DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

   Preliminary Proxy Statement
   Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Proxy Statement
   Definitive Additional Materials
   Soliciting Material under §240.14a-12

SPECTRUM BRANDS HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

 

      

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
  (1)   

Title of each class of securities to which transaction applies:

 

     

  (2)   

Aggregate number of securities to which transaction applies:

 

     

  (3)   

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)   

Proposed maximum aggregate value of transaction:

 

     

  (5)   

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   

Amount Previously Paid:

 

     

  (2)   

Form, Schedule or Registration Statement No.:

 

     

  (3)   

Filing Party:

 

     

  (4)   

Date Filed:

 

     

 

 

 


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LOGO    LOGO

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

June 12, 2018

Dear Stockholders of Spectrum Brands Holdings, Inc. and HRG Group, Inc.:

On February 24, 2018, HRG Group, Inc. (“HRG”) and Spectrum Brands Holdings, Inc. (“Spectrum”) entered into an Agreement and Plan of Merger as amended June 8, 2018, (the “Merger Agreement”), providing for the acquisition of Spectrum by HRG (the “Merger”) in exchange for HRG equity. HRG stockholders as of the close of business on May 17, 2018 (the “Record Date”), are invited to attend a special meeting of HRG stockholders at 9:30 AM, local time, on July 13, 2018 at Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017, to consider and vote upon proposals to amend the HRG certificate of incorporation, approve the issuance of HRG common stock in connection with the Merger, and certain other matters related to the Merger. Spectrum stockholders as of the close of business on the Record Date are invited to attend a special meeting of Spectrum stockholders at 9:30 AM, local time, on July 13, 2018, at Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York, 10022, to consider and vote upon a proposal to adopt the Merger Agreement and certain other matters related to the Merger.

The Merger will be implemented through several steps that will occur in immediate succession. Immediately prior to the consummation of the Merger, HRG’s certificate of incorporation will be amended and restated (the “Amended HRG Charter”) as further described in the accompanying joint proxy statement/prospectus, and as a result, each of the issued and outstanding shares of HRG common stock, par value $0.01 per share, will, by means of a reverse stock split, be combined into a fraction of a share of HRG common stock equal to (i) the number of shares of common stock, par value $0.01 per share, of Spectrum held by HRG and its subsidiaries as of immediately prior to the effective time of the Merger, adjusted for HRG’s net indebtedness as of closing, certain transaction expenses of HRG that are unpaid as of closing and a $200,000,000 upward adjustment, divided by (ii) as of immediately prior to the reverse stock split, the number of outstanding shares of HRG common stock on a fully diluted basis (the “Share Combination Ratio”). As part of the amendment and restatement of the HRG certificate of incorporation, HRG will change its name to “Spectrum Brands Holdings, Inc.”

Thereafter, pursuant to the Merger Agreement, each share of Spectrum common stock issued and outstanding immediately prior to the effective time of the Merger (other than shares of Spectrum common stock held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum immediately prior to the effective time of the Merger) will be converted into the right to receive one share of HRG common stock.

Notwithstanding the foregoing, no HRG common stock will be issued in the Merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become, or be treated under the Amended HRG Charter as becoming, a holder of more than 4.9% of “Corporation Securities” (as defined in Article XIII of the Amended HRG Charter). Any shares of HRG common stock that would be issuable to a Spectrum stockholder but for that limitation will instead be treated as “Excess Securities” (as defined in Article XIII of the Amended HRG Charter) and will be delivered to one or more charitable organizations described in Section 501(c)(3) of the Internal Revenue Code, or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder.

In the Reverse Stock Split, each HRG stockholder is expected to receive 0.1603 of a share of HRG common stock in respect of each share of HRG common stock, which would have a value of approximately $12.25. Immediately upon consummation of the Merger, pre-closing Spectrum stockholders and pre-closing HRG stockholders are expected to own approximately 39% and 61%, respectively, of the outstanding shares of HRG common stock, and a total of approximately 53,613,184 shares of HRG common stock are expected to be outstanding. Such ownership percentages and share amounts and value are based on (i) the 20-trading-day volume-weighted average price per share of Spectrum common stock ending on June 6, 2018, the latest practicable date before the filing of the accompanying joint proxy statement/prospectus, (ii) the number of shares of Spectrum common stock outstanding, the number of Shares of Spectrum common stock held by HRG and its subsidiaries and the number of shares of HRG common stock outstanding as of June 6, 2018, the latest practicable date before the filing of the accompanying joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement. Shares of Spectrum common stock currently trade on the New York Stock Exchange (the “NYSE”) under the symbol “SPB” and shares of HRG common stock currently trade on the NYSE under the symbol “HRG.” Following the Merger, the shares of HRG common stock will be listed on the NYSE and are expected to trade under the symbol “SPB.”

At the Spectrum special meeting, Spectrum stockholders will be asked to consider and vote on, among other things, a proposal to adopt the Merger Agreement (the “Spectrum Merger Proposal”), which must be adopted by the affirmative vote of (i) the holders of a majority of the outstanding shares of Spectrum common stock, including shares held by HRG and its affiliates and the executive officers of Spectrum, (ii) the holders of a


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majority of the outstanding shares of Spectrum common stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and the executive officers of Spectrum, and (iii) the holders of a majority of the outstanding shares of Spectrum common stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the certificate of incorporation of Spectrum. The Spectrum board of directors (other than Messrs. Joseph Steinberg and Ehsan Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of a special committee of the Spectrum board formed for the purpose of evaluating the Merger, has determined that the Merger Agreement, the Spectrum Merger Proposal and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its stockholders and, recommends that the Spectrum stockholders vote “FOR” the Spectrum Merger Proposal and “FOR” each of the other proposals to be considered at the Spectrum special meeting and described in the accompanying joint proxy statement/prospectus. HRG has entered into a voting agreement with Spectrum pursuant to which HRG has agreed, among other things, to vote all of the shares of Spectrum common stock beneficially owned by HRG (constituting approximately 62% of the issued and outstanding shares of Spectrum common stock as of June 6, 2018, the latest practicable date before the filing of the accompanying joint proxy statement/prospectus) in favor of the Spectrum Merger Proposal and certain other matters, on the terms and subject to the conditions set forth in the voting agreement.

At the HRG special meeting, HRG stockholders will be asked to consider and vote on, among other things, the issuance of shares of HRG common stock to the Spectrum stockholders in connection with the Merger (the “HRG Share Issuance Proposal”) and the amendment and restatement of the HRG certificate of incorporation (the “HRG Charter Amendment Proposals”). The HRG board of directors recommends that HRG stockholders vote “FOR” the HRG Share Issuance Proposal, “FOR” the HRG Charter Amendment Proposals and “FOR” each of the other proposals to be considered at the HRG special meeting and described in the accompanying joint proxy statement/prospectus. Each of Leucadia National Corporation and CF Turul LLC, an affiliate of Fortress Investment Group, LLC, has entered into a separate voting agreement with HRG pursuant to which each of them has agreed, among other things, to vote all of the shares of HRG common stock beneficially owned by it (constituting approximately 23% and 16%, respectively, of the issued and outstanding shares of HRG common stock as of June 6, 2018, the latest practicable date before the filing of the accompanying joint proxy statement/prospectus) in favor of the HRG Share Issuance Proposal and the HRG Charter Amendment Proposals and certain other matters, on the terms and subject to the conditions set forth in the applicable voting agreement.

Consummation of the Merger is conditioned on the approval of the Spectrum Merger Proposal, the HRG Share Issuance Proposal and the HRG Charter Amendment Proposals. Your vote is very important. Whether or not you plan to attend the Spectrum special meeting or the HRG special meeting, as applicable, please promptly complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Submitting a proxy now will not prevent you from being able to vote in person at the Spectrum special meeting or the HRG special meeting, as applicable.

The obligations of Spectrum and HRG to consummate the Merger are subject to the satisfaction or waiver of several conditions set forth in the Merger Agreement, a copy of which is included as Annex A to the accompanying joint proxy statement/prospectus, as amended by Amendment No. 1 to the Merger Agreement, a copy of which is included as Annex B to the accompanying joint proxy statement/prospectus. The Merger Agreement may be terminated by either HRG or Spectrum if the Merger is not consummated by October 8, 2018. The accompanying joint proxy statement/prospectus provides you with detailed information about the Merger. It also contains or references information about Spectrum and HRG and certain related matters.

You are encouraged to read the accompanying document carefully. In particular, you should read the “Risk Factors ” section beginning on page 47 of the accompanying joint proxy statement/prospectus for a discussion of the risks you should consider in evaluating the Merger and how they will affect you.

On behalf of Spectrum and HRG, thank you for your consideration and continued support.

 

 

LOGO

David M. Maura

Executive Chairman and Chief Executive Officer

Spectrum Brands Holdings, Inc.

  

             LOGO

Ehsan Zargar

Executive Vice President,

Chief Operating Officer and General Counsel

HRG Group, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger or the securities to be issued in connection with the Merger or passed upon the merits or fairness of the Merger or the adequacy or accuracy of the disclosure in the accompanying joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The accompanying joint proxy statement/prospectus is dated June 12, 2018 and is first being mailed to the Spectrum and HRG stockholders on or about June 12, 2018.


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LOGO

SPECTRUM BRANDS HOLDINGS, INC.

3001 Deming Way

Middleton, Wisconsin 53562

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JULY 13, 2018

To the Stockholders of Spectrum Brands Holdings, Inc.:

A special meeting of stockholders of Spectrum Brands Holdings, Inc. (“Spectrum”) will be held at 9:30 AM, local time, on July 13, 2018, at Kirkland and Ellis LLP, 601 Lexington Avenue, New York, New York 10022 (the “Spectrum Special Meeting”), for the following purposes:

 

  1. to consider and act upon a proposal to adopt the Agreement and Plan of Merger, dated as of February 24, 2018 as amended June 8, 2018, (the “Merger Agreement”), by and among Spectrum, HRG Group, Inc. (“HRG”), HRG SPV Sub I, Inc. and HRG SPV Sub II, LLC, a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus, as amended by Amendment No. 1 thereto, a copy of which is attached as Annex B to the accompanying joint proxy statement/prospectus, and the Merger and other transactions contemplated thereby (the “Spectrum Merger Proposal”);

 

  2. to consider and act upon a proposal to approve the adjournment of the Spectrum Special Meeting to another date and place if necessary or appropriate to solicit additional votes in favor of the Spectrum Merger Proposal (the “Spectrum Adjournment Proposal”); and

 

  3. to consider and act upon six separate proposals to approve, on a non-binding, advisory basis, the amendment of the HRG certificate of incorporation, including (i) a proposal to cause each outstanding share of HRG common stock to, by means of a reverse stock split, be combined into a fraction of a share of HRG common stock equal to the number of shares of Spectrum common stock currently held by HRG divided by the number of outstanding shares of HRG common stock on a fully diluted basis, subject to certain adjustments; (ii) a proposal to subject HRG to Section 203 of the General Corporation Law of the State of Delaware; (iii) a proposal to decrease the number of authorized shares of HRG common stock from 500 million to 200 million; (iv) a proposal to increase the number of authorized shares of HRG preferred stock from 10 million to 100 million; (v) a proposal to amend the Internal Revenue Code Section 382 transfer provisions; and (vi) a proposal to make other amendments related or incidental to the foregoing (collectively, the “Spectrum Advisory HRG Charter Amendment Proposals”).

Approval of the Spectrum Merger Proposal by the Spectrum stockholders is a condition to the consummation of the Merger contemplated by the Merger Agreement and requires the affirmative vote of (i) the holders of a majority of the outstanding shares of Spectrum common stock, (ii) the holders of a majority of the outstanding shares of Spectrum common stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and the executive officers of Spectrum, and (iii) the holders of a majority of the outstanding shares of Spectrum common stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Exchange Act with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the Spectrum certificate of incorporation, and is a condition to the closing of the Merger (items (ii) and (iii), collectively, the “Unaffiliated Approvals”). Approval of the Spectrum Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum common stock present in person or by proxy at the Spectrum


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Special Meeting and entitled to vote on such proposal, regardless of whether a quorum is present. Approval of each of the non-binding Spectrum Advisory HRG Charter Amendment Proposals requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum common stock present in person or by proxy at the Spectrum Special Meeting and entitled to vote on such proposal, assuming a quorum is present.

The Spectrum board of directors has set May 17, 2018 as the record date for the Spectrum Special Meeting. Only holders of record of Spectrum common stock as of the close of business on May 17, 2018 will be entitled to notice of and to vote at the Spectrum Special Meeting and any adjournments thereof. Any stockholder entitled to attend and vote at the Spectrum Special Meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of Spectrum common stock.

HRG, which held approximately 62% of the issued and outstanding shares of Spectrum common stock as of June 6, 2018, has agreed to vote all of its shares of Spectrum common stock to approve and adopt the Merger Agreement, the Merger and the other transactions contemplated thereby, and other actions related thereto. HRG’s shares of Spectrum common stock will not be counted for purposes of the Unaffiliated Approvals, so your vote is very important.

Each of the Spectrum Proposals is described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully in its entirety before you vote.

Your vote is very important. To ensure your representation at the Spectrum Special Meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please submit your proxy promptly whether or not you expect to attend the Spectrum Special Meeting. Submitting a proxy now will not prevent you from being able to vote in person at the Spectrum Special Meeting. If your shares of Spectrum common stock are held in the name of a bank, broker or other nominee, follow the instructions on the voting instruction card furnished to you by such bank, broker or other nominee.

The Spectrum board of directors (other than Messrs. Joseph Steinberg and Ehsan Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum special committee, has determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its stockholders and has authorized, approved, adopted and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby. The Spectrum board of directors (other than Messrs. Joseph Steinberg and Ehsan Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum special committee, recommends that you vote “FOR” the Spectrum Merger Proposal, “FOR” each of the Spectrum Advisory HRG Charter Amendment Proposals and “FOR” the Spectrum Adjournment Proposal.

By Order of the Board of Directors,

Nathan E. Fagre

Senior Vice President, General Counsel and Secretary

Middleton, Wisconsin

June 12, 2018


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YOUR VOTE IS IMPORTANT!

WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECTRUM SPECIAL MEETING IN PERSON, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) VIA THE INTERNET, (2) BY TELEPHONE OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED SPECTRUM PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE SPECTRUM SPECIAL MEETING AND WISH TO VOTE YOUR SHARES OF SPECTRUM COMMON STOCK IN PERSON, YOU MAY DO SO AT ANY TIME PRIOR TO YOUR PROXY BEING EXERCISED. You may revoke your proxy or change your vote at any time before the Spectrum Special Meeting. If your shares of Spectrum common stock are held in the name of a bank, broker or other nominee holder of record, please follow the instructions on the voting instruction form furnished to you by such record holder.

We urge you to read the accompanying joint proxy statement/prospectus, including all documents incorporated by reference into the accompanying joint proxy statement/prospectus, and its annexes and exhibits carefully and in their entirety. If you have any questions concerning the Merger Agreement, the Merger, the Spectrum Proposals, the Spectrum Special Meeting or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus or need help voting your shares of Spectrum common stock, please contact:

 

 

LOGO

1407 Broadway, 27th Floor

New York, New York 10018

proxy@mackenziepartners.com

(212) 929-5500 or Toll-Free (800) 322-2885

Spectrum Brands Holdings, Inc.

3001 Deming Way

Middleton, Wisconsin 53562

Attention: Investor Relations

Telephone: 608-278-6141

Email: david.prichard@spectrumbrands.com


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LOGO

HRG GROUP, INC.

450 Park Avenue, 29th Floor

New York, New York 10022

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JULY 13, 2018

To the Stockholders of HRG Group, Inc.:

A special meeting of stockholders of HRG Group, Inc. (“HRG”) will be held at 9:30 AM, local time, on July 13, 2018, at Davis Polk & Wardwell LLP located at 450 Lexington Avenue, New York, New York 10017 (the “HRG Special Meeting”), for the following purposes:

 

  1. to consider and act upon six proposals to amend the HRG certificate of incorporation, including (i) a proposal to cause each outstanding share of HRG common stock to, by means of a reverse stock split, be combined into a fraction of a share of HRG common stock equal to the number of shares of Spectrum common stock currently held by HRG divided by the number of outstanding shares of HRG common stock on a fully diluted basis, subject to certain adjustments; (ii) a proposal to subject HRG to Section 203 of the General Corporation Law of the State of Delaware; (iii) a proposal to decrease the number of authorized shares of HRG common stock from 500 million to 200 million; (iv) a proposal to increase the number of authorized shares of HRG preferred stock from 10 million to 100 million; (v) a proposal to amend the Internal Revenue Code Section 382 transfer provisions; and (vi) a proposal to make other amendments related or incidental to the foregoing (collectively, the “HRG Charter Amendment Proposals”);

 

  2. to consider and act upon a proposal to approve the issuance of shares of HRG common stock in connection with the Agreement and Plan of Merger, dated as of February 24, 2018 (as amended June 8, 2018, the “Merger Agreement”), by and among Spectrum Brands Holdings, Inc., HRG, HRG SPV Sub I, Inc. and HRG SPV Sub II, LLC, a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus, as amended by Amendment No. 1 thereto, a copy of which is attached as Annex B to the accompanying joint proxy statement/prospectus (the “HRG Share Issuance Proposal”);

 

  3. to consider and act upon a proposal to adjourn the HRG Special Meeting, if necessary or appropriate to, solicit additional proxies in the event there are not sufficient votes at the time of the HRG Special Meeting to approve the HRG Charter Amendment Proposals or the HRG Share Issuance Proposal (the “HRG Adjournment Proposal”); and

 

  4. to consider and act upon a proposal to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to HRG’s named executive officers that is based on or otherwise relates to the merger contemplated by the Merger Agreement (the “HRG Advisory Compensation Proposal”).

Approval of each of the HRG Charter Amendment Proposals by the HRG stockholders is a condition to the consummation of the transactions contemplated by the Merger Agreement and requires the affirmative vote of the holders of a majority of outstanding shares of HRG common stock entitled to vote generally in the election of directors. Approval of the HRG Share Issuance Proposal by the HRG stockholders is a condition to the consummation of the transactions contemplated by the Merger Agreement and requires the affirmative vote of a majority of votes cast by HRG stockholders present in person or by proxy at the HRG Special Meeting and entitled to vote on the proposal. Approval of each of the HRG Adjournment Proposal and the HRG Advisory Compensation Proposal require the affirmative vote of holders of a majority of shares of HRG common stock present in person or by proxy at the HRG Special Meeting and entitled to vote on such proposal.


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The HRG board of directors has set May 17, 2018 as the record date for the HRG Special Meeting. Only holders of record of HRG common stock as of the close of business on May 17, 2018 will be entitled to notice of and to vote at the HRG Special Meeting and any adjournments thereof. Any stockholder entitled to attend and vote at the HRG Special Meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of HRG common stock.

Each of Leucadia National Corporation and CF Turul LLC, an affiliate of Fortress Investment Group LLC, which held approximately 23% and 16%, respectively, of the issued and outstanding shares of HRG common stock as of June 6, 2018, the latest practicable date before the filing of the accompanying joint proxy statement/prospectus, has agreed to vote all of its shares of HRG common stock to approve and adopt the HRG Charter Amendment Proposals and the HRG Share Issuance Proposal and other actions related thereto, on the terms and subject to the conditions set forth in their respective voting agreements.

Each of the HRG proposals is described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully in its entirety before you vote.

Your vote is very important. To ensure your representation at the HRG Special Meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please submit your proxy promptly whether or not you expect to attend the HRG Special Meeting. Submitting a proxy now will not prevent you from being able to vote in person at the HRG Special Meeting. If your shares of HRG common stock are held in the name of a bank, broker or other nominee, follow the instructions on the voting instruction card furnished to you by such bank, broker or other nominee.

The HRG board of directors unanimously recommends that you vote “FOR” each of the HRG Charter Amendment Proposals, “FOR” the HRG Share Issuance Proposal, “FOR” the HRG Adjournment Proposal, and “FOR” the HRG Advisory Compensation Proposal.

By Order of the Board of Directors,

Ehsan Zargar

Executive Vice President, Chief Operating Officer

and General Counsel


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YOUR VOTE IS IMPORTANT!

WHETHER OR NOT YOU EXPECT TO ATTEND THE HRG SPECIAL MEETING IN PERSON, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) VIA THE INTERNET, (2) BY TELEPHONE OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED HRG PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE HRG SPECIAL MEETING AND WISH TO VOTE YOUR SHARES OF HRG COMMON STOCK IN PERSON, YOU MAY DO SO AT ANY TIME PRIOR TO YOUR PROXY BEING EXERCISED. You may revoke your proxy or change your vote at any time before the HRG Special Meeting. If your shares of HRG common stock are held in the name of a bank, broker or other nominee holder of record, please follow the instructions on the voting instruction form furnished to you by such record holder.

We urge you to read the accompanying joint proxy statement/prospectus, including all documents incorporated by reference into the accompanying joint proxy statement/prospectus, and its annexes and exhibits carefully and in their entirety. If you have any questions concerning the Merger Agreement, the transactions contemplated thereby, the HRG Proposals, the HRG Special Meeting or the accompanying joint proxy statement/prospectus, would like additional copies of the accompanying joint proxy statement/prospectus or need help voting your shares of HRG common stock, please contact:

 

 

LOGO

1290 Avenue of the Americas, 9th Floor

New York, New York 10104

Shareholders, Banks and Brokers

Telephone: (781) 575-2137 or Toll-Free (888) 680-1529

Email: HRGGroup@Georgeson.com

or

HRG Group, Inc.

450 Park Avenue, 29th Floor

New York, New York 10022

Attention: Investor Relations

Telephone: (212) 906-8560

Email: Investorrelations@HRGGroup.com


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ADDITIONAL INFORMATION

The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about Spectrum and HRG from other documents that are filed with the SEC that are not included in or delivered with the accompanying joint proxy statement/prospectus. You can obtain any of the documents incorporated by reference into this joint proxy statement/prospectus from the SEC’s website at www.sec.gov, and they are available for you to review at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. This information is also available to you without charge upon your request by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

Spectrum Brands Holdings, Inc.

3001 Deming Way

Middleton, Wisconsin 53562

Attention: Investor Relations

Telephone: 608-278-6141

Email: david.prichard@spectrumbrands.com

 

or

 

HRG Group, Inc.

450 Park Avenue, 29th Floor

New York, New York 10022

Attention: Investor Relations

Telephone: (212) 906-8560

Email: Investorrelations@HRGGroup.com

 

or

LOGO

 

1407 Broadway, 27th Floor

New York, New York 10018

Telephone: (212) 929-5500 or

Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

 

LOGO

1290 Avenue of the Americas, 9th Floor

New York, New York 10104

Shareholders, Banks and Brokers

Telephone: (781) 575-2137 or

Toll-Free (888) 680-1529

Email: HRGGroup@Georgeson.com

Investors may also consult the websites of Spectrum or HRG for more information concerning the Agreement and Plan of Merger, dated as of February 24, 2018, as amended, by and among Spectrum and HRG and the other transactions described in the accompanying joint proxy statement/prospectus. The website of Spectrum is www.spectrumbrands.com and the website of HRG is www.hrggroup.com. Information included on these websites is not incorporated by reference into the accompanying joint proxy statement/prospectus.

If you would like to request any documents, please do so by July 6, 2018, in order to receive them before the special meetings.

For a more detailed description of the information incorporated by reference in the accompanying joint proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information.”


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by HRG Group, Inc. (“HRG”) (File No. 333-224209), constitutes a prospectus of HRG under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock of HRG, par value $0.01 per share (“HRG Common Stock”), to be issued to Spectrum stockholders pursuant to the Agreement and Plan of Merger, dated as of February 24, 2018 (the “Merger Agreement”), as amended by Amendment No. 1 to the Merger Agreement, dated as of June 8, 2018 (“Amendment No. 1”), by and among Spectrum Brands Holdings, Inc. (“Spectrum”), HRG, HRG SPV Sub I, Inc. and HRG SPV Sub II, LLC. This document also constitutes a proxy statement of each of HRG and Spectrum under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Unless otherwise specified or the context otherwise requires, HRG has supplied all information contained or incorporated by reference herein relating to HRG, and Spectrum has supplied all information contained or incorporated by reference herein relating to Spectrum. HRG and Spectrum have both contributed to the information relating to the Merger Agreement and the transactions contemplated thereby contained in this joint proxy statement/prospectus.

You should rely only on the information contained in or incorporated by reference herein in connection with any vote, the giving or withholding of any proxy or any investment decision in connection with the transactions contemplated by the Merger Agreement. HRG and Spectrum have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference herein. This joint proxy statement/prospectus is dated June 12, 2018, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein. Further, you should not assume that the information incorporated by reference herein is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint proxy statement/prospectus to HRG or Spectrum stockholders nor the issuance by HRG of shares of HRG Common Stock pursuant to the Merger Agreement will create any implication to the contrary.


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

     1  

SUMMARY

     18  

Parties to the Transaction

     18  

The Transaction

     19  

Litigation Relating to the Merger

     21  

Board and Management of HRG After the Merger

     21  

Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors

     22  

HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors

     23  

Opinion of the Spectrum Special Committee’s Financial Advisor

     23  

Opinion of HRG’s Financial Advisor

     23  

Key Terms of the Transaction Agreements

     24  

Material Agreements between the Parties

     29  

Accounting Treatment

     30  

Material U.S. Federal Income Tax Consequences

     30  

Interests of Spectrum’s Directors and Officers in the Merger

     31  

Interests of HRG’s Directors and Officers in the Merger

     31  

Voting by Spectrum’s Directors and Executive Officers

     32  

Voting by HRG’s Directors and Executive Officers

     32  

No Appraisal Rights

     32  

Comparison of Stockholder Rights

     32  

Charter Amendments

     32  

Risk Factors

     33  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPECTRUM

     34  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF HRG

     37  

SELECTED SPECTRUM AND HRG UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

     41  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     43  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     45  

RISK FACTORS

     47  

Risks Related to the Merger

     47  

Risks Related to Our Business

     54  

Risks Related to Spectrum’s Business

     56  

Risks Related to HRG’s Business

     56  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     57  

THE SPECTRUM SPECIAL MEETING

     58  

Date, Time and Place of the Spectrum Special Meeting

     58  

Purpose of the Spectrum Special Meeting

     58  

Spectrum Record Date and Quorum

     58  

Required Vote

     59  

Treatment of Abstentions; Failure to Vote

     60  

Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors

     60  

Voting by Spectrum’s Directors and Executive Officers

     60  

Voting of Proxies; Incomplete Proxies

     61  

Shares Held in Street Name

     62  

Revocability of Proxies and Changes to a Spectrum Stockholder’s Vote

     62  

Solicitation of Proxies

     63  

Attending the Spectrum Special Meeting

     63  

Assistance

     63  

SPECTRUM PROPOSALS

     64  

Spectrum Proposal 1: The Spectrum Merger Proposal

     64  

 

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Spectrum Proposal 2: The Spectrum Adjournment Proposal

     65  

Spectrum Proposal 3: The Spectrum Advisory HRG Section 203 Proposal

     65  

Spectrum Proposal 4: The Spectrum Advisory HRG Reverse Stock Split Proposal

     66  

Spectrum Proposal 5: The Spectrum Advisory HRG Common Stock Proposal

     67  

Spectrum Proposal 6: The Spectrum Advisory HRG Preferred Stock Proposal

     68  

Spectrum Proposal 7: The Spectrum Advisory HRG Section 382 Proposal

     69  

Spectrum Proposal 8: The Spectrum Advisory Additional Charter Amendments Proposal

     70  

THE HRG SPECIAL MEETING

     72  

Date, Time and Place of the HRG Special Meeting

     72  

Purpose of the HRG Special Meeting

     72  

HRG Record Date and Quorum

     72  

Required Vote

     73  

Treatment of Abstentions; Failure to Vote

     73  

Recommendation of the HRG Board of Directors

     74  

Voting by HRG’s Directors and Executive Officers

     75  

Voting of Proxies; Incomplete Proxies

     75  

Shares Held in Street Name

     76  

Revocability of Proxies and Changes to an HRG Stockholder’s Vote

     76  

Solicitation of Proxies

     77  

Attending the HRG Special Meeting

     77  

Assistance

     77  

HRG PROPOSALS

     78  

HRG Proposal 1: The HRG Section 203 Proposal

     78  

HRG Proposal 2: The HRG Reverse Stock Split Proposal

     78  

HRG Proposal 3: The HRG Common Stock Proposal

     79  

HRG Proposal 4: The HRG Preferred Stock Proposal

     79  

HRG Proposal 5: The HRG Section 382 Proposal

     79  

HRG Proposal 6: The HRG Additional Charter Amendments Proposal

     80  

HRG Proposal 7: The HRG Share Issuance Proposal

     81  

HRG Proposal 8: The HRG Adjournment Proposal

     81  

HRG Proposal 9: The HRG Advisory Compensation Proposal

     82  

THE MERGER

     83  

General Description of the Merger

     83  

Consideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split

     83  

Background of the Merger

     85  

Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors

     110  

HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors

     117  

Opinion of the Spectrum Special Committee’s Financial Advisor

     122  

Spectrum Management’s Unaudited Prospective Financial Information

     127  

Opinion of HRG’s Financial Advisor

     129  

HRG Management’s Unaudited Prospective Financial Information

     136  

Board and Management of HRG following the Merger

     137  

Interests of Spectrum’s Directors and Officers in the Merger

     141  

Interests of HRG’s Directors and Officers in the Merger

     144  

Material Agreements Between the Parties

     149  

Accounting Treatment

     149  

Listing of Shares of HRG Common Stock

     149  

Delisting and Deregistration of Shares of Spectrum Common Stock

     150  

Litigation Relating to the Merger

     150  

Rights Agreements

     150  

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     152  

THE TRANSACTION AGREEMENTS

     155  

Description of the Merger Agreement

     155  

Description of the HRG Voting Agreement

     180  

Description of the Voting Agreements

     181  

Description of the Post-Closing Stockholder Agreement

     183  

Description of Letter Agreement

     186  

Description of the Post-Closing Registration Rights Agreement

     186  

Description of the Spectrum Rights Agreement

     187  

Description of the HRG Rights Agreement

     187  

SPECTRUM AND HRG UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     189  

COMPARISON OF STOCKHOLDER RIGHTS

     195  

NO APPRAISAL OR DISSENTERS’ RIGHTS

     205  

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/ DIRECTORS OF HRG

     206  

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/ DIRECTORS OF SPECTRUM

     208  

LEGAL MATTERS

     210  

EXPERTS

     210  

SPECTRUM ANNUAL MEETING STOCKHOLDER PROPOSALS

     211  

HRG ANNUAL MEETING STOCKHOLDER PROPOSALS

     212  

HRG ANNUAL MEETING STOCKHOLDER PROPOSALS FOLLOWING THE MERGER

     213  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     214  

WHERE YOU CAN FIND MORE INFORMATION

     216  

ANNEXES

  

Annex A—Agreement and Plan of Merger, by and among HRG Group, Inc., HRG SPV Sub I, Inc., HRG SPV Sub II, LLC and Spectrum Brands Holdings, Inc.

     A-1  

Annex B—Amendment No. 1 to Agreement and Plan of Merger, by and among HRG Group, Inc., HRG SPV Sub I, Inc., HRG SPV Sub II, LLC and Spectrum Brands Holdings, Inc.

     B-1  

Annex C—Composite copy of Amended HRG Charter

     C-1  

Annex D—Opinion of Moelis & Company LLC

     D-1  

Annex E—Opinion of J.P. Morgan Securities LLC

     E-1  

Annex F—Shareholder Agreement by and between HRG Group, Inc. and Leucadia National Corporation

     F-1  

Annex G—Voting Agreement by and between Spectrum Brands Holdings, Inc. and HRG Group, Inc.

     G-1  

Annex H—Voting Agreement by and between HRG Group, Inc. and Leucadia National Corporation

     H-1  

Annex I—Voting Agreement by and between HRG Group, Inc. and CF Turul LLC

     I-1  

Annex J—Letter Agreement by and among HRG Group, Inc., Leucadia National Corporation and CF Turul LLC

     J-1  

Annex K—Rights Agreement by and between Spectrum Brands Holdings, Inc. and Computershare Trust Company, N.A.

     K-1  

Annex L—Rights Agreement by and between HRG Group, Inc. and American Stock Transfer & Trust Company, LLC

     L-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following are brief answers to certain questions that you may have regarding the Merger Agreement, the Merger, the amendment and restatement of the HRG Charter, the Spectrum Special Meeting, the HRG Special Meeting and the consideration to be received in the Merger. You are urged to read carefully this entire joint proxy statement/prospectus because the information in this section may not provide all of the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes and exhibits to, and the documents incorporated by reference into, this joint proxy statement/prospectus. See “Where You Can Find More Information.”

 

Q: What is the proposed transaction?

 

A: On February 24, 2018, HRG, HRG SPV Sub I, Inc. (“Merger Sub 1”), a direct wholly owned subsidiary of HRG, HRG SPV Sub II, LLC (“Merger Sub 2,” and together with Merger Sub 1, “Merger Sub”), and Spectrum entered into the Merger Agreement. The merger provided for in the Merger Agreement, will be implemented through several steps that will occur in immediate succession. Immediately prior to the consummation of the First Merger (as defined herein), HRG’s certificate of incorporation (the “HRG Charter”) will be amended and restated (the “Amended HRG Charter,” a copy of which (giving effect to Amendment No. 1) is attached as Annex C to this joint proxy statement/prospectus). As a result of this amendment and restatement, each of the issued and outstanding shares of HRG common stock, par value $0.01 per share (“HRG Common Stock”), will, by means of a reverse stock split (the “Reverse Stock Split”), be combined into a fraction of a share of HRG Common Stock equal to (i) the number of shares of common stock, par value $0.01 per share, of Spectrum (“Spectrum Common Stock”) held by HRG and its subsidiaries as of immediately prior to the effective time of the First Merger (the “Effective Time”), adjusted for HRG’s net indebtedness as of closing, certain transaction expenses of HRG that are unpaid as of closing and a $200,000,000 upward adjustment, divided by (ii) as of immediately prior to the Reverse Stock Split, the number of outstanding shares of HRG Common Stock on a fully diluted basis (the “Share Combination Ratio”). As part of the amendment and restatement of the HRG Charter, HRG will change its name to “Spectrum Brands Holdings, Inc.” Shares of HRG Common Stock will continue to be listed on the NYSE and are expected to trade under the symbol “SPB” following the Merger. In connection with the Merger, Spectrum will also change its name.

At the Effective Time, Merger Sub 1 will merge with and into Spectrum, with Spectrum surviving as a wholly owned subsidiary of HRG (the “First Merger”). Unless the Second Merger Opt-Out Condition (as defined herein) is met, Spectrum will immediately thereafter merge with and into Merger Sub 2 (the “Second Merger”), with Merger Sub 2 surviving as a wholly owned subsidiary of HRG. The “Second Merger Opt-Out Condition” means either of HRG or Spectrum receiving a tax opinion to the effect that the First Merger will qualify as a tax-free reorganization if the Second Merger is not consummated. As used herein, the term “Merger” means the First Merger and, only if the Second Merger occurs, the Second Merger, collectively.

In the Merger, each share of Spectrum Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Spectrum Common Stock held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum immediately prior to the Effective Time) will be converted, subject to certain exceptions, into the right to receive one (the “Merger Exchange Ratio”) share of HRG Common Stock (such consideration referred to as the “Merger Consideration”). Notwithstanding the foregoing, no HRG Common Stock will be issued in the Merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become, or be treated under the Amended HRG Charter as becoming a holder of more than 4.9% of Corporation Securities (as defined in Article XIII of the Amended HRG Charter). Any shares of HRG Common Stock that would be issuable to a Spectrum stockholder but for the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter will instead be treated as “Excess Securities” (as defined in the Amended HRG Charter) and be delivered to one or more charitable organizations described in

 

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Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder.

Spectrum will not have a controlling stockholder after the consummation of the Merger. Immediately upon consummation of the Merger, pre-closing Spectrum stockholders and pre-closing HRG stockholders are expected to own approximately 39% and 61%, respectively, of the outstanding shares of HRG Common Stock, and a total of approximately 53,613,184 shares of HRG Common Stock are expected to be outstanding. Such ownership percentages and share amount are based on (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement. HRG Common Stock will continue to be registered and subject to reporting obligations under the Exchange Act following the consummation of the Merger.

On June 8, 2018, Spectrum, HRG and Merger Sub entered into Amendment No. 1 to the Merger Agreement, which made certain modifications to the form of the Amended HRG Charter to (i) give effect to the resignation of Andreas Rouvé as a member of the Spectrum board of directors, and (ii) make certain clarifying changes in connection with the preapprovals granted to certain large institutional advisors from the transfer restrictions under the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter, as discussed under “The MergerInterests of HRG’s Directors and Offices in the MergerRights of Certain Stockholders” and “What will happen if a person would become a holder of more than 4.9% of the HRG securities as a result of the Merger?” and as described in HRG’s Current Report on Form 8-K dated June 8, 2018 and filed with the SEC on June 8, 2018 and Spectrum’s Current Report on Form 8-K dated June 8, 2018 and filed with the SEC on June 8, 2018.

 

Q: Why are Spectrum and HRG proposing the Merger?

 

A: The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the recommendation of the Spectrum Special Committee (as defined below), and the HRG board of directors each believe that the proposed Merger will provide a number of significant strategic benefits and opportunities that will be in the best interests of the Spectrum stockholders and the HRG stockholders, respectively. To review the reasons for the proposed Merger in greater detail, see “The Merger—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors” beginning on page 110 and “The Merger—HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors” beginning on page 117.

 

Q: Why am I receiving this joint proxy statement/prospectus?

 

A: Each of Spectrum and HRG is sending these materials to its respective stockholders to help them decide how to vote their shares of Spectrum Common Stock or HRG Common Stock, as the case may be, with respect to the matters to be considered at a special meeting of stockholders of Spectrum (the “Spectrum Special Meeting”) and at a special meeting of stockholders of HRG (the “HRG Special Meeting”), respectively.

Consummation of the Merger requires the affirmative votes by both Spectrum and HRG stockholders as described below in the sections entitled “The Spectrum Special Meeting” beginning on page 58, “The HRG Special Meeting” beginning on page 72 and “The Merger” beginning on page 83. To obtain these required approvals, Spectrum will hold the Spectrum Special Meeting to ask its stockholders to adopt the Merger Agreement (the “Spectrum Merger Proposal”), and HRG will hold the HRG Special Meeting to ask its stockholders to approve the issuance of HRG Common Stock to the Spectrum stockholders in connection with the Merger and the amendment and restatement of the HRG Charter (the “HRG Required Proposals”).

 

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Further information about the Spectrum Special Meeting, the HRG Special Meeting and the Merger is contained in the sections entitled “The Spectrum Special Meeting” beginning on page 58, “The HRG Special Meeting” beginning on page 72 and “The Merger” beginning on page 83. This joint proxy statement/prospectus constitutes both a joint proxy statement of Spectrum and HRG and a prospectus of HRG. It is a joint proxy statement because the Spectrum board of directors is soliciting proxies from its stockholders, and the HRG board of directors is soliciting proxies from its stockholders, using this joint proxy statement/prospectus. It is a prospectus because HRG, in connection with the Merger Agreement, is offering HRG Common Stock in exchange for the outstanding shares of Spectrum Common Stock.

The enclosed proxy materials allow you to submit a proxy by telephone or over the Internet without attending your respective company’s special meeting in person.

Your vote is very important. You are encouraged to submit your proxy by telephone or over the Internet as soon as possible, even if you plan to attend the Spectrum Special Meeting or the HRG Special Meeting in person.

 

Q: What will HRG stockholders receive in the Reverse Stock Split and/or the Merger?

 

A: Immediately prior to the First Merger, each outstanding share of HRG Common Stock will be combined by means of the Reverse Stock Split into a fraction of a share of HRG Common Stock equal to the Share Combination Ratio. No holder of HRG Common Stock will be issued fractional shares in the Reverse Stock Split. Each holder of shares of HRG Common Stock subject to the Reverse Stock Split who would otherwise have been entitled to receive a fraction of a share of HRG Common Stock (after aggregating all fractional shares held by such holder after giving effect to the Reverse Stock Split) will receive cash in an amount equal to the proceeds of the sale of such fractional share. Other than the HRG Common Stock and cash in lieu of fractional shares of HRG Common Stock received in the Reverse Stock Split, HRG stockholders will not receive any additional consideration in the Reverse Stock Split and/or the Merger.

 

Q: What will Spectrum stockholders receive in the Reverse Stock Split and/or the Merger?

 

A: In the Merger, each share of Spectrum Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Spectrum Common Stock held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum immediately prior to the Effective Time) will be converted into the right to receive one share of HRG Common Stock. The Reverse Stock Split does not apply to shares of Spectrum Common Stock.

 

Q: What are the reasons for, consequences of and risks related to the Reverse Stock Split?

 

A: The Reverse Stock Split will function to combine the outstanding shares of HRG Common Stock into fractions of a share equal to the Share Combination Ratio, after which new shares will be issued pursuant to the First Merger to holders of Spectrum Common Stock.

The Reverse Stock Split will apply to all outstanding shares of HRG Common Stock. For a discussion of the mechanics of the Reverse Stock Split, see “—Q: Am I required to send in my HRG stock certificates now?” For a discussion of the Reverse Stock Split’s effect on HRG options, warrants and restricted stock, see “The Transaction Agreements—Description of the Merger Agreement—Treatment of HRG Equity Awards.”

The number of shares of HRG Common Stock held by the current holders of HRG Common Stock following the Reverse Stock Split and the Merger will depend on the Share Combination Ratio, which will be determined by, among other things, the number of shares of Spectrum Common Stock held by HRG and its subsidiaries immediately prior to the Effective Time, the number of shares of HRG Common Stock outstanding on a fully-diluted basis, the net indebtedness and transaction expenses of HRG at closing and the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date of the Merger. For additional discussion of the

 

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consequences of the Reverse Stock Split, see “—Q: What happens if the trading price of Spectrum Common Stock or HRG Common Stock changes before the closing of the Merger?” and “The MergerConsideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split.”

For a discussion of certain U.S. income tax consequences of the Reverse Stock Split, see “—Q: What are the material U.S. federal income tax consequences of the Reverse Stock Split and the Merger to U.S. Holders of HRG Common Stock?” and “Material U.S. Federal Income Tax ConsequencesU.S. Federal Income Tax Consequences of the Reverse Stock Split to U.S. Holders of Shares of HRG Common Stock.”

 

Q: What will happen if a person would become a holder of more than 4.9% of the HRG securities as a result of the Merger?

 

A: No HRG Common Stock will be issued in the Merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become, or be treated under the Amended HRG Charter as becoming, a holder of more than 4.9% of Corporation Securities (as defined in the Amended HRG Charter). Any HRG Common Stock that would be issuable to a Spectrum stockholder but for the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter will instead be treated as “Excess Securities” (as defined in the Amended HRG Charter) and be delivered to one or more charitable organizations described in Section 501(c)(3) of the Code or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder. CF Turul LLC, an affiliate of Fortress Investment Group LLC (“Fortress”), which held approximately 16% of the issued and outstanding shares of HRG Common Stock as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, Leucadia National Corporation (“Leucadia”), which held approximately 23% of the issued and outstanding shares of HRG Common Stock as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, will be exempted from certain restrictions on ownership in the Amended HRG Charter, and may hold more than 4.9% of Corporation Securities, as discussed under “The Merger—Interests of HRG’s Directors and Officers in the MergerRights of Certain Stockholders.”

Additionally, the HRG board of directors has granted prospective preapprovals to certain large institutional advisors (each, together with its direct and indirect subsidiaries and other affiliates that manage assets for investment advisory clients, a “Fund Advisor”) deeming that, subject to the accuracy of certain representations, each of the Fund Advisors and certain of the funds, collective trusts and other pooled investment vehicles, or other clients for whom such Fund Advisor manages assets (the “Underlying Funds” and, a Fund Advisor together with its Underlying Funds, a “Fund Family”) will be exempted from these restrictions under the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter in certain circumstances where ownership by the Underlying Funds would not substantially impair the current ability of HRG to utilize certain net operating loss carryforwards and other tax benefits of HRG and its subsidiaries, as discussed under “The Merger—Interests of HRG’s Directors and Officers in the Merger—Rights of Certain Stockholders.

 

Q: When will the Merger be consummated?

 

A: The Merger is expected to be consummated in July 2018. However, neither Spectrum nor HRG can predict the actual date on which the Merger will be consummated, or whether it will be consummated, because the Merger is subject to factors beyond each company’s control. See “The Transaction Agreements—Description of the Merger Agreement—Conditions to Completion of the Merger.”

 

Q: What are the conditions to the consummation of the Merger?

 

A: In addition to approval of the Spectrum Merger Proposal by Spectrum stockholders and approval of the HRG Required Proposals by HRG stockholders, consummation of the Merger is subject to the satisfaction or, to the extent permitted by applicable law, waiver of a number of other conditions. See “The Transaction Agreements—Description of the Merger Agreement—Conditions to Completion of the Merger.”

 

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Q: What effect will the Merger have on Spectrum and HRG?

 

A: Spectrum will not have a controlling stockholder after the consummation of the Merger. At the Effective Time, Merger Sub 1 will merge with and into Spectrum, with Spectrum surviving as a wholly owned subsidiary of HRG. Immediately following the effectiveness of the First Merger, but only if the Second Merger Opt-Out Condition has not occurred, Spectrum will merge with and into Merger Sub 2, with Merger Sub 2 surviving as a wholly owned subsidiary of HRG. Following the consummation of the Merger, Spectrum Common Stock will no longer be listed on the NYSE or any other stock exchange or quotation system, and Spectrum will cease to be a publicly traded company.

HRG Common Stock will continue to be registered and subject to reporting obligations under the Exchange Act following the consummation of the Merger. As part of the HRG Charter Amendment, HRG will change its name to “Spectrum Brands Holdings, Inc.” In connection with the Merger, Spectrum will also change its name. Shares of HRG Common Stock will continue to be listed on the NYSE and are expected to trade under the symbol “SPB” following the Merger.

 

Q: Who will serve as the directors and senior officers of HRG following the Merger?

 

A: At the Effective Time, the HRG board of directors will consist of (i) Kenneth C. Ambrecht, Norman S. Matthews, David M. Maura, Terry L. Polistina, Hugh R. Rovit and Joseph S. Steinberg, all current directors of Spectrum (or if any such person is unable or unwilling to serve as a member of the HRG board of directors at the Effective Time as a result of illness, death, resignation, removal or any other reason, then such person’s successor prior to the Merger) and (ii) an individual designated by Leucadia who satisfies the independent designee requirements described in the section entitled “The Transaction Agreements—Description of the Merger Agreement—Post-Closing Governance.” At the time the Merger Agreement was executed, it was contemplated that Andreas Rouvé, who at such time was the Chief Executive Officer and a member of the board of directors of Spectrum, would become a member of the HRG board of directors at the Effective Time. On April 25, 2018, Mr. Rouvé resigned as Chief Executive Officer of Spectrum and from the Spectrum board of directors. Accordingly, Mr. Rouvé will not become a member of the HRG board of directors at the Effective Time.

At the Effective Time, the officers of Spectrum immediately prior to the Effective Time will become the officers of HRG (or if any such individual is unwilling or unable to so serve as an officer of HRG following the Effective Time, a replacement designated by Spectrum). The executive team of HRG following the Effective Time will be led by David M. Maura (Executive Chairman and Chief Executive Officer), Douglas L. Martin (Executive Vice President and Chief Financial Officer), Nathan E. Fagre (Senior Vice President, General Counsel and Secretary) and Stacey L. Neu (Senior Vice President of Human Resources).

 

Q: Who is entitled to vote?

 

A: Spectrum: The Spectrum board of directors has fixed the close of business on May 17, 2018 as the record date for the Spectrum Special Meeting (the “Spectrum Record Date”). If you were a holder of record of Spectrum Common Stock as of the close of business on May 17, 2018, you are entitled to receive notice of and to vote at the Spectrum Special Meeting and any adjournments thereof.

HRG: The HRG board of directors has fixed the close of business on May 17, 2018 as the record date for the HRG Special Meeting (the “HRG Record Date”). If you were a holder of record of HRG Common Stock as of the close of business on May 17, 2018, you are entitled to receive notice of and to vote at the HRG Special Meeting and any adjournments thereof.

