beyond the offline household purchase dynamics described above into online purchases. In addition to its household panelists, SpinCo also maintains a digitally native 100,000 member omni-shopper panel collecting purchase confirmation at the individual consumer level across both the offline and online worlds within one panel.

Analytics

SpinCo provides a wide selection of real-time, automated consumer intelligence and analytical services that help clients make smarter business decisions throughout their product development and marketing cycles. SpinCo draws actionable insights from retail and consumer panel data sets, online behavioral information and a variety of other data sets, including product and store reference data.

SpinCo’s demand-driven approach allows clients to identify unmet consumer needs and develop products to match them. SpinCo’s intelligence informs client decisions on marketing spend and helps them reach the consumer along their path to purchase. These services are delivered globally, leveraging technology to produce

 

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the data, models and applications to help simulate, plan, and execute decisions. SpinCo also connects its data to a series of third-party partners via its Connect Partner Network.

Loyalty

SpinCo is a global leader in loyalty data processing that enables clients to understand and activate on their consumer data sets through personalization, promotion, pricing, assortment and analytics. SpinCo significantly increased these capabilities through its acquisition of Precima, Inc. in January 2020, the world’s leader in loyalty offerings for retailers and first-party data owners.

SpinCo engages Precima, Inc. clients in performance-based commitments, which guarantee results in critical areas, such as system performance, delivery dates and technology enhancements. Additionally, these offerings allow retailers to share valuable customer data and analytics with manufacturing partners for purposes of mutual growth.

Advisory Services

SpinCo provides its clients with a suite of customized research services as well as consumer and industry studies to better understand consumer attitudes and purchasing behavior, to evaluate and understand why marketing campaigns succeed or fail, and to address issues such as promotions, pricing and marketing mix. SpinCo also provides sales forecasts for new products and product restages across a number of industries, particularly in the CPG field. SpinCo’s clients use this information to evaluate the sales potential of new products, identify potential customers, forecast sales volume and refine concept design and communication.

Strategies

SpinCo’s growth strategy includes the following key elements:

Continued growth in emerging markets

SpinCo’s relationships with top, multi-national CPG companies make it vital for SpinCo to respond to client demands, often where population growth is most occurring. Clients expect SpinCo to expand coverage and services in emerging markets, where growth is most rapid. Increasing coverage in hard-to-reach channels, while increasing penetration among local clients who have never used market research data, will be a continued focus for SpinCo.

Continue to attract new clients and expand existing relationships

The Connect platform democratizes SpinCo’s existing data sets to users across existing and new client bases. SpinCo has various opportunities to enter into near adjacent fields and is developing plans to do so. For existing clients, casual users now have access to intuitive, self-serve data and analytics. More technical, advanced users can also leverage SpinCo’s capabilities to internally develop new solutions unique to their own data enrichment and modeling needs. New clients now have a user-friendly entry point to experience the benefits that market research can bring to their business.

Continue to develop innovative services

Investments will focus on SpinCo’s pursuit of 100% coverage, winning with retail and dramatically expanding analytic capabilities. Innovations in coverage will focus on filling blind spots with the help of SpinCo’s retail data partners, and expanding SpinCo’s omni-channel and e-commerce coverage. SpinCo will further expand its product suite for retailer and supplier collaborative needs, opening up new loyalty cases, and deepening retail analytics programs that increase SpinCo’s clients’ return on investment. Expanding SpinCo’s

 

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analytics solutions will require moving towards predictions and return on investment capabilities across product availability, placement, price and promotion.

Continue to pursue strategic acquisitions

SpinCo’s strategic acquisitions will focus on accelerating profitable growth in coverage for existing or new markets, differentiating or complementing SpinCo’s core measurement business and speeding up SpinCo’s product roadmap. These three pillars all serve to increase SpinCo’s relevance with clients, and uncover growth for them at a more rapid rate than they could achieve themselves.

Technology

SpinCo operates with an extensive data and technology infrastructure utilizing six primary data centers in three countries around the world. SpinCo also uses Amazon Web Services from Amazon and Azure from Microsoft for cloud-based infrastructure. SpinCo’s global database has the capacity to house an unlimited amount of information, processing approximately 1,500 billion purchasing data points each month in 2019. SpinCo’s technology infrastructure plays an instrumental role in meeting service commitments to global clients and allows SpinCo to quickly scale its services across practice areas and geographies. SpinCo’s Connect platform utilizes an open approach that facilitates integration of distinct data sets, interoperability with client data and technology, and partnerships with leading technology companies and other technology providers.

Intellectual Property

SpinCo’s patents, trademarks, trade secrets, copyrights and other intellectual property, taken as a whole, are important assets that afford protection to its business. To ensure that SpinCo protects and preserves certain proprietary aspects of its technology, it controls and limits access to its proprietary technology. SpinCo’s employees and consultants enter into confidentiality, non-disclosure and invention assignment agreements with SpinCo. SpinCo protects its rights to proprietary technology and confidential information in its business arrangements with third parties through confidentiality and other intellectual property and business agreements.

Currently, SpinCo does not face major barriers to its operations from patents owned by third parties. However, because SpinCo operates a well-known retail measurement service with major customers, it does defend patent litigation, from time to time, brought primarily by non-practicing entities, as opposed to marketplace competitors. SpinCo has sought patent protection in certain instances; however, SpinCo does not consider any individual patent to be material to its business as a whole. Of greater importance to SpinCo’s overall business are the federal, international and state trademark registrations and applications that protect, along with its common law rights, SpinCo’s brands, certain of which are long-standing and well known. In connection with the separation and prior to the distribution, SpinCo and Nielsen will enter into a non-exclusive, royalty-free license from Nielsen to SpinCo to use certain trademarks, service marks and trade names, including the Nielsen brand, for a period of time. SpinCo also owns a large number of copyrights with respect to its proprietary data sets, none of which individually is material to the business as a whole. SpinCo maintains certain licensing and data sharing relationships with third-party content providers that allow it to produce the particular mix of data it provides to its customers in its markets. Other than the foregoing and commercially available software licenses, SpinCo does not believe that any of its licenses to third-party intellectual property are material to its business as a whole.

