Ranpak Holdings Corp.: Form 10-Q for the period ended Mar 31, 2019

Except where the context otherwise requires, all references in this Quarterly Report to the “Company”, “we”, “us”, “our” or similar words or phrases are to One Madison Corporation, a Cayman Islands exempted company, and references to the “Sponsor” refer to One Madison Group, LLC, a Delaware limited liability company, in which our founder, Omar M. Asali, together with certain affiliates, holds a controlling 80% ownership interest. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-Q, words such as “may,” “should,” “could,” “would,” “expect,” “forecast,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all forward-looking statements whenever they appear in this Quarterly Report. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Overview

We are a blank check company incorporated on July 13, 2017 as a Cayman Islands exempted company incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our Initial Business Combination using cash from the proceeds of the Initial Public Offering and the Private Placement of the Private Placement Warrants. We may also use our shares, debt or a combination of cash, equity and debt to effectuate our Initial Business Combination.

Business Combination

Stock Purchase Agreement

On December 12, 2018, the Company entered into a Stock Purchase Agreement with Rack Holdings L.P., a Delaware limited partnership, and Rack Holdings Inc., a Delaware corporation and a direct wholly owned subsidiary of Ranpak, pursuant to which the Company will acquire all of the issued and outstanding equity interests of Rack Holdings from Seller, on the terms and subject to the conditions set forth in the Stock Purchase Agreement. The transactions set forth in the Stock Purchase Agreement will result in a Business Combination involving the Company for purposes of the Company’s Amended and Restated Memorandum and Articles of Association. The Stock Purchase Agreement and the transactions contemplated thereby were unanimously approved by the Board of Directors of the Company.

Ranpak is the global leader in fiber-based, environmentally sustainable protective packaging solutions that safeguard products in commerce and industrial supply chains. Ranpak, founded in 1972, is headquartered in Concord Township, Ohio and has approximately 550 employees.

Subject to the terms and conditions set forth in the Stock Purchase Agreement, the Company has agreed to pay to Seller at the closing of the Business Combination $950,000,000 in cash in consideration for the acquisition of Rack Holdings, which amount will be (i) adjusted by the difference between the net working capital of Rack Holdings and its subsidiaries as of Closing as measured against normalized level of working capital of $22,000,000 (which could be a downward or upward adjustment), (ii) increased by the amount of cash of Rack Holdings and its subsidiaries as of Closing and (iii) reduced by the amount of debt and unpaid transaction expenses of Rack Holdings and its subsidiaries as of Closing. The purchase price paid at Closing will be based on an estimate of the amount of the foregoing adjustments and will be subject to a customary post-Closing true-up. On January 24, 2019, we entered into the Stock Purchase Agreement Amendment with Seller and Rack Holdings, pursuant to which, the closing cash consideration is payable in immediately available funds as follows: (x) €140,000,000 in Euros (which payment shall be credited against the closing cash consideration in an amount equal to $160,825,000 based on an agreed currency exchange ratio of 1.00:1.14875 EUR:USD) and (y) an amount in U.S. dollars equal to the closing cash consideration less the Euro payment credit.

Financing for the Business Combination and for related transaction expenses is expected to consist of (i) $300,000,000 of proceeds from the Company’s Initial Public Offering on deposit in the Trust Account (plus any interest income accrued thereon since the Initial Public Offering), net of any redemptions of the Company’s ordinary shares in connection with the shareholder vote to be held in connection with the transactions contemplated by the Stock Purchase Agreement, (ii) $150,000,000 of proceeds from the Forward Purchase Agreements entered into in connection with the Initial Public Offering, (iii) $142,000,000 of proceeds from subscription agreements entered into on December 12, 2018 in connection with the Business Combination and (iv) up to $650,000,000 of senior secured credit facilities provided by Goldman Sachs Merchant Banking Division.

The Closing is subject to certain customary closing conditions, including the expiration or termination of the applicable waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and the German Act Against Restraints on Competition, approval by the Company’s shareholders of the additional equity issuances relating to the equity financing, the accuracy of the parties’ respective representations and warranties and compliance with the parties’ respective covenant obligations (each to certain specified materiality standards), and the absence of a “Material Adverse Effect” on Rack Holdings and its subsidiaries.

The Stock Purchase Agreement contains customary termination rights, including (i) by mutual written consent of the parties; (ii) by either party if (a) the Closing has not occurred on or prior to July 12, 2019, unless such party’s failure to comply in all material respects with the covenants and agreements contained in the Stock Purchase Agreement causes the failure of the Business Combination to be consummated by such time, (b) the consummation of the Business Combination is permanently enjoined or prohibited by the terms of a final, non-appealable governmental order or a statute, rule or regulation, (c) the representations, warranties or covenants of the other party are breached such that there is a failure of the related closing condition (subject to a 30-day cure period) or (d) the Company does not obtain the approval of its shareholders upon a vote taken thereon at the Company shareholder meeting; and (iii) by Seller if (a) the Company’s Board of Directors withdraws its recommendation that shareholders approve the transaction, (b) the Company shareholder approval is not obtained at the Company’s first call of its shareholder meeting or (c) the Company fails to consummate the Business Combination on the 10th business day following the satisfaction or waiver of the last condition to closing (subject to a further 10-business-day cure period).

