Pegasus Digital Mobility Acquisition Corp. Announces Revaluation of its Business Combination with Gebr. Schmid Group and the Entering Into Related Agreements

Rhea-AI Summary

Pegasus Digital Mobility Acquisition Corp. (PGSS) has announced amendments to the business combination agreement with Gebr. Schmid Group, extending the closing time to April 30, 2024, and reducing the number of shares to be issued to Schmid's shareholders. An earn-out agreement has also been agreed upon, awarding shares based on the combined company's share price performance. Additionally, the company has entered into a subscription agreement with XJ Harbour HK Limited for the transfer of equity interest in a subsidiary of Schmid.

Financial Analyst

The amendment to the business combination agreement and the shareholders' undertaking agreement between Pegasus Digital Mobility Acquisition Corp., Pegasus Topco B.V. and Gebr. Schmid Group indicates a strategic reassessment of the initial terms, reflecting a mutual interest in adjusting the deal structure to current market conditions. The reduction in the number of shares issued to Schmid shareholders suggests a revaluation of the transaction, potentially due to changes in the valuation of Schmid or market dynamics affecting the deal's perceived value.

An earn-out agreement linked to future share price performance is a common mechanism to align the interests of the acquiring and target company shareholders post-acquisition. It incentivizes the target company's shareholders to continue contributing to the combined entity's success. The specific thresholds set at USD 15.00 and USD 18.00 per share indicate confidence in the post-merger performance, but also introduce an element of risk for the Schmid shareholders, as the additional compensation is contingent on the stock's future performance.

The transfer of private placement warrants to the Schmid shareholders and the conditions set for the exercise of remaining warrants by the Sponsor and Pegasus' directors and officers can be seen as a move to stabilize the post-merger share price. A 'cashless' exercise of warrants minimizes the dilution of existing shares, which could be favorable for current shareholders. Additionally, the subscription agreement with XJ Harbour HK Limited for the transfer of equity interest in Schmid Technology (Guangdong) Co., Ltd. adds a layer of complexity to the transaction, with staggered payments and share allotments that need to be scrutinized for their impact on the financials of the combined entity.

Mergers & Acquisitions Legal Expert

The extension of the business combination closing to April 30, 2024, suggests that there might be regulatory, operational, or due diligence complexities requiring additional time to resolve. Legal experts would analyze the implications of this extension, which may include renegotiations of terms, reassessment of risk and securing of further approvals. The reduction in share issuance and the introduction of an earn-out agreement may reflect a compromise between the negotiating parties to address valuation disagreements or share price volatility.

The legal intricacies of the earn-out agreement and the private placement warrant conditions will be carefully structured to ensure compliance with securities laws and to protect the interests of all parties involved. The earn-out agreement's three-year term provides a limited window for the share price targets to be met, which may necessitate a focused strategy to enhance shareholder value within that period.

The XJ Subscription Agreement introduces cross-border transactional elements, given the involvement of a subsidiary in China. This necessitates careful legal navigation of international business laws, foreign investment regulations and potential geopolitical risks. The structured payment plan to XJ, including a significant deferred payment with interest, requires legal oversight to ensure enforceability and alignment with the broader strategic objectives of the acquisition.

Market Research Analyst

From a market perspective, the business combination between Pegasus Digital Mobility Acquisition Corp. and Gebr. Schmid Group, along with the associated agreements, signifies an attempt to create a more competitive and financially robust entity. Market analysts would examine the strategic fit of the companies, the potential for synergies and the expected impact on the market position of the combined company.

The earn-out agreement linked to share price performance is a signal to the market about the anticipated growth trajectory and the management's confidence in achieving specific financial milestones. This could influence investor sentiment and the stock's performance. Market research would also delve into the implications of the transfer of equity interest from XJ Harbour HK Limited to TopCo, assessing how the integration of Schmid Technology (Guangdong) Co., Ltd. could enhance the combined company's market presence, particularly in the Asia-Pacific region.

Additionally, market analysts would assess the potential impact of the transaction on the competitive landscape, considering the unique capabilities or technologies that Schmid brings to the table. The transaction's completion timeline and the milestones set forth in the earn-out agreement would be factored into market forecasts and the anticipated financial performance of the combined entity.

