BigBear.ai and GigCapital4 Enter Into $75M Backstop Agreement With AE Industrial Partners
COLUMBIA, Md. & PALO ALTO, Calif., Nov. 30, 2021 -- BigBear.ai (“the Company"), a leading provider of artificial intelligence, machine learning, cloud-based big data analytics, and cyber engineering solutions, and GigCapital4, Inc. (“GigCapital4”; Nasdaq: GIGGU, GIG, GIGGW), a Private-to-Public Equity (PPE) entity also known as special purpose acquisition company (“SPAC”), today announced that GigCapital4 has entered into a $75 million backstop agreement (7.5 million shares at $10 per share) with AE Industrial Partners to support their previously announced business combination. The backstop agreement provides that an affiliate of AE Industrial Partners will purchase up to 7.5 million shares of GigCapital stock, with the actual amount dependent upon the amount of cash available at the closing of the business combination of the Company and GigCapital4 after any redemptions, the repayment of existing Company debt, transaction expenses and the cash portion of the merger consideration being paid in the business combination.
In addition, GigCapital4 and the Company have adjusted the rollover equity of BigBear.ai by 15% to $1.05 billion to reflect current market conditions and establish a more attractive entry point to market. Additionally, they have set as a condition to GigCapital4 closing that there be a minimum available cash at closing of $75 million on the balance sheet of the post-combination Company. BigBear.ai believes that its recent strategic progress and new contract awards support substantial value opportunities for stockholders:
- Reported third quarter 2021 revenue of $40.2 million, an increase of approximately 11% over the second quarter of 2021, driven by new and expanded customer engagements.
- Added more than $150 million of new contract awards in the third quarter, growing total backlog to approximately $485 million as of September 30, 2021.
- New engagements and contract awards include: new commercial partnership with Palantir to collaborate on go-to-market opportunities in the commercial market sector; commercial partnerships with Virgin Orbit and Terran Orbital; MOU with Redwire Corporation; one-year contract with the Defense Intelligence Agency; new award by the United States Army for Global Force Information Management Phase 1 Prototype contract; five-year, single award contract by the National Security Agency (NSA).
- Targeted investments aimed at accelerating commercial penetration, including strategic leadership appointments to support the Company’s growth.
“We believe our suite of AI-powered solutions are indispensable tools that give government and commercial sector clients critical competitive advantages – allowing them to make decisions faster and better than their competitors,” said Dr. Reggie Brothers, Chief Executive Officer of BigBear.ai. “Along with our partners at GigCapital4 and AE Industrial and the purchasers of our convertible senior unsecured notes, we are confident in our opportunities to create value as a public company. We are well positioned to accelerate our progress and take advantage of a rapidly growing addressable market, and today’s announcement reflects our commitment to delivering significant value for GigCapital4 shareholders as well as future shareholders of BigBear.ai.”
Dr. Raluca Dinu, Founding Managing Partner of GigCapital Global and Chief Executive Officer of GigCapital4, said, “With consistent backlog growth and major contract awards, BigBear.ai is generating strong momentum and has multiple paths for growth as it continues to expand into the fast-growing commercial market. We believe that AI is one of the highest-impact technology verticals of our generation, and we are confident that this transaction brings compelling opportunities to all stakeholders.”
Kirk Konert, Partner at AE Industrial Partners, said, “AE Industrial Partners is proud to further support this transaction through the backstop agreement, and believes BigBear.ai is well positioned to leverage the significant opportunities to operationalize its AI platform and create value for shareholders as a public company.”
Dr. Avi Katz, Founding Managing Partner of GigCapital Global and Executive Chairman of the Board of GigCapital4, said, “The GigCapital team is delighted to combine with a world leading AI/ML company, as BigBear.ai, and with AE Industrial Partners being lead investors in the aerospace and defense space, as we will jointly work together as part of the future public company board of directors to enhance the future growth of the enterprise. We are also humbled by the exceptional partnership we found with our investors supporting this deal in unlocking significant value for all stakeholders in the ecosystem.”
