DEFA14A: Cartesian II & PLXSUR Ink Framework for Business Combo

Cartesian Growth Corporation II, a SPAC, has entered into a non-binding Letter of Framework with PLXSUR Limited for a potential business combination, outlining key terms and a shared vision.

Summary

• Cartesian Growth Corporation II (Cartesian), a special purpose acquisition company, has entered into a non-binding Letter of Framework (Business Combination Framework) with PLXSUR Limited (PLXSUR), an English private limited company, for a potential business combination.
• The Proposed Transaction involves PLXSUR becoming a direct wholly-owned subsidiary of a newly formed Cayman Islands company, PubCo, and Cartesian merging into a Merger Sub (a wholly-owned subsidiary of PubCo), with Cartesian surviving as a wholly-owned subsidiary of PubCo.
• PLXSUR shareholders will transfer their shares to PubCo and receive PubCo Ordinary Shares as consideration.
• Cartesian's Class B Ordinary Shares will automatically convert into Class A Ordinary Shares, and any outstanding Cartesian Units will separate into Class A Ordinary Shares and Cartesian Public Warrants.
• CGC II Sponsor LLC (Sponsor) has agreed to a Sponsor Support Agreement, which includes not converting Sponsor Loans into Private Placement Warrants, amending Sponsor Loan terms for repayment within six months post-closing, transferring 1,000,000 Cartesian Ordinary Shares to certain PLXSUR shareholders, voting in favor of the transaction, not redeeming Class B shares, and waiving anti-dilution provisions.
• The Sponsor will also exchange 6,600,000 Cartesian Private Placement Warrants for 349,947 newly issued PubCo Ordinary Shares.
• The parties intend for the Merger and the Company Exchange to qualify as exchanges described in Section 351 of the U.S. Internal Revenue Code for tax purposes.
• Cartesian will seek shareholder approval to extend the time period for consummating its initial business combination to at least March 31, 2026.

Sentiment

Score: 6

Explanation: The announcement of a framework agreement for a business combination is a positive step for a SPAC, indicating progress towards its primary objective. Sponsor support and intended tax treatment are favorable. However, the non-binding nature, reliance on future approvals, and the need for a deadline extension introduce significant uncertainties and risks, preventing a higher score. Key financial details are also omitted.

Positives

• A non-binding framework agreement has been established, indicating significant progress towards a definitive business combination for Cartesian.
• The Sponsor has committed to supporting the transaction through voting agreements, non-redemption of Class B shares, and waiving anti-dilution provisions, enhancing deal certainty.
• Sponsor loans will be amended for repayment within six months after closing, which could reduce post-merger debt obligations.
• The transaction is intended to qualify for favorable U.S. federal income tax treatment under Section 351 of the Code.
• PubCo Ordinary Shares are expected to be approved for listing on Nasdaq, providing a public market for the combined entity's shares.

Negatives

• The Letter of Framework is non-binding, meaning there is no guarantee that a definitive business combination agreement will be entered into or that the transaction will be consummated.
• The transaction is subject to various approvals, including board, stakeholder, and regulatory approvals, which may not be obtained.
• Cartesian's ability to consummate the business combination by its current termination date is uncertain, necessitating a shareholder vote for an extension.
• The 'Warrant Accounting Matter' is identified as a potential factor that could lead to a Cartesian Material Adverse Effect.
• Key financial figures, such as the exact amount in the Trust Fund and the Company Value of PLXSUR, are omitted from the public filing, limiting immediate financial assessment.

Risks

• Failure to enter into a definitive business combination agreement with PLXSUR or to consummate the Proposed Transaction by Cartesian's termination date (which may require an extension).
• Inability to obtain necessary board, stakeholder, and regulatory approvals for the transaction.
• Risks related to the financial performance of PLXSUR, which could materially differ from expectations.
• Potential material adverse effects on Cartesian due to changes in or interpretation of U.S. GAAP, including the 'Warrant Accounting Matter'.
• The number of Cartesian Shareholders who exercise their redemption rights could reduce the funds available for the business combination.
• Failure to obtain shareholder approval for the Extension Proposal could lead to Cartesian's liquidation.
• Potential for litigation or regulatory actions related to the transaction or the companies' operations.

Future Outlook

The company intends to consummate a business combination with PLXSUR Limited, with PubCo Ordinary Shares expected to be listed on Nasdaq. Cartesian will seek shareholder approval to extend its business combination deadline to at least March 31, 2026, and may pursue private placements to support the transaction.

