425: Katapult to Merge with Aarons and CCFI in All-Stock Deal

Sentiment:

Merger Announcement 15 December 2025 4:22 PM

Katapult Holdings, Inc. announced an all-stock merger with Aarons Intermediate Holdco, Inc. and CCF Holdings LLC, creating a combined entity with a new ownership structure.

Capital raiseThe entire transaction is an all-stock merger, involving the issuance of a significant number of Katapult Common Stock shares to Aarons and CCFI equityholders.The filing details amendments to Katapult's Loan and Security Agreement, which is a debt financing arrangement, indicating ongoing management of capital structure.

Worse than expectedKatapult failed to maintain Minimum Trailing Three-Month Originations as of November 30, 2025, resulting in a default under its Loan Agreement. Although this default was permanently waived, it indicates a worse-than-expected operational performance in meeting a key financial covenant prior to the merger announcement.

Summary

Katapult Holdings, Inc. (Katapult) is entering into an Agreement and Plan of Merger with Aarons Intermediate Holdco, Inc. (Aarons) and CCF Holdings LLC (CCFI).
The transaction will result in Aarons and CCFI becoming wholly-owned indirect subsidiaries of Katapult.
The merger is an all-stock transaction, with Katapult issuing shares of its common stock as consideration.
Aarons MIP Holders will receive 943,580 shares of Katapult Common Stock.
CCFI MIP Holders will receive 11,011,927 shares of Katapult Common Stock.
Other Aarons equity interests will be converted into the right to receive an aggregate of 11,369,237 shares of Katapult Common Stock.
Other CCFI equity interests will be converted into the right to receive an aggregate of 58,516,558 shares of Katapult Common Stock.
244,146 shares of Katapult Common Stock will be subject to CCFI Warrants (assuming cashless exercise).
Immediately following the mergers, existing Katapult stockholders are expected to hold approximately 6.0% of the combined company, CCFI unitholders 79.9%, and Aarons stockholders 14.1% on a fully diluted basis.
Katapult will pay an aggregate termination fee of $1,514,174 to Aarons and CCFI under certain circumstances, such as a Katapult Triggering Event or acceptance of a superior acquisition proposal.
The transaction is intended to qualify as a reorganization under Section 368(a) and an exchange under Section 351 of the U.S. Internal Revenue Code for tax purposes.
Katapult entered into a Second Amendment to its Loan and Security Agreement, which permanently waives a default related to Minimum Trailing Three-Month Originations as of November 30, 2025.
The Loan Agreement was also amended to permit the merger transactions and release Katapult from certain guaranty obligations and liens on its assets in connection with the corporate reorganization.

Sentiment

Score: 5

Explanation: The merger is a significant strategic move that could strengthen Katapult's market position. However, the substantial dilution for existing Katapult shareholders and the prior default on a key financial covenant (Minimum Trailing Three-Month Originations) introduce elements of concern, balancing the overall sentiment to neutral.

Positives

The merger creates a larger, potentially more diversified entity by combining Katapult with Aarons and CCFI.
The transaction is structured as an all-stock merger, preserving cash for the combined entity.
The permanent waiver of Katapult's default in Minimum Trailing Three-Month Originations resolves a prior financial covenant breach, preventing immediate negative consequences from that specific issue.

Negatives

Existing Katapult stockholders will experience significant dilution, holding only approximately 6.0% of the combined company on a fully diluted basis.
Katapult had a recent default in its Minimum Trailing Three-Month Originations as of November 30, 2025, indicating potential operational challenges prior to the merger, although this default was waived.
Vested CCFI Options will be forfeited for no consideration at the CCFI Merger Effective Time, which could be a negative for those option holders.

Risks

Ability to obtain regulatory approval and meet other closing conditions, including shareholder approval.
Potential adverse reactions or changes to business relationships resulting from the announcement or pendency of the transaction.
Litigation relating to the proposed transactions.
Inability to retain key personnel or diminished productivity due to the impact on employees, management, customers, distributors, merchants, and business partners.
Ability to maintain adequate financing, meet liquidity requirements, and comply with restrictive covenants related to indebtedness.
Unexpected costs, charges, or expenses resulting from the transactions.
The combined company's ability to successfully integrate and grow its business.
Ability to comply with laws and regulations applicable to the business, including rental purchase transactions.
Other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, geopolitical uncertainty, public health crises, trade wars, or responses to such events.

Future Outlook

The filing outlines the strategic combination of Katapult, Aarons, and CCFI, aiming to create a stronger, integrated entity. The combined company anticipates successful integration and growth, with a new board structure and a focus on maintaining compliance with regulatory requirements. The transaction is expected to close by September 30, 2026, subject to various conditions including regulatory and shareholder approvals.

