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Mail Stop 3561
August 10, 2018
Alec E. Gores
Chairman of the Board of Directors
Gores Holdings II, Inc.
9800 Wilshire Blvd.
Beverly Hills, CA 90212
Re: Gores Holdings II, Inc.
Preliminary Proxy Statement on Schedule 14A
Filed July 12, 2018
File No. 1-37979
Dear Mr. Gores:
We have reviewed your filing and have the following comments. In some of
our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by providing
the
requested information or advise us as soon as possible when you will respond.
If you do not
believe our comments apply to your facts and circumstances, please tell us why
in your
response.
After reviewing your response to these comments, we may have additional
comments.
General
1. In an appropriate place toward the front of your proxy statement, please
explain how
Greenlight is affiliated with Verra Mobility, as you do not make it
clear how Verra
Mobility will be acquired by you. For example, in your first Q&A on page
11, you
state that Verra Mobility will be the surviving corporation in the First
Merger,
however, you don't explain how it will become the surviving corporation.
Summary Term Sheet, page 1
2. In the final bullet point on page 6, you identify as an interest "the
fact that Alec
Gores, our Chairman, is the brother of Tom Gores, the Chief Executive
Officer and
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 2
Chairman of Platinum Equity, and that Tom Gores and certain other
executives of
Platinum Equity would participate in the Private Placement indirectly
through an
investment in our Sponsor." Please clarify here and elsewhere where you
discuss this
interest that Platinum Equity currently holds a controlling stake in
Verra Mobility
through the Platinum Stockholder, which will receive all of the cash
consideration
and a portion of the stock consideration to be paid in connection with
the business
combination. Please also disclose here that the Platinum Stockholder
will retain
approximately 42% of voting power in the post-combination company
assuming no
share redemptions and 51% of voting power assuming maximum share
redemptions.
Finally, please describe here the Platinum Stockholder's director
designation rights,
and make corresponding revisions throughout your proxy statement.
Questions and Answers about the Proposals for Stockholders, page 11
3. Please add a question and answer about the absence of a maximum
redemption
threshold which includes the related disclosure on page 102.
Is there a limit on the total number of shares that may be redeemed?, page 24
4. Please disclose here the number of shares that would be redeemed under
the
maximum redemption scenario you describe elsewhere in the prospectus
(such as on
pages 37 and 121).
What happens if the Business Combination is not consummated?, page 26
5. Please revise to clarify here, if true, that you may amend your
certificate of
incorporation to extend your business combination deadline without
limitation. We
note your related disclosure in the final risk factor on page 81. If
there are reasons
why you cannot or will not seek shareholder approval to extend such
deadline, please
state why. Please add similar clarification elsewhere in your filing
where you
mention the January 19, 2019 deadline.
Summary of the Proxy Statement
Verra Mobility's Business, page 30
6. Please revise to provide support for your claims throughout your proxy
statement
regarding Verra Mobility's market leadership. As examples, we note your
disclosure
in this section that Verra Mobility is a "leading provider" and has
"industry leading
capabilities, information and technology expertise," as well as your
disclosure on
page 184 regarding Verra Mobility's "market-leading positions." We also
note a
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 3
number of similar claims in the "Information About Verra Mobility"
section,
including those made on pages 243 and 246.
Consideration to the Greenlight Stockholders in the Business Combination, page
31
7. Please expand the disclosure in this section to provide ranges of
potential cash, stock,
and aggregate consideration you may be required to issue in the
Business
Combination, taking into account the various adjustments you describe
here.
Consider providing this information in tabular format when you depict
the alternative
scenarios.
Organizational Structure, page 34
8. Please revise to depict who controls PE Greenlight Holdings, LLC, with
a view to
understanding who will ultimately control you.
Risk Factors
Risks Related to Verra Mobility's Business
A failure in or breach of Verra Mobility's networks or systems . . ., page 65
9. You state here, "In the normal course of Verra Mobility's business,
Verra Mobility
has been the target of malicious cyber-attack attempts." Please revise
to discuss here
any material cybersecurity breaches you have experienced, and quantify
the related
costs you have incurred and reasonably expect to incur here or
elsewhere as
appropriate. Alternatively, please confirm to us that you have not
experienced any
material cybersecurity breaches.