Consent of Forward Contract Parties

On November 12, 2018, subsequently amended and concurrently with the execution of the Stock Purchase Agreement, the Company entered into (the “FPA Consent”) with parties to the Forward Purchase Agreements, as amended, dated October 5, 2017 and amended on December 15, 2017 and January 5, 2018, that have committed to purchase substantially all of the Forward Purchase Shares pursuant to which, among other things, the consenting FPA parties consented to the entry into the Stock Purchase Agreement.

Debt Financing

Concurrently with the execution of the Stock Purchase Agreement, the Company entered into a debt commitment letter with Goldman Sachs Lending Partners LLC and certain affiliated investment entities thereof, pursuant to which the Lenders have committed to provide senior secured credit facilities subject to the conditions set forth in the Debt Commitment Letter. The aggregate commitment consists of a $450,000,000 First Lien Term Facility, a $45,000,000 Revolving Facility, a $100,000,000 First Lien Contingency Term Facility and a $100,000,000 Second Lien Contingency Term Facility. The Company has the ability to bring in additional revolving lenders to provide up to $30,000,000 additional commitments under the Revolving Facility within 15 business days after the date of the Debt Commitment Letter. The obligations of the Lenders to provide debt financing under the Debt Commitment Letter are subject to a number of conditions.

Voting Agreement

On December 7, 2018, in connection with the execution of the Stock Purchase Agreement, the Company and the BSOF Entities entered into an Amended and Restated Voting Agreement, pursuant to which the BSOF Entities, holders of 4,000,000 Class A Shares, agree to vote any Class A Shares they hold in favor of any shareholder approvals sought by the Company in connection with the Business Combination and not to exercise any right of redemption in respect of such Class A Shares.

The Voting Agreement requires the BSOF Entities to obtain prior written consent of the Company before transferring any Class A Shares prior to the termination of the Voting Agreement. The Voting Agreement will automatically terminate upon the first to occur of (i) the completion of the Business Combination, (ii) the termination of the Stock Purchase Agreement and (iii) prior to the completion of the Business Combination by the mutual written consent of the Company and the BSOF Entities.

Working Capital Promissory Note

Concurrently with the execution of the Stock Purchase Agreement, One Madison issued a $4,000,000 Global Promissory Note (the “Working Capital Promissory Note”) to certain of the sources of equity financing for the Business Combination under the Forward Purchase Agreements and the Subscription Agreements in exchange for $4,000,000 of financing to be used for the payment of working capital expenses, including expenses incurred in connection with the Business Combination. The note is non-interest bearing, unsecured and due on the earliest of (i) the Closing of the Business Combination, (ii) 30 days after the date on which the Stock Purchase Agreement is terminated in accordance with its terms and (iii) September 12, 2019. The Company intends to repay the Note from the proceeds of the equity financing provided pursuant to the Subscription Agreements.

Subscription Agreements

Concurrently with the execution of the Stock Purchase Agreement, One Madison entered into Subscription Agreements with the Subscribing Parties for the purchase and sale of 14,200,000 shares of the Company’s Class A Shares, par value $0.0001 per share, or Class C Shares, par value $0.0001 per share, for an aggregate purchase price of $142 million. The closing of the transactions contemplated by the Subscription Agreements will occur immediately prior to the completion of the Business Combination. The funding of such amounts is subject to customary conditions, including the satisfaction or waiver of the conditions to Closing set forth in the Stock Purchase Agreement. The Subscription Agreements automatically terminate upon the termination of the Stock Purchase Agreement or upon the mutual written consent of the Company and the Subscribing Parties.

FPA Assignment and Assumption Agreement

Concurrently with the execution of the Stock Purchase Agreement, Mr. Asali, the Assignor, entered into the FPA assignment and assumption agreement with Gerard Griffin, a Managing Director of the Sponsor, pursuant to which the Assignor, on the terms and subject to the conditions set forth therein, (i) assigned to Mr. Griffin the right and obligation to acquire 350,000 Class A Shares and 116,677 warrants to purchase Class A Shares under the terms of the Assignor’s Forward Purchase Agreement and (ii) sold to Mr. Griffin 87,500 Class B Shares at the same price per share at which the Assignor purchased such Class B Shares from the Company. The assignment contemplated by the FPA Assignment and Assumption Agreement does not relieve the Assignor of his obligations with respect to the portion of the Forward Purchase Agreement commitment assigned thereunder. Mr. Griffin agreed to waive any Claim (as defined in the Forward Purchase Agreement) in or to any distributions by the Company from the Trust Account and agreed not to seek recourse against the Trust Account for any reason whatsoever. Finally, Mr. Griffin acknowledged and agreed to the transfer restrictions on the Class B Shares under the FPA pursuant to which the Assignor acquired the Class B Shares from the Company.