Management Comments

The Transaction Committee of the Katapult Board has determined that the Contemplated Transactions, including the Mergers, are fair to and in the best interests of Katapult and its stockholders.
The Katapult Board has approved the Merger Agreement and recommended that Katapult stockholders vote to approve the issuance of Katapult Common Stock to Aarons stockholders and CCFI unitholders.
The Aarons Board has determined that the Contemplated Transactions are fair to and in the best interests of Aarons and its stockholders and has recommended adoption of the Merger Agreement.
The CCFI Special Committee and CCFI Board have determined that the Contemplated Transactions are fair to and in the best interests of CCFI and its unitholders and have recommended adoption of the Merger Agreement.

Industry Context

This merger represents a significant consolidation within the lease-to-own and rent-to-own industry, bringing together Katapult's existing platform with Aarons and CCFI. The all-stock nature of the deal and the resulting ownership structure suggest a strategic realignment and potential for increased market share or operational efficiencies in a competitive consumer financing landscape. The waiver of a financial covenant default for Katapult prior to the merger indicates that the company may have faced headwinds, making this strategic combination a critical move for its future stability and growth.

Comparison to Industry Standards

NA The filing primarily details a merger agreement and does not provide specific comparative financial or operational data against industry benchmarks or competitors' results.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Board of Directors	Philip Key Bartow III, Don Gayhardt, Derek Medlin	Resigned (except Zayas and Zink)	Closing Date	Corporate reorganization as part of the merger agreement
Board of Directors (Increased Size)	N/A	Nine directors	Closing Date	Corporate reorganization as part of the merger agreement
Class A Directors	N/A	Jennifer Baldock, Michael Heller, Cory Miller	Closing Date	Appointments as part of the merger agreement
Class B Directors	N/A	Lynn DeVault, Gene Schutt, Orlando Zayas	Closing Date	Appointments as part of the merger agreement
Class C Directors	N/A	Will Jones, Kyle Hanson, Gregory L. Zink	Closing Date	Appointments as part of the merger agreement
Executive Chair of the Katapult Board	N/A	Kyle Hanson	Closing Date	Appointment as part of the merger agreement
Chief Executive Officer (Holdings)	Orlando Zayas	Derek Medlin	N/A (change in definition of Key Man Trigger Event)	Amendment to Loan Agreement's Key Man Trigger Event definition, implying a change in the designated key executive for covenant purposes.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Size Increase	The Katapult Board of Directors will be increased to nine members.	Closing Date	Significantly alters board composition and potentially strategic direction.
Board Composition Change	All current Katapult Board members, except Orlando Zayas and Gregory L. Zink, will resign. New directors Jennifer Baldock, Michael Heller, Cory Miller, Lynn DeVault, Gene Schutt, Will Jones, and Kyle Hanson will be appointed across three classes.	Closing Date	Represents a substantial overhaul of the board, reflecting the new ownership structure and strategic priorities of the combined entity.
Executive Chair Appointment	Kyle Hanson will serve as the executive chair of the Katapult Board.	Closing Date	Establishes new leadership at the board level, likely influencing strategic oversight.
Prohibition on Short Form Mergers	For three years following the Closing, any short-form merger or consolidation will require approval of eighty percent (80%) of the disinterested and independent directors on the Katapult Board.	Closing Date	Provides a significant safeguard for minority shareholders against rapid, potentially unfavorable, takeovers or restructurings.
Board Observer Rights	The Jones Group will have the right to designate a non-voting board observer (initially Allan Jones) to attend all Katapult Board and committee meetings, subject to certain ownership thresholds and confidentiality agreements.	Closing Date	Grants a significant stakeholder enhanced oversight and access to strategic discussions, potentially influencing decision-making.

Legal Proceedings

The forward-looking statements section identifies 'litigation relating to the proposed Transactions' as a risk factor.
Each party represents that there are no pending material legal proceedings or threatened actions that would prevent the consummation of the Contemplated Transactions or have a Material Adverse Effect on their respective businesses.

Related Party Transactions

The Merger Agreement itself is a related party transaction, as it involves Katapult, Aarons, and CCFI, with existing equityholders of Aarons and CCFI becoming significant shareholders of Katapult.
Lock-Up Agreements were entered into by certain equityholders of Katapult, Aarons, and CCFI, restricting the transfer of Katapult Common Stock for a period post-closing.
Support Agreements were entered into by certain Katapult stockholders to vote in favor of the merger.
Stockholders Agreement was entered into by certain equityholders of Aarons and CCFI with Katapult, detailing post-closing corporate governance matters, including board composition and observer rights.
Contribution and Exchange Agreements were entered into by Aarons MIP Holders and CCFI MIP Holders with Katapult, Aarons, and CCFI for the exchange of MIP equity for Katapult Common Stock.
Registration Rights Agreement was entered into by certain equityholders of Aarons and CCFI with Katapult, providing rights to register their Katapult Common Stock for resale.
The Second Amendment to the Loan Agreement involves Katapult SPV-1 LLC, Katapult Group, Inc., Katapult Holdings, Inc., and Midtown Madison Management LLC (Agent and Lender), which is a related party financing arrangement.