Competition

There is no single competitor that offers all of the services SpinCo offers in all of the markets in which it offers them. SpinCo has many competitors worldwide that offer some of the services SpinCo provides in selected markets. While SpinCo maintains leading positions in many markets in which it operates, SpinCo’s future success will depend on its ability to enhance and expand its suite of services, provide reliable and accurate

 

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measurement solutions and related information, drive innovation that anticipates and responds to emerging client needs, strengthen and expand its geographic footprint, and protect consumer privacy. See “Risk Factors—Risks Related to SpinCo’s Business.” SpinCo believes its global presence and integrated portfolio of services are key assets in its ability to effectively compete in the marketplace.

While SpinCo does not have one global competitor, it faces numerous competitors in different markets throughout the world. Such competitors include companies specializing in marketing research, in-house research departments of manufacturers and advertising agencies, retailers that sell information directly or through brokers, information management and software companies and consulting and accounting firms. In retail measurement, SpinCo’s principal competitor in the U.S. is Information Resources, Inc., which is also present in some European and Asian/Pacific markets. SpinCo’s retail measurement service also faces competition in individual markets from local companies. Its consumer panel services and analytics services have many direct and/or indirect competitors in all markets around the world including in selected cases, GfK SE, Ipsos Group S.A., the Kantar group and local companies in individual countries.

Regulatory Matters

SpinCo’s operations are subject to and affected by data protection laws in many countries. These laws pertain primarily to personal data (i.e., information relating to an identified or identifiable individual), constrain whether and how SpinCo collects personal data, how that data may be used and stored, and whether, to whom and where that data may be transferred. What constitutes “personal data” varies from country to country and continues to evolve. Data collection methods that may not always be obvious to the individual providing the data, like the use of cookies online, or that present a higher risk of abuse, such as collecting data directly from children, tend also to be more highly regulated, and products that rely on these technologies may require re-engineering to comply with new laws. In addition, data transfer constraints can impact multinational access to a central database and cross-border data transfers.

Some of the personal data SpinCo collects may be considered “sensitive” by the laws of many jurisdictions because they may include certain demographic information and consumption preferences. Sensitive personal data is typically more highly regulated than non-sensitive data. Generally, this means that for sensitive data, the consent of the individual providing the data should be more explicit and fully informed and security measures surrounding the storage of the data should be more rigorous. The greater constraints that apply to the collection and use of sensitive personal data increase the administrative and operational burdens and costs of panel recruitment and management.

Despite these challenges, SpinCo’s commitment to privacy and data protection issues offers it a competitive advantage. Because SpinCo recognizes the importance of privacy to its panelists, its customers, consumers in general, and regulators, SpinCo devotes dedicated resources to enhancing its privacy and security practices in its product development plans and other areas of operation, and participates in privacy policy organizations and “think tanks.” SpinCo does this to improve both its practices and the perception of its company as a leader in this area.

Global Responsibility and Sustainability

Through responsible, sustainable business practices and a commitment to giving back, SpinCo cares for the communities and markets where it operates its business. SpinCo’s global responsibility and sustainability (“GR&S”) strategy includes environmental, social and governance (“ESG”) issues, impacting its operations, supply chain and stakeholders.

With direction from its Nomination and Corporate Governance Committee, SpinCo’s GR&S team manages relevant risks and opportunities in collaboration with internal legal counsels, including its human resources counsel and its technology and operations counsel. As part of SpinCo’s commitment to stakeholder engagement, will conduct a non-financial materiality assessment every two years. As part of SpinCo’s ESG strategy, this assessment identifies the most critical ESG issues to its stakeholders and business.

 

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Employees

SpinCo expects to employ approximately [                ] individuals as of the distribution date, [                    ] of whom are represented by labor unions and [                ] of whom are represented by works councils in Europe.

Legal Proceedings

SpinCo is subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, SpinCo expects that the ultimate disposition of these matters will not have a material adverse effect on its operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect its future results of operations or cash flows in a particular period.

Properties

SpinCo’s corporate headquarters is located in [                ]. SpinCo leases property in approximately 310 locations worldwide with a total square footage of approximately 3.6 million square feet leased. SpinCo believes that its existing properties are in good condition and are suitable for the conduct of its business.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SPINCO

Introduction

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of SpinCo (“MD&A”) should be read in conjunction with the other sections of this joint proxy statement/information statement, including “Risk Factors,” “SpinCo Business,” “Cautionary Statement Concerning Forward-Looking Statements,” “Summary Historical and Pro Forma Financial Data,” “Selected Historical Financial Data of SpinCo,” “Unaudited Pro Forma Condensed Combined Financial Statements of SpinCo,” and the Combined Financial Statements and Unaudited Condensed Combined Financial Statements of SpinCo, including their respective accompanying notes thereto, included or incorporated by reference elsewhere in this joint proxy statement/information statement. This MD&A contains a number of forward-looking statements. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those projected or implied in the forward-looking statements. See the sections entitled “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the risks, uncertainties, and assumptions associated with these statements.