In addition to the backstop agreement described above, and in order to reflect current market conditions and establish a more attractive entry point to market, the change in the rollover equity agreed to by GigCapital4 and the Company results in an adjustment of the post-combination pro forma enterprise value of BigBear.ai from $1.565 billion to $1.378 billion.
As previously announced, the Company is expected to have approximately $330 million in cash at transaction close, post all debt repayments and payment of transaction expenses, which the Company believes will provide the flexibility to support organic and inorganic growth. The cash component of the purchase price to be paid to the equity holders of BigBear.ai is expected to be funded by GigCapital4's cash in trust (minus any redemptions by public stockholders), and a $200 million convertible senior unsecured note private placement with institutional investors including funds managed by affiliates of Fortress Investment Group, LLC, Marathon Asset Management, LP, and certain funds managed by Highbridge Capital Management, LLC. The 5-year unsecured convertible notes, which shall bear interest at a rate of 6% per annum, are convertible into common shares of the combined company at a conversion price of $11.50, and are being revised in conjunction with the entry into the backstop agreement and the change in rollover equity to provide certain covenants and other protections to the note holders, including restrictions on additional borrowing by the post-combination Company, subject to certain exceptions, and a one-time conversion price reset, if required for down‑side protection.
GigCapital4 Special Meeting of Stockholders
The special meeting of GigCapital4 stockholders to approve the proposed business combination (the “Special Meeting”) will be held at 1 p.m. Eastern Time/10 a.m. Pacific Time on December 3, 2021. The proxy statement/prospectus is being mailed to the Company's stockholders of record as of the close of business on October 5, 2021 (the "Record Date").
Upon closing of the transaction, BigBear.ai’s common shares and warrants are expected to trade on the New York Stock Exchange under the ticker symbols "BBAI" and “BBAI.WS,” respectively.
The transaction is expected to close on December 7, 2021, subject to approval by GigCapital4 stockholders.
William Blair is serving as exclusive financial advisor, Kirkland and Ellis LLP is serving as legal counsel, and Grant Thornton is serving as auditor to BigBear.ai. Oppenheimer & Co Inc. is serving as Capital Markets Advisor and Placement Agent, and BMO Capital Markets is serving as Exclusive Financial Advisor, DLA Piper LLP (US) is serving as legal counsel, and BPM LLP is serving as auditors to GigCapital4. Mayer Brown LLP is serving as legal counsel to Oppenheimer & Co Inc., BMO Capital Markets and William Blair.
A leader in decision dominance for more than 20 years, BigBear.ai operationalizes artificial intelligence and machine learning at scale through its end-to-end data analytics platform. The Company uses its proprietary AI/ML technology to support its customers’ decision-making processes and deliver practical solutions that work in complex, realistic and imperfect data environments. BigBear.ai’s composable AI-powered platform solutions work together as often as they stand alone: Observe (data ingestion and conflation), Orient (composable machine learning at scale), and Dominate (visual anticipatory intelligence and optimization).
BigBear.ai’s customers, which include the U.S. Intelligence Community, Department of Defense, the U.S. Federal Government, as well as customers in the commercial sector, rely on BigBear.ai’s high value software products and technology to analyze information, identify and manage risk, and support mission critical decision making. Headquartered in Columbia, Maryland, BigBear.ai has additional locations in Virginia, Massachusetts, Michigan, and California. For more information, please visit: http://bigbear.ai.
GigCapital4, Inc. is a Private-to-Public Equity (PPE) company, also known as a blank check company or special purpose acquisition company (SPAC), focusing on the technology, media and telecommunications (TMT) and sustainable industries. It was sponsored by GigAcquisitions4, LLC, which was founded by GigFounders, LLC, each a member entity of GigCapital Global, and formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses.
About AE Industrial Partners
AE Industrial Partners is a private equity firm specializing in Aerospace, Defense & Government Services, Space, Power & Utility Services, and Specialty Industrial markets. AE Industrial Partners invests in market-leading companies that can benefit from our deep industry knowledge, operating experience, and relationships throughout our target markets. AE Industrial Partners is a signatory to the United Nations Principles for Responsible Investment and the ILPA Diversity in Action initiative. Learn more at www.aeroequity.com.