RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement/prospectus, including the financial statements and notes to the financial statements included herein and the matters addressed in the section entitled “General Information,” in evaluating the Business Combination and the proposals to be voted on at the General Meeting. For purposes of this section, “SSU”, “we”, “our”, “us” and “ourselves” refer to SIGNA Sports United GmbH, together with its subsidiaries prior to the consummation of the Business Combination; and “TopCo” refers to SIGNA Sports United N.V., together with its subsidiaries after completion of the Business Combination, in each case unless the context otherwise requires. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, cash flows, financial condition and results of operations of TopCo following the Business Combination. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by TopCo, Yucaipa and SSU which later may prove to be incorrect or incomplete. TopCo, Yucaipa and SSU may face additional risks and uncertainties that are not presently known to such entity, or that are currently deemed immaterial, which may also impair their business or financial condition.

Risks Related to the Industry in Which We Operate

The sports retail industry in our markets is very competitive and our ability to compete depends on a large variety of factors both within and beyond our control.

The sports retail industry is fragmented and characterized by intense competition. Each of our regional brands faces increasing competitive pressure both online and offline and from local and international players, impacting their ability to grow, sustain profitability and retain and grow market share. The diverse group of sports retailers with which we compete includes, but is not limited to:

 

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pure-play online sports retailers with business models similar to ours;

 

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general e-commerce retailers and marketplaces attempting to increase their presence across a range of product categories;

 

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offline-focused, vertically-integrated local retailers and brands, as well as international companies seeking to enter our geographic markets, who are expanding their own online and offline market share space using their own websites and apps; and

 

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offline stores and mail order retailers focused on or including sports that use their brand, customer reach and fulfillment infrastructure to expand their online sports market shares.

Some of our current and potential future competitors have longer operating histories, greater financial resources, a larger customer base and wider reach or better economies of scale than we do. New market entrants may appear and some of our current smaller competitors may be acquired by, receive investment from or enter into strategic relationships with well-established and well-funded companies or investors who would enhance their competitive positions, potentially leading to reduced sales, lower profitability, and loss of market share for us. Moreover, as has happened in several of our regions in the past, competitors may significantly discount their prices on merchandise also offered by us. Such intensive price competition could negatively affect our ability to generate revenues as well as our profitability. Additionally, individual, strong competitors could expand their market presence in our current or future geographies and thus create a market controlling position for themselves, which could make it more difficult for us to expand our own market position.

In addition, some of our brand partners and suppliers are producers or distributors of sports products that sell their products directly to end-customers independent of any partnership with us. We could experience additional competitive pressure if such suppliers initiate or successfully expand their own online retail

 

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operations, as they have access to their merchandise at lower costs and can therefore sell such merchandise at lower prices while maintaining higher margins on their revenue than we can. We also face competition from the grey market, i.e., sports product imports that have not been authorized by the brand owner. In addition, as a result of the challenges presented by COVID-19, sports retailers and brands that previously have not used e-commerce channels to market their products may establish their own online presence or sell their goods in cooperation with our existing competitors, which may create new or strengthen existing competition.

We believe these factors make our industry especially competitive, with the potential for increased competition in the future. As a result, we believe that our ability to compete will depend on factors both within and beyond our control, including, but not limited to:

 

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our ability to offer a convenient, efficient and reliable shopping experience for our customers in our regions and to adapt to evolving or local consumer preferences;

 

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the development, brand recognition and reputation of our brands, relative to those of our competitors;

 

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the growth, size and composition of our customer base and our ability to increase the number of repeat purchases from active customers;

 

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the composition of and the quality of relationship with our supplier base, and its subsequent impact on the selection and price of products we feature on our sites;

 

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the perception of our technical and operational capabilities, e.g. our websites, tools and apps as attractive distribution channels and service partners for our brand partners and suppliers;

 

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our ability to create and expand proprietary brands that are recognized for high quality and generate attractive margins for us;

 

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our ability to expand our product offering into new product categories and into new geographies;

 

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our ability to create efficient and cost-effective advertising and marketing efforts to acquire new customers;

 

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our ability to develop and manage new and existing technologies and sales channels in a timely manner;

 

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our ability to collect, consolidate and leverage our data in order to improve our various operational processes and to drive new business models both for consumers and our brand partners;

 

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the efficiency, reliability and service quality of our fulfillment operations, including fulfillment center activities, distribution, payment and customer service;

 

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the legal framework on e-commerce and related legislation governing liability, obligations and supervisory oversight; and

 

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our ability to offer convenient payment methods for every customer.

Any failure to properly address these factors and to successfully compete against current or future competitors could negatively affect our ability to attract and retain customers as well as brand partners and to achieve growth and sustainable profitability, which could, in turn, have a material adverse effect on our business, financial condition, results of operations and prospects.

Negative developments in global and local economic conditions in our markets, including the COVID-19 pandemic if it continues, could adversely impact consumer spending in the sports retail industry.

We sell sports products mainly online. Purchases of our customers are discretionary, and therefore dependent upon the level of customer spending, particularly among affluent customers. As a result, our

 

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performance depends on global and regional economic conditions, which, however, have shown significant volatility in recent years. For example, as a result of the COVID-19 pandemic and the measures taken by various governments to combat its spread most countries in which we operate fell into recession in 2020. Our home market Germany, which had seen a long period of stable economic growth since the financial and economic crisis of 2008/2009, reported a 5% decline in its gross domestic product (GDP) for 2020 compared to 2019 (source: Destatis (Press release #20 of January 14, 2021)). The ongoing pandemic and related counter-measures will at best continue to dampen economic prospects in Europe in the short term. While the COVID-19 crisis contributed to growth in the sports retail industry in 2020, following the end of government support programs a continued economic downturn in one or more of our markets may result in higher levels of unemployment or other negative macro-economic developments that can, as a consequence materially negatively affect consumer confidence and discretionary consumer spending, including purchases of sports products.

In addition, adverse economic developments in the countries in which we generate our revenue could adversely affect the collection of accounts receivable from our customers due to deterioration in credit quality and increase our inventory risk. There is also a risk of increased taxes, for the purpose of addressing the extraordinary levels of public spending and public debt related to the COVID-19 pandemic, in some or all of the European countries in which we sell our merchandise. Tax increases that lead to increases in the sales prices of our products or the prices of services we purchase or offer or reduce the income available for consumption could also weaken demand for our sports products.

Furthermore, there is no guarantee that our markets will continue to grow at rates experienced in the recent past, or at all. In particular, there is no certainty that our growth continues to be supported by an increasing shift from offline to online retail in the markets in which we operate (particularly in our bike vertical). There is no guarantee that the growth, which has been significantly driven by the COVID-19 pandemic will continue sustainably after the end of the COVID-19 pandemic. If our markets do not develop as anticipated, demand for our products may not increase as currently anticipated. Consequently, we may not be able to recoup the investments made in these markets and may be forced to close, or decide to divest, our operations in selected markets, which could have an adverse material effect on the implementation of our expansion strategy.

Risks related to Our Business Activities

We have incurred significant operating losses since our inception, and there is no guarantee that we will achieve or maintain profitability in the future.

We have not yet generated any consolidated net profit. In the fiscal year ended September 30, 2019, our group wide loss amounted to €35.9 million and to €25.6 million in the fiscal year ended September 30, 2020. These losses are primarily attributable to the costs associated with building and growing our business such as marketing expenses, geographic expansion and investments to further developing our platform. Our business plan is premised on our ability to benefit from the expected growth of, and increasing e-commerce penetration in, our regional markets. If our markets experience disruptive political or economic events or otherwise fail to grow, or if local governments restrain us from continuing to do business as we have in the past or at all, our growth prospects may not materialize, which may negatively affect our profitability or may even force us to cease operating in certain regions. Even in a stable political and economic environment, we must invest significant resources into organic growth opportunities such as building relationships with sports brands, enhancing the customer experience, driving market campaigns to gain new and retain existing customers, improving and expanding our technology and fulfillment infrastructure and other areas in order to capitalize on any potential growth opportunities. These investments may prove more expensive than anticipated and may not yield the desired results. There can be no assurance that we will be able to achieve or maintain profitability in the future. Continued losses would have a material adverse effect on our business, financial condition, results of operations and prospects.

 

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We regularly pursue acquisitions, any of which could result in significant additional expenses, failure to achieve anticipated benefits, or failure to be properly integrated.

As part of our business strategy, we regularly engage in acquisitions of other companies, businesses or assets. Acquisitions involve numerous risks, any of which could harm our business, including but not limited to:

 

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difficulties in integrating the technologies, operations, existing contracts and personnel of acquired businesses;

 

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difficulties in supporting, retaining and transitioning customers or suppliers of an acquired company;

 

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diversion of financial and management resources from existing operations or alternative acquisition opportunities;

 

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failure to realize the anticipated benefits or synergies of a transaction;

 

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failure to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance, accounting practices or employee or customer issues;

 

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risks of entering new product categories or markets in which we have limited or no experience;

 

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potential loss of key employees, customers and suppliers from either our current business or an acquired company’s business;

 

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inability to generate sufficient net revenue, profits and/or financial benefits to offset acquisition costs;

 

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additional costs or equity dilution associated with funding the acquisition; and

 

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potential write-offs or impairment charges relating to acquired businesses.

If, in the context of any future acquisition, we fail to properly assess the merits of the acquisition target, incur costs that later prove to be unjustified, fail to integrate the acquisition into our business properly and in a cost-efficient manner, or incur liabilities that prove to be larger than anticipated, it could have a material adverse effect on our business, financial condition and results of operations. Failure to provide our customers with an inspiring personalized online sports experience and to adapt to the fast-changing landscape (including, but not limited to social media platforms, sports brands, associations and clubs) could limit our growth and prevent us from achieving or maintaining profitability.

We may not be able to maintain or grow our revenue or our business.

We experienced significant growth in the past, with revenue increasing from €413.3 million in the fiscal year ended September 30, 2018 to €703.2 million in the fiscal year ended September 30, 2020, corresponding to a compound annual growth rate (“CAGR”) of 30.4%. Likewise, the number of site visits increased from 178.7 million in the fiscal year ended September 30, 2018 to 250.2 million in the fiscal year ended September 30, 2020, corresponding to a CAGR of 18.3%. However, there can be no assurance that we will be able to sustain these historic growth levels, or that we will continue to experience significant above-market growth or any growth at all. In addition, we anticipate that our growth rate will decline over time, especially in our first-party ecommerce business, as we achieve higher market penetration rates in all markets in which we operate. To the extent growth rate in the first-party business slows, our business performance will become increasingly dependent on our ability to achieve economies of scale by, among other things, using our operating leverage, increasing our fulfillment efficiencies and reducing marketing costs in relation to our revenue and to expand into adjacent business models and new strategies to maintain growth. We have made and are continuing to make investments in optimizing and localizing our overall customer experience, our fulfillment and technology infrastructure and the development of mobile applications. However, there is no assurance that these efforts will be sufficient to grow our revenue or business in total or in relation to the costs we incur. In particular, there is no certainty that our revenue growth continues to be supported by an increasing shift from offline to online retail in the markets in which we operate (particularly in our bike vertical), which has been significantly driven by the

 

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COVID-19 pandemic and that our new services and offerings leveraging our platform capabilities for industry partners and other market participants will be successful and will to complementary growth. There is no guarantee that the revenue growth driven by the COVID-19 pandemic will continue sustainably after the end of the COVID-19 pandemic. If our efforts and strategies should prove to be unsuccessful, our revenue growth slows or if our revenue declines, this could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are unable to manage our organic growth effectively, this could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

While we have taken steps to further enable the scalability of or business, our underlying businesses continue to operate, to a large degree, as separate entities. A primary operational target of us is to create a more integrated e-commerce and technology platform across our businesses as well as integrated back-office functions to enable us to realize revenue and cost-saving synergies in the context of a rapidly growing market. If we continue to experience organic growth at similar or higher levels than currently envisaged, we may be required to further upscale our technical IT-platform as well as expand and improve our fulfillment infrastructure, enterprise resource planning, logistics, customer service and related functions beyond what is currently planned to further support the growth and harmonize our e-commerce and technology platform. Our existing teams may not be adequately staffed to handle an increase in the workload. In addition, our workforce management may prove insufficient for our expanding business and growth plans. Our continued growth strategy therefore depends on our ability to hire new and qualified personnel in the near future and there is no guarantee that we will be able to hire the required number of employees with the adequate qualifications to expand our business in a timely manner and on acceptable terms.