Background and Executive Summary

SpinCo is a global data analytics and measurement company, with a broad geographic presence in approximately 100 countries and services covering approximately 90% of the world’s population, according to population estimates published by the United Nations. Through its measurement, SpinCo believes that it has the best and most comprehensive understanding of the world’s consumer. SpinCo takes this understanding and delivers trusted data, advanced solutions and essential insights to manufacturers and retailers, so they can make more informed marketing and merchandising decisions. SpinCo’s information on consumer behavior allows its retail and CPG clients to quickly identify opportunities for growth, reduce inefficiencies and strengthen their position in the marketplace. SpinCo invented the concept of market share when, in 1935, its auditors first surveyed store shelves to determine sales patterns, and SpinCo builds upon that industry-defining innovation today.

SpinCo provides these trusted technology-driven products and services to over 20,000 clients:

 

   

Retail Measurement: SpinCo combines detailed sales data with online and offline partner data, in-house expertise and the latest technology to produce the most accurate view of the marketplace. Clients across nearly every retail industry use SpinCo’s information and insights to make manufacturing, marketing, distribution and sales decisions.

 

   

Consumer Panel Measurement: SpinCo’s consumer panels collect data from more than 250,000 household panelists across 24 countries, using a combination of in-home scanners and mobile applications to record purchases, to help its clients understand consumer purchasing trends.

 

   

Analytics: SpinCo’s Connect platform provides a growing selection of automated consumer intelligence and actionable insights that help clients identify unmet consumer needs, improve workflow and make smarter decisions throughout their development and marketing cycles.

 

   

Loyalty: A global leader in loyalty data processing, SpinCo allows its retail clients to understand and act on consumer data sets. SpinCo’s technology also allows retailers to easily share customer data and analytics with their manufacturer partners for mutual growth.

 

   

Advisory Services: SpinCo provides its clients with a suite of customized research services as well as consumer and industry studies to better understand consumer attitudes and purchasing behavior, to evaluate and understand why marketing campaigns succeed or fail, and to address issues such as promotions, pricing and marketing mix.

 

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SpinCo has two major product offerings: Measure and Predict/Activate. The Measure product offering consists of SpinCo’s Retail Measurement and Consumer Panel Measurement products, and the Predict/Activate product offering includes Analytics, Loyalty and Advisory Services products. SpinCo presents these operations in the Combined Financial Statements of SpinCo in one reportable segment.

SpinCo holds leading positions in all major developed markets, as well as emerging markets, including China, India, Russia and Latin America. In 2019, 62% of SpinCo’s revenues came from developed markets and 38% came from emerging markets.

The material terms of SpinCo’s client agreements vary between its Measure product offering and its Predict/Activate product offering.

Approximately 80% of SpinCo’s Measure revenue pertains to continuous services with long-cycle contracts. Of these long-cycle contracts, approximately 60% are multi-year contracts of between three to five years, approximately 30% are annual and approximately 10% are perpetual or evergreen, in each case with high contract renewal rates. Subject to certain customary exceptions, such multi-year and annual contracts are generally only terminable by either party for cause. The perpetual and evergreen contracts are generally terminable for convenience (without any termination fees) upon prior notice. The remaining approximately 20% of SpinCo’s Measure revenue corresponds to short-term, ad hoc services (generally less than 12 months in duration) with short-cycle contracts and varying termination rights.

Approximately 70% of SpinCo’s Predict/Activate revenue pertains to short-term, ad hoc services (generally less than 12 months in duration) with short-cycle contracts. The remaining approximately 30% pertain to long-cycle services with a duration of 12 months or more. In SpinCo’s Predict/Activate contracts (across both long-cycle and short-cycle contracts), clients typically may terminate their contracts for convenience (with varying notice requirements) but must either pay a termination fee to SpinCo and/or compensate SpinCo for the value of the work it performed prior to such termination.

Across all of its revenue streams, SpinCo’s pricing is generally based on standard rate cards, which are generally updated annually. Furthermore, in multiple markets, SpinCo’s long-cycle contracts across its Measure revenue stream generally permit SpinCo to automatically adjust the contract price annually to account for changes in consumer price indices.

At the beginning of each year, approximately 60% of SpinCo’s revenue base for the upcoming year is typically committed under existing client agreements. SpinCo’s top five clients represented approximately 16% of its revenues for the year ended December 31, 2019, and the average length of relationship with these clients is over 30 years. No single client accounted for 5% or more of SpinCo’s revenues in 2019. Subscription revenue made up approximately 60% of SpinCo’s revenue for the year ended December 31, 2019, and non-subscription revenue represented approximately 40%.

SpinCo’s investments in developing markets with a rising middle class, as well as its trusted reputation and breadth of solutions make it particularly suited to take advantage of future growth opportunities in consumer behavior measurement. SpinCo invested approximately $14 million in 2019 to grow its business in emerging markets, including increasing the breadth and depth of its retail measurement services business and its data-sharing partnerships with retailers in those markets. Also, in 2019, SpinCo acquired a leading retail measurement services business in Latin America, which expanded SpinCo’s retail measurement footprint in the region and also enabled SpinCo to strengthen its partnerships with retailers in the region.

SpinCo believes that important measures of its results of operations include revenue, operating income/(loss), and Adjusted EBITDA (defined below). SpinCo’s long-term financial objectives include consistent revenue growth, efficient capital allocation, and expanding operating margins. Accordingly, SpinCo is focused on geographic market and service offering expansion to drive revenue growth and improve operating efficiencies, including effective resource utilization, information technology leverage, and overhead cost management.

 

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SpinCo’s business strategy is built upon a model that has historically yielded consistent revenue performance, although there is no assurance this will continue, particularly in light of the current economic climate. SpinCo continues to look for growth opportunities through global expansion, specifically within emerging markets, as well as through the cross-platform expansion of its analytical services and measurement services.