Reallocation Agreement

On November 12, 2018, subsequently amended concurrently with the execution of the Stock Purchase Agreement, the Company entered into the Reallocation Agreement with the parties to the Forward Purchase Agreements for the Business Combination under the Forward Purchase Agreements and the Subscription Agreements, pursuant to which the Class B Shares issued and the rights to acquire warrants to purchase Class A Shares arising under the Forward Purchase Agreements have been reallocated among all equity financing sources, including two new equity sources, one of whom is a related party, on a pro rata basis on the aggregate amount of equity financing provided by such equity financing source under the Forward Purchase Agreements and the Subscription Agreements. The reallocation was effective as of the execution of the Stock Purchase Agreement.

Class B Share Consent

Concurrently with the execution of the Stock Purchase Agreement, shareholders holding more than two-thirds of the Company’s Class B Shares, par value $0.0001 per share (“Class B Shares”), entered into a consent (the “Class B Share Consent”) pursuant to which such shareholders, on behalf of themselves and all other holders of Class B Shares, waived the anti-dilution protection benefiting the Class B Shares under the terms of the Company’s Amended and Restated Memorandum and Articles of Association with respect to (i) the Class A Shares and Class C Shares to be issued pursuant to the Subscription Agreements and (ii) any Class A Shares or Class C Shares to be issued by the Company in connection with the exchange of any of the Company’s outstanding private placement warrants. As such, assuming no other equity securities are issued in connection with the Business Combination and assuming no redemption of Class A Shares by the Company’s shareholders, on the business day following the consummation of the Business Combination, each Class B Share will convert into one Class A Share or Class C Share as applicable.

For the full text of the Stock Purchase Agreement and related agreements, see the Exhibits to the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 13, 2018.

Warrant Exchange Agreement

On March 27, 2019, the Company entered into a warrant exchange agreement (the “Warrant Exchange Agreement”) with certain holders (the “Investors”) of the Company’s Private Placement Warrants to purchase Class A shares, par value $0.0001 per share of the Company issued to such Investors on the date of the Company’s initial public offering pursuant to private placement agreements. Under the terms of the Warrant Exchange Agreement, the Private Placement Warrants held by the Investors will be deemed automatically canceled in full and in consideration therefor, the Company will issue to each Investor on a private placement basis, Class A Shares or Class C shares, par value $0.0001 per share, of the Company, based upon an exchange ratio of 10 Private Placement Warrants for one Class A Share or Class C Share, as applicable (the “Warrant Exchange”).

The Investors collectively hold 7,429,256 Private Placement Warrants (out of a total of 8,000,000 outstanding Private Placement Warrants), which will be cancelled in exchange for an aggregate 742,926 Class A shares or Class C shares to be issued pursuant to the Warrant Exchange Agreement. The closing of the Warrant Exchange will occur immediately prior to, and subject to, the closing of the Business Combination.

Other than as specifically discussed, this Quarterly Report does not assume the closing of the Business Combination.

Initial Public Offering

On January 22, 2018, we consummated our Initial Public Offering (the “Initial Public Offering”) of 30,000,000 units. Each unit consists of one Class A ordinary share and one-half of one warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds, before expenses, of $300,000,000. Prior to the consummation of the Initial Public Offering, the Sponsor purchased 8,625,000 Class B Shares for an aggregate purchase price of $25,000, or approximately $0.003 per share, and the Company’s founder, Omar M. Asali, along with the Anchor Investors purchased 3,750,000 Class B Shares for an aggregate purchase price of $37,500, or approximately $0.01 per share. The Founder Shares were issued to the Anchor Investors in connection with their agreement to purchase an aggregate of 15,000,000 ordinary shares (13,025,000 Class A Shares and 1,975,000 Class C Shares), plus an aggregate of 5,000,000 redeemable warrants for $10.00 per share, for an aggregate purchase price of $150,000,000, in a private placement to occur concurrently with the closing of the Initial Business Combination. We also entered into the Strategic Partnership Agreement, pursuant to which the Sponsor transferred 525,000 Founder Shares to BSOF Master Fund L.P., a Cayman Islands exempted limited partnership, and BSOF Master Fund II L.P., a Cayman Islands exempted limited partnership, both affiliates of The Blackstone Group L.P.

