Sec Form 13D Filing - Sterling Fund Management LLC filing for Keypath Education International Inc.Keypath Education International Inc. - 2024-09-09

The Principal Business of the Majority Stockholder is to hold the reported securities on behalf of Sterling Capital Partners IV, L.P. (“SCP IV”) and SCP IV Parallel, L.P. (“SCP IV Parallel” and, together with SCP IV, the “SCP IV Funds”). Parent is a Delaware limited liability company formed on May 10, 2024, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, including the Merger, each as defined below. Parent has not conducted any business operations except in furtherance of this purpose and activities incident to its formation. The principal business of Upper Parent, a Delaware corporation, is to hold the capital stock of Parent. The principal business of TopCo, a Delaware limited liability company, is to hold the capital stock of Upper Parent, the sole member of Parent. The principal business of SCP IV GP, a Delaware limited liability company, is to serve as the general partner of SC Partners IV, LP (the “Funds IV GP”), the general partner of the SCP IV Funds. The principal business of SFM, a Delaware limited liability company, is to provide investment management to various client funds and accounts including the SCP IV Funds, pursuant to an investment management agreement with the Funds IV GP. The principal office address of the Reporting Persons is c/o Sterling Partners, 167 N Green St, 4th Floor, Chicago, Il 60607.

Item 3. Source and Amount of Funds or Other Consideration

The information contained in or incorporated into Item 4 of this Schedule 13D is hereby incorporated by reference into this Item 3.

Item 4. Purpose of Transaction

This Schedule 13D relates to the acquisition of the Issuer by Sterling Partners, pursuant to the Agreement and Plan of Merger, dated as of May 23, 2024 (the “Merger Agreement”), by and among the Company, Parent and Karpos Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“Merger Sub”).

Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent, and each share of Common Stock outstanding immediately prior to the effective time of the Merger, other than shares of Common Stock held by the Management Rollover Stockholders (as defined below), the Company, Parent, Merger Sub and stockholders who have validly exercised their appraisal rights under the Delaware General Corporation Law, will be canceled and converted into the right to receive $0.87 Australian Dollars (“A$”) (the “Transaction Consideration”).

The total amount of funds necessary to consummate the Merger and related transactions, including payment of related fees and expenses, will be approximately $50 million. Concurrently with the execution of the Merger Agreement, Parent, as the borrower, and Upper Parent, as the direct parent company of Parent, entered into a credit agreement (the “Credit Agreement”), pursuant to which funds affiliated with Morgan Stanley Private Credit have committed to provide up to a $40 million senior secured term loan facility to Parent, the aggregate proceeds of which are expected to be, together with the Company’s cash on hand, sufficient for Parent to pay the aggregate Transaction Consideration.

The foregoing descriptions of the Merger Agreement and the Credit Agreement are not intended to be complete and are each qualified in their entirety by the full text of such agreements which are filed as Exhibits 10.1 and 10.2 hereto and incorporated by reference herein.

Item 5. Interest in Securities of the Issuer

The Majority Stockholder directly holds 141,687,978 CDIs, representing a right to acquire and beneficial ownership of an equivalent number of shares of Common Stock, constituting 66.0% of the shares of Common Stock outstanding as of July 26, 2024. Such percentage is calculated assuming 214,694,686 shares of Common Stock outstanding as disclosed in the Issuer’s Definitive Proxy Statement filed with the SEC on August 8, 2024.

The Majority Stockholder directly holds the reported securities on behalf of SCP IV and SCP IV Parallel. The general partner of the Majority Stockholder is SCP IV. The general partner of SCP IV and SCP IV Parallel is the Funds IV GP. The general partner of Funds IV GP is SCP IV GP (together with the foregoing entities, the “Sterling Holders”). SCP IV GP is managed by majority vote of Steven M. Taslitz, Douglas L. Becker and R. Christopher Hoehn-Saric, who each disclaim beneficial ownership of the reported securities. As a result of the aforementioned ownership and control relationships, the Sterling Holders may be deemed to beneficially own the securities directly held by the Majority Stockholder.