SpinCo’s restructuring and other productivity initiatives have been focused on a combination of improving operating leverage through targeted cost-reduction programs, business process improvements, and portfolio restructuring actions, while at the same time investing in key programs to enhance future growth opportunities.

On June 30, 2020, SpinCo announced a broad-based optimization plan (the “Restructuring Plan”) to drive permanent cost savings and operational efficiencies, as well as to position us for greater profitability and growth. SpinCo expects the Restructuring Plan to be substantially completed in 2020 and for restructuring actions and other permanent cost-savings initiatives to drive approximately $130 million in pre-tax annual run-rate savings. SpinCo expects 2020 pre-tax restructuring charges of $100 to $120 million.

Achieving SpinCo’s business objectives requires it to manage a number of key risk areas. SpinCo’s growth objective of geographic market and service expansion requires it to maintain the consistency and integrity of its information and underlying processes on a global scale, and to invest effectively its capital in technology and infrastructure to keep pace with its clients’ demands and its competitors. Core to managing these key risk areas is SpinCo’s commitment to data privacy and security, as it drives SpinCo’s ability to deliver quality insights for its clients in line with evolving regulatory requirements and governing standards across all the geographies and industries in which it operates. SpinCo’s operating footprint across more than 100 countries requires disciplined global and local resource management of internal and third-party providers to ensure success.

SpinCo’s historical combined financial statements have been prepared on a standalone basis and are derived from Nielsen’s consolidated financial statements and accounting records and are presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). SpinCo’s financial position, results of operations, and cash flows historically have been included, and will continue to be included, as part of Nielsen’s financial position, results of operations, and cash flows until the separation and distribution. These historical combined financial statements may not be indicative of SpinCo’s future performance and do not necessarily reflect what SpinCo’s combined results of operations, financial condition, and cash flows would have been had SpinCo operated as a separate, publicly traded company during the periods presented.

The separation and distribution will result in incremental costs related to operating as a public company, such as compensating an independent board of directors, increased personnel costs, compliance with regulatory and stock exchange requirements, increased auditing and insurance fees and development of internal infrastructure and support functions, which costs were preliminarily estimated to be approximately $[ ] million to $[ ] million on an annual basis. The separation and distribution will also result in one-time separation costs, such as costs of legal counsel, financial advisors, consultants, debt issuance costs, the audit of SpinCo’s historical financial statements and accounting and valuation advisory work related to the separation, which costs were preliminarily estimated to be approximately $[ ] million to $[ ] million and will be paid by Nielsen.

Prior to or concurrently with the separation and distribution, SpinCo expects to enter into certain agreements with Nielsen resulting from and relating to the separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property matters agreement, a trademark license agreement, and a master services agreement. The terms of these agreements, including information on the business purpose of such agreements, transaction prices, related ongoing contractual commitments, and any related special risks or contingencies are discussed in greater detail in the section entitled “SpinCo’s Relationship with Nielsen Following the Separation and Distribution.” These agreements will also allow SpinCo to operate its business independently prior to establishing its full stand-alone infrastructure.

The master services agreement will provide for the mutual licensing of data and the provision of certain services by SpinCo to Nielsen. SpinCo estimates that if this agreement was in place during the six months ended

 

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June 30, 2020 and year ended December 31, 2019, SpinCo’s revenue would have increased by approximately $[ ] million and $[ ] million, respectively, and SpinCo’s gross margin would have increased by approximately $[ ] million and $[ ] million, respectively. The master services agreement is intended to enable the parties and their respective subsidiaries to continue using certain data and services in the operation of their businesses after the separation and distribution. The agreed-upon fees for the licensed data and the related services are generally intended to (i) allow the providing party to recover all costs and expenses of providing such services or licensing such data plus a mark-up over those costs and expenses or (ii) provide for a profit-sharing approach, in both cases so that the data and services will be provided on an arm’s-length basis. The estimates for the revenue to be earned and expenses to be incurred by SpinCo are based on historical experience with the relevant data to be licensed and services to be provided, along with the retrospective application of agreed-upon pricing models as described above.

COVID-19

In March 2020, the global outbreak of the novel coronavirus (“COVID-19”) was categorized as a pandemic by the World Health Organization and has negatively affected the global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets.

SpinCo has established a global task force to ensure execution of its key priorities during the COVID-19 pandemic—the health and safety of its global workforce, maintaining its financial position with ample liquidity, and continuity of critical business processes.

SpinCo has taken measures to protect the health and safety of its employees, their families and SpinCo’s clients, with a large majority of SpinCo’s worldwide workforce working from home. SpinCo has halted in-store field research and in-person client engagements in its markets and is adapting processes and developing innovative solutions to ensure continuity of critical business processes. In addition, SpinCo is sharing retail measurement data with several government entities to support its communities.

SpinCo delivered solid results in the first quarter, but saw slowing momentum as the quarter progressed. SpinCo faced increased pressure in the second quarter. This was primarily due to the impact of COVID-19 on retail measurement services in markets that are heavy in traditional trade as well as pressure on custom insights and innovation. These pressures are continuing, though to a lesser extent, primarily due to non-subscription project revenues.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants, and investments. The CARES Act is not expected to have a material impact on SpinCo’s effective tax rate due to existing U.S. losses. SpinCo continues to monitor any future effects that may result from the CARES Act.

SpinCo believes it has a sound plan in place to mitigate the financial impacts of the COVID-19 pandemic in the face of ongoing economic uncertainty. SpinCo has taken aggressive cost actions to date and continues to closely monitor the situation. SpinCo remains well-capitalized, has sufficient liquidity to satisfy its cash needs and will take additional actions as required.