Stakeholder Impact

**Shareholders (Existing Katapult):** Significant dilution (6.0% post-merger ownership) but potential for growth from a larger, combined entity. Lock-up agreements restrict immediate sale of shares.
**Shareholders (Aarons & CCFI):** Become majority owners of the combined entity (79.9% for CCFI, 14.1% for Aarons), gaining significant influence and control. Subject to lock-up agreements.
**Management/Employees:** Significant changes to the Katapult Board of Directors and executive leadership, with new appointments and an executive chair. Employee benefit plans will be reviewed and potentially integrated into new benefit plans.
**Creditors (Katapult's Lenders):** The Loan Agreement was amended to permit the merger and waive a prior default, indicating continued support from lenders for the combined entity, but also highlighting past financial covenant breaches.
**Customers/Suppliers:** Potential for changes in business relationships due to the merger, as noted in the risk factors.

Next Steps

Katapult will file a registration statement on Form S-4 with the SEC, containing a prospectus and proxy statement.
Katapult will seek approval from its stockholders for the issuance of Katapult Common Stock and a new incentive plan (the 2026 Plan) authorizing at least 9,000,000 shares.
The parties will work to satisfy customary closing conditions, including regulatory approvals (e.g., HSR Act expiration) and Nasdaq listing approval for the new shares.
The closing of the mergers is expected to occur as promptly as practicable following the satisfaction or waiver of all conditions, with an End Date of September 30, 2026 (extendable by 90 days).

Key Dates

Date	Description
2025-04-09	Date of Confidentiality Agreement between IQV Holdings, LLC and Katapult.
2025-04-10	Date of Confidentiality Agreement between CCFI and Katapult.
2025-04-16	Date of Mutual Non-Disclosure Agreement between CCF Intermediate Holdings, LLC, Aarons, LLC and IQVentures Holdings, LLC.
2025-06-12	Original Closing Date of the Amended and Restated Loan and Security Agreement for Katapult.
2025-09-15	Date of a Limited Waiver to Katapult's Loan and Security Agreement.
2025-09-29	Date of a Limited Waiver to Katapult's Loan and Security Agreement.
2025-09-30	End of the quarter for which Katapult filed its Quarterly Report on Form 10-Q on November 12, 2025.
2025-10-13	Date of a Limited Waiver to Katapult's Loan and Security Agreement.
2025-10-20	Date of a Limited Waiver to Katapult's Loan and Security Agreement.
2025-10-27	Date of a Limited Waiver to Katapult's Loan and Security Agreement.
2025-10-29	Date of a Limited Waiver to Katapult's Loan and Security Agreement.
2025-11-02	First Amendment Effective Date of Katapult's Loan and Security Agreement.
2025-11-12	Date Katapult filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2025.
2025-11-30	Date of default in Minimum Trailing Three-Month Originations for Katapult, which was permanently waived.
2025-12-07	Date as of which material forms of lease-to-own or rent-to-own contracts were used by Aarons and Katapult.
2025-12-11	Date the Agreement and Plan of Merger was entered into; Second Amendment Effective Date of Katapult's Loan and Security Agreement.
2025-12-15	Date of Report (Date of earliest event reported) for the Form 8-K filing.
2026-09-30	End Date for the completion of the Aarons MIP Exchange, CCFI MIP Exchange, Hawthorn Preferred Stock Exchange, Hawthorn Warrant Exercise, Mergers, and Katapult Stock Issuance (extendable by 90 days under certain conditions).
2026-12-04	Maturity Date of Katapult's Loan Agreement.

Recommendation

hold

The merger represents a significant strategic shift for Katapult, combining with Aarons and CCFI to create a larger entity. While the all-stock nature preserves cash and the waiver of a prior default addresses an immediate financial concern, the substantial dilution for existing Katapult shareholders (to 6.0% ownership) is a major factor. The success of the combined entity hinges on effective integration and the realization of anticipated synergies, which are subject to various risks. Given the significant change in ownership structure and the inherent uncertainties of a large-scale integration, a 'hold' recommendation is appropriate for existing shareholders to observe the execution of the merger and the performance of the new combined management team. New investors should approach with caution, awaiting clearer signs of successful integration and sustained operational improvement.

Keywords

Merger, Acquisition, All-stock transaction, Katapult Holdings, Aarons Intermediate Holdco, CCF Holdings, SEC filing, Corporate governance, Shareholder approval, Risk factors, Financing, Loan agreement, Default waiver, Rent-to-own, Lease-to-own

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.