Form 4: Gulf Hungary Holdings Restructures and Enters New Variable Prepaid Forward Sale Contracts for Quaker Chemical Corp Shares

Gulf Hungary Holdings amended existing and entered into new variable prepaid forward sale contracts (VPFs) involving Quaker Chemical Corp shares with Citibank and Royal Bank of Canada.

Summary

• On May 22, 2024, QH Hungary Holdings Limited, a subsidiary of Gulf Hungary Holding, amended and restated seven existing variable prepaid forward sale contracts (VPFs) and entered into two new VPFs with Citibank and Royal Bank of Canada (RBC).
• The amended VPFs were originally entered into between May 2020 and March 2021 and have been amended and restated multiple times.
• The new VPFs include one with Citibank for 237,200 shares and one with RBC for 158,133 shares.
• QH Hungary received $39,500,675 from Citibank and $26,333,784 from RBC for entering into the new VPFs.
• The settlement of the amended and restated VPFs will occur between May 27, 2026, and August 6, 2026.
• The settlement of the new VPFs will occur between November 28, 2025, and February 10, 2026.
• The number of shares or cash equivalent to be delivered at settlement depends on the volume-weighted average price per share on the valuation date, with different formulas applying based on whether the price is below $186.3683, between $186.3683 and $292.5982 (for amended VPFs) or $205.0051 (for new VPFs), or above $292.5982 (for amended VPFs) or $205.0051 (for new VPFs).

Sentiment

Score: 5

Explanation: Neutral. The announcement describes financial transactions that could be beneficial or detrimental depending on future market conditions. The restructuring of existing VPFs and the creation of new VPFs are neither inherently positive nor negative.

Positives

• QH Hungary received significant cash upfront ($39,500,675 from Citibank and $26,333,784 from RBC) by entering into new VPFs.
• The restructuring of existing VPFs may provide more favorable terms or flexibility for QH Hungary.

Negatives

• QH Hungary paid significant amounts to Citibank and RBC to amend the existing VPFs, including $729,309.61, $2,500,204.34, $822,233.87, $5,833,810.12, $429,035.06, $729,309.72 and $357,529.28.
• The structure of the VPFs means that QH Hungary may have to deliver a significant number of shares if the share price remains low.

Risks

• The value QH Hungary ultimately receives from the VPFs is dependent on the future share price of Quaker Chemical Corp.
• If the share price appreciates significantly, QH Hungary will deliver fewer shares but will not fully participate in the upside beyond the 'Forward Cap Price'.
• The complexity of the VPF agreements could lead to disputes or unexpected outcomes.

Future Outlook

The future value and outcome of these VPFs are contingent on the market price of Quaker Chemical Corp shares between November 2025 and August 2026.

Industry Context

Variable prepaid forward sale contracts are a common tool used by large shareholders to monetize their holdings while retaining some potential upside and deferring tax liabilities.

Comparison to Industry Standards

• Similar VPF structures are used by other large shareholders to manage their positions, examples include similar transactions by corporate insiders at companies such as Microsoft and Apple.
• The specific terms, such as the 'Forward Floor Price' and 'Forward Cap Price', are negotiated based on market conditions and the specific risk appetite of the parties involved.

Stakeholder Impact

• Shareholders may be impacted by the potential dilution from the shares that could be delivered under the VPFs.
• The transactions could affect the company's stock price, depending on market perception.

Key Dates