Risks Related to Verra Mobility's Debt
Verra Mobility's substantial level of indebtedness . . ., page 99
10. Please revise to quantify here the aggregate amount of anticipated
post-closing
indebtedness as of the effective date of the Business Combination.
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 4
Unaudited Pro Forma Condensed Combined Financial Information
Verra Mobility Historical Information in the Unaudited Pro Forma Condensed
Combined
Statements of Operations, page 115
11. We note your pro forma adjustments to reflect incremental amortization
expense
related to the revised intangible asset valuations associated with the
HTA and
Platinum mergers. Please explain to us why there do not appear to be
similar
adjustments related to depreciation of the revised valuations of your
property and
equipment.
Sources and Uses for the Business Combination, page 140
12. We note that the "maximum redemption scenario" presented throughout
your filing
assumes a 33.3% redemption, or 13.3 million shares, of the outstanding
shares of
Class A Stock. Since actual redemptions could exceed these "maximum"
amounts,
please tell us and prominently disclose how this percentage was
determined. In doing
so, clarify if 33.3% is the maximum redemption percentage under which
the merger
may be consummated and explain if and how the redemption limitation
thresholds
discussed on page 24 impacted this percentage.
Proposal No. 1 Approval of the Business Combination
Background of the Business Combination, page 169
13. Please supplementally provide us with copies of any presentations
relating to the
Business Combination that Moelis presented to your board.
14. Please expand the disclosure in this section to include a more detailed
description of
the negotiations surrounding the material terms of the merger agreement
and the other
agreements related to the Business Combination. For example, please
specify which
of the parties recommended the initial consideration, explain how that
amount was
determined, and describe how the consideration changed over the course
of the
negotiations until the parties arrived at the final consideration
amount. We note in
that regard your brief reference on page 173 to the parties' respective
counsels
"exchang[ing] several drafts of the definitive agreements for the
potential business
combination" between May 28, 2018 and June 20, 2018. Please provide
similar
disclosure with respect to the form and mix of consideration and the
adjustments
thereto, the earn-out right, and the material terms of the PIPE
agreements, the investor
rights agreement, and the tax receivable agreement. See Item 14(b)(7)
of Schedule
14A.
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 5
15. Please revise to briefly describe the criteria you initially considered
which led you to
pursue Greenlight as a potential target.
16. We note your disclosure on page 170 that, during a February 1, 2018
meeting, your
CEO conveyed to a Platinum Equity representative your "views as to how
a potential
transaction involving the Company and Greenlight would be structured,
including
that the Company contemplated raising additional equity capital from
private
investors in connection with a potential business combination." Please
expand your
disclosure to explain whether you considered any alternative financing
arrangements,
and, if so, why you ultimately determined to pursue the PIPE
Investment.
17. Please revise to clarify the role played by Deutsche Bank in the
discussions leading to
the Business Combination, and to disclose that Deutsche Bank will
forfeit $14.0
million in deferred underwriting commissions from your initial public
offering should
you fail to consummate a business combination by the deadline. We note
in that
regard your description on page 171 of a telephonic meeting during
which Deutsche
Bank provided its "analysis as to the financial market's views with
respect to
comparable companies to Verra Mobility and similar transactions to the
potential
business combination" to your CEO and a Platinum Equity representative.
Please
also disclose the scope of KPMG's "accounting diligence review" which
you
reference throughout this section. If a report, opinion or appraisal
was prepared by
either party, please provide the disclosure that Item 14(b)(6) of
Schedule 14A
requires and supplementally provide us with any related presentations
such party
made to your board.
18. We note your description on page 174 regarding the independence
disclosure letter in
which Moelis "disclosed to the Board particular relationships or
investments of
Moelis that could impact Moelis' independence and the Board's decision
to engage
Moelis to deliver a fairness opinion to the Board." Please revise to
describe these
relationships or investments, and to explain why the board
"determin[ed] that none of
such matters would have an impact on Moelis' independence."