GREENWICH, Conn.--(BUSINESS WIRE)-- Pegasus Digital Mobility Acquisition Corp. (NYSE: PGSS.U) (the "Company"), a special purpose acquisition company founded by StratCap Investment Management, LLC, formerly Strategic Capital Fund Management, LLC ("StratCap"), today announced that it has together with Pegasus Topco B.V., a Dutch private limited liability company and wholly-owned subsidiary of Pegasus ("TopCo") entered into an amendment to the business combination agreement with Gebr. Schmid Group ("Schmid"). In addition, the Company has entered into an amendment of the shareholders' undertaking agreement with Anette Schmid and Christian Schmid. Pursuant to the amendments, the parties agreed to extend the time for the business combination closing to April 30, 2024 and also agreed to reduce the number of shares to be issued to the shareholders of Schmid at the closing of the business combination to 28,725,000 shares.

In connection with these changes, an earn-out agreement has been agreed which awards 2,500,000 TopCo shares to Anette Schmid and Christian Schmid should the share price of the combined company reach or exceed USD 15.00 after the closing of the business combination and an additional 2,500,000 TopCo shares should the share price of TopCo reach or exceed USD 18.00 after the closing of the business combination. The earn-out agreement has a three (3) year term.

In addition, the Pegasus Digital Mobility Sponsor LLC, a Cayman Islands limited liability company (the "Sponsor") has agreed to transfer 2,000,000 private placement warrants to Anette Schmid and Christian Schmid (in equal parts) at the date of the closing of the business combination.

In addition, the Sponsor and certain directors and officers of Pegasus have undertaken towards TopCo that, subsequent to the closing of the business combination, they will (i) only exercise the remaining 7,750,000 private placement warrants on a "cashless basis" in accordance with the terms of the private placement warrants, and (ii) exercise the private placement warrants on a "cashless basis" in accordance with the terms of the private placement warrants when the reference price as defined in the warrant agreement reaches USD 18.00 (unless the private placement warrants have been exercised or redeemed before).

In addition, Pegasus, Schmid and TopCo entered into a subscription agreement with XJ Harbour HK Limited ("XJ") (the "XJ Subscription Agreement") according to which XJ agreed to in stages transfer its 24.1% equity interest in Schmid Technology (Guangdong) Co., Ltd., a subsidiary of Schmid, to TopCo for consideration amounting to (i) 1,406,361 TopCo shares to be allotted to XJ at the time of the completion of the business combination, (ii) a EUR 10 million payment to XJ from TopCo at the completion of the business combination, (iii) a EUR 5 million payment to XJ from TopCo within 270 days from the day of the completion of the business combination and (iv) a EUR 15 million payment (plus an interest in respect thereof at an annual rate of 6% from the completion of the business combination to the date of payment) to XJ from TopCo within 455 days from the day of the completion of the business combination.

The completion of the business agreement is currently expected towards the end of the first quarter of 2024.

FORWARD-LOOKING STATEMENTS

This press release contains statements that constitute "forward-looking statements." All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company, including those set forth in the "Risk Factors" section of the Company’s registration statement and final prospectus for the offering filed with the SEC. Copies are available on the SEC’s website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

About Pegasus Digital Mobility Acquisition Corp.

The Company is a blank check company incorporated as a Cayman Islands exempted entity. The Company was founded by StratCap, an investment management organization focused on digital economy investments. The Company is a special purpose acquisition company formed for the purpose of effecting a business combination with one or more businesses.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240129064716/en/

Investor Relations

investor-relations@pegasusdm.com

Source: Pegasus Digital Mobility Acquisition Corp.

FAQ

What is the ticker symbol for Pegasus Digital Mobility Acquisition Corp.?

The ticker symbol for Pegasus Digital Mobility Acquisition Corp. is PGSS.

What amendments were made to the business combination agreement with Gebr. Schmid Group?

The amendments extended the closing time to April 30, 2024, and reduced the number of shares to be issued to Schmid's shareholders.

What is the earn-out agreement and what does it entail?

The earn-out agreement awards shares to Anette Schmid and Christian Schmid based on the combined company's share price performance after the closing of the business combination.

What subscription agreement has Pegasus entered into with XJ Harbour HK Limited?

Pegasus has entered into a subscription agreement with XJ Harbour HK Limited for the transfer of equity interest in a subsidiary of Schmid.