 

Q: What are Spectrum stockholders being asked to vote on?

 

A: At the Spectrum Special Meeting, Spectrum stockholders will be asked to approve the following items (collectively, the “Spectrum Proposals”):

 

  1. the proposal to adopt the Merger Agreement (the “Spectrum Merger Proposal”);

 

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  2. the proposal to approve the adjournment of the Spectrum Special Meeting to another date and place if necessary or appropriate to solicit additional votes in favor of the Spectrum Merger Proposal (the “Spectrum Adjournment Proposal”); and

 

  3. six separate proposals to approve, on a non-binding, advisory basis, the amendment of the HRG certificate of incorporation (the “Spectrum Advisory HRG Charter Amendment Proposals”), including:

 

    a proposal to subject HRG to Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) (the “Spectrum Advisory HRG Section 203 Proposal”);

 

    a proposal to cause each outstanding share of HRG Common Stock to, by means of a reverse stock split, be combined into a fraction of a share of HRG Common Stock equal to the Share Combination Ratio (the “Spectrum Advisory HRG Reverse Stock Split Proposal”) (See “The Merger—Consideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split” and “The Transaction Agreements—Description of the Merger Agreement” for further information on the calculation of the Share Combination Ratio);

 

    a proposal to decrease the number of authorized shares of HRG Common Stock from 500 million to 200 million (the “Spectrum Advisory HRG Common Stock Proposal”);

 

    a proposal to increase the number of authorized shares of HRG preferred stock from 10 million to 100 million (the “Spectrum Advisory HRG Preferred Stock Proposal”);

 

    a proposal to amend the Internal Revenue Code Section 382 transfer provisions (the “Spectrum Advisory HRG Section 382 Proposal”); and

 

    a proposal to make other amendments related or incidental to the foregoing (the “Spectrum Advisory HRG Additional Charter Amendments Proposal”).

Approval of the Spectrum Merger Proposal is required for consummation of the Merger. Neither the approval of the Spectrum Adjournment Proposal nor the approval of any of the Spectrum Advisory HRG Charter Amendment Proposals is required for consummation of the Merger.

No other matters are intended to be brought before the Spectrum Special Meeting by Spectrum.

 

Q: What vote is required to approve each proposal at the Spectrum Special Meeting?

 

A: At the Spectrum Special Meeting, the following votes are required to approve each proposal:

 

  1. Spectrum Merger Proposal: Approval of the Spectrum Merger Proposal requires the affirmative vote of (i) the holders of a majority of the outstanding shares of Spectrum Common Stock, (ii) the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and the executive officers of Spectrum, and (iii) the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Exchange Act with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the Certificate of Incorporation of Spectrum (referred to as the “Spectrum Certificate of Incorporation”) (items (ii) and (iii), collectively the “Spectrum Unaffiliated Approvals”). For the Spectrum Merger Proposal, an abstention, failure to vote or broker non-vote will have the same effect as a vote cast “AGAINST” this proposal.

 

  2. Spectrum Adjournment Proposal: Approval of the Spectrum Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum Common Stock present in person or by proxy at the Spectrum Special Meeting and entitled to vote on such proposal, regardless of whether a quorum is present. For the Spectrum Adjournment Proposal, an abstention will have the same effect as a vote cast “AGAINST” this proposal. A failure to vote or broker non-vote will not be counted as a vote FOR or AGAINST this proposal.

 

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  3. Spectrum Advisory HRG Charter Amendment Proposals: Approval of each of the non-binding Spectrum Advisory HRG Charter Amendment Proposals requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum Common Stock present in person or by proxy at the Spectrum Special Meeting and entitled to vote on such proposal, assuming a quorum is present. For the Spectrum Advisory HRG Charter Amendment Proposals, an abstention will have the same effect as a vote cast “AGAINST” these proposals. A failure to vote or broker non-vote will not be counted as a vote FOR or AGAINST these proposals.

 

Q: How does the Spectrum board of directors recommend Spectrum stockholders vote?

 

A: The Spectrum board of directors (other than Messrs. Steinberg and Zargar, who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, has determined that the Merger Agreement, all agreements and documents related to and contemplated by the Merger Agreement (the “Related Agreements”), the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its stockholders, and has authorized, approved, adopted and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby. The Spectrum board of directors (other than Messrs. Steinberg and Zargar, who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends that the Spectrum stockholders vote their shares of Spectrum Common Stock:

 

  1. FOR” the Spectrum Merger Proposal;

 

  2. FOR” the Spectrum Adjournment Proposal; and

 

  3. FOR” each of the Spectrum Advisory HRG Charter Amendment Proposals.

 

Q: Are there any risks about the Merger or HRG’s business that Spectrum stockholders should consider in deciding whether to vote on the Spectrum Proposals?

 

A: Yes. Before making any decision on whether and how to vote, Spectrum stockholders are urged to read carefully and in its entirety the information contained in “Risk Factors” beginning on page 47 of this joint proxy statement/prospectus. Spectrum stockholders should also read and carefully consider the risk factors of Spectrum and HRG and the other risk factors that are incorporated by reference into this joint proxy statement/prospectus.

 

Q: Do any of Spectrum’s directors or executive officers have interests in the Merger that may be different from, or in addition to, those of Spectrum stockholders?

 

A: Yes. Spectrum’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of Spectrum stockholders. See “The Merger—Interests of Spectrum’s Directors and Officers in the Merger.” The members of the Spectrum Special Committee and the Spectrum board of directors were aware of and considered these interests, among other matters, in evaluating the Merger Agreement and the Merger, and in recommending that the Spectrum stockholders approve the Spectrum Proposals.

 

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Q: What are HRG stockholders being asked to vote on?

 

A: At the HRG Special Meeting, HRG stockholders will be asked to approve the following items (collectively, the “HRG Proposals”):

 

  1. Six separate proposals to amend the HRG Charter (collectively, the “HRG Charter Amendment Proposals”), including:

 

    a proposal to amend the HRG Charter such that each outstanding share of HRG Common Stock will, by means of a reverse stock split, be combined into a fraction of a share of HRG Common Stock equal to the Share Combination Ratio (the “HRG Reverse Stock Split Proposal”);

 

    a proposal to amend the HRG Charter such that HRG is subject to Section 203 of the DGCL (the “HRG Section 203 Proposal”);

 

    a proposal to amend the HRG Charter to decrease the number of authorized shares of HRG Common Stock from 500 million to 200 million (the “HRG Common Stock Proposal”);

 

    a proposal to amend the HRG Charter to increase the number of authorized shares of HRG preferred stock from 10 million to 100 million (the “HRG Preferred Stock Proposal”);

 

    a proposal to amend the HRG Charter’s Section 382 transfer provisions (the “HRG Section 382 Proposal”); and

 

    a proposal to make other additional amendments to the HRG Charter (the “HRG Additional Charter Amendments Proposal”);

 

  2. a proposal to approve the issuance of shares of HRG Common Stock in connection with the Merger Agreement, the Merger and other transactions contemplated thereby (the “HRG Share Issuance Proposal”);

 

  3. a proposal to approve the adjournment of the HRG Special Meeting to another date and place if necessary or appropriate to solicit additional votes in favor of the HRG Charter Amendment Proposals or the HRG Share Issuance Proposal (the “HRG Adjournment Proposal”); and

 

  4. a proposal to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to HRG’s named executive officers that is based on or otherwise relates to the merger contemplated by the Merger Agreement (the “HRG Advisory Compensation Proposal”).

 

Q: What vote is required to approve each proposal at the HRG Special Meeting?

 

A: At the HRG Special Meeting, the following votes are required to approve each proposal:

 

  1. HRG Charter Amendment Proposals: Approval of each of the HRG Charter Amendment Proposals requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. For each HRG Charter Amendment Proposal, an abstention, failure to vote or broker non-vote will have the same effect as a vote cast “AGAINST” such proposal.

 

  2. HRG Share Issuance Proposal: Approval of the HRG Share Issuance Proposal requires the affirmative vote of the holders of a majority of all votes cast by HRG stockholders present in person or by proxy and entitled to vote at the HRG Special Meeting, assuming a quorum is present. Approval of the HRG Share Issuance Proposal is required for approval of the shares of HRG Common Stock to be issued to Spectrum stockholders in the Merger for listing on the NYSE. Under NYSE rules, an abstention will be counted as a “vote cast.” Therefore, for the HRG Share Issuance Proposal, an abstention will have the same effect as a vote cast “AGAINST” this proposal. A failure to vote or broker non-vote will not be counted as a vote in favor of or against this proposal.

 

  3.

HRG Adjournment Proposal: Approval of the HRG Adjournment Proposal requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of HRG Common Stock

 

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  which are present in person or by proxy and entitled to vote on such proposal. For the HRG Adjournment Proposal, an abstention will have the same effect as a vote cast “AGAINST” such proposal. A failure to vote or broker non-vote will not be counted as a vote FOR or AGAINST this proposal.

 

  4. HRG Advisory Compensation Proposal: Approval of the non-binding HRG Advisory Compensation Proposal requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of HRG Common Stock which are present in person or by proxy and entitled to vote on such proposal, assuming a quorum is present. For the HRG Advisory Compensation Proposal, an abstention will have the same effect as a vote cast “AGAINST” such proposal. A failure to vote or broker non-vote will not be counted as a vote FOR or AGAINST such proposal.

 

Q: How does the HRG board of directors recommend HRG stockholders vote?

 

A: The HRG board of directors has approved the Merger Agreement and determined that the Merger Agreement and the Merger are advisable and in the best interests of HRG and its stockholders. The HRG board of directors recommends that the HRG stockholders vote their shares of HRG Common Stock:

 

  1. FOR” the HRG Reverse Stock Split Proposal;

 

  2. FOR” the HRG Section 203 Proposal;

 

  3. FOR” the HRG Common Stock Proposal;

 

  4. FOR” the HRG Preferred Stock Proposal;

 

  5. FOR” the HRG Section 382 Proposal;

 

  6. FOR” the HRG Additional Charter Amendments Proposal;

 

  7. FOR” the HRG Share Issuance Proposal;

 

  8. FOR” the HRG Adjournment Proposal; and

 

  9. FOR” the HRG Advisory Compensation Proposal.

 

Q: Are there any risks about the Merger or Spectrum’s business that HRG stockholders should consider in deciding whether to vote on the HRG Proposals?

 

A: Yes. Before making any decision on whether and how to vote, HRG stockholders are urged to read carefully and in its entirety the information contained in “Risk Factors” beginning on page 47 of this joint proxy statement/prospectus. HRG stockholders should also read and carefully consider the risk factors of Spectrum and HRG and the other risk factors that are incorporated by reference into this joint proxy statement/prospectus.

 

Q: Do any of HRG’s directors or executive officers have interests in the Merger that may be different from, or in addition to, those of HRG stockholders?

 

A: Yes. HRG’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of HRG stockholders. See “The Merger—Interests of HRG’s Directors and Officers in the Merger.” The members of the HRG board of directors were aware of and considered these interests, among other matters, in evaluating the Merger Agreement and the Merger, and in recommending that the HRG stockholders approve the HRG Proposals.

 

Q: What do I need to do now?

 

A:

After carefully reading and considering the information contained in this joint proxy statement/prospectus, please submit your proxy or voting instruction card for your shares of Spectrum Common Stock or HRG

 

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  Common Stock, as applicable, as soon as possible so that your shares will be represented at your respective company’s special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction card provided by your bank, broker or other nominee if your shares are held in “street name” through your bank, broker or other nominee.

 

Q: How do I vote?

 

A: If you are a stockholder of record of Spectrum as of the Spectrum Record Date, or a stockholder of record of HRG as of the HRG Record Date, you may submit your proxy before your respective company’s special meeting in one of the following ways:

 

  1. visit the website shown on your proxy card to submit your proxy via the Internet;

 

  2. call the toll-free number for telephone proxy submission shown on your proxy card; or

 

  3. complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

If your shares are held in “street name,” through a bank, broker or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. Please follow the voting instructions provided by your bank, broker or other nominee. “Street name” stockholders who wish to vote in person at the meeting will need to obtain a “legal proxy” from their bank, broker or other nominee.

You may also cast your vote in person at your respective company’s special meeting. Please bring proper identification, together with proof that you are a record owner of Spectrum Common Stock or HRG Common Stock. If your shares are held in “street name,” please bring acceptable proof of ownership, such as a letter from your broker or an account statement stating or showing that you beneficially owned Spectrum Common Stock or HRG Common Stock, as applicable, on the applicable record date to be admitted to the meeting, and you must obtain a legal proxy from the bank, broker or other nominee to vote at the meeting.

 

Q: How many votes do I have?

 

A: Spectrum: You are entitled to one vote on each of the Spectrum Proposals for each share of Spectrum Common Stock that you owned as of the close of business on the Spectrum Record Date. As of the close of business on the Spectrum Record Date, 55,358,038 shares of Spectrum Common Stock were outstanding and entitled to vote at the Spectrum Special Meeting.

HRG: You are entitled to one vote on each of the HRG Proposals for each share of HRG Common Stock that you owned as of the close of business on the HRG Record Date. As of the close of business on the HRG Record Date, 203,153,237 shares of HRG Common Stock were outstanding and entitled to vote at the HRG Special Meeting.

 

Q: Are any Spectrum stockholders already committed to vote in favor of the Spectrum Merger Proposal? Are any HRG stockholders already committed to vote in favor of the HRG Required Proposals?

 

A: Spectrum: Yes. HRG, which held approximately 62% of the issued and outstanding shares of Spectrum Common Stock as of the Spectrum Record Date, entered into an agreement with Spectrum (the “HRG Voting Agreement”), pursuant to which HRG has agreed to vote all of its shares of Spectrum Common Stock to approve and adopt the Merger Agreement and the transactions contemplated thereby and take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, in each case subject to the terms and conditions set forth therein. However, HRG’s shares of Spectrum Common Stock will not be counted for the purposes of the Spectrum Unaffiliated Approvals, so your vote is very important. The HRG Voting Agreement is included as Annex G to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus.

 

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HRG: Yes. Leucadia, which held approximately 23% of the issued and outstanding shares of HRG Common Stock as of the HRG Record Date, has entered into a voting agreement with HRG (the “Leucadia Voting Agreement”), pursuant to which Leucadia has agreed to vote its shares of HRG Common Stock in favor of the HRG Required Proposals, in each case subject to the terms and conditions set forth therein. In addition, Fortress, which held approximately 16% of the issued and outstanding shares of HRG Common Stock as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, has entered into a voting agreement with HRG (the “Fortress Voting Agreement” and together with the Leucadia Voting Agreement, the “Voting Agreements”), pursuant to which Fortress has agreed to vote its shares of HRG Common Stock in favor of the HRG Required Proposals in each case subject to the terms and conditions set forth therein. The Leucadia Voting Agreement and the Fortress Voting Agreement are included as Annexes H and I, respectively, to this joint proxy statement/prospectus and are incorporated herein by reference into this joint proxy statement/prospectus.

 

Q: What if I sell my Spectrum Common Stock before the Spectrum Special Meeting, or I sell my HRG Common Stock before the HRG Special Meeting?

 

A: Spectrum: If you transfer your shares of Spectrum Common Stock after the Spectrum Record Date but before the Spectrum Special Meeting, you will, unless you provide the transferee of your shares with a proxy, retain your right to vote at the Spectrum Special Meeting, but will have transferred the right to receive the Merger Consideration, as further described herein. In order to receive HRG Common Stock as a result of the Merger, you must hold your shares of Spectrum Common Stock through the Effective Time.

HRG: If you transfer your shares of HRG Common Stock after the HRG Record Date but before the HRG Special Meeting, you will, unless you provide the transferee of your shares with a proxy, retain your right to vote at the HRG Special Meeting, but will have transferred the right to receive a fraction of a share of HRG Common Stock (and any proceeds of the sale of fractional shares), as further described herein, for each share of HRG Common Stock pursuant to the Merger Agreement. In order to receive HRG Common Stock in connection with the Merger, you must hold your shares of HRG Common Stock through the time of the Reverse Stock Split (the “Reverse Split Time”).

 

Q: Should I send in my Spectrum stock certificates now?

 

A: No. To the extent Spectrum stockholders have certificated shares, such Spectrum stockholders should keep their existing stock certificates at this time. After the Merger is consummated, Spectrum stockholders will receive from the exchange agent a letter of transmittal and written instructions for exchanging their stock certificates or book-entry shares for shares of HRG Common Stock.

HRG will not issue stock certificates in respect of any shares of HRG Common Stock, except as required by law. Spectrum stockholders who are entitled to receive the Merger Consideration will receive shares of HRG Common Stock in book-entry form.

 

Q: Am I required to send in my HRG stock certificates now?

 

A: No. To the extent HRG stockholders have certificated shares, such HRG stockholders should keep their existing stock certificates at this time. After the Reverse Stock Split is consummated, HRG stockholders will receive from the exchange agent a letter of transmittal and written instructions for exchanging their stock certificates or book-entry shares.

HRG will not issue stock certificates in respect of shares of HRG Common Stock, except as required by law. HRG stockholders who are entitled to receive new shares as a result of the Reverse Stock Split will receive shares of HRG Common Stock in book-entry form.

 

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Q: When and where are the Spectrum Special Meeting and the HRG Special Meeting?

 

A: Spectrum: The Spectrum Special Meeting will be held at Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022, at 9:30 AM (local time), on July 13, 2018.

HRG: The HRG Special Meeting will be held at Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017, at 9:30 AM (local time), on July 13, 2018.

 

Q: What constitutes a quorum?

 

A: Spectrum: The presence in person or by proxy of the holders of a majority of Spectrum Common Stock entitled to vote is necessary to constitute a quorum at the Spectrum Special Meeting. Abstentions will be counted as present and entitled to vote for purposes of determining a quorum.

HRG: The presence in person or by proxy of the holders of shares of HRG Common Stock representing a majority of the voting power of all issued and outstanding shares of HRG Common Stock and entitled to vote at the HRG Special Meeting is necessary to constitute a quorum at the HRG Special Meeting. Abstentions will be counted as present and entitled to vote for purposes of determining a quorum.

 

Q: If my shares are held in “street name” by a bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me?

 

A: If your shares of Spectrum Common Stock or HRG Common Stock are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your bank, broker or other nominee with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Spectrum or HRG or by voting in person at your respective company’s special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.

Under the rules of the NYSE, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. It is expected that all proposals to be voted on at the Spectrum Special Meeting and the HRG Special Meeting will be “non-routine” matters. Banks, brokers and other nominees do not have discretionary voting power with respect to the approval of matters determined to be non-routine without specific instructions from the beneficial owner. If a stockholder meeting consists of a mix of “routine” and non-routine matters, the banks, brokers or other nominees may exercise voting discretion over the routine matters and must refrain from voting on the non-routine matters, which are known as “broker non-votes.” When a special meeting is comprised of only non-routine matters and no proposal is considered routine, banks, brokers or other nominees, absent specific instructions from the beneficial owner, have no voting power over any matters and therefore no broker non-votes will result. Because all proposals at the Spectrum Special Meeting and the HRG Special Meeting will be considered non-routine, we do not expect to receive any broker non-votes.

If you are a Spectrum stockholder and you do not instruct your bank, broker or other nominee on how to vote your shares:

 

    your bank, broker or other nominee may not vote your shares on the Spectrum Merger Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

    your bank, broker or other nominee may not vote your shares on the Spectrum Adjournment Proposal or the Spectrum Advisory HRG Charter Amendment Proposals, which will not count as a vote “FOR” or “AGAINST” any of these proposals; and

 

    your shares will not be counted towards determining whether a quorum is present.

 

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If you are an HRG stockholder and you do not instruct your bank, broker or other nominee on how to vote your shares:

 

    your bank, broker or other nominee may not vote your shares on the HRG Charter Amendment Proposals, which will have the same effect as a vote “AGAINST” these proposals;

 

    your bank, broker or other nominee may not vote your shares on the HRG Share Issuance Proposal, the HRG Adjournment Proposal or the HRG Advisory Compensation Proposal, which will not count as a vote “FOR” or “AGAINST” any of these proposals; and

 

    your shares will not be counted towards determining whether a quorum is present.

 

Q: What if I do not vote?

 

A: If you are a Spectrum stockholder and you fail to vote, fail to submit a proxy or fail to return a voting instruction card instructing your bank, broker or other nominee how to vote on the Spectrum Merger Proposal, or if you respond with an “abstain” vote on the Spectrum Merger Proposal, this will have the same effect as a vote cast “AGAINST” the Spectrum Merger Proposal.

If you are a Spectrum stockholder and you fail to vote, fail to submit a proxy or fail to return a voting instruction card instructing your bank, broker or other nominee how to vote on the Spectrum Adjournment Proposal or the Spectrum Advisory HRG Charter Amendment Proposals, this will not count as a vote cast “FOR” or “AGAINST” the Spectrum Proposals. If you respond with an “abstain” vote on the Spectrum Adjournment Proposal or the Spectrum Advisory HRG Charter Amendment Proposals, this will have the same effect as a vote cast “AGAINST” these Proposals.

If you fail to vote, fail to submit a proxy or fail to properly instruct your bank, broker or other nominee how to vote with respect to any of the Spectrum Proposals, your shares will not count towards determining whether a quorum is present. However, if you respond with an “abstain” vote on any of the Spectrum Proposals, or vote on one or more of the Spectrum Proposals, your shares will count towards determining whether a quorum is present.

If you are an HRG stockholder and you fail to vote, fail to submit a proxy or fail to return a voting instruction card instructing your bank, broker or other nominee how to vote on the HRG Charter Amendment Proposals, or if you respond with an “abstain” vote on the HRG Charter Amendment Proposals, this will have the same effect as a vote cast “AGAINST” the HRG Charter Amendment Proposals.

If you are an HRG stockholder and you fail to vote, fail to submit a proxy or fail to return a voting instruction card instructing your bank, broker or other nominee how to vote on the HRG Share Issuance Proposal, this will not count as a vote cast “FOR” or “AGAINST” such proposal. However, if you respond with an “abstain” vote on the Share Issuance Proposal, which is required for approval of the shares of HRG Common Stock to be issued to Spectrum stockholders in the Merger for listing on the NYSE, this will have the same effect as a vote cast “AGAINST” such proposal because the NYSE does not follow Delaware law that an abstention is not a vote cast and instead considers an abstention to be a vote cast.

If you are an HRG stockholder and you fail to vote, fail to submit a proxy or fail to return a voting instruction card instructing your bank, broker or other nominee how to vote on the HRG Adjournment Proposal or the HRG Advisory Compensation Proposal, this will not count as a vote cast “FOR” or “AGAINST” such proposals. If you respond with an “abstain” vote on the HRG Adjournment Proposal or the HRG Advisory Compensation Proposal, this will have the same effect as a vote cast “AGAINST” such proposals.

If you fail to vote, fail to submit a proxy or fail to properly instruct your bank, broker or other nominee how to vote with respect to any of the HRG Proposals, your shares will not count towards determining whether a quorum is present. However, if you respond with an “abstain” vote on any of the HRG Proposals, or vote on one or more of the HRG Proposals, your shares will count towards determining whether a quorum is present.

 

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An abstention occurs when a stockholder attends the applicable meeting in person and does not vote or returns a proxy or voting instruction card with an “abstain” vote.

Please note that if you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal (and you do not change your vote after delivering your proxy or voting instruction card), the shares of Spectrum Common Stock represented by your proxy will be voted “FOR” each Spectrum Proposal in accordance with the recommendation of the Spectrum board of directors, or the shares of HRG Common Stock represented by your proxy will be voted “FOR” each HRG Proposal in accordance with the recommendation of the HRG board of directors. See the Q&A below entitled “May I change my vote after I have delivered my proxy or voting instruction card?” for further information on how to change your vote.

Your vote is very important. Whether or not you plan to attend the Spectrum Special Meeting or the HRG Special Meeting, as applicable, please promptly complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet.

 

Q: May I change my vote after I have delivered my proxy or voting instruction card?

 

A: Spectrum: As a Spectrum stockholder, you may change your vote or revoke a proxy at any time before your proxy is exercised at the Spectrum Special Meeting. If you are a Spectrum stockholder of record, you can do this by:

 

    sending a written notice of revocation stating that you would like to revoke your proxy, to:

Senior Vice President, General Counsel and Secretary

Spectrum Brands Holdings, Inc.

3001 Deming Way

Middleton, Wisconsin 53562

 

    submitting a new proxy bearing a later date (by Internet, telephone or mail); or

 

    attending the Spectrum Special Meeting and voting in person.

Attending the Spectrum Special Meeting will not automatically revoke a proxy that was submitted through the Internet or by telephone or mail. If you wish to change your vote at the Spectrum Special Meeting, you must vote by ballot at such meeting to change your vote.

If you are a Spectrum stockholder whose shares are held in “street name” by a bank, broker or other nominee, you may revoke your proxy and vote your shares in person at the Spectrum Special Meeting only in accordance with applicable rules and procedures as employed by such bank, broker or other nominee. If your shares are held in an account at a bank, broker or other nominee, you should contact your bank, broker or other nominee to change your vote.

HRG: As an HRG stockholder, you may change your vote or revoke a proxy at any time before your proxy is voted at the HRG Special Meeting. If you are an HRG stockholder of record, you can do this by:

 

    sending a written notice of revocation that is received by HRG prior to 12:00 p.m. (U.S. Eastern Time) on the day preceding the HRG Special Meeting, stating that you would like to revoke your proxy, to:

Ehsan Zargar

Executive Vice President, Chief Operating Officer and General Counsel

HRG Group, Inc.

450 Park Avenue, 29th Floor

New York, New York 10022

 

    submitting a new proxy bearing a later date (by Internet, telephone or mail) that is received by HRG prior to 12:00 p.m. (U.S. Eastern Time) on the day preceding the HRG Special Meeting; or

 

    attending the HRG Special Meeting and voting in person.

 

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Attending the HRG Special Meeting will not automatically revoke a proxy that was submitted through the Internet or by telephone or mail. If you wish to change your vote at the HRG Special Meeting, you must vote by ballot at such meeting to change your vote.

If you are an HRG stockholder whose shares are held in “street name” by a bank, broker or other nominee, you may revoke your proxy and vote your shares in person at the HRG Special Meeting only in accordance with applicable rules and procedures as employed by such bank, broker or other nominee. If your shares are held in an account at a bank, broker or other nominee, you should contact your bank, broker or other nominee to change your vote.

 

Q: What should I do if I receive more than one set of voting materials?

 

A: Spectrum and HRG stockholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of Spectrum Common Stock or HRG Common Stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of Spectrum Common Stock or HRG Common Stock and your shares are registered in more than one name, you will receive more than one proxy card. In addition, if you are a holder of shares of both Spectrum Common Stock and HRG Common Stock, you will receive one or more separate proxy cards or voting instruction cards for each company. Therefore, if you are a record holder, please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this joint proxy statement/prospectus to ensure that you vote every share of Spectrum Common Stock and/or every share of HRG Common Stock that you own.

 

Q: What is householding and how does it affect me?

 

A: The Securities and Exchange Commission (the “SEC”) permits companies to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the applicable company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card.

If you hold your shares of Spectrum Common Stock or HRG Common Stock in “street name,” your bank, broker or other nominee may have instituted householding. If your household has multiple accounts holding Spectrum Common Stock or HRG Common Stock, you may have already received householding notification from your bank, broker or other nominee. Please contact your bank, broker or other nominee directly if you have any questions or require additional copies of this joint proxy statement/prospectus. The broker will arrange for delivery of a separate copy of this joint proxy statement/prospectus promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies. Not all banks, brokers or other nominees may offer the opportunity to permit beneficial owners to participate in householding. If you want to participate in householding and eliminate duplicate mailings in the future, you must contact your bank, broker or other nominee directly.

 

Q: Where can I find the voting results of the Spectrum Special Meeting and the HRG Special Meeting?

 

A: Preliminary voting results are expected to be announced at the Spectrum Special Meeting and the HRG Special Meeting and may be set forth in a press release of Spectrum or HRG after the Spectrum Special Meeting and the HRG Special Meeting, respectively. Final voting results for the Spectrum Special Meeting and the HRG Special Meeting are expected to be published in Current Reports on Form 8-K to be filed by Spectrum and HRG with the SEC within four business days after the Spectrum Special Meeting and the HRG Special Meeting, as applicable.

 

Q: Are Spectrum stockholders entitled to appraisal rights?

 

A: No. Spectrum stockholders will not be entitled to exercise any appraisal rights under Delaware law in connection with the Merger.

 

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Q: Are HRG stockholders entitled to appraisal rights?

 

A: No. HRG stockholders will not be entitled to exercise any appraisal rights under Delaware law in connection with the Merger, including the Reverse Stock Split.

 

Q: What are the material U.S. federal income tax consequences of the Merger to U.S. Holders of Spectrum Common Stock?

 

A: Spectrum and HRG intend for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to both parties’ obligations to complete the Merger that either Spectrum or HRG (or both) receive an opinion from nationally recognized tax counsel to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the Merger is completed in the manner set forth in the Merger Agreement and the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part and based solely on the information, and subject to the assumptions, qualifications and limitations set forth herein (including those set forth in “Material U.S. Federal Income Tax Consequences”) and in the federal income tax opinion filed herewith, it is the opinion of Kirkland & Ellis LLP (“Kirkland”) that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Accordingly, it is the opinion of Kirkland that, for U.S. federal income tax purposes, a U.S. Holder (as defined under “Material U.S. Federal Income Tax Consequences”) of Spectrum Common Stock will not recognize any gain or loss upon the exchange of Spectrum Common Stock for HRG Common Stock in the Merger.

Please review the information set forth in the section entitled “Material U.S. Federal Income Tax Consequences” for a more complete description of the material U.S. federal income tax consequences of the Merger. The tax consequences to you of the Merger will depend on your particular facts and circumstances. Please consult your own tax advisors as to the specific tax consequences to you of the Merger.

 

Q: What are the material U.S. federal income tax consequences of the Reverse Stock Split and the Merger to U.S. Holders of HRG Common Stock?

 

A: Assuming the Reverse Stock Split is completed in the manner set forth in the Merger Agreement and the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part and based solely on the information, and subject to the assumptions, qualifications and limitations set forth herein (including those set forth in “Material U.S. Federal Income Tax Consequences”) and in the federal income tax opinion filed herewith, it is the opinion of Davis Polk & Wardwell LLP (“Davis Polk”) that, for U.S. federal income tax purposes, a U.S. Holder of HRG Common Stock will not recognize gain or loss upon the Reverse Stock Split, except with respect to cash received in lieu of a fractional HRG share. A U.S. Holder’s aggregate tax basis in the HRG Common Stock received pursuant to the Reverse Stock Split will equal the aggregate tax basis of the HRG Common Stock surrendered (excluding any portion of such basis that is allocated to a fractional share of HRG Common Stock), and such U.S. Holder’s holding period in the HRG Common Stock received will include the holding period in the HRG Common Stock surrendered. A U.S. Holder of HRG Common Stock that receives cash in lieu of a fractional HRG share pursuant to the Reverse Stock Split will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the HRG Common Stock surrendered that is allocated to such fractional HRG share. The Merger, which will occur immediately following the Reverse Stock Split, will have no U.S. federal income tax consequences to a U.S. Holder of HRG Common Stock (other than a U.S. Holder that receives HRG Common Stock pursuant to the Merger Agreement, as described in the section entitled “Material U.S. Federal Income Tax Consequences” and the below Q&A).

Please review the information set forth in the section entitled “Material U.S. Federal Income Tax Consequences” for a more complete description of the material U.S. federal income tax consequences of the Reverse Stock Split and the Merger. The tax consequences to you of the Reverse Stock Split and the Merger will depend on your particular facts and circumstances. Please consult your own tax advisors as to the specific tax consequences to you of the Reverse Stock Split and the Merger.

 

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Q: What happens if the trading price of Spectrum Common Stock or HRG Common Stock changes before the closing of the Merger?

 

A: Because the Share Combination Ratio is not fixed and will vary with market prices, among other things, the number of shares of HRG Common Stock to be received by holders of HRG Common Stock in the Reverse Stock Split, and therefore the portion and value of HRG following the Effective Time represented by shares of HRG Common Stock issued to Spectrum stockholders in the Merger, will change between now and the time the Merger is consummated.

The exact value of the shares of HRG Common Stock to be received by the current HRG stockholders and the current Spectrum stockholders will depend on, among other things, the trading prices of the Spectrum Common Stock and the HRG Common Stock immediately prior to the Effective Time, as discussed under “The Merger—Consideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split.”

 

Q: What happens if the Merger is not consummated?

 

A: If the Merger is not consummated, shares of HRG Common Stock will not be subject to the Reverse Stock Split and Spectrum stockholders will not receive the Merger Consideration in exchange for their shares of Spectrum Common Stock. Instead, HRG and Spectrum will remain separate public companies and the Spectrum Common Stock and the HRG Common Stock will continue to be listed and traded on the NYSE. In addition, Spectrum will continue to be HRG’s majority-owned subsidiary.

 

Q: Whom should I contact if I have any questions about the proxy materials or voting?

 

A: If you have any questions about the proxy materials or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should, if you are a Spectrum stockholder, contact Spectrum’s proxy solicitation agent and, if you are an HRG stockholder, contact HRG’s proxy solicitation agent.

Spectrum stockholders should contact MacKenzie Partners, Inc., the proxy solicitation agent for Spectrum, by (i) mail at 1407 Broadway, 27th Floor, New York, New York 10018, (ii) email at proxy@mackenziepartners.com or (iii) telephone toll-free at (800) 322-2885.

HRG stockholders should contact Georgeson LLC, the proxy solicitation agent for HRG, by (i) mail at 1290 Avenue of the Americas, 9th Floor, New York, New York 10104, (ii) e-mail at HRGGroup@Georgeson.com or (iii) telephone at (781) 575-2137 or toll-free (888) 680-1529.

 

Q: Where can I find more information about Spectrum and HRG?

 

A: You can find more information about Spectrum and HRG from the various sources described under “Where You Can Find More Information.”

 

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SUMMARY

This summary highlights selected information included in this joint proxy statement/prospectus. You should read carefully this entire joint proxy statement/prospectus and its annexes and exhibits and the other documents referred to in this joint proxy statement/prospectus, because the information in this section may not provide all of the information that might be important to you in determining how to vote. Additional important information about Spectrum and HRG is also contained in the annexes and exhibits to, and the documents incorporated by reference into, this joint proxy statement/prospectus. For a description of, and instructions as to how to obtain, this information, see “Where You Can Find More Information.” Certain items in this summary include a page reference directing you to a more complete description of that item.

Parties to the Transaction

Spectrum Brands Holdings, Inc.

Spectrum Brands Holdings, Inc. is a diversified global branded consumer products company. Spectrum manufactures, markets and/or distributes its products in approximately 160 countries in the North America; Europe, Middle East & Africa; Latin America and Asia-Pacific regions through a variety of trade channels, including retailers, wholesalers and distributors, original equipment manufacturers, construction companies and hearing aid professionals. Spectrum enjoys strong name recognition in its regions under its various brands and patented technologies across multiple product categories.

The principal executive offices of Spectrum are located at 3001 Deming Way, Middleton, Wisconsin 53562; its telephone number is (609) 275-3340; and its website is www.spectrumbrands.com. Information on this Internet web site is not incorporated by reference into or otherwise part of this joint proxy statement/prospectus.

This joint proxy statement/prospectus incorporates important business and financial information about Spectrum from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a list of the documents that are incorporated by reference, see “Incorporation of Certain Documents by Reference.”

HRG Group, Inc.

HRG is a holding company that conducts its operations principally through Spectrum, which is a majority-owned subsidiary of HRG.

The principal executive offices of HRG are located at 450 Park Avenue, 29th Floor, New York, New York 10022; its telephone number is (212) 906-8555; and its website is www.hrggroup.com. Information on this Internet web site is not incorporated by reference into or otherwise part of this joint proxy statement/prospectus.

This joint proxy statement/prospectus incorporates important business and financial information about HRG from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a list of the documents that are incorporated by reference, see “Incorporation of Certain Documents by Reference.

HRG SPV Sub I, Inc.

Merger Sub 1 was incorporated in the State of Delaware on February 20, 2018, and is a direct wholly owned subsidiary of HRG. Merger Sub 1 was formed solely for the purpose of completing the Merger. Merger Sub 1 has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the Merger.



 

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The principal executive offices of Merger Sub 1 are located at 450 Park Avenue, 29th Floor, New York, New York 10022; and its telephone number is (212) 906-8555.

HRG SPV Sub II, LLC

Merger Sub 2 was formed in the State of Delaware on February 20, 2018, and is a direct wholly owned subsidiary of HRG. Merger Sub 2 was formed solely for the purpose of completing the Merger. Merger Sub 2 has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the Merger.

The principal executive offices of Merger Sub 2 are located at 450 Park Avenue, 29th Floor, New York, New York 10022; and its telephone number is (212) 906-8555.

The Transaction (See Page 83)

The terms and conditions of the transaction are contained in the Merger Agreement and Amendment No. 1, which are attached to this joint proxy statement/prospectus as Annex A and Annex B, respectively, and incorporated by reference into this joint proxy statement/prospectus. You should read the Merger Agreement carefully, as it is the legal document that governs the transaction.

Transaction Structure

The Merger will be implemented through several steps that will occur in immediate succession.

Immediately prior to the consummation of the First Merger, the HRG Charter will be amended and restated. As a result of this amendment and restatement, each of the outstanding shares of HRG Common Stock will, by means of the Reverse Stock Split, be combined into a fraction of a share of HRG Common Stock equal to (i) the number of shares of Spectrum Common Stock held by HRG and its subsidiaries as of immediately prior to the Effective Time, adjusted for HRG’s net indebtedness as of closing, certain transaction expenses of HRG that are unpaid as of closing and a $200,000,000 upward adjustment, divided by (ii) as of immediately prior to the Reverse Split Time, the number of outstanding shares of HRG Common Stock on a fully diluted basis. As part of the amendment and restatement of the HRG Charter, HRG will change its name to “Spectrum Brands Holdings, Inc.” In connection with the Merger, Spectrum will also change its name.

Immediately following the Reverse Stock Split, Merger Sub 1 will merge with and into Spectrum in the First Merger, with Spectrum surviving the First Merger as a direct wholly owned subsidiary of HRG. Immediately following the effectiveness of the First Merger, but only if HRG or Spectrum does not receive a tax opinion that states the First Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, Spectrum will merge with and into Merger Sub 2 in the Second Merger, with Merger Sub 2 surviving the Second Merger as a direct wholly owned subsidiary of HRG.

In the Merger, each share of Spectrum Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Spectrum Common Stock held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum immediately prior to the Effective Time, which will be cancelled and will cease to exist) will be converted into the right to receive one share of HRG Common Stock.

Notwithstanding the foregoing, no shares of HRG Common Stock will be issued in the Merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become, or be treated under the Amended HRG Charter as becoming a holder of more than 4.9% of Corporation Securities (as defined



 

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in Article XIII of the Amended HRG Charter). Any shares of HRG Common Stock that would be issuable to a Spectrum stockholder but for the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter will instead be treated as “Excess Securities” (as defined in Article XIII of the Amended HRG Charter) and be delivered to one or more charitable organizations described in Section 501(c)(3) of the Code or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder.

Immediately upon consummation of the Merger, pre-closing Spectrum stockholders and pre-closing HRG stockholders are expected to own approximately 39% and 61%, respectively, of the outstanding shares of HRG Common Stock, and a total of approximately 53,613,184 shares of HRG Common Stock are expected to be outstanding. Such ownership percentages and share amount are based on (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement. Shares of Spectrum Common Stock currently trade on the NYSE under the symbol “SPB” and shares of HRG Common Stock currently trade on the NYSE under the symbol “HRG.” Following the completion of the Merger, the shares of HRG Common Stock will be listed on the NYSE and are expected to trade under the symbol “SPB.”

Treatment of Spectrum Equity-Based Awards (See Page 159)

By virtue of the First Merger and at the Effective Time, (i) each award of Spectrum Common Stock subject to vesting, repurchase or other lapse restrictions granted under an equity-based Spectrum plan (each, a “Spectrum Restricted Stock Award”) that is outstanding as of immediately prior to the Effective Time, will be assumed by HRG and will be automatically converted into a restricted stock award of HRG Common Stock equal to the number of shares of Spectrum Common Stock subject to such Spectrum Restricted Stock Award as of immediately prior to the Effective Time (each, a “New HRG Restricted Stock Award”); (ii) each vested and unvested restricted stock unit award that corresponds to a number of shares of Spectrum Common Stock granted under a Spectrum Plan (each, a “Spectrum RSU Award”) that is outstanding as of immediately prior to the Effective Time, will be assumed by HRG and will be automatically converted into a restricted share unit award of HRG Common Stock equal to the number of shares of Spectrum Common Stock subject to such Spectrum RSU Award as of immediately prior to the Effective Time (each, a “New HRG RSU Award”); and (iii) each vested and unvested performance share unit award that corresponds to a number of shares of Spectrum Common Stock granted under a Spectrum Plan (each, a “Spectrum PSU Award”) that is outstanding as of immediately prior to the Effective Time, will be assumed by HRG and will be automatically converted into a performance share unit award of HRG Common Stock equal to the number of shares of Spectrum Common Stock subject to such Spectrum PSU Award as of immediately prior to the Effective Time (subject to such adjustment as may be determined by the board of directors of Spectrum or any applicable committee thereof in its discretion) (each, a “New HRG PSU Award”). Each New HRG Restricted Stock Award, New HRG RSU Award and New HRG PSU Award will continue to have the same terms and conditions, including with respect to vesting, as the Spectrum Restricted Stock Award, Spectrum RSU Award and Spectrum PSU Award to which they relate. In addition, and as further discussed below in the section entitled “The Merger—Interests of HRG’s Directors and Officers in the Merger,” beginning on page 144, all outstanding Spectrum equity awards held by Ehsan Zargar, HRG’s Executive Vice President, Chief Financial Officer and Chief Accounting Officer, will accelerate and vest immediately upon the Effective Time.



 

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Treatment of HRG Equity-Based Awards (See Page 160)

As of the date that is ten days prior to the Effective Time, but subject to the consummation of the First Merger, each stock option granted under an equity-based HRG plan or otherwise (each, an “HRG Stock Option”) and each warrant granted under an equity-based HRG plan or otherwise (each, an “HRG Warrant”) that in either case is then outstanding and unvested will become fully vested and exercisable. To the extent that, prior to the Reverse Split Time, the holder of an HRG Stock Option or HRG Warrant exercises the applicable award, the shares of HRG Common Stock issued to the holder on exercise will be treated as shares of HRG Common Stock for all purposes of the Merger, including the Reverse Split and the First Merger. As of the Reverse Split Time, each outstanding HRG Stock Option and HRG Warrant will be adjusted by (i) multiplying the number of shares of HRG Common Stock covered by such award by the Share Combination Ratio and rounding down to the nearest whole share and (ii) dividing the per-share exercise price of such award by the Share Combination Ratio and rounding up to the nearest whole cent. Except as otherwise provided above, each adjusted HRG Stock Option and HRG Warrant will continue to have, and will be subject to, the same terms and conditions as applied to the award as of immediately prior to the Reverse Split Time.

Immediately prior to the Reverse Split Time, each award of HRG Common Stock subject to vesting, repurchase or other lapse restrictions granted under an equity-based HRG plan (each, an “HRG Restricted Stock Award”) that is outstanding as of immediately prior to the Reverse Split Time, will vest in full and become fully vested shares of HRG Common Stock (“HRG Vested Restricted Stock Award Shares”). As of the Reverse Split Time, each HRG Vested Restricted Stock Award Share will be treated as a share of HRG Common Stock for all purposes of the Merger, including the Reverse Split and the First Merger.

Litigation Relating to the Merger (See Page 150)

On January 17, 2018, Spectrum received a demand letter from counsel for a purported Spectrum stockholder pursuant to Section 220 of the DGCL seeking inspection of Spectrum’s books and records. After negotiation with counsel for this purported stockholder, and pursuant to an agreement governing the confidentiality of any produced documents, Spectrum agreed to produce certain books and records in connection with the proposed Merger between Spectrum and HRG.

Board and Management of HRG After the Merger (See Page 137)

At the Effective Time, the HRG board of directors will consist of (i) Messrs. Kenneth C. Ambrecht, Norman S. Matthews, David M. Maura, Terry L. Polistina, Hugh R. Rovit and Joseph S. Steinberg, all current directors of Spectrum (or if any such person is unable or unwilling to serve as a member of the HRG board of directors at the Effective Time as a result of illness, death, resignation, removal or any other reason, then such person’s successor prior to the Merger) and (ii) an individual designated by Leucadia who satisfies the following designation requirements: that (x) such individual (A) qualifies as an “independent director” of HRG and Spectrum, in each case as of and following the Effective Time, under Rule 303A(2) of the NYSE Listed Company Manual, (B) is not, and within the three years prior to the date of the Merger Agreement has not been, a director, officer, or employee of HRG, Leucadia, Fortress or any of their respective subsidiaries, (C) is not as of the closing date of the Merger a director, officer or employee of a hedge fund or an investment bank, (D) completes reasonable and customary onboarding documentation generally applicable to the other members of the HRG board of directors (as of the date of the Merger Agreement), and (E) has not been the subject of any event required to be disclosed pursuant to Items 2(d) or 2(e) of Schedule 13D under the Exchange Act or Item 401(f) of Regulation S-K of the Securities Act (for the avoidance of doubt, excluding bankruptcies and violations of or non-compliance with Section 16(b) under the Exchange Act) involving an act of moral turpitude by such individual and is not subject to any order, decree or judgment of any governmental entity prohibiting service as a director of any public company, and (y) the election of such individual to the HRG board of directors would not cause HRG to be in violation of applicable law. At the time the Merger Agreement was executed, it



 

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was contemplated that Andreas Rouvé, who at such time was the Chief Executive Officer and a member of the board of directors of Spectrum, would become a member of the HRG board of directors at the Effective Time. On April 25, 2018, Mr. Rouvé resigned as Chief Executive Officer of Spectrum and from the Spectrum board of directors. Accordingly, Mr. Rouvé will not become a member of the HRG board of directors at the Effective Time.

At the Effective Time, the officers of Spectrum immediately prior to the Effective Time will become the officers of HRG (or if any such individual is unwilling or unable to so serve as an officer of HRG following the Effective Time, a replacement designated by Spectrum). The executive team of HRG following the Effective Time will be led by Messrs. Maura (Executive Chairman and Chief Executive Officer), Douglas L. Martin (Executive Vice President and Chief Financial Officer) and Nathan E. Fagre (Senior Vice President, General Counsel and Secretary), and Ms. Stacey L. Neu (Senior Vice President of Human Resources).

On April 26, 2018, Spectrum announced the appointment of David M. Maura as Chief Executive Officer of Spectrum effective as of April 25, 2018, replacing Andreas Rouvé, who on that date resigned as Spectrum’s Chief Executive Officer and as a member of the Spectrum board of directors. This appointment is in addition to Mr. Maura’s continuing role as the Executive Chairman of the Spectrum board of directors, a position he has held since January 2016. In connection with this appointment, Mr. Maura entered into a new employment agreement with Spectrum. In connection with Mr. Rouvé’s resignation, Spectrum, Spectrum Brands, Inc. and Mr. Rouvé entered into a separation agreement. The terms of Mr. Maura’s employment agreement and Mr. Rouvé’s separation agreement are described in Spectrum’s Current Report on Form 8-K dated April 25, 2018 and filed with the SEC on May 1, 2018. Mr. Rouvé’s departure created a vacancy on the Spectrum board of directors that Spectrum does not expect will be filled prior to the consummation of the Merger.

Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors (See Page 110)

The “Spectrum Special Committee” is a committee consisting of four independent and disinterested directors of the Spectrum board of directors formed for the purpose of exploring, considering, negotiating and reviewing any strategic alternatives announced by HRG involving Spectrum or any other strategic or financial alternatives available to Spectrum. The Spectrum Special Committee has unanimously determined that the Merger Agreement, all Related Agreements, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its minority stockholders, and has recommended that the Spectrum board of directors authorize, approve, adopt and declare advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, and recommend Spectrum’s stockholders adopt the Merger Agreement and the Related Agreements and approve the Merger and the other transactions contemplated thereby.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar, who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, has determined that the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its stockholders, and has authorized, approved, adopted and declared advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby. The Spectrum board of directors (other than Messrs. Steinberg and Zargar, who recused themselves due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends that the Spectrum stockholders vote “FOR” each of the resolutions to be considered at the Spectrum Special Meeting and described in this joint proxy statement/prospectus, including the Spectrum Merger Proposal.