For further discussion regarding the potential impacts of COVID-19 and related economic conditions on SpinCo, see the section entitled “Risk Factors.”

Critical Accounting Policies

The discussion and analysis of SpinCo’s financial condition and results of operations is based on the Combined Financial Statements of SpinCo, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most

 

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significant of these policies relate to: revenue recognition; business combinations including purchase price allocations; accruals for pension costs and other post-retirement benefits; accounting for income taxes; and valuation of long-lived assets, including goodwill and indefinite-lived intangible assets. SpinCo based estimates on historical experience and on various other assumptions that are reasonable under the circumstances, the results of which form the basis for making judgments about the valuation of assets and liabilities that are not readily apparent from other sources. SpinCo evaluates these estimates on an ongoing basis. Actual results could vary from these estimates under different assumptions or conditions. For a summary of the significant accounting policies, including the critical accounting policies discussed below, see Note 3 (“Summary of Significant Accounting Policies”) to the Combined Financial Statements of SpinCo.

Revenue Recognition

On January 1, 2018, SpinCo adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, using the modified retrospective method. The ASC has been applied to all contracts as of the date of adoption. There was no impact on SpinCo’s financial statements as a result of this adoption.

Revenue is measured based on the consideration specified in a contract with a customer. SpinCo recognizes revenue when it satisfies a performance obligation by transferring control of a product or service to a customer, which generally occurs over time. Substantially all of SpinCo’s customer contracts are non-cancelable and non-refundable.

The following is a description of principal activities from which SpinCo generates its revenues.

Revenue from SpinCo consists primarily of measurement services, which include its core tracking and scan data (primarily transactional measurement data and consumer behavior information) to businesses in the consumer-packaged goods industry. SpinCo’s data is used by its clients to measure their market share, tracking billions of sales transactions per month in retail outlets around the world. Revenues for these services are recognized over the period during which the performance obligations are satisfied as the customer receives and consumes the benefits provided by SpinCo and control of the services is transferred to the customer.

SpinCo also provides consumer intelligence and analytical services that help clients make smarter business decisions throughout their product development and marketing cycles. SpinCo’s performance under these arrangements does not create an asset with an alternative use to it and generally includes an enforceable right to payment for performance completed to date; as such, revenue for these services is typically recognized over time. Revenue for contracts that do not include an enforceable right to payment for performance completed to date is recognized at a point in time when the performance obligation is satisfied, generally upon delivery of the services, and when control of the service is transferred to the customer.

SpinCo enters into cooperation arrangements with certain customers, under which the customer provides SpinCo with its data in exchange for SpinCo’s services. SpinCo records these transactions at fair value, which is determined based on the fair value of goods or services received, if reasonably estimable. If not reasonably estimable, SpinCo considers the fair value of the goods or services surrendered.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other indefinite-lived intangible assets are stated at historical cost less accumulated impairment losses, if any.

Goodwill and other indefinite-lived intangible assets, consisting of certain trade names and trademarks, are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. SpinCo reviews the recoverability of goodwill by comparing estimated fair values with respective carrying amounts. SpinCo has designated October 1st as the date on which

 

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the annual assessment is performed, as this timing corresponds with the development of its formal budget and business plan review. During the first quarter of 2020, SpinCo concluded that there was a triggering event for an interim assessment.

SpinCo established, and continues to evaluate, its reporting unit based on internal reporting structure and defines the reporting unit at the operating segment level. The estimates of fair value of the reporting unit are determined using a combination of valuation techniques, primarily by an income approach using a discounted cash flow analysis and supplemented by a market-based approach.

A discounted cash flow analysis requires the use of various assumptions, including expectations of future cash flows, growth rates, discount rates, and tax rates in developing the present value of future cash flow projections. Many of the factors used in assessing fair value are outside of the control of management, and these assumptions and estimates can change in future periods. Changes in assumptions or estimates could materially affect the determination of the fair value of the reporting unit, and therefore could affect the amount of potential impairment. The following assumptions are significant to SpinCo’s discounted cash flow analysis:

 

   

Business projections—expected future cash flows and growth rates are based on assumptions about the level of business activity in the marketplace as well as applicable cost levels that drive SpinCo’s budget and business plans. Management updated the business projections in light of the estimated impacts from the COVID-19 pandemic. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions, and a slower or weaker economic recovery than currently estimated by management could have a significant impact on the estimated fair value of SpinCo’s reporting unit and could result in an impairment charge in the future. Should such events or circumstances arise, management would evaluate other options available at that time that, if executed, could result in future profitability.

 

   

Long-term growth rates—the assumed long-term growth rate representing the expected rate at which the reporting unit’s earnings stream, beyond that of the budget and business plan period, is projected to grow. These rates are used to calculate the terminal value, or value at the end of the future earnings stream, and are added to the cash flows projected for the budget and business plan period. The long-term growth rate is influenced by general market conditions and specific factors such as the maturity of the underlying services. The long-term growth rate used in SpinCo’s first quarter of 2020 and 2019 evaluation were both 1.5%.

 

   

Discount rates—combined future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that is likely to be used by market participants. The weighted-average cost of capital is SpinCo’s estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. The discount rate is influenced by general market conditions as well as factors specific to the reporting unit. The discount rates used in SpinCo’s first quarter of 2020 evaluation was 12.0%, and for the 2019 evaluation was 11.25%.

SpinCo believes that the estimates and assumptions made are reasonable, but they are susceptible to change from period to period.

SpinCo also uses a market-based approach in estimating the fair value of its reporting unit. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings, next year’s revenue and earnings, and recent comparable transactions.

