8-K: FiscalNote Sells Dragonfly and Oxford Analytica to Factiva for $40 Million

FiscalNote Holdings, Inc. has entered into an agreement to sell its subsidiaries Dragonfly Eye Limited and The Oxford Analytica International Group, LLC to Factiva Ltd. for $40 million in cash.

Summary

• FiscalNote Holdings, Inc. has agreed to sell its indirect wholly-owned subsidiary, FiscalNote, Inc.'s equity interests in Dragonfly Eye Limited (Dragonfly) and The Oxford Analytica International Group, LLC (Oxford) to Factiva Ltd. for $40.0 million in cash.
• The purchase price is subject to adjustments based on the working capital of the Sold Businesses, indebtedness, and transaction expenses.
• The agreement allows either the Buyer or Seller to terminate if the transaction is not completed by June 30, 2025.
• The company anticipates completing the sale by the end of the quarter ending March 31, 2025, pending regulatory approvals from Austrian competition authorities and other customary closing conditions.
• In connection with the sale, FiscalNote also amended its credit agreement, requiring a $27.14 million payment from the sale proceeds to lenders.
• Upon receipt of the payment, lenders will release Dragonfly and Oxford as guarantors under the credit agreement.
• The credit agreement amendment also increases the minimum liquidity covenant from $22.5 million to $25 million and modifies ARR and adjusted EBITDA requirements to reflect the sale.

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. While the company is selling assets, it is receiving cash, reducing debt, and improving its liquidity position. The deal is expected to close soon, and the terms appear reasonable.

Positives

• The sale provides FiscalNote with $40 million in cash, which can be used for other strategic initiatives.
• The debt repayment of $27.14 million will reduce FiscalNote's outstanding debt and improve its financial position.
• The release of Dragonfly and Oxford as guarantors simplifies the credit agreement.
• The increased minimum liquidity covenant provides a larger cushion for FiscalNote's ongoing operations.

Negatives

• The sale will reduce FiscalNote's future revenue and adjusted EBITDA, as Dragonfly and Oxford will no longer contribute to the company's financial performance.
• The company will incur transaction expenses related to the sale.
• The minimum ARR and adjusted EBITDA requirements are modified to reflect the sale, which may impact future financial flexibility.

Risks

• The deal is subject to regulatory approval, and there is a risk that the Austrian competition authorities may not approve the transaction.
• The transaction may not close by the expected date of March 31, 2025, or at all, if closing conditions are not met or waived.
• The purchase price is subject to adjustments, which could reduce the amount of cash received by FiscalNote.
• Failure to make the Required Payment on the Purchase Agreement Closing Date in accordance with the terms of the Release Letter shall constitute an immediate Event of Default not capable of cure.

Future Outlook

The company expects to consummate the transactions contemplated by the Purchase Agreement by the end of the quarter ending March 31, 2025, subject to the clearance/approval of the transactions by the Austrian competition authorities, and subject to satisfaction and/or waiver of required regulatory approvals and other customary closing conditions.

Industry Context

This announcement reflects a strategic decision by FiscalNote to divest certain assets, potentially to focus on core business areas or improve its financial position. Such divestitures are common in the industry as companies optimize their portfolios.

Comparison to Industry Standards

• Comparable companies in the information services sector, such as RELX Group and Thomson Reuters, periodically review their asset portfolios and divest non-core businesses.
• The valuation of $40 million will likely be assessed against industry benchmarks for similar geopolitical and security risk analysis businesses, considering revenue multiples and growth rates.
• The credit agreement amendment and increased liquidity covenant are standard financial management practices following a significant asset sale.

Stakeholder Impact

• Shareholders will see a reduction in debt and an increase in liquidity, which could improve the company's financial stability.
• Employees of Dragonfly and Oxford will transition to new ownership under Factiva.
• Customers of Dragonfly and Oxford will continue to receive services under the new ownership.
• Lenders will receive a debt repayment, reducing their exposure to FiscalNote.

Next Steps

• Obtain regulatory approval from Austrian competition authorities.
• Satisfy or waive all other closing conditions.
• Complete the sale transaction by the end of the quarter ending March 31, 2025.
• Make the required payment to lenders and release Dragonfly and Oxford as guarantors.
• Implement the changes to the credit agreement, including the increased liquidity covenant and modified ARR and adjusted EBITDA requirements.

Key Dates

Keywords

FiscalNote, Factiva, Dragonfly, Oxford Analytica, acquisition, sale, credit agreement, liquidity, EBITDA, ARR, regulatory approval