 

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For a discussion of the factors considered by the Spectrum Special Committee and the Spectrum board of directors in their determination to recommend the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated thereby, see “The Merger—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors.”

HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors (See Page 117)

The HRG board of directors determined that it is advisable and fair to, and in the best interests of, HRG and its stockholders for HRG to enter into the Merger Agreement, the Related Agreements, and the transactions contemplated thereby, including the Merger, the HRG Share Issuance and the HRG Charter Amendment, and to adopt the Amended HRG Charter. The HRG board of directors unanimously recommends that the HRG stockholders vote “FOR” each of the resolutions to be considered at the HRG Special Meeting and described in this joint proxy statement/prospectus.

For a discussion of the factors considered by the HRG board of directors in their determination to recommend, authorize, approve and declared advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, see “The Merger—HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors.”

Opinion of the Spectrum Special Committee’s Financial Advisor (See Page 122)

In connection with the Merger and the other transactions contemplated by the Merger Agreement (collectively, the “Transaction”), the Spectrum Special Committee received an oral opinion, which was confirmed by delivery of a written opinion, dated February 24, 2018, from its financial advisor, Moelis & Company LLC (“Moelis”), as to the fairness, from a financial point of view and as of the date of such opinion, of the Merger Exchange Ratio in the Transaction, to the holders of Spectrum Common Stock other than HRG, its affiliates, and those holders of HRG Common Stock party to the Voting Agreements (collectively, the “Excluded Holders”). The full text of Moelis’ written opinion, dated February 24, 2018, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D to this joint proxy statement/prospectus and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Spectrum Special Committee (solely in its capacity as such) in its evaluation of the Transaction. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Exchange Ratio to the holders of Spectrum Common Stock, other than the Excluded Holders, and does not address Spectrum’s underlying business decision to effect the Transaction or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available with respect to Spectrum. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Transaction or any other matter.

Opinion of HRG’s Financial Advisor (See Page 129)

HRG retained J.P. Morgan Securities LLC (“J.P. Morgan”) to act as financial advisor to the HRG board of directors in connection with the proposed Transaction. At the meeting of the HRG board of directors on February 24, 2018, J.P. Morgan rendered its oral opinion to the HRG board of directors that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the Share Combination Ratio in the proposed Transaction was fair, from a financial point of view, to the holders of HRG Common Stock. J.P. Morgan confirmed this oral opinion by delivering its written opinion to the HRG board of directors, dated February 24, 2018.

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J.P. Morgan in preparing the opinion, is attached as Annex E to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. HRG’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the HRG board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Transaction, was directed only to the Share Combination Ratio in the proposed Transaction and did not address any other aspect of the proposed Transaction. The opinion does not constitute a recommendation to any stockholder of HRG as to how such stockholder should vote with respect to the HRG Proposals or any other matter. For a description of the opinion that the HRG board of directors received from J.P. Morgan, see “The MergerOpinion of HRG’s Financial Advisor” beginning on page 129 of this joint proxy statement/prospectus.

Key Terms of the Transaction Agreements (See Page 155)

Agreement and Plan of Merger (See Page 155)

Conditions to the Completion of the Merger

As more fully described in this joint proxy statement/prospectus and as set forth in the Merger Agreement, the closing of the Merger depends on a number of conditions being satisfied or waived (except with respect to the condition set forth in item (ii) of the first bullet below, which is not waivable). These conditions include:

 

    approval of the Spectrum Merger Proposal by the affirmative vote (i) of the holders of a majority of the outstanding shares of Spectrum Common Stock, (ii) of the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and the executive officers of Spectrum and (iii) of the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Exchange Act with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the Spectrum Certificate of Incorporation;

 

    approval of (i) each of the HRG Charter Amendment Proposals by the affirmative vote of the holders of a majority of the outstanding shares of HRG Common Stock and consent of the holder of Series A Participating Convertible Preferred Stock of HRG, par value $0.01 (the “HRG Series A Preferred Stock”), and (ii) the HRG Share Issuance Proposal by the affirmative vote of the holders of a majority of HRG Common Stock present in person or represented by proxy and entitled to vote at the HRG Special Meeting, assuming a quorum is present;

 

    absence of any applicable law or order being in effect restraining, enjoining, prohibiting or making illegal the consummation of the proposed transaction;

 

    the effectiveness of the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part under the Securities Act and not being the subject of any stop order;

 

    the listing on the NYSE of the shares of HRG Common Stock to be issued to the Spectrum stockholders in the Merger, subject to official notice of issuance;

 

    receipt by either HRG or Spectrum (or both) of a written opinion of a nationally recognized tax counsel, dated as of the closing date of the Merger and in form and substance reasonably satisfactory to such party, to the effect that for U.S. federal income tax purposes the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

 

    the accuracy of each party’s representations and warranties in the Merger Agreement (generally subject to a material adverse effect standard) as of the date of the Merger Agreement and as of the closing date of the Merger and the receipt by each party of a certificate from an executive officer of the other party certifying that this condition has been satisfied;


 

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    the performance in all material respects by each party of the covenants and agreements required to be performed by it under the Merger Agreement and the receipt by each party of a certificate from an executive officer of the other party certifying that this condition has been satisfied; and

 

    the absence of a material adverse effect on either party since the date of the Merger Agreement (see section entitled “—Definition of ‘Material Adverse Effect’” for a discussion on the meaning of “material adverse effect”).

Spectrum and HRG cannot be certain when, or if, the conditions to the Merger Agreement will be satisfied or waived, or when or whether the Merger will be completed.

No Solicitation; Change of Recommendation

As more fully described in this joint proxy statement/prospectus and as set forth in the Merger Agreement, Spectrum and HRG have agreed, among other things:

 

    not to solicit, initiate or knowingly encourage, induce or facilitate any alternative acquisition proposal or any inquiry, proposal or offer that may reasonably be expected to lead to an alternative acquisition proposal;

 

    not to furnish nonpublic information regarding itself or any of its subsidiaries or afford access to its business, properties, assets, books or records to, or otherwise knowingly cooperate in any way with, any third party that is reasonably expected to make, or has made, an alternative acquisition proposal; and

 

    subject to certain exceptions, not to engage in any discussions or negotiations with any third parties regarding alternative acquisition proposals.

However, the foregoing restrictions do not apply to any inquiry, proposal or offer with respect to (i) any transaction that relates specifically to the battery or appliances business of Spectrum and its subsidiaries or (ii) any other transaction that would not reasonably be expected to prevent or materially delay or make more unlikely to occur the consummation of the Merger and the other transactions contemplated by the Merger Agreement, so long as Spectrum keeps HRG informed on a reasonably current basis of the status of such transaction.

Prior to the time, in the case of Spectrum, that Spectrum receives stockholder approval of the Spectrum Merger Proposal, or, in the case of HRG, that HRG receives stockholder approval of the HRG Required Proposals:

 

    upon receipt by a party of an unsolicited acquisition proposal made after the date of the Merger Agreement, if such party’s board of directors determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) that such acquisition proposal constitutes a superior proposal or is reasonably likely to lead to a superior proposal, such party may, subject to specified conditions and requirements, furnish nonpublic information to the person making the proposal and participate in discussions or negotiations with such person; and

 

   

the board of directors of either party may change its recommendation to its stockholders in response to certain intervening events or a superior proposal if such board of directors determines that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties to its stockholders under applicable law, subject in each case to delivering the other party four business days’ notice (it being understood that any amendment or subsequent amendment to the material terms of the superior proposal will require the notifying party to deliver the other party a new three business days’ notice) and, to the extent requested by the other party, engaging in good faith negotiations with the other party during such period to amend the Merger Agreement, considering in good faith any bona fide offer by the other party, and after such negotiations and good faith consideration of such offer (if any), making a



 

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determination after the negotiations (if any) whether such superior proposal is no longer superior or, in the case of an intervening event, whether a change in the recommendation is no longer necessary.

Subject to the parties’ rights to terminate the Merger Agreement, each party has agreed to submit the Merger in the manner described in this joint proxy statement/prospectus to a vote of its respective stockholders for approval notwithstanding any change in recommendation by its respective board of directors.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the closing in any of the following ways:

 

    by mutual consent of HRG and Spectrum;

 

    by either HRG or Spectrum, if:

 

    the Merger has not been consummated on or before the “outside date,” which is October 8, 2018;

 

    any court of competent jurisdiction or other governmental entity has issued a final and nonappealable judgment, order, injunction, rule, law or decree, or taken any other action, restraining, enjoining or otherwise prohibiting any of the HRG Charter Amendment, the HRG Share Issuance or the Merger;

 

    after completion of the HRG Special Meeting (including any adjournment or postponement thereof), the HRG stockholders have not approved the HRG Required Proposals; or

 

    after completion of the Spectrum Special Meeting (including any adjournment or postponement thereof), the Spectrum stockholders have not approved the Spectrum Merger Proposal;

 

    by HRG, if:

 

    there has been an uncured breach by Spectrum of any of its representations and warranties or covenants and as a result of such breach the related closing conditions cannot be satisfied and such breach cannot be cured by or has not been cured by the earlier of (x) the outside date and (y) 45 days following notice of such breach; or

 

    the Spectrum board of directors changes its recommendation in favor of the Merger;

 

    by Spectrum, if:

 

    there has been an uncured breach by HRG of any of its representations and warranties or covenants and as a result of such breach the related closing conditions cannot be satisfied and such breach cannot be cured by or has not been cured by the earlier of (x) the outside date and (y) 45 days following notice of such breach; or

 

    the HRG board of directors changes its recommendation in favor of the Merger.

Termination Fee

The Merger Agreement does not provide for a termination fee in the event of termination in any circumstance.

Amendment No. 1 to Agreement and Plan of Merger (See Page 180)

On June 8, 2018, Spectrum, HRG and Merger Sub entered into Amendment No. 1 to the Merger Agreement, which made certain modifications to the form of the Amended HRG Charter to (i) give effect to the resignation of Andreas Rouvé as a member of the Spectrum board of directors, and (ii) make certain clarifying changes in connection with the preapprovals granted to certain large institutional advisors from the transfer restrictions



 

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under the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter, as discussed under “The MergerInterests of HRG’s Directors and Offices in the MergerRights of Certain Stockholders” and “Questions and Answers about the Merger and the Special MeetingsWhat will happen if a person would become a holder of more than 4.9% of the HRG Securities as a result of the Merger?” and as described in HRG’s Current Report on Form 8-K dated June 8, 2018 and filed with the SEC on June 8, 2018 and Spectrum’s Current Report on Form 8-K dated June 8, 2018 and filed with the SEC on June 8, 2018. The form of the Amended HRG Charter, as amended by the amendments provided for in Amendment No. 1, is attached as Annex C to this joint proxy statement/prospectus.

Listing of Shares of HRG Common Stock (See Page 149)

Pursuant to the Merger Agreement, HRG has agreed to use its reasonable best efforts to cause the shares of HRG Common Stock to be issued in the Merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Effective Time. It is expected that, following the Merger, shares of HRG Common Stock will be listed on the NYSE and trade under the symbol “SPB.”

Delisting and Deregistration of Shares of Spectrum Common Stock (See Page 150)

Following the Merger, shares of Spectrum Common Stock will be delisted from the NYSE, deregistered under the Exchange Act and cease to be publicly traded.

Voting Agreements (See Pages 181 and 183)

On February 24, 2018, in connection with the execution of the Merger Agreement, HRG, which as of the HRG Record Date, beneficially owns approximately 62% of the outstanding Spectrum Common Stock, entered into the HRG Voting Agreement. The HRG Voting Agreement requires that HRG vote all of its shares of Spectrum Common Stock to approve and adopt the Merger Agreement and the transactions contemplated thereby and take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the HRG Voting Agreement.

On February 24, 2018, in connection with the execution of the Merger Agreement, Fortress, which as of the HRG Record Date, beneficially owns approximately 16% of the outstanding HRG Common Stock and the one outstanding share of HRG Series A Preferred Stock, entered into the Fortress Voting Agreement with HRG. The Fortress Voting Agreement requires that Fortress vote or exercise its right to consent with respect to its share of HRG Series A Preferred Stock and all of its shares of HRG Common Stock to approve the amendment and restatement of the HRG Charter and the issuance of HRG Common Stock to Spectrum stockholders in the First Merger and take certain other actions, including voting against an alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Fortress Voting Agreement.

On February 24, 2018, in connection with the execution of the Merger Agreement, Leucadia, which as of the HRG Record Date, beneficially owns approximately 23% of the outstanding HRG Common Stock, entered into the Leucadia Voting Agreement. The Leucadia Voting Agreement requires that Leucadia vote its shares of HRG Common Stock to approve the amendment and restatement of the HRG Charter and the issuance of HRG Common Stock to Spectrum stockholders in the First Merger and take certain other actions, including voting against an alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Leucadia Voting Agreement.



 

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Post-Closing Stockholder Agreement (See Page 183)

On February 24, 2018, in connection with the execution of the Merger Agreement, Leucadia and HRG entered into a shareholder agreement (the “Post-Closing Stockholder Agreement”), which will become effective as of the closing of the Merger.

Under the Post-Closing Stockholder Agreement, Leucadia has the right to designate one nominee to the HRG board of directors, until the earliest of (i) such time as Leucadia and its subsidiaries in the aggregate own less than 10% of the number of shares of HRG Common Stock (calculated on a fully diluted basis) issued and outstanding immediately after the Effective Time, (ii) such time as Leucadia and its subsidiaries in the aggregate own less than 5% of the number of shares of HRG Common Stock (calculated on a fully diluted basis) then issued and outstanding, and (iii) the later of (A) the 60-month anniversary of the Effective Time and (B) such time as Leucadia and its subsidiaries in the aggregate own less than 10% of the number of shares of HRG Common Stock (calculated on a fully diluted basis) then issued and outstanding. At any time following the Effective Time, if (A) Leucadia and its subsidiaries in the aggregate own less than 5% of the number of shares of HRG Common Stock (calculated on a fully diluted basis) issued and outstanding immediately after the Effective Time or (B) either of the events specified in clause (ii) or (iii) of the preceding sentence occurs, then the director designated by Leucadia is required to promptly resign from the HRG board of directors.

Under the Post-Closing Stockholder Agreement, Leucadia is subject to certain standstill provisions following the Effective Time providing that it and its subsidiaries will not, among other things, (i) acquire equity securities or derivative instruments of HRG, if after giving effect to such acquisitions the aggregate number of shares of HRG Common Stock beneficially owned by Leucadia and its subsidiaries exceeds 15% of the number of shares of HRG Common Stock (calculated on a fully diluted basis) then issued and outstanding, (ii) make, or in any way participate in, any solicitation of proxies to vote any voting securities of HRG, (iii) commence a tender offer or exchange offer for voting securities of HRG without the prior written consent of the HRG board of directors, (iv) form or join a group for the purpose of voting, acquiring or disposing of any voting securities of HRG, (v) submit to the HRG board of directors a written proposal for an acquisition of HRG or make any public announcement related thereto, or (vi) call a meeting of the stockholders of HRG. The standstill provisions are subject to certain exceptions as set forth in the Post-Closing Stockholder Agreement. The standstill provisions cease at such time as both (i) Leucadia and its subsidiaries no longer in the aggregate own at least 10% of the number of shares of HRG Common Stock (calculated on a fully diluted basis) issued and outstanding immediately after the Effective Time and (ii) a nominee of Leucadia is no longer serving on the HRG board of directors.

Post-Closing Registration Rights Agreement (See Page 186)

Upon consummation of the Merger, Fortress, Leucadia and HRG will enter into a registration rights agreement (the “Post-Closing Registration Rights Agreement”). Pursuant to the Post-Closing Registration Rights Agreement, HRG will use its commercially reasonable efforts to file within 30 days following the closing of the Merger a shelf registration statement and keep such shelf registration statement effective so long as Fortress and Leucadia (and their permitted assigns) own shares of HRG Common Stock (such shares of HRG Common Stock owned by Fortress and Leucadia (and their permitted assigns), the “Registrable Securities”). In addition, each of Fortress and Leucadia (and their permitted assigns) will be able to cause HRG to undertake up to two underwritten takedowns of the shelf registration statement. The Post-Closing Registration Rights Agreement will also grant certain customary piggyback rights for Fortress and Leucadia (and their permitted assigns). The Post-Closing Registration Rights Agreement will allow Fortress and Leucadia (and their affiliates) to transfer their registration rights to, among others, certain permitted transferees, including to affiliates of Fortress and Leucadia, respectively, and to persons advised by Fortress or Leucadia, respectively (so long as the decision-making control with respect to such interests remains after such transfer with Fortress or Leucadia, respectively), and in



 

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certain circumstances, to the direct or indirect members, shareholders, general or limited partners, or other equity holders of Fortress and Leucadia.

Letter Agreement (See Page 186)

On February 24, 2018, Fortress, Leucadia and HRG entered into a letter agreement (the “Letter Agreement”), pursuant to which Fortress and Leucadia may elect, subject to certain conditions and on a one-time basis, to reapportion, as between Fortress and Leucadia, certain rights of Fortress and Leucadia under the Amended HRG Charter.

Spectrum Rights Agreement (See Page 187)

On February 24, 2018, the Spectrum board of directors declared a dividend of one preferred share purchase right (a “Spectrum Right”), payable on March 8, 2018, for each share of Spectrum Common Stock outstanding on March 8, 2018 (the “Spectrum Rights Dividend Record Date”) to the stockholders of record on that date. In connection with the distribution of the Rights, Spectrum entered into a Rights Agreement (the “Spectrum Rights Agreement”), dated as of February 24, 2018, with Computershare Trust Company, N.A., as Rights Agent. Each Right entitles the registered holder to purchase from Spectrum one one-thousandth of a share of Series R Preferred Stock, par value $0.01 per share (the “Series R Preferred Shares”), of Spectrum at a price of $462.00 per one one-thousandth of a Series R Preferred Share represented by a Right, subject to adjustment.

As discussed in more detail under “The Merger—Rights Agreements,” on April 26, 2018, the Spectrum board of directors granted an exemption to members of one of the Fund Families, determining that each such member shall be deemed to be an “Exempt Person” (as defined in the Spectrum Rights Agreement).

HRG Rights Agreement (See Page 187)

On February 24, 2018, the HRG board of directors declared a dividend of one preferred share purchase right (an “HRG Right”), payable on March 8, 2018, for each outstanding share of HRG Common Stock outstanding on March 8, 2018 (the “HRG Rights Dividend Record Date”) to the stockholders of record on that date. Each HRG Right entitles the registered holder to purchase from HRG one one-thousandth of a share of Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Shares”), of HRG, at a price of $71.55 per one one-thousandth of a Series B Preferred Share represented by an HRG Right, subject to adjustment. The description and terms of the HRG Rights are set forth in a Rights Agreement (the “HRG Rights Agreement”), dated as of February 24, 2018, between HRG and American Stock Transfer & Trust Company, LLC, a limited liability trust company, as rights agent.

The HRG Rights Agreement is intended to, among other things, discourage an “ownership change” within the meaning of Section 382 of the Code and thereby preserve the current ability of HRG to utilize certain net operating loss carryovers and capital loss carryforwards of HRG and its subsidiaries.

As discussed in more detail under “The Merger—Rights Agreements,” on May 2, 2018, the HRG board of directors granted exemptions to members of each of the Fund Families, determining that each shall be deemed to be an “Exempt Person” (as defined in the HRG Rights Agreement).

Material Agreements between the Parties (See Page 149)

In addition to the Merger Agreement, the other agreements relating to the Merger and the transactions contemplated thereby, certain relationships have existed and will continue to exist among Spectrum, HRG and their respective affiliates, which are described in Item 13, “Certain Relationships and Related Transactions and



 

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Director Independence” in Spectrum’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the SEC on November 16, 2017 and amended on November 17, 2017 and January 23, 2018 and Item 13, “Certain Relationships and Related Transactions and Director Independence” in HRG’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the SEC on November 20, 2017 and Note 19, Related Party Transactions, to the consolidated financial statements included therewith, each of which is incorporated by reference in this joint proxy statement/prospectus. The following updates the descriptions of agreements described therein that will terminate as of the Effective Time.

Stockholder Agreement

Spectrum and HRG are parties to a stockholder agreement, dated as of February 9, 2010 (the “Existing Stockholder Agreement”), by and among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Global Opportunities Breakaway Ltd. (who collectively transferred their interests in Spectrum to HRG (formerly known as Harbinger Group Inc.) as of September 10, 2010) and Spectrum (formerly known as SB/RH Holdings, Inc.), which provides certain rights and imposes certain obligations on HRG. The Existing Stockholder Agreement includes provisions to (i) allow HRG to nominate a certain number of directors of the Spectrum board of directors as long as HRG and its affiliates beneficially own 40% or more of the outstanding Spectrum Common Stock, (ii) prevent the Spectrum Certificate of Incorporation or the bylaws of Spectrum (the “Spectrum Bylaws”) from being amended in a manner inconsistent with the provisions of the Existing Stockholder Agreement, (iii) prevent HRG from transferring equity to any person that would result in such person owning 40% or more of the Spectrum Common Stock, and (iv) grant HRG certain access and information rights with respect to Spectrum. The Spectrum board of directors currently consists of seven directors (giving effect to Andreas Rouvé’s resignation as Spectrum’s Chief Executive Officer and as a member of the Spectrum board of directors on April 25, 2018), including two directors affiliated with HRG. The Existing Stockholder Agreement will terminate as of the Effective Time.

Registration Rights Agreement

Spectrum and HRG are parties to a registration rights agreement, dated as of February 9, 2010 (the “Existing Registration Rights Agreement”), by and among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Global Opportunities Breakaway Ltd., Avenue International Master, L.P., Avenue Investments, L.P., Avenue Special Situations Fund V, L.P., Avenue Special Situations Fund IV, L.P., Avenue-CDP Global Opportunities Fund, L.P. (who collectively transferred their interests in Spectrum to HRG (formerly known as Harbinger Group Inc.) as of September 10, 2010) and Spectrum (formerly known as SB/RH Holdings, Inc.), pursuant to which HRG has, among other things and subject to the terms and conditions set forth therein, certain demand and so-called “piggy back” registration rights with respect to its shares of the Spectrum Common Stock. The Existing Registration Rights Agreement will terminate as of the Effective Time.

Accounting Treatment (See Page 149)

The Merger will be accounted for as an acquisition of a non-controlling interest under Accounting Standards Codification Topic 810-10 (“ASC 810-10”). In accounting for the Merger, HRG will apply its historical accounting policies and recognize the assets and liabilities of Spectrum at their respective historical values as of the closing date of the Merger.

Material U.S. Federal Income Tax Consequences (See Page 152)

The Reverse Stock Split

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on the information, and subject to the assumptions, qualifications and limitations set forth herein, a U.S. Holder (as defined under “Material U.S. Federal Income Tax Consequences”) of HRG Common Stock will not recognize gain or loss upon the Reverse Stock Split, except with respect to cash received in lieu of a fractional HRG share. A U.S. Holder’s aggregate tax basis in the HRG Common Stock received pursuant to the Reverse Stock Split will equal the aggregate tax basis of the HRG Common Stock surrendered (excluding any portion of such basis that is allocated to a fractional share of HRG Common Stock), and such U.S. Holder’s holding period in the HRG Common Stock received will include the holding period in the HRG Common Stock surrendered. A U.S. Holder of HRG Common Stock that receives cash in lieu of a fractional HRG share pursuant to the Reverse Stock Split will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the HRG Common Stock surrendered that is allocated to such fractional HRG share.

The Merger

Spectrum and HRG intend for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to both parties’ obligations to complete the Merger that either Spectrum or HRG (or both) receive an opinion from a nationally recognized tax counsel to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the Merger is completed in the manner set forth in the Merger Agreement and the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part and based solely on the information, and subject to the assumptions, qualifications and limitations set forth herein, a U.S. Holder of Spectrum Common Stock will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of shares of Spectrum Common Stock for shares of HRG Common Stock in the Merger.

Please review the information set forth in the section entitled “Material U.S. Federal Income Tax Consequences” for a more complete description of the material U.S. federal income tax consequences of the Reverse Stock Split and of the Merger.

Interests of Spectrum’s Directors and Officers in the Merger (See Page 141)

In considering the recommendation of the Spectrum board of directors, Spectrum stockholders should be aware that certain of Spectrum’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of Spectrum’s stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. The members of the Spectrum Special Committee and the Spectrum board of directors were aware of these interests and considered them, among others, in their authorization, approval and adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and their recommendation that Spectrum’s stockholders vote “FOR” the Spectrum Merger Proposal. See “The Merger—Background of the Merger,” “The Merger—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors” and “The Merger—Interests of Spectrum’s Directors and Officers in the Merger” for further discussion of these matters.

Interests of HRG’s Directors and Officers in the Merger (See Page 144)

In considering the recommendation of the HRG board of directors, HRG stockholders should be aware that certain of HRG’s executive officers and directors have interests in the Merger that may be different from, or in addition to, those of HRG’s stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. The members of the HRG board of directors were aware of these interests during their deliberations on the merits of the Merger and in deciding to recommend that HRG stockholders vote for the HRG Proposals. For additional information on the interests of HRG’s directors and officers in the Merger, see “The Merger—Interests of HRG’s Directors and Officers in the Merger.”



 

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Voting by Spectrum’s Directors and Executive Officers (See Page 60)

As of the Spectrum Record Date, approximately 1.2% of the shares of Spectrum Common Stock outstanding and entitled to vote were held by the directors and executive officers of Spectrum and their affiliates. As of the Spectrum Record Date, approximately 1.2% of the shares of Spectrum Common Stock outstanding and entitled to vote were held by directors and executive officers of Spectrum (and their affiliates) who are not affiliated with HRG, which represents approximately 3.0% of the shares of Spectrum Common Stock outstanding and entitled to vote held by the Spectrum stockholders not affiliated with HRG. Spectrum currently expects that the directors and executive officers of Spectrum will vote their shares of Spectrum Common Stock in favor of the Spectrum Merger Proposal, although none has entered into any agreement obligating them to do so. For additional information regarding the votes required to approve the proposals to be voted on at the Spectrum Special Meeting, see “The Spectrum Special Meeting—Required Vote.”

Voting by HRG’s Directors and Executive Officers (See Page 75)

As of the HRG Record Date, approximately 0.14% of the total outstanding shares of HRG Common Stock were held by HRG directors and executive officers and their affiliates (not including shares held by Fortress or Leucadia or any of their respective affiliates). HRG currently expects that the directors and executive officers of HRG will vote their shares of HRG Common Stock in favor of the Share Issuance Proposal and each of the Charter Amendment Proposals, although none has entered into any agreement obligating them to do so.

Leucadia and Fortress, representing approximately 23% and 16%, respectively, of the total voting power of the outstanding shares of HRG Common Stock, as of the HRG Record Date, have agreed to vote in favor of the HRG Share Issuance Proposal and each of the HRG Charter Amendment Proposals, pursuant to the terms of the Voting Agreements. For additional information regarding the votes required to approve the proposals to be voted on at the HRG Special Meeting, see “The HRG Special Meeting—Required Vote,” and for additional information regarding the Fortress and Leucadia voting obligations, see “The Transaction Agreements—Description of the Voting Agreements.”

No Appraisal Rights (See Page 205)

Spectrum stockholders and HRG stockholders will not be entitled to exercise any appraisal rights under Delaware law in connection with the Merger.

Comparison of Stockholder Rights (See Page 195)

As a result of the Merger, the holders of Spectrum Common Stock will become holders of HRG Common Stock, and their rights will be governed by Delaware law and by the Amended HRG Charter and amended bylaws of HRG (the “Amended HRG Bylaws”) (instead of the Spectrum Certificate of Incorporation or the Spectrum Bylaws). As described herein, the HRG Charter will be amended and restated immediately prior to the Effective Time. Former Spectrum stockholders and HRG stockholders will have different rights as HRG stockholders following the Merger from those they had as Spectrum stockholders and HRG stockholders, respectively.

Charter Amendments (See Page 202)

In connection with the Merger, the HRG Charter will be amended such that (i) each outstanding share of HRG Common Stock will, by means of a reverse stock split, be combined into a fraction of a share of HRG Common Stock equal to the Share Combination Ratio, (ii) HRG is subject to Section 203 of the DGCL, (iii) the



 

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number of authorized shares of HRG Common Stock is decreased from 500 million to 200 million, (iv) the number of authorized shares of HRG preferred stock is increased from 10 million to 100 million, (v) the Section 382 transfer provisions are modified and (vi) other additional modifications are adopted. For additional information regarding the charter amendments, see the section entitled “Comparison of Stockholder Rights,” “Spectrum Proposals” and “HRG Proposals.”

Risk Factors (See Page 47)

In deciding how to vote your shares of Spectrum Common Stock or HRG Common Stock, you should read carefully this entire joint proxy statement/prospectus, including the documents incorporated by reference herein and the annexes and exhibits hereto, and in particular, you should read the “Risk Factors” section beginning on page 47 of this joint proxy statement/prospectus.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPECTRUM

Set forth below are selected historical consolidated financial data for Spectrum. The financial data as of September 30, 2017 and September 30, 2016, and for the years ended September 30, 2017, September 30, 2016 and September 30, 2015, are derived from Spectrum’s audited financial statements that are incorporated by reference into this joint proxy statement/prospectus from Spectrum’s Current Report on Form 8-K filed on March 30, 2018. The financial data as of September 30, 2015, September 30, 2014, September 30, 2013, and for the years ended September 30, 2014 and September 30, 2013, are derived from Spectrum’s audited financial statements for those years, which are not incorporated by reference into this joint proxy statement/prospectus. The financial data as of April 1, 2018 and for the six months ended April 1, 2018 and April 2, 2017, are derived from Spectrum’s unaudited financial statements from Spectrum’s Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2018, which is incorporated by reference into this joint proxy statement/prospectus. The financial data as of April 2, 2017 are derived from Spectrum’s unaudited financial statements from Spectrum’s Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2017, which is not incorporated by reference in this joint proxy statement/prospectus. Spectrum’s management believes that Spectrum’s unaudited consolidated financial statements have been prepared on a basis consistent with its audited financial statements and include all normal and recurring adjustments necessary for a fair presentation of the results for each interim period.

During the three months ended December 31, 2017, Spectrum’s board of directors approved a plan to explore strategic alternatives, including a planned sale of Spectrum’s Global Batteries and Appliances (“GBA”) segment. As a result, Spectrum’s assets and liabilities associated with the GBA segment have been classified as held for sale in the Consolidated Statement of Financial Position of Spectrum and the respective operations of the GBA segment have been classified as discontinued operations in the Consolidated Statements of Income of Spectrum for the years ended September 30, 2017, September 30, 2016 and September 30, 2015 and for the six months ended April 1, 2018 and April 2, 2017 and reported separately for such periods. For the fiscal years ended September 30, 2014 and 2013 included within the selected financial data below, Spectrum has not adjusted to reflect changes due to the recognition of the GBA segment as discontinued operations and therefore certain financial information within the summarized financial information below may not be comparable between the respective periods.



 

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The financial statement data provided below is only a summary, and you should read it in conjunction with the historical consolidated financial statements of Spectrum and the related notes contained in its annual and quarterly reports and the other information that Spectrum has previously filed with the SEC and which is incorporated into this joint proxy statement/prospectus by reference. See “Incorporation of Certain Documents by Reference” and “Where You Can Find More Information.” Amounts below are presented in millions, except per share amounts.

 

     Six-Month Period
Ended
     Year Ended September 30,  
(in millions, except per share data)    April 1,
2018
     April 2,
2017
     2017(2)      2016(3)     2015(4)      2014(5)      2013(6)  

Statement of Operations Data

 

          

Net sales

     $1,412.6      $ 1,358.7      $ 3,009.5      $ 3,029.4     $ 2,598.2      $ 4,429.1      $ 4,085.6  

Gross profit

     509.0        545.8        1,176.0        1,237.7       978.5        1,568.9        1,390.3  

Operating income

     77.1        166.3        328.1        417.7       246.2        481.9        351.2  

Interest expense

     80.6        81.9        160.9        182.0       185.8        202.1        375.6  

(Loss) Income from continuing operations before income taxes

     (6.2)        83.5        162.3        231.0       56.4        273.5        (27.9

Income tax expense

     (127.2)        31.1        37.3        (50.0     5.6        59.0        27.4  

Net income from continuing operations

     121.0        52.4        125.0        281.0       50.8        

Income from discontinued operations, net of tax

     41.6        71.5        172.1        76.6       98.6        

Net income (loss)

     162.6        123.9        297.1        357.6       149.4        214.5        (55.3

Net income (loss) attributable to controlling interest

     161.6        124.1        295.8        357.1       148.9        214.1        (55.2

Earnings (Loss) Per Share of Common Stock

             

Basic earnings per share from continuing operations

   $ 2.09      $ 0.89      $ 2.13      $ 4.72     $ 0.90        

Basic earnings per share from discontinued operations

     0.72        1.21        2.91        1.30       1.78        
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

       

Basic earnings per share

   $ 2.81      $ 2.10      $ 5.04      $ 6.02     $ 2.68      $ 4.07      $ (1.06
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Diluted earnings per share from continuing operations

   $ 2.09      $ 0.88      $ 2.12      $ 4.70     $ 0.90        

Diluted earnings per share from discontinued operations

     0.72        1.21        2.90        1.29       1.76        
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

       

Diluted earnings per share

   $ 2.81      $ 2.09      $ 5.02      $ 5.99     $ 2.66      $ 4.02      $ (1.06
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Dividends per share

   $ 0.85      $ 0.80      $ 1.64      $ 1.47     $ 1.27      $ 1.15      $ 0.75  

Statement of Financial Position Data

             

Cash and cash equivalents

   $ 135.2      $ 137.2      $ 168.2      $ 275.3     $ 247.9      $ 194.6      $ 207.3  

Working capital(7)

     2,003.4        797.0        493.7        537.3       660.6        485.0        497.5  

Total assets

     7,576.8        7,129.4        7,419.7        7,069.1       7,193.8        5,429.6        5,543.2  

Total debt

     4,334.7        3,721.9        3,771.7        3,560.0       3,905.9        2,939.7        3,153.6  

Total equity

     1,705.5        1,836.6        1,846.7        1,844.0       1,606.8        1,086.8        940.1  


 

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(1) During the three-month period ended December 31, 2017, the board of directors of Spectrum approved a plan to explore strategic alternatives, including a planned sale of Spectrum’s GBA segment. Spectrum expects a sale to be realized by December 31, 2018. As a result, Spectrum’s assets and liabilities associated with the GBA segment have been classified as current assets and liabilities of business held for sale on the Statement of Financial Position. Additionally, on December 22, 2017, the Tax Cuts and Jobs Act was signed into law, which significantly changes U.S. tax law by, among other things, lowering corporate income tax rates from a maximum of 35% to a flat 21% rate, effective January 1, 2018. Since Spectrum files U.S. tax returns on a September fiscal year basis, the Spectrum U.S. tax rate for Fiscal 2018 will be a blended rate of 24.53%. During the six-month period ended April 1, 2018, Spectrum recorded a provisional $206.7 million tax benefit for restatement of U.S. deferred tax assets and liabilities and a provisional $78.0 million of income tax expense for the one-time deemed mandatory repatriation.
(2) For the year ended September 30, 2017, the operating results include the PetMatrix, LLC (“PetMatrix”) business operations since the acquisition date of June 1, 2017 and GloFish (“GloFish”) branded operations since the acquisition date of May 12, 2017. Operating income includes an impairment of indefinite lived intangible assets of $16.3 million. Interest expense includes $4.6 million of tender premium and a non-cash expense of $1.9 million as a result of the write-off of unamortized debt issuance costs in connection with the redemption of Spectrum’s 6.375% Senior Notes due 2020 (the “6.375% Notes”).
(3) For the year ended September 30, 2016, operating income includes an impairment of indefinite lived intangible assets of $2.7 million. Interest expense includes $15.6 million of tender premium and a non-cash expense of $5.8 million as a result of the write-off of unamortized debt issuance costs in connection with the redemption of the 6.375% Notes. Income tax expense includes a non-cash benefit of $111.1 million from a decrease in the valuation allowance against net deferred tax asset.
(4) For the year ended September 30, 2015, the operating results include the Armored AutoGroup (“AAG”) business operations since the acquisition date of May 21, 2015; Salix Animal Health LLC (“Salix”) operations since the acquisition date of January 16, 2015; European IAMS and Eukanuba (“European IAMS and Eukanuba”) pet food business operations since the acquisition date of December 31, 2014; and Tell Manufacturing, Inc. (“Tell”) operations since the acquisition date of October 1, 2014. Interest expense of $58.8 million was incurred related to the financing of the acquisition of AAG and the refinancing of the then-existing senior credit facility and asset based revolving loan facility. Income tax expense includes a non-cash benefit of $20.2 million from a decrease in the valuation allowance against net deferred tax assets, and a $22.8 million benefit due to the reversal of valuation allowance in conjunction with the acquisition of the AAG business.
(5) For the year ended September 30, 2014, the operating results include the Liquid Fence Company (“Liquid Fence”) operations since the acquisition date of January 2, 2014. Interest expense includes a non-cash charge of $9.2 million as a result of the write-off of unamortized debt issuance costs and unamortized discounts in connection with the amendment of Spectrum’s then existing term loans. Income tax expense includes a non-cash benefit of approximately $115.6 million from a decrease in the valuation allowance against net deferred tax assets.
(6) For the year ended September 30, 2013, the operating results include the Hardware & Home Improvement (“HHI”) business operations since the acquisition date of December 17, 2012, and the TLM Taiwan operations since the acquisition date of April 8, 2013. Interest expense includes $105.6 million fees and expenses along with a $10.9 million non-cash charge for the write-off of unamortized debt issuance cost and unamortized premiums in connection with the extinguishment and replacement of Spectrum’s 9.5% notes and then-existing term loan in conjunction with the acquisition of the HHI business. Income taxes includes a non-cash charge of approximately $64.4 million from an increase in the valuation allowance against net deferred tax assets, net of a $49.8 million benefit due to the reversal of a portion of the valuation allowance in conjunction with the acquisition of the HHI business.
(7) Working capital is defined as current assets less current liabilities per the consolidated statements of financial position.


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF HRG

Set forth below are selected historical consolidated financial data for HRG. The financial data as of September 30, 2017 and September 30, 2016, and for the years ended September 30, 2017, September 30, 2016, and September 30, 2015, are derived from HRG’s audited financial statements that are incorporated by reference into this joint proxy statement/prospectus from HRG’s Current Report on Form 8-K filed on April 2, 2018. The financial data as of September 30, 2015, September 30, 2014, September 30, 2013, and for the years ended September 30, 2014 and September 30, 2013, are derived from HRG’s audited financial statements for those years, which are not incorporated by reference into this joint proxy statement/prospectus. The financial data as of March 31, 2018 and for the six months ended March 31, 2018 and March 31, 2017 are derived from HRG’s unaudited financial statements from HRG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, which is incorporated by reference into this joint proxy statement/prospectus. The financial data as of March 31, 2017 are derived from HRG’s unaudited financial statements from HRG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017. HRG’s management believes that HRG’s unaudited consolidated financial statements have been prepared on a basis consistent with its audited financial statements and include all normal and recurring adjustments necessary for a fair presentation of the results for each interim period.

Spectrum’s assets and liabilities associated with the GBA segment have been classified as held for sale in the Consolidated Statement of Financial Position of Spectrum as of September 30, 2017, September 30, 2016, March 31, 2018 and March 31, 2017 and the respective operations of the GBA segment have been classified as discontinued operations in the Consolidated Statements of Income of Spectrum for the years ended September 30, 2017, September 30, 2016 and September 30, 2015 and for the six months ended March 31, 2018 and March 31, 2017 and reported separately for such periods. For the fiscal years ended September 30, 2014 and 2013 included within the selected financial data below, HRG has not adjusted to reflect changes due to the recognition of the GBA segment as discontinued operations and therefore certain financial information within the summarized financial information below may not be comparable between the respective periods.



 

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The information set forth below is not necessarily indicative of future results and should be read together with the historical consolidated financial statements of HRG and the related notes contained in its annual and quarterly reports and the other information that HRG has previously filed with the SEC and which is incorporated into this joint proxy statement/prospectus by reference. See “Incorporation of Certain Documents by Reference” and “Where You Can Find More Information.” Amounts below are presented in millions, except per share amounts.

 

    For the Six Months
Ended March 31,
    For the Year Ended September 30,  
        2018             2017         2017     2016     2015     2014     2013  

Income Statement Data(1):

         

Revenues(2)

    $1,412.6       $1,359.7     $ 3,010.6     $ 3,038.3     $ 2,661.6     $ 4,482.6     $ 4,114.5  

Operating income (loss)(3)

    55.5       136.6       283.0       334.9       (48.8     354.8       270.4  

Interest expense(4)

    (143.1)       (156.4     (309.9     (334.5     (321.7     (307.4     (505.4

Loss from the change in the fair value of the equity conversion feature of preferred stock

    —         —         —         —         —         (12.7     (101.6

Net income (loss) from continuing operations

    40.8       (49.8     (69.2     67.6       (318.3     (36.3     (367.0

Income (loss) from discontinued operations, net of tax

    501.5       259.2       342.4       (101.5     (194.1     138.0       298.0  

Net income (loss)(5)

    542.3       209.4       273.2       (33.9     (512.4     101.7       (69.0

Net income (loss) attributable to controlling interest

    470.3       130.1       106.0       (198.8     (556.8     (10.3     (45.8

Preferred stock dividends, accretion and loss on conversion

    —         —         —         —         —         73.6       48.4  

Net income (loss) attributable to common and participating preferred stockholders

    470.3       130.1       106.0       (198.8     (556.8     (83.9     (94.2

Amounts attributable to controlling interest:

             

Net loss from continuing operations

    (8.7     (71.6     (121.1     (45.8     (299.3     (194.7     (392.2

Net income (loss) from discontinued operations

    479.0       201.7       227.1       (153.0     (257.5     110.8       298.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to controlling interest

  $ 470.3     $ 130.1     $ 106.0     $ (198.8   $ (556.8   $ (83.9   $ (94.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Share Data(1):

         

Net income (loss) per common share:

         

Basic loss from continuing operations

    (0.04)       (0.36     (0.61     (0.23     (1.51     (1.19     (2.80

Basic income (loss) from discontinued operations

    2.38       1.01       1.14       (0.77     (1.30     0.68       2.13  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic

  $ 2.34     $ 0.65     $ 0.53     $ (1.00   $ (2.81   $ (0.51   $ (0.67
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted loss from continuing operations(6)

    (0.04)       (0.36     (0.61     (0.23     (1.51     (1.19     (2.80

Diluted income (loss) from discontinued operations(6)

    2.38       1.01       1.14       (0.77     (1.30     0.68       2.13  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ 2.34     $ 0.65     $ 0.53     $ (1.00   $ (2.81   $ (0.51   $ (0.67
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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    As of March 31,     As of September 30,  

Balance Sheet Data:

  2018     2017     2017     2016     2015     2014     2013  

Total assets

    $8,240.3     $ 34,579.6     $ 35,849.7     $ 33,580.1     $ 32,594.4     $ 30,394.0     $ 28,200.4  

Total debt

    5,318.7       5,722.4       5,705.1       5,465.6       6,046.9       4,908.4       4,620.4  

Total shareholders’ equity

    1,343.7       1,768.3       1,946.9       1,817.2       1,588.1       2,257.0       1,133.5  

 

(1) FGL and Front Street, HRG’s former subsidiaries (collectively, the “Insurance Operations”) are classified as discontinued operations for all periods presented. In addition, following the completion of the sale of Compass Production Partners, LP, HRG’s former subsidiary (“Compass”), in Fiscal 2016, HRG no longer owns, directly or indirectly, any oil and gas properties and as a result, the results of Compass were presented as discontinued operations for Fiscal 2016, Fiscal 2015, Fiscal 2014 and Fiscal 2013. In addition, cash and cash equivalents excludes the cash and cash equivalents from the Insurance Operations (businesses classified as held for sale) and Compass.
(2) Fiscal 2017 operating results include the PetMatrix business operations since June 1, 2017 and GloFish business operations since May 12, 2017. Fiscal 2015 operating results include the AAG business operations since the acquisition date of May 21, 2015, Salix operations since the acquisition date of January 16, 2015; European IAMS and Eukanuba pet food business operations since the acquisition date of December 31, 2014; and Tell operations since the acquisition date of October 1, 2014. The AAG business contributed $160.5 million in revenues and recorded an operating profit of $21.8 million for the period from May 21, 2015 through September 30, 2015. Fiscal 2014 operating results include the Liquid Fence Company (“Liquid Fence”) operations since the acquisition date of January 2, 2014. Fiscal 2013 operating results includes the HHI business operations since the acquisition date of December 17, 2012. The HHI business contributed $869.6 million in revenues and recorded an operating profit of $88.7 million for the period from December 30, 2012 through September 30, 2013.
(3) In Fiscal 2017, operating income included an impairment of indefinite-lived intangible assets of $16.3 million. In Fiscal 2016, HRG recorded a loan loss provision of $12.8 million for credit losses on Salus’ asset-based loan portfolio and impairments of $10.7 million to goodwill of CorAmerica Capital, LLC, HRG’s former subsidiary (“CorAmerica”). In addition, a $2.7 million impairment on indefinite-lived intangible asset was recorded due to the reduction in value of certain tradenames in response to changes in Spectrum’s strategy. In Fiscal 2015, HRG recorded $88.0 million loan loss provision related to deterioration in Salus’ asset-based loan portfolio, including $60.7 million related to the bankruptcy of RadioShack Corporation (“RadioShack”), a significant former Salus borrower. HRG also recorded impairments of $60.2 million to goodwill and the intangible assets as a result of the change of strategic direction of HRG’s former subsidiary, Frederick’s of Hollywood Group Inc. (“FOH”). In April 2015, FOH, its parent company, FOHG Holdings, LLC and their subsidiaries (together, “FOHG”) filed for bankruptcy, and any remaining assets and liabilities were deconsolidated. Upon deconsolidation, HRG recognized a gain of $38.5 million, primarily resulting from the elimination of FOH’s cumulative historical losses. Following the completion of the bankruptcy of FOHG, such entities ceased to be subsidiaries of HRG. Fiscal 2015 also includes $61.1 million of acquisition and integration-related charges, a portion of which was associated with the AAG business acquisition. Fiscal 2013 includes $53.2 million of acquisition and integration-related charges principally associated with the HHI business acquisition.
(4) Fiscal 2017, Fiscal 2016, Fiscal 2015, Fiscal 2014 and Fiscal 2013 interest expenses included $6.5 million, $21.4 million, $58.8 million, $9.2 million and $210.1 million, respectively, related to the refinancing, prepayment and/or amendment of various senior debt. Such charges include cash fees and expenses of $4.6 million, $15.6 million, $46.0 million, $0.0 million and $181.2 million, respectively, and non-cash charges for write-off and accelerated amortization of unamortized debt issuance costs and discount/premium of $1.9 million, $5.8 million, $12.8 million, $9.2 million and $28.9 million, respectively.
(5)

Fiscal 2017, Fiscal 2016, Fiscal 2015, Fiscal 2014 and Fiscal 2013 income tax expense of $38.1 million, $58.4 million, $1.3 million, $59.3 million and $26.3 million, respectively, include non-cash charges



 

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  (benefits) of approximately $79.6 million, $(45.7) million, $190.8 million, $(31.0) million and $152.9 million, respectively, resulting primarily from an increase (decrease) in the valuation allowance against certain net deferred tax assets.
(6) See Exhibit 99.6 Note 24, Earnings per Share, to the Consolidated Financial Statements included in HRG’s Current Report on Form 8-K filed on April 2, 2018 for further details regarding the calculation of net income (loss) per common share. In Fiscal 2014, diluted weighted average common shares outstanding did not reflect the conversion effect of the HRG Series A Preferred Stock and HRG’s Series A-2 Participating Convertible Preferred Stock (together with the HRG Series A Preferred Stock, the “HRG Preferred Stock”) for the portion of the period that these securities were outstanding, or the exercise of dilutive common stock equivalents as both would be antidilutive. In Fiscal 2013, diluted weighted average common shares outstanding did not reflect any conversion effect of the HRG Preferred Stock or the exercise of dilutive common stock equivalents as both would be antidilutive. For the six months ended March 31, 2018, Fiscal 2017, Fiscal 2016 and Fiscal 2015, the conversion effect of the HRG Preferred Stock had no impact on the diluted weighted average common shares as the HRG Preferred Stock was converted in the third quarter of Fiscal 2014.