SpinCo performs a sensitivity analysis on its assumptions, primarily around both long-term growth rate and discount rate assumptions. SpinCo’s sensitivity analyses include several combinations of reasonably possible scenarios with regard to these assumptions, including a 1% movement in both SpinCo’s long-term growth rate and discount rate assumptions. When applying these sensitivity analyses, SpinCo noted that the fair value was

 

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greater than the carrying value for its reporting unit. While SpinCo management believes that these sensitivity analyses provide a reasonable basis on which to evaluate the recovery of goodwill, other facts or circumstances may arise that could impact the impairment assessment and therefore these analyses should not be used as a sole predictor of impairment. As a result of SpinCo’s interim impairment assessment as of March 31, 2020, SpinCo determined that the estimated fair values of its reporting unit exceed its carrying value (including goodwill), thus no impairment was recorded. Based on SpinCo’s second quarter results and projections, there were no indicators of impairment during the second quarter of 2020. SpinCo will continue to closely evaluate any indicators of future impairments.

In connection with Nielsen’s strategic review, there were indications that the fair value of SpinCo was lower than the carrying value. SpinCo considered this as well as other factors to be interim indicators of impairment and determined that it was more likely than not that the SpinCo reporting unit was impaired. Management performed an updated impairment analysis of SpinCo as of September 30, 2019. As a result of this analysis, SpinCo concluded that the fair value was less than the carrying value and recorded a non-cash goodwill impairment charge of $1,004 million. The primary inputs for determining the estimated fair value were inputs from the strategic review process, market values for comparable entities, and updated intrinsic values. SpinCo conducted the annual assessment as of October 1, 2019 and concluded that there was no impairment.

The amount by which fair value exceeded carrying value was between 10% and 20% at the time of our 2019 annual impairment test.

The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of trade names and trademarks are determined using a “relief from royalty” discounted cash flow valuation methodology, which includes revenue projections. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace. There was no impairment noted in any period presented with respect to SpinCo’s indefinite-lived intangible asset. As of the March 31, 2020 assessment, SpinCo’s indefinite-lived intangible assets had a fair value that exceeded its carrying value by less than 5%. As of the October 1, 2019 assessment, SpinCo’s indefinite-lived intangible asset had a fair value that exceeded its carrying value by less than 10%. The valuation is sensitive to the assumptions listed above. A downward trend in revenue projections or an increase in discount rate could lead to a future impairment. SpinCo concluded that there was no triggering event for an interim impairment assessment for the three-month period ending June 30, 2020. SpinCo will continue to closely evaluate and report on any indicators of future impairments.

Pension Costs

Nielsen sponsors both funded and unfunded defined benefit pension plans (the “Pension Plans” or “plans”) and post-retirement medical plans for some of its employees in the Netherlands, the United States and other international locations. Where permitted by applicable law, Nielsen reserves the right to change, modify or discontinue the pension plans. Nielsen offers plans that are shared among its businesses, including SpinCo. In these cases, the participation of employees in these plans is reflected in these financial statements as though SpinCo participates in a multiemployer plan with Nielsen. A proportionate share of the net periodic benefit cost is recorded in Other income/(expense), net in the Combined Statements of Operations. Assets and liabilities of such plans are retained by Nielsen. The amount of net periodic benefit costs reflected in the Combined Statements of Operations relating to these multiemployer plans were $0.3 million and $3 million, for the six months ended June 30, 2020 and 2019 respectively, and $8 million, $4 million and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively.

 

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For plans that are not shared among Nielsen businesses and provide the majority of pension benefits to the employees of SpinCo, the projected benefit obligation and related net periodic benefit costs are reflected within the Combined Financial Statements of SpinCo as though SpinCo participates in a single employer plan. The amount of net periodic benefit costs reflected within the Combined Statements of Operations for the single employer plans was $3 million and $(0.3) million, for the six months ended June 30, 2020 and 2019 respectively, and $165 million, $4 million and $3 million for the years ended December 31, 2019, 2018 and 2017, respectively.

A proportionate share of the net periodic benefit cost will be charged to Nielsen for the participation of employees from other Nielsen businesses for both service and nonservice related costs. Service costs are recorded in Selling, general and administrative expenses and nonservice costs are recorded in Other income/(expense), net in the Combined Statements of Operations as though Nielsen participates in a Connect pension plan. The amount of net periodic benefit costs charged to Nielsen and reflected as income in the Combined Statements of Operations for service charges were $1 million for both the six months ended June 30, 2020 and 2019, and $1 million, $3 million and $4 million for the years ended December 31, 2019, 2018 and 2017, respectively. The amount of net periodic benefit costs charged to Nielsen and reflected as Other income/(expense), net in the Combined Statements of Operations for nonservice charges were $(0.2) million and $(2) million, for the six months ended June 30, 2020 and 2019 respectively, and $63 million, $(3) million and $(4) million for the years ended December 31, 2019, 2018 and 2017, respectively. The $63 million charge to Nielsen in 2019 primarily relates to pension settlements.

For the single employer plans of SpinCo, the determination of benefit obligations and expenses is based on actuarial models. To measure benefit costs and obligations using these models, critical assumptions are made with regard to the discount rate, the expected return of plan assets and the assumed rate of compensation increases. These assumptions are reviewed at least annually.

The discount rate is the rate at which the benefit obligations could be effectively settled. For SpinCo’s U.S. plans, the discount rate is based on a bond portfolio that includes only long-term bonds with an AA rating, or equivalent, from a major rating agency. For the Dutch and other non-U.S. plans, the discount rate is set by reference to market yields on high-quality corporate bonds. SpinCo believes the timing and amount of cash flows related to the bonds in these portfolios are expected to match the estimated payment benefit streams of its plans.