In January 2018, the Sponsor transferred 240,000 Founder Shares to the Company’s independent directors at their original purchase price. Subsequently 60,000 of the 240,000 Founder Shares were forfeited back to the Sponsor due to the resignation of one of the Company’s directors in May 2018. In March 2018, following the expiration of the underwriters’ over-allotment option granted in the Initial Public Offering, the Sponsor surrendered 1,125,000 Class B Shares to the Company for no consideration, which the Company cancelled. In October 2018, the Sponsor sold 100,000 Founder Shares to the Company’s Chief Financial Officer and 423,000 Founder Shares to certain employees of the Sponsor for aggregate consideration of $3,138, or $0.006 per share. As of March 31, 2019, the Sponsor owned 6,272,000 Class B Shares.

Upon execution of the Forward Purchase Agreements, each Anchor Investor elected to receive a fixed number of Class A Shares or Class C Shares. The Class C Shares have identical terms as the Class A Shares, except the Class C Shares do not grant their holders any voting rights. Our Amended and Restated Memorandum and Articles of Association provide that, following the consummation of our Initial Business Combination, the Class C Shares may be converted into Class A Shares on a one-for-one basis at the election of the holder with 65 days’ written notice or upon the transfer of such Class C ordinary share to a non-affiliate of the holder.

Pursuant to the Strategic Partnership Agreement, the BSOF Entities have agreed to act as our strategic partner and may provide debt or equity financing in connection with our Initial Business Combination but are not required to do so. The Founder Shares held by the BSOF Entities are subject to certain transfer restrictions, forfeiture and earnout provisions similar to those imposed upon our Sponsor and the Anchor Investors. If we seek shareholder approval of our Initial Business Combination, the BSOF Entities have agreed to vote any Founder Shares they may own in favor of such Initial Business Combination. The BSOF Entities may designate one observer to our board of directors until the consummation of our Initial Business Combination. The BSOF Entities have also separately purchased an aggregate of 560,000 Private Placement Warrants, at a price of $1.00 per warrant, in the Initial Private Placement. Such Private Placement Warrants have the same terms and conditions as those purchased by our Anchor Investors. The BSOF Entities will be entitled to registration rights with respect to any ordinary shares and warrants held by them. We believe that the combination of capital provided by our Anchor Investors and a strategic partnership with the BSOF Entities will provide us with a material advantage in effecting an Initial Business Combination.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Initial Private Placement of 8,000,000 Private Placement Warrants, each exercisable to purchase one Class A ordinary share or Class C ordinary share, as applicable, at $11.50 per share, at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $8,000,000.

Upon the closing of the Initial Public Offering and the Initial Private Placement, $300,000,000 ($10.00 per unit) from the net proceeds thereof was placed in a U.S.-based Trust Account at Morgan Stanley & Co., maintained by Continental Stock Transfer & Trust Company, acting as trustee, and is invested in a money market fund selected by the Company until the earlier of: (i) the completion of the Initial Business Combination or (ii) the redemption of the Company’s public shares if the Company is unable to complete a business combination within 24 months from the closing of the Initial Public Offering, subject to applicable law.

After the payment of underwriting discounts and commissions (excluding the deferred portion of $10,500,000 in underwriting discounts and commissions, which amount will be payable upon consummation of our Initial Business Combination if consummated) and approximately $1,000,000 in expenses relating to the Initial Public Offering, approximately $1,000,000 of the net proceeds of the Initial Public Offering and Initial Private Placement was not deposited into the Trust Account and was retained by us for working capital purposes. The net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest.

Results of Operations and Known Trends or Future Events

We have not generated any operating revenues to date, and we will not be generating any operating revenues until the closing and completion of our Initial Business Combination. Our entire activity from inception to March 31, 2019 relates to our formation, consummation of the Initial Public Offering, the Strategic Partnership Agreement, the Forward Purchase Agreements, and, since the closing of the Initial Public Offering, the search for a Business Combination candidate and the other transactions describer herein. Our expenses increased since our date of inception, July 13, 2017, as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as costs and expenses associated with search for and due diligence of, an Initial Business Combination.

For the three months ended March 31, 2019 and 2018, we had net (loss) income of ($4,476,809) and $588,617, respectively, which consisted of interest income held in the Trust Account and Escrow Account offset by total expenses. Total expenses for the three months ended March 31, 2019 and 2018, totaled $6,255,929 and $146,756, respectively, due to increased costs.

Costs increased significantly during the three months ended March 31, 2019 compared to the prior year period due to professional fees, consulting fees, travel, and other cost related to the closing of the Business Combination. If the Business Combination does not close for any reason, significant new additional professional, due diligence and consulting fees and travel costs will be required in connection with any new Initial Business Combination.

Going Concern Considerations and Capital Resources

In connection with our assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, we determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after the end of business on January 22, 2020.