 

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SELECTED SPECTRUM AND HRG UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The following selected unaudited pro forma condensed consolidated financial data (the “Selected Pro Forma data”) give effect to the Merger. The Merger will be accounted for as an acquisition of a non-controlling interest under ASC 810-10. In accounting for the Merger, HRG will apply its historical accounting policies and recognize the assets and liabilities of Spectrum at their respective historical values as of the closing date of the Merger.

The selected unaudited pro forma condensed consolidated statement of financial position data at March 31, 2018 are presented on a basis to reflect the Merger as if it had occurred on March 31, 2018. The selected unaudited pro forma condensed consolidated statements of income data for the year ended September 30, 2017 and the six months ended March 31, 2018 are presented on a basis to reflect the Merger as if it had occurred on October 1, 2016.

The Selected Pro Forma data has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed consolidated financial statements appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the unaudited pro forma condensed consolidated financial statements. In addition, the Selected Pro Forma data are based on, and should be read in conjunction with, HRG’s historical audited consolidated financial statements and notes thereto included in HRG’s Current Report on Form 8-K dated March 30, 2018, HRG’s historical unaudited consolidated financial statements included in HRG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, Spectrum’s historical audited consolidated financial statements and notes thereto included in Spectrum’s Current Report on Form 8-K dated March 30, 2018 and Spectrum’s historical unaudited consolidated financial statements contained in Spectrum’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2018.

HRG’s historical consolidated financial information has been adjusted in the Selected Pro Forma data to give effect to pro forma events that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the selected unaudited pro forma condensed consolidated statement of operations data, expected to have a continuing impact on results. The Selected Pro Forma data do not include any adjustments related to cost savings, operating synergies, tax benefits or revenue enhancements (or the necessary costs to achieve such benefits) that are expected to result from the Merger.



 

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The pro forma adjustments are based upon available information and assumptions that management believes reasonably reflect the Merger. The Selected Pro Forma data are provided for illustrative purposes only and do not purport to represent what actual results of operations or the consolidated financial position would have been had the Merger occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or financial position.

 

     For the
Six Months
Ended
March 31,
2018
    For the
Fiscal Year
Ended
September 30,
2017
 

Income Statement Data (In millions, except per share data):

    

Revenues

   $ 1,412.6     $ 3,010.6  

Operating income (loss)

     78.9       305.4  

Interest expense

     (143.1     (309.9

Net income (loss) from continuing operations

     58.4       (54.6

Income (loss) from discontinued operations, net of tax

     501.5       342.4  

Net income (loss)

     559.9       287.8  

Amounts attributable to controlling interest:

    

Net income (loss) from continuing operations

     57.8       (48.8

Net income from discontinued operations

     495.7       291.7  
  

 

 

   

 

 

 

Net income attributable to controlling interest

   $ 553.5     $ 242.9  
  

 

 

   

 

 

 

Per Share Data:

    

Net income (loss) per common share:

    

Basic income (loss) from continuing operations

     1.05       (0.87

Basic income from discontinued operations

     8.95       5.18  
  

 

 

   

 

 

 

Basic

   $ 10.00     $ 4.31  
  

 

 

   

 

 

 

Diluted income (loss) from continuing operations

     1.04       (0.87

Diluted income from discontinued operations

     8.92       5.18  
  

 

 

   

 

 

 

Diluted

   $ 9.96     $ 4.31  
  

 

 

   

 

 

 

 

Balance Sheet Data (In millions):

   As of
March 31,
2018
 

Total assets

   $ 8,592.8  

Total debt

     5,318.7  

Total shareholders’ equity

     1,664.9  


 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table sets forth selected historical and unaudited pro forma per share information for Spectrum and HRG.

Historical Per Share Information of Spectrum and HRG. The historical per share information of each of Spectrum and HRG below is derived from the audited consolidated financial statements of each of Spectrum and HRG as of, and for the year ended, September 30, 2017 and the unaudited consolidated financial statements of Spectrum as of, and for the six months ended, April 1, 2018 and the unaudited consolidated financial statements of HRG as of, and for the six months ended, March 31, 2018. The historical book value per share is computed by dividing stockholders’ equity by the number of shares of common stock outstanding at the end of the period.

Unaudited Pro Forma per Share Data. The unaudited pro forma per share data set forth below gives effect to the Merger and the Reverse Stock Split as if they had been completed on October 1, 2016, the first day of HRG’s fiscal year ended September 30, 2017. The pro forma net income per share from continuing operations is computed by dividing the pro forma net income from continuing operations by the pro forma weighted average number of shares outstanding. Based on (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement, each HRG shareholder is expected to receive approximately 0.1603 of a share of the post-Merger combined company stock for each share of pre-Merger HRG Common Stock that such shareholder owns. Each Spectrum shareholder, other than HRG, will receive one share of post-Merger HRG Common Stock for each share of pre-merger Spectrum Common Stock that such shareholder owns. Each Spectrum stockholder, other than HRG, will receive one share of the post-Merger HRG Common Stock for each share of pre-Merger Spectrum Common Stock that such stockholder owns. The pro forma book value per share is computed by dividing total pro forma stockholders’ equity by the pro forma number of shares of common stock outstanding at the end of the period. The pro forma book value per share is computed as if the Merger had been completed on October 1, 2016.

The unaudited pro forma per share data is derived from the audited consolidated financial statements of each of HRG and Spectrum as of, and for the year ended, September 30, 2017, and the unaudited consolidated financial statements of each of HRG and Spectrum as of, and for the six months ended, April 1, 2018 and the unaudited consolidated financial statements of HRG as of, and for the six months ended, March 31, 2018.

The unaudited pro forma per share data does not purport to represent the actual results of operations that HRG would have achieved had the companies been combined during these periods or to project the future results of operations that HRG may achieve after completion of the Merger.

Unaudited Equivalent Pro Forma per Share Data for Spectrum. The unaudited equivalent per share data for Spectrum is not presented. The unaudited equivalent per share data for Spectrum would be identical to the unaudited pro forma per share amounts because the Merger Exchange Ratio is equal to one share of HRG Common Stock for each share of Spectrum Common Stock.

Generally. You should read the below information in conjunction with the selected historical consolidated financial information included elsewhere in this joint proxy statement/prospectus and the historical consolidated financial statements of Spectrum and HRG and related notes that have been filed with the SEC, certain of which are incorporated by reference into this joint proxy statement/prospectus. See “Selected Historical Consolidated



 

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Financial Data of Spectrum,” “Selected Historical Consolidated Financial Data of HRG” and “Where You Can Find More Information.” The unaudited pro forma per share data and the unaudited equivalent pro forma per share data for HRG is derived from, and should be read in conjunction with, the Spectrum and HRG unaudited pro forma condensed consolidated financial statements and related notes included in this joint proxy statement/prospectus. See “Spectrum and HRG Unaudited Pro Forma Condensed Consolidated Financial Statements.”

The pro forma per share data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of HRG. The pro forma per share data, although helpful in illustrating the financial characteristics of HRG under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring, or other factors that may result as a consequence of the Merger and, accordingly, does not attempt to predict or suggest future results.

 

     As of/For the
Six Months
Ended
April 1, 2018
    As of/For the
Year Ended
September 30, 2017
 

Spectrum Historical per Common Share Data:

    

Net income from continuing operations—basic

   $ 2.09     $ 2.13  

Net income from continuing operations—diluted

   $ 2.09     $ 2.12  

Cash dividends paid

   $ 0.84     $ 1.64  

Book value

   $ 29.53     $ 31.91  
     As of/For the
Six Months
Ended
March 31, 2018
    As of/For the
Year Ended
September 30, 2017
 

HRG Historical per Common Share Data:

    

Net income (loss) from continuing operations—basic

   $ (0.04   $ (0.61

Net income (loss) from continuing operations—diluted

   $ (0.04   $ (0.61

Cash dividends paid

   $ —       $ —    

Book value

   $ 3.42     $ 3.78  

Unaudited Pro Forma per Share Data:

    

Net income (loss) from continuing operations—basic

   $ 1.05     $ (0.87

Net income (loss) from continuing operations—diluted

   $ 1.04     $ (0.87

Cash dividends paid

   $ 0.88     $ 1.71  

Book value

   $ 29.84       N/A  


 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Market Prices

The following table sets forth, for the calendar periods indicated, the high and low sales prices per share of Spectrum Common Stock and per share of HRG Common Stock as reported by the NYSE. The Spectrum Common Stock is traded on the NYSE under the symbol “SPB,” and the HRG Common Stock is traded on the NYSE under the symbol “HRG.”

 

     Spectrum
Common Stock
     HRG
Common Stock
 
     High      Low      High      Low  

Fiscal 2016:

           

Three months ended December 31, 2015

   $ 103.57      $ 89.87      $ 14.11      $ 11.63  

Three months ended March 31, 2016

   $ 110.39      $ 87.65      $ 14.04      $ 10.28  

Three months ended June 30, 2016

   $ 122.52      $ 106.91      $ 14.59      $ 12.50  

Three months ended September 30, 2016

   $ 138.94      $ 114.63      $ 16.39      $ 13.14  

Fiscal 2017:

           

Three months ended December 31, 2016

   $ 138.10      $ 113.95      $ 16.08      $ 14.07  

Three months ended March 31, 2017

   $ 143.20      $ 118.93      $ 19.50      $ 15.19  

Three months ended June 30, 2017

   $ 146.09      $ 122.79      $ 20.17      $ 17.25  

Three months ended September 30, 2017

   $ 126.69      $ 102.27      $ 17.90      $ 14.74  

Fiscal 2018:

           

Three months ended December 31, 2017

   $ 117.25      $ 98.11      $ 17.73      $ 14.22  

Three months ended March 31, 2018

   $ 126.66      $ 89.36      $ 19.19      $ 14.30  

Three months ending June 30, 2018 (through June 6, 2018)

   $ 99.44      $ 71.03      $ 15.87      $ 11.12  

The following table sets forth the closing sale prices per share of Spectrum Common Stock and HRG Common Stock as reported on the NYSE as of February 23, 2018, the last trading day before the public announcement of the Merger Agreement, and as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus. The table also shows the equivalent implied value of a share of HRG Common Stock on each of the dates, which has been determined by multiplying the market price of a share of Spectrum Common Stock on each of the dates by the Share Combination Ratio, calculated based on (i) the 20-trading-day volume-weighted average share price per share of Spectrum Common Stock ending on such date, 2018, (ii) the number of shares of Spectrum Common Stock outstanding, the number of shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of such date, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement.

 

     Spectrum
Share
     HRG
Share
     Implied Value of
HRG Share
 

February 23, 2018

   $ 103.61      $ 15.90      $ 16.96  

June 6, 2018

   $ 81.50      $ 12.98      $ 13.06  

The market prices of Spectrum Common Stock and HRG Common Stock have fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the Spectrum Special Meeting and the HRG Special Meeting and the date the

Merger is consummated and thereafter. No assurance can be given concerning the market prices of Spectrum Common Stock or HRG Common Stock.



 

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Dividends

Spectrum currently pays a quarterly dividend on shares of Spectrum Common Stock and last paid a dividend on March 13, 2018, of $0.42 per share. Under the terms of the Merger Agreement, during the period before the Effective Time, Spectrum is permitted to make its regular quarterly cash dividend payment not in excess of $0.42 per share per quarter, provided the record date is not more than four business days prior to the anniversary of the record date of Spectrum’s regular quarterly dividend for the corresponding quarter of the prior fiscal year, but is not permitted to declare, set aside or pay any other dividend or distribution.

HRG does not currently pay dividends on its shares. Under the terms of the Merger Agreement, during the period before the Effective Time, HRG is not permitted to declare, set aside or pay any dividend or other distribution.

After the Effective Time, former Spectrum stockholders who hold shares of HRG Common Stock into which their shares of Spectrum Common Stock have been converted in connection with the Merger will receive whatever dividends are declared and paid on shares of HRG Common Stock. However, no dividend or other distribution having a record date after the Effective Time will actually be paid with respect to any HRG Common Stock into which shares of Spectrum Common Stock have been converted in connection with the Merger until the certificates formerly representing shares of Spectrum Common Stock have been surrendered (or the book-entry shares formerly representing shares of Spectrum Common Stock have been transferred), at which time any accrued dividends and other distributions on those shares of HRG Common Stock will be paid without interest.

Subject to the limitations set forth in the Merger Agreement described above, any future dividends by Spectrum or HRG will be made at the discretion of the board of directors of Spectrum or HRG, as applicable. It is expected that, following the Merger, HRG will continue Spectrum’s current dividend practice. However, there can be no assurance that any future dividends will be declared or paid by Spectrum or HRG or as to the amount or timing of those dividends, if any.



 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed under “Cautionary Statement Regarding Forward- Looking Statements” of this joint proxy statement/prospectus, Spectrum stockholders should carefully consider the following risks in deciding whether to vote for the approval of the Spectrum Proposals, and HRG stockholders should carefully consider the following risks in deciding whether to vote for the approval of the HRG Proposals. Descriptions of some of these risks can be found in the Annual Reports of Spectrum and HRG on Form 10-K for the fiscal year ended September 30, 2017, and any amendments thereto, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this joint proxy statement/prospectus. You should read carefully this entire joint proxy statement/prospectus and its annexes and exhibits and the other documents incorporated by reference into this joint proxy statement/prospectus. See also “Where You Can Find More Information.”

Risks Related to the Merger

Because the market price of shares of HRG Common Stock and Spectrum Common Stock will fluctuate, HRG stockholders cannot be sure of the value of their shares following the Merger and Spectrum stockholders cannot be sure of the value of the Merger Consideration they will receive pursuant to the Merger Agreement.

In the Merger, each of the outstanding shares of HRG Common Stock will, by means of the Reverse Stock Split, be combined into a fraction of a share of HRG Common Stock equal to (i) (a) the number of shares of Spectrum Common Stock held by HRG and its subsidiaries as of immediately prior to the Effective Time, minus (b) (1) the sum of (x) HRG’s net indebtedness as of closing and certain transaction expenses of HRG that are unpaid as of closing, minus (y) $200,000,000, divided by (2) the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date, divided by (ii) as of immediately prior to the Reverse Stock Split, the sum of (without duplication) (a) the aggregate number of issued and outstanding shares of HRG Common Stock, (b) (1) the aggregate number of shares of HRG Common Stock subject to then-unexercised HRG stock options and warrants, minus (2) the number of shares of HRG Common Stock having a then-aggregate value equal to the aggregate exercise price of such unexercised HRG stock options and warrants, and (c) the number of shares of HRG Common Stock subject to HRG restricted stock awards, vested in full in accordance with terms of the Merger Agreement. Thereafter, each Spectrum share issued and outstanding immediately prior to the Effective Time will be converted into, subject to certain exceptions, into the right to receive one share of HRG Common Stock.

Based on (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement, the 0.1603 of a share of HRG Common Stock that the HRG stockholders are expected to hold after the Merger in respect of each share of HRG Common Stock they held immediately prior to the Effective Time would have a value of approximately $13.06.

The exact value of the shares of HRG Common Stock that the Spectrum and HRG stockholders will hold after the Merger will not be known at the time of the Spectrum Special Meeting or the HRG Special Meeting and may be greater than, the same as or less than the current prices at the time of the Spectrum Special Meeting or the HRG Special Meeting. The market prices of Spectrum Common Stock and HRG Common Stock are subject to general price fluctuations in the market for publicly traded equity securities and have experienced volatility in the past. Stock price changes may result from a variety of factors, including general market and economic

 

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conditions, changes in the respective businesses, operations and prospects of Spectrum and HRG, and an evolving regulatory landscape. Market assessments of the benefits of the Merger and the likelihood that the Merger will be consummated, as well as general and industry specific market and economic conditions, may also impact market prices of Spectrum Common Stock and HRG Common Stock. Many of these factors are beyond Spectrum’s and HRG’s control. You should obtain current market price quotations for Spectrum Common Stock and for HRG Common Stock, but as indicated above, the prices at the time the Merger is consummated may be greater than, the same as or less than such price quotations.

The Merger Agreement and Amended HRG Charter contain restrictions on the amount of HRG Common Stock that may be issued in the Merger.

In order to preserve HRG’s ability to utilize certain tax attributes, no HRG Common Stock will be issued in the Merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become, or be treated under the Amended HRG Charter as becoming a holder of more than 4.9% of Corporation Securities (as defined in the Amended HRG Charter). Any shares of HRG Common Stock that would be issuable to a Spectrum stockholder but for the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter will instead be treated as “Excess Securities” (as defined in Article XIII of the Amended HRG Charter) and be delivered to one or more charitable organizations described in Section 501(c)(3) of the Code or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder.

Because the Share Combination Ratio is not fixed and will vary with market prices, among other things, the number of shares of HRG Common Stock to be received by holders of HRG Common Stock in the Reverse Stock Split, and therefore the portion of HRG following the Merger represented by the shares of HRG Common Stock issued to Spectrum stockholders in the Merger, will change between now and the time the Merger is consummated.

The exact value of the shares of HRG Common Stock to be received by the HRG stockholders and the Spectrum stockholders will depend in part on the trading prices of the Spectrum Common Stock and the HRG Common Stock at the Effective Time. In the Merger, each outstanding share of HRG Common Stock will, by means of the Reverse Stock Split, be combined into a fraction of a share of HRG Common Stock equal to the Share Combination Ratio, which will be determined by calculating, among other things, the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date. For additional information, see “The MergerConsideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split.

The Merger Agreement is subject to certain conditions; the Merger may not be consummated on the terms or timeline currently contemplated, or at all, and the Merger Agreement may be terminated in accordance with its terms.

The Merger Agreement contains a number of conditions that must be fulfilled or, to the extent permitted by applicable law or the Merger Agreement, waived, to consummate the Merger. Those conditions include: (i) the approval of the Spectrum Merger Proposal by the Spectrum stockholders (see section entitled “Spectrum Proposals—Spectrum Proposal 1: The Spectrum Merger Proposal” for a discussion on the Spectrum Merger Proposal), (ii) the approval of the HRG Required Proposals by HRG stockholders (see section entitled “The HRG Special Meeting” for a discussion on the HRG Required Proposals), (iii) the absence of any applicable law or order being in effect restraining, enjoining, prohibiting or making illegal the consummation of the proposed Merger, (iv) the effectiveness of the registration statement on Form S-4 of which this joint proxy statement/prospectus is a part, and the absence of any stop order issued by the SEC suspending the effectiveness of the Form S-4, (v) the listing on the NYSE of the shares of HRG Common Stock to be issued to the Spectrum stockholders in the Merger, subject to official notice of issuance, (vi) the receipt of a tax opinion by Spectrum and/or HRG that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code,

 

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(vii) the accuracy of certain representations and warranties of Spectrum, Merger Sub and HRG contained in the Merger Agreement and the performance in all material respects by the parties of the covenants contained in the Merger Agreement, (viii) the absence of a material adverse effect on either party since the date of the Merger Agreement (see section entitled “—Definition of ‘Material Adverse Effect’” for a discussion on the meaning of “material adverse effect”) and (ix) other conditions specified in the Merger Agreement.

Spectrum and HRG cannot assure that the Merger will be consummated on the terms or timeline currently contemplated or at all. Many of the conditions to the closing of the Merger are not within the control of Spectrum or HRG, and neither company can predict when or if these conditions will be satisfied. The failure to meet all of the required conditions could delay the completion of the Merger for a significant period of time or prevent it from occurring. Any delay in completing the Merger could cause each of Spectrum and HRG to incur additional costs and expenses and/or not to realize some or all of the benefits that each expects to achieve if the Merger is successfully completed within its expected timeframe.

In addition, if the Merger is not consummated by October 8, 2018, either Spectrum or HRG may choose not to proceed with the Merger. Spectrum or HRG may also terminate the Merger Agreement in certain other circumstances. Specifically, Spectrum may terminate the Merger Agreement if the HRG board of directors makes a change of recommendation and HRG may terminate the Merger Agreement if the Spectrum board of directors makes a change of recommendation. The parties can also mutually decide to terminate the Merger Agreement at any time prior to the consummation of the Merger, whether before or after the Spectrum stockholder approval or the HRG stockholder approval. See “The Transaction Agreements—Description of the Merger Agreement—Termination of the Merger Agreement.”

The Merger Agreement contains provisions that restrict the ability of the HRG board of directors or the Spectrum board of directors to pursue alternatives to the Merger and to change its recommendation that HRG stockholders or Spectrum stockholders, as applicable, vote for the approval of the Merger and the related proposals.

Under the Merger Agreement, HRG and Spectrum are restricted, subject to certain exceptions, from soliciting, initiating, knowingly facilitating or negotiating, or furnishing non-public information with regard to, any inquiry, proposal or offer for an alternative business combination transaction from a third party. However, the foregoing restrictions do not apply to any inquiry, proposal or offer with respect to (i) any transaction that relates specifically to the battery or appliances business of Spectrum and its subsidiaries or (ii) any other transaction that would not reasonably be expected to prevent or materially delay or make more unlikely to occur the consummation of the Merger and the other transactions contemplated by the Merger Agreement, so long as Spectrum keeps HRG informed on a reasonably current basis of the status of such transaction. Further, subject to the parties’ rights to terminate the Merger Agreement, each party has agreed to use reasonable best efforts to submit the Merger in the manner described in this joint proxy statement/prospectus to a vote of its stockholders for approval notwithstanding any change in recommendation by its board of directors.

Each of HRG and Spectrum may terminate the Merger Agreement upon a change in recommendation by the other party’s board of directors. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of HRG or Spectrum from considering or proposing an alternative business combination transaction with HRG or Spectrum. If HRG stockholders approve the HRG Required Proposals at the HRG Special Meeting or if Spectrum stockholders approve the Spectrum Merger Proposal at the Spectrum Special Meeting, HRG or Spectrum, as applicable, will be restricted under the terms of the Merger Agreement (without exception) from having any discussions or negotiations with any third party that may have an interest in entering into an alternative business combination transaction with HRG or Spectrum, as applicable. See “The Transaction Agreements—Description of the Merger Agreement—Termination of the Merger Agreement.

 

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The pendency of the Merger could materially adversely affect the business, financial condition, results of operations or cash flows of Spectrum.

Uncertainty about the effect of the Merger on stockholders, customers, suppliers and employees may have an adverse effect on Spectrum. Some stockholders, customers, suppliers, employees and others who deal with Spectrum may seek to change existing relationships with Spectrum or delay decisions to continue or expand their relationships with the companies. Current and prospective employees may experience uncertainty about their future roles, which may affect Spectrum’s ability to attract, retain and motivate key personnel. If employees depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with the businesses, HRG following the Merger could face disruptions in its operations, loss of expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the Merger. Any such negative impact would adversely effect HRG as the largest stockholder of Spectrum prior to the Merger or as the surviving entity following the completion of the Merger.

HRG and Spectrum are subject to restrictive interim operating covenants during the pendency of the Merger.

HRG and Spectrum are subject to contractual restrictions while the Merger is pending, which could adversely affect their respective businesses and operations. These restrictions may prevent HRG from taking certain actions before the closing of the Merger or the termination of the Merger Agreement and adversely affect HRG’s ability to execute certain of its business strategies, including HRG share repurchases, certain actions relating to material contracts, certain employee benefit changes, certain capital expenditures, payments of dividends, pledges of capital stock, liquidation or dispositions and mergers or otherwise pursuing certain business opportunities, or making certain changes to its capital stock, that the HRG board of directors may deem beneficial. Although less restrictive than those imposed on HRG, the Merger Agreement does impose certain restrictive interim covenants on Spectrum. These restrictions may prevent Spectrum from taking certain actions before the closing of the Merger or the termination of the Merger Agreement and adversely affect Spectrum’s ability to execute certain of its business strategies, including Spectrum’s payment of dividends (other than its ordinary course dividend of up to $0.42 per share per calendar quarter), issuance of capital stock, making certain acquisitions or otherwise pursuing certain business opportunities (other than a transaction that relates specifically to the battery or appliances business of Spectrum and its subsidiaries), or making certain changes to its capital stock, that the Spectrum board of directors may deem beneficial. See “The Transaction Agreements—Description of the Merger Agreement—Conduct of Business Pending the Merger.

Spectrum and HRG directors and officers have interests in the Merger that may be different from, or in addition to, the interests of Spectrum stockholders and HRG stockholders.

In considering the recommendation of the Spectrum board of directors, Spectrum stockholders should be aware that certain of Spectrum’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of Spectrum’s stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. These interests include, but are not limited to, the continued service of certain directors of Spectrum as directors of HRG, the continued employment of certain executive officers of Spectrum by HRG following the Merger, the treatment in the Merger of equity award and provisions in the Merger Agreement regarding continued indemnification of and advancement of expenses to Spectrum directors and officers. The members of the Spectrum Special Committee and the Spectrum board of directors were aware of these interests and considered them, among others, in their authorization, approval and adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and their recommendation that Spectrum’s stockholders adopt the Merger Agreement and approve the Merger and the transactions contemplated thereby. See “The Merger—Background of the Merger,” “The Merger—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors” and “The Merger—Interests of Spectrum’s Directors and Officers in the Merger” for further discussion of these matters.

 

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In considering the recommendation of the HRG board of directors, HRG stockholders should be aware that certain of HRG’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of HRG’s stockholders generally, including as a result of their relationships with Leucadia or Fortress. These interests may present such executive officers and directors with actual or potential conflicts of interest. The members of the HRG board of directors were aware of and considered these interests relating to HRG, among other matters, in evaluating the Merger Agreement and the Merger, and in recommending that HRG stockholders approve the HRG Required Proposals. See “The Merger—Background of the Merger,” “The Merger—HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors” and “The Merger—Interests of HRG’s Directors and Officers in the Merger” for further discussion of these matters.

Leucadia and Fortress have interests in the Merger that may be different from, or in addition to, the interests of Spectrum stockholders and HRG stockholders.

In considering the recommendation of the HRG board of directors, HRG stockholders should be aware that Leucadia and Fortress have interests in the Merger that may be different from, or in addition to, those of HRG’s stockholders generally. The members of the HRG board of directors were aware of and considered these interests relating to HRG, among other matters, in evaluating the Merger Agreement and the Merger, and in recommending that HRG stockholders approve the HRG Required Proposals. See “The Merger—Interests of HRG’s Directors and Officers in the MergerRights of Certain Stockholders” for further discussion of these matters.

The HRG Common Stock following the Reverse Stock Split and the Merger will have different rights from the HRG Common Stock and the Spectrum Common Stock prior to the Reverse Stock Split and the Merger.

Upon consummation of the Reverse Stock Split and the Merger, the rights of former holders of HRG Common Stock will be governed by the Amended HRG Charter, the Amended HRG Bylaws and Delaware law. The rights currently associated with HRG Common Stock or Spectrum Common Stock are different from the rights that will be associated with HRG Common Stock following the Reverse Stock Split and the Merger. For a discussion of the different rights currently associated with HRG Common Stock and Spectrum Common Stock and to be associated with HRG Common Stock following the Reverse Stock Split and the Merger, see “Comparison of Stockholder Rights” and “—Risks Related to Our Business—Certain provisions of the Amended HRG Charter, Amended HRG Bylaws and of the DGCL will have anti-takeover effects and could delay, discourage, defer or prevent a tender offer or takeover attempt that a stockholder might consider to be in the stockholder’s best interests.”

Following the consummation of the Merger, the composition of the HRG board of directors will be different than the composition of the current Spectrum board of directors and the current HRG board of directors.

Upon consummation of the Merger, the composition of the HRG board of directors will be different than the current Spectrum board of directors and the current HRG board of directors. Upon the consummation of the Merger, the HRG board of directors will consist of all of the directors of the Spectrum board of directors immediately prior to the closing (other than Mr. Zargar who will resign from the Spectrum board of directors immediately prior to the closing) and an independent director designated by Leucadia. This new composition of the HRG board of directors may affect the future decisions of HRG.

Leucadia and Fortress will be significant stockholders of HRG following the Merger and if a large percentage of their holdings were sold or otherwise disposed of, the stock price of the shares of HRG Common Stock could decline.

At the closing of the Merger, Leucadia and Fortress are expected to beneficially own approximately 14% and 10% of outstanding shares of HRG Common Stock, respectively, based on (i) their beneficial ownership of approximately 23% and 16% of the shares of HRG Common Stock as of June 6, 2018, respectively, (ii) the

 

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20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iv) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (v) a $200.0 million upward adjustment contemplated by the Merger Agreement. Pursuant to the Amended HRG Charter, Leucadia and Fortress will be subject to certain transfer restrictions as further discussed in “Comparison of Stockholder Rights,” and pursuant to the Post-Closing Stockholder Agreement, Leucadia will be subject to certain transfer restrictions as further discussed in “The Transaction Agreements—Description of the Post-Closing Stockholder Agreement.” If in compliance with such restrictions or after their expiration, Leucadia or Fortress were to sell or otherwise transfer all or a large percentage of its holdings, the stock price of HRG Common Stock could decline.

The opinions of the financial advisors to the Spectrum Special Committee and the HRG board of directors do not reflect changes in circumstances that may have occurred or that may occur between the signing of the Merger Agreement and the closing of the Merger.

The opinion rendered to the Spectrum Special Committee by Moelis and the opinion rendered to the HRG board of directors by J.P. Morgan were provided in connection with, and at the time of, Spectrum Special Committee’s and the HRG board of directors’ respective evaluation of the Merger. Neither the Spectrum Special Committee nor the HRG board of directors has obtained updated opinions from their respective financial advisors as of the date of this joint proxy statement/prospectus or as of any other date, nor will either receive updated, revised or reaffirmed opinions prior to the consummation of the Merger. Changes in the operations and prospects of Spectrum or HRG, general market and economic conditions and other factors that may be beyond the control of Spectrum or HRG, and on which Moelis and J.P. Morgan’s opinions were based, may significantly alter the value of Spectrum or HRG or the prices of Spectrum Common Stock or HRG Common Stock by the time the Merger is consummated. The opinions do not speak as of the time the Merger will be consummated or as of any date other than the date of such opinions. Because Moelis and J.P. Morgan will not be updating their opinions, the opinions do not address the fairness of the Merger Consideration or the Share Combination Ratio, respectively, from a financial point of view, at any time other than the time such opinions were issued, even though the Spectrum board of directors’ recommendation, based on the Spectrum Special Committee’s unanimous recommendation, that Spectrum stockholders vote “FOR” the Spectrum Proposals and the HRG board of directors’ recommendation that HRG stockholders vote “FOR” the HRG Proposals are made as of the date of this joint proxy statement/prospectus. For a description of the opinions that the Spectrum Special Committee received from Moelis and the HRG board of directors received from J.P. Morgan, see “The Merger—Opinion of the Spectrum Special Committee’s Financial Advisor” and “The Merger—Opinion of HRG’s Financial Advisor.”

Failure to consummate the Merger could negatively impact respective future stock prices, operations and financial results of Spectrum and HRG.

If the Merger is not consummated for any reason, Spectrum and HRG may be subjected to a number of material risks. The price of Spectrum Common Stock and the price of HRG Common Stock may decline to the extent that their current market prices reflect a market assumption that the Merger will be consummated and will be beneficial to the value of the business of HRG following the Merger. In addition, some costs related to the Merger must be paid by Spectrum and HRG whether or not the Merger is consummated. Furthermore, Spectrum and HRG may experience negative reactions from their respective stockholders, customers, suppliers and employees if the Merger is not consummated.

Furthermore, if the Merger is not consummated, HRG may undertake a new strategic review process to search for alternative ways to optimize stockholder value, and such alternatives may differ significantly from

 

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HRG’s current strategy. The pursuit of a new strategic direction poses inherent risks, and could lead to temporary or permanent negative impacts on HRG’s stock prices, operations and financial results.

Spectrum and HRG stockholders will not be entitled to appraisal rights in the Merger.

Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Holders of shares of Spectrum Common Stock and shares of HRG Common Stock will not have appraisal rights in connection with the Merger or the other transactions contemplated by the Merger Agreement.

The Merger may disrupt attention of Spectrum’s management or HRG’s management from ongoing business operations.

Each of Spectrum and HRG has expended, and expects to continue to expend, significant management resources to complete the Merger. Their respective management’s attention may be diverted away from the day-to-day operations of their respective business, implementing initiatives to improve performance throughout the remainder of fiscal 2018 and execution of existing business plans in an effort to complete the Merger. This diversion of management resources could disrupt their respective operations and may have an adverse effect on their respective business, financial conditions and results of operations.

The issuance of the shares of HRG Common Stock to holders of Spectrum Common Stock in connection with the Merger materially increases the risk that HRG could experience an “ownership change” for U.S. federal income tax purposes, which could materially affect HRG’s ability to utilize its net operating losses and capital loss carryforwards and adversely impact HRG’s results of operations.

HRG has substantial deferred tax assets related to net operating losses (“NOLs”) and capital loss carryforwards (together with the NOLs, the “Tax Attributes”) for U.S. federal and state income tax purposes, which HRG currently expects to be available to offset future taxable income. HRG’s ability to utilize or realize the current carrying value of the NOLs and capital loss carryforwards may be impacted by certain events, including annual limits imposed under Section 382 of the Code, or applicable provisions of state law, as a result of an “ownership change.” Although HRG does not currently anticipate that the issuance of the shares of HRG Common Stock to holders of Spectrum Common Stock in connection with the Merger will result in an “ownership change” for U.S. federal and applicable state income tax purposes, the issuance of such shares materially increases the risk that HRG could experience an “ownership change” in the future as a result of future issuances of shares or certain direct or indirect changes in the ownership of such shares or other securities (e.g., as a result of a disposition of shares currently owned by existing “5% stockholders”). In addition, although Leucadia’s and Fortress’s ability to dispose of shares of HRG Common Stock owned by them will be subject to certain transfer restrictions in the Amended HRG Charter that are designed to prevent an “ownership change” from occurring, such restrictions will expire on the second anniversary of the closing or earlier in certain specified circumstances. As a result, HRG could experience an “ownership change” in the future as a result of transfers by Leucadia and Fortress following the expiration of such transfer restrictions.

An “ownership change” is generally defined as a cumulative increase of 50 percentage points or more (by value) in the ownership positions of certain “5% stockholders” of a corporation during a rolling three year period. Upon an “ownership change,” a corporation generally is subject to an annual limit on the ability to utilize pre-change NOLs and capital loss carryforwards to offset future taxable income and gain in an amount equal to the value of the corporation’s market capitalization immediately before the “ownership change” multiplied by the adjusted long-term tax-exempt rate set by the Internal Revenue Service (the “IRS”). Since NOLs generally may be carried forward for up to 20 years, any such annual limitation may result in the inability to utilize certain pre-change NOLs and other tax attributes.

 

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In the event an “ownership change” were to occur, HRG could lose the ability to use a significant portion of its NOLs and capital loss carryforwards. Any permanent loss could have a material adverse effect on HRG’s results of operations and financial condition.

Each of Spectrum and HRG may refuse to close in the event the other experiences a “material adverse effect,” which is defined with respect to HRG to include a monetary threshold below which adverse effects will not trigger Spectrum’s right to terminate the Merger Agreement, and shareholder litigation related to the Merger and impairments of HRG’s tax attributes are both expressly excluded from triggering an HRG “material adverse effect.”

The respective obligations of the parties to consummate the transactions contemplated by the Merger Agreement are subject to the performance of the other party’s covenants and accuracy of certain of its representations and warranties up to a “material adverse effect” threshold.

A material adverse effect will be deemed to have occurred, with respect to HRG, only if all the applicable effects have resulted or would reasonably be expected to result in a net adverse impact in excess of $100,000,000 to the business, financial condition or results of operations of HRG and its subsidiaries (excluding Spectrum and its subsidiaries).

Furthermore, in addition to customary exclusions from the definition of “material adverse effect,” any effects relating to tax attributes of HRG (including net operating losses of HRG) and any effects relating to the existence of the Merger Agreement (including shareholder litigation relating to the Merger Agreement) will not count toward the occurrence of an HRG material adverse effect.

Risks Related to Our Business

Spectrum and HRG may fail to realize all of the anticipated benefits of the Merger or those benefits may take longer to realize than expected.

The anticipated benefits of the Merger depend on factors that are outside of the control of HRG and Spectrum and/or will be outside the control of HRG, including, among others, the possibility that contingent liabilities of HRG are larger than expected and the potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Merger. Any one of these factors could result in increased costs, decreased expected revenues and diversion of management time and energy, which could materially impact the business, financial condition and results of operations of HRG. Any failure to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, the activities of HRG and could adversely affect the results of operations of HRG. The Merger may also result in material unanticipated problems, expenses, liabilities and diversion of management attention.

In addition, the full benefits of the Merger may not be realized. These benefits may not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in operating the business of HRG. All of these factors could cause dilution to the earnings per share of HRG, decrease or delay the expected accretive effect of the Merger and negatively impact the price of the shares of HRG Common Stock. As a result, it cannot be assured that the combination of Spectrum and HRG will result in the realization of the full benefits anticipated from the Merger within the anticipated time frames, or at all.

Spectrum and HRG will incur direct and indirect costs and expenses as a result of the Merger.

Spectrum and HRG will incur costs and expenses in connection with and as a result of consummating the Merger. The transaction costs incurred by HRG will reduce the number of shares of HRG Common Stock that HRG stockholders will receive in the Reverse Stock Split. A portion of the transaction costs related to the Merger will be incurred regardless of whether the Merger is consummated. While Spectrum and HRG have assumed that

 

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a certain magnitude of transaction expenses will be incurred, factors beyond Spectrum’s and HRG’s control could affect the total amount or the timing of these expenses. These expenses may exceed the costs historically borne by Spectrum and HRG. These costs could adversely affect the financial condition and results of operations of Spectrum and HRG prior to the consummation of the Merger and of HRG following the consummation of the Merger.

All fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be borne by the party incurring such fees or expenses, except that Spectrum will pay any SEC filing fees, exchange agent or transfer agent fees and expenses, amounts incurred by HRG relating to its efforts to cooperate with financing activities undertaken by Spectrum in connection with the Merger (if applicable), and any fees payable to any stock exchange or to FINRA in connection with the Merger Agreement and the transactions contemplated thereby. Due to HRG’s ownership of approximately 62% of Spectrum (as of June 6, 2018), holders of HRG Common Stock will indirectly bear its allocable share of these amounts. Except to the extent described in the preceding two sentences, holders of HRG Common Stock will directly bear, in the form of an adjustment to the Share Combination Ratio, the aggregate amount of all incurred but unpaid HRG third-party advisor fees and expenses and, except for consideration payable or issuable pursuant to the terms of the Merger Agreement, any change of control, retention bonus, termination, severance or other similar payments and any employer-paid portion of any employment and payroll taxes related thereto.

HRG’s actual financial positions and results of operations following the Merger may differ materially from the unaudited pro forma financial data included in this joint proxy statement/prospectus.

The pro forma financial information contained in this joint proxy statement/prospectus is presented for informational purposes only and may not be an indication of what HRG’s financial position or results of operations would have been had the Merger been consummated on the dates indicated. The pro forma financial information has been derived from the audited and unaudited historical financial statements of Spectrum and HRG and certain adjustments and assumptions regarding HRG after giving effect to the Merger. The assets and liabilities of HRG have been measured at historical values.

In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect HRG’s financial condition or results of operations following the consummation of the Merger. Any material variance from the pro forma financial information may cause significant variations in the market price of HRG Common Stock. See “Spectrum and HRG Unaudited Pro Forma Condensed Consolidated Financial Statements.

Upon completion of the Merger, HRG will have more debt than either HRG or Spectrum alone.

HRG will be subject, after closing, to the net indebtedness at closing of each of HRG and Spectrum, and the limitations on its business and operations resulting from that debt and the terms of any debt agreements of HRG or Spectrum. HRG and Spectrum cannot predict the terms of any subsequent debt arrangements HRG will enter into, which may be less favorable than HRG’s existing loan agreement dated as of January 13, 2017 (the “2017 Loan”).

HRG’s level of indebtedness could have the effect, among other things, of reducing its flexibility to respond to changing business and economic conditions and increasing its interest expense. The increased levels of indebtedness following completion of the Merger could also reduce funds available for HRG’s investments in capital expenditures, share repurchases, dividend payments and other activities and may create competitive disadvantages for HRG relative to competitors with lower debt levels.

 

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Certain provisions of the Amended HRG Charter, Amended HRG Bylaws and of the DGCL will have anti-takeover effects and could delay, discourage, defer or prevent a tender offer or takeover attempt that a stockholder might consider to be in the stockholder’s best interests.

Certain provisions of the Amended HRG Charter may have the effect of delaying or preventing changes in control if HRG’s board of directors determines that such changes in control are not in the best interests of HRG and its stockholders. Such provisions include, among other things, those that:

 

    provide for a classified board of directors with staggered three-year terms;

 

    authorize the board of directors to issue preferred shares and to determine the terms, including the number of shares, voting powers, redemption provisions, dividend rates, liquidation preferences and conversion rights, of those shares, without stockholder approval;

 

    increase the number of authorized preferred shares from 10 million to 100 million;

 

    permit the removal of directors by the stockholders only for cause and then only by the affirmative vote of a majority of the outstanding shares of HRG Common Stock;

 

    opt in to Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in a “business combination” with any interested stockholder (generally speaking a stockholder who holds 15% or more of HRG’s voting stock) for three years from the date such stockholder becomes an interested stockholder unless certain conditions are met; and

 

    subject to certain exceptions, prohibit any person from acquiring shares of HRG Common Stock if such person is, or would become as a result of the acquisition, a “Substantial Holder” (as defined in the Amended HRG Charter).

These provisions may frustrate or prevent attempts by stockholders to cause a change in control of HRG or to replace members of its board of directors. For more information, see “Comparison of Stockholder Rights.”

Risks Related to Spectrum’s Business

You should read and consider the risk factors specific to Spectrum’s business that will also affect HRG after the Merger. These risks are described in Spectrum’s Current Report on Form 8-K filed on March 30, 2018, as such risks may be updated or supplemented in Spectrum’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, and in other documents that are incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” for the location of information incorporated by reference in this joint proxy statement/prospectus.

Risks Related to HRG’s Business

You should read and consider the risk factors specific to HRG’s businesses that will continue to affect the HRG after the Merger. These risks are described in HRG’s Current Report on Form 8-K filed on April 2, 2018, as such risks may be updated or supplemented in HRG’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, and in other documents that are incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” for the location of information incorporated by reference in this joint proxy statement/prospectus.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this joint proxy statement/prospectus may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and within the meaning of, and subject to the safe harbor created by, Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. We have tried, whenever possible, to identify these statements by using words like “future,” “anticipate,” “intend,” “plan,” “estimate,” “believe,” “expect,” “project,” “forecast,” “could,” “would,” “should,” “will,” “may,” and similar expressions of future intent or the negative of such terms. These statements are subject to a number of risks and uncertainties that could cause results to differ materially from those anticipated as of the date of this joint proxy statement/prospectus. Actual results may differ materially as a result of (1) the ability to consummate the Merger on the expected terms and within the anticipated time period, or at all, which is dependent on the parties’ ability to satisfy certain closing conditions, including the required stockholder approval; (2) any delay or inability of HRG to realize the expected benefits of the Merger (including those relating to tax attributes of HRG); (3) changes in tax laws, regulations, rates, policies or interpretations; (4) the value of the shares of HRG Common Stock to be issued in the Merger; (5) the risk of unexpected significant transaction costs and/or unknown liabilities; (6) potential litigation relating to the proposed Merger; (7) the outcome of Spectrum’s previously announced transaction to sell its Global Battery and Lighting Business (as defined in Spectrum’s annual report on Form 10-K for the fiscal year ended September 30, 2017) and exploration of strategic options for its Appliances business, including uncertainty regarding consummation of any such transaction or transactions and the terms of such transaction or transactions, if any, and, if consummated, Spectrum’s ability to realize the expected benefits of such transaction; (8) the impact of actions taken by significant stockholders; (9) the impact of expenses resulting from the implementation of new business strategies, divestitures or current and proposed restructuring activities; (10) the potential disruption to Spectrum’s or HRG’s business or diverted management attention, and the unanticipated loss of key members of senior management or other employees, in each case as a result of the proposed Merger, the previously announced transaction to sell Spectrum’s Global Battery and Lighting Business, in connection with the strategic options for Spectrum’s Appliances business or otherwise; and (11) general economic and business conditions that affect HRG following the consummation of the Merger. Risks that could cause actual risks to differ from those anticipated as of the date hereof include those discussed herein, those set forth in the combined securities filings of Spectrum and SB/RH Holdings, LLC, including their most recently filed Annual Report on Form 10-K, as amended on November 17, 2017 and January 23, 2018, as updated in subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and those set forth in the securities filings of HRG, including its most recently filed Annual Report on Form 10-K.

Spectrum and HRG also caution the reader that undue reliance should not be placed on any forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus. Except as required by law, Spectrum and HRG undertake no duty or responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect actual outcomes.

 

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THE SPECTRUM SPECIAL MEETING

Date, Time and Place of the Spectrum Special Meeting

The Spectrum Special Meeting will be held at 9:30 AM, local time, on July 13, 2018, at Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022. On or about June 12, 2018, Spectrum commenced mailing this joint proxy statement/prospectus and the enclosed form of proxy card to its stockholders entitled to vote at the Spectrum Special Meeting.

Purpose of the Spectrum Special Meeting

At the Spectrum Special Meeting, Spectrum stockholders will be asked to consider and vote upon the following items:

 

  1. the Spectrum Merger Proposal;

 

  2. the Spectrum Adjournment Proposal; and

 

  3. the Spectrum Advisory HRG Charter Amendment Proposals, which include:

 

    the Spectrum Advisory HRG Section 203 Proposal;

 

    the Spectrum Advisory HRG Reverse Stock Split Proposal;

 

    the Spectrum Advisory HRG Common Stock Proposal;

 

    the Spectrum Advisory HRG Preferred Stock Proposal;

 

    the Spectrum Advisory HRG Section 382 Proposal; and

 

    the Spectrum Advisory HRG Additional Charter Amendments Proposal.

No other business will be acted upon at the Spectrum Special Meeting.

Spectrum and HRG entered into the HRG Voting Agreement, pursuant to which HRG has agreed to vote all of its shares of Spectrum Common Stock to approve and adopt the Merger Agreement and the transactions contemplated thereby and take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement. The HRG Voting Agreement and the obligations thereunder terminate upon the termination of the Merger Agreement in accordance with its terms. These shares represent approximately 62% of the aggregate voting power of all shares of Spectrum Common Stock as of the Spectrum Record Date.

Spectrum Record Date and Quorum

Record Date

The Spectrum board of directors has fixed the close of business on May 17, 2018 as the record date for determining the Spectrum stockholders entitled to receive notice of and to vote at the Spectrum Special Meeting.

As of the Spectrum Record Date, there were 55,358,038 shares of Spectrum Common Stock outstanding and entitled to vote at the Spectrum Special Meeting. Each share of Spectrum Common Stock entitles the holder to one vote at the Spectrum Special Meeting on each proposal to be considered at the Spectrum Special Meeting. Shares of Spectrum Common Stock that are held in treasury will not be entitled to vote at the Spectrum Special Meeting.

Quorum

The presence of the holders of shares of Spectrum Common Stock representing a majority of the voting power of all issued and outstanding shares of Spectrum Common Stock entitled to vote at the Spectrum Special

 

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Meeting, in person or represented by proxy, is necessary to constitute a quorum at the Spectrum Special Meeting. Pursuant to the HRG Voting Agreement, HRG, which beneficially owns approximately 62% of the outstanding Spectrum Common Stock as of the Spectrum Record Date, has agreed to vote its shares of Spectrum Common Stock at the Spectrum Special Meeting, which would provide a quorum at the Spectrum Special Meeting, subject to the conditions set forth in the voting agreement.