Continued growth may also require us to expand and improve our operational, IT, financial, accounting, compliance and management controls and reporting systems and to make significant capital expenditures in offline sites and facilities, which may not always be possible or prove lengthy or costly. If we are unable to successfully handle future growth, we may be required to take steps to slow down our growth, which may adversely affect our business and competitive position.

If we experience significant future growth, we may also have to expand our relationships with various suppliers and other third parties we do business with and to expend time and effort to integrate new suppliers and other third parties into our operations. The expansion of our business could exceed the capacities of certain of our suppliers and third parties willing to do business with us and if they are unable to keep up with our growth, our operations could be adversely affected.

In addition, an expansion of our e-commerce and technology platform, in particular our IT-infrastructure, as well as our relationships with a growing number of third parties and a growing workforce will make our operations more complex and challenging. There is no guarantee that we will be able to meet such challenges and the risk of disruptions and compliance violations may increase

An inability to manage future growth efficiently could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Our growth strategy includes entering new geographic markets and pursuing new business opportunities, developing new websites or apps, or offering new products, sales formats or services, and the related investments may not yield the targeted results.

As part of our growth strategy we continuously search for opportunities to expand into new geographic markets, such as recently into the United Kingdom and the US as a result of the acquisition of Midwest Sports, Wiggle and Tennis Express. While we have experience with entering into new markets, such as entering into the Japanese market in 2020 via a joint venture with AEON Co., Ltd., we need to tailor our offering to the specific

 

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circumstances of every new geography which results in significant investments. However, we may not be able to reach our strategic goals for these new markets or these markets may prove less attractive than anticipated. If we launch but fail to generate satisfactory returns from any such initiative, it could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we choose to enter into new markets, expand our offering to include other types of products, or develop any new businesses, own sports brands, apps, websites, promotions, sales formats or services we believe would be compatible with, adjacent to, or complementary to our existing business, there can be no guarantee that any such endeavor will succeed. As a result, we may need to terminate, cancel, close, sell or wind up parts of our business. Any such initiative that is not favorably received by consumers and/or suppliers, especially in the case of a termination, could damage our reputation and brand, and any expansion or alteration of our operations could require significant additional expenses and divert management and other resources, which could in turn negatively affect our results of operations. In addition, the entrance into new markets will result in a more complex regulatory and compliance environment and any failure to comply with such rules may negatively affect our results of operations.

Our management team has limited experience managing a public company, and publicly traded company reporting and compliance requirements could divert resources from the day-to-day management of our business.

Our management team has limited experience managing a publicly-traded company and complying with the increasingly complex laws pertaining to public companies. Our management team might not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under applicable laws and regulations. These new obligations will require substantial attention from our management team and could divert their attention away from the day-to-day management of our business.

As a public company, we will be subject to additional reporting and disclosure requirements. In connection with the audit of SSU’s consolidated financial statements for the fiscal years ended September 30, 2019 and 2020, SSU identified material weaknesses in SSU’s internal controls related to (i) the adequate number of individuals within its accounting and financial reporting function with sufficient training in IFRS and SEC reporting standards, (ii) the design and maintenance of formal and effective controls over certain general information technology controls for IT systems and (iii) control activities that are responsive to the identified fraud risks, including the risk of bias and management override of controls. We have developed and are in the process of implementing a remediation plan to address these control deficiencies, which we believe will address the underlying causes of our material weaknesses. Please also refer to “We are aware of material control and accounting weaknesses in our current finance organization. If TopCo fails to maintain an effective system of internal control over financial reporting, TopCo may not be able to accurately report its financial results or prevent fraud. As a result, shareholders could lose confidence in TopCo’s financial and other public reporting, which is likely to negatively affect TopCo’s business and the market price of TopCo Shares.”

Notwithstanding the actions already taken, management’s attention may be diverted from other business concerns and we may be required to hire and train additional employees or engage outside consultants to comply with these requirements and additional Sarbanes-Oxley Act requirements applicable to SSU in the future, which would increase costs and expenses. Any compliance failure could harm SSU’s reputation and have a material adverse effect on SSU’s business, financial condition, results of operations and prospects. Compliance with these rules and regulations will increase our legal and financial compliance costs and may make some activities more time-consuming than they were previously. For example, our accounting, controlling, legal or other corporate administrative functions may not be capable of responding to these additional requirements without difficulties and inefficiencies that may cause us to incur significant additional expenditures and/or expose us to legal, regulatory or civil costs or penalties. Any non-compliance could result in significant fines or other penalties. To secure compliance it may become necessary to hire further employees or purchase outside services which may in turn interfere with our lean organizational set-up, increase our costs and expenses, and may therefore have a material adverse effect on the operation of our business as well as on our financial condition.

 

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We may be subject to negative publicity, including adverse information and negative publicity related to our affiliates or persons associated with us or any one of our affiliates.

Customers value readily available information concerning online retailers and often act on such information without further investigation or authentication or regard to its accuracy. Social media and websites immediately publish posts from users, often without filters or checks on the accuracy of the content posted. Allegations against us may be posted on social media, in internet chat rooms or on blogs or websites or other channels by anyone on an anonymous basis and any negative publicity may be accelerated through social media or other channels due to its immediacy and accessibility as a means of communication. In addition, we may be the target of harassment or other detrimental conduct by third parties, including from our competitors. Our reputation may be negatively affected as a result of the public dissemination of allegations or demeaning statements about our business, the business of our affiliates or persons associated with us or one of our affiliates, even if these allegations or statements are unfounded and we may be required to spend significant time and money to address such allegations. Such negative publicity, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brands, undermine the trust and credibility we have established and have a negative impact on our ability to attract new or retain existing customers. Inaccurate adverse information may harm our business and we may not be able to redress or correct inaccurate posts in a timely manner, or at all.

Our business may become the subject of negative media coverage and public attention, including regarding our business, the business of our affiliates or persons associated with us or one of our affiliates, which may develop strong dynamics and adversely affect our business. Third parties may communicate complaints to regulatory agencies and we may be subject to government or regulatory investigation as a result of such complaints. There is no assurance that we will be able to conclusively refute such allegations in a timely manner, or at all.

In addition, since many of our products are supplied by third-party suppliers, we may also receive negative publicity in case of inappropriate actions of our suppliers (e.g., violations of product safety regulation, environmental standards, labor laws or a use of child and slave labor). While we target to delist any products or suppliers who fail to meet our contractually agreed performance standards, there is no guarantee that we will be able to address any such concerns in a timely manner, or at all.

Any negative publicity and complaints could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Our business depends on search engines to attract a substantial portion of the customers who visit our sites. Any increase in the cost of or in our reliance on search engine marketing or any decrease in the effectiveness of our search engine marketing could materially adversely affect our business.

A portion of our business is generated by customers clicking on search results displayed by search engines, such as Google, Yahoo or Bing. These search engines typically provide two types of results: algorithmic and purchased listings. Algorithmic listings cannot be purchased and instead are determined and displayed solely by a set of formulas designed by the search engine provider. Purchased listings can be purchased by companies and other entities in order to attract users to their sites. We rely on both algorithmic and purchased listings to attract a substantial portion of the customers that we serve. The cost of purchased search listing advertising may increase as demand for such advertising channels grows, and further increases may have a negative impact on our ability to maintain or increase profitability. Further, search engines revise their algorithms from time to time in an attempt to optimize their search result listings and to maximize the advertising revenue generated by those listings. Innovations at search engines and online retailers, such as the Google “Buy” button or voice assistance, such as Amazon Alexa, may no longer channel customers to our websites in order to purchase products, which may result in reduced site traffic, fewer repeat customers and lower overall orders. Search engines may also place websites on a “blacklist” or remove them from their indexes for example due to poor search engine optimization. We cannot guarantee that a removal of any of our websites by Google, Yahoo, Bing or another search engine will

 

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not happen in the future or that we will be able to adapt to changes in search engine providers’ algorithms in a timely manner.

If the search engines on which we rely for site traffic remove any of our websites from their indices or otherwise modify their algorithms such that our websites have less favorable placement or do not appear among search results, our business would be adversely affected. Such circumstances may result in fewer customers clicking through to our sites, requiring us to resort to other more costly resources to attempt to replace that traffic, and this may reduce our net sales and could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

In addition, a part of our marketing strategy is to pay for a prominent display on search engines’ results pages. In order to place these listings with a search engine, we frequently place bids on key words at a certain cost per click that we pay to the search engine. Under the bidding system, the order in which websites appear in a search engine’s paid search results is determined by a combination of the price bid by the website and the historical and expected rate at which consumers click through to the website. Bids on generic search terms (such as “bike”) typically cost more than bids on branded search terms (such as “Tennis-Point”). The click-through rate is, in turn, influenced by the strength of the website’s brand and the popularity of the website. As the importance of online advertising increases and competition to be ranked higher in purchased listings intensifies, the cost of search engine marketing generally increases. Any increase in the cost of or in our reliance on search engine marketing, or any decrease in the effectiveness of our search engine marketing, could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Our business depends on the continued penetration of the internet and the development and maintenance of internet infrastructure by third parties.

The delivery of our products and services depends on the ability of third-party internet service companies to provide internet access and maintain reliable networks with the necessary speeds, data capacity and security. Changes in access fees to users may materially adversely affect the ability or willingness of users to access our content. A departure from “net neutrality” (the principle that all forms of internet traffic (i.e., video, telephony and text) are subject to equal treatment in transmission speed and quality) in the markets in which we operate, for example, could result in increased costs to our business. These factors are out of our control and the manifestation of any of them could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

In addition, increasing traffic or user numbers may result in a decline in internet (including mobile internet) performance or reliability. Internet outages or delays could also materially adversely affect our ability to provide services to its customers, which could in turn have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects

Our investments to increase brand awareness, to generate website and mobile traffic and to build or retain a loyal customer base may not be effective.

Maintaining and enhancing the awareness of our brands, acquiring new customers, and increasing the number of customer visits to our website and apps, the number of orders and the basket size per order is critical to our success and profitability.

We have made significant investments related to brand awareness, customer acquisition and customer loyalty, and we expect to continue to spend significant amounts to attract new and retain existing customers. For example, we have incurred and will continue to incur significant expenses in marketing through a broad range of media to attract website and app traffic, to increase customer loyalty and repeat purchases in order to increase revenue and maintain our brand awareness and recognition. These expenses include cost of marketing relating primarily to search engine advertising (Google), costs for TV commercials and costs for price comparison

 

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websites. Our decisions regarding investments in customer acquisition substantially depend upon our analysis of the conversion rates and customer lifetime value to customer acquisition cost ratios as well as first order profitability generated from customers we acquired in earlier periods. There can be no assurance that our assumptions regarding required customer acquisition investment and resulting net revenue from such customers, including those relating to the effectiveness of our marketing expenditures, will prove to be correct or that our marketing efforts and other promotional activities will achieve what we consider to be an optimal mix of advertising and marketing at a cost we consider to be economically viable. Furthermore, we cannot guarantee that certain methods of advertising that we currently utilize will not become less effective, be prohibited or otherwise be unavailable to us in the future. Our online partners might be unable to deliver the anticipated number of customer visits or impressions, or visitors that are attracted to our websites by such campaigns might not make purchases as anticipated by us.