Management Comments

• The Company believes that it can consummate an initial business combination with PLXSUR.
• The parties memorialize their progress and shared vision with the attached Business Combination Framework.

Industry Context

This filing represents a typical de-SPAC transaction where a Special Purpose Acquisition Company (SPAC) identifies and enters into a business combination with a private operating company (PLXSUR Limited) to take it public. The mention of the 'Warrant Accounting Matter' reflects a broader regulatory scrutiny and accounting challenge faced by many SPACs in the industry. The intention to list on Nasdaq is standard for such transactions, aiming to provide the combined entity with access to public capital markets.

Comparison to Industry Standards

• The transaction follows a common SPAC structure involving a merger with a private company (PLXSUR) and the creation of a new public entity (PubCo), which is a standard approach for de-SPAC transactions.
• The Sponsor Support Agreement, including voting commitments, non-redemption, and waiver of anti-dilution rights, is a typical feature in SPAC mergers to ensure deal certainty and alignment of interests.
• The explicit mention of the 'Warrant Accounting Matter' highlights a significant industry-wide issue for SPACs following SEC guidance, indicating compliance efforts or acknowledgment of potential accounting complexities.
• The intention for the transaction to qualify as a Section 351 exchange is a common strategy in business combinations to achieve tax-efficient outcomes for shareholders.
• The plan to list PubCo Ordinary Shares on Nasdaq is a standard goal for companies going public via a SPAC, aiming for a reputable exchange with established liquidity.

Management Changes

Corporate Governance

Legal Proceedings

• No material Action is pending or, to the knowledge of Cartesian, threatened against Cartesian or any of its property or assets before any Governmental Authority.
• No material Action is pending or, to the knowledge of PLXSUR, threatened against PLXSUR or any Company Subsidiary, or any property or asset of PLXSUR or any Company Subsidiary, before any Governmental Authority or any other person.
• Neither PLXSUR nor any Company Subsidiary, nor to PLXSUR's knowledge, any director, officer, key employee, auditor, accountant or representative, has received any written complaint, allegation, assertion or claim regarding accounting or auditing practices or internal accounting controls in the past three years.

Related Party Transactions

• PLXSUR Limited entered into a Loan Agreement and an Advance Subscription Agreement with Pangaea Three-B, LP, an exempted limited partnership and an affiliate of the Sponsor, on October 15, 2024.
• The Sponsor Support Agreement and Private Placement Warrant Support Agreement involve CGC II Sponsor LLC, an affiliate of Cartesian, and detail specific commitments and exchanges related to the transaction.
• Cartesian's Section 6.16 of the Cartesian Disclosure Schedules (not provided in filing) would list other contracts between Cartesian and its related parties (officers, directors, equityholders, Sponsor, affiliates).
• PLXSUR's Section 4.21 of the Company Disclosure Schedules (not provided in filing) would list other interested party transactions for PLXSUR.

Stakeholder Impact

• **Shareholders (Cartesian):** Will vote on the business combination and an extension proposal. Those not redeeming will receive PubCo Ordinary Shares. Potential for dilution from private placements.
• **Shareholders (PLXSUR):** Will become shareholders of PubCo, receiving PubCo Ordinary Shares in exchange for their existing shares.
• **Sponsor (CGC II Sponsor LLC):** Has significant involvement through share transfers, warrant exchanges, and voting commitments, aligning its interests with the transaction's success.
• **Employees (PLXSUR):** The company aims to preserve its business organization and avoid terminating key employees and consultants.
• **Customers/Suppliers (PLXSUR):** Efforts will be made to preserve current relationships with customers and suppliers.

Next Steps

• Enter into a definitive business combination agreement with PLXSUR Limited.
• Obtain board and stakeholder approval from both Cartesian and PLXSUR.
• Secure necessary regulatory approvals and satisfy customary closing conditions.
• Prepare and file a proxy statement and Registration Statement (Form F-4) with the SEC.
• Seek shareholder approval for the Cartesian Proposals at the Cartesian Shareholders Meeting.
• Seek shareholder approval for an Extension Proposal to extend the business combination deadline to at least March 31, 2026.
• Cause the Registration Statement to be declared effective by the SEC.
• Cause PubCo Ordinary Shares to be approved for listing on Nasdaq.
• Potentially arrange private placements of Cartesian Class A Ordinary Shares or PubCo Ordinary Shares.

Key Dates

Keywords

SPAC, business combination, merger, PLXSUR Limited, Cartesian Growth Corporation II, corporate governance, risk management, Nasdaq listing, Section 351, Sponsor Support Agreement, Private Placement Warrants, de-SPAC