Abstentions will be counted as present for purposes of determining a quorum. It is expected that all proposals to be voted on at the Spectrum Special Meeting will be “non-routine” matters. Banks, brokers and other nominees do not have discretionary voting power with respect to the approval of matters determined to be non-routine, without specific instructions from the beneficial owner. If a stockholder meeting consists of a mix of “routine” and non-routine matters, the banks, brokers or other nominees may exercise voting discretion over the routine matters and must refrain from voting on the non-routine matters, which are known as “broker non-votes.” When a special meeting is comprised of only non-routine matters and no proposal is considered routine, banks, brokers or other nominees, absent specific instructions from the beneficial owner, have no voting power over any matters and therefore no broker non-votes will result. Because all proposals at the Spectrum Special Meeting will be considered non-routine, we do not expect to receive any broker non-votes. Shares of Spectrum Common Stock held in treasury will not be included in the calculation of the number of shares of Spectrum Common Stock represented at the Spectrum Special Meeting for purposes of determining a quorum.

Required Vote

Required Vote to Approve the Spectrum Merger Proposal

Approval of the Spectrum Merger Proposal requires the affirmative vote of (i) the holders of a majority of the outstanding shares of Spectrum Common Stock, (ii) the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and the executive officers of Spectrum and (iii) the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Exchange Act with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the Spectrum Certificate of Incorporation.

Pursuant to the HRG Voting Agreement discussed elsewhere in this joint proxy statement/prospectus, HRG, which beneficially owns approximately 62% of the outstanding Spectrum Common Stock as of the Spectrum Record Date, has agreed to vote all of its shares of Spectrum Common Stock to approve and adopt the Merger Agreement and the transactions contemplated thereby and take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, subject to the conditions set forth in the voting agreement.

Required Vote to Approve the Spectrum Adjournment Proposal

Approval of the Spectrum Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum Common Stock present in person or by proxy at the Spectrum Special Meeting and entitled to vote on such proposal, regardless of whether a quorum is present.

Required Vote to Approve the Spectrum Advisory HRG Charter Amendment Proposals

Approval of each of the non-binding Spectrum Advisory HRG Charter Amendment Proposals requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum Common Stock present in person or by proxy at the Spectrum Special Meeting and entitled to vote on such proposal, assuming a quorum is present.

 

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Treatment of Abstentions; Failure to Vote

For purposes of the Spectrum Special Meeting, an abstention occurs when a Spectrum stockholder attends the Spectrum Special Meeting in person and does not vote or returns a proxy marked “ABSTAIN.”

 

    For the Spectrum Merger Proposal, an abstention, failure to vote or broker non-vote will have the same effect as a vote cast “AGAINST” this proposal.

 

    For the Spectrum Adjournment Proposal and each of the Spectrum Advisory HRG Charter Amendment Proposals, an abstention will count as a vote “AGAINST” these proposals. If a Spectrum stockholder fails to vote or to instruct his or her bank, broker or other nominee on how to vote and is not present in person or by proxy at the Spectrum Special Meeting, it will have no effect on the vote count for the Spectrum Adjournment Proposal or any of the Spectrum Advisory HRG Charter Amendment Proposals.

Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors

The Spectrum Special Committee is a committee consisting of four independent and disinterested directors of the Spectrum board of directors formed for the purpose of exploring, considering, negotiating and reviewing any strategic alternatives announced by HRG involving Spectrum or any other strategic or financial alternatives available to Spectrum. The Spectrum Special Committee has unanimously determined that the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its minority stockholders, and has recommended that the Spectrum board of directors authorize, approve, adopt and declare advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, and recommend Spectrum’s stockholders adopt the Merger Agreement and the Related Agreements and approve the Merger and the other transactions contemplated thereby.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar, who agreed to recuse themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, has determined that the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum and its stockholders, and has authorized, approved, adopted and declared advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby. The Spectrum board of directors (other than Messrs. Steinberg and Zargar, who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends that the Spectrum stockholders vote “FOR” each of the resolutions to be considered at the Spectrum Special Meeting and described in this joint proxy statement/prospectus, including the Spectrum Merger Proposal.

For a discussion of the factors considered by the Spectrum Special Committee and the Spectrum board of directors in their determination to recommend the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated thereby, see “The Merger—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors.”

Consummation of the Merger is conditioned on approval of the Spectrum Merger Proposal, but is not conditioned on the approval of the Spectrum Adjournment Proposal or any of the Spectrum Advisory HRG Charter Amendment Proposals.

Voting by Spectrum’s Directors and Executive Officers

As of the Spectrum Record Date, approximately 1.2% of the shares of Spectrum Common Stock outstanding and entitled to vote were held by the directors and executive officers of Spectrum and their affiliates. As of the

 

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Spectrum Record Date, approximately 1.2% of the shares of Spectrum Common Stock outstanding and entitled to vote were held by directors and executive officers of Spectrum (and their affiliates) who are not affiliated with HRG, which represents approximately 3.0% of the shares of Spectrum Common Stock outstanding and entitled to vote held by the Spectrum stockholders not affiliated with HRG. Spectrum currently expects that the directors and executive officers of Spectrum will vote their shares of Spectrum Common Stock in favor of the Spectrum Merger Proposal, although none has entered into any agreement obligating them to do so. For additional information regarding the votes required to approve the proposals to be voted on at the Spectrum Special Meeting, see “The Spectrum Special Meeting—Required Vote.”

Voting of Proxies; Incomplete Proxies

Giving a proxy means that a Spectrum stockholder authorizes the persons named in the enclosed proxy card to vote its shares at the Spectrum Special Meeting in the manner it directs. A Spectrum stockholder may give a proxy or vote in person at the Spectrum Special Meeting. If you hold your shares of Spectrum Common Stock in your name as a stockholder of record, you may use one of the following methods to give your proxy before the Spectrum Special Meeting:

 

    By Internet. The web address and instructions for Internet proxy submission can be found on the enclosed proxy card. You will be required to provide your assigned control number located on the proxy card. Internet proxy submission via the web address indicated on the enclosed proxy card is available 24 hours a day. If you choose to submit your proxy by Internet, then you do not need to return the proxy card.

 

    By Telephone. The toll-free number for telephone proxy submission can be found on the enclosed proxy card. You will be required to provide your assigned control number located on the proxy card. Telephone proxy submission is available 24 hours a day. If you choose to submit your proxy by telephone, then you do not need to return the proxy card.

 

    By Mail. Mark the enclosed proxy card, sign and date it, and return it in the postage-paid envelope you have been provided.

You may also vote your shares in person at the Spectrum Special Meeting.

Spectrum requests that Spectrum stockholders submit their proxies over the Internet, by telephone or by completing and signing the accompanying proxy card and returning it to Spectrum in the enclosed postage-paid envelope as soon as possible. When the accompanying proxy card is returned properly executed, the shares of Spectrum Common Stock represented by it will be voted at the Spectrum Special Meeting in accordance with the instructions contained on the proxy card.

If you sign and return your proxy card without indicating how to vote on any particular proposal, the shares of Spectrum Common Stock represented by your proxy will be voted “FOR” each such proposal in accordance with the recommendation of the Spectrum board of directors. Unless you check the box on your proxy card to withhold discretionary authority, the proxyholders may use their discretion to vote on the proposals relating to the Spectrum Special Meeting.

If your shares of Spectrum Common Stock are held in “street name” by a bank, broker or other nominee, you should check the voting form used by that firm to determine whether you may give voting instructions by telephone or the Internet.

EVERY SPECTRUM STOCKHOLDER’S VOTE IS IMPORTANT. ACCORDINGLY, EACH SPECTRUM STOCKHOLDER SHOULD SUBMIT ITS PROXY VIA THE INTERNET OR BY TELEPHONE, OR SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD, WHETHER OR NOT THE SPECTRUM STOCKHOLDER PLANS TO ATTEND THE SPECTRUM SPECIAL MEETING IN PERSON.

 

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Shares Held in Street Name

If your shares of Spectrum Common Stock are held in “street name” through a bank, broker or other nominee, you must instruct such bank, broker or other nominee on how to vote the shares by following the instructions that the bank, broker or other nominee provides you along with this joint proxy statement/prospectus. Your bank, broker or other nominee, as applicable, may have an earlier deadline by which you must provide instructions to it as to how to vote your shares of Spectrum Common Stock, so you should read carefully the materials provided to you by your bank, broker or other nominee.

You may not vote shares held in “street name” by returning a proxy card directly to Spectrum or by voting in person at the Spectrum Special Meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee. Further, banks, brokers or other nominees who hold shares of Spectrum Common Stock on behalf of their customers may not give a proxy to Spectrum to vote those shares with respect to any of the Spectrum Proposals without specific instructions from their customers, as banks, brokers and other nominees do not have discretionary voting power on any of the Spectrum Proposals. Therefore, if your shares of Spectrum Common Stock are held in “street name” and you do not instruct your bank, broker or other nominee on how to vote your shares,

 

  1. your bank, broker or other nominee may not vote your shares on the Spectrum Merger Proposal, which will have the same effect as a vote “AGAINST” this proposal; and

 

  2. your bank, broker or other nominee may not vote your shares on the Spectrum Adjournment Proposal or any of the Spectrum Advisory HRG Charter Amendment Proposals, which will not count as a vote “FOR” or “AGAINST” these proposals.

If your shares of Spectrum Common Stock are held in “street name” and you do not instruct your bank, broker or other nominee on how to vote your shares with respect to any of the Spectrum Proposals, your shares will not be counted toward determining whether a quorum is present. Your shares will be counted toward determining whether a quorum is present if you instruct your bank, broker or other nominee on how to vote your shares with respect to one or more of the Spectrum Proposals.

Revocability of Proxies and Changes to a Spectrum Stockholder’s Vote

If you are a Spectrum stockholder of record, you may revoke or change your proxy at any time before it is exercised at the Spectrum Special Meeting by:

 

    sending a written notice of revocation to the Spectrum Corporate Secretary, at Spectrum’s corporate headquarters, 3001 Deming Way, Middleton, Wisconsin 53562, stating that you would like to revoke your proxy;

 

    submitting a new proxy bearing a later date (by Internet, telephone or mail); or

 

    attending the Spectrum Special Meeting and voting in person.

If you are a Spectrum stockholder whose shares of Spectrum Common Stock are held in “street name” by a bank, broker or other nominee, you may revoke your proxy or voting instructions and vote your shares in person at the Spectrum Special Meeting only in accordance with applicable rules and procedures as employed by your bank, broker or other nominee. If your shares of Spectrum Common Stock are held in an account at a bank, broker or other nominee, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your proxy or voting instructions and should contact your bank, broker or other nominee to do so.

Attending the Spectrum Special Meeting will NOT automatically revoke a proxy that was submitted through the Internet or by telephone or mail. You must vote by ballot at the Spectrum Special Meeting to change your vote.

 

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Solicitation of Proxies

The cost of solicitation of proxies from Spectrum stockholders will be borne by Spectrum. Spectrum will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of Spectrum Common Stock. Spectrum has retained a professional proxy solicitation firm, MacKenzie Partners, Inc., to assist in the solicitation of proxies for a base fee of approximately $60,000 plus reasonable out-of-pocket expenses. In addition to solicitations by mail, Spectrum’s directors, officers and regular employees may solicit proxies personally or by telephone without additional compensation.

Attending the Spectrum Special Meeting

Subject to space availability and certain security procedures, all Spectrum stockholders as of the Spectrum Record Date, or their duly appointed proxies, may attend the Spectrum Special Meeting. Admission to the Spectrum Special Meeting will be on a first-come, first-served basis.

Each person attending the Spectrum Special Meeting must have proof of ownership of Spectrum Common Stock, as well as valid government-issued photo identification, such as a valid driver’s license or passport, to be admitted to the meeting. If you hold your shares of Spectrum Common Stock in your name as a stockholder of record, you will need proof of ownership of Spectrum Common Stock. If your shares of Spectrum Common Stock are held in the name of a bank, broker or other nominee and you plan to attend the Spectrum Special Meeting, you must present proof of your ownership of Spectrum Common Stock, such as a bank or brokerage account statement, to be admitted to the meeting, and you must obtain a legal proxy from the bank, broker or other nominee to vote at the meeting.

Assistance

If you need assistance in completing your proxy card or have questions regarding the Spectrum Special Meeting, please contact MacKenzie Partners, Inc., the proxy solicitation agent for Spectrum, by (i) mail at 1407 Broadway, 27th Floor, New York, New York 10018, (ii) email at proxy@mackenziepartners.com or (iii) telephone toll-free at (800) 322-2885.

 

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SPECTRUM PROPOSALS

Spectrum Proposal 1: The Spectrum Merger Proposal

As discussed throughout this joint proxy statement/prospectus, Spectrum is asking its stockholders to approve the Spectrum Merger Proposal. Under the terms of the Merger Agreement, Merger Sub 1 will merge with and into Spectrum, with Spectrum surviving the First Merger as a wholly owned subsidiary of HRG, and immediately following the effectiveness of the First Merger, if the Second Merger Opt-Out Condition has not occurred, Spectrum will merge with and into Merger Sub 2, with Merger Sub 2 surviving the Second Merger as a wholly owned subsidiary of HRG.

Immediately prior to the consummation of the First Merger, the HRG Charter will be amended and restated. As a result of this amendment and restatement, each of the outstanding shares of HRG Common Stock will, by means of the Reverse Stock Split, be combined into a fraction of a share of HRG Common Stock equal to (i) (a) the number of shares of Spectrum Common Stock held by HRG and its subsidiaries as of immediately prior to the Effective Time, minus (b) (1) the sum of (x) HRG’s net indebtedness as of closing and certain transaction expenses of HRG that are unpaid as of closing, minus (y) $200,000,000, divided by (2) the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date, divided by (ii) as of immediately prior to the Reverse Stock Split, the sum of (without duplication) (a) the aggregate number of issued and outstanding shares of HRG Common Stock, (b) (1) the aggregate number of shares of HRG Common Stock subject to then-unexercised HRG stock options and warrants, minus (2) the number of shares of HRG Common Stock having a then-aggregate value equal to the aggregate exercise price of such unexercised HRG stock options and warrants, and (c) the number of shares of HRG Common Stock subject to HRG restricted stock awards, vested in full in accordance with terms of the Merger Agreement. As part of the HRG Charter Amendment, HRG will change its name to “Spectrum Brands Holdings, Inc.”

In the Merger, each share of Spectrum Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Spectrum Common Stock held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum immediately prior to the Effective Time) will be converted into the right to receive one share of HRG Common Stock. Notwithstanding the foregoing, no HRG Common Stock will be issued in the Merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become, or be treated under the Amended HRG Charter as becoming a holder of more than 4.9% of Corporation Securities (as defined in the Amended HRG Charter). Any shares of HRG Common Stock that would be issuable to a Spectrum stockholder but for the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter will instead be treated as “Excess Securities” (as defined in the Amended HRG Charter) and be delivered to one or more charitable organizations described in Section 501(c)(3) of the Code or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder.

Immediately upon consummation of the Merger, pre-closing Spectrum stockholders and pre-closing HRG stockholders are expected to own approximately 39% and 61%, respectively, of the outstanding shares of HRG Common Stock, and a total of approximately 53,613,184 shares of HRG Common Stock are expected to be outstanding. Such ownership percentages and share amount assume (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iii) a $200.0 million upward adjustment contemplated by the Merger Agreement. Following the completion of the Merger, the shares of HRG Common Stock will be listed on the NYSE and are expected to trade under the symbol “SPB.”

 

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To review the reasons for the proposed Merger in greater detail, see “The Merger—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors.”

Spectrum stockholders should carefully read this joint proxy statement/prospectus in its entirety, including the annexes and exhibits, for more detailed information concerning the Merger Agreement and the Merger. In particular, Spectrum stockholders are directed to the Merger Agreement and Amendment No. 1, which are attached as Annex A and Annex B, respectively, to this joint proxy statement/prospectus and incorporated by reference into this joint proxy statement/prospectus.

The consummation of the Merger is conditioned on approval of the Spectrum Merger Proposal.

Vote Required and Spectrum Board Recommendation

Approval of the Spectrum Merger Proposal requires the affirmative vote of (i) the holders of a majority of the outstanding shares of Spectrum Common Stock, (ii) the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and the executive officers of Spectrum, and (iii) the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Exchange Act with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the Spectrum Certificate of Incorporation.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Merger Proposal.

Spectrum Proposal 2: The Spectrum Adjournment Proposal

Spectrum is asking its stockholders to approve the adjournment of the Spectrum Special Meeting to another time and place if necessary or appropriate to solicit additional votes in favor of the Spectrum Merger Proposal. The Merger Agreement provides that the Spectrum Special Meeting will not be postponed or adjourned to a date that is more than thirty days after the date for which the Spectrum Special Meeting was originally scheduled without the prior written consent of HRG.

Consummation of the Merger is not conditioned on the approval of the Spectrum Adjournment Proposal.

Vote Required and Spectrum Board Recommendation

Approval of the Spectrum Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of the shares of Spectrum Common Stock present in person or by proxy at the Spectrum Special Meeting and entitled to vote on such proposal, regardless of whether a quorum is present.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Adjournment Proposal.

Spectrum Proposal 3: The Spectrum Advisory HRG Section 203 Proposal

The HRG Charter provides that business combinations with interested stockholders will not be governed by Section 203 of the DGCL. Spectrum is asking its stockholders to approve, on a non-binding, advisory basis, an amendment to the HRG Charter whereby any business combination with an interested stockholder will be subject to Section 203 of the DGCL.

 

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The proposed amendment to the HRG Charter to opt into Section 203 of the DGCL would be expected to result in any persons or entities interested in pursuing an acquisition of HRG negotiating with the HRG board of directors prior to accumulating a significant stake in HRG. Although the provisions of Section 203 of the DGCL may also have the effect of making it more difficult for potential acquirors to accomplish transactions on a non-consensual basis (which some stockholders may otherwise deem to be attractive), it is common for Delaware public companies without a controlling stockholder to be subject to the protections against abusive takeover tactics provided by Section 203 of the DGCL.

The amendments to the HRG Charter are contingent upon the completion of the Merger. Following completion of the Merger, Spectrum stockholders who receive Merger Consideration will be receiving common stock governed by the Amended HRG Charter. Accordingly, Spectrum stockholders are being provided the opportunity to cast an advisory vote on the amendment.

As an advisory vote, this proposal is not binding upon Spectrum or the Spectrum board of directors, and approval of this proposal is not a condition to completion of the Merger. However, Spectrum seeks the support of Spectrum stockholders and believes that stockholder support is appropriate because many Spectrum stockholders will become holders of HRG Common Stock governed by the Amended HRG Charter upon completion of the Merger. Accordingly, holders of Spectrum Common Stock are being asked to vote on the non-binding Spectrum Advisory HRG Section 203 Proposal.

Vote Required and Spectrum Board Recommendation

Because the vote on the Spectrum Advisory HRG Section 203 Proposal is advisory only, it will not be binding on HRG. Accordingly, if the Merger Agreement is adopted and the Merger is approved and completed, the proposed amendment to the HRG Charter to opt into Section 203 of the DGCL, if approved by HRG’s stockholders, will or may be made, regardless of the outcome of the advisory (non-binding) vote of Spectrum stockholders. Spectrum will consider the non-binding Spectrum Advisory HRG Section 203 Proposal approved upon the affirmative vote of holders of a majority in voting power of the shares of Spectrum Common Stock present in person or represented by proxy at the Spectrum Special Meeting and entitled to vote on such proposal.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Advisory HRG Section 203 Proposal.

Spectrum Proposal 4: The Spectrum Advisory HRG Reverse Stock Split Proposal

Spectrum is asking its stockholders to approve, on a non-binding, advisory basis, an amendment to the HRG Charter whereby each outstanding share of HRG Common Stock will, by means of a reverse stock split, be combined into a fraction of a share of HRG Common Stock equal to equal to (i) (a) the number of shares of Spectrum Common Stock held by HRG and its subsidiaries as of immediately prior to the Effective Time, minus (b) (1) the sum of (x) HRG’s net indebtedness as of closing and certain transaction expenses of HRG that are unpaid as of closing, minus (y) $200,000,000, divided by (2) the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date, divided by (ii) as of immediately prior to the Reverse Stock Split, the sum of (without duplication) (a) the aggregate number of issued and outstanding shares of HRG Common Stock, (b) (1) the aggregate number of shares of HRG Common Stock subject to then-unexercised HRG stock options and warrants, minus (2) the number of shares of HRG Common Stock having a then-aggregate value equal to the aggregate exercise price of such unexercised HRG stock options and warrants, and (c) the number of shares of HRG Common Stock subject to HRG restricted stock awards, vested in full in accordance with terms of the Merger Agreement.

 

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The reverse stock split will allow for the Spectrum Common Stock to be converted into HRG Common Stock at a one-for-one ratio in the Merger, which HRG and Spectrum believe will allow for greater continuity with respect to the prior trading price of Spectrum Common Stock. The reverse stock split also ensures that, following the one-for-one exchange, existing HRG stockholders will own (on a fully diluted basis) the same proportion of the post-Merger combined company as HRG currently owns of Spectrum (adjusted for HRG’s net indebtedness as of closing, certain transaction expenses of HRG that are unpaid as of closing and a $200,000,000 upward adjustment).

The amendments to the HRG Charter are contingent upon the completion of the Merger. Following completion of the Merger, Spectrum stockholders who receive Merger Consideration will be receiving common stock governed by the Amended HRG Charter. Accordingly, Spectrum stockholders are being provided the opportunity to cast an advisory vote on the amendment.

As an advisory vote, this proposal is not binding upon Spectrum or the Spectrum board of directors, and approval of this proposal is not a condition to completion of the Merger. However, Spectrum seeks the support of Spectrum stockholders and believes that stockholder support is appropriate because many Spectrum stockholders will become holders of HRG Common Stock governed by the Amended HRG Charter upon completion of the Merger. Accordingly, holders of Spectrum Common Stock are being asked to vote on the non-binding Spectrum Advisory HRG Reverse Stock Split Proposal.

Vote Required and Spectrum Board Recommendation

Because the vote on the Spectrum Advisory HRG Reverse Stock Split Proposal is advisory only, it will not be binding on HRG. Accordingly, if the Merger Agreement is adopted and the Merger is approved and completed, the proposed amendment to the HRG Charter to effect the Reverse Stock Split, if approved by HRG’s stockholders, will or may be made, regardless of the outcome of the advisory (non-binding) vote of Spectrum stockholders. Spectrum will consider the non-binding Spectrum Advisory HRG Reverse Stock Split Proposal approved upon the affirmative vote of holders of a majority in voting power of the shares of Spectrum Common Stock present in person or represented by proxy at the Spectrum Special Meeting and entitled to vote on such proposal.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Advisory HRG Reverse Stock Split Proposal.

Spectrum Proposal 5: The Spectrum Advisory HRG Common Stock Proposal

The HRG Charter provides that the total number of shares of common stock which HRG will have the authority to issue is 500 million. The certificate of incorporation of Spectrum provides that the total number of shares of common stock which Spectrum has the authority to issue is 200 million. As it is the intention of the parties that HRG have the same capital structure following the Merger as Spectrum currently, Spectrum is asking its stockholders to approve, on a non-binding, advisory basis, an amendment to the HRG Charter whereby the authorized number of shares of HRG Common Stock will decrease from 500 million shares to 200 million shares.

The amendments to the HRG Charter are contingent upon the completion of the Merger. Following completion of the Merger, Spectrum stockholders who receive Merger Consideration will be receiving common stock governed by the Amended HRG Charter. Accordingly, Spectrum stockholders are being provided the opportunity to cast an advisory vote on the amendment.

 

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As an advisory vote, this proposal is not binding upon Spectrum or the Spectrum board of directors, and approval of this proposal is not a condition to completion of the Merger. However, Spectrum seeks the support of Spectrum stockholders and believes that stockholder support is appropriate because many Spectrum stockholders will become holders of HRG Common Stock governed by the Amended HRG Charter upon completion of the Merger. Accordingly, holders of Spectrum Common Stock are being asked to vote on the non-binding Spectrum Advisory HRG Common Stock Proposal.

Vote Required and Spectrum Board Recommendation

Because the vote on the Spectrum Advisory HRG Common Stock Proposal is advisory only, it will not be binding on HRG. Accordingly, if the Merger Agreement is adopted and the Merger is approved and completed, the proposed amendment to the HRG Charter to reduce the number of shares of HRG Common Stock from 500 million shares to 200 million shares, if approved by HRG’s stockholders, will or may be made, regardless of the outcome of the advisory (non-binding) vote of Spectrum stockholders. Spectrum will consider the non-binding Spectrum Advisory HRG Common Stock Proposal approved upon the affirmative vote of holders of a majority in voting power of the shares of Spectrum Common Stock present in person or represented by proxy at the Spectrum Special Meeting and entitled to vote on such proposal.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Advisory HRG Common Stock Proposal.

Spectrum Proposal 6: The Spectrum Advisory HRG Preferred Stock Proposal

The HRG Charter provides that the total number of shares of preferred stock which HRG will have the authority to issue is 10 million. The certificate of incorporation of Spectrum provides that the total number of shares of preferred stock which Spectrum has the authority to issue is 100 million shares. As it is the intention of the parties that HRG have the same capital structure following the Merger as Spectrum currently, Spectrum is asking its stockholders to approve, on a non-binding, advisory basis, an amendment to the HRG Charter whereby the authorized number of shares of HRG preferred stock will increase from 10 million shares to 100 million shares.

The amendments to the HRG Charter are contingent upon the completion of the Merger. Following completion of the Merger, Spectrum stockholders who receive Merger Consideration will be receiving common stock governed by the Amended HRG Charter. Accordingly, Spectrum stockholders are being provided the opportunity to cast an advisory vote on the amendment.

As an advisory vote, this proposal is not binding upon Spectrum or the Spectrum board of directors, and approval of this proposal is not a condition to completion of the Merger. However, Spectrum seeks the support of Spectrum stockholders and believes that stockholder support is appropriate because many Spectrum stockholders will become holders of HRG Common Stock governed by the Amended HRG Charter upon completion of the Merger. Accordingly, holders of Spectrum Common Stock are being asked to vote on the non-binding Spectrum Advisory HRG Preferred Stock Proposal.

Vote Required and Spectrum Board Recommendation

Because the vote on the Spectrum Advisory HRG Preferred Stock Proposal is advisory only, it will not be binding on HRG. Accordingly, if the Merger Agreement is adopted and the Merger is approved and completed, the proposed amendment to the HRG Charter to increase the authorized number of shares of HRG preferred stock from 10 million shares to 100 million shares, if approved by HRG’s stockholders, will or may be made,

 

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regardless of the outcome of the advisory (non-binding) vote of Spectrum stockholders. Spectrum will consider the non-binding Spectrum Advisory HRG Preferred Stock Proposal approved upon the affirmative vote of holders of a majority in voting power of the shares of Spectrum Common Stock present in person or represented by proxy at the Spectrum Special Meeting and entitled to vote on such proposal.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Advisory HRG Preferred Stock Proposal.

Spectrum Proposal 7: The Spectrum Advisory HRG Section 382 Proposal

Spectrum is asking its stockholders to approve, on a non-binding, advisory basis, an amendment to the HRG Charter’s Section 382 transfer restrictions. The Amended HRG Charter generally would retain the HRG Charter’s existing transfer restrictions that prohibit any person from acquiring or disposing of any shares of HRG Common Stock (i) to the extent that after giving effect to such transfer, such person, or any other person by reason of such transfer, becomes a “Substantial Holder” as defined in the HRG Charter (generally, a holder of 4.9% or more of the HRG Common Stock or a person identified as a “5-percent shareholder” of HRG under applicable Treasury regulations), (ii) if, before giving effect to the transfer, such person is identified as a “5-percent shareholder” of HRG under applicable Treasury regulations or (iii) to the extent that the ownership percentage of any person that, prior to giving effect to such transfer, is a Substantial Holder of HRG would be increased. However, the Amended HRG Charter would adopt (x) certain modifications to the application of those transfer restrictions to HRG Common Stock otherwise issuable in the Merger and (y) certain exceptions to those transfer restrictions, including for certain distributions by Fortress and Leucadia to their respective members or stockholders, as applicable, and certain other transfers by Fortress and Leucadia.

The modifications to the application of the transfer restrictions applicable to HRG Common Stock otherwise issuable in the Merger are intended to ensure that no shares of HRG Common Stock will be issued in the Merger if, as a result of such issuance, a person would become a holder of more than 4.9% of HRG Common Stock, and instead any excess shares over 4.9% would be treated as “Excess Securities” (as defined in the Amended HRG Charter) and delivered to one or more charitable organizations or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder. The purpose of these modifications is to preserve the value of the Tax Attributes following the consummation of the Merger, the utilization of which is expected to benefit all stockholders.

Leucadia and Fortress, the two largest stockholders of HRG following the consummation of the Merger and “Substantial Holders” (as defined in the Amended HRG Charter), will be subject to the transfer restrictions retained from the existing HRG Charter described above. However, in connection with the negotiation of the Merger Agreement as well as the Leucadia Voting Agreement and Fortress Voting Agreement, certain limited exceptions to these transfer restrictions in the Amended HRG Charter have been agreed to with Leucadia and Fortress. These exceptions are more fully discussed in the section entitled “Comparison of Stockholder Rights—Transfer Restrictions.” These exceptions are the result of negotiations among the parties to the Merger Agreement and Leucadia and Fortress (who have committed to vote in favor of the HRG Share Issuance Proposal and HRG Charter Amendment Proposal) and were approved by independent and disinterested representatives of the parties to the Merger Agreement. These exceptions are intended to substantially preserve the value of the Tax Attributes following consummation of the Merger, on the one hand, and address Leucadia’s and Fortress’s need for some flexibility to dispose of shares following the consummation of the Merger, on the other hand.

On April 26, 2018, the Spectrum board of directors granted exemptions to members of each of the Fund Families, determining that each shall be deemed to be an “Exempt Person” (as defined in the HRG Rights Agreement). On May 2, 2018, the HRG board of directors granted exemptions to members of each of the Fund

 

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Families, determining that each shall be deemed to be an “Exempt Person” (as defined in the HRG Rights Agreement). These exemptions are discussed in more detail under “The Merger—Rights Agreements.”

The amendments to the HRG Charter are contingent upon the completion of the Merger. Following completion of the Merger, Spectrum stockholders who receive Merger Consideration will be receiving common stock governed by the Amended HRG Charter. Accordingly, Spectrum stockholders are being provided the opportunity to cast an advisory vote on the amendment.

As an advisory vote, this proposal is not binding upon Spectrum or the Spectrum board of directors, and approval of this proposal is not a condition to completion of the Merger. However, Spectrum seeks the support of Spectrum stockholders and believes that stockholder support is appropriate because many Spectrum stockholders will become holders of HRG Common Stock governed by the Amended HRG Charter upon completion of the Merger. Accordingly, holders of Spectrum Common Stock are being asked to vote on the non-binding Spectrum Advisory HRG Section 382 Proposal.

Vote Required and Spectrum Board Recommendation

Because the vote on the Spectrum Advisory HRG Section 382 Proposal is advisory only, it will not be binding on HRG. Accordingly, if the Merger Agreement is adopted and the Merger is approved and completed, the proposed amendment to the HRG Charter Section 382 transfer restrictions, if approved by HRG’s stockholders, will or may be made, regardless of the outcome of the advisory (non-binding) vote of Spectrum stockholders. Spectrum will consider the non-binding Spectrum Advisory HRG Section 382 Proposal approved upon the affirmative vote of holders of a majority in voting power of the shares of Spectrum Common Stock present in person or represented by proxy at the Spectrum Special Meeting and entitled to vote on such proposal.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Advisory HRG Section 382 Proposal.

Spectrum Proposal 8: The Spectrum Advisory Additional Charter Amendments Proposal

Spectrum is asking its stockholders to approve, on a non-binding, advisory basis, the additional amendments contained in the Amended HRG Charter, attached as Annex C hereto.

These amendments include, among others, changing HRG’s corporate name from “HRG Group, Inc.” to “Spectrum Brands Holdings, Inc.” for the purpose of operational continuity following the Merger and certain other technical changes to reflect the provisions of the current Spectrum Certificate of Incorporation (e.g., the substitution of the corporate opportunity waiver in the HRG Charter with the corporate opportunity waiver in the Spectrum Certificate of Incorporation). The provisions of the Amended HRG Charter were negotiated by the parties to the Merger Agreement and are considered by the parties to be an integral part of the transaction. For additional information, see the section entitled “Comparison of Stockholder Rights.

The amendments to the HRG Charter are contingent upon the completion of the Merger. Following completion of the Merger, Spectrum stockholders who receive Merger Consideration will be receiving common stock governed by the Amended HRG Charter. Accordingly, Spectrum stockholders are being provided the opportunity to cast an advisory vote on the amendment.

As an advisory vote, this proposal is not binding upon Spectrum or the Spectrum board of directors, and approval of this proposal is not a condition to completion of the Merger. However, Spectrum seeks the support of Spectrum stockholders and believes that stockholder support is appropriate because many Spectrum stockholders

 

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will become holders of HRG Common Stock governed by the Amended HRG Charter upon completion of the Merger. Accordingly, holders of Spectrum Common Stock are being asked to vote on the non-binding Spectrum Advisory HRG Additional Charter Amendments Proposal.

Vote Required and Spectrum Board Recommendation

Because the vote on the Spectrum Advisory HRG Additional Charter Amendments Proposal is advisory only, it will not be binding on HRG. Accordingly, if the Merger Agreement is adopted and the Merger is approved and completed, the proposed additional amendments to the HRG Charter, if approved by HRG’s stockholders, will or may be made, regardless of the outcome of the advisory (non-binding) vote of Spectrum stockholders. Spectrum will consider the non-binding Spectrum Advisory HRG Additional Charter Amendments Proposal approved upon the affirmative vote of holders of a majority in voting power of the shares of Spectrum Common Stock present in person or represented by proxy at the Spectrum Special Meeting and entitled to vote on such proposal.

The Spectrum board of directors (other than Messrs. Steinberg and Zargar who recused themselves from determinations relating to the Merger due to their affiliation with HRG), acting on the unanimous recommendation of the Spectrum Special Committee, recommends a vote “FOR” the Spectrum Advisory HRG Additional Charter Amendments Proposal.

 

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THE HRG SPECIAL MEETING

Date, Time and Place of the HRG Special Meeting

The special meeting of HRG stockholders will be held at 9:30 AM, local time, on July 13, 2018, at Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017. On or about June 12, 2018, HRG commenced mailing this joint proxy statement/prospectus and the enclosed form of proxy card to its stockholders entitled to vote at the HRG Special Meeting.

Purpose of the HRG Special Meeting

At the HRG Special Meeting, HRG stockholders will be asked to consider and vote upon the following items:

 

  1. the HRG Section 203 Proposal;

 

  2. the HRG Reverse Stock Split Proposal;

 

  3. the HRG Common Stock Proposal;

 

  4. the HRG Preferred Stock Proposal;

 

  5. the HRG Section 382 Proposal;

 

  6. the HRG Additional Charter Amendments Proposal;

 

  7. the HRG Share Issuance Proposal;

 

  8. the HRG Adjournment Proposal; and

 

  9. the HRG Advisory Compensation Proposal

No other business will be acted upon at the HRG Special Meeting.

HRG Record Date and Quorum

HRG Record Date

The HRG board of directors has fixed the close of business on May 17, 2018 as the record date for determining the HRG stockholders entitled to receive notice of and to vote at the HRG Special Meeting.

On the HRG Record Date, HRG’s outstanding capital stock consisted of 203,153,237 shares of HRG Common Stock, which was held by approximately 1,409 holders of record including persons who hold shares for an indeterminate number of beneficial owners. Each share of common stock is entitled to one vote on each matter submitted for stockholder approval.

Quorum

The presence in person or by proxy of the holders of shares of HRG Common Stock representing a majority of the voting power of all outstanding shares of HRG Common Stock entitled to vote at the HRG Special Meeting, is necessary to constitute a quorum at the HRG Special Meeting. Abstentions will be counted as present and entitled to vote for purposes of determining a quorum. Because, as described below, it is expected that all proposals to be voted on at the HRG Special Meeting will be “non-routine” matters, broker non-votes (which are shares of HRG Common Stock held by banks, brokers or other nominees with respect to which the bank, broker or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the bank, broker or other nominee does not have discretionary voting power on such proposal), if any, will not be counted as present and entitled to vote for purposes of determining a quorum.

 

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Required Vote

1. Required Vote to Approve the HRG Section 203 Proposal

Approval of the HRG Section 203 Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors.

2. Required Vote to Approve the HRG Reverse Stock Split Proposal

Approval of the HRG Reverse Stock Split Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors.

3. Required Vote to Approve the HRG Common Stock Proposal

Approval of the HRG Common Stock Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors.

4. Required Vote to Approve the HRG Preferred Stock Proposal

Approval of the HRG Preferred Stock Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors.

5. Required Vote to Approve the HRG Section 382 Proposal

Approval of the HRG Section 382 Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors.

6. Required Vote to Approve the HRG Additional Charter Amendments Proposal

Approval of the HRG Additional Charter Amendments Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors.

7. Required Vote to Approve the HRG Share Issuance Proposal

Approval of the HRG Share Issuance Proposal requires the affirmative vote of a majority of votes cast by HRG stockholders present in person or by proxy at the HRG special meeting and entitled to vote on the proposal.

8. Required Vote to Approve the HRG Adjournment Proposal

Approval of the HRG Adjournment Proposal requires the affirmative vote of holders of a majority of shares of HRG Common Stock present in person or by proxy at the HRG Special Meeting and entitled to vote on such proposal.

9. Required Vote to Approve the HRG Advisory Compensation Proposal

Approval of the HRG Advisory Compensation Proposal requires the affirmative vote of holders of a majority of shares of HRG Common Stock present in person or by proxy at the HRG Special Meeting and entitled to vote on such proposal.

Treatment of Abstentions; Failure to Vote

For purposes of the HRG Special Meeting, an abstention occurs when an HRG stockholder attends the HRG Special Meeting in person and does not vote or returns a proxy marked “ABSTAIN.”

 

  1. For the HRG Section 203 Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Section 203 Proposal or an abstention on the HRG Section 203 Proposal will have the same effect as a vote cast “AGAINST” the HRG Section 203 Proposal.

 

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  2. For the HRG Reverse Stock Split Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Reverse Stock Split Proposal or an abstention on the HRG Reverse Stock Split Proposal will have the same effect as a vote cast “AGAINST” the HRG Reverse Stock Split Proposal.

 

  3. For the HRG Common Stock Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Common Stock Proposal or an abstention on the HRG Common Stock Proposal will have the same effect as a vote cast “AGAINST” the HRG Common Stock Proposal.

 

  4. For the HRG Preferred Stock Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Preferred Stock Proposal or an abstention on the HRG Preferred Stock Proposal will have the same effect as a vote cast “AGAINST” the HRG Preferred Stock Proposal.

 

  5. For the HRG Section 382 Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Section 382 Proposal or an abstention on the HRG Section 382 Proposal will have the same effect as a vote cast “AGAINST” the HRG Section 382 Proposal.

 

  6. For the HRG Additional Charter Amendments Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Additional Charter Amendments Proposal or an abstention on the HRG Additional Charter Amendments Proposal will have the same effect as a vote cast “AGAINST” the HRG Additional Charter Amendments Proposal.

 

  7. For the HRG Share Issuance Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Share Issuance Proposal will not count as a vote cast “FOR” or “AGAINST” the HRG Share Issuance Proposal. An abstention on the HRG Share Issuance Proposal will have the same effect as a vote cast “AGAINST” the HRG Share Issuance Proposal.

 

  8. For the HRG Adjournment Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Adjournment Proposal will not count as a vote cast “FOR” or “AGAINST” the HRG Adjournment Proposal. An abstention on the HRG Adjournment Proposal will have the same effect as a vote cast “AGAINST” the HRG Adjournment Proposal.

 

  9. For the HRG Advisory Compensation Proposal, failure to vote, failure to submit a proxy or failure to return a voting instruction card instructing the HRG stockholder’s bank, broker or other nominee how to vote on the HRG Advisory Compensation Proposal will not count as a vote cast “FOR” or “AGAINST” the HRG Advisory Compensation Proposal. An abstention on the HRG Advisory Compensation Proposal will have the same effect as a vote cast “AGAINST” the HRG Advisory Compensation Proposal.

Recommendation of the HRG Board of Directors

The HRG board of directors recommends that the HRG stockholders vote “FOR” the HRG Section 203 Proposal, “FOR” the HRG Reverse Stock Split Proposal, “FOR” the HRG Common Stock Proposal, “FOR” the HRG Preferred Stock Proposal, “FOR” the HRG Section 382 Proposal, “FOR” the HRG Additional Charter Amendments Proposal, “FOR” the HRG Share Issuance Proposal, “FOR” the HRG Adjournment Proposal and “FOR” the HRG Advisory Compensation Proposal. See “The Merger—HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors.”

Consummation of the Merger is conditioned on approval of each of the HRG Charter Amendment Proposals and the HRG Share Issuance Proposal, but is not conditioned on the approval of the HRG Adjournment Proposal or the HRG Advisory Compensation Proposal.

 

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Voting by HRG’s Directors and Executive Officers

As of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, directors and executive officers of HRG and their affiliates owned and were entitled to vote 275,652 shares of HRG Common Stock, representing approximately 0.14% of the HRG Common Stock outstanding on that date (not including shares held by Fortress or Leucadia or any of their respective affiliates).

HRG currently expects that HRG’s directors and executive officers will vote their shares of HRG Common Stock in favor of the HRG Proposals, although none of them has entered into any agreement obligating him or her to do so.

Voting of Proxies; Incomplete Proxies

Giving a proxy means that an HRG stockholder authorizes the persons named in the enclosed proxy card to vote its shares at the HRG Special Meeting in the manner it directs. An HRG stockholder may give a proxy or vote in person at the HRG Special Meeting. If you hold your shares of HRG Common Stock in your name as a stockholder of record, to give a proxy, you, as an HRG stockholder, may use one of the following methods:

 

    By Mail. If you received printed proxy materials, you may submit your vote by completing, signing and dating the proxy card received and returning it in the prepaid envelope by following the instructions that appear on the proxy card. Proxy cards submitted by mail must be received no later than 12:00 p.m., Eastern Time, on July 12, 2018 to be voted at the special meeting.

 

    By Telephone/Internet. You may vote your shares by telephone or via the Internet by following the instructions provided in the proxy card. If you vote by telephone or via the Internet, you do not need to return a proxy card by mail. Internet and telephone voting are available 24 hours a day, 7 days a week. Votes submitted by telephone or through the Internet must be received by 12:00 p.m., Eastern Time, on July 12, 2018 to be voted at the special meeting.

 

    In Person. You may vote your shares in person at the special meeting. Even if you plan to attend the special meeting in person, we recommend that you also submit your proxy card or vote by telephone or via the Internet by the applicable deadline so that your vote will be counted if you later decide not to attend the meeting.

HRG requests that HRG stockholders submit their proxies over the Internet, by telephone or by completing and signing the accompanying proxy card and returning it to HRG in the enclosed postage-paid envelope as soon as possible. When the accompanying proxy card is returned properly executed, the shares of HRG Common Stock represented by it will be voted at the HRG Special Meeting in accordance with the instructions contained on the proxy card.

If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the shares of HRG Common Stock represented by your proxy will be voted “FOR” each such proposal in accordance with the recommendation of the HRG board of directors. Unless you check the box on your proxy card to withhold discretionary authority, the proxyholders may use their discretion to vote on the proposals relating to the HRG Special Meeting.

If your shares of HRG Common Stock are held in “street name” by a bank, broker or other nominee, you should check the voting form used by that firm to determine whether you may give voting instructions by telephone or the Internet.

EVERY HRG STOCKHOLDER’S VOTE IS IMPORTANT. ACCORDINGLY, EACH HRG STOCKHOLDER SHOULD SUBMIT ITS PROXY VIA THE INTERNET OR BY TELEPHONE, OR SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD, WHETHER OR NOT THE HRG STOCKHOLDER PLANS TO ATTEND THE HRG SPECIAL MEETING IN PERSON.

 

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Shares Held in Street Name

If your shares of HRG Common Stock are held in “street name” through a bank, broker or other nominee, you must instruct such bank, broker or other nominee on how to vote the shares by following the instructions that the bank, broker or other nominee provides you along with this joint proxy statement/prospectus. Your bank, broker or other nominee, as applicable, may have an earlier deadline by which you must provide instructions to it as to how to vote your shares of HRG Common Stock, so you should read carefully the materials provided to you by your bank, broker or other nominee.

You may not vote shares of HRG Common Stock held in “street name” by returning a proxy card directly to HRG or by voting in person at the HRG Special Meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee. Further, banks, brokers or other nominees who hold shares of HRG Common Stock on behalf of their customers may not give a proxy to HRG to vote those shares with respect to any of the HRG Proposals without specific instructions from their customers, as banks, brokers and other nominees do not have discretionary voting power on any of the HRG Proposals. Therefore, if your shares of HRG Common Stock are held in “street name” and you do not instruct your bank, broker or other nominee on how to vote your shares,

 

  1. your bank, broker or other nominee may not vote your shares on the HRG Section 203 Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

  2. your bank, broker or other nominee may not vote your shares on the HRG Reverse Stock Split Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

  3. your bank, broker or other nominee may not vote your shares on the HRG Common Stock Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

  4. your bank, broker or other nominee may not vote your shares on the HRG Preferred Stock Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

  5. your bank, broker or other nominee may not vote your shares on the HRG Section 382 Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

  6. your bank, broker or other nominee may not vote your shares on the HRG Additional Charter Amendment Proposal, which will have the same effect as a vote “AGAINST” this proposal;

 

  7. your bank, broker or other nominee may not vote your shares on the HRG Share Issuance Proposal, which will not count as a vote “FOR” or “AGAINST” this proposal;

 

  8. your bank, broker or other nominee may not vote your shares on the HRG Adjournment Proposal, which will not count as a vote “FOR” or “AGAINST” this proposal; and

 

  9. your bank, broker or other nominee may not vote your shares on the HRG Advisory Compensation Proposal, which will not count as a vote “FOR” or “AGAINST” this proposal.

If your shares of HRG Common Stock are held in “street name” and you do not instruct your bank, broker or other nominee on how to vote your shares with respect to any of the HRG Proposals, your shares will not be counted toward determining whether a quorum is present. Your shares will be counted toward determining whether a quorum is present if you instruct your bank, broker or other nominee on how to vote your shares with respect to one or more of the HRG Proposals.

Revocability of Proxies and Changes to an HRG Stockholder’s Vote

If you are an HRG stockholder of record, you may revoke or change your proxy at any time before it is exercised at the HRG Special Meeting by:

 

   

sending a written notice of revocation to Ehsan Zargar, Executive Vice President, Chief Operating Officer and General Counsel at HRG Group, Inc., 450 Park Avenue, 29th Floor, New York, New York

 

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10022, that is received prior to 12:00 p.m. (U.S. Eastern Time) on the day preceding the HRG Special Meeting, stating that you would like to revoke your proxy;

 

    submitting a new proxy bearing a later date (by Internet, telephone or mail) that is received by HRG prior to 12:00 p.m. (U.S. Eastern Time) on the day preceding the HRG Special Meeting; or

 

    attending the HRG Special Meeting and voting in person.

If you are an HRG stockholder whose shares of HRG Common Stock are held in “street name” by a bank, broker or other nominee, you may revoke your proxy or voting instructions and vote your shares in person at the HRG Special Meeting only in accordance with applicable rules and procedures as employed by your bank, broker or other nominee. If your shares are held in an account at a bank, broker or other nominee, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your proxy or voting instructions and should contact your bank, broker or other nominee to do so.

Attending the HRG Special Meeting will NOT automatically revoke a proxy that was submitted through the Internet or by telephone or mail. You must vote by ballot at the HRG Special Meeting to change your vote.

Solicitation of Proxies

The cost of solicitation of proxies from HRG stockholders will be borne by HRG. HRG will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of shares of HRG Common Stock. HRG has retained a professional proxy solicitation firm Georgeson LLC, to assist in the solicitation of proxies. HRG will bear the costs of the fees for the solicitation agent, which are not expected to exceed $11,500, excluding out-of-pocket expenses. In addition to solicitations by mail, HRG’s directors, officers and regular employees may solicit proxies personally or by telephone without additional compensation.

Attending the HRG Special Meeting

Subject to space availability and certain security procedures, all HRG stockholders as of the HRG Record Date, or their duly appointed proxies, may attend the HRG Special Meeting. Admission to the HRG Special Meeting will be on a first-come, first-served basis.