Until the consummation of our Initial Public Offering, our only source of liquidity was an initial sale of the Founder Shares to our Sponsor, and the proceeds of loans from our Sponsor in the amount of $148,844. In connection with our Initial Public Offering, we incurred offering costs of $18,244,607 (including underwriting discounts and commissions of $6,000,000, deferred underwriting discounts and commissions of $10,500,000 and deferred legal fees of $800,000). Other incurred offering costs consisted principally of formation and preparation fees related to our Initial Public Offering.

Upon the closing of our Initial Public Offering, we generated $300,000,000 of gross proceeds.

On January 22, 2018, simultaneously with the sale of the units, we completed a private placement with our Sponsor for 8,000,000 Private Placement Warrants at a purchase price of $1.00 per warrant, generating gross proceeds of $8,000,000.

Approximately $300,000,000 of the net proceeds from our Initial Public Offering and the Private Placement Warrants was deposited in the Trust Account established for the benefit of our public shareholders. The $300,000,000 of net proceeds held in the Trust Account includes $10,500,000 of deferred underwriting discounts and commissions that will be released to the underwriters of the Initial Public Offering upon completion of our Initial Business Combination. Of the gross proceeds from the Initial Public Offering that were not deposited in the Trust Account, $6,000,000 was used to pay the non-deferred portion of the underwriting discounts and commissions in the Initial Public Offering and the balance was reserved to pay accrued offering and formation costs, business, legal and accounting due diligence expenses on prospective acquisitions and continuing general and administrative expenses. At March 31, 2019, we had $1,964,516 of cash available outside of the Trust Account and Escrow Account to fund our activities until we consummate an Initial Business Combination.

Concurrently with the execution of the Stock Purchase Agreement on December 12, 2018, the Company issued a $4,000,000 promissory note to certain equity financing sources for the Business Combination under the Forward Purchase Agreements and the Subscription Agreements in exchange for $4,000,000 of financing. The loan is non-interest bearing and payable on the earliest of (a) the date on which a Business Combination is consummated, (b) 30 days after the date on which the Stock Purchase Agreement is terminated in accordance with its terms, and (c) the date that is nine months after the date of the note, December 12, 2018. The note will be used for the purpose of paying working capital expenses, including expenses incurred in connection with the Business Combination. At March 31, 2019, the note totaled $4,000,000 and is included in the liability section on the unaudited Condensed consolidated Balance Sheet.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account not previously released to us (less taxes payable and deferred underwriting commissions) and the proceeds from the sale of the forward purchase securities, to complete our Initial Business Combination. We may withdraw interest to pay our income taxes, if any. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our Initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We do not believe we will need to raise additional funds following our Initial Public Offering in order to meet the expenditures required for operating our business prior to our Initial Business Combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an Initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Initial Business Combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended Initial Business Combination, our Sponsor, officers and directors or their respective affiliates may, but are not obligated to, loan us funds as may be required on a non-interest basis. If we complete our Initial Business Combination, we would repay such loaned amounts. In the event that our Initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. The terms of any such loans have not been determined, and no written agreement exists with respect thereto. Prior to the completion of our Initial Business Combination, we do not expect to seek loans from parties other than our Sponsor, officers, directors or their respective affiliates as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.

Moreover, we may need to obtain additional financing to complete our Initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our Trust Account or because we become obligated to redeem a significant number of our public shares upon completion of the Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Initial Business Combination. If we are unable to complete our Initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instrument and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no significant changes in our critical accounting policies as discussed in our on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 28, 2019.

Recent Accounting Pronouncements

The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.

Related Party Transactions

Founder Shares

Our Sponsor, the BSOF Entities, the Anchor Investors, our independent directors, our Chief Financial Officer, and certain employees of our Sponsor hold an aggregate of 6,272,000, 525,000, 3,750,000, 180,000, 100,000, and 423,000 Founder Shares, respectively, as of March 31, 2019. The Founder Shares will automatically convert into Class A Shares (or Class C Shares, at the election of the holder) on the first business day following the consummation of our Initial Business Combination, however the shareholders holding more than two-thirds of the Class B Shares entered into the Class B Share Consent pursuant to which such shareholders, on behalf of themselves and all other holders of Class B Shares, waived the anti-dilution protection benefiting the Class B Shares under the terms of the existing organizational documents with respect to (i) the Class A Shares and Class C Shares to be issued pursuant to the subscription agreements and (ii) any Class A Shares or Class C Shares to be issued by One Madison in connection with the exchange of any of One Madison’s outstanding private placement warrants.