19. Elaborate upon how the Board concluded that the proposed Business
Combination
"represented the best potential business combination for the Company
based upon the
process utilized to evaluate and assess other potential acquisition
targets," to elaborate
upon the process utilized and the results of this process.
Opinion of the Company's Financial Advisor, page 175
20. Revise to disclose the "Historical Synergies" and "Historical Tax
Benefits," which
you discuss here.
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 6
Independent Director Oversight, page 183
21. You state here and elsewhere in your proxy statement that your
independent directors
"took an active role in evaluating and negotiating the proposed terms
of the Business
Combination..." and were aware of the potential conflicts of interest
of the other
Board members. State, if true, that you did not form a special
committee of directors
comprised solely of your independent directors to exclusively evaluate
and negotiate
the terms of the Business Combination and explain why not, given the
conflicts of
interest you describe.
The Company's Board of Directors' Reasons for the Approval of the Business
Combination,
page 183
22. Elaborate upon the "Market Leadership" you describe in the first bullet
to specify
how you measured, quantitatively or qualitatively, Verra Mobility's
"leading" and
"market-leading" industry status in deciding to approve the
transaction.
Certain Company Projected Financial Information, page 186
23. Please revise to identify the material assumptions underlying the
projections disclosed
in this section. We note your reference to certain assumptions in the
penultimate
paragraph of page 186.
Proposal No. 2--Approval of the Issuance of More Than 20% of the Company's
Issued and
Outstanding Common Stock in Connection with the Business Combination and the
Private
Placement, page 201
24. We note your disclosure here that you will effect your issuance of
stock in the Private
Placement in reliance on the Section 4(a)(2) exemption from
registration. Please
revise to specify the exemption from registration you will rely upon to
issue Class A
shares to the Greenlight Stockholders, and briefly explain why the
exemption is
available for this issuance.
Proposal No. 3--Approval of the Second Amended and Restated Certificate of
Incorporation, page 203
25. Please provide your analysis as to why you are not required to unbundle
this proposal
into separate proposals so as to allow shareholders to vote separately
on the
authorized share increase, the determination of board size, the
supermajority voting
requirements, the DGCL Section 203 opt-out, and the corporate
opportunity
exemption provisions. Refer to Rule 14a-4(a)(3) of Regulation 14A as
well as
Question 201.01 of the Division's Exchange Act Rule 14a-4(a)(3)
Compliance and
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 7
Disclosure Interpretations. In that regard, we note Proposal No. 4
provides
shareholders with only a "non-binding advisory" vote on the
supermajority voting
and DGCL Section 203 opt-out provisions "in accordance with SEC
guidance," and
that you intend for these provisions to take effect "regardless of the
outcome of the
non-binding advisory vote." Your analysis should identify the "SEC
guidance"
referenced and explain how it applies to your particular circumstances.
Please also
include a form of proxy card with your next revised proxy statement.
Information about Verra Mobility
The Industries in Which Verra Mobility Operates
Tolling, page 245
26. Please revise to provide support for your reference here to "the
overall growth in
tolling," as the currently disclosed statistics do not appear to
address any change in
tolling over time. Please also update the statistics from IBTTA here
and on page 248.
In that regard, we note the statistic from IBTTA regarding
infrastructure funding by
tolling authorities covers 2009 to 2011, and the date of IBTTA's
estimate of $65 to
$70 billion in annual U.S. tolling industry revenues by 2030 is not
specified.
Verra Mobility's Strengths
Recurring Revenue Business Model with Diversified Blue-Chip Customer Base, page
246
27. You state on page 246 that Verra Mobility "has experienced a high level
of customer
retention" in the Government Solutions segment. Please revise your
disclosure where
appropriate to specify the metric or metrics Verra Mobility uses to
gauge customer
retention and to disclose such metrics for the periods presented.
Competition, page 251
28. You state here that "Verra Mobility does face competition in certain
solutions it
offers from certain services offered by other vendors." Please revise
to specify the
solutions and services to which this disclosure refers.