Each person attending the HRG Special Meeting must have proof of ownership of shares of HRG Common Stock, as well as a valid government-issued photo identification, such as a valid driver’s license or passport, to be admitted to the meeting. If you hold your shares of HRG Common Stock in your name as a stockholder of record, you will need proof of ownership of shares of HRG Common Stock. If your shares of HRG Common Stock are held in the name of a bank, broker or other nominee and you plan to attend the HRG Special Meeting, you must present proof of your ownership of shares of HRG Common Stock, such as a bank or brokerage account statement, to be admitted to the meeting, and you must obtain a legal proxy from the bank, broker or other nominee to vote at the meeting.

Assistance

If you need assistance in completing your proxy card or have questions regarding the HRG Special Meeting, please contact Georgeson LLC, the proxy solicitation agent for HRG, by (i) mail at 1290 Avenue of the Americas, 9th Floor, New York, New York 10104, (ii) e-mail at HRGGroup@Georgeson.com or (iii) by telephone at (781) 575-2137 or toll-free (888) 680-1529.

 

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HRG PROPOSALS

HRG Proposal 1: The HRG Section 203 Proposal

The HRG Charter provides that business combinations with interested stockholders will not be governed by Section 203 of the DGCL. HRG is asking its stockholders to approve an amendment to the HRG Charter whereby any business combination with an interested stockholder will be subject to Section 203 of the DGCL.

The proposed amendment to the HRG Charter to opt into Section 203 of the DGCL would be expected to result in any persons or entities interested in pursuing an acquisition of HRG negotiating with the HRG board of directors prior to accumulating a significant stake in HRG. Although the provisions of Section 203 of the DGCL may also have the effect of making it more difficult for potential acquirors to accomplish transactions on a non-consensual basis (which some stockholders may otherwise deem to be attractive), it is common for Delaware public companies without a controlling stockholder to be subject to the protections against abusive takeover tactics provided by Section 203 of the DGCL.

Consummation of the Merger is conditioned on approval of the HRG Section 203 Proposal.

Vote Required and HRG Board Recommendation

Approval of the HRG Section 203 Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. The HRG Section 203 Proposal also requires the consent of the holder of HRG preferred stock.

The HRG board of directors recommends a vote “FOR” the HRG Section 203 Proposal.

HRG Proposal 2: The HRG Reverse Stock Split Proposal

HRG is asking its stockholders to approve an amendment to the HRG Charter whereby each outstanding share of HRG Common Stock will, by means of a reverse stock split, be combined into a fraction of a share of HRG Common Stock equal to (i) (a) the number of shares of Spectrum Common Stock held by HRG and its subsidiaries as of immediately prior to the Effective Time, minus (b) (1) the sum of (x) HRG’s net indebtedness as of closing and certain transaction expenses of HRG that are unpaid as of closing, minus (y) $200,000,000, divided by (2) the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date, divided by (ii) as of immediately prior to the Reverse Stock Split, the sum of (without duplication) (a) the aggregate number of issued and outstanding shares of HRG Common Stock, (b) (1) the aggregate number of shares of HRG Common Stock subject to then-unexercised HRG stock options and warrants, minus (2) the number of shares of HRG Common Stock having a then-aggregate value equal to the aggregate exercise price of such unexercised HRG stock options and warrants, and (c) the number of shares of HRG Common Stock subject to HRG restricted stock awards, vested in full in accordance with terms of the Merger Agreement.

The reverse stock split will allow for the Spectrum Common Stock to be converted into HRG Common Stock in the Merger at a one-for-one ratio, which HRG and Spectrum believe will allow for greater continuity with respect to the prior trading price of Spectrum Common Stock. The reverse stock split also ensures that, following the one-for-one exchange, existing HRG stockholders will own (on a fully diluted basis) the same proportion of the post-Merger combined company as HRG currently owns of Spectrum (adjusted for HRG’s net indebtedness as of closing, certain transaction expenses of HRG that are unpaid as of closing and a $200,000,000 upward adjustment).

Consummation of the Merger is conditioned on approval of the HRG Reverse Stock Split Proposal.

 

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Vote Required and HRG Board Recommendation

Approval of the HRG Reverse Stock Split Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. The HRG Reverse Stock Split Proposal also requires the consent of the holder of HRG preferred stock.

The HRG board of directors recommends a vote “FOR” the HRG Reverse Stock Split Proposal.

HRG Proposal 3: The HRG Common Stock Proposal

The HRG Charter provides that the total number of shares of common stock which HRG will have the authority to issue is 500 million. The certificate of incorporation of Spectrum provides that the total number of shares of common stock which Spectrum has the authority to issue is 200 million. As it is the intention of the parties that HRG have the same capital structure following the Merger as Spectrum currently, HRG is asking its stockholders to approve an amendment to the HRG Charter whereby the authorized number of shares of HRG Common Stock will decrease from 500 million shares to 200 million shares.

Consummation of the Merger is conditioned on approval of the HRG Common Stock Proposal.

Vote Required and HRG Board Recommendation

Approval of the HRG Common Stock Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. The HRG Common Stock Proposal also requires the consent of the holder of HRG preferred stock.

The HRG board of directors recommends a vote “FOR” the HRG Common Stock Proposal.

HRG Proposal 4: The HRG Preferred Stock Proposal

The HRG Charter provides that the total number of shares of preferred stock which HRG will have the authority to issue is 10 million. The certificate of incorporation of Spectrum provides that the total number of shares of preferred stock which Spectrum has the authority to issue is 100 million shares. As it is the intention of the parties that HRG have the same capital structure following the Merger as Spectrum currently, HRG is asking its stockholders to approve an amendment to the HRG Charter whereby the authorized number of shares of HRG preferred stock will increase from 10 million shares to 100 million shares.

Consummation of Merger is conditioned on approval of the HRG Preferred Stock Proposal.

Vote Required and HRG Board Recommendation

Approval of the HRG Preferred Stock Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. The HRG Preferred Stock Proposal also requires the consent of the holder of HRG preferred stock.

The HRG board of directors recommends a vote “FOR” the HRG Preferred Stock Proposal.

HRG Proposal 5: The HRG Section 382 Proposal

HRG is asking its stockholders to approve an amendment to the HRG Charter’s Section 382 transfer restrictions. The Amended HRG Charter generally would retain transfer restrictions that prohibit any person from

 

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acquiring or disposing of any shares of HRG Common Stock (i) to the extent that after giving effect to such transfer, such person, or any other person by reason of such transfer, becomes a “Substantial Holder” as defined in the HRG Charter (generally, a holder of 4.9% or more of the HRG Common Stock or a person identified as a “5-percent shareholder” of HRG under applicable Treasury regulations), (ii) if, before giving effect to the transfer, such person is identified as a “5-percent shareholder” of HRG under applicable Treasury regulations or (iii) to the extent that the ownership percentage of any person that, prior to giving effect to such transfer, is a Substantial Holder of HRG would be increased. However, the Amended HRG Charter would adopt (x) certain modifications to the application of those transfer restrictions to HRG Common Stock otherwise issuable in the Merger and (y) certain exceptions to those transfer restrictions, including for certain distributions by Fortress and Leucadia to their respective members or stockholders, as applicable, and certain other transfers by Fortress and Leucadia.

The modifications to the application of the transfer restrictions applicable to HRG Common Stock otherwise issuable in the Merger are intended to ensure that no shares of HRG Common Stock will be issued in the Merger if, as a result of such issuance, a person would become a holder of more than 4.9% of HRG Common Stock, and instead any excess shares over 4.9% would be treated as “Excess Securities” (as defined in the Amended HRG Charter) and delivered to one or more charitable organizations or escheated to the state of residence, incorporation or formation (as applicable) of the relevant Spectrum stockholder. The purpose of these modifications is to preserve the value of the Tax Attributes following the consummation of the Merger, the utilization of which is expected to benefit all stockholders.

Leucadia and Fortress, the two largest stockholders of HRG following the consummation of the Merger and “Substantial Holders” (as defined in the Amended HRG Charter), will be subject to the transfer restrictions retained from the existing HRG Charter described above. However, in connection with the negotiation of the Merger Agreement as well as the Leucadia Voting Agreement and Fortress Voting Agreement, certain limited exceptions to these transfer restrictions in the Amended HRG Charter have been agreed to with Leucadia and Fortress. These exceptions are more fully discussed in the section entitled “Comparison of Stockholder Rights—Transfer Restrictions.” These exceptions are the result of negotiations among the parties to the Merger Agreement and Leucadia and Fortress (who have committed to vote in favor of the HRG Share Issuance Proposal and HRG Charter Amendment Proposal) and were approved by independent and disinterested representatives of the parties to the Merger Agreement. These exceptions are intended to substantially preserve the value of the Tax Attributes following consummation of the Merger, on the one hand, and address Leucadia’s and Fortress’s need for some flexibility to dispose of shares following the consummation of the Merger, on the other hand.

On April 26, 2018, the Spectrum board of directors granted exemptions to members of each of the Fund Families, determining that each shall be deemed to be an “Exempt Person” (as defined in the HRG Rights Agreement). On May 2, 2018, the HRG board of directors granted exemptions to members of each of the Fund Families, determining that each shall be deemed to be an “Exempt Person” (as defined in the HRG Rights Agreement). These exemptions are discussed in more detail under “The Merger—Rights Agreements.”

Vote Required and HRG Board Recommendation

Approval of the HRG Section 382 Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. The HRG Section 382 Proposal also requires the consent of the holder of HRG preferred stock.

The HRG board of directors recommends a vote “FOR” the HRG Section 382 Proposal.

HRG Proposal 6: The HRG Additional Charter Amendments Proposal

HRG is asking its stockholders to approve the additional amendments contained in the Amended HRG Charter, which is attached as Annex C hereto.

 

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These amendments include, among others, changing HRG’s corporate name from “HRG Group, Inc.” to “Spectrum Brands Holdings, Inc.” for the purpose of operational continuity following the Merger and certain other technical changes to reflect the provisions of the current Spectrum Certificate of Incorporation (e.g., the substitution of the corporate opportunity waiver in the HRG Charter with the corporate opportunity waiver in the Spectrum Certificate of Incorporation). The provisions of the Amended HRG Charter were negotiated by the parties to the Merger Agreement and are considered by the parties to be an integral part of the transaction. For additional information, see the section entitled “Comparison of Stockholder Rights.”

Vote Required and HRG Board Recommendation

Approval of each of the HRG Additional Charter Amendments Proposal requires the affirmative vote of the holders of a majority of outstanding shares of HRG Common Stock entitled to vote generally in the election of directors. The HRG Additional Charter Amendments Proposal also requires the consent of the holder of HRG preferred stock.

The HRG board of directors recommends a vote “FOR” the HRG Additional Charter Amendments Proposal.

HRG Proposal 7: The HRG Share Issuance Proposal

HRG is asking its stockholders to approve the issuance of shares of HRG Common Stock in connection with the Merger. In the Merger, each Spectrum stockholder will receive, for each share of Spectrum Common Stock that is issued and outstanding as of immediately prior to the Effective Time and that is exchanged for the stock consideration, one share of HRG Common Stock.

Under NYSE rules, a company is required to obtain stockholder approval prior to the issuance of shares of common stock if the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock. If the Merger is completed pursuant to the Merger Agreement, HRG expects to issue approximately 21,022,827 shares of HRG Common Stock in connection with the Merger, depending upon the aggregate number of Spectrum Common Stock, Spectrum stock options, unvested Spectrum RSUs, Spectrum PSUs, and other Spectrum awards outstanding as of the Effective Time of the First Merger. Accordingly, the aggregate number of shares of HRG Common Stock that HRG will issue in the Merger will exceed 20% of the shares of HRG Common Stock outstanding before such issuance, and for this reason, HRG is seeking the approval of HRG stockholders for the issuance of shares of HRG Common Stock pursuant to the Merger Agreement.

Consummation of the Merger is conditioned on approval of the HRG Share Issuance Proposal.

Vote Required and HRG Board Recommendation

Approval of the HRG Share Issuance Proposal requires the affirmative vote of a majority of votes cast by HRG stockholders present in person or by proxy at the HRG Special Meeting and entitled to vote on the proposal.

The HRG board of directors recommends a vote “FOR” the HRG Share Issuance Proposal.

HRG Proposal 8: The HRG Adjournment Proposal

HRG is asking its stockholders to approve the adjournment of the HRG Special Meeting to another time and place if necessary or appropriate to solicit additional votes in favor of the HRG Additional Charter Amendment

 

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Proposals and the HRG Share Issuance Proposal. The Merger Agreement provides that the HRG Special Meeting will not be postponed or adjourned to a date that is more than thirty days after the date for which the HRG Special Meeting was originally scheduled without the prior written consent of Spectrum.

Consummation of the Merger is not conditioned on the approval of the HRG Adjournment Proposal.

Vote Required and HRG Board Recommendation

Approval of the HRG Adjournment Proposal requires the affirmative vote of holders of a majority of shares of HRG Common Stock present in person or by proxy at the HRG Special Meeting and entitled to vote on such proposal.

The HRG board of directors recommends a vote “FOR” the HRG Adjournment Proposal.

HRG Proposal 9: The HRG Advisory Compensation Proposal

As required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, which were enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, HRG is required to provide its stockholders the opportunity to vote to approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to HRG’s named executive officers that is based on or otherwise relates to the Merger, as described in the section entitled “The Merger—Interests of HRG’s Directors and Officers in the Merger.” Accordingly, HRG stockholders are being provided the opportunity to cast an advisory vote on such payments.

As an advisory vote, this proposal is not binding upon HRG or the HRG board of directors, and approval of this proposal is not a condition to completion of the Merger. Because the Merger-related executive compensation to be paid in connection with the Merger is based on the terms of the Merger Agreement as well as the contractual arrangements with HRG’s named executive officers, such compensation will be payable, regardless of the outcome of this advisory vote, if the Merger Agreement is adopted (subject only to the contractual conditions applicable thereto). However, HRG seeks the support of its stockholders and believes that stockholder support is appropriate because HRG has a comprehensive executive compensation program designed to link the compensation of its executives with HRG’s performance and the interests of HRG stockholders. Accordingly, holders of HRG Common Stock are being asked to vote on the following resolution:

“RESOLVED, that the stockholders of HRG, Inc. approve, on an advisory, non-binding basis, certain compensation that may be paid or become payable to the named executive officers of HRG, Inc. that is based on or otherwise relates to the Merger, as disclosed pursuant to Item 402(t) of Regulation S-K under the heading “Interests of HRG’s Directors and Officers in the Merger.”

Vote Required and HRG Board Recommendation

Approval of the HRG Advisory Compensation Proposal requires the affirmative vote of holders of a majority of shares of HRG Common Stock present in person or by proxy at the HRG Special Meeting and entitled to vote on such proposal.

The HRG board of directors recommends a vote “FOR” the HRG Advisory Compensation Proposal.

 

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THE MERGER

The following is a description of certain material aspects of the Merger. This description may not contain all of the information that may be important to you. The discussion of the Merger in this joint proxy statement/prospectus is qualified in its entirety by reference to the Merger Agreement, which is attached to this joint proxy statement/prospectus as Annex A, Amendment No. 1, which is attached to this joint proxy statement/ prospectus as Annex B, the form of the Amended HRG Charter, which is attached to this joint proxy statement/prospectus as Annex C, the form of the Second Restated Bylaws of HRG that will be in effect as of the closing of the Merger and the form of Post-Closing Registration Rights Agreement, which are included as Exhibits B and E, respectively, to the Merger Agreement, and the Post-Closing Stockholder Agreement, the HRG Voting Agreement, the Leucadia Voting Agreement and the Fortress Voting Agreement, which are attached to this joint proxy statement/prospectus as Annexes F, G, H and I, respectively. We encourage you to read carefully this entire joint proxy statement/prospectus, including the annexes and exhibits to, and the documents incorporated by reference in, this joint proxy statement/prospectus and the exhibits to the registration statement to which this joint proxy statement/prospectus relates, for a more complete understanding of the Merger and the documents incorporated by reference. This section is not intended to provide you with any factual information about Spectrum or HRG. Such information can be found elsewhere in this joint proxy statement/prospectus and in the public filings Spectrum and HRG make with the SEC, as described in “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference.”

General Description of the Merger

Under the terms of the Merger Agreement, (i) the HRG Charter will be amended and restated, as a result of which, among other things, the corporate name of HRG will change to “Spectrum Brands Holdings, Inc.,” the share of HRG Series A Preferred Stock will automatically be cancelled without any action by the holder thereof and each share of HRG Common Stock will, by means of the Reverse Stock Split, be combined into a fraction of a share of HRG Common Stock equal to the Share Combination Ratio, (ii) immediately following the effectiveness of the Reverse Stock Split, in the First Merger, Merger Sub 1 will merge with and into Spectrum, with Spectrum surviving as a wholly owned subsidiary of HRG, and (iii) immediately following the effectiveness of the First Merger, but only if HRG or Spectrum does not receive a tax opinion that states the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the surviving entity of the First Merger will merge with and into Merger Sub 2 in the Second Merger, pursuant to which Merger Sub 2 will survive as a wholly owned subsidiary of HRG.

Immediately upon consummation of the Merger, pre-closing Spectrum stockholders and pre-closing HRG stockholders are expected to own approximately 39% and 61%, respectively, of the outstanding shares of HRG Common Stock, and a total of approximately 53,613,184 shares of HRG Common Stock are expected to be outstanding. Such ownership percentages and share amount are based on (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock ending on June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement. Shares of Spectrum Common Stock currently trade on the NYSE under the symbol “SPB,” and shares of HRG Common Stock currently trade on the NYSE under the symbol “HRG.” Following the closing of the Merger, the shares of HRG Common Stock will be listed on the NYSE and are expected to trade under the symbol “SPB.”

Consideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split

Immediately prior to the Effective Time, each of the outstanding shares of HRG Common Stock will, by means of the Reverse Stock Split, be combined into a fraction of a share of HRG Common Stock equal to

 

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(i) (a) the number of shares of Spectrum Common Stock held by HRG and its subsidiaries as of immediately prior to the Effective Time, minus (b) (1) the sum of (x) HRG’s net indebtedness as of closing and certain transaction expenses of HRG that are unpaid as of closing, minus (y) $200,000,000, divided by (2) the volume-weighted average price of a share of Spectrum Common Stock for the 20-day trading period starting with the 21st trading day prior to the closing date, divided by (ii) as of immediately prior to the Reverse Stock Split, the sum of (without duplication) (a) the aggregate number of issued and outstanding shares of HRG Common Stock, (b) (1) the aggregate number of shares of HRG Common Stock subject to then-unexercised HRG stock options and warrants, minus (2) the number of shares of HRG Common Stock having a then-aggregate value equal to the aggregate exercise price of such unexercised HRG stock options and warrants, and (c) the number of shares of HRG Common Stock subject to HRG restricted stock awards, vested in full in accordance with terms of the Merger Agreement. Thereafter, each Spectrum share issued and outstanding immediately prior to the Effective Time will be converted into, subject to certain exceptions, into the right to receive one share of HRG Common Stock.

The following examples are presented for illustrative purposes only and do not reflect Spectrum’s or HRG’s expectations regarding share prices or ownership percentages following the Merger.

For example, based on (i) the 20-trading-day volume-weighted average price per share of Spectrum Common Stock of $78.28 for the period ending on June 6, 2018, (ii) the number of shares of Spectrum Common Stock outstanding, the number of Shares of Spectrum Common Stock held by HRG and its subsidiaries and the number of shares of HRG Common Stock outstanding as of June 6, 2018, the latest practicable date before the filing of the accompanying joint proxy statement/prospectus, (iii) an assumed $336.9 million of HRG net indebtedness and transaction expenses at closing, and (iv) a $200.0 million upward adjustment contemplated by the Merger Agreement:

 

    in the Reverse Stock Split, the Share Combination Ratio will be 0.1603x and the 203,153,237 outstanding shares of HRG Common Stock will be converted into 32,568,708 shares of HRG Common Stock;

 

    in the Merger, the 21,022,827 outstanding shares of Spectrum Common Stock that are not held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum will be converted into the right to receive 21,022,827 newly-issued shares of HRG Common Stock; and

 

    after giving effect to the Reverse Stock Split and the Merger, pre-Merger Spectrum stockholders and pre-Merger HRG stockholders will own approximately 39.21% and 60.79% of the outstanding shares of HRG Common Stock, respectively.

If, on the other hand, the volume-weighted average price per share of Spectrum Common Stock for the period ending on the second business day prior to closing were higher or lower than the 20-trading-day volume-weighted average price per share of Spectrum Common Stock for the period ending on June 6, 2018, and all other values remained the same, the respective share ownership percentages of the current holders of HRG Common Stock and the current holders of Spectrum Common Stock would change.

 

    In such case, if such average trading price increased by 10% to $86.11, then:

 

    in the Reverse Stock Split, the Share Combination Ratio would be 0.1611x and the 203,153,237 outstanding shares of HRG Common Stock would be converted into 32,727,640 shares of HRG Common Stock;

 

    in the Merger, the 21,022,827 outstanding shares of Spectrum Common Stock that are not held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum would be converted into the right to receive 21,022,827 newly-issued shares of HRG Common Stock; and

 

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    after giving effect to the Reverse Stock Split and the Merger, Spectrum stockholders and HRG stockholders would own approximately 39.10% and 60.90% of the outstanding shares of HRG Common Stock, respectively; and

 

    in such case, if the average trading price decreased by 10% to $70.45, then:

 

    in the Reverse Stock Split, the Share Combination Ratio would be 0.1594x and the 203,153,237 outstanding shares of HRG Common Stock would be converted into 32,374,458 shares of HRG Common Stock (on a fully diluted basis);

 

    in the Merger, the 21,022,827 outstanding shares of Spectrum Common Stock that are not held in the treasury of Spectrum or owned or held, directly or indirectly, by HRG or any subsidiary of HRG or Spectrum would be converted into the right to receive 21,022,827 newly-issued shares of HRG Common Stock; and

 

    after giving effect to the Reverse Stock Split and the Merger, Spectrum stockholders and HRG stockholders would own approximately 39.35% and 60.65% of the outstanding shares of HRG Common Stock, respectively.

The Merger Consideration will be adjusted appropriately to reflect the effect of any stock dividend or any subdivision split (including a reverse stock split), combination or consolidation of shares, or any similar event resulting in a change in the number shares or class of outstanding shares of HRG Common Stock after the date of the Merger Agreement and prior to the Effective Time (in each case, other than the Reverse Stock Split).

No share of HRG Common Stock will be issued to any holder of Spectrum Common Stock to the extent such a share would result in such holder of Spectrum Common Stock holding Excess Merger Shares. Instead, pursuant to the Amended HRG Charter, Excess Merger Shares will be issued to an agent that will at HRG’s direction either donate such Excess Merger Shares to a charitable organization qualifying under Section 501(c)(3) of the Code or escheat such Excess Merger Shares to the state of residence or incorporation or formation, as applicable, of such holder of Spectrum Common Stock.

Background of the Merger

HRG is the largest shareholder of Spectrum, with beneficial ownership of approximately 62% of Spectrum’s Common Stock as of June 6, 2018, the latest practicable date before the filing of this joint proxy statement/prospectus. In connection with HRG’s ownership in Spectrum, HRG and Spectrum are party to the Existing Stockholder Agreement, which is currently in effect, and, among other things, provides HRG with certain corporate governance and other rights (see “—Material Agreements Between the Parties”). The Spectrum board of directors currently consists of seven directors (giving effect to Andreas Rouvé’s resignation as Spectrum’s Chief Executive Officer and as a member of the Spectrum board of directors on April 25, 2018), including two directors affiliated with HRG, Messrs. Joseph Steinberg (currently the Chairman of the HRG board of directors and Chief Executive Officer of HRG) and Ehsan Zargar (currently the Executive Vice President, Chief Operating Officer and General Counsel of HRG).

The boards of directors and management of HRG and Spectrum each periodically and in the ordinary course review and assess their operations, performance, prospects and strategic direction, and evaluate and consider a variety of possible financial and strategic opportunities to find synergies or cost-savings or otherwise enhance shareholder value as part of their long-term business plans, including, exploration of possible capital markets offerings, rights offerings, acquisitions, and divestitures, including, in the case of HRG, its ownership interest in Spectrum. As part of its regular review, from time to time, the Spectrum board of directors and Spectrum management and the HRG board of directors and HRG management have periodically, including following the announcement by HRG that it was exploring strategic alternatives described below, engaged in discussions regarding the feasibility and attractiveness of one or more potential transactions between Spectrum and HRG, including to explore whether a potential transaction would lead to a more efficient capital structure and unlock other benefits for each party.

 

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On November 8, 2015, Fidelity & Guaranty Life (“FGL”), at that time a publicly traded, majority owned subsidiary of HRG engaged in the annuities and life insurance business, and Anbang Insurance Group Co., Ltd and its affiliates (“Anbang”) entered into an agreement and plan of merger providing for the acquisition of FGL by Anbang (such transaction, as well as the subsequent transaction entered into between FGL and CF Corporation on May 24, 2017, the “FGL Sale”). The initial outside date for the FGL Sale was November 7, 2016. At the time that transaction was entered into, HRG’s principal assets were its majority ownership stakes in each of Spectrum and FGL, as well as a substantially smaller investment in Front Street Re Ltd., a wholly owned subsidiary of HRG engaged in the life and fixed annuity reinsurance business (“Front Street”).

On November 3, 2016, in light of the fact that certain regulatory approvals for the transaction had not yet been received, FGL and Anbang announced that they had entered into an amendment to the agreement and plan of merger they had previously entered into on November 8, 2015, in order to extend the outside date for the transaction from November 7, 2016 to February 8, 2017.

In early November, Omar Asali, at the time HRG’s President and Chief Executive Officer conducted interviews of, and received presentations from, four nationally recognized investment banks, including J.P. Morgan and Jefferies LLC (“Jefferies”), to act as financial advisors to HRG in connection with HRG’s review of strategic alternatives, including a potential transaction with Spectrum.

On November 16, 2016, the HRG board of directors held a meeting and reviewed with HRG’s management and HRG’s financial and legal advisors HRG’s strategic alternatives and a range of potential strategic transactions and transaction structures, including potential strategic transactions and structures involving Spectrum, and discussed the opportunities, challenges and other considerations relating to such alternatives and potential transactions and transaction structures. At this meeting, the HRG board of directors (with consent of Mr. Maura) determined that in light of Mr. Maura’s role at Spectrum, Mr. Maura would not participate in board deliberations regarding HRG’s strategic review process other than those relating to the FGL Sale, unless requested to do so by the HRG board of directors.

Later in the day on November 16, 2016, Messrs. Asali and Steinberg informed representatives of Spectrum that HRG was going to publicly announce that it was conducting a review of HRG’s strategic alternatives and that Mr. Asali had elected to leave HRG and resign from the Spectrum board of directors.

On November 17, 2016, HRG publicly announced that the HRG board of directors had initiated a process to explore strategic alternatives available to HRG, including a potential merger, sale or other business combination involving HRG or its assets with a view to maximizing shareholder value. Also, on November 17, 2016, HRG announced that Mr. Asali had elected to leave HRG (and resign as a director of Spectrum) in the second half of fiscal 2017 to establish an investment vehicle. Following such announcement, from time to time thereafter, Mr. Steinberg and other representatives of HRG discussed with members of Spectrum’s board of directors and management HRG’s intention to designate an individual to replace Mr. Asali on the Spectrum board of directors.

During the period between HRG’s announcement of its exploration of strategic alternatives and the formation of the Spectrum Special Committee on January 24, 2017, various Spectrum board members had a number of discussions with each other, Spectrum’s management and Spectrum’s advisors regarding HRG’s strategic review process, strategic options available to Spectrum, the potential formation of a special committee of independent and disinterested directors and other related matters.

On November 28, 2016, Mr. Maura resigned his employment with HRG as Managing Director and Executive Vice President of Investments, while continuing to serve as a member of the HRG board of directors and as Executive Chairman of Spectrum.

On December 6, 2016, the HRG board of directors (other than Mr. Maura, who was not in attendance) held a meeting, with representatives of HRG’s management in attendance, at which they discussed potential strategic

 

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alternatives and transactions available to HRG. At this meeting, the HRG board of directors determined to engage J.P. Morgan to act as an independent financial advisor in connection with its previously announced strategic review process. This determination was based on, among other things, the qualifications of J.P. Morgan, J.P. Morgan’s familiarity with HRG and the HRG board of directors’ determination as to the independence of J.P. Morgan in connection with the strategic review process based on its review of the relationship disclosure provided by J.P. Morgan to the HRG board of directors. Additionally, following a discussion by the HRG board of directors (other than Messrs. Steinberg and Whittaker, who recused themselves for this portion of the discussion due to their affiliation with Jefferies), the participants determined to retain Jefferies as an additional financial advisor in connection with the strategic review process based on, among other things, the experience and capabilities of Jefferies (including its familiarity with HRG), and taking into account Jefferies’ potential conflicts of interest, and subject to negotiation of mutually agreeable terms for such engagement, and that decision was approved by the HRG board of directors (including Messrs. Steinberg and Whittaker). Furthermore, the HRG board of directors determined to engage Davis Polk as its legal counsel in connection with the strategic review process. The decision to engage Davis Polk was based on, among other things, the qualifications of Davis Polk, Davis Polk’s familiarity with HRG and the absence of material conflicts on the part of Davis Polk.

Over the next several weeks HRG’s management and advisors reviewed and analyzed the strategic alternatives potentially available to HRG. During this period Messrs. Asali and Steinberg had a number of high-level conversations with Spectrum board members regarding the status of HRG’s strategic review process. No specific proposals for a potential transaction between HRG and Spectrum were made during such conversations.

On January 17, 2017, HRG publicly filed with the SEC an amended Schedule 13D, announcing that as part of its previously announced exploration of strategic alternatives, it expected to discuss with and might make proposals to one or more of Spectrum, its management, its board of directors, its stockholders and other persons, including discussions and proposals regarding a merger, sale and/or a business combination involving HRG and Spectrum.

On January 24, 2017, in light of the fact that HRG’s investment in Spectrum was HRG’s largest asset and in anticipation of the possibility that HRG’s review of strategic alternatives would likely include strategic alternatives involving Spectrum, the Spectrum board of directors determined that it would be advisable to form the Spectrum Special Committee of independent and disinterested directors. The Spectrum board of directors determined that the Spectrum Special Committee would consist of Messrs. Kenneth Ambrecht, Norman Matthews, Terry Polistina and Hugh Rovit, each of whom is an independent director of Spectrum and was determined by the Spectrum board of directors to be independent of HRG and its affiliates (other than Spectrum and its subsidiaries) and not to have a material interest in any reasonably foreseeable potential strategic alternatives relating to HRG or otherwise, or any other relationship, that would interfere with the exercise of independent judgment as a member of the Spectrum Special Committee. The resolutions passed by the Spectrum board of directors forming the Spectrum Special Committee authorized the Spectrum Special Committee to, among other things, (1) formulate, review, evaluate, negotiate, develop, propose, and reject strategic alternatives involving HRG or that may otherwise be available to Spectrum, and (2) engage independent legal, financial and other advisors on terms determined by the Spectrum Special Committee. The Spectrum board of directors further resolved not to recommend or approve any strategic alternatives involving Spectrum without the prior favorable recommendation of the Spectrum Special Committee.

At various times while the Spectrum Special Committee’s process was ongoing, RBC Capital Markets, LLC (“RBC Capital Markets”), which had in the past provided financial advisory services to Spectrum and HRG on various matters and was subsequently engaged by Spectrum in connection with the Batteries Divestiture (as defined below), provided perspectives and information to Spectrum’s management, as well as at times, to the Spectrum Special Committee’s advisors and the Chairman of the Spectrum Special Committee in connection with a potential transaction between Spectrum and HRG. Following the execution of the Merger Agreement and in consideration of such services, on March 7, 2018, Spectrum entered into an engagement letter with RBC Capital Markets in respect thereto. RBC Capital Markets did not participate in any meetings of, or provide any report, opinion or appraisal to, the Spectrum board of directors or the Spectrum Special Committee in connection

 

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with the transaction, nor did RBC Capital Markets negotiate any terms of the potential transaction with HRG on behalf of the Spectrum Special Committee or otherwise.

On January 27, 2017, the Spectrum Special Committee engaged Kirkland to act as independent legal counsel to the Spectrum Special Committee. The decision to engage Kirkland was based on, among other things, the qualifications of Kirkland and the absence of material conflicts on the part of Kirkland. Prior to the formation of the Spectrum Special Committee, Messrs. Polistina and Nathan Fagre, General Counsel and Secretary of Spectrum, had conducted interviews of three law firms, including Kirkland, to act as independent legal counsel to the Spectrum Special Committee.

On February 1, 2017, the HRG board of directors (including Mr. Maura) held a meeting, with representatives of HRG’s management in attendance, at which Mr. Asali discussed the status of HRG’s strategic review process, which included consideration of a potential strategic transaction involving Spectrum and informed the HRG board of directors that the Spectrum board of directors had formed the Spectrum Special Committee.

On February 3, 2017, the Spectrum Special Committee, together with representatives of Kirkland, conducted interviews of, and received presentations from, four nationally recognized investment banks, including Moelis, to act as independent financial advisor to the Spectrum Special Committee.

On February 9, 2017, in light of the fact that certain regulatory approvals for the FGL Sale had not yet been received, FGL and Anbang announced that they had entered into a second amendment to the agreement and plan of merger they had previously entered into on November 8, 2015, in order to extend the outside date of the transaction from February 8, 2017 to April 17, 2017. In connection with the extension of the outside date for the transaction, the parties also amended the agreement and plan of merger to, among other things, permit FGL to solicit acquisition proposals from other potential acquirers.

On February 10, 2017, the Spectrum Special Committee held a meeting, with representatives of Spectrum’s management and Kirkland in attendance. Representatives of Kirkland reviewed with the Spectrum Special Committee members certain legal matters, including the Spectrum Special Committee members’ fiduciary duties and various considerations and process matters related to the Spectrum Special Committee’s evaluation of strategic alternatives. The Spectrum Special Committee discussed and approved a set of guidelines (the “Communication Guidelines”) containing certain policies and restrictions regarding interactions and communications between the Spectrum Special Committee and other members of the Spectrum board of directors, Spectrum’s management (including, for the avoidance of doubt, Mr. Maura), HRG, and other third parties in connection the Spectrum Special Committee’s review and evaluation of strategic alternatives. The Spectrum Special Committee recognized the input of certain members of management would be valuable to the Spectrum Special Committee’s process and accordingly determined that it would likely be appropriate from time to time to, in accordance with the Communication Guidelines, invite certain members of management to all or portions of certain Spectrum Special Committee meetings. The Spectrum Special Committee next discussed financial advisors and after discussion and consideration of the presentations made by each of the four investment banks on February 3, 2017, determined to retain Moelis as the Spectrum Special Committee’s independent financial advisor. This determination was based on, among other things, the qualifications of Moelis and the Spectrum Special Committee’s determination as to the independence of Moelis in connection with a potential strategic transaction based on its review of relationships disclosure provided by Moelis to the Spectrum Special Committee. Finally, after discussion, the Spectrum Special Committee unanimously elected Mr. Polistina to serve as its Chairman.

During the week of February 13, 2017, Messrs. Polistina and Steinberg, the Chairman of the HRG board of directors, discussed the status of HRG’s review of strategic alternatives. During the course of this discussion, Mr. Steinberg informed Mr. Polistina that HRG was currently focused on the pending FGL Sale, but that if the Spectrum Special Committee wished to submit a proposal relating to a potential transaction between Spectrum and HRG, the HRG board of directors would be open to considering such a proposal.

 

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On February 24, 2017, representatives of Moelis, at the direction of Mr. Polistina, made an introductory telephone call to Mr. Steinberg to discuss, among other things, the status and timing of the FGL Sale in light of the February 9, 2017 amendment to the agreement and plan of merger and in the context of a potential transaction between Spectrum and HRG.

Also on that day, Messrs. Polistina and Asali discussed the status and timing of the FGL Sale in the context of a potential transaction between Spectrum and HRG.

On February 27, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance. Mr. Douglas Martin, Executive Vice President and Chief Financial Officer of Spectrum, and Mr. Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. Representatives of Moelis and Kirkland reviewed on a preliminary basis, and the Spectrum Special Committee considered, a range of potential strategic alternative structures and scenarios that may be available to Spectrum as well as various financial, tax and other considerations related thereto. Among the strategic alternatives discussed during this review were various potential transactions between Spectrum and HRG, including (1) a merger between the companies following the FGL Sale, (2) a merger between the companies prior to the FGL Sale, (3) a distribution by HRG of its shares of FGL to HRG shareholders, immediately followed by a merger between HRG and Spectrum, and (4) a merger between HRG and Spectrum, immediately followed by a distribution of the shares of FGL held by the combined company to former HRG shareholders. The Spectrum Special Committee and its advisors discussed the fact that if the FGL Sale was completed prior to a merger transaction between Spectrum and HRG, it would significantly reduce or eliminate the need to consider the value of, or conduct diligence on, FGL (although the historical and other businesses of HRG would still require due diligence) and would also eliminate any risk to Spectrum that the FGL Sale would fail to close. The representatives of Moelis also discussed with the Spectrum Special Committee the potential benefits to Spectrum’s minority shareholders that could be achieved in a transaction with HRG. The Spectrum Special Committee directed Moelis and Kirkland to continue to progress their analysis of potential transaction structures involving HRG, focusing in particular on a potential merger that would follow the completion of the FGL Sale. The Spectrum Special Committee also directed Moelis and Kirkland to continue to consider other strategic alternatives not involving HRG, but acknowledged that such alternatives were unlikely to be feasible or as attractive for a variety of reasons, including, among others, because there were unlikely to be counterparties interested in such a transaction at that time that would be more attractive to both Spectrum and HRG (in light of HRG being Spectrum’s controlling shareholder, most such transactions were unlikely to be feasible without HRG’s support).

On March 9, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance. Mr. Andreas Rouvé, Chief Executive Officer of Spectrum, and Messrs. Martin and Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. Representatives of Kirkland and Moelis delivered a presentation analyzing, on a preliminary basis, potential merger structures between Spectrum and HRG assuming completion of the FGL Sale (including preliminary financial analyses by Moelis) and structural, tax, financing and other considerations related thereto. Also discussed during the presentation were certain key value components related to such a transaction, including the estimated value of HRG’s assets and liabilities, which the representatives of Moelis noted would require further due diligence at the appropriate time. The Spectrum Special Committee and its advisors also discussed (1) the potential benefits to Spectrum and its minority shareholders that could be achieved from no longer having HRG as a controlling shareholder and (2) the expected pro forma ownership in a combined company of HRG’s shareholders and specifically its two largest shareholders, Leucadia and Fortress. As part of this discussion, the Spectrum Special Committee discussed governance matters related to a transaction and potential standstill and transfer restrictions applicable to Leucadia and/or Fortress. Following discussion, the Spectrum Special Committee determined to further explore a potential merger between Spectrum and HRG following completion of the FGL Sale and directed Moelis to contact HRG or its representatives to indicate that the Spectrum Special Committee was evaluating such a transaction and that in connection with its evaluation, the Spectrum Special Committee would be interested in conducting due diligence on HRG.

On March 10, 2017, Moelis contacted HRG and indicated that the Spectrum Special Committee was evaluating a potential merger involving Spectrum and HRG and that it was interested in conducting due diligence

 

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on HRG in connection with its evaluation. Following this contact, Messrs. Steinberg and Zargar discussed the Spectrum Special Committee’s request with the HRG board of directors.

On March 13, 2017, Kirkland, on behalf of the Spectrum Special Committee, sent a draft non-disclosure agreement to Davis Polk.

On March 14, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance. Messrs. Maura, Rouvé, Martin and Fagre were also present for a portion of the meeting at the invitation of the Spectrum Special Committee. Mr. Maura shared his perspectives regarding (1) certain benefits to Spectrum and its minority shareholders that he believed would result from a strategic transaction with HRG and (2) process and timing considerations related to such a transaction.

On March 20, 2017, Messrs. Asali and Polistina discussed a potential merger between Spectrum and HRG. Among other things, they discussed the assets and liabilities of HRG (other than HRG’s shares of Spectrum Common Stock) that may be included in such a transaction and the related due diligence process. As part of this discussion, Mr. Asali indicated that if the parties were to enter into a transaction conditioned on prior completion of the FGL Sale, it was HRG’s current working assumption that a transaction would involve the transfer into a solvent liquidating trust of substantially all of HRG’s non-core assets and liabilities (including Front Street and all of its other businesses and subsidiaries). Mr. Asali indicated that HRG’s working assumption was that it would retain its (1) shares of Spectrum Common Stock, (2) debt remaining following the FGL Sale and expected paydown of HRG’s debt with the sale proceeds, (3) cash, (4) certain NOLs and capital loss carryforwards (together with NOL carryforwards, the “Tax Attributes”), and (5) liabilities for transaction-related costs. Mr. Asali indicated that after the closing of the FGL Sale this liquidating trust would be spun off to HRG’s shareholders and excluded from any potential transaction between Spectrum and HRG. Messrs. Asali and Polistina discussed HRG’s view that establishing the liquidating trust would appear to eliminate the need for the parties to agree on the value of those excluded assets and liabilities of HRG (including Front Street) and may significantly reduce the scope of Spectrum’s diligence process on HRG.

On March 22, 2017, HRG announced that the effective date of Mr. Asali’s resignation (previously announced on November 17, 2016) from his position as President and Chief Executive Officer of HRG and his membership on each of the HRG board of directors and the Spectrum board of directors, would be April 14, 2017, and that at that time, Mr. Steinberg would become the Chief Executive Officer of HRG and Mr. Zargar would become the Chief Operating Officer of HRG.

On March 23, 2017, representatives of Moelis and J.P. Morgan discussed the status of the FGL Sale, the liquidating trust, the due diligence process and other aspects of a potential merger between Spectrum and HRG.

On March 24, 2017, the Spectrum Special Committee held a meeting to continue its discussion and evaluation of a potential transaction between Spectrum and HRG, with representatives of Kirkland and Moelis in attendance. Messrs. Martin and Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. Representatives of Moelis discussed with the Spectrum Special Committee a preliminary financial analysis related to a potential stock-for-stock merger between HRG and Spectrum following completion of the FGL Sale. The Spectrum Special Committee considered a range of potential exchange ratios for the potential merger, discussed various considerations for making a proposal to HRG and determined to further consider such matters at a subsequent meeting. Representatives of Kirkland also discussed with the Spectrum Special Committee certain matters relating to post-closing governance if a transaction with HRG were to be consummated. Following discussion, the Spectrum Special Committee determined that such governance and related terms should not be included in an initial proposal to HRG in the interest of engaging on economic terms first.

Later in the day on March 24, 2017, Spectrum and HRG entered into a non-disclosure agreement, which did not include a standstill provision.

 

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On March 27, 2017, the Spectrum Special Committee held a meeting to continue its discussion of a potential transaction between Spectrum and HRG, with representatives of Kirkland and Moelis in attendance. Representatives of Moelis discussed with the Spectrum Special Committee financial analyses related to a potential stock-for-stock merger of the companies following the FGL Sale. The Spectrum Special Committee considered a range of potential exchange ratios for the merger, discussed the status of the due diligence of HRG and discussed the potential submission of a proposal to HRG later that week subject to further developments.

On March 30, 2017, HRG granted Spectrum, Deloitte & Touche LLP (tax advisor to Spectrum) (“Deloitte”), Moelis and Kirkland access to an electronic data room containing certain due diligence information.

On March 31, 2017, the Spectrum Special Committee held a meeting to review and approve the financial and other terms of an initial proposal to be made to HRG for a merger between the companies, with representatives of Kirkland and Moelis in attendance. Messrs. Martin and Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. Representatives of Kirkland and Moelis provided an update on the due diligence performed with respect to HRG and the potential transaction. The representatives of Moelis discussed with the Spectrum Special Committee financial analyses related to a potential stock-for-stock merger of the companies following the FGL Sale. The Spectrum Special Committee considered a range of exchange ratios for the merger and, following discussion with its advisors and Spectrum’s management, the Spectrum Special Committee approved the submission of a non-binding proposal for a stock-for-stock merger between Spectrum and HRG at an exchange ratio of 0.130 shares of Spectrum Common Stock for each share of HRG Common Stock, with the merger being subject to, among other things, (1) the closing of the FGL Sale and pay down of HRG debt with the sale proceeds, (2) the implementation of the liquidating trust and (3) the approval of the transaction by Spectrum shareholders, including a non-waivable majority of the minority vote.

Later in the day on March 31, 2017, representatives of Kirkland, on behalf of the Spectrum Special Committee, submitted the preliminary, non-binding proposal to HRG on the terms authorized by the Spectrum Special Committee.

On April 14, 2017, Mr. Asali’s previously announced resignation from his positions as President and Chief Executive Officer of HRG and member of the HRG board of directors and Spectrum board of directors became effective. Mr. Steinberg replaced Mr. Asali as the Chief Executive Officer of HRG.

On April 17, 2017, FGL and Anbang announced the termination of the agreement and plan of merger they had previously entered into on November 8, 2015.

On April 25, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance, to discuss the status of the Spectrum Special Committee’s March 31, 2017 proposal to HRG. Messrs. Rouvé, Martin and Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. The Spectrum Special Committee and its advisors noted that HRG appeared to be focused on the FGL Sale. In light of this, the Spectrum Special Committee determined not to engage in any further discussion with HRG pending a response to the March 31, 2017 proposal.

On May 3, 2017, the HRG board of directors (including Mr. Maura) held a meeting, with representatives of HRG’s management in attendance, during which Messrs. Steinberg and Zargar described for the board the Spectrum Special Committee’s March 31, 2017 proposal.

On May 24, 2017, FGL and CF Corporation announced that they had entered into an agreement and plan of merger, pursuant to which CF Corporation would acquire FGL, subject to satisfaction of certain closing conditions. Concurrently with and as part of such transaction, HRG agreed to sell its Front Street operating subsidiaries to CF Corporation. At the same time, HRG and CF Corporation, along with other related parties, entered into an agreement permitting an HRG subsidiary to elect to cause applicable CF Corporation subsidiaries

 

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to make joint elections under Section 338(h)(10) of the Code with respect to the FGL Sale, in which case the HRG subsidiary and/or a CF Corporation affiliate would be required to make one or more payments for the election to the other (the “338 Election Payments”).

Commencing in early June 2017 and from time to time thereafter, representatives of HRG and Mr. Maura discussed at a high level HRG’s views with respect to certain matters related to a potential transaction between HRG and Spectrum, including the proposal that the Spectrum Special Committee had delivered to HRG on March 31, 2017. These discussions were informational in nature and included, among other things, HRG’s business strategy, discussions of potential transaction structures between HRG and Spectrum as well as the nature and appropriate treatment of HRG’s assets (including Tax Attributes) and liabilities, and did not include a negotiation of the terms of the transaction on behalf of Spectrum or the Spectrum Special Committee.

Also commencing in early June 2017 and continuing for the next several months, HRG’s management and financial advisors had preliminary exploratory conversations with a number of potential counterparties (both strategic and financial) regarding potential strategic transactions involving HRG, including the sale of HRG’s interest in Spectrum or a merger or other business combination transaction involving HRG. None of these conversations progressed past the exploratory stage.

Between July 10, 2017 and July 21, 2017, Messrs. Steinberg and Zargar had a number of conversations with HRG’s advisors regarding possible structures of a potential transaction involving HRG’s shares of Spectrum Common Stock.

On July 10, 2017, Mr. Steinberg e-mailed Mr. Maura requesting a meeting with the Spectrum Special Committee in order to discuss an alternative structure for a potential transaction between Spectrum and HRG. Mr. Maura forwarded the e-mail to the Spectrum Special Committee. Mr. Polistina subsequently arranged a Spectrum Special Committee meeting with Mr. Steinberg and other representatives of HRG to be held on July 20, 2017.