To determine the expected long-term rate of return on pension plan assets, SpinCo considers, for each country, the structure of the asset portfolio and the expected rates of return for each of the components. For SpinCo’s UK plan, a 50 basis point decrease in the expected return on assets would increase pension expense on SpinCo’s principal plans by approximately $1 million per year. SpinCo assumed that the weighted averages of long-term returns on its pension plans were 4.4% for the year ended December 31, 2019, 4.0% for the year ended December 31, 2018, and 4.2% for the year ended December 31, 2017. The expected long-term rate of return is applied to the fair value of pension plan assets. The actual return on plan assets will vary year to year from this assumption. Although the actual return on plan assets will vary from year to year, it is appropriate to use long-term expected forecasts in selecting SpinCo’s expected return on plan assets. As such, there can be no assurance that its actual return on plan assets will approximate the long-term expected forecasts.

During 2019, certain of SpinCo’s pension plans contracted with insurance companies and transferred $578 million of outstanding defined benefit pension obligations and related pension assets for approximately 5,900 retirees and beneficiaries in the Netherlands to these insurance companies. These insurance companies are now required to pay and administer the retirement benefits owed to these retirees and beneficiaries. These transactions have no impact on the amount, timing, or form of the monthly retirement benefit payments to the covered retirees and beneficiaries. These transactions resulted in a non-cash charge to Other income/(expense), net of $165 million in the Combined Statements of Operations and did not impact cash flows in 2019.

 

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Income Taxes

SpinCo has a presence in more than 100 countries, and effective tax rates are subject to significant variation due to several factors including variability in pre-tax and taxable income or loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in where or how SpinCo does business, acquisitions or dispositions, audit-related developments, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. Additionally, the effective tax rate can fluctuate based on the level of pre-tax income or loss. For example, the impact of non-deductible expenses on SpinCo’s effective tax rate is greater when its pre-tax income is lower.

In general, the taxable income/(loss) of the various SpinCo business entities was included in Nielsen’s consolidated tax returns, where applicable, in jurisdictions around the world. As such, separate income tax returns were not prepared for certain SpinCo business entities. Consequently, income taxes currently payable are deemed to have been remitted to Nielsen, through net Parent investment, in the period the liability arose, and income taxes currently receivable are deemed to have been received from Nielsen in the period that a refund could have been recognized had SpinCo been a separate taxpayer.

SpinCo has to use its judgment to make various tax determinations. SpinCo has sought to organize the affairs of its subsidiaries in a tax-efficient manner, taking into consideration the jurisdictions in which it operates. Although SpinCo is confident that tax returns have been appropriately prepared and filed, there is risk that additional tax may be assessed on certain transactions or that the deductibility of certain expenditures may be disallowed for tax purposes. SpinCo’s policy is to estimate tax risk to the best of its ability and provide accordingly for those risks and take positions in which a high degree of confidence exists that the tax treatment will be accepted by the tax authorities. The policy with respect to deferred taxation is to provide in full for temporary differences using the liability method.

Deferred tax assets and deferred tax liabilities are computed by assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The carrying value of deferred tax assets is adjusted by a valuation allowance to the extent that these deferred tax assets are not considered to be realized on a more-likely-than-not basis. Realization of deferred tax assets is based, in part, on SpinCo’s judgment and various factors, including reversal of deferred tax liabilities, its ability to generate future taxable income in jurisdictions where such assets have arisen, and potential tax planning strategies. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount expected to be realized in the future.

SpinCo records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Such tax positions are, based solely on their technical merits, more likely than not to be sustained upon examination by taxing authorities and reflect the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. SpinCo recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Long-Lived Assets

SpinCo is required to assess whether the value of SpinCo’s long-lived assets, including its buildings, improvements, technical and other equipment, and amortizable intangible assets have been impaired whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. SpinCo does not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. Recoverability of assets that are held and used is measured by comparing the sum of the future

 

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undiscounted cash flows expected to be derived from an asset (or a group of assets) to their carrying value. If the carrying value of the asset (or the group of assets) exceeds the sum of the future undiscounted cash flows, impairment is considered to exist. If impairment is considered to exist based on undiscounted cash flows, the impairment charge is measured using an estimation of the assets’ fair value, typically using a discounted cash flow method. The identification of impairment indicators, the estimation of future cash flows, and the determination of fair values for assets (or groups of assets) requires SpinCo to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows, and applicable discount rates. These estimates are subject to revision as market conditions and SpinCo’s assessments change.

SpinCo capitalizes software development costs with respect to major internal-use software initiatives or enhancements. The costs are capitalized from the time that the preliminary project stage is completed, and SpinCo considers it probable that the software will be used to perform the function intended until the time the software is placed in service for its intended use. Once the software is placed in service, the capitalized costs are generally amortized over periods of three to seven years. If events or changes in circumstances indicate that the carrying value of software may not be recovered, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the software in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. These estimates are subject to revision as market conditions and as its assessments change.

Corporate Expense Allocation

The Combined Financial Statements of SpinCo include general corporate expenses for certain support functions that are provided on a centralized basis, such as expenses related to executive management, finance, audit, legal, information technology infrastructure, human resources, communications, facilities, employee benefits, and compensation. Throughout the period covered by the financial statements, the costs of such functions, services, and items have been directly charged or allocated to SpinCo using methods SpinCo management believes are reasonable. The methods for allocating functions, services, and items to SpinCo, if not specifically identified, are based on a proportional-allocation basis of revenue and headcount. All such costs have been deemed to have been incurred and settled through net Parent investment in the period when the costs were recorded.