The Sponsor, its controlled affiliates and any director, officer or employee of the Sponsor who is also serving in any such role or position at the Company, including Mr. Asali (each, a “Sponsor-Affiliate” provided that such term does not refer to any of the Company’s non-executive directors), have agreed not to transfer, assign or sell any of their Founder Shares and any Class A Shares or Class C shares issued upon conversion thereof until the earlier to occur of: (a) the third anniversary after the completion of the Initial Business Combination or (b) the waiver of such restrictions on transfer by Anchor Investors representing over 50.0% of the Forward Purchase Shares (except to certain permitted transferees and subject to certain exceptions). The initial shareholders (other than the Sponsor, its controlled affiliates or any sponsor-affiliate) have agreed not to transfer, assign or sell any of their Founder Shares and any Class A Shares or Class C Shares issued upon conversion thereof until the earlier to occur of: (i) one year after the completion of the Initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction after the Initial Business Combination that results in all of the Company’s ordinary shareholders having the right to exchange their ordinary shares for cash, securities or other property (except to certain permitted transferees and subject to certain exceptions). Any permitted transferees will be subject to the same restrictions and other agreements of the initial shareholders with respect to any Founder Shares. Notwithstanding the foregoing, if the closing price of the Class A Shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, the Founder Shares held by the initial shareholders (other than the Sponsor’s Founder Shares that are subject to the earnout condition in the Securities Subscription Agreement, between the Company and the Sponsor, as amended) will be released from the lock-up.

In December 2017, the Company amended the Securities Subscription Agreement dated July 18, 2017 to include an “earnout” clause which requires the forfeiture of certain Founder Shares by the Sponsor under certain circumstances as described in the agreement.

Private Placement Warrants

The Anchor Investors, Vivoli Holdings, LLC and the BSOF Entities have purchased, pursuant to separate written agreements, an aggregate of 8,000,000 Private Placement Warrants. If the Initial Business Combination is not completed within 24 months from the closing of the Initial Public Offering, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the initial Anchor Investors, Vivoli Holdings, LLC or the BSOF Entities that purchased such warrants or their respective permitted transferees.

Subsequently, on March 27, 2019, the Company entered into a warrant exchange agreement (the “Warrant Exchange Agreement”) with certain holders (the “Investors”) of the Company’s Private Placement Warrants to purchase Class A shares, par value $0.0001 per share of the Company issued to such Investors on the date of the Company’s initial public offering pursuant to private placement agreements. Under the terms of the Warrant Exchange Agreement, the Private Placement Warrants held by the Investors will be deemed automatically canceled in full and in consideration therefor, the Company will issue to each Investor on a private placement basis, Class A Shares or Class C shares, par value $0.0001 per share, of the Company, based upon an exchange ratio of 10 Private Placement Warrants for one Class A Share or Class C Share, as applicable (the “Warrant Exchange”).

The Investors collectively hold 7,429,256 Private Placement Warrants (out of a total of 8,000,000 outstanding Private Placement Warrants), which will be cancelled in exchange for an aggregate 742,926 Class A shares or Class C shares to be issued pursuant to the Warrant Exchange Agreement. The closing of the Warrant Exchange will occur immediately prior to, and subject to, the closing of the business combination of Rack Holdings, Inc.

Forward Purchase Agreements; Strategic Partnership Agreement

In connection with our Initial Public Offering, we entered into Forward Purchase Agreements pursuant to which the Anchor Investors agreed to purchase an aggregate of 15,000,000 ordinary shares (13,025,000 Class A Shares and 1,975,000 Class C Shares) plus an aggregate of 5,000,000 redeemable warrants for $10.00 per Class A ordinary share or Class C ordinary share, as applicable, for an aggregate purchase price of $150,000,000, in a private placement to occur concurrently with the closing of the Initial Business Combination. In connection with these agreements, we also issued to the Anchor Investors an aggregate of 3,750,000 Founder Shares for $0.01 per share prior to the consummation of our Initial Public Offering. In connection with the Strategic Partnership Agreement, our Sponsor transferred 525,000 Founder Shares to the BSOF Entities. Subject to certain exceptions to forfeiture, transfer and earnout provisions, the Founder Shares issued to the Anchor Investors and held by the BSOF Entities are subject to similar contractual conditions and restrictions as the Founder Shares issued to our Sponsor. The Forward Purchase Warrants will have the same terms as our public warrants except that one of the Anchor Investors will receive Forward Purchase Warrants exercisable only for Class C Shares, as described above.

Upon execution of the Forward Purchase Agreements, each Anchor Investor elected to receive a fixed number of Class A Shares or Class C Shares. The Class C Shares have identical terms as the Class A Shares, except the Class C Shares do not grant their holders any voting rights. Our Amended and Restated Memorandum and Articles of Association provide that, following the consummation of our Initial Business Combination, the Class C Shares may be converted into Class A Shares on a one-for-one basis (i) at the election of the holder with 65 days’ written notice or (ii) upon the transfer of such Class C ordinary share to an unaffiliated third party.