On July 20, 2017, the Spectrum Special Committee and representatives of Kirkland met with Messrs. Steinberg and Zargar and representatives of Davis Polk. The representatives of HRG described to the Spectrum Special Committee a potential transaction between Spectrum and HRG, which would not, as a matter of Delaware law, NYSE rules or the Spectrum Certificate of Incorporation, require Spectrum stockholder approval, whereby the number of shares of Spectrum Common Stock held by HRG would be adjusted for HRG’s net debt and certain other items, and then, following such adjustment, would be distributed to HRG’s shareholders. Following this distribution, HRG would transfer its remaining assets and liabilities into a liquidating trust and then HRG would dissolve (the “Share Exchange Structure”). Representatives of HRG also advised that they estimated the aggregate amount of HRG’s Tax Attributes to be approximately $1.6 billion (consisting of approximately $1.2 billion of NOL and approximately $400 million of capital loss carryforwards) and the parties agreed that irrespective of the structure pursued in a transaction between Spectrum and HRG, the Spectrum Special Committee and its advisors would need to diligence such Tax Attributes. The representatives of HRG noted that HRG contemplated obtaining a private letter ruling from the IRS in connection with the Share Exchange Structure, given certain complexities associated with a “downstream” reorganization of HRG into Spectrum. No specific proposal regarding the economic or other terms of the Share Exchange Structure was made at this meeting.

Over the subsequent weeks, (1) the Spectrum Special Committee’s advisors further analyzed the feasibility and other considerations of the Share Exchange Structure and conducted further due diligence on HRG, including HRG’s tax assets and liabilities (including the Tax Attributes), (2) representatives of Kirkland and Davis Polk began coordinating with respect to the preparation of a private letter ruling request to be submitted to the IRS in respect of the Share Exchange Structure and (3) Messrs. Steinberg and Zargar continued to keep the HRG board of directors apprised of the status of the ongoing discussions and the Spectrum Special Committee’s advisors continued to keep the Spectrum Special Committee appraised of the status of the ongoing discussions.

 

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On July 25, 2017, the Spectrum board of directors held a regularly scheduled meeting. As part of its regular strategic review process, and unrelated to and separate from the Spectrum Special Committee’s ongoing consideration of a potential transaction with HRG, the Spectrum board of directors authorized management to explore a potential divestiture of all or part of one or both of Spectrum’s global batteries business and global appliances business (collectively, the “GBA Businesses”) to one or more third parties. After this date, Spectrum began a process of exploring, and engaged in conversations with third parties regarding, a potential divestiture of one or both of the GBA Businesses, including through a sale of the business or a spin-off of one or both of the GBA Businesses followed by a merger of those business units with a third party (a so-called “reverse morris trust” transaction).

On August 2, 2017, the HRG board of directors (other than Mr. Maura, who was not in attendance) held a meeting, with representatives of HRG’s management in attendance, during which the HRG board of directors discussed the status of a potential strategic transaction involving Spectrum and the various alternatives that were under consideration by HRG’s management and advisors.

On August 8, 2017, the HRG board of directors held a meeting, with representatives of HRG’s management in attendance, during which the HRG board of directors discussed a potential strategic transaction involving Spectrum. At the invitation of Mr. Steinberg, Mr. Maura provided his perspective on a potential transaction between HRG and Spectrum. At neither this meeting nor any other meeting of the HRG board of directors in which Mr. Maura participated in connection with a potential transaction between Spectrum and HRG did Mr. Maura act on behalf of the Spectrum Special Committee or otherwise negotiate terms of the potential transaction on behalf of Spectrum. Mr. Steinberg reviewed the terms of the potential proposal and identified elements of the potential proposal that required further consideration by HRG’s management. Following discussion, the HRG board of directors determined that Mr. Steinberg should work with HRG’s management and advisors to finalize the proposal in a manner consistent with the board discussion and, once finalized, management of HRG should make the proposal discussed during the meeting.

On August 10, 2017, the Spectrum Special Committee held a meeting to discuss, among other things, the Share Exchange Structure, with representatives of Kirkland and Moelis in attendance. Messrs. Martin and Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. Representatives of Kirkland and the Spectrum Special Committee discussed the subject of a Spectrum shareholder vote in connection with the Share Exchange Structure and following such discussion the Spectrum Special Committee concluded that, notwithstanding the fact that the Share Exchange Structure did not require Spectrum shareholder approval under the Spectrum Certificate of Incorporation, Delaware law or the rules of the NYSE, it would still be appropriate to condition a transaction with HRG, including the Share Exchange Structure, on a non-waivable majority of the minority vote (as was the case in the Spectrum Special Committee’s March 31, 2017 proposal to HRG).

On August 24, 2017, the Spectrum Special Committee held a meeting to discuss the status of the potential transaction with HRG, with representatives of Kirkland and Moelis in attendance. In light of the Spectrum board of directors’ determination to explore potential divestitures of the GBA Businesses, the Spectrum Special Committee discussed whether there could be benefits to exploring a divestiture of all or a portion of the GBA Businesses to HRG as a potential alternative transaction structure. Representatives of Moelis and Kirkland provided preliminary views regarding the viability, merits and considerations of a divestiture of the GBA Businesses to HRG through a tax-free non-pro rata split-off in exchange for the redemption of a portion of the shares in Spectrum held by HRG (the “GBA Split-Off Structure”). Representatives of Moelis also updated the Spectrum Special Committee on the tax due diligence conducted over the prior several weeks by Spectrum’s management, Deloitte, and the Spectrum Special Committee’s advisors in connection with the Share Exchange Structure. The Spectrum Special Committee directed its advisors to further explore the potential GBA Split-Off Structure in parallel with the continued evaluation of the Share Exchange Structure and associated due diligence.

Also on August 24, 2017, HRG entered into an engagement letter with J.P. Morgan.

 

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On August 31, 2017, the Spectrum board of directors appointed Mr. Zargar as a director of Spectrum to fill the vacancy created by the resignation of Mr. Asali on April 14, 2017.

On September 5, 2017, Davis Polk submitted, on behalf of HRG, a request for a private letter ruling to the IRS in respect of the Share Exchange Structure.

On September 9, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance. At the meeting, the advisors updated the Spectrum Special Committee on the ongoing work being conducted by its advisors regarding the Share Exchange Structure and the GBA Split-Off Structure, including due diligence of HRG’s Tax Attributes. Additionally, at the direction of the Spectrum Special Committee, Moelis reviewed standalone valuation analyses of the GBA Businesses. Representatives of Kirkland also reviewed with the Spectrum Special Committee members certain legal matters, including the members’ fiduciary duties, considerations in transactions involving controlling shareholders, and the interaction between the Spectrum Special Committee’s ongoing review of a potential transaction with HRG and Spectrum’s independent consideration of a sale of the GBA Businesses. The Spectrum Special Committee and its advisors also discussed upcoming meetings with HRG regarding a potential transaction, including tax and structuring matters, that were scheduled for September 11 and 12, 2017.

On September 11, 2017, Mr. Polistina and representatives of Moelis met with Messrs. Steinberg and Zargar to discuss a potential transaction between Spectrum and HRG. In addition to discussion of the Share Exchange Structure, Mr. Polistina and Moelis raised for discussion the potential GBA Split-Off Structure to evaluate whether HRG would have any interest in pursuing a transaction of this nature. At that meeting, Mr. Steinberg stated that while HRG was continuing to review the GBA Split-Off Structure, it likely was not interested in pursuing such transaction because it was not sufficiently attractive. No specific proposal regarding the economic or other terms of the Share Exchange Structure, the GBA Split-Off Structure or any other transaction between Spectrum and HRG was made at this meeting.

On September 12, 2017, Mr. Polistina, representatives of Spectrum’s management, Kirkland and certain other of the Spectrum Special Committee’s advisors met with Messrs. Steinberg and Zargar and representatives of Davis Polk, certain of the HRG board of directors’ other advisors and representatives of Leucadia to discuss various tax and structural matters related to a potential transaction between Spectrum and HRG. The discussion covered a range of potential transaction structures that could achieve the parties’ objectives with respect to the Tax Attributes and the relevant considerations for each, including a downstream reorganization of HRG with Spectrum, a merger of Spectrum with a subsidiary of HRG, reverse morris trust transaction, a split-off of certain Spectrum business units in which HRG would exchange its Spectrum shares for stock in the split-off entity and a spin-off of certain Spectrum business units followed by an exchange of HRG’s shares in Spectrum for shares in the spun-off entity and a merger of the remaining Spectrum entity with a third party (a so-called “morris trust” transaction).

On September 25, 2017, the HRG board of directors held a meeting, with representatives of HRG’s management, Davis Polk, J.P. Morgan and Jefferies in attendance. At the invitation of Mr. Steinberg, Mr. Maura provided an update on the business and results of operations of Spectrum as well as an update on the potential sale of Spectrum’s global batteries business to Energizer Holdings, Inc. (the “Batteries Divestiture”). Following such update Mr. Maura left the meeting, after which the other members of the HRG board of directors discussed, among other things, the terms of a potential transaction between HRG and Spectrum. In addition, the HRG board of directors discussed potential conflicts of interest relating to Fortress or Leucadia that could arise in such a transaction. The HRG board of directors determined that any elements of such a transaction that presented such a conflict of interest would be negotiated under the supervision and direction of the disinterested and independent members of the HRG board of directors and that the interested members of the HRG board of directors would recuse themselves from the applicable board discussions, following which the disinterested directors would consider the matter in an executive session, and determine how to proceed. Messrs. Steinberg, McKnight and Whittaker were then excused and the disinterested and independent members of the HRG board of directors then continued the discussion of governance matters and reviewed and discussed the potential terms of an engagement letter for

 

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Jefferies, and based upon, among other things, the experience and capabilities of Jefferies (including its familiarity with HRG), and taking into account Jefferies’ potential conflicts of interest, and the compensation structure and amount of Jefferies’ fees, instructed HRG’s management to seek to finalize Jefferies’ engagement letter.

On September 27, 2017, at a meeting requested by Mr. Steinberg, Mr. Steinberg delivered to Mr. Polistina a written proposal for a transaction based on the Share Exchange Structure in which, among other things, (1) HRG’s shareholders would receive a number of shares of Spectrum Common Stock equal to the number of shares of Spectrum Common Stock held by HRG, (2) Spectrum would assume HRG’s outstanding net debt, without any adjustments, (3) HRG’s shareholders would receive an additional cash payment equal to the difference between $602 million and the amount of HRG’s net debt, which consideration represented a control premium as well as value for HRG’s Tax Attributes, (4) a liquidating trust would be established to hold certain assets and liabilities of HRG, and (5) because the transaction would not require Spectrum shareholder approval pursuant to the Spectrum Certificate of Incorporation, Delaware law or NYSE rules, no “majority of the minority” approval of Spectrum’s shareholders would be required as a condition to the closing of a transaction.

In late September 2017, Mosaic Acquisition Corp. (“Mosaic Acquisition”), a special purpose acquisition investment vehicle formed by Mr. Maura and an affiliate of Fortress Parent, conducted an initial public offering, following which Mr. Maura began to serve as the public company’s Chairman, President and Chief Executive Officer. The initial public offering of Mosaic Acquisition was underwritten by J.P. Morgan, among others. For additional discussion, see “The Merger—Interests of Spectrum’s Directors and Officers in the Merger” and “The Merger—Opinion of HRG’s Financial Advisor.”

On October 2, 2017, the Spectrum Special Committee held a meeting to discuss HRG’s September 27, 2017 proposal, with representatives of Kirkland and Moelis in attendance. Representatives of Moelis discussed with the Spectrum Special Committee financial analyses of HRG’s September 27, 2017 proposal, including the impact of a transaction on such terms to Spectrum’s minority shareholders. Following discussion, the Spectrum Special Committee determined that the proposal was not attractive to, and was not in the best interests of, Spectrum and its minority shareholders. In light of this determination, Mr. Polistina and Moelis were directed to inform HRG and its representatives that the September 27, 2017 proposal was not attractive to Spectrum and its minority shareholders, but that the Spectrum Special Committee remained interested in exploring a mutually beneficial transaction with HRG. The Spectrum Special Committee and representatives of Kirkland also discussed the status of Spectrum’s potential transaction involving the GBA Businesses and the potential interaction of any such transaction with a potential transaction with HRG.

On October 2, 2017, Mr. Polistina sent the Spectrum Special Committee’s response discussed at the Spectrum Special Committee meeting held earlier that day to Messrs. Steinberg and Zargar.

Over the next week, Mr. Polistina and representatives of Moelis engaged in numerous discussions with representatives of HRG regarding HRG’s September 27, 2017 proposal, Mr. Polistina updated the other members of the Spectrum Special Committee on such discussions and Messrs. Steinberg and Zargar updated the HRG board of directors on such discussions. The representatives of Moelis and J.P. Morgan discussed the valuation gap relating to the parties’ differing preliminary valuations of the HRG Tax Attributes as well as HRG’s request to receive compensation for surrendering control of Spectrum and various transaction mechanisms that could be utilized to address such valuation gap, including Spectrum issuing contingent value rights to HRG related to the utilization of HRG’s Tax Attributes.

On October 9, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance, to discuss potential responses to HRG’s September 27, 2017 proposal. Moelis discussed with the Spectrum Special Committee financial analyses regarding a range of potential responses, based on the Share Exchange Structure, including analysis regarding a proposal providing for (1) an adjustment to the number of shares of Spectrum Common Stock held by HRG for HRG’s net debt and for the transaction and financing costs of both parties, (2) a 75%/25% split in favor of Spectrum of the value created from the elimination of the

 

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discount in the trading price of HRG Common Stock and HRG’s “sum of the parts” valuation, (3) the parties entering into a tax receivable agreement (a “TRA”) entitling HRG’s shareholders to cash payments which, in combination with their continued ownership of the combined company, would provide them with 75% of the value realized by the combined company from the utilization of HRG’s Tax Attributes (the “Net Effective Tax Attribute Savings”), (4) HRG’s establishment of a liquidating trust, and (5) conditioning the transaction on a non-waivable vote of the majority of the minority Spectrum shareholders. The Spectrum Special Committee discussed with its advisors the various potential responses, including the potential benefits of providing HRG with realized rather than upfront value for HRG’s Tax Attributes, including eliminating the impact of uncertainty regarding future tax rates. Following discussion, the Spectrum Special Committee approved the terms of a proposal and authorized Moelis to deliver the proposal to HRG.

On October 10, 2017, Moelis submitted a written proposal to HRG on the terms approved by the Spectrum Special Committee at the October 9, 2017 meeting. After HRG received the October 10, 2017 proposal, Messrs. Steinberg and Zargar discussed it with the HRG board of directors.

On October 16, 2017, HRG entered into an engagement letter with Jefferies.

On October 25, 2017, the board of directors of HRG held a meeting, with representatives of HRG’s management, Davis Polk, J.P. Morgan and Jefferies in attendance. At the meeting, Mr. Steinberg updated the HRG board of directors on the status of discussions with the Spectrum Special Committee regarding the potential transaction, and reviewed the terms of the Spectrum Special Committee’s October 10, 2017 proposal. He noted there remained a substantial difference between HRG’s and Spectrum Special Committee’s positions. At the invitation of Mr. Steinberg, Mr. Maura joined the meeting to provide his perspective on a potential transaction with Spectrum, and thereafter Mr. Maura left the meeting. Representatives of J.P. Morgan then reviewed with the other members of the HRG board of directors the proposals made by HRG and Spectrum on September 27, 2017 and October 10, 2017, respectively, and the HRG board of directors discussed the fundamental differences between the proposals. Mr. Steinberg stated his view that because he believed Spectrum may not be willing to pay HRG compensation for surrendering control over Spectrum or compensate HRG for the value of its Tax Attributes, HRG should terminate discussions with the Spectrum Special Committee and pursue other strategic alternatives. After further discussion among the HRG directors, it was the sense of the board that HRG management should continue to engage with the Spectrum Special Committee and try to negotiate a mutually beneficial transaction.

On October 30, 2017, representatives of HRG made a proposal to the Spectrum Special Committee for a transaction utilizing the Share Exchange Structure, which the parties had explored during discussions in July of 2017. The proposal differed from the Spectrum Special Committee’s last proposal in that, among other things, (1) it contemplated an incremental $100 million adjustment in HRG’s favor as a payment for its capital loss carryforwards, (2) cash payments under the TRA, along with their continued ownership in the combined company, would entitle HRG’s shareholders to 90% of any net effective NOL savings (rather than the 75% previously proposed by the Spectrum Special Committee), (3) HRG’s shareholders would retain the benefit of the elimination of the discount in the trading price of HRG Common Stock and HRG’s “sum of the parts” valuation, (4) HRG’s shareholders would receive a number of warrants equal to the net reduction in the number of shares of Spectrum Common Stock resulting from the adjustments described above, (5) Spectrum would bear the transaction and financing costs of both parties, (6) Spectrum would owe a $100 million termination fee in the event the transaction failed to close due to not obtaining the majority of the minority Spectrum shareholder vote, and (7) HRG would be entitled to designate two directors (out of a proposed 10 total directors) to the post-closing board of directors of the combined company.

On October 31, 2017, representatives of J.P. Morgan and Moelis had a meeting to discuss the parties’ respective positions and proposals.

On November 1, 2017, the Spectrum Special Committee held a meeting to discuss HRG’s October 30, 2017 proposal, with representatives of Kirkland and Moelis in attendance. Prior to the representatives of Moelis

 

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joining the meeting, the Spectrum Special Committee discussed that Mr. Polistina had been asked to participate in a potential business opportunity that Mr. Maura had been considering involving an affiliate of Fortress, and in light of the Spectrum Special Committee’s process, Mr. Polistina had determined that it would not be appropriate to participate in such opportunity and had informed Mr. Maura of the same. The other members of the Spectrum Special Committee engaged in a discussion regarding this matter and determined that this had no impact on Mr. Polistina’s independence or ability to serve on the Spectrum Special Committee and that no changes to the Spectrum Special Committee’s process were warranted. Following such discussion, the representatives of Moelis joined the meeting and discussed with the Spectrum Special Committee a financial analysis of HRG’s October 30, 2017 proposal, including the impact of a transaction on such terms to Spectrum’s minority shareholders. The Spectrum Special Committee determined that the proposal was not attractive to, and was not in the best interests of, Spectrum and its minority shareholders. In light of this determination, the Spectrum Special Committee directed Mr. Polistina to communicate to the HRG board of directors that while the Spectrum Special Committee was willing to continue exploring a potential transaction with HRG, the terms would have to be mutually beneficial for both parties.

Later that day, Mr. Polistina, on behalf of the Spectrum Special Committee, sent an e-mail to the HRG board of directors rejecting HRG’s October 30, 2017 proposal and communicating the message discussed by the Spectrum Special Committee at its meeting earlier that day.

On November 2, 2017, Mr. Polistina and representatives of HRG, Moelis, J.P. Morgan and Jefferies participated in a conference call during which they discussed HRG’s October 30, 2017 proposal, HRG’s desire to receive a greater amount of compensation for surrendering control over Spectrum and for the value of the Tax Attributes, and the Spectrum Special Committee’s October 10, 2017 proposal, in an effort to identify potential opportunities to bridge those differences.

On November 2, 2017, Spectrum’s management approached Kirkland about the possibility of Kirkland representing Spectrum on antitrust matters in connection with the Batteries Divestiture due to the fact that the chair of the antitrust practice at Paul, Weiss, Rifkind, Wharton & Garrison LLP, Spectrum’s outside legal counsel on the Batteries Divestiture at the time, was nominated to become the Chairman of the Federal Trade Commission. Subsequently and following approval by the Spectrum Special Committee on November 3, 2017, Kirkland was engaged to represent Spectrum on such matters. Subsequently, in late November, at the request of Spectrum’s management and following approval by Mr. Polistina (and which approval was confirmed by the Spectrum Special Committee), Kirkland was engaged to represent Spectrum on corporate matters on the Batteries Divestiture. In both instances, the Spectrum Special Committee determined that Spectrum’s retention of Kirkland would not create a conflict of interest or compromise Kirkland’s independence and was in Spectrum’s and its minority shareholders’ best interests, including because of Kirkland’s familiarity with Spectrum from its work with the Spectrum Special Committee as well as Kirkland’s familiarity with certain aspects of the Batteries Divestiture due to the Spectrum Special Committee’s previous evaluation of the GBA Split-Off Structure, putting Kirkland in a good position to commence work quickly on the Batteries Divestiture which was expected to proceed on an accelerated timeline.

On November 3, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance, to receive an update on recent discussions between Moelis and Mr. Polistina and representatives of HRG, determine whether it would be advisable to make a proposal to HRG, and if so, decide the appropriate terms. Representatives of Moelis discussed with the Spectrum Special Committee financial analyses regarding a range of potential proposals, based on the Share Exchange Structure, including analysis regarding a proposal providing for (1) an adjustment for HRG’s net debt and for the transaction and financing costs of both parties, (2) the receipt by HRG’s shareholders of 75% of any Net Effective Tax Attribute Savings payable through a TRA, in cash or in stock at the election of Spectrum, (3) no issuance of the warrants contemplated in HRG’s October 30, 2017 proposal but the acceptance of HRG’s proposal that HRG’s shareholders retain the benefit of the elimination of the discount in the trading price of HRG Common Stock and HRG’s “sum of the parts” valuation, and (4) the establishment of a liquidating trust to hold certain assets and

 

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liabilities of HRG. Representatives of Kirkland then discussed with the Spectrum Special Committee various non-economic considerations related to a potential transaction with HRG, including the proposed termination fee in the event the majority of the minority Spectrum shareholder vote was not obtained, post-closing board composition and potential ongoing nomination rights for one or both of Leucadia and Fortress, and the potential for a post-closing shareholder agreement providing for customary standstills and/or lock-ups for one or both of Leucadia and Fortress. Following discussion, the Spectrum Special Committee determined to make a proposal on the basis of the economic terms reviewed with Moelis, but directed Moelis to first preview such terms with HRG prior to any submission of a formal proposal.

On November 6 and 7, 2017, representatives of Moelis had conference calls with a representative of HRG to preview the economic terms of the Spectrum Special Committee’s potential proposal.

On November 8, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance. The representatives of Moelis summarized their recent interactions with HRG and noted that HRG seemed to be willing to consider the Spectrum Special Committee’s contemplated proposal. Representatives of Kirkland then discussed with the Spectrum Special Committee a possible approach to certain non-economic terms that could be incorporated in a proposal, including (1) Leucadia and Fortress being subject to a post-closing lock-up expiring at the earlier of (a) three years and (b) the utilization of HRG’s Tax Attributes, (2) the two existing HRG-designated directors on the Spectrum board of directors continuing on the post-closing board of directors of the combined company through the end of their current terms, (3) Leucadia receiving a continuing post-closing nomination right to appoint a director with respect to one of the two board seats currently held by HRG designated directors as described in clause (2) for so long as it owned at least 10% of Spectrum’s Common Stock (and being subject to a customary standstill for so long as its nominee serves on the Spectrum board of directors), and (4) a rejection of HRG’s October 30, 2017 proposal for a termination fee in the event the majority of the minority Spectrum shareholder vote was not obtained. Following discussion, the Spectrum Special Committee approved such non-economic terms and directed its advisors to submit a comprehensive proposal to HRG at the further direction of Mr. Polistina.

On November 9, 2017, at the direction of Mr. Polistina, Moelis delivered the proposal approved at the November 8, 2017 Spectrum Special Committee meeting to HRG. Following HRG’s receipt of the November 9, 2017 proposal from Moelis, Messrs. Steinberg and Zargar discussed it with the HRG board of directors.

On November 13 and 14, 2017, Mr. Steinberg and representatives of Moelis held separate telephone conferences during which Mr. Steinberg provided HRG’s feedback on the Spectrum Special Committee’s November 9, 2017 proposal.

On November 15, 2017, the HRG board of directors held a meeting, with representatives of HRG’s management, J.P. Morgan and Jefferies in attendance. Mr. Maura discussed Spectrum’s performance, after which he was excused from the meeting. The other members of the HRG board of directors then discussed the proposal delivered by Moelis on November 9, 2017. The HRG board of directors developed a proposed response to the Moelis proposal, and directed Mr. Steinberg to deliver its feedback to Moelis.

On November 30, 2017, the FGL Sale and the sale of HRG’s Front Street operating subsidiaries to CF Corporation were consummated.

In early December, in the course of discussions regarding the preparation of the proxy statement for Spectrum’s 2018 annual meeting, representatives of HRG conveyed to Spectrum’s management that prior to the filing of such proxy it would be important for HRG to have a better understanding of whether a transaction between Spectrum and HRG was likely to be agreed prior to such annual meeting.

On December 6, 2017, Moelis held a telephone conference with representatives of J.P. Morgan and Jefferies during which representatives of J.P. Morgan, at the direction of HRG management, orally previewed the terms of

 

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a proposal that HRG would be delivering to the Spectrum Special Committee in writing the following day. The terms outlined by representatives of J.P. Morgan were based on the Share Exchange Structure and contemplated, among other things, (1) an adjustment for HRG’s net debt, (2) Spectrum bearing the transaction and financing costs of both parties, (3) the parties entering into a TRA providing HRG’s shareholders with the first $303 million of value realized from Spectrum’s utilization of HRG’s Tax Attributes, paid in the form of shares of the combined company, (4) the establishment of a liquidating trust, (5) acceptance of the Spectrum Special Committee’s requirement that the transaction be conditioned on a non-waivable majority of the minority Spectrum shareholder vote (with no termination fee in the event this vote was not obtained), (6) Leucadia and Fortress not being subject to a post-closing lock-up, (7) the two existing HRG-designated directors on the Spectrum board of directors continuing on the post-closing board of directors of the combined company through the end of their current terms, as proposed by the Spectrum Special Committee, but with HRG having the right to designate one additional director at closing, and (8) acceptance of the Spectrum Special Committee’s proposal that Leucadia receive a continuing post-closing nomination right to one of the board seats referenced in clause (7) for so long as it owned at least 10% of Spectrum Common Stock (and being subject to a customary standstill for so long as its nominee serves on the Spectrum board of directors).

On December 7, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland and Moelis in attendance. Representatives of Moelis summarized the terms of the HRG proposal that representatives of J.P. Morgan had previewed to Moelis on December 6, 2017. Following discussion, the Spectrum Special Committee concluded that a transaction on the terms described by representatives of J.P. Morgan was not attractive to, and not in the best interests of, Spectrum and its minority shareholders. The Spectrum Special Committee further determined that, assuming the pending written proposal from HRG was consistent with the terms previewed, upon receipt of the proposal, Mr. Polistina should send an e-mail to the HRG board of directors on behalf of the Spectrum Special Committee rejecting HRG’s proposal.

Later on December 7, 2017, at the direction of HRG management, representatives of J.P. Morgan, on behalf of HRG, formally delivered the written proposal to the Spectrum Special Committee, which provided for terms substantially similar to those previewed by representatives of J.P. Morgan to Moelis on December 6, 2017.

On December 8, 2017, Mr. Polistina, on behalf of the Spectrum Special Committee, sent an e-mail to the HRG board of directors rejecting HRG’s December 7, 2017 proposal.

On December 9, 2017, at the direction of HRG management, representatives of J.P. Morgan and Jefferies, on behalf of HRG, called Moelis to deliver modifications to the terms of HRG’s December 7, 2017 proposal regarding the TRA construct and approach to transaction and financing costs. The modified terms were that, among other things, (1) the transaction costs of both parties (other than any financing costs) would be borne by HRG subject to a $50 million cap, and (2) rather than providing HRG shareholders with the first $303 million of tax savings realized from the utilization of HRG’s Tax Attributes, HRG’s shareholders would instead receive 75% of any Net Effective Tax Attribute Savings paid in the form of shares of the combined company.

Although the Spectrum Special Committee had previously determined that Kirkland’s retention on the Batteries Divestiture would not impair Kirkland’s ability to serve as independent counsel to the Spectrum Special Committee, out of an abundance of caution and in light of increasing activity and developments with respect to a potential Batteries Divestiture and a potential transaction with HRG, in early December, 2017, the Spectrum Special Committee determined it would be advisable to retain additional independent counsel.

During the week of December 11, 2017, Mr. Polistina, on behalf of the Spectrum Special Committee, conducted interviews with three law firms, including Cleary Gottlieb Steen & Hamilton LLP (“Cleary”). Following such interviews and after discussing with the other members of the Spectrum Special Committee, Mr. Polistina decided to recommend that the Spectrum Special Committee retain Cleary.

On December 13, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance, to discuss HRG’s December 9, 2017 proposal. The Spectrum Special

 

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Committee and its advisors discussed the terms of that proposal and the impact on Spectrum and its minority shareholders. The Spectrum Special Committee and its advisors then discussed a potential proposal to HRG. The principal differences between the potential proposal and the terms of HRG’s December 9, 2017 proposal were: (1) the transaction costs and financing costs of both parties would be borne by HRG, subject to a $40 million cap, (2) certain value related adjustments to the TRA arrangement and the share exchange, (3) Leucadia and Fortress being subject to an 18-month post-closing lock-up, and (4) HRG not having the right to designate one additional director at closing. Following discussion, the Spectrum Special Committee authorized Moelis to deliver the proposal to J.P. Morgan and also authorized Mr. Polistina and the representatives of Moelis to offer fallback positions on certain terms, including the length of the lock-up period and aspects of the share exchange value adjustments, to the extent additional flexibility was required during the course of negotiations. The Spectrum Special Committee approved Cleary’s engagement as independent legal counsel to the Spectrum Special Committee to act alongside Kirkland in that role. The decision to engage Cleary was based on, among other things, the qualifications of Cleary and the absence of material conflicts on the part of Cleary.

Later in the day on December 13, 2017, Moelis, on behalf of the Spectrum Special Committee, delivered the Spectrum Special Committee’s proposal to J.P. Morgan on the terms approved by the Spectrum Special Committee earlier that day.

On December 15, 2017, Mr. Maura informed HRG that he was resigning from the HRG board of directors and later that day HRG announced Mr. Maura’s resignation from the HRG board of directors, effective as of December 31, 2017.

Also on December 15, 2017, the HRG board of directors (other than Mr. Maura, who was not in attendance) held a meeting, with representatives of HRG’s management and Davis Polk in attendance, to discuss the proposal delivered by Moelis on December 13, 2017. The HRG board of directors reviewed the proposal and discussed its response. The HRG board of directors decided that, due to, among other things, the additional complexities of the Share Exchange Structure, HRG should pursue a simpler merger transaction. The HRG board of directors instructed HRG’s management to deliver a public letter to Spectrum containing a proposal on that basis, so HRG and the Spectrum Special Committee could have a dialogue with the companies’ respective stockholders. Additionally, in light of the differences between the parties’ proposals with respect to a potential transaction involving HRG and Spectrum and HRG’s belief that there was decreasing likelihood that agreement could be reached in advance of the upcoming 2018 annual meeting of Spectrum stockholders, the HRG board of directors instructed HRG’s management to deliver a letter to Spectrum making HRG’s December 17 Governance Requests (as defined below).

On December 17, 2017, HRG delivered a letter to Spectrum requesting that, among other things, (1) the Spectrum board of directors be expanded to consist of ten directors, (2) Mr. McKnight and Mr. Brian Friedman, President and member of the Leucadia board of directors, be added as directors on the expanded Spectrum board of directors, (3) the Nominating and Corporate Governance Committee of the Spectrum board of directors (the “Nominating Committee”) be expanded to consist of five directors, (4) Messrs. Steinberg, McKnight and Zargar be added as members of the expanded Nominating Committee, and (5) a meeting of the expanded Nominating Committee be held as soon as possible and in any event before the proxy statement for the upcoming annual meeting of Spectrum shareholders was filed with the SEC (collectively, “HRG’s December 17 Governance Request”).

On December 18, 2017, as previously authorized by the Spectrum Special Committee at its December 13, 2017 meeting and based on subsequent discussions with Mr. Polistina, Moelis proposed to J.P. Morgan certain modifications to the terms of the Spectrum Special Committee’s December 13, 2017 proposal, including to reduce the post-closing lock-up period for Leucadia and Fortress from 18 months to 12 months.

On December 19, 2017, HRG delivered a letter to the Spectrum Special Committee containing a proposal for a merger between Spectrum and HRG, which HRG indicated it intended to make public. The proposal contemplated, among other things, (1) that the HRG shareholders’ ownership in the combined company would

 

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equal the number of shares of Spectrum Common Stock held by HRG prior to the merger, adjusted based on HRG’s net debt, (2) a $200 million upfront payment to HRG’s shareholders for the termination of the Existing Stockholder Agreement between Spectrum and HRG and other governance arrangements and for HRG’s Tax Attributes, (3) Spectrum and HRG bearing their own transaction and financing costs, (4) Leucadia and Fortress being subject to a 12-month post-closing lock-up, (5) HRG designating three members of the combined company board of directors, and (6) that the merger would be conditioned on a non-waivable majority of the minority Spectrum shareholder vote. The proposal did not reference the establishment of a liquidating trust to hold certain assets and liabilities of HRG.

Later in the day on December 19, 2017, HRG publicly filed with the SEC an amended Schedule 13-D, which attached HRG’s December 17 Governance Request and HRG’s December 19, 2017 proposal as exhibits.

On December 19, 2017, the Spectrum Special Committee held a meeting to discuss HRG’s December 17 Governance Request and December 19 proposal, with representatives of Kirkland, Cleary and Moelis in attendance. Messrs. Maura and Fagre were also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. The Spectrum Special Committee and its advisors discussed the economic and governance terms outlined in HRG’s December 19, 2017 proposal and their impact on Spectrum and its minority shareholders, and Kirkland and Cleary reviewed with the Spectrum Special Committee HRG’s December 17 Governance Request. Following discussion of such matters as well as a variety of related considerations and potential responses to HRG, the Spectrum Special Committee determined that Spectrum would file a Form 8-K that would (1) indicate that the Spectrum Special Committee was reviewing HRG’s December 19, 2017 proposal and that Spectrum would be reviewing HRG’s December 17 Governance Request, and (2) describe the terms of the most recent private proposals exchanged between Spectrum and HRG in order to provide appropriate context to Spectrum’s shareholders regarding such matters and to facilitate the Spectrum Special Committee receiving feedback from Spectrum shareholders.

On December 20, 2017, Spectrum filed a Form 8-K with the SEC, which contained a statement from the Spectrum Special Committee and the disclosure of recent private proposals discussed by the Spectrum Special Committee at its meeting on December 19, 2017.

On December 21, 2017, the HRG board of directors held a meeting, with representatives of HRG’s management and Davis Polk in attendance. At the invitation of Mr. Steinberg, Mr. Maura joined the meeting to offer his perspective on the discussions between HRG and the Spectrum Special Committee on a potential transaction between HRG and Spectrum. Mr. Maura was then excused, following which the other members of the HRG board of directors reviewed and discussed the respective positions of HRG and the Spectrum Special Committee and provided negotiating direction to HRG’s management. Messrs. Steinberg, McKnight and Whittaker were then excused from the meeting and the disinterested and independent directors met in an executive session to discuss Spectrum-related matters.

On December 26, 2017, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. Representatives of Moelis discussed with the Spectrum Special Committee financial analyses of HRG’s December 19, 2017 proposal as well as a potential alternative proposal, including, in each case, the impact of a transaction on such terms to Spectrum’s minority shareholders. As part of this discussion, the Spectrum Special Committee weighed considerations related to an upfront payment for HRG’s Tax Attributes, including in light of clarity regarding corporate tax rates due to the passage of federal tax reform legislation under the Tax Cuts and Jobs Act and Spectrum management’s and the Spectrum Special Committee’s belief that the potential divestiture of one or both of the GBA Businesses would occur. The Spectrum Special Committee and its advisors also discussed preliminary feedback received from certain of Spectrum’s minority shareholders regarding HRG’s December 19, 2017 proposal and a transaction with HRG generally, which included, among other things, a general sense of support for compromising with HRG in order to finalize a potential transaction that would result in an independent post-closing governance structure. Following discussion, the Spectrum Special Committee determined to consider these matters further at its next meeting.

 

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On December 31, 2017, Mr. Maura’s previously announced resignation from the HRG board of directors became effective.

On January 3, 2018, Spectrum announced that it was exploring strategic options for its GBA Businesses with the expectation of completing any such divestitures in 2018.

On January 5, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. At the meeting, the Spectrum Special Committee and its advisors discussed a potential alternative proposal to HRG’s December 19, 2017 proposal, which was generally consistent with the terms discussed during the December 26, 2017 meeting. Representatives of Moelis also discussed with the Spectrum Special Committee various illustrative scenarios for the divestitures of the GBA Businesses and the utilization of HRG’s Tax Attributes by the combined company. Following discussion, the Spectrum Special Committee approved the proposal, which provided for, among other things, (1) a $120 million upfront payment to HRG’s shareholders and (2) adjustments for HRG’s net debt and up to $40 million of Spectrum’s transaction costs (excluding any financing costs). The Spectrum Special Committee directed Moelis to preview the key terms of the proposal with J.P. Morgan.

On January 6, 2018, Moelis, on behalf of the Spectrum Special Committee, called J.P. Morgan to preview the key terms of the Spectrum Special Committee’s proposal.

On January 7, 2018, Mr. Polistina, on behalf of the Spectrum Special Committee, sent an e-mail to the HRG board of directors containing the proposal approved during the Spectrum Special Committee’s January 5, 2018 meeting.

During the course of the week of January 8, 2018, representatives of Moelis and HRG discussed the parties’ respective proposals and positions, following which Kirkland and Cleary had a number of discussions with Davis Polk regarding the same. Mr. Zargar joined certain of these discussions as well and reiterated the HRG board of directors’ view that, among other things, (1) in light of the recent passage of federal tax reform legislation and associated reduction of corporate tax rates (which HRG believed significantly reduced the value its shareholders would receive in respect of HRG’s Tax Attributes under a TRA), Spectrum’s January 3, 2018 announcement that it intended to divest one or both of the GBA Businesses (which if consummated would provide more certainty regarding the combined company’s ability to utilize such Tax Attributes), and HRG’s desire to receive compensation for surrendering control of Spectrum, HRG would not accept a substantial departure from the economic terms of its December 19, 2017 proposal, and (2) HRG no longer believed it was necessary to establish a liquidating trust in connection with a transaction with Spectrum, in part because after giving effect to the sale of FGL and Front Street, HRG believed it had only immaterial remaining residual and contingent assets and liabilities.

On January 9, 2018, HRG delivered a letter to the Spectrum Special Committee rejecting the Spectrum Special Committee’s January 7, 2018 proposal, citing reasons previously outlined to Moelis, Kirkland and Cleary by the representatives of HRG and its advisors.

On January 11, 2018, the HRG board of directors held a meeting, with representatives of HRG’s management, Davis Polk and J.P. Morgan in attendance. During the meeting, the HRG board of directors reviewed with HRG’s management and its advisors the status of the negotiations, the respective positions of HRG and Spectrum, potential considerations in the event a mutually acceptable agreement could not be reached between HRG and the Spectrum Special Committee, and the other strategic alternatives potentially available to HRG. The HRG board of directors directed HRG’s management to inform the Spectrum Special Committee that HRG was not willing to accept a substantial departure from the economic terms of its December 19, 2017 proposal.

Also on January 11, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. Mr. Maura was also in attendance for a portion of the meeting at the invitation of the Spectrum Special Committee. Mr. Maura updated the Spectrum Special Committee and its

 

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advisors on the status of the Batteries Divestiture and also discussed with the Spectrum Special Committee feedback he had received from certain of Spectrum’s minority shareholders regarding a potential transaction with HRG, including the importance of any such transaction resulting in an independent post-closing governance structure. Mr. Maura was then excused from the meeting. The Spectrum Special Committee and its advisors next discussed HRG’s January 9, 2018 letter, HRG’s insistence on the economic terms of its December 19, 2017 proposal, and the alternatives and potential responses available to the Spectrum Special Committee. Representatives of Moelis discussed with the Spectrum Special Committee a financial analysis of a potential proposal to HRG, and the financial impact of a transaction on such terms to Spectrum’s minority shareholders, and also discussed with the Spectrum Special Committee various benefits of a transaction with HRG to Spectrum and its minority shareholders, including, among others, the elimination of a controlling shareholder in the combined company and instead having an independent governance structure. Representatives of Kirkland and Cleary discussed with the Spectrum Special Committee non-economic terms of a potential proposal designed to ensure an independent post-closing corporate governance structure. Following discussion, the Spectrum Special Committee approved the proposal, the principal terms different from HRG’s December 19, 2017 proposal being: (1) a $120 million upfront payment to HRG’s shareholders and an additional $80 million payment to HRG’s shareholder contingent on the first closing of a divesture of either of the GBA Businesses, (2) Leucadia and Fortress would be subject to a post-closing lock-up ending on the earlier of 18 months and the first closing of a divesture of either of the GBA Businesses, (3) the two existing HRG-designated directors on the Spectrum board of directors would continue on the combined company board of directors through the end of their current terms (rather than HRG’s proposal for HRG to designate a third director), and (4) Leucadia would have a post-closing nomination right to one of the board seats held by the existing HRG-designated directors for so long as it owned at least 10% of the combined company’s shares (and would be subject to a customary standstill for so long as it owns more than 10% of the combined company’s shares). Additionally, the Spectrum Special Committee discussed HRG’s position that a liquidating trust would no longer be necessary or appropriate, and determined that it would be amenable to this approach subject to satisfactory completion of due diligence regarding the nature and amount of HRG’s remaining assets and contingent and other liabilities. The Spectrum Special Committee determined to provide in its proposal that the terms of such proposal assumed that HRG’s wind-down costs and other non-debt actual and contingent liabilities would not exceed $5 million. Following discussion, the Spectrum Special Committee directed Mr. Polistina to submit the proposal to HRG following the public announcement of the Batteries Divestiture, which was scheduled to occur on or around January 16, 2018.

On January 16, 2018, Spectrum announced it had entered into a definitive agreement to sell its global batteries business to Energizer Holdings, Inc. for $2 billion, subject to satisfaction of certain conditions to closing.

Later in the day on January 16, 2018, Mr. Polistina, on behalf of the Spectrum Special Committee, sent an e-mail to the HRG board of directors containing the proposal approved during the Spectrum Special Committee meeting on January 11, 2018.

On January 17, 2018, the HRG board of directors held a meeting, with representatives of HRG’s management, Davis Polk, J.P. Morgan and Jefferies in attendance. During the meeting, the HRG board of directors discussed, among other things, the respective positions of HRG and the Spectrum Special Committee, potential compromise positions, and the strategic alternatives available to HRG and other considerations if a mutually acceptable agreement could not be reached between HRG and the Spectrum Special Committee.

On January 18, 2018, Spectrum announced the postponement of its upcoming annual meeting of Spectrum shareholders, previously scheduled to be held on January 30, 2018, in light of the ongoing discussions with HRG related to a potential transaction.

On January 19, 2018, at the direction of HRG management, representatives of J.P. Morgan contacted Moelis to discuss the terms of the Spectrum Special Committee’s January 16, 2018 proposal as well as the deal terms and potential compromises HRG was considering, which included, among other things, (1) an upfront payment of $200 million to HRG’s shareholders, to compensate HRG for the Tax Attributes and for surrendering control

 

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of Spectrum, (2) Leucadia and Fortress being subject to a 24-month post-closing lock-up, (3) Leucadia receiving the right to designate two directors to the combined company board for so long as it held at least 10% of the combined company’s shares (and the right to designate one director for so long as it owned at least 5%), and (4) Fortress receiving the right to designate one independent director, who would not be an affiliate of Fortress, for so long as it owned at least 5% of the combined company’s shares.

On January 20, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. The Spectrum Special Committee discussed with its advisors the terms of the potential proposal representatives of J.P. Morgan had indicated that HRG was considering. The Spectrum Special Committee also discussed with its advisors various considerations related to an upfront payment of $200 million to HRG’s shareholders in comparison to the Spectrum Special Committee’s prior proposal that $80 million of such aggregate payment be contingent on the closing of a divesture of either of the GBA Businesses. Following discussion, the Spectrum Special Committee determined that it would further consider whether to accept the economic terms representatives of J.P. Morgan had described, but that the governance terms proposed by HRG were not consistent with an independent governance structure and accordingly would not be an acceptable basis for a transaction between Spectrum and HRG. The Spectrum Special Committee directed Moelis to communicate this message to J.P. Morgan.

On January 20, 2018, Moelis, on behalf of the Spectrum Special Committee, called J.P. Morgan to communicate the Spectrum Special Committee’s response to the terms of a potential proposal that J.P. Morgan had described on January 19, 2018.

On January 25, 2018, the HRG board of directors held a meeting, with representatives of HRG’s management and Davis Polk in attendance, during which HRG’s management relayed the January 20, 2018 response from Moelis. The HRG board of directors discussed the parties’ respective positions and instructed HRG’s management to reiterate that HRG was unwilling to further compromise on the economic terms of its proposal. Messrs. Steinberg, McKnight and Whittaker were then excused and the disinterested and independent directors then discussed potential conflicts of interest matters relating to potential post-closing governance and liquidity terms relating to Fortress and Leucadia.

On January 26, 2018, at the direction of HRG management, representatives of HRG and J.P. Morgan delivered to Mr. Polistina and representatives of Moelis a proposal that contemplated, among other things, (1) two alternative formulations for an upfront payment to HRG’s shareholders, to compensate HRG for the Tax Attributes and for surrendering control of Spectrum, (i) an upfront $200 million payment or (ii) an upfront $150 million payment combined with a $100 million payment contingent on the closing of a divesture of either of the GBA Businesses, and (2) Leucadia and Fortress receiving the right to collectively designate two directors to the combined company board for so long as they held at least 15% of the combined company’s shares in the aggregate, and the right to collectively designate one director for so long as they held at least 5% of the combined company’s shares in the aggregate.

On January 27, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. Representatives of Moelis discussed with the Spectrum Special Committee financial analyses of HRG’s January 26, 2018 proposal, including the impact of a transaction on such terms to Spectrum’s minority shareholders, and also discussed with the Spectrum Special Committee various illustrative scenarios for Spectrum business divestitures and the utilization of HRG’s Tax Attributes. As part of this discussion, the Spectrum Special Committee and its advisors discussed that in recent weeks the likelihood that Spectrum could divest one or both of its GBA Businesses had increased significantly, and as a result, there was a greater degree of certainty concerning whether, and the time period over which, the value of HRG’s Tax Attributes could be realized by the combined company following a transaction. The Spectrum Special Committee and its advisors discussed other potential economic and non-economic benefits that could result from a transaction with HRG, including, among others, the elimination of a controlling shareholder in the combined company, an independent governance structure, greater liquidity, increased appeal to a broader shareholder base

 

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and the removal of uncertainty regarding a potential transaction with HRG. The Spectrum Special Committee and its legal advisors also discussed the post-closing board designation rights proposed by HRG and other governance considerations related to a potential transaction. Following discussion, the Spectrum Special Committee determined to inform HRG that, although it could not support HRG’s January 26, 2018 proposal, the Spectrum Special Committee could support a transaction on the basis of HRG’s proposed $200 million upfront payment to HRG’s shareholders, so long as HRG agreed to governance terms in line with the terms of the Spectrum Special Committee’s January 16 proposal. The Spectrum Special Committee directed Mr. Polistina to convey the Spectrum Special Committee’s position to the HRG board of directors in writing later that day.

Later in the day on January 27, 2018, the members of the Spectrum Special Committee and representatives of Moelis participated in a conference call with representatives of HRG during which the Spectrum Special Committee communicated its response to HRG’s January 26, 2018 proposal.

On January 28, 2018, Mr. Polistina, on behalf of the Spectrum Special Committee, sent an e-mail to the HRG board of directors communicating the Spectrum Special Committee’s response to HRG’s January 26, 2018 proposal.

Also on January 28, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance, to receive an update on the status of the potential transaction with HRG prior to the meeting of the Spectrum board of directors that was scheduled to be held on January 29, 2018.

On January 29, 2018, Mr. Polistina, on behalf of the Spectrum Special Committee, and Mr. Steinberg, on behalf of HRG, had a number of discussions regarding the open terms, and negotiated and agreed, subject to the approval of the Spectrum Special Committee and the HRG board of directors, on the parameters of governance and shareholder arrangement terms related to a potential transaction, including that, among other things: (1) Mr. Zargar would resign from the Spectrum board of directors at the closing of the transaction, (2) Mr. Zargar would be replaced by an independent director designated by Leucadia, and such director would be added to the longest-serving class of the combined company board of directors, but Leucadia would not have an ongoing right to designate an independent director after the term of that class expires, (3) Leucadia would have an ongoing right to designate one director to the combined company board of directors so long as it held 10% of the combined company’s shares (expected to be Mr. Steinberg), (4) Leucadia and Fortress would be subject to a post-closing lock-up for the earlier of 24 months and the closing of a divesture of either of the GBA Businesses (rather than 18 months as last proposed by HRG), and (5) Leucadia would be subject to a customary standstill. Mr. Polistina consulted with other members of the Spectrum Special Committee over the course of these discussions. Messrs. Steinberg and Zargar relayed the results of these discussions to the HRG board of directors.

