DEFM14A: Cepton to be Acquired by Koito in Going Private Transaction

Cepton, Inc. has agreed to be acquired by Koito Manufacturing Co., Ltd. in a going private transaction for $3.17 per share in cash.

Summary

• Cepton, Inc. has entered into a merger agreement with Koito Manufacturing Co., Ltd., a Japanese corporation, and Project Camaro Merger Sub, Inc., a wholly owned subsidiary of Koito.
• The merger will result in Cepton becoming a privately held, indirect subsidiary of Koito.
• Cepton stockholders will receive $3.17 in cash per share, without interest, subject to any applicable withholding taxes.
• The transaction is a going private transaction, and upon completion, Ceptons common stock and public warrants will no longer trade on the Nasdaq Stock Market.
• The Board of Directors of Cepton, acting on the recommendation of a Special Committee, has unanimously approved the merger agreement.
• The Special Committee engaged Craig-Hallum Capital Group LLC, who rendered an opinion that the merger consideration is fair, from a financial point of view, to the unaffiliated stockholders.
• The merger agreement includes a termination fee of $1.25 million payable by Cepton under certain circumstances and a reverse termination fee of $5 million payable by Koito under certain circumstances.
• The transaction is expected to close in the first quarter of 2025, subject to stockholder approval and other closing conditions.
• The merger is subject to approval by a majority of the outstanding shares of Ceptons common stock.
• Certain directors and executive officers of Cepton have entered into a Rollover Agreement, pursuant to which they will contribute a portion of their shares to Holdco in exchange for equity interests in Holdco and will not receive the per share merger consideration in respect of each of the Rollover Shares.

Sentiment

Score: 7

Explanation: The document is generally positive, as it outlines a transaction that provides a premium to stockholders and is supported by a fairness opinion. However, the going private nature of the transaction and the potential for delays or termination temper the overall sentiment.

Positives

• The merger consideration represents a premium of approximately 25% over Ceptons closing stock price on July 26, 2024.
• The Special Committee of Ceptons Board determined the merger is fair to stockholders.
• The transaction provides certainty and immediate liquidity to the Unaffiliated Stockholders.
• The merger will eliminate the effect on our stockholders of likely further dilution, long-term business and execution risk or to financial markets or economic conditions.

Negatives

• Ceptons common stock and public warrants will no longer trade on the Nasdaq Stock Market.
• Cepton will become a privately held, indirect subsidiary of Koito.
• The merger is subject to stockholder approval and other closing conditions.
• Certain directors and executive officers of Cepton will not receive the per share merger consideration in respect of each of the Rollover Shares.

Risks

• The merger agreement may be terminated under certain circumstances.
• The transaction is subject to regulatory approvals, including CFIUS approval.
• The merger may not be completed in a timely manner or at all.
• The Company may be required to pay a termination fee to Koito if the merger agreement is terminated under certain circumstances.
• The Company will no longer exist as an independent public company and the stockholders will forego any future increase in value that might result from future growth and the potential achievement of the Companys long-term plans.
• The Company will be subject to restrictions on its ability to solicit offers that may lead to an Acquisition Proposal for a specified period following execution of the Merger Agreement.

Future Outlook

The transaction is expected to close in the first quarter of 2025, subject to stockholder approval and other closing conditions.

Management Comments

• The Special Committee unanimously determined that the terms of the Merger Agreement, the other transaction documents and the transactions contemplated thereby, including the merger consideration and the merger, are advisable, fair to, and in the best interests of, the Company and its stockholders.
• The Board (acting on the recommendation of the Special Committee) determined that the merger is fair to and in the best interests of the Company and its stockholders.

Industry Context

This announcement reflects a trend of consolidation in the lidar industry, as companies seek to gain scale and resources to compete in the automotive and other markets.

Comparison to Industry Standards

• The merger consideration represents a premium of approximately 25% over Ceptons closing stock price on July 26, 2024, which is a typical premium for going private transactions.
• The fairness opinion provided by Craig-Hallum Capital Group LLC is a standard practice in such transactions.
• The termination fee and reverse termination fee are within the range of what is typically seen in similar transactions.
• The going private transaction is similar to other transactions in the lidar industry, where companies are seeking to gain scale and resources to compete in the automotive and other markets.

Legal Proceedings

• The Company received four demand letters from purported shareholders alleging that the Companys disclosures in its preliminary proxy statement were deficient.
• An alleged shareholder of the Company filed a complaint in the United States District Court for the Northern District of California against the Company and the members of its Board alleging that the Preliminary Proxy Statement contained misleading disclosures and omissions.

Related Party Transactions

• Certain directors and executive officers of Cepton have entered into a Rollover Agreement, pursuant to which they will contribute a portion of their shares to Holdco in exchange for equity interests in Holdco and will not receive the per share merger consideration in respect of each of the Rollover Shares.
• Koito is a significant stockholder of Cepton and has a business relationship with the Company.

Stakeholder Impact

• Cepton stockholders will receive $3.17 in cash per share.
• Cepton employees will have their compensation and benefits maintained at a comparable level for 12 months following the merger.
• Cepton will become a privately held, indirect subsidiary of Koito.

Next Steps

• Cepton stockholders will vote on the merger agreement at a special meeting.
• The parties will seek regulatory approvals, including CFIUS approval.
• The parties will work to satisfy all closing conditions to complete the transaction.

Key Dates

Keywords

merger, acquisition, lidar, Koito, going private, stockholders, Nasdaq, delisting, fairness opinion, termination fee