The Forward Purchase Agreements and the Strategic Partnership Agreement also provide that the Anchor Investors and the BSOF Entities are entitled to (i) a right of first refusal with respect to any proposed issuance of additional equity or equity-linked securities (including working capital loans from our founder that are convertible into Private Placement Warrants) by us, including for capital raising purposes, or if we offer or seek commitments for any equity or equity-linked securities to backstop any such capital raise, in connection with the closing of our initial Business Combination (other than the units we offered in the Initial Public Offering and their component public shares and warrants, the Founder Shares (and Class A Shares and/or Class C Shares for which such Founder Shares are convertible), the forward purchase shares, Forward Purchase Warrants and the Private Placement Warrants, and any securities issued by us as consideration to any seller in our Initial Business Combination and warrants issued upon the conversion of working capital loans to us made by our founder that are convertible into Private Placement Warrants) and (ii) registration rights with respect to (A) the forward purchase securities and Class A Shares and Class C Shares underlying the Anchor Investors’ Forward Purchase Warrants and the Anchor Investors’ and the BSOF Entities’ Founder Shares, and (B) any other Class A Shares or warrants acquired by the Anchor Investors and the BSOF Entities, including any time after we complete our Initial Business Combination. The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include such securities in other registration statements filed by us and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the costs and expenses of filing any such registration statement.

The Forward Purchase Agreements provide that prior to signing a definitive agreement with respect to a potential Initial Business Combination, and prior to making any material amendment to such definitive agreement following signing, Anchor Investors representing over 50% of the Forward Purchase Shares must approve such potential Initial Business Combination or amendment, as applicable.

In addition, the Forward Purchase Agreements for two of our Anchor Investors provide each such Anchor Investor with (i) the right to designate (prior to the consummation of a business combination) and the right to request the designation of (following the consummation of a business combination) one observer to our board of directors and (ii) the right to acquire, at the same price paid by, directly or indirectly, and on the same terms and conditions as, our founder, a number of Founder Shares equal to its pro rata share, based on its allocation of forward purchase shares, of 5% of the Founder Shares of any special purpose acquisition company sponsored by our founder for 10 years following the closing of our Initial Business Combination, which we refer to as the new acquisition company. Further, such Forward Purchase Agreements for the same two Anchor Investors provide such investors with the right to purchase up to an aggregate of $63,000,000 in equity securities of the new acquisition company substantially similar to the forward purchase securities on the same or more favorable terms as new investors in such equity securities.

The Strategic Partnership Agreement provides that, so long as the Company remains a “blank check company” as such term is defined in Rule 419 under the Securities Act and prior to our Initial Business Combination, the BSOF Entities have the right to designate one observer to our board of directors. In addition, on the date set for the shareholder vote to approve the Initial Business Combination or on the business day immediately prior to the scheduled closing date of the Initial Business Combination, if the BSOF Entities do not hold at least 4,000,000 Class A Shares, the BSOF Entities will forfeit a pro rata number of their Founder Shares to our Sponsor.

Consent of Forward Contract Parties

On November 12, 2018, subsequently amended concurrently with the execution of the Stock Purchase Agreement, the Company entered into the FPA Consent with parties to the Forward Purchase Agreements, as amended, dated October 5, 2017 and amended on December 15, 2017 and January 5, 2018, that have committed to purchase substantially all of the Forward Purchase Shares pursuant to which, among other things, the consenting FPA parties consented to the entry into the Stock Purchase Agreement.

Reallocation Agreement

On November 12, 2018, subsequently amended concurrently with the execution of the Stock Purchase Agreement, the Company entered into a reallocation agreement with the parties to the Forward Purchase Agreements for the Business Combination under the Forward Purchase Agreements and the Subscription Agreements, pursuant to which the Class B Shares issued and the rights to acquire warrants to purchase Class A Shares arising under the Forward Purchase Agreements have been reallocated among all equity financing sources, including two new equity sources, one of whom is a related party, on a pro rata basis on the aggregate amount of equity financing provided by such equity financing source under the Forward Purchase Agreements and the Subscription Agreements. The reallocation was effective as of the execution of the Stock Purchase Agreement.

FPA Assignment and Assumption Agreement

Concurrently with the execution of the Stock Purchase Agreement, the Assignor entered into the FPA Assignment and Assumption Agreement with Gerard Griffin, a Managing Director of the Sponsor, pursuant to which the Assignor, on the terms and subject to the conditions set forth therein, (i) assigned to Mr. Griffin the right and obligation to acquire 350,000 Class A Shares and 116,677 warrants to purchase Class A Shares under the terms of the Assignor’s Forward Purchase Agreements and (ii) sold to Mr. Griffin 87,500 Class B Shares at the same price per share at which the Assignor purchased such Class B Shares from the Company. The assignment contemplated by the FPA Assignment and Assumption Agreement does not relieve the Assignor of his obligations with respect to the portion of the Forward Purchase Agreements commitment assigned thereunder. Mr. Griffin agreed to waive any Claim in or to any distributions by the Company from the Trust Account and agreed not to seek recourse against the Trust Account for any reason whatsoever. Finally, Mr. Griffin acknowledged and agreed to the transfer restrictions on the Class B Shares under the FPA pursuant to which the Assignor acquired the Class B Shares from the Company.