Later in the day on January 29, 2018, Davis Polk submitted to Kirkland a written summary intended to memorialize the parameters of the governance and shareholder arrangement terms negotiated by Messrs. Polistina and Steinberg.

On January 30, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. Mr. Polistina updated the Spectrum Special Committee on the discussions he had with Mr. Steinberg regarding post-closing governance and shareholder arrangements. Representatives of Kirkland and Cleary reviewed for the Spectrum Special Committee the summary of such post-closing governance and shareholder arrangements, and following discussion, the Spectrum Special Committee determined the overall parameters that had been negotiated were acceptable and directed Kirkland to propose certain specific items regarding the details of such parameters (including certain additional limitations on the permissible affiliations of the independent director to be designated by Leucadia) to Davis Polk and authorized Kirkland to otherwise finalize such terms. The Spectrum Special Committee also discussed with its advisors next steps including due diligence.

Between January 30, 2018 and January 31, 2018, Kirkland and Davis Polk negotiated and finalized the parameters of the governance and shareholder arrangement terms, including that, among other things, (1) the

 

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independent director to be nominated by Leucadia would not be a current or former director, officer or employee of HRG, Leucadia, or Fortress or a current director, officer or employee of a hedge fund or an investment bank and (2) early expiration of the 24-month lock-up period would require a sale of a majority of either of the GBA Businesses.

On January 31, 2018, the HRG board of directors held a meeting, with representatives of HRG’s management and Davis Polk in attendance. Among other things, the board discussed the status of the negotiations with the Spectrum Special Committee and the proposed terms for a transaction, including governance and shareholder arrangement terms. The HRG board of directors directed HRG’s management and advisors to seek to finalize the transaction on the terms discussed. Messrs. Steinberg, McKnight and Whittaker were then excused; following which the disinterested and independent directors held a discussion regarding potential conflicts of interest matters relating to potential post-closing governance and liquidity terms relating to Fortress and Leucadia.

Between February 1, 2018 and February 22, 2018, Spectrum’s management and Spectrum’s and the Spectrum Special Committee’s advisors conducted confirmatory financial, tax and legal due diligence on HRG, including with respect to HRG’s wind-down costs and other actual and contingent liabilities.

On February 6, 2018, Davis Polk delivered to Kirkland a draft post-closing shareholder agreement that would be applicable to Leucadia (which, among other things, would contain Leucadia’s ongoing right to designate one director subject to certain ownership requirements and restrict Leucadia from acquiring additional shares or taking certain other actions for so long as the director designated by Leucadia remained on the combined company board of directors), as well as drafts of a post-closing registration rights agreement and voting agreements applicable to HRG, Fortress and Leucadia.

On February 7, 2018, Kirkland delivered to Davis Polk a draft agreement and plan of merger in connection with the potential transaction.

Between February 7, 2018 and February 24, 2018, representatives of Kirkland, Cleary and Davis Polk engaged in numerous discussions regarding the terms of transaction documents, and exchanged various drafts of the merger agreement and related transaction documents.

On February 9, 2018, Davis Polk withdrew, on behalf of HRG, the request for a private letter ruling to the IRS on the Share Exchange Structure, as such “downstream” reorganization of HRG into Spectrum was no longer applicable to the potential transaction between the parties.

On February 10, 2018, Kirkland and Davis Polk held a conference call during which Davis Polk communicated HRG’s positions on certain open terms of the merger agreement, including, among other things, (1) whether there would be any adjustment to the economic terms for HRG’s wind-down costs and other actual and contingent liabilities in excess of the Spectrum Special Committee’s expectation, (2) a $200 million adjustment in favor of HRG’s stockholders to HRG’s net indebtedness rather than a “special dividend” prior to the closing of the merger, (3) the treatment of HRG’s equity awards in the transaction, (4) the parameters of interim operating covenants applicable to each company, (5) the definition of “Material Adverse Effect”, (6) the scope of representations and warranties and closing conditions relating to tax matters, (7) the outside date and (8) a mechanism to preserve HRG’s Tax Attributes by ensuring no HRG Common Stock would be issued in the merger in violation of the Amended HRG Charter, including if as a result of such issuance a person would become a holder of more than 4.9% of “Corporation Securities” (as defined in the Amended HRG Charter). In addition, Kirkland communicated to Davis Polk the Spectrum Special Committee’s positions on certain open terms related to the shareholder agreement and the voting agreements, including the impact of Leucadia’s ownership going below 5% and matters surrounding Leucadia’s voting obligations and post-closing standstill.

Over the next several days, representatives of Kirkland, Cleary and Davis Polk further negotiated open items in the transaction documents.

 

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On February 17, 2018, a conference call was held with Mr. Polistina, the advisors to the Spectrum Special Committee, members of Spectrum management, and representatives of HRG and its advisors participating. During this call, the parties agreed (in each case subject to approval by the Spectrum Special Committee or the HRG board of directors, as applicable) that, among other things, (1) subject to the satisfactory completion of the Spectrum Special Committee’s due diligence with respect to HRG, the economic terms of the contemplated transaction would not be subject to adjustment for HRG’s wind-down costs and other actual and contingent liabilities, (2) Spectrum would be subject to specific limited interim operating covenants, (3) the merger agreement would have an outside date of seven and half months from signing, (4) with respect to Leucadia’s ongoing board designation right, its ownership percentage would be determined based on the number of shares outstanding at closing and Leucadia’s designee would resign if Leucadia sold down to below 5%, and (5) Leucadia would be free to vote its shares in its discretion as a shareholder of the combined company.

Also on February 17, 2018, Davis Polk delivered to Kirkland drafts of the combined company charter and bylaws, and on February 18, 2018, Kirkland sent Davis Polk revised drafts of the post-closing shareholder agreement and the voting agreements.

On February 18, 2018, Davis Polk sent a revised draft of the merger agreement to Kirkland.

On February 20 and 21, 2018, conference calls were held with Mr. Polistina, the advisors to the Spectrum Special Committee, members of Spectrum management, and representatives of HRG and its advisors participating. During these calls, and separate calls between Kirkland and Davis Polk, the parties agreed, among other things, to the following (in each case subject to approval by the Spectrum Special Committee or the HRG board of directors, as applicable): (1) HRG’s equity awards would remain outstanding following the transaction, (2) the parameters surrounding HRG’s ability to acquire and sell assets between signing and closing, (3) parties would have customary exceptions to the non-solicitation covenant to explore qualifying alternative acquisition proposals and make recommendation changes, subject to procedural and matching rights, (4) a “Material Adverse Effect” as applicable to HRG would be deemed to have occurred if aggregate losses were to exceed $100 million, (5) the scope of tax representations and warranties, (6) the closing condition requiring the receipt of a tax opinion would be satisfied by Kirkland, Davis Polk or another nationally recognized firm reasonably acceptable to both parties, (7) the Leucadia and Fortress voting agreements would terminate upon a change of recommendation by the HRG board of directors, (8) Leucadia’s standstill would have exceptions permitting purchases of shares up to 15% ownership, and (9) Leucadia’s ongoing right to designate one director to the combined company board would survive certain strategic mergers and acquisitions transactions subject to eventual sunset and minimum actual ownership requirements.

Over the next several days and until the afternoon of February 24, 2018, Kirkland, Cleary and Davis Polk finalized the merger agreement and related transaction documents. Each party also decided to implement at signing of the transaction a shareholder rights plan in order to preserve the value of HRG’s Tax Attributes.

On February 21, 2018, the board of directors of HRG held a meeting, with representatives of HRG’s management, Davis Polk, J.P. Morgan and Jefferies in attendance. During this meeting, the HRG board of directors and its advisors discussed the status of the potential transaction and the key open items, the status of the 338 Election Payments and the treatment of that payment in various circumstances, and certain interests of Fortress and Leucadia that might differ from other HRG stockholders in the potential transaction, among other things. The representatives of J.P. Morgan and Jefferies were then excused from the meeting, and representatives of Davis Polk reviewed with the HRG board of directors their fiduciary duties. During the February 21, 2018 board meeting, the HRG board of directors determined that the independent members of the HRG board of directors should meet in an executive session without the presence of representatives of Fortress or Leucadia the following day.

On February 22, 2018, Messrs. Gerald Luterman, Curtis Glovier and Frank Ianna, the independent members of the board of directors of HRG, held a meeting, with representatives of HRG’s management, Davis Polk,

 

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Jefferies and J.P. Morgan in attendance. During this meeting, the independent members of the board discussed open points in the transaction, including the proposed share consolidation ratio, treatment of HRG’s unpaid transaction expenses at closing, the status of HRG’s contingent and fixed assets and liabilities (including the 338 Election Payments), proposed conditions to closing and treatment of HRG’s outstanding equity awards, among other things. Additionally, the participants discussed Spectrum’s proposal to implement a shareholder rights plan to preserve HRG’s Tax Attributes, the proposed tax structure of the transaction, and certain interests of Fortress and Leucadia that might differ from other HRG stockholders in the merger. After representatives of J.P. Morgan and Jefferies left the meeting, representatives of Davis Polk then reviewed with the independent directors their fiduciary duties. Prior to this meeting, copies of the draft transaction documents were circulated to the independent members of the HRG board of directors.

On February 23, 2018, the board of directors of HRG held a meeting, with representatives of HRG’s management, Davis Polk, J.P. Morgan and Jefferies in attendance. During this meeting, representatives of Jefferies and J.P. Morgan each reviewed with the HRG board of directors their respective preliminary financial analyses. After representatives of Jefferies and J.P. Morgan were excused from the meeting, representatives of Davis Polk reviewed the fiduciary duties of the HRG board of directors with the HRG board of directors. Representatives of Davis Polk then summarized for the HRG board of directors the draft transaction documents and noted in particular the material changes since the prior meeting of the HRG board of directors, with reference to revised drafts of the transaction documents, which were circulated to the HRG board of directors in advance of the meeting. The HRG board of directors discussed the preservation of HRG’s Tax Attributes and disposition of contingent assets and liabilities of HRG, including the 338 Election Payments, among other things. The HRG board of directors additionally determined to hold a meeting the following day to review any changes to the transaction documents.

Also on February 23, 2018, the Spectrum board of directors (other than Messrs. Zargar and Steinberg, who recused themselves from discussions and determinations relating to the merger due to their affiliation with HRG) held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. Representatives of Kirkland and Cleary reviewed the terms of the current drafts of the merger agreement and related transaction documents, copies of which were circulated prior to the meeting, including the remaining open issues to be resolved and a description of the potential resolution of each issue. Representatives of Moelis presented Moelis’ final financial analyses. Following such presentations and related discussion by the Spectrum board of directors, the board meeting was adjourned. Immediately following the board meeting, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance, to further discuss the items covered during the meeting of the Spectrum board of directors. The Spectrum Special Committee also discussed the results of the due diligence conducted on the nature and amount of HRG’s remaining assets and contingent and other liabilities, which were substantially consistent with the Spectrum Special Committee’s assumption that HRG’s wind-down costs and other non-debt actual and contingent liabilities would not exceed $5 million.

On February 24, 2018, the HRG board of directors held a meeting, with representatives of HRG’s management, Davis Polk, J.P. Morgan and Jefferies in attendance. Representatives of Davis Polk described the final resolution of the open issues in the merger agreement and related transaction documents, final forms of which were circulated to the HRG board of directors in advance of the meeting. The HRG board of directors discussed the status of the 338 Election Payments. Representatives of Jefferies reviewed with the HRG board of directors its final financial analyses. Representatives of J.P. Morgan then reviewed with the HRG board of directors its final financial presentation, including J.P. Morgan’s financial analysis of the Share Combination Ratio provided for in the Transaction, and the HRG board of directors discussed with J.P. Morgan the analyses included in J.P. Morgan’s presentation. J.P. Morgan then delivered to the HRG board of directors its oral opinion, which was confirmed by delivery of a written opinion dated February 24, 2018, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the Share Combination Ratio in the proposed Transaction was fair, from a financial point view, to the holders of HRG Common Stock, as more fully described below in the section “—Opinion of HRG’s Financial Advisor.” The representatives of J.P. Morgan and Jefferies

 

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were then excused from the meeting. Representatives of Davis Polk then walked the HRG board of directors through a fiduciary duties presentation, and reviewed certain interests of Fortress and Leucadia in the merger that differed from other HRG stockholders, as further described in the section entitled “The Merger—Interests of HRG’s Directors and Officers in the Merger – Rights of Certain Stockholders.”

The non-independent directors of HRG then excused themselves from the meeting. In an executive session without the presence of representatives of Fortress or Leucadia, the independent members of the HRG board of directors discussed certain governance matters. Based on the discussion and deliberations at this meeting and prior meetings, the various presentations of Davis Polk, Jefferies and J.P. Morgan, and various other factors, including that the independent directors did not believe that any economic value potentially available to the unaffiliated stockholders of HRG was foregone in exchange for the rights provided specifically to Fortress and Leucadia in the transaction, the independent members of the HRG board of directors unanimously determined to approve and recommend to the full HRG board of directors (1) the Post-Closing Shareholder Agreement, including Leucadia’s rights thereunder, (2) the Post-Closing Registration Rights Agreement, (3) a reaffirmation of the previously-approved Jefferies engagement letter and (4) the provisions of the Amended HRG Charter and the HRG Rights Agreement that make exceptions for Fortress and Leucadia.

The non-independent directors of HRG then rejoined the meeting, and the independent directors’ recommendation was conveyed to them. Based on the discussions and deliberations at this meeting and prior meetings, the various presentations of Davis Polk, J.P. Morgan and Jefferies, and various other factors, including those described in “—HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors,” the HRG board of directors, among other things, unanimously (1) approved the merger agreement, the Post-Closing Registration Rights Agreement, the Post-Closing Shareholder Agreement, the Spectrum Voting Agreement, the HRG Voting Agreements and the transactions contemplated thereby, including the merger, the HRG Share Issuance, the HRG Charter Amendment and the adoption of the amended and restated HRG bylaws, (2) directed that the HRG Charter Amendment and the HRG Share Issuance be submitted to the HRG stockholders for their consideration, (3) recommended that the HRG stockholders approve the HRG Charter Amendment and the HRG Share Issuance and (4) approved the HRG Rights Agreement.

Later on February 24, 2018, the Spectrum Special Committee held a meeting, with representatives of Kirkland, Cleary and Moelis in attendance. Representatives of Kirkland and Cleary described the final resolution of the open issues in the merger agreement and related transaction documents, final forms of which were circulated to the Spectrum Special Committee in advance of the meeting (and which were consistent with drafts circulated the prior day). At the request of the Spectrum Special Committee, Moelis delivered to the Spectrum Special Committee an oral opinion, which was confirmed by delivery of a written opinion, dated February 24, 2018, addressed to the Spectrum Special committee to the effect that, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and conditions and limitations set forth in the opinion, the merger exchange ratio in the transaction is fair, from a financial point of view, to Spectrum’s shareholders other than HRG shareholders and the holders entering into voting agreements with HRG in connection with the merger. Based on the discussions and deliberations at this meeting and prior meetings, the various presentations of Kirkland, Cleary and Moelis, including financial analyses presented by Moelis at the February 23rd meeting, and various factors, including those described in “—Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors,” the Spectrum Special Committee unanimously (1) determined that the merger agreement, the merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of, Spectrum’s minority shareholders, and (2) recommended that the Spectrum board of directors (i) authorize, approve, adopt and declare advisable the merger agreement, the merger and the other transactions contemplated thereby, (ii) direct that the adoption of the merger agreement and the approval of the merger and the other transactions contemplated thereby be submitted to a vote at a meeting of Spectrum’s shareholders and (iii) recommend that Spectrum’s shareholders vote to adopt the merger agreement and approve the merger and the other transactions contemplated thereby.

Shortly thereafter, the Spectrum board of directors (other than Messrs. Zargar and Steinberg, who recused themselves from discussions and determinations relating to the merger due to their affiliation with HRG)

 

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convened and, acting upon the Spectrum Special Committee’s recommendation, the members of the Spectrum board of directors present at the meeting by unanimous vote (1) determined the merger, the merger agreement and the other transactions contemplated thereby are fair to, advisable and in the best interests of Spectrum and its shareholders, (2) authorized, approved, adopted and declared advisable the merger agreement, the merger and the other transactions contemplated thereby, (3) directed the adoption of the merger agreement and the approval of the merger and the other transactions contemplated thereby be submitted to a vote at a meeting of Spectrum’s shareholders and (4) recommended adoption of the merger agreement and approval of the merger and the other transactions contemplated thereby by Spectrum’s shareholders.

Shortly following the meetings of the HRG board of directors, the Spectrum Special Committee and the Spectrum board of directors (other than Messrs. Zargar and Steinberg, who recused themselves from discussions and determinations relating to the merger due to their affiliation with HRG), in the evening of February 24, 2018, Spectrum and HRG entered into the Merger Agreement and related transaction documents.

Before the opening of trading on the NYSE on February 26, 2018, Spectrum and HRG issued a joint press release announcing the proposed transaction.

On June 8, 2018, Spectrum, HRG and Merger Sub entered into Amendment No. 1 to the Merger Agreement, which made certain modifications to the form of the Amended HRG Charter to (i) give effect to the resignation of Andreas Rouvé as a member of the Spectrum board of directors, and (ii) make certain clarifying changes in connection with the preapprovals granted to certain large institutional advisors from the transfer restrictions under the operation of the Merger Agreement and the provisions of Article XIII of the Amended HRG Charter, as discussed under “The MergerInterests of HRG’s Directors and Offices in the MergerRights of Certain Stockholders” and “Questions and Answers About the Merger and the Special Meetings—What will happen if a person would become a holder of more than 4.9% of the HRG Securities as a result of the Merger?” and as described in HRG’s Current Report on Form 8-K dated June 8, 2018 and filed with the SEC on June 8, 2018 and Spectrum’s Current Report on Form 8-K dated June 8, 2018 and filed with the SEC on June 8, 2018. Amendment No. 1 is attached to this joint proxy statement/prospectus as Annex B, and the Amended HRG Charter, as amended by Amendment No. 1, is attached to this joint proxy statement/prospectus as Annex C.

Spectrum’s Reasons for the Merger; Recommendation of the Spectrum Special Committee and the Spectrum Board of Directors

Spectrum Special Committee

On February 22, 2017, following public disclosure that HRG’s board of directors had initiated a process to explore potential strategic alternatives available to HRG (each, an “HRG Potential Strategic Alternative”), the Spectrum board of directors, mindful that potential conflicts of interests may arise or exist between HRG and its affiliates (other than Spectrum and its subsidiaries), on the one hand, and Spectrum and its stockholders (other than HRG and such affiliates), on the other hand, determined that it was advisable and in the best interests of Spectrum and its stockholders to establish the Spectrum Special Committee consisting only of independent and disinterested directors to explore, consider, negotiate and review any such strategic alternatives announced by HRG involving Spectrum or any other strategic or financial alternatives available to Spectrum (each, a “Spectrum Potential Strategic Alternative”). The Spectrum board of directors delegated full power and authority to the Spectrum Special Committee in connection with its exploration, consideration, negotiation and review of Spectrum Potential Strategic Alternatives, including full power and authority to (i) formulate, review, evaluate and negotiate on behalf of Spectrum any Spectrum Potential Strategic Alternative, including the authority to develop and deliver a proposal for a Spectrum Potential Strategic Alternative, (ii) determine on behalf of the Spectrum board of directors whether any Spectrum Potential Strategic Alternative is fair to, advisable and in the best interests of, Spectrum and its stockholders (other than HRG and its affiliates), (iii) make recommendations to the Spectrum board of directors in respect of any Spectrum Potential Strategic Alternative, including, without limitation, any recommendation to not proceed with or reject any Spectrum Potential Strategic Alternative, and

 

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(iv) take any and all actions and approve any actions or agreements and other documents the Spectrum Special Committee deems necessary or appropriate with respect to any Spectrum Potential Strategic Alternative. In connection with the formation of the Spectrum Special Committee, the Spectrum board of directors resolved that it would not propose or recommend to Spectrum’s stockholders or otherwise approve any Spectrum Potential Strategic Alternative without the favorable recommendation of such Spectrum Potential Strategic Alternative by the Spectrum Special Committee.

The Spectrum Special Committee, at its meeting on February 24, 2018, unanimously determined that the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby were fair to, advisable and in the best interests of, Spectrum and its stockholders (other than HRG and its affiliates), and recommended that the Spectrum board of directors (i) authorize, approve, adopt and declare advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, (ii) direct the adoption of the Merger Agreement and the Related Agreements and the approval of the Merger and the other transactions contemplated thereby be submitted to a vote at a meeting of Spectrum’s stockholders and (iii) recommend Spectrum’s stockholders adopt the Merger Agreement and the Related Agreements and approve the Merger and the other transactions contemplated thereby.

In reaching its determination and recommendation, the Spectrum Special Committee consulted with and received the advice of its financial and legal advisors, discussed certain matters with Spectrum’s senior management team and other members of Spectrum’s board of directors and considered a number of factors that the Spectrum Special Committee believed supported its determination and recommendation, including the following factors (not in any relative order of importance):

 

    the elimination of a controlling stockholder of Spectrum;

 

    the expectation that the Merger will result in more independent corporate governance for Spectrum by providing for an independent board structure at HRG and eliminating certain governance rights held by HRG pursuant to its ownership of a majority of the outstanding Spectrum Common Stock and pursuant to the Spectrum Certificate of Incorporation, Spectrum Bylaws and the Existing Stockholder Agreement (which will terminate at the Effective Time), as more fully described in the sections entitled “—Material Agreements Between the Parties – Stockholder Agreement” and “Comparison of Stockholder Rights”;

 

    the removal of overhang on Spectrum Common Stock given HRG’s majority ownership and uncertainty regarding HRG’s process to explore HRG Potential Strategic Alternatives involving Spectrum;

 

    the expectation that Spectrum stockholders will be able to participate as stockholders of HRG in the benefit of certain tax attributes of HRG;

 

    the belief that Spectrum’s pending divestiture of its Global Batteries business will allow Spectrum and its stockholders to realize substantial value from the Tax Attributes in the near term;

 

    the fact that the Spectrum Special Committee considered a range of Spectrum Potential Strategic Alternatives and determined that the Merger was fair to, advisable and in the best interests of Spectrum and its stockholders (other than HRG and its affiliates), as more fully described in the section entitled “The Merger—Background of the Merger”;

 

    the expectation that the Merger will not preclude other potential strategic transactions with third parties in the future and could potentially enhance the flexibility to pursue such transactions;

 

    the potential to increase flexibility around Spectrum’s capital structure due to the elimination of the controlling stockholder of Spectrum;

 

    the potential to increase the liquidity and appeal of the shares of HRG Common Stock following the Merger, as compared to Spectrum Common Stock, to a broader, fully distributed stockholder base due to lack of a controlling stockholder and a smaller proportion of shares held by affiliated stockholders;

 

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    the expectation that the consummation of the Merger on terms that are favorable to Spectrum will eliminate a source of distraction for the Spectrum board of directors, management and investors;

 

    feedback from Spectrum’s stockholders (other than HRG and its affiliates) who generally expressed support of pursuing a transaction with HRG;

 

    the support of the Merger by HRG, which entered into the HRG Voting Agreement pursuant to which HRG agreed to vote its shares of Spectrum Common Stock to approve and adopt the Merger Agreement, the Merger and the transactions contemplated thereby and take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the HRG Voting Agreement, as more fully described in the section entitled “The Transaction Agreements—Description of the Voting Agreements”;

 

    the support of the Merger by Leucadia, which entered into the Leucadia Voting Agreement pursuant to which, among other things, Leucadia agreed to vote its shares of HRG Common Stock to approve the HRG Charter Amendment and the HRG Share Issuance and to take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Leucadia Voting Agreement, as more fully described in the section entitled “The Transaction Agreements—Description of the Voting Agreements—Leucadia Voting Agreement”;

 

    the support of the Merger by Fortress, which entered into the Fortress Voting Agreement pursuant to which, among other things, Fortress agreed to vote its shares of HRG Common Stock to approve the HRG Charter Amendment and the HRG Share Issuance and to take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Fortress Voting Agreement, as more fully described in the section entitled “The Transaction Agreements—Description of the Voting Agreements—Fortress Voting Agreement”;

 

    Moelis’ financial analysis, and its oral opinion, subsequently confirmed in writing dated February 24, 2018, delivered by Moelis and addressed to the Spectrum Special Committee, that, as of the date of such opinion, and based upon and subject to the assumptions made, procedures followed, matters considered and conditions and limitations set forth in such opinion, the merger exchange ratio in the transactions contemplated by the Merger Agreement is fair, from a financial point of view, to the holders of Spectrum Common Stock, other than HRG, its affiliates, and those holders of HRG Common Stock party to the Voting Agreements, as more fully described in the section entitled “The Merger—Opinion of the Spectrum Special Committee’s Financial Advisor;”

 

    the likelihood that the Merger will be consummated, based on, among other things, the nature of conditions to the Merger, including the fact that the Merger is not conditioned on the receipt of any regulatory approvals, third party consents or financing, other than the required stockholder approvals and consents described herein;

 

    the fact that Leucadia, the largest stockholder of HRG following the consummation of the Merger, will be subject to certain standstill obligations with respect to HRG following the consummation of the Merger, pursuant to the terms and conditions of the Post-Closing Stockholder Agreement, as more fully discussed in the section entitled “The Transaction Agreements—Description of the Post-Closing Stockholder Agreement”;

 

   

the fact that, in order to preserve the value of the Tax Attributes that are expected to benefit Spectrum and its stockholders (other than HRG and its affiliates) following the consummation of the Merger, Leucadia and Fortress, the two largest stockholders of HRG following the consummation of the

 

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Merger, will be subject to certain limitations on the transfer of their shares of HRG Common Stock following the consummation of the Merger (subject to certain exceptions), as set forth in the Amended HRG Charter, which is more fully discussed in the section entitled “Comparison of Stockholder Rights—Transfer Restrictions”;

 

    the fact that the Merger is expected to be tax free to Spectrum and its stockholders and HRG and its stockholders;

 

    the scope and results of Spectrum’s due diligence investigation of HRG, which included review of its financial statements, contingent liabilities, Tax Attributes, existing agreements and legal and other matters; and

 

    the fact that the Spectrum Special Committee, with the advice of its advisors, reviewed the terms of the Merger Agreement and considered them to be reasonable, including:

 

    that the Share Combination Ratio takes into account, among other things, the amount of HRG’s debt and cash (including any changes to HRG’s debt and cash between signing and closing) as well as HRG’s transaction expenses;

 

    that, subject to certain conditions, the Spectrum board of directors is permitted to change its recommendation to its stockholders in response to a superior proposal or, in the absence of a superior proposal, in response to an intervening event, in each case if it determines that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, and that no termination fee is payable by Spectrum upon termination of the Merger Agreement in such event;

 

    the right to terminate the Merger Agreement if, among other things, the HRG board of directors changes its recommendation to its stockholders in response to a superior proposal or an intervening event following a determination that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties under applicable law; and

 

    the right, subject to certain conditions, to terminate the Merger Agreement if the Merger is not consummated on or before October 8, 2018.

The Spectrum Special Committee also considered the procedural safeguards involved in the negotiation of the Merger Agreement, the Related Agreements, Merger and the transactions contemplated thereby believed to support the substantial and procedural fairness of the Merger to Spectrum and its stockholders (other than HRG and its affiliates), including the following factors (not in any relative order of importance):

 

    the fact that the Spectrum Special Committee consists solely of independent and disinterested directors;

 

    the fact that the Spectrum board of directors delegated, and the Spectrum Special Committee exercised, full power and authority to explore, consider, negotiate, review and make recommendations to the Spectrum board of directors in respect of any Spectrum Potential Strategic Alternative;

 

    the fact that, other than their receipt of Spectrum Special Committee and Spectrum board of director fees (which are not contingent upon the consummation of the Merger or the Spectrum Special Committee’s or Spectrum board of directors’ recommendation as to the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby) and other interests described under “The Merger—Interests of Spectrum’s Directors and Officers in the Merger,” members of the Spectrum Special Committee do not have interests in the Merger different from, or in addition to, those of Spectrum and its stockholders (other than HRG and its affiliates);

 

    the fact that the Spectrum Special Committee held 29 meetings to discuss and evaluate the Merger and other matters related thereto and was advised by independent financial and legal advisors, and each member of the Spectrum Special Committee was actively engaged in the process on a continuous and regular basis;

 

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    the fact that the Spectrum Special Committee was advised by Moelis, as financial advisor, and Kirkland and Cleary, as legal advisors, each an internationally recognized firm selected by the Spectrum Special Committee based on its respective qualifications and the Spectrum Special Committee’s review of each firm’s relationships disclosure and determination that each firm was independent in connection with the Merger;

 

    the fact that the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby were negotiated on an arms-length basis between the Spectrum Special Committee and its advisors, on the one hand, and HRG and its advisors, on the other hand;

 

    the fact that the Spectrum Special Committee had full power and authority to not proceed with or reject the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby; and

 

    the requirement that the Merger Agreement be adopted (i) by the holders of a majority of the outstanding shares of Spectrum Common Stock, including shares held by HRG and its affiliates and the executive officers of Spectrum, (ii) by the holders of a majority of the outstanding shares of Spectrum Common Stock that are not beneficially owned, directly or indirectly, by HRG, its affiliates and the executive officers of Spectrum, and (iii) by the holders of a majority of the outstanding shares of Spectrum Common Stock beneficially owned, directly or indirectly, by holders other than HRG and its affiliates and any group (that would be deemed to be a “person” by Section 13(d)(3) of the Exchange Act with respect to securities of HRG) of which HRG or any entity or group directly or indirectly controlling or controlled by HRG is a member, as required under Section 12 of the Spectrum certificate of incorporation.

In the course of its deliberations, the Spectrum Special Committee also considered a variety of risks and other countervailing factors concerning the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby, including the following factors (not in any relative order of importance):

 

    Leucadia and Fortress, which are expected to hold approximately 14% and 10%, respectively, of the outstanding shares of HRG Common Stock following the closing of the Merger;

 

    Leucadia will have an ongoing right, subject to certain conditions, to appoint a director to the HRG board of directors as well as a right at the closing to designate a second director who meets certain independence requirements, as more fully described in the sections entitled “The Transaction Agreements – Post-Closing Governance” and “The Transaction Agreements – Description of the Post-Closing Stockholder Agreement”;

 

    the potential downward pressure on the share price of HRG that may result if HRG’s stockholders who are not subject to transfer restrictions (or upon the expiration thereof) seek to sell their shares of HRG Common Stock following the consummation of the Merger;

 

    the increased indebtedness of HRG following the Merger due to the assumption of HRG’s net debt as well as the incurrence of transaction fees and expenses by HRG and Spectrum;

 

    the risk that HRG’s contingent liabilities, including potentially unknown legacy liabilities of HRG, exceed anticipated exposure;

 

    the value of the Tax Attributes to HRG following the Merger is in part subject to and dependent on the expected results of Spectrum’s business and operations, including the timing of its anticipated divestiture of the GBA Businesses;

 

    HRG’s ability to use the Tax Attributes following the Merger to reduce future tax payments may be limited if HRG is considered to have experienced an “ownership change” for U.S. federal income tax purposes as a result of the Merger or as a result of future changes in ownership;

 

   

the fact that there can be no assurance that all conditions to the parties’ obligations to complete the Merger will be satisfied, including approvals by Spectrum and HRG stockholders, and that failure to

 

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complete the Merger may have a potential negative impact on Spectrum, its business and the trading price of its stock;

 

    the fact that substantial costs will be incurred by both Spectrum and HRG in connection with the Merger and the transactions contemplated thereby, including in connection with any litigation that may result from the announcement or pendency of the Merger;

 

    Spectrum management’s focus and resources may become diverted from other important business opportunities and operational matters while working to implement the Merger, which could adversely affect Spectrum’s business;

 

    certain financial and other terms of the Merger Agreement, including:

 

    that the Merger Exchange Ratio will not be adjusted based on the relative market values of HRG Common Stock and Spectrum Common Stock;

 

    the restriction on Spectrum’s ability to solicit alternative acquisition proposals from third parties, to provide non-public information to third parties and to engage in discussions with third parties regarding alternative acquisition proposals;

 

    that, subject to certain conditions, the HRG board of directors is permitted to change its recommendation to its stockholders in response to a superior proposal or, in the absence of a superior proposal, an intervening event, in each case if it determines that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties to its stockholders, in which case the voting obligations of Fortress and Leucadia will terminate, and that no termination fee is payable by HRG upon termination of the Merger Agreement in such event;

 

    that, Spectrum will only be permitted to terminate the Merger Agreement as a result of a “material adverse effect” on HRG if all the applicable effects have resulted or would reasonably be expected to result in a net adverse impact in excess of $100,000,000, and which excludes, among others, any effects relating to the Tax Attributes and any effects resulting from the negotiation, execution, consummation, existence, delivery, performance or announcement of the Merger Agreement to the business, financial condition or results of operations of HRG and its subsidiaries (excluding Spectrum and its subsidiaries);

 

    the restrictions on the conduct of Spectrum’s business until the consummation of the Merger or termination of the Merger Agreement, which may delay or prevent Spectrum from undertaking certain opportunities that may arise; and

 

    each of the factors described in the section entitled “Risk Factors.”

The Spectrum Special Committee weighed the benefits, advantages and opportunities against the risks and countervailing factors of entering into the Merger Agreement and the Related Agreements and completing the Merger and the other transactions contemplated thereby. Although the Spectrum Special Committee realized that there can be no assurance about future results or outcomes, including results expected or considered in the factors listed above, the Spectrum Special Committee concluded that the potential benefits, advantages and opportunities of entering into the Merger Agreement and the Related Agreements and completing the Merger and the other transactions contemplated thereby outweigh the risks and countervailing factors.

The foregoing discussion of the factors considered by the Spectrum Special Committee in connection with its determination and recommendation regarding the fairness of the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby to Spectrum and its stockholders (other than HRG and its affiliates) is not intended to be exhaustive but is believed to include the material factors considered by the Spectrum Special Committee. The Spectrum Special Committee did not find it practicable to assign, and did not quantify, rank or otherwise assign, relative weights to the individual factors considered in reaching its

 

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conclusions as to the fairness of the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby. Rather, the Spectrum Special Committee made its fairness determination and recommendation after consideration of all of the foregoing factors as a whole. In addition, individual members of the Spectrum Special Committee may have given different weight to different information and factors.

Spectrum Board of Directors

The Spectrum board of directors (other than Messrs. Joseph Steinberg and Ehsan Zargar, who recused themselves from discussions and determinations relating to the Merger due to their affiliation with the HRG), at its meeting on February 24, 2018, acting upon the unanimous recommendation of the Spectrum Special Committee, (i) determined that the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby were fair to, advisable and in the best interests of, Spectrum and its stockholders, (ii) authorized, approved, adopted and declared advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, (iii) directed the adoption of the Merger Agreement and the Related Agreements and the approval of the Merger and the other transactions contemplated thereby be submitted to a vote at a meeting of Spectrum’s stockholders and (iv) recommended that Spectrum’s stockholders adopt the Merger Agreement and the Related Agreements and approve the Merger and the other transactions contemplated thereby.

In reaching its determination and recommendation, the Spectrum board of directors (other than Messrs. Steinberg and Zargar) considered a number of factors, including the following factors (not in any relative order of importance):

 

    the Spectrum Special Committee’s analysis, conclusions and unanimous determination, which the Spectrum board of directors adopted, that the Merger Agreement, the Related Agreements, the Merger and the other transactions thereby were fair to, advisable and in the best interests of, Spectrum and its stockholders (other than HRG and its affiliates), and the Spectrum Special Committee’s unanimous recommendation that the Spectrum board of directors (i) authorize, approve, adopt and declare advisable the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, (ii) direct the adoption of the Merger Agreement and the Related Agreements and the approval of the Merger and the other transactions contemplated thereby be submitted to a vote at a meeting of Spectrum’s stockholders and (iii) recommend Spectrum’s stockholders adopt the Merger Agreement and the Related Agreements and approve the Merger and the other transactions contemplated thereby; and

 

    the fact that the Spectrum Special Committee is comprised only of independent and disinterested directors, the fact that, other than their receipt of Spectrum board of directors and Spectrum Special Committee fees (which are not contingent upon the consummation of the Merger or the Spectrum Special Committee’s or Spectrum board of directors’ recommendation of the Merger) and their interests described under “The Merger—Interests of Spectrum’s Directors and Officers in the Merger,” members of the Spectrum Special Committee do not have material interests in the Merger different from, or in addition to, those of Spectrum and its stockholders (other than HRG and its affiliates) and the fact that the Spectrum Special Committee received the opinion of a financial advisor it determined to be independent as described above, which opinion is more fully described in the section entitled “The Merger—Opinion of the Spectrum Special Committee’s Financial Advisor.”

The foregoing discussion of the factors considered by the Spectrum board of directors (other than Messrs. Steinberg and Zargar) in connection with its determination and recommendation on fairness of the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby to Spectrum and its stockholders is not intended to be exhaustive but is believed to include the material factors considered by the Spectrum board of directors (other than Messrs. Steinberg and Zargar). The Spectrum board of directors (other than Messrs. Steinberg and Zargar) did not find it practicable to assign, and did not quantify, rank or otherwise assign, relative weights to the individual factors considered in reaching its conclusions as to the fairness of the

 

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Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby. Rather, the Spectrum board of directors (other than Messrs. Steinberg and Zargar) made its fairness determination and recommendation after consideration of all of the foregoing factors as a whole. In addition, individual members of the Spectrum board of directors (other than Messrs. Steinberg and Zargar) may have given different weight to different information and factors.

In considering the recommendation of the Spectrum board of directors with respect to the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby, Spectrum stockholders should be aware that certain of Spectrum’s directors and executive officers have interests in the Merger that may be different from, or in addition to, those of Spectrum’s stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. These interests include, but are not limited to, the continued service of certain directors of Spectrum as directors of HRG following the Merger, the continued employment of certain executive officers of Spectrum by HRG following the Merger, and the treatment in the Merger of equity award and provisions in the Merger Agreement regarding continued indemnification of and advancement of expenses to Spectrum directors and officers. The members of the Spectrum Special Committee and the Spectrum board of directors were aware of these interests and considered them, among others, in their approval and adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby and their recommendation that Spectrum’s stockholders adopt the Merger Agreement and approve the Merger and the transactions contemplated thereby. See “The Merger—Interests of Spectrum’s Directors and Officers in the Merger” for further discussion of these matters.

The foregoing discussion of the information and factors considered by the Spectrum Special Committee and the Spectrum board of directors contains statements that are forward-looking in nature. This information should be read in light of the factors described in “Cautionary Statement Regarding Forward-Looking Statements.”

HRG’s Reasons for the Merger; Recommendation of the HRG Board of Directors

The HRG board of directors (and separately, Messrs. Luterman, Ianna and Glovier), at its meeting on February 24, 2018, unanimously (i) determined that it is advisable and fair to, and in the best interests of, HRG and its stockholders for HRG to enter into the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, including the HRG Share Issuance, the HRG Charter Amendment, the HRG Rights Agreement and the adoption of the amended and restated HRG bylaws, (ii) approved the Merger Agreement, the Related Agreements, the Merger and the other transactions contemplated thereby, including the HRG Share Issuance, the HRG Charter Amendment, the HRG Rights Agreement and the adoption of the amended and restated HRG bylaws, (iii) directed that the HRG Share Issuance and the HRG Charter Amendment be submitted to the stockholders of HRG for their consideration and (iv) recommended that the stockholders of HRG vote to approve the HRG Share Issuance and the HRG Charter Amendment.

In reaching its determination and recommendation, the HRG board of directors (and separately, Messrs. Luterman, Ianna and Glovier) consulted with and received the advice of its independent financial and legal advisors, discussed certain matters with HRG’s senior management team and considered a number of factors that the HRG board of directors believed supported its determination and recommendation, including the following factors (not in any relative order of importance):

 

    the in-depth knowledge of and familiarity with the business, operations, financial condition and prospects of Spectrum, HRG’s primary asset that was developed by HRG as a significant stockholder of Spectrum and the belief that Spectrum Common Stock represents an attractive long term investment opportunity;

 

    the belief that after the Merger, the ownership of HRG Common Stock will be less concentrated and the market for HRG Common Stock will be more liquid than HRG Common Stock or Spectrum Common Stock, and that the simplification of the holding company structure may increase investor interest in HRG and thus potentially further enhance these market dynamics;

 

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    that the Share Combination Ratio (i) only takes into account specific liabilities including HRG’s net indebtedness as of closing and certain transaction expenses of HRG that are unpaid as of closing and (ii) is calculated to include a $200,000,000 upward adjustment to, among other things, compensate pre-closing HRG stockholders for relinquishment of control over Spectrum and the value of the Tax Attributes, as more fully discussed in the section entitled “The Merger – Consideration To Be Received by the Spectrum Stockholders and Consequences of the Reverse Stock Split”;

 

    the expectation that the Merger will eliminate the discount in the trading price of HRG shares and HRG assets in a “sum of the parts” valuation;

 

    the value to HRG stockholders in removing the overhang on Spectrum Common Stock, related to HRG’s majority ownership and the overhang on HRG Common Stock and Spectrum Common Stock related to the uncertainty regarding HRG’s process to explore HRG Potential Strategic Alternatives;

 

    the expectation that simplifying the holding company structure and eliminating the need to comply with two separate public reporting companies’ legal, administrative and other obligations will reduce overhead, lead to cost savings, and enable management of HRG following the Merger to more fully focus on its business and operations;

 

    the belief that Spectrum’s pending divestiture of its GBA Businesses will allow HRG and its stockholders to realize substantial value from the Tax Attributes in the near term;

 

    the fact that the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby were negotiated on an arms-length basis between the HRG board of directors and its advisors, on the one hand, and a special committee consisting solely of independent and disinterested directors of Spectrum with the full power and authority to consider and make recommendations to the Spectrum board of directors in respect of any Spectrum Potential Strategic Alternative, on the other hand, and the fact that, consistent with the Spectrum Certificate of Incorporation, the Merger and the transactions contemplated thereby are conditioned on a non-waivable majority of the minority Spectrum shareholder vote;

 

    the fact that the board of directors of HRG was actively involved for the entirety of the strategic review process, considered a broad range of alternative transactions, including a rights issue to, sales to and other business combinations with third parties and acquisitions of and other business combinations with third parties, and had processes in place to facilitate an independent review by Messrs. Luterman, Ianna and Glovier of matters that impacted Fortress and Leucadia in a manner different from HRG stockholders generally, each as more fully described in the sections entitled “The Merger—Background of the Merger” and “—Interests of HRG’s Directors and Officers in the Merger”;

 

    the support of the Merger by Leucadia, which entered into a voting agreement pursuant to which, among other things, Leucadia agreed to vote its shares of HRG Common Stock to approve the HRG
  Charter Amendment and the HRG Share Issuance and to take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Leucadia Voting Agreement, as more fully described in the section entitled “The Transaction Agreements—Description of the Voting Agreements—Leucadia Voting Agreement”;

 

    the support of the Merger by Fortress, who entered into a voting agreement pursuant to which, among other things, Fortress agreed to vote its shares of HRG Common Stock to approve the HRG Charter Amendment and the HRG Share Issuance and to take certain other actions, including voting against any alternative acquisition proposal or other proposal which would frustrate the purposes, or prevent, delay or otherwise adversely affect the consummation of the transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Fortress Voting Agreement, as more fully described in the section entitled “The Transaction Agreements—Description of the Voting Agreements—Fortress Voting Agreement”;

 

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    feedback from HRG’s stockholders who generally expressed support of pursuing the Merger with Spectrum;

 

    the fact that the Reverse Stock Split, the HRG Share Issuance and the Merger generally are expected to be tax free to HRG and its stockholders;

 

    the expectation that, in addition to the $200,000,000 for the relinquishment of control over Spectrum and the value of the Tax Attributes, pre-closing HRG stockholders will be able to participate as stockholders of HRG after the Merger in the potential upside of the HRG Common Stock and value of the Tax Attributes;

 

    the belief that (i) the Merger is more favorable to HRG stockholders than the potential value that would result from HRG continuing as a stand-alone company, (ii) it was unlikely that an alternative transaction with Spectrum or any other counterparty would provide superior value to the HRG stockholders and (iii) the terms of the Merger Agreement would not preclude or deter a willing and financially capable third party, were one to exist, from making a superior proposal with respect to HRG following the announcement of the Merger Agreement;

 

    that, subject to certain conditions, the HRG board of directors is permitted to change its recommendation to its stockholders in response to a superior proposal or, in the absence of a superior proposal, in response to an intervening event, in each case if it determines that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, and that no termination fee is payable by HRG upon termination of the Merger Agreement in such event;

 

    the right to terminate the Merger Agreement if, among other things, the Spectrum board of directors changes its recommendation to its stockholders in response to a superior proposal or an intervening event following a determination that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties under applicable law;

 

    that Spectrum will only be permitted to terminate the Merger Agreement as a result of a “material adverse effect” on HRG if all the applicable effects have resulted or would reasonably be expected to result in a net adverse impact in excess of $100,000,000, and which excludes, among others, any effects relating to the Tax Attributes and any effects resulting from the negotiation, execution, consummation, existence, delivery, performance or announcement of the Merger Agreement to the business, financial condition or results of operation of HRG and its subsidiaries (excluding Spectrum and its subsidiaries);

 

    the right, subject to certain conditions, to terminate the Merger Agreement if the Merger is not consummated on or before October 8, 2018;

 

    the likelihood that the Merger will be consummated, based on, among other things, the nature of conditions to the Merger, including the fact that the Merger is not conditioned on the receipt of any regulatory approvals, third party consents or financing, other than the required stockholder approvals and consents described herein;

 

    the oral opinion of J.P. Morgan delivered to the HRG board of directors, which was confirmed by delivery of a written opinion dated February 24, 2018, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the Share Combination Ratio in the proposed Transaction was fair, from a financial point of view, to the holders of HRG Common Stock, as more fully described in the section entitled “The Merger—Opinion of HRG’s Financial Advisor.” The full text of the written opinion of J.P. Morgan, dated February 24, 2018, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, is attached as Annex E to this joint proxy statement/prospectus;

 

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    the fact that, in order to preserve the value of the Tax Attributes following the consummation of the Merger, Leucadia and Fortress, the two largest stockholders of HRG following the consummation of the Merger, will be subject to certain limitations on the transfer of their shares of HRG Common Stock following the consummation of the Merger (subject to certain exceptions). These restrictions are set forth in the Amended HRG Charter, which is more fully discussed in the section entitled “Comparison of Stockholder Rights”; and

 

    the fact that the HRG board of directors was advised by J.P. Morgan and Jefferies, as financial advisors, and Davis Polk, as legal advisor, each an internationally recognized firm selected by the HRG board of directors based on its respective qualifications, familiarity with HRG and Spectrum and the HRG board of directors’ review of each firm’s relationships disclosure.

In the course of its deliberations, the HRG board of directors considered a variety of risks and other countervailing factors concerning the Merger Agreement, the Related Agreements, the Merger and the transactions contemplated thereby, including the following factors (not in any relative order of importance):

 

    the elimination of certain governance rights held by HRG pursuant to its ownership of a majority of the outstanding Spectrum Common Stock and pursuant to the Spectrum Certificate of Incorporation, the Spectrum Bylaws and the Existing Stockholder Agreement (which will terminate at the Effective Time);

 

    the potential that the $200,000,000 upward adjustment in the calculation of the Share Combination Ratio does not adequately compensate pre-closing HRG stockholders for the relinquishment of control over Spectrum and the value of the Tax Attributes;

 

    the fact that Spectrum received a demand letter from counsel for a purported Spectrum stockholder pursuant to Section 220 of the DGCL seeking inspection of Spectrum’s books and records in connection with the Merger, which could indicate an increased risk of litigation involving Spectrum’s transaction with HRG;

 

    the restrictions on the conduct of HRG’s business until the consummation of the Merger or termination of the Merger Agreement, which may delay or prevent HRG from undertaking certain opportunities that may arise;

 

    the value of the Tax Attributes to HRG following the Merger is in part subject to and dependent on, among other things, the expected results of Spectrum’s busines