Factors Affecting SpinCo’s Financial Results

Acquisitions, Dispositions and Investments in Affiliates

Acquisitions

For the six months ended June 30, 2020, SpinCo paid cash consideration of $25 million associated with current period acquisitions, net of cash acquired. Had these 2020 acquisitions occurred as of January 1, 2020, the impact on SpinCo’s results of operations would not have been material.

For the year ended December 31, 2019, SpinCo paid cash consideration of $16 million associated with current-period acquisitions, net of cash acquired. Had these 2019 acquisitions occurred as of January 1, 2019, the impact on combined results of operations would not have been material.

Dispositions

In December 2016, SpinCo completed the sale of Claritas, a business focusing on consumer segmentation insights, for cash consideration of $34 million and a note receivable of $60 million. The note is payable at any time over three years and bears interest at 3% in year one, 5% in year two, and 7% in year three. In 2017, upon finalization of working capital and other settlement matters, SpinCo reduced the note receivable to $51 million and recorded a charge of $13 million to Other income/(expense), net in the Combined Statements of Operations. In December 2018, SpinCo received $51 million as payment for the note receivable.

 

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Foreign Currency

SpinCo’s financial results are reported in U.S. dollars and are therefore subject to the impact of movements in exchange rates on the translation of the financial information of individual businesses whose functional currencies are other than U.S. dollars. SpinCo’s principal foreign exchange revenue exposure is spread across several currencies, primarily the Euro. The table below sets forth the profile of SpinCo’s revenue by principal currency.

 

     Six Months
Ended June 30,
    Year Ended
December 31,
 
     2020     2019     2019     2018     2017  

U.S. Dollar

     31     29     29     29     33

Euro

     17     17     17     17     16

Other Currencies

     52     54     54     54     51
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As a result, fluctuations in the value of foreign currencies relative to the U.S. dollar impact SpinCo’s operating results. In countries with currencies other than the U.S. dollar, assets and liabilities are translated into U.S. dollars using end-of-period exchange rates; revenues, expenses, and cash flows are translated using average rates of exchange. The average U.S. dollar to Euro exchange rate was $1.10 to €1.00 and $1.13 to €1.00 for the six months ended 2020 and 2019, respectively, and $1.12 to €1.00, $1.18 to €1.00, and $1.13 to €1.00 for the years ended December 31, 2019, 2018, and 2017, respectively. Constant currency growth rates used in the following discussion of results of operations eliminate the impact of year-over-year foreign currency fluctuations.

SpinCo evaluates its results of operations on both an as-reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. SpinCo believes providing constant currency information provides valuable supplemental information regarding results of operations, thereby facilitating period-to-period comparisons of its business performance and is consistent with how management evaluates SpinCo’s performance. SpinCo calculates constant currency percentages by converting prior-period local currency financial results using the current-period exchange rates and comparing these adjusted amounts to current-period reported results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with U.S. GAAP, nor should such amounts be considered in isolation.

Accounts Receivable

SpinCo extends non-interest bearing trade credit to our customers in the ordinary course of business. To minimize credit risk, ongoing credit evaluations of client’s financial condition are performed. Effective January 1, 2020, SpinCo adopted ASU, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Prior to the adoption, an estimate of the allowance for doubtful accounts was made when collection of the full amount was no longer probable (incurred loss) or returns were expected. Subsequent to the adoption, as noted in “Summary of Recent Accounting Pronouncements” below, the allowance for doubtful accounts is made when collection of the full amounts is no longer probable by also incorporating reasonable and supportable forecasts (expected loss).

The uncertainty regarding the length of lock-downs related to the COVID-19 pandemic and speed of recovery may impact our level of reserves in future periods. SpinCo continues to monitor and assess the impacts related to its different clients and will base its reasonable forecasts on the latest information available.

During the six months ended June 30, 2020, SpinCo sold $65 million of accounts receivables to third parties and recorded an immaterial loss on the sale to interest expense, net in the Condensed Combined Statement of

 

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Operations. As of June 30, 2020 and December 31, 2019, $0 million and $18 million, respectively, of previously sold receivables remained outstanding. The sales were accounted for as true sales, without recourse. SpinCo maintains servicing responsibilities of the majority of the receivables sold during the year, for which the related costs are not significant. The proceeds of $65 million from the sales were reported as a component of the changes in Trade and other receivables, net within operating activities in the Condensed Combined Statements of Cash Flows for the six months ended June 30, 2020.

Operations in Argentina

SpinCo has operations in Argentina and the functional currency for those operations is the Argentine Peso. In accordance with U.S. GAAP, Argentina’s currency has been considered hyperinflationary since July 1, 2018, and, accordingly, local currency transactions have been denominated in U.S. dollars since July 1, 2018, and will continue to be denominated in U.S. dollars until Argentina’s currency is no longer deemed to be hyperinflationary. SpinCo will continue to assess the appropriate conversion rate based on events in Argentina and Argentina operations. This event has had an immaterial impact on the Combined Financial Statements of SpinCo.

Results of Operations—For the Six Months Ended June 30, 2020 and 2019 and Years Ended December 31, 2019, 2018 and 2017

The following table sets forth, for the periods indicated, the amounts included in the Combined Statements of Operations:

 

     Six Months Ended
June 30,
    Year Ended December 31,  
(in millions)    2020     2019     2019     2018     2017  

Revenues

   $ 1,402     $ 1,509     $ 3,057     $ 3,138     $ 3,278  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown separately below

     791       801       1,653       1,624       1,565  

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     526       576       1,086       1,214       1,228  

Depreciation and amortization

     140       123       249       212       214  

Impairment of goodwill and other long-lived assets

     4       —         1,004       1,412       —    

Restructuring charges

     63       26       50       100       55  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income/(loss)

     (122     (17     (985     (1,424     216