Class B Share Convert

Concurrently with the execution of the Stock Purchase Agreement, shareholders holding more than two-thirds of the Company’s Class B Shares, par value $0.0001 per share (“Class B Shares”), entered into a consent (the “Class B Share Consent”) pursuant to which such shareholders, on behalf of themselves and all other holders of Class B Shares, waived the anti-dilution protection benefiting the Class B Shares under the terms of the Company’s Amended and Restated Memorandum and Articles of Association with respect to (i) the Class A Shares and Class C Shares to be issued pursuant to the Subscription Agreements and (ii) any Class A Shares or Class C Shares to be issued by the Company in connection with the exchange of any of the Company’s outstanding Private Placement Warrants. As such, assuming no other equity securities are issued in connection with the Business Combination and assuming no redemption of Class A Shares by the Company’s shareholders, on the business day following the consummation of the Business Combination, each Class B Share will convert into one Class A Share or Class C Share as applicable.

Due to Related Parties

In connection with the Initial Public Offering, he Sponsor agreed to loan the Company up to $200,000 for the payment of costs related to the Initial Public Offering pursuant to a promissory note, under which the Company borrowed an aggregate of $148,844 for the payment of such cost. The loan was non-interest bearing, unsecured and was due on the earlier of March 31, 2018 or the closing of the Initial Public Offering. As of March 31, 2019, the Company had repaid all outstanding borrowings under the promissory note from the proceeds of the Initial Public Offering not placed in the Trust Account.

Promissory Note

Concurrently with the execution of the Stock Purchase Agreement on December 12, 2018, the Company issued a $4,000,000 promissory note to certain equity financing sources for the Business Combination under the Forward Purchase Agreements and the Subscription Agreements in exchange for $4,000,000 of financing. The loan is non-interest bearing and payable on the earliest of (a) the date on which a Business Combination is consummated, (b) 30 days after the date on which that certain Stock Purchase Agreement by the Company, Rack Holdings L.P. and Rack Holdings Inc. is terminated in accordance with its terms, and (c) the date that is nine months after the date of the note. The note will be used for the purpose of paying working capital expenses, including expenses incurred in connection with the initial Business Combination. At March 31, 2019, the note totaled $4,000,000 and is included in the liability section on the unaudited interim condensed consolidated balance sheet.

Subscription Agreements

Concurrently with the execution of the Stock Purchase Agreement, One Madison entered into Subscription Agreements with the Subscribing Parties for the purchase and sale of 14,200,000 shares of the Company’s Class A Shares, par value $0.0001 per share, or Class C Shares, par value $0.0001 per share, for an aggregate purchase price of $142 million. The closing of the transactions contemplated by the Subscription Agreements will occur immediately prior to the completion of the Business Combination. The funding of such amounts is subject to customary conditions, including the satisfaction or waiver of the conditions to Closing set forth in the Stock Purchase Agreement. The Subscription Agreements automatically terminate upon the termination of the Stock Purchase Agreement or upon the mutual written consent of the Company and the Subscribing Parties.

Administrative Service Fee

We have agreed, commencing on January 17, 2018 through the earlier of our consummation of a Business Combination and liquidation, to pay our Sponsor a monthly fee of $10,000 for office space, and secretarial and administrative services.

Off-Balance Sheet Arrangements

As of March 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

JOBS Act

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our unaudited interim condensed consolidated financial statements may not be comparable to companies that comply with public company effective dates.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an administrative agreement to reimburse the Sponsor for office space, secretarial and administrative services provided to the Company in an amount not to exceed $10,000 per month. Upon completion of a Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. In addition, as described in this Quarterly Report, we have entered into certain additional financing arrangements to be effective upon the completion of our Business Combination. See “Item 1. Condensed consolidated Financial Statements (unaudited) — Note 3.”

In connection with the Initial Public Offering, the underwriters were entitled to underwriting discounts and commissions of 5.5% of the gross proceeds of $300,000,000, of which 3.5% ($10,500,000) was deferred. The deferred underwriting discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement. The underwriters are not entitled to any interest accrued on the deferred underwriting discount.

There have been no material changes in the Company’s market risk during the three months ended March 31, 2019. For additional information refer to Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 28, 2019.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

Notwithstanding the foregoing, there can be no assurance that the Company’s disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

PART II – OTHER INFORMATION

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this report, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this report, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this report should be read as being applicable to all forward-looking statements whenever they appear in this report. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Factors that could cause our actual results to differ materially from those in this report are any of the risks disclosed under the caption “Risk Factors” in our prospectus for our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 28, 2019 and incorporated by reference herein. Any of the factors described therein could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.