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 8
Verra Mobility Management's Discussion & Analysis
Results of Operations
Three Months Ended March 31, 2018 Compared to Three Months Ended March 31,
2017,
page 259
29. We note your statement on page 262 that, "A contract negotiation with a
large
customer negatively impacted price during the period, but also allowed
for
operational efficiencies that were expected to impact adoption rates
going forward."
Please revise to specify, if material, the nature of these "operational
efficiencies" and
the manner in which they are "expected to impact adoption rates going
forward."
Liquidity and Capital Resources, page 273
30. Please revise your liquidity disclosures to address the Tax Receivable
Agreement. In
doing so, ensure you disclose your estimates of annual payments and how
you intend
to fund the required payments under the agreement.
Beneficial Ownership of Securities, page 309
31. Please identify the natural persons with voting and/or dispositive
power over the
securities held by the non-natural persons listed in the ownership
table.
Certain Relationships and Related Transactions
Verra Mobility Related Party Transactions
Transactions between Platinum Equity and Verra Mobility, page 314
32. You disclose here that Verra Mobility paid Platinum Equity an aggregate
of $13.8
million in fees in the period from June 1, 2017 to December 31, 2017
and an
aggregate of $11.25 million in fees in the three months ended March 31,
2018. You
also state that "Platinum Equity receives certain management fees in
return for such
services rendered, in an aggregate amount not to exceed $5,000,000 per
year." Please
revise to briefly describe the fees in excess of $5,000,000 which Verra
Mobility paid
Platinum Equity in the periods discussed.
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 9
Gores Holdings II, Inc. Financial Statements
Notes to the Unaudited, Interim Financial Statements
Private Placement Warrants, page F-13
33. We note that the Private Placement Warrants "may be net cash settled."
Please tell us
how you determined the warrants should be classified within equity and
not within
liabilities. See ASC 815-40-25-1 and -2.
Verra Mobility Corporation and Subsidiaries Financial Statements
Notes to Unaudited Condensed Consolidated Financial Statements
2. Business Combinations
Verra Mobility Merger, page F-41
34. We note Verra Mobility acquired all of the issued and outstanding
membership
interest of the Highway Toll Administration, LLC and Canada Highway
Toll
Administration for an aggregate purchase price of $604.1 million,
including 5.26
shares Greenlight Holdings II Corporation common stock with a fair
value of $57.3
million. We also note 5.54 shares of Greenlight II common stock were
issued as
purchase consideration in April 2018 for the acquisition of Euro
Parking Collection
with a fair value of $62.6 million. Please tell us and disclose how you
determined the
fair value of the Greenlight Holdings II Corporation common stock for
each of these
transactions.
Notes to Consolidated Financial Statements
12. Stockholders' Equity
Successor, page F-81
35. We note that, pursuant to the plan of merger, the Parent received 100
common shares
of Verra Mobility and is the sole shareholder at December 31, 2017. We
also note
that you present the issuance of common shares as an equity
contribution of
$129,026,398in your statement of stockholders' equity and as proceeds
from issuance
of common stock in your statement of cash flows. Please revise your
disclosures to
explain what this balance represents and how the per share amount was
determined.
Alec E. Gores
Gores Holdings II, Inc.
August 10, 2018
Page 10
18. Subsequent Events, page F-87
36. Citing applicable accounting guidance, please tell us how you plan to
account for the
tax receivable agreement.
Annex A--Merger Agreement, page A-1
37. We refer you to Section 11.9(b) of the Merger Agreement. Please tell us
whether the
waiver of the right to a jury trial applies to claims made under the
federal securities
laws.
We remind you that the company and its management are responsible for
the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Myra Moosariparambil, Staff Accountant, at (202)
551-3796 or
Andrew Blume, Staff Accountant, at (202) 551-3254 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Parhaum J.
Hamidi, Special Counsel, at (202) 551-3421 or me at (202) 551-3720 with any
other
questions.
Sincerely,
/s/ Jennifer
Thompson for
Mara L. Ransom
Assistant Director
Office of Consumer
Products