If we are unable to attract sufficient brand awareness, website or app traffic, translate a sufficient number of website visitors or app users into purchasers with sufficiently large basket sizes, build and maintain a loyal customer base, increase repeat purchases from customers, or do any of the foregoing on a cost-effective basis, our future growth could be limited or our revenue could even decline. The occurrence of any of these events, alone or in combination, could have a material adverse effect on our business, financial condition and results of operations.

Our business depends on strong brands, which we might not be able to maintain or enhance. Any such inability could harm our business, financial condition, cash flows, results of operations and prospects.

The recognition and reputation of our brands, in particular “Tennis-Point”^TM, “fahrrad.de”^TM, “Bikester”^TM, “Brügelmann”^TM, “Probikeshop”^TM, “Addnature”^TM, “Campz”^TM, “Stylefile” ^TM and “Outfitter”^TM, among customers and suppliers are critical for the growth and continued success of our business as well as for our competitiveness in its target product categories and markets. Maintaining leading brands is particularly important in the multi-brand sports e-commerce industry, and competition among online retailers typically favors the market participants with the strongest brands. While less well-known brands may also be able to operate profitably, the market participant with the strongest brand typically captures a very large market share. In this regard, we depend on our multi-brand strategy, where each individual brand is well known though not necessarily maintaining a leading market position in respect of such brand. Therefore, any developments, such as the potential legal dispute concerning the use of our brand “Tennis-Point”^TM in the United States, that harm our brands could materially adversely affect our business.

As competition in the sports e-commerce markets intensifies, we anticipate that maintaining and enhancing our brands will become increasingly difficult and expensive, and investments to increase the value of our brands may not be successful. Many factors, some of which are beyond our control, are important for maintaining and enhancing its brands, including its ability to:

 

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compile an attractive sports and sports-related product offering sold at attractive prices;

 

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increase brand awareness through marketing and brand promotion activities;

 

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preserve and improve our reputation;

 

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increase purchase frequency;

 

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maintain and improve customer satisfaction through dedicated customer services tailored to meet customers’ specific needs (from pre-sale advice to after-sales services);

 

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attractively present and market these products as part of an inspiring and convenient shopping experience, in particular products marketed under our private brand labels;

 

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maintain, monitor and improve its relationships with suppliers;

 

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manage new and existing technologies and sales channels, including its apps; and

 

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maintain and improve the efficiency, reliability and quality of our delivery and fulfillment processes to ensure comparably short delivery times.

In addition, we may be required in the future to invest in one specific brand or customer category to the detriment of our other brands or customer categories, which may weaken such brand or category.

Any failure to offer high-quality products, an inspiring and convenient shopping experience and excellent customer service tailored to meet customers’ specific needs could damage our reputation and brands and result in the loss of revenues, which could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Our business is complemented by our private label brands, which we might not be able to maintain or enhance, and unfavorable customer feedback or negative publicity could adversely affect our private label brands.

Our business is complemented by private label brands, including, Fixie Inc., Red Cycling, Votec, Ortler, Serious, Tennis-Point, Bidi Badu, Axant and Campz. The strong awareness of our private label brands contributes to higher organic traffic on our websites and lower marketing costs, as a high percentage of our website traffic is generated by direct visits or related to customer relationship management, social media or search engine optimization channels. We also typically achieve a higher gross margin when selling our private label brands to consumers vs selling third-party brands. Maintaining and enhancing our private label brands is therefore crucial for the expansion and retention of our base of customers, suppliers and brands as well as for the improvement of our financial results. However, our private label brands may be adversely affected if their public image or reputation is tarnished by customer complaints or negative publicity about product quality, delivery times, return processes, customer support or other services. Any failure to maintain or enhance our private label brands and thus to expend and retain our loyal customer base, could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Failure to provide our customers with a customized and an inspiring sports online experience could limit our growth and prevent us from achieving or maintaining sustainable profitability.

We believe that the foundation of our success as a sports online retailer is to provide our customers with a highly inspiring and engaging sports online experience from a wide selection of brands. If we should fail to offer the sports products and brands in demand by our clients, if we are unable to present such products on our websites in an inspiring and attractive way and at competitive prices, if customization of online experience offered by us fails to be inspiring and yet being expensive, or if customers regard our fulfillment capabilities, in particular delivery, returns and payment, as not entirely convenient, we may be unable to win new customers, may lose existing customers or may be faced with reduced volumes of purchases on our websites, any of which would have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Any failure to anticipate and respond in a timely manner to sports trends and consumer preferences could result in a loss of customers and business.

Our ability to sell a sufficient number of products at satisfactory price levels depends on our ability to predict and respond to sports trends and changing customer preferences in a timely manner. We operate in the sports retail industry, which is highly sensitive to changes in customer preference, fluctuations in sports trends and seasonal weather patterns. Customer preferences regarding sports design, quality and price tend to change rapidly and new trends, such as focus on sustainability, may continue to gain importance. Thus, accurately forecasting the selection and required quantities of such products is difficult. In addition, we must take into account the time it takes us to respond to changes in trends, as we incur lead times for the delivery of merchandise from our suppliers. As such, a potential increase in lead times, e.g., due to disruptions in the supply

 

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chain, may result in us not having the appropriate selection or the required quantities of products in order to satisfy customer demand. While there has been an increase in demand for more sustainable and environmental-friendly sports products due to ever more present public awareness regarding climate change and the environmental impact of sports, this may not result in customers’ willingness to pay higher prices, for example. We typically enter into agreements to purchase our merchandise in advance of the applicable selling season and any failure to anticipate and respond in a timely manner to sports trends and customer preferences could result in lost sales, a loss of customers or unfavorable margin structures when selling lower demanded products, which would have a material adverse effect on our business, financial condition, write-offs on inventory and results of operation.

We may miss or may not be able to adapt to the latest trends in communication with our customers through social media or other channels.

We heavily rely on social media to communicate with our customers. Changes to the terms and conditions of the relevant providers could limit our ability to communicate through social media. These services may also change their algorithms or interfaces even without notifying us, which may reduce our visibility or increase our costs.

We also use newsletters in the form of emails and other messaging services in order to promote our brands, inform customers of our product offering and/or the status of their transactions. Changes in how webmail services organize and prioritize emails could reduce the number of customers opening our emails. For example, several service providers organize incoming emails into categories. Such tools and features could result in our emails and other messages being shown as “spam” or as lower-priority messages to our customers, which could reduce the likelihood of customers opening or responding positively to them. Actions by third parties to block, impose restrictions on, or charge for the delivery of, emails, app push notifications and other messages, as well as legal or regulatory changes limiting our right to send such messages or imposing additional requirements on our ability to conduct email marketing or send other messages, could impair our ability to communicate with our customers.

If we are unable to communicate through social media, via emails, app push notifications or other messages with our customers, if our messages are delayed, or if customers do not receive or view them, we will no longer be able to use this marketing channel. This could impair our marketing efforts, or make them more expensive if we feel the need to increase spending on paid marketing channels to compensate for the loss of free marketing, and, as a result, our business could be adversely affected.

In addition, any malfunction of our communication services could result in erroneous messages being sent and customers no longer wanting to receive any messages from us. Furthermore, our process to obtain consent from the visitors to our websites to receive newsletters, app push notifications and other messages from us and to allow us to use their data may be seen as insufficient or invalid. As a result, such individuals or third parties may accuse us of sending unsolicited advertisements and other messages which could result in claims against us.

The way our customers communicate online is constantly evolving. Keeping up with these developments is key for us to effectively present our brand, labels and products to our customers. However, we may not be able to identify new trends in communication or to adapt to these trends. An inability to communicate through social media, app push notifications, emails or other messaging services could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are involved in and may pursue strategic relationships. We may have limited control over such relationships, and these relationships may not provide the anticipated benefits.

We have partnered with numerous third parties, inter alia by acquiring shares in their businesses or by entering into cooperation agreements, including komoot and our joint venture with AEON and a number of

 

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operative cooperations across our group of companies and may pursue and enter into additional strategic relationships in the future. Current and future strategic relationships involve risks, including but not limited to maintaining good working relationships with the other party, inconsistency of economic or business interests, the other party’s failure to fund its share of capital for operations or to fulfill its other commitments — including providing accurate and timely accounting and financial information to us — loss of key personnel, actions taken by our strategic partners that may not be compliant with applicable rules, regulations and laws, reputational concerns regarding our partners or our leadership that may be imputed to us, bankruptcy and related bankruptcy proceedings requiring us to assume all risks and capital requirements related to the relationship. Further, these relationships may not deliver the benefits that were originally anticipated, all of which could have a material adverse effect on our business strategy and results of operations.

We rely on external financing to support the continued growth of our business and may not be able to raise needed capital on economically acceptable terms, or at all.

Since our inception, we have had negative operating cash flows and relied on external financing. The uncertain and volatile economic environment across our key regions, combined with significant funding needs and a loss-making business, may reduce our options for raising additional capital, be it in the form of equity or debt financing. This uncertain and volatile environment may also negatively impact the accuracy of our budgeting and financial forecasting. As a consequence, we may not be able to correctly anticipate our capital requirements. If we are not able to raise the required capital on economically acceptable terms, or at all, or fail to accurately project and anticipate our capital needs, we might have insufficient funds to meet our obligations and/or may be forced to limit or even scale back our operations, which may adversely affect our growth, business and market share and could ultimately lead to insolvency.

We intend to raise significant capital in the Business Combination. However, we may require additional capital to finance our operations or the future growth of our business. If we choose to raise additional capital by issuing new shares, our ability to place such shares at attractive prices, or at all, depends on the condition of equity capital markets in general and the price of our shares in particular, and such share price may be subject to considerable fluctuation.

A breach of covenants or other contractual obligations contained in external financing agreements, including any arrangements we enter into in the future, could trigger an event of default that may trigger immediate repayment obligations or may lead to the seizure of collateral posted by us, all of which may adversely affect our business. Additional debt financing from independent third parties may not be easily available to us. Even if additional debt financing were available, such financing may require us to grant security in favor of the relevant lenders or impose other restrictions on our business and financial position. Moreover, if we raise additional capital through debt financing on unfavorable terms, this could adversely affect our operational flexibility and profitability. Such restrictions may adversely affect our operations and limit our ability to grow our business as intended.

An inability to obtain capital on economically acceptable terms, or at all, could have a material adverse effect on the implementation of our business strategy, financial condition, results of operations and prospects.

We rely on third party suppliers for the products we sell and any deterioration in those business relationships may materially and adversely affect our business.

We source the products we sell (including our private brand label products) from a significant number of suppliers. Our continued growth resulting from increased demand for the products we sell will require us to increase our ability to source commercial-quality products on reasonable terms.

Our suppliers (including those manufacturing our private label products) may:

 

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cease selling merchandise on terms acceptable to us;

 

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fail to deliver goods that meet consumer demands;

 

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encounter financial difficulties;

 

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terminate our relationships and enter into agreements with our competitors on more favorable terms;

 

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have economic or business interests or goals that are inconsistent with ours and take actions contrary to our instructions, requests or objectives;

 

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decide to initiate their own e-commerce operations, thereby directly competing with us;

 

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be unable or unwilling to fulfill their obligations, including their obligations to meet our production deadlines, quality standards and product specifications;

 

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fail to expand their production capacities to meet our growing demands;

 

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encounter raw material or labor shortages or increases in raw material or labor costs, labor disputes or boycotts which may impact our costs;

 

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be affected by natural disasters;

 

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encounter trade restrictions or disruptions, currency fluctuations or adverse changes in general economic and political conditions; or

 

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engage in other activities or employment practices that may harm our reputation.

Any disruption in our relationships with suppliers or our failure to resolve disputes with or complaints from its suppliers in a timely manner, could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

In addition, certain of our businesses have a high level of turnover with a select number of suppliers. For instance, a significant portion of our sales in our teamsport and athleisure segments related to products of Adidas and Nike. If any significant supplier chooses not to sell their products to us or limit our access to their products, this could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Our brands and other suppliers could discontinue selling to us on financially viable terms, fail to supply us with high quality, compliant and sufficient merchandise, or fail to comply with applicable laws or regulations.

We source our proprietary brand products from numerous domestic and international manufacturers, distributors and resellers with whom we typically do not agree on long-term supply agreements. These suppliers are subject to various risks, such as changes in raw material costs, labor disputes, boycotts, natural disasters, trade restrictions or disruptions, currency fluctuations, reductions in available credit from banks, factors or other financial institutions and adverse changes in general economic and political conditions as well as supply chain interruptions caused by the ongoing COVID-19 pandemic that could limit their ability to provide us with high-quality and compliant merchandise on a timely basis and in accordance with agreed-upon terms or may fail to re-negotiate new supply agreements with our suppliers on favorable terms. In addition, we face risks in relation to the shortage of supplies in bicycles and bicycle parts due to the overall increased demand for bicycles and bicycle parts due to the COVID-19 pandemic. In this respect, we may be unable to fully pass on price increases for bicycles to our customers which could have a negative impact on our profitability.

We could also become subject to adverse legal or regulatory actions if our suppliers provide us with or have us sell from third-party stock products that do not comply with applicable laws or regulations, including laws and regulations relating to product safety, embargoes, environmental protection, and standards relating to employment and factory conditions. While we have taken steps to prevent non-compliance of our brand partners and suppliers with applicable laws and regulations, there can be no assurance that these steps effectively prevent non-compliance in all circumstances. If sports brand partners or suppliers do not observe these regulations, we

 

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may be unable to sell or otherwise handle the relevant products. If we fail to detect any deficiencies in the products sold or handled by us before such products are shipped to customers, we may have to recall such products. In the event of any failure by sports brand partners or suppliers to meet our quality standards or the quality standards of our customers, we could incur additional costs, our brand and reputation may be damaged by negative publicity due to such deficiencies, we or our management may face administrative fines, claims related to product liability or criminal charges and we may lose current or potential customers, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We source our private label brand products from a large number of different manufacturers, including manufacturers across multiple continents (including Asia), where there is a relatively higher risk that agreed-upon working conditions are not respected at all times. In addition, manufacturers may use materials that are not suitable for the relevant products and could potentially even harm consumers of our own private label brand products. While we regularly check the working conditions in most of these factories and the quality of our own private label brand products, there can be no guarantee that our checks effectively uncover all deficiencies. We may also become liable for violation of national or European legislation regarding the monitoring of our supply chains in the future (for further details please refer to “We are subject to various regulations applying to e-commerce and tech businesses generally, including but not limited to regulations governing cyber security, data protection, consumer protection, product safety and trademarks, and future regulations might impose additional requirements and other obligations on our business.”). Any deficiencies may result in negative publicity and may materially harm our reputation and business. In addition, some of our manufacturers require that we prepay orders for merchandise, which exposes us to the risk of fraud. Further, we may lose these prepayments if the relevant manufacturer enters bankruptcy proceedings.

We are subject to standardized contractual terms and conditions imposed by our suppliers that regularly include restrictive clauses, which. for example, prohibit us from selling our products in or into certain regions and markets or on certain platforms.

When we enter into arrangements or contracts with our suppliers, we typically have to agree to their respective standardized contractual terms and conditions, which are generally not further negotiable. Such standardized contracts often include various restrictive clauses, such as, territorially restricting or other similar clauses prohibiting us from selling our products in or into certain regions and markets or on-selling products through channels other than our own websites. At the same time, such standardized contracts typically do not impose comparable restrictions on our suppliers that would prevent those suppliers from selling the relevant products to our competitors or any other third party. Any breach of such restricting clauses, both intentional or inadvertent, might lead to the termination of the respective contract by the supplier concerned, expose us to substantial liability or contractual fines, and could result in material litigation against us. Even if our contractors falsely accuse us of having violated such clauses and assert corresponding claims against us, defending such claims might be expensive and time-consuming and may divert our management’s attention away from the day-to-day management of our business. Besides that, there would be no guarantee that the defense against such claims would ultimately be successful.

The agreements concluded with our suppliers typically do not provide for a fixed price for the purchase of products by us. As a result, we may be subject to price fluctuations based on changes in our suppliers’ businesses, cost structures, foreign exchange rates or other factors. Most of these standardized contracts do not incorporate any obligations or standards for our suppliers regarding ethical business conduct, corporate responsibility or legal compliance in general. There is no guarantee that our suppliers conduct their business according to our own ethical business principles or ideas of corporate responsibility and any non-compliance by any of our suppliers with such principles or applicable laws and regulations could significantly damage our reputation, business and/or expose us to claims by third parties. For further details on recent supply chain legislation, please also refer to “We are subject to various regulations applying to e-commerce and tech businesses generally, including but not limited to regulations governing cyber security, data protection, consumer protection, product safety and trademarks, and future regulations might impose additional requirements and other obligations on our business.”

 

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Further, we are already subject to numerous contracts incorporating such restricting or other similar clauses and may enter into additional contracts or may be subjected to similar arrangements in the future involving such or similarly restricting clauses, particularly if and to the extent we geographically expand our business operations. For example, based on such restricting clauses, we are already prohibited from selling certain of our products sourced from selected brand partners or suppliers in or into markets outside of Germany, the European Economic Area or the US. Certain other brand partners impose restrictions or certain requirements for the presentation of their products on our websites or our marketing activities. Any such contractual restriction may significantly limit our ability and potential to conduct or grow our business operations, particularly if we enter into further contracts containing such non-compete, territorially restricting or similar clauses in the future.

Many of our suppliers rely on credit insurance to protect their receivables, and any changes to, or too slow adjustments or withdrawals of, such credit insurance might lead suppliers to seek to reduce their credit exposure to us.

We are aware that many of our third-party suppliers have traditionally obtained credit insurance to protect their receivables against the risk of bad debt, insolvency or protracted default of their buyers, including us. Credit levels available to us from our suppliers remain dependent on the general economic environment and our financial position. In our last fiscal year ended September 30, 2020, we experienced a notable decrease in the availability of credit insurance to our suppliers. If such availability further decreases, or if requests concerning an increase in credit levels are not met in a timely manner, and if such suppliers are unwilling or unable to take credit risk themselves or find alternative credit sources, they might choose to reduce their credit exposure to us, which efforts might include attempts to change their credit terms or refusing to contract with us. Any such actions could have a material adverse effect on our cash position, lead to an increase in our indebtedness or have a negative impact on our product offering and, thus, on revenue, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Changes in customer return rates might increase our costs and harm our business.

We have established return policies specific to our various local markets and verticals that permit our customers to return products within designated timeframes ranging from 30 to 100 days following delivery. Granting return rights is an important element for converting app and website visitors into customers, providing our customers with the certainty that they will only be required to pay for those products that they want to keep.

We might experience a significant increase in returns — for example, due to customer dissatisfaction with our products or customer service, changes in customer behavior or the abuse of our liberal return policy by persons not actually willing to purchase our products. In this case there is no guarantee that we will be able to utilize returned goods in a cost-efficient manner — for example, by reselling them on our websites, selling them at third-party outlets or returning them to our suppliers. We incur costs associated with returned goods — for example, costs associated with return processing and delivery — but may not receive revenue from returns or proceeds from sales of returned goods may not cover all costs incurred. Thus, any increase in returns would increase our costs with no corresponding increase in revenue.

Continued growth, in particular in case of an increase in market place sales, is likely to increase the absolute number of returns, which may force us to allocate additional resources to the handling of such returns and may further complicate our operations. Even though products that have not passed through our fulfillment centers, but are delivered via drop-shipping, contain a return label for that drop-shipping partner, we cannot guarantee that some packages are wrongly labeled and returned to us, which may require us to store such products for a certain amount of time and initiate the further return to our partner. Furthermore, any modification of our return policies may result in customer dissatisfaction or an increase in the number of returns, which could adversely affect our business.

 

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We may be unable to manage our own inventory levels effectively and shifting customer preferences may result in overstocking or understocking of products.

We operate in the sports retail industry, which is highly sensitive to changes in consumer preference, fluctuations in sports trends and weather patterns. Consumer preferences regarding sports design, quality, sustainability and price tend to change rapidly and accurately forecasting the selection and required quantities of such products in future periods is difficult. Accelerated through sentiments on social media, the popularity of products can change significantly between the time products are ordered and the date of sale. In addition, the lead times we must incur in taking delivery of merchandise from many of our suppliers pose challenges by increasing, in some cases significantly, the time it takes us to respond to changes in product trends, consumer demand and market prices. As a result, we face the risk of not having the appropriate selection or the required quantities of products in order to satisfy customer demand, in which case our reputation might suffer. A sudden loss of customers may additionally result in increased costs of maintaining inventory and the risk of losses on excess inventory.

In addition, we may misjudge the popularity of our products due to changing customer preferences, which may render us unable to avoid overstocking or understocking. We therefore face the risk of carrying excess inventory which we might be unable to sell during the relevant selling seasons, or only by offering significant discounts. In addition, significant discounting may damage both our relationship with suppliers whose products we sell at discounts as well as our own brand. We generally do not have the right to return unsold products to our brand partners. If we fail to anticipate and respond in a timely manner to changing consumer preferences and adjust our purchases and inventory accordingly, this may result in lost sales, sales at lower than anticipated margins and/or write-offs on inventories, any of which would have a material adverse effect on our business, financial condition and results of operations.

The broad variety of payment methods we accept exposes us to operational, regulatory and fraud risks.

We currently accept a number of different payment methods tailored to meet our customers’ payment preferences. These payment methods include, among others, invoicing, credit and debit cards, PayPal, direct deposit, online bank transfer, direct debit, checks and gift cards. Due to the complexity of the broad variety of payment methods we accept, we face the risk of operational failures in our checkout process, which could adversely affect our conversion rate (i.e., the percentage of people visiting our websites that actually place an order) and customer satisfaction. There is also the risk that, in connection with the methods of payment we offer, we may become subject to additional regulations, compliance requirements, and various types of fraud or cyber-attacks.

For certain payment methods, including credit and debit cards, we pay bank interchange and other fees. These fees may increase over time, increasing our operating costs and decreasing our profitability. We are also subject to operating rules and certification requirements of payment scheme associations, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers. Amendments to these rules or the introduction of new laws or requirements regarding any payment method we accept could result in increasing compliance costs, higher transaction fees, and the possible loss of or restrictions to our ability to accept credit or debit cards or other types of payment.

We generally rely on third parties to provide payment processing services. We also rely on third-party payment processors, and encryption and authentication technology licensed from third parties, to securely transmit customers’ personal information. If these companies become unwilling or unable to provide these services, or increase their fees, such as bank and intermediary fees for credit card payments, our operations may be disrupted and our operating costs could increase.

Furthermore, we face risks relating to customer claims that purchases or payments were not properly authorized or were transmitted in error, as well as risks that customers have insufficient funds and the risk of

 

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fraud. While fraud risks are mostly covered through our contracts with payment processing services, any failure to avoid or limit losses from fraudulent transactions could damage our reputation and result in increased legal expenses and fees.

The materialization of any of the risks described above could have a material adverse effect on our business, financial condition, results of operations and prospects.

We largely depend on third-party service providers for the fulfillment and distribution of our products to end customers.

We depend on third-party logistics providers for the fulfillment and distribution of the products that our customers order online. Therefore, we have only limited control over the handling of our goods in the course of the fulfillment process, the timing of deliveries and the security of our products while they are being transported. There may be shipping delays due to, among other things, inclement weather, natural disasters, strikes, terrorism or ongoing restrictions related to the COVID-19 pandemic. We also face the risk that our products may be damaged or lost in transit — for example, in the course of sourcing from overseas. If these third-party providers terminate their contracts with us, we may not be able to find suitable alternatives on commercially acceptable terms, which could disrupt our services or increase our costs. Additionally, there can be no assurance that customers will not expect or demand faster delivery times than we can ensure in the future. If the products we sell are not delivered in a timely manner or are damaged or lost in transit, if we are not able to provide adequate customer support, or if our competitors are able to deliver the same or equivalent products faster or more conveniently, our customers could become dissatisfied and cease buying on our websites.

In some of our markets, it may be difficult to replace the logistics providers with whom we cooperate due to a lack of alternative offerings at comparable price and/or service quality and we may not be able to substitute such third-party services with an own last-mile delivery service. Changes in shipping terms and costs, for example due to higher fuel costs, or the inability or refusal of third-party logistics providers to deliver our products in a safe and timely manner could harm our reputation and have an adverse effect on our business. Additionally, any deterioration in the financial condition of any third-party service provider could have an adverse impact on the quality of our logistics processes and distribution costs. If third-party logistics providers were to increase their shipping costs and we continue to offer free delivery and returns, the increased shipping costs could have a material adverse effect on our business and financial condition.

Any failure to successfully address our changing fulfillment and logistics capacity requirements could severely affect our business and prospects.

The functioning of our online business depends to a large extent on our customers receiving the ordered goods in a timely and convenient manner and their ability to return them without any difficulties. To keep our customers satisfied we rely on a multi-national logistics infrastructure, consisting of both own, hybrid and third-party logistics infrastructure set-ups, including inbound receipt of items for sale, storage systems, packaging, outbound freight, and the receipt, screening and handling of returns. These processes are complex and depend on sophisticated know-how and computerized systems. We are therefore constantly monitoring and sourcing our fulfillment services and logistics capacity to keep up with those requirements and match our continued growth. It is, however, not certain that we will be able to find suitable service providers on commercially acceptable terms to support any future expansion plans. We might also need to increase our capital expenditures more than anticipated in order to increase the capacity of our own logistics infrastructure while at the same time, in other regions we may be forced to deal with excess capacities. Any failure in the required sourcing of fulfillment and logistics infrastructure as our business expands could materially impact our growth strategy.

If we continue to add new businesses or categories with different logistical requirements, or change the mix in products that we sell, our logistics capacities will become increasingly complex and operating it will become even more challenging. Operational difficulties could result in shipping delays and customer dissatisfaction or

 

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cause our logistics costs to become high and uncompetitive. Any failure to successfully address such challenges in a cost-effective and timely manner could severely disrupt our business and harm our reputation.

Our sourcing and logistics costs are subject to movements in the prices for raw materials and fuel as well as other factors beyond our control, and we may not be able to pass on price increases by our third-party services providers to our customers.

Our sourcing and logistics costs depend on the development of prices for certain raw materials, in particular cotton and other textile raw materials, as well as fuel. In addition, our sourcing costs are also influenced by the capacity utilization rates at our suppliers, quantities demanded from our suppliers, and product specification. As a result, our costs of materials can vary materially in the short-term and, in cases of supply shortages, can increase significantly. We are typically impacted by increases in the prices of raw materials and fuel price as well as carrier-charge increases, as our suppliers and third-party service providers attempt to pass along these increases to us. Although we may attempt to pass on cost increases to our customers by increasing selling prices via regular price reviews, we may not always be able to do so. Moreover, any price increases could adversely affect our sales or reduce our profitability. During periods of declining input or fuel prices, customer demand may also require that we sell our products at lower prices or may restrict our ability to increase prices, in spite of the fact that we may use goods that were purchased at higher prices or that we are forced to incur higher shipping costs, thereby negatively impacting our margins. The volatility in our sourcing and logistics costs and our limited ability to pass them on to customers may adversely affect our business and financial condition.

Dissatisfaction with our customer service could negatively affect our customer retention and the further implementation of our growth strategy.

A satisfied and loyal customer base is crucial to our continued growth. A strong customer service is required to ensure that customer complaints are dealt with in a timely manner and to the customer’s satisfaction. Except with respect to our offline stores, we do not typically have direct face-to-face contact with customers which is afforded through offline retail, the way we directly interact with customers through our customer service team is crucial to maintaining continuous customer relationships. We respond to customer requests and inquiries through e-mail, chat functions, social media and our partly toll-free hotlines. Any actual or perceived failure or unsatisfactory response by our customer service could negatively affect customer satisfaction and loyalty. Our inability to retain customers due to a lack of satisfactory customer service could have a material adverse effect on the further implementation of our growth strategy.

Our business is subject to operational and accident risks which may not be fully covered by our insurance.

We are exposed to risks related to the health and safety of our employees and contractors as well as other workplace safety risks. For example, our distribution activities involve specific risks such as fire, falls from height, objects falling from storage shelving and during movement, or traffic movements which could result in damage to equipment, damage to the property of third parties and personal injury or death. Accidents or other incidents that occur at any of our shops or distribution facilities or involve its personnel or operations could result in claims for damages against us and could damage our reputation. If staff and contractors get injured during the course of their duties we may, among other things, face fines and penalties from regulators as well as damage to our reputation.

We are also exposed to risks due to external factors beyond our control, including, but not limited to, accidents, vandalism, natural hazards, acts of terrorism, damage and loss caused by fire, power failures or other events, that could potentially lead to personal injuries, damage to third-party property or the environment or the interruption of our business operations. Accidents or other incidents that occur at our offices and workshops, or involve our personnel or operations could result in claims for damages against us and could damage our reputation. Although we maintain insurance against such losses to a level and at a cost we deem appropriate, our insurance policies are subject to exclusions and limitations, and we cannot guarantee that all material events of

 

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damage or loss will be fully or adequately covered by an applicable insurance policy. As a result, the amount of any costs, including fines or damages that we might incur in such circumstances, could substantially exceed any insurance we have to cover such losses. In addition, our insurance providers could raise their costs or become insolvent. The occurrence of any of these events, alone or in combination, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Any failure to operate, maintain, integrate and scale our network and mobile infrastructure could result in customer dissatisfaction, loss of revenues or subject us to claims for damages.

As an online sports retailer, we are dependent on the smooth functioning of our information technology systems, especially our internet and mobile infrastructure, which are critical to our business and inherently subject to various operating risks. For example, our offering is founded on our marketing platform specifically designed for the sourcing, presentation, curation, marketing and fulfillment of sports products. In addition, a key element of our strategy is to generate a high volume of traffic on, and use of, our websites and mobile domains to analyze a broad range of customer data, tracking individual journeys and ensuring efficient spending of our marketing resources. Our reputation and ability to acquire, retain and serve our customers are dependent upon the reliable performance of our websites, mobile domains and their underlying network infrastructure. As our customer base and the amount of information shared on our websites continue to grow, we will require additional network capacity and computing power. In addition, we need to maintain reliable internet and mobile networks with the necessary speed, data capacity and security, as well as ensuring timely development of complementary products.

The operation of our technology systems is expensive and complex and could result in operational failures. In addition, we are exposed to the risk of our technology systems being undersized and functionally maladjusted. In the event that our customer base or the amount of traffic on our websites grows more quickly than anticipated, we may be required to incur significant additional costs to enhance the underlying network infrastructure. Inadequate performance of our technology systems, whether due to system failures, power outages, lack of firewall protection, denial-of-service and credential stuffing attacks (attempts of which we experience regularly), computer viruses, physical or electronic break-ins, undetected errors, design faults or other unexpected events or causes, could affect the security or availability of websites, prevent customers from accessing our websites and result in limited capacity, reduced demand, processing delays and loss of customers. Past internal and external audits have revealed deficiencies in the technology systems of certain of our verticals. There can be no assurance that our remediation measures are effective. Moreover, future audits could reveal similar or other deficiencies in our technology systems. Any actual or perceived failure to maintain the performance, reliability, security and availability of our products and technology systems to the satisfaction of our customers and certain regulators could harm our reputation, disrupt our business or decrease our ability to attract and retain customers.

We use cloud services for storing and maintaining customer data as well as for the provision of our IT-infrastructure. An interruption or breakdown of our technology systems and IT-infrastructure due to power outages, fire, natural disasters, acts of terrorism, vandalism or sabotage, actions of third-party providers or any other unanticipated reason cannot be ruled out completely. If our cloud service partners fail, we may experience downtime on websites which could reduce the attractiveness of our websites to customers. Failure in our IT-infrastructure could also result in unfavorable media coverage, damage our reputation, and/or result in regulatory inquiries or other proceedings.

A failure to adopt and apply technological advances in a timely manner could limit our growth and prevent us from maintaining profitability.

The internet and e-commerce ecosystems are characterized by rapid technological development. New advances in technology can increase competitive pressure. Our success therefore depends, for example, on our ability to improve our current technological capabilities and capacities, including machine learning algorithms and big data infrastructure and to develop new online features and apps for a variety of platforms in a timely

 

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manner in order to remain competitive. Any failure to adopt and apply new technological advances in a timely manner could decrease the attractiveness of our websites and mobile domains to customers and thus adversely affect our growth and our revenue.

Customer growth and activity on mobile devices depends upon effective use of mobile operating systems, networks and standards that we do not control.

Purchases using mobile devices by customers generally, and by our customers specifically, have increased significantly, and we expect this trend to continue. In the fiscal year ended September 30, 2020, approximately 61.8% of page views were generated via mobile app, tablet and mobile phone. To optimize the mobile shopping experience, we are dependent on our customers’ ability to access our sites from an internet browser on their mobile device. With the continued release of new mobile devices and operating systems, we face difficulties predicting the problems we may encounter in developing apps for these alternative devices and operating systems, and we may need to devote significant resources to the creation, support and maintenance of such applications. In addition, our future growth and our results of operations could suffer if we experience difficulties in the future when offering our merchandise on mobile devices. We are further dependent on the interoperability of our sites with popular mobile operating systems that we do not control, such as iOS and Android, and any changes in such systems that degrade the functionality of our sites or give preferential treatment to competitive products could adversely affect the usage of our sites on mobile devices. In the event that it is more difficult for our customers to access and use our sites on their mobile devices, or if our customers choose not to access or to use our sites on their mobile devices or to use mobile products that do not offer access to our sites, our customer growth could be harmed and our business, financial condition and results of operations may be materially and adversely affected.

Further, we continually upgrade existing technologies and business applications, and we may be required to implement new technologies or business applications in the future. The implementation of upgrades and changes requires significant investments. The timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure could have adverse effects on our results of operations.

We are exposed to the risk of security breaches, including cyber-attacks, and unauthorized use of one or more of our websites, databases, online security systems or computerized logistics management systems.

We operate apps, websites, networks and other data systems through which we collect, maintain, transmit and store information about our customers, suppliers and others, including credit card or other financial information and personal information, as well as other confidential and proprietary information, including information related to intellectual property. We also employ third-party service providers that store, process and transmit proprietary, personal and confidential information on our behalf. Furthermore, we rely on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card details. While we take extensive steps to protect the security, integrity and confidentiality of sensitive and confidential information (e.g., password policies and firewalls), our security practices may be insufficient and third parties may breach our systems (e.g., through Trojans, spyware, ransomware or other malware attacks, or breaches by our employees or third party service providers), which may result in unauthorized use or disclosure of information. Such attacks might lead to blackmailing attempts, forcing us to pay substantial amounts to release our captured data or resulting in the unauthorized release of such data. Given that techniques used in these attacks change frequently and often are not recognized until launched against a target, it may be impossible to properly secure our systems. In addition, technical advances or a continued expansion and increased complexity of our IT-infrastructure could increase the likelihood of security breaches.

Advances in computer capabilities, new technological discoveries or other developments could increase the frequency or likelihood of security breaches. In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom

 

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we have commercial relationships. Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws, and cause significant legal and financial risks, adverse publicity or a loss of confidence in our security measures. We cannot be certain that our insurance coverage concerning other risks will be adequate for liabilities that we might actually incur or that such insurance will continue to be available to us on economically reasonable terms, or at all. Additionally, we may need to devote significant resources to protect against security breaches or to address problems caused by breaches, which may require us to divert resources from the growth and expansion of our business. The materialization of any of the foregoing risks could have a material adverse effect on our business, financial condition, results of operations and prospects as well as our reputation as a software enterprise.

Our business may be harmed if we are unable to secure licenses for third-party technologies on which we rely.

We rely on licenses to utilize certain technology provided by third parties, such as database technology, our e-commerce and technology platform, operating systems for our servers and other computers and components for our servers. These third-party technology licenses may cease to be available to SSU on commercially reasonable terms, or at all. If we are unable to obtain licenses for, or otherwise make use of this technology, we would need to obtain substitute technology, which may not be available. If substitute technology is available, it may be of lower quality or have lower performance standards or may only be available at a greater cost, any of which could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

Also, because we often depend upon the successful operation of third-party products in conjunction with our software, any errors in these third-party products, which may be outside of our control, may prevent the implementation or impair the functionality of our software and internet-based services, or delay the introduction of new services.

Ineffective protection of confidential information might materially weaken our market position.

Our key employees and officers have access to sensitive confidential information relating to our business, especially relating to the functioning of our websites and apps, our proprietary machine learning algorithms and big data infrastructure. While we have confidentiality agreements and technical measures in place we cannot assure that third parties or the general public never gain access to such information. Any ineffective protection of such information relating to our business might materially weaken our market position and thus adversely affect our business and operations.

We may be unable to attract, train, motivate and retain suitably qualified personnel and to maintain good relationships with our workforce.

The competence and commitment of our employees are important factors for our successful development and management of opportunities and risks. Therefore, our success is largely dependent on our ability to attract, train, motivate and retain highly qualified individuals, while building our corporate culture. A lack of qualified and motivated personnel could impair our development and growth, increase our costs and harm our reputation. We face competition for qualified personnel, for example those in information technology positions. Any loss of qualified personnel, high employee turnover, or persistent difficulties in filling job vacancies with suitable applicants could have a material adverse effect on our ability to compete effectively in our business and considerable expertise could be lost by us or access thereto gained by our competitors. In addition, to attract or retain qualified personnel, we might have to offer competitive compensation packages and other benefits which could lead to higher personnel costs. Any failure to attract, train, motivate or retain skilled personnel at reasonable costs could result in a material adverse effect on our business, financial condition and our reputation.

Personnel expenses represent a significant cost factor for our business. Although none of our own employees, except for some of our employees at our subsidiary Addnature AB, is currently subject to any collective bargaining agreement, there can be no assurance that labor disputes, work stoppages, strikes or similar

 

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actions will not occur in the future which might urge us to adopt or negotiate a collective bargaining agreement. Any material disagreements between us and our employees could disrupt our operations, lead to a loss in revenue and customers and increase our operating costs. In addition, there is no guarantee that collective bargaining would be possible on terms that are satisfactory to us. If our operations are affected over a longer period of time by labor disputes or if we are forced to enter into a collective bargaining agreement at unfavorable terms, this could have a material adverse effect on our business, financial condition and our reputation.

Our business is partly subject to local seasonal revenue fluctuations which may make it difficult to predict our future performance.

Our business has historically been, and will in all likelihood continue to be, seasonal. For example, most sports we sell equipment for are played in spring/summer, leading to significantly lower sales during winter times than during spring/summer. As a result of this seasonality of our business, any factor that negatively affects our business during the warmer months in any given year can have a disproportionate adverse effect on our revenue for such year. These factors include unfavorable economic conditions in the markets in which we operate at the relevant time and adverse weather conditions such as unusually long winters or short summers. In addition, any negative effects of weak seasons or weak sales of seasonal merchandise are likely to be exacerbated by industry-wide price reductions designed to clear out excess merchandise before or at the end of the relevant season. We might be unable to forecast accurately or synchronize its procurement cycles to coincide properly with seasonal variations in sales volumes. If our business growth slows or ceases, these seasonal fluctuations could become more important to its results of operations. Seasonal variations could also cause our inventories, working capital requirements and cash flows to vary from quarter to quarter. In addition, any negative effects of weak seasons or weak sales of seasonal merchandise are likely to be exacerbated by industry-wide price reductions designed to clear out excess merchandise before or at the end of the relevant season. We might be unable to forecast accurately or synchronize our procurement cycles to coincide properly with seasonal variations in sales volumes. If our business growth slows or ceases, these seasonal fluctuations could become more important to our results of operations. Seasonal variations could also cause our inventories, working capital requirements and cash flows to fluctuate from quarter to quarter. Any failure to adapt to these seasonal changes in a timely manner, may have a material adverse effect on our financial condition and results of operations for the relevant period.

Inability to forecast our business accurately could prevent us from properly planning expenses and process capacity.

We base our current and future expense levels on our forecasts of our business and estimates of future revenue. Such future revenue and results of operations are difficult to forecast because they generally depend on the volume, timing and type of orders we receive, all of which are uncertain. Seasonal variations in our inventories, working capital requirements and cash flows, among other things, also increase the difficulty of our financial forecasting and could adversely affect our ability to accurately predict financial results. For any given season, a substantial portion of our expenses is incurred in advance, and therefore fixed, due to the seasonality of demand for our products and the necessity of purchasing merchandise with significant lead times. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in revenue, which could have a material adverse effect on our financial condition and results of operations.

Regulatory, Legal and Tax Risks

We are subject to various regulations applying to e-commerce and tech businesses generally, including but not limited to regulations governing cyber security, data protection, consumer protection, product safety and trademarks, and future regulations might impose additional requirements and other obligations on our business.

We are subject to a variety of laws and regulations applicable to e-commerce and tech businesses, as well as laws and regulations of broader application that apply to us and to public companies in general. These laws and

 

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regulations include, among other things, cyber security, data protection, consumer protection, product safety, trademarks and internet domains, human rights and environmental topics (including the collection and disposal of electrical waste and electronic equipment), antitrust, pricing, content, copyrights, the design and operation of websites, social media and other communication, advertising practices, electronic contracts, credit card processing procedures, the provision of online payment services, unencumbered internet access to our services, textile labeling, packaging as well as taxation, tariffs and anti-bribery.

These laws and regulations evolve continuously and at a rapid pace and can differ across the jurisdictions in which we operate. Existing and future regulations and laws may particularly impede the growth and availability of the internet and online services which in turn could impede the ability to grow our business, or otherwise adversely affect our business by increasing costs and administrative burdens.

Given the broad variety of rules and their evolving nature, there can be no assurance that we have complied or will comply fully with all applicable laws and regulations. Any actual or alleged failure by us to comply with applicable laws or regulations could damage our reputation, could lead to a loss of revenue and may give rise to civil liability, administrative orders, fines or criminal charges. Legal or enforcement actions brought against us could damage our reputation and result in substantial legal expenses. Changes in laws or regulations could cause us to incur substantial costs, require us to change business practices, and could inhibit the effective implementation of our growth strategy.

In addition, the legislative and regulatory bodies, or self-regulatory organizations in jurisdictions in which we operate, may expand the scope of applicable laws or regulations, enact new laws or regulations in areas that are relevant to our business. For example, the European Commission’s Digital Single Market (DSM) initiative is expected to result in additional rules on e-commerce or data protection, information security and privacy. Furthermore, on June 11, 2021, the German federal parliament (Bundestag) adopted the so-called Supply Chain Act (Lieferkettengesetz), under which companies will have to carefully document their whole value chains, review their suppliers and prove that they are making efforts to comply with applicable standards and will make companies responsible for counteracting human rights violations in the production of their economic goods or economic goods supplied to them. In addition, in January 2021, the Legal Affairs Committee of the European Parliament called on the Commission to present a law that ensures companies are held accountable and liable when they harm or contribute to harming human rights, the environment and good governance. The European Parliament adopted a legislative initiative report in March 2021 calling for the adoption of a binding European law on the same matter. This would oblige companies to identify, address and remedy aspects of their value chains. It would also include a ban on imported products linked to severe human rights violations. Companies could be held liable for their actions and risk fines and legal remedies by victims. The Commission will present its legislative proposal on this matter later this year.

Any (perceived) compliance failure with existing laws and regulations as well as new or expanded rules could result in damage to our reputation and a loss of revenues as well as liability, fines and charges.

Non-compliance with data protection laws could result in liability and reputational harm to our business, and adverse changes in the applicable legal framework could increase our costs of operations.

As part of our business we process sensitive customer data (including banking/payment information, names and addresses) and therefore must comply with the applicable data protection and privacy laws. We are currently particularly subject to German and European laws and regulations on privacy, information security and data protection, the most relevant of which relate to the collection, protection and use of personal and business data, including Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (“General Data Protection Regulation”), but also to other legal frameworks like the UK Data Protection Act or the California Consumer Privacy Act. The costs of complying with the General Data Protection Regulation are high and continue to increase, particularly in the context of ensuring that adequate data protection and data

 

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transfer mechanisms are in place. Any failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions and damage to our reputation.

Privacy related regulation could interfere with our strategy to collect and use personal information as part of our data driven approach. For example, the use of “cookies” and similar (tracking) technologies, especially for behavioral advertising as well as other tracking and analytics purposes, requires any user’s explicit prior consent. Certain details as to how to validly obtain prior consent of the users are still open and there can be no assurance that further restrictions in obtaining prior consent, if widely adopted, will not result in a significant reduction in the effectiveness of the use of cookies and other methods of online tracking. Currently, there is uncertainty in relation to the exact implementation of future consent requirements and the exact implementation of tighter legislative restrictions may lead to lower opt-in rates for the application of our cookies and other methods of online tracking. Data protection laws and rules also impose certain standards of protection and safeguarding on our ability to collect and use personal information relating to customers and potential customers. This particularly applies to profiling, e.g. any form of automated processing of personal data intended to evaluate certain personal aspects relating to a natural person or to analyze or predict such person’s economic situation, location, health, consumer preferences, or other relevant behavior. Such restrictions may impede our ability to offer more curated and personalized content to our customers.

Any unauthorized access or disclosure of personal data may constitute a personal data breach under the General Data Protection Regulation. Unauthorized data access or disclosure could occur through cyber security breaches as a result of human error, external hacking, malware infection, malicious or accidental user activity, internal security breaches, and physical security breaches due to unauthorized personnel gaining physical access. In the event of such a personal data breach, we could be required to notify applicable government authorities and/or potential victims on very short notice and could face continued governmental investigations, fines and private claims for compensation from individuals whose personal data was involved. Violations of the General Data Protection Regulation may result in monetary penalties in the higher of up to €20.0 million or 4% of our worldwide turnover of the preceding fiscal year.

Furthermore, on July 16, 2020, the European Court of Justice issued its decision in Data Protection Commissioner v. Facebook Ireland Limited and Maximilian Schrems, which invalidated the EU-U.S. Privacy Shield framework for data transfers from countries of the European Union to the United States. This decision has greatly increased the legal requirements imposed on data exporters for transfers of personal data from EU-countries to non-EU countries, which are deemed to have an inadequate data protection level compared to the standards imposed in the European Economic Area (including, amongst others, the United States). Ensuring compliance with changing and/or stricter standards requires resources to continuously review and, as necessary, replace, amend or supplement the international data transfer mechanisms which we currently rely on, including corporate binding rules, standard contractual clauses and adequate data processing agreements with our business partners. The resulting mechanisms and procedures may increase the expenses associated with our overall compliance with personal data protection requirements or even require us to discontinue using certain tools that are relevant to our business. Any non-compliance could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions and damage to our reputation.

Changes in the economic or political framework may lead to further changes in these and/or other regulations governing data protection or changed interpretation of existing laws as well as the enactment of stricter laws and regulations governing data protection, which could increase our costs of operations due to increased compliance measures.

 

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We sell products to customers that are located in various jurisdictions and intent to further increase our geographic reach, which requires us to comply with various, and sometimes conflicting legal and regulatory requirements.

As we sell products to customers that are located in various jurisdictions, we are subject to various laws and regulations of the relevant countries. While a certain number of relevant regulations have been harmonized throughout the European Union, currently or main markets, many of these laws and regulations are complex and difficult to interpret, also due to deviating practices and interpretation of local authorities and courts. Moreover, as we plan to further expand our international operations to target customers in additional countries, we will become subject to additional laws and regulatory regimes. The legal and regulatory frameworks governing our business and operations may become increasingly uncertain due to quickly changing laws, contradictory interpretation of laws and regulations, administrative bypassing of legal frameworks or a lack of market precedents upon which we can rely.

Our international business is subject to laws and regulations in many areas, including cyber security, data protection, consumer protection, product safety, trademarks and internet domains, human rights and environmental topics, antitrust, pricing, content, copyrights, the design and operation of websites, social media and other communication, advertising practices, electronic contracts, credit card processing procedures, the provision of online payment services, textile labeling, packaging as well as taxation, tariffs, international sanctions and anti-bribery. These various laws and regulations often evolve and sometimes conflict with each other. Furthermore, operating in foreign jurisdictions entails an inherent risk of misinterpreting and wrongly implementing foreign laws and regulations. While we are not aware of any material breach by us of any applicable laws and regulations, we cannot rule out that we have not been in full compliance with these laws and regulations in the past.

Additionally, some of the tax systems into which we sell our products are very complex and there is no guarantee that the relevant tax authorities agree with the positions we have taken or the tax optimization structures and measures we have used to minimize legal risks, administrative burdens and tax rates. In other countries, changes in the political or legal climate may impact our use of local currency and local banking. Similarly, we may be bound by extended waiting periods and complex and costly administrative approval processes and registration.

As these laws continue to evolve and as we expand into new jurisdictions, our compliance efforts will become more complex and expensive and the risk of non-compliance will increase. Violations of applicable laws and regulations may harm our reputation and result in legal action, criminal and civil sanctions, or administrative fines and penalties against us or members of our governing bodies and our employees. Such violations may also result in damage claims by third parties or other adverse legal consequences, including class action lawsuits and enforcement actions by national and international regulators resulting in the limitation or prohibition of business operations. There is no guarantee that we can successfully manage or avoid any of the legal risks to which we are exposed, and non-compliance with the legal and regulatory frameworks that govern our operations, whether intentional or not, may have material adverse effects on our businesses, including causing us to cease our operations entirely.

Product recalls, product liability claims and breaches of corporate social responsibility could harm our reputation and business.

There is a risk that the goods we sell may cause property damage or injury to our customers, particularly in our bike business. While we believe that our operations comply in all material respects with all applicable product safety and consumer protection laws and regulations, the sale of defective products might result in product recalls, product liability claims and/or administrative fines or criminal charges. Even if an event causing a product recall proves to be unfounded or if a product liability claim against us is unsuccessful, the negative publicity surrounding any assertion that products sold by us caused injury or damage, or any allegation that the

 

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goods sold by us were defective, could adversely affect our reputation with both existing and potential customers as well as our corporate and brand image, particularly with a view to our own brands. We also face risks associated with environmental, animal-rights and sustainability concerns. For example, any negative publicity campaigns concerning low-priced, short-lived sports items may negatively affect our reputation or our sales. Similarly, negative publicity associated with the sale of sports items manufactured using animal-sourced products may negatively affect our reputation or our sales. We are further exposed to risks in relation to possible breaches of corporate social responsibility, including ethical sourcing, working conditions, child labor and responsible recruitment, which may harm our reputation and prospects. For example, if improper working conditions are found or alleged to exist at one or more of the factories in which the sports products we sell are manufactured, or if there is a major injury or loss-of-life incident in such factories, we could face negative publicity that could damage our reputation and the perception of the brands we sell, including our own brands, and we may be required to pay fines, face enhanced scrutiny by regulators or be subjected to other adverse legal consequences. Deficiencies in the area of corporate social responsibility may also negatively affect our recruiting efforts or disrupt our business.

The materialization of any of the foregoing risks, alone or in combination, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our inability to acquire, use or maintain our local trademarks and domain names for our sites could substantially harm our business, financial condition and results of operations.

We are the registrant of various trademarks as well as the trademarks of our websites in numerous jurisdictions and have also registered various internet domain names containing e.g., our brand names for our websites combined with the relevant top level domain in those jurisdictions in which we are active, e.g., inter alia but not limited to, “fahrrad.de”, “tennis-point”, “bikester”, “probikeshop”, “campz”, “Outfitter” and “stylefile” for our websites in those jurisdictions in which we are active (for example, “tennis-point.de” in Germany). Domain names are generally regulated by internet regulatory bodies and are also subject to trademark laws and other related laws of each country. If we do not have or cannot obtain or maintain on reasonable terms the ability to use our core trademarks or a major private label brand in a particular country, or to use or register our domain names, we could be forced either to incur significant additional expenses to market our products within that country, including the development of a new brand and the creation of new promotional materials and packaging, or to elect not to sell products in that country.

Any of our trademarks and domain names, from time to time, may become the subject matter of litigation. Currently, our trademark “Tennis-Point” is subject to a dispute for cease-and-desist and deletion in the United States. In case of a negative outcome, we therefore might not be able to use our trademark Tennis-Point, our domain Tennis-Point.com and the respective company name in the US in the future.

Furthermore, the regulations governing domain names and laws protecting marks and similar proprietary rights could change in ways that block or interfere with our ability to use relevant domains or our current brands. In addition, we might not be able to prevent third parties from registering, using or retaining domain names that interfere with our consumer communications or infringe or otherwise decrease the value of our marks, domain names and other proprietary rights. Regulatory bodies may establish additional generic or country-code top-level domains or may allow modifications of the requirements for registering, holding or using domain names. As a result, we might not be able to register, use or maintain the domain names that utilize our brand names in all of the countries in which we currently conduct business or intend to conduct business in the future, which, alone or in combination with the above risks, could have a material adverse effect on the further implementation and expansion of our business.

The realization of any of such risks, alone or in combination, could have a material adverse effect on our business, financial condition, cash flows, results of operations and prospects.

 

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We might be unable to adequately protect other intellectual property rights.

We believe our customer data, copyrights, trade secrets, proprietary technology and similar intellectual property are critical to our success, and we rely on trade secret protection, agreements and other methods with our employees and others to protect our proprietary rights. In addition, we have developed, and we anticipate that we will continue to develop, a substantial number of programs, processes and other know-how on a proprietary basis (but partly based on open source codes) that are of key importance to the successful functioning of our business.

We might be required to spend significant resources to monitor and protect our intellectual property rights. We may not be able to discover or determine the extent of any infringement, misappropriation or other violation of our intellectual property rights and other proprietary rights. We may initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or proprietary rights or to establish the validity of such rights. Despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights and other proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which could have a material adverse effect on our business and financial condition.

Third parties might accuse us of infringing their intellectual property rights.

The e-commerce sports industry, as well as the sports industry in general, is characterized by vigorous protection for and pursuit of intellectual property rights. We might be subject to litigation and disputes related to our intellectual property rights and technology in the future, as well as disputes related to intellectual property and product offerings of third-party suppliers featured by us. The costs of defending against such actions can be high, and there is no guarantee that such defenses will be successful. In addition, as our business expands and the number of competitors in our market increases, infringement claims against us could increase in number and significance. As an example, our trademark “Tennis-Point” is currently subject to a dispute for cease-and-desist and deletion in the United States. In case of a negative outcome, we therefore might not be able to use our trademark Tennis-Point, our domain Tennis-Point.com and the respective company name in the US in the future. We also have received in the past, and we will receive in the future, claims from third parties that certain items posted on, or sold through one of our websites violate third-party marks, copyrights, trade names or other intellectual property rights. Such claims, whether or not successful, could result in significant expenses, redirect management attention and could have a material adverse effect on our business and financial condition.

Legal claims regarding intellectual property rights are subject to inherent uncertainties due to the complex issues involved, and we cannot be certain that we will be successful in defending ourselves against such claims. Many potential litigants have the ability to dedicate substantially greater resources than we do to the enforcement of intellectual property rights and defense of claims that may be brought against them. If successful, a claimant could secure a judgment against us for substantial damages or prevent us from conducting our business as we have historically done so or may desire to do so in the future. We could also be required to seek additional licenses or pay royalties for the use of the intellectual property we need to conduct our business, which might not be available on commercially acceptable terms or at all. Alternatively, we may be forced to develop non-infringing technology or intellectual property on a proprietary basis, which could be expensive and/or unsuccessful.

The control and prevention mechanisms of our compliance structure might not be sufficient to adequately protect us from all legal or financial risks.

To protect us against legal risks and other potential harm, we established several compliance guidelines, including a code of ethics for employees as well as anti-corruption and anti-bribery guidelines and a group-wide guideline on data protection. These codes, guidelines and policies and the oversight of our internal compliance

 

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and legal departments might not be sufficient to prevent all unauthorized practices, legal infringements, corruption and fraud — especially regarding purchasing practices — or other adverse consequences of non-compliance within our organization or by or on behalf of our employees. Any compliance failure could harm our reputation and have a material adverse effect on our business, financial condition, results of operations and prospects.

As a result, we are exposed to the risk that our employees or other authorized persons could make payments or grant hidden benefits in violation of anti-corruption laws and regulations, especially in response to demands or attempts at extortion. In addition, our current internal controls, prevention (such as our anti-corruption policy) and training programs may prove to be insufficient. Our employees or authorized persons may have been or could be engaged in activities for which we could be held liable.

Some laws and regulations promulgated against corruption and money laundering may require us to implement certain controls, procedures and internal regulations in order to ensure that the operations of a given entity do not involve corruption, illegal payments, extortion or money-laundering. The great diversity and complexity of these local laws and regulations and the expansive nature of the business conducted by us in various countries and markets create a risk that we may be deemed liable for violations of local laws and regulations. Any violation or breach of these laws and regulations could affect our overall reputation and, depending on the case, expose us to administrative or judicial proceedings, which could result in criminal and civil judgments, including a possible prohibition on maintaining business relationships with suppliers, sports brands or customers in certain countries, which could have material adverse effects on the implementation of our business strategy as well as on our financial condition.

Changes in tax treatment of companies engaged in e-commerce in the jurisdictions in which we operate could adversely affect the commercial use of our sites and our financial results.

Our business is subject to the general tax environments in the countries in which we operate. Changes in tax legislation or case law, especially with regards to transnational e-commerce activities, — which might be applied retroactively — could increase our tax burden. Since 2017, the G20/OECD Inclusive Framework has been working on addressing the tax challenges arising from the digitalization of the economy and has proposed a two-pillar tax approach with pillar one referring to the re-allocation of taxing rights, addressing issues such as where tax should be paid and on what basis (i.e., where sustained and significant business is conducted, regardless of a physical presence), and pillar two ensuring a minimum tax to be paid by multinational enterprises. An agreement on the approach presented could have material adverse effects for us as a digital and multinational enterprise with regards to our tax obligations.

Changes in tax treatment of companies engaged in e-commerce in the jurisdictions in which we operate could adversely affect the commercial use of our sites and our financial results. For example, some jurisdictions in which we operate our business (e.g., Italy) have introduced new local taxes on transnational e-commerce activities (“digital services taxes” or “DST”). These DST generally aim at securing taxation rights of the jurisdiction for the revenues/profits generated by the transnational e-commerce activities with customers who are resident in this specific jurisdiction. We have established a process to assess on a regular (i.e., quarterly) basis whether or not our revenues/profits are subject to these DST. For 2020, it was concluded that there should be no such DST liability but there is a general risk that new local DST will be introduced or that the existing DST will be applied differently with the result that this could adversely affect our tax liability. We cannot predict the effect of current attempts to impose sales, income or other taxes on e-commerce. New or revised taxes — e.g., sales taxes, value-added tax (“VAT”) and similar taxes — would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling products over the internet. New taxes could also lead to significant increases in internal costs necessary to capture data and collect and remit taxes.

Additionally, tax laws may be interpreted differently by the competent tax authorities and courts, and their interpretations may change at any time, which could lead to an increase of our tax burden. Accordingly, we may

 

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face unfounded tax claims in such countries. Moreover, legislators and tax authorities may change territoriality rules or their interpretation for the application of VAT on cross-border services, which may lead to significant additional payments for past and future periods. In addition, court decisions are sometimes ignored by competent tax authorities or overruled by higher courts, which could lead to higher legal and tax advisory costs and create significant uncertainty. New taxes could also result in additional costs necessary to collect the data required to assess these taxes and to remit them to the relevant tax authorities. Besides this, the documentation obligations under applicable VAT and VAT-related laws are considerable. Therefore, it cannot be ruled out that we may not fully comply, or, as the case may be, may have not fully complied with applicable VAT regulations throughout all phases of their development.

Taxes actually assessed in future tax audits for periods not yet covered by our last tax audit may exceed the taxes already paid by us. As a result, we may be required to make significant additional tax payments with respect to previous periods. Furthermore, the competent tax authorities could revise their original tax assessments (for example, with respect to the recognition of invoiced value added taxes). Any tax assessments that deviate from our expectations could lead to an increase in our tax burden. In addition, we may be required to pay interest on these additional taxes as well as late filing penalties. Furthermore, we have carried out reorganizations of the Group structure, and there is a risk that any such restructuring could attract additional tax scrutiny or result in unexpected or expected tax leakage despite our best efforts to avoid such negative tax consequences (e.g., obtain tax advisory services by reputable consultants who confirmed the tax neutrality of the group structure reorganizations).

Any of these events occurring could, alone or in combination, have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks Related to the Acquisition of Wiggle

We may not be successful in integrating Wiggle into our existing business in the manner, or within the time frame, as currently anticipated or only at higher costs

Through the acquisition of Wiggle (together with its subsidiaries, the “Wiggle Group”), we aim to expand our business into new markets, in particular in the United Kingdom. The integration of the Wiggle business into our business holds special challenges for both parties and expose us to a number of risks, that could, among others arise from the circumstances described below. The following discussion is not meant to be exhaustive and, in addition, other risks and unexpected issues may arise that we are currently not aware of or unable to assess.

 

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Commitment of management capacity: The integration of the Wiggle Group is expected to require significant resources in terms of time and attention by both companies’ managements. If integration issues divert management from other responsibilities, our business could be adversely affected.

 

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Possible loss of key employees: Both companies depend on our and Wiggle’s executives and talent for the successful integration and implementation of a joint strategy. Should we and Wiggle be unsuccessful in retaining these employees, for example due to potential uncertainty among employees regarding jobs, company locations or corporate culture, this could impede efficient integration and leveraging our or Wiggle’s respective strengths. In particular, know-how of management and talented employees could be lost, which could be negatively affect innovation capability and lead to business disruptions.

 

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Transaction and integration costs: We and Wiggle have incurred and expect to continue to incur a number of non-recurring expenses associated with the acquisition of Wiggle and the integration of Wiggle’s operations in our group, which could be significant. These include financial advisory, legal, accounting, consulting and other advisory fees and expenses, investments in IT, business continuity and the adaptation of quality, health, safety & environment systems, reorganization and restructuring costs, severance/employee benefit-related expenses, public company filing fees and other regulatory expenses and related charges.

 

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Disruption to business operations: In connection with the integration of Wiggle, inadequate or misaligned commercial priorities, insufficient speed of decision making or insufficient demand could lead to a result in business loss and reputational damage. In addition, failure to harmonize potentially diverging corporate and commercial policies of us and Wiggle could negatively impact stakeholder loyalty and cause customers to change existing business relationships. A failure to harmonize external co-operations could entail a loss of partners, loss of projects, overlaps and legal implications. There is also a risk that any negative perception of the acquisition of Wiggle may impair our ability to attract and retain its key stakeholders and could cause suppliers, customers and other counterparties to change existing business relationships.

 

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Integration of internal controls and compliance procedures: Wiggle has internal controls and compliance procedures in place to identify business and financial risks, including compliance risks, at an early stage and take appropriate action to manage them. While we expect that Wiggle’s control systems are designed to comply with legal and other requirements applicable or relevant to Wiggle, there can be no assurance that they cover all topics deemed relevant to us. While we aim to bring Wiggle’s internal controls and compliance procedures in line with our controls and compliance procedures as quickly as possible, there can be no assurance that our control and risk management system can provide adequate protection against losses arising from business risks, including compliance risks, arising from the Wiggle business.

 

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Unidentified risks and liabilities: We performed due diligence as part of the acquisition of Wiggle. However, we may not be aware of all material risks and such risks may only be detected in the course of the integration process.

If any of the risks discussed were to materialize, this could disrupt our operations and cause the integration of Wiggle to become more onerous, time-consuming and costly than anticipated. In addition, the potential benefits of the acquisition of Wiggle may not be realized to the full extent, in a timely fashion or at all. In particular, we may not be able to capitalize on the expected opportunities for cost and sales synergies.

Warranty claims and claims for damages and indemnification under the Wiggle share purchase agreement are limited in scope and amount and are subject to time limits.

All warranty claims and claims for damages that we may have against the sellers of Wiggle under the share purchase agreement are subject to customary limitations and qualifications. Each seller of Wiggle has given title and capacity warranties to us, with all other commercial and tax warranties being given by the warrantors only (as described in the Wiggle share purchase agreement). Most of the warranties contained in the share purchase agreement are backed by a warranty and indemnity insurance policy. However, due to the limitations in scope and amount of the warranty claims and claims for damages and indemnification and due to the fact that not all warranties are covered by insurance, for instance warranties for cyber security, legal compliance on data protection which are not covered by the warranty and indemnity insurance policy, there is no certainty that the warranty and indemnity insurance policy or our contractual protections under the Wiggle share purchase agreement will be sufficient to ensure we will be able to recover all claims and claims for damages we may have against the sellers of Wiggle.

The pro forma consolidated financial information of TopCo describes only a hypothetical situation and thus, due to its nature, the presentation does not reflect the actual combined assets, financial position and results of operations of TopCo upon the closing of the Wiggle Acquisition.

Since the Business Combination is expected to have a material impact on the assets, financial position and results of operations of TopCo, pro forma consolidated financial information, consisting of unaudited pro forma condensed combined statements of profit or loss for the twelve-month period ended September 30, 2020 and for the six-month period ended March 31, 2021 and an unaudited pro forma condensed combined balance sheet as of March 31, 2021 and pro forma notes, was prepared for purposes of this proxy statement/prospectus (the

 

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“Unaudited Pro Forma Condensed Combined Financial Information”). The purpose of the Unaudited Pro Forma Condensed Combined Financial Information, among others, is to present the pro forma effects of the Wiggle Acquisition on TopCo after giving pro forma effect to the Business Combination. The unaudited pro forma condensed combined balance sheet as of March 31, 2021, assumes that the Business Combination was consummated on March 31, 2021. The unaudited pro forma condensed combined statements of profit or loss for the twelve-month period ended September 30, 2020 and the six-month period ended March 31, 2021 assume that the Business Combination was consummated on October 1, 2019. Therefore, the Unaudited Pro Forma Condensed Combined Financial Information describes only a hypothetical situation and thus, due to its nature, the presentation does not reflect the actual net assets, financial position and results of operations of TopCo upon the Closing of the Business Combination. The presentation of the Unaudited Pro Forma Condensed Combined Financial Information of TopCo is based on information available, preliminary estimates and certain pro forma assumptions and is intended for illustrative purposes only. In addition, the Unaudited Pro Forma Condensed Combined Financial Information does not represent a forecast of the net assets, financial position and results of operations of TopCo at any future date or for any future period. The Unaudited Pro Forma Condensed Combined Financial Information neither contains potential synergies or cost savings, nor a normalization of any restructuring or any additional future expenses that could result from the Wiggle Acquisition. Furthermore, the Unaudited Pro Forma Condensed Combined Financial Information is only meaningful in conjunction with the historical consolidated financial statements of SSU, Yucaipa and Wiggle, included elsewhere in this proxy statement/prospectus.

The historical consolidated financial information of Wiggle contained in the proxy statement/prospectus may not be considered indicative of Wiggle’s future performance as part of TopCo.

The audited consolidated financial statements for the 39 weeks ended September 27, 2020 of the Wiggle Group have been prepared in accordance with IFRS and the unaudited consolidated financial statements for the 26 weeks ended March 28, 2021 of the Wiggle Group have been prepared on the basis of IFRS applicable for interim financial reporting (IAS 34) (together the “Wiggle Consolidated Financial Statements”) have been prepared in accordance with IFRS and British pound sterling (GBP) as its reporting currency. We were not involved in the preparation of the Wiggle Consolidated Financial Statements and therefore did not have the possibility to independently confirm and verify that these financial statements are complete and correct in all material respects as was the case for our own historical financial statements contained herein. The Unaudited Pro Forma Condensed Combined Financial Information gives effect to adjustments required to convert Wiggle’s financial statement presentation (function) to SSU’s presentation (nature) and its reporting currency to Euros.

The Wiggle Acquisition will be accounted for as a business combination using the acquisition method of accounting in accordance with IFRS 3 Business Combinations. The assets acquired and liabilities assumed from the Wiggle Group are recorded at the fair value. The Wiggle Acquisition has not been consummated as of the date of the preparation of the Unaudited Pro Forma Condensed Combined Financial Information and its completion is subject to numerous conditions, including the closing of the Business Combination as well as the occurrence of certain other events contemplated by the Wiggle SPA. The accounting of the Wiggle Acquisition will have a significant impact on the TopCo’s future consolidated financial statements.

Therefore, the historical consolidated financial information of Wiggle contained in the proxy statement / prospectus may not be considered indicative of the future performance of Wiggle as part of TopCo.

Potential tariffs or uncertainty surrounding the exit