As a result of the Management Rollover Agreements (defined below), the Reporting Persons may be deemed to be in a group with the Management Rollover Stockholders (defined below), who collectively beneficially own an aggregate of 10,959,740 CDIs. Aggregating such CDIs with the securities beneficially owned by the Reporting Persons, the group would beneficially own 152,647,718 CDIs representing 152,647,718 shares of Common Stock and constituting 71.1% of the shares of Common Stock outstanding as of July 26, 2024. The securities reported in this Schedule 13D do not include the CDIs directly or indirectly held by the Management Rollover Stockholders and the Reporting Persons disclaim beneficial ownership of such securities.

Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission by the Issuer, or any of the Reporting Persons that it is the beneficial owner of any of the Ordinary Shares referred to herein for the purposes of Section 13(d) of the Act, or for any other purpose, and such beneficial ownership (other than beneficial ownership of Ordinary Shares directly held by such Reporting Person) is expressly disclaimed by each such Reporting Person.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

The information contained in or incorporated into Item 4 of this Schedule 13D is hereby incorporated by reference into this Item 6.

On May 23, 2024, in connection with the execution of the Merger Agreement, the Majority Stockholder entered into a Voting and Support Agreement (the “Sterling Support Agreement”) with Sterling Karpos Holdings, LLC, an affiliate of the Sponsor and the indirect owner of Parent (“TopCo”) with respect to the securities owned by the Majority Stockholder (the “Owned Shares”). Under the Support Agreement, the Majority Stockholder agreed, among other things and on the terms set forth therein, to (i) not transfer any of its Owned Shares or to enter into a contract or agreement relating thereto except in certain circumstances; (ii) vote (or cause to be voted) at the Stockholder Meeting the Owned Shares then beneficially owned by the Majority Stockholder in favor of the approval of the Merger Agreement, the Merger, and the other transactions contemplated by the Merger Agreement; (iii) vote in favor of the approval of a proposal to adjourn or postpone the Stockholder Meeting to a later date if there are not sufficient votes for the approval of the Merger Agreement and the Merger on the date on which such meeting is held; (iv) vote against any action or agreement that would reasonably be expected to result in any of the conditions to the consummation of the Merger under the Merger Agreement not being fulfilled; and (v) vote in favor of any other matter or action necessary or desirable in furtherance of the Merger and the other transactions contemplated by the Merger Agreement.

Sterling Contribution and Exchange Agreement

On May 23, 2024, in connection with the execution of the Merger Agreement, the Majority Stockholder entered into a Contribution and Exchange Agreement with TopCo, pursuant to which the Majority Shareholder agreed to exchange shares of Common Stock for TopCo Equity Units, on or prior to the Closing.

Management Rollover Agreements

Mr. Fireng, the Company’s Global Chief Executive Officer and Executive Director and Mr. O’Hare, the Company’s Chief Executive Officer, Australia Asia-Pacific (collectively, the “Management Rollover Stockholders”), own in the aggregate 10,382,897 CDIs, or approximately 4.80% of the Company’s outstanding CDIs, each entered into certain conditional Rollover Agreements with TopCo on May 23, 2024 (together, the “Management Rollover Agreements”), pursuant to which the Management Rollover Stockholders, among other things, agreed to, directly or indirectly, exchange shares of Common Stock for TopCo Equity Units, on or prior to the Closing, expressly conditioned upon the Management Rollover Stockholders and TopCo reaching agreement on and entering into certain definitive agreements relating to (i) the governance terms and repurchase terms relating to the TopCo Equity Units, (ii) certain future compensation arrangements, and (iii) the terms of new TopCo incentive equity plans benefiting each of the Management Rollover Stockholders. If TopCo and the Management Rollover Stockholders were unable to agree on such definitive agreements prior to the Closing, the Management Rollover Stockholders would have no obligation to TopCo to exchange their shares of Common Stock in connection with the Merger. On or after September 3, 2024, TopCo and the Management Rollover Stockholders reached agreement regarding such definitive agreements.

The foregoing descriptions of the Sterling Support Agreement and the Management Rollover Agreements are not intended to be complete and are each qualified in their entirety by the full text of such agreements which are filed as Exhibits 10.3, 10.4 and 10.5, respectively, hereto and incorporated by reference herein.

Item 7. Material to be Filed as Exhibits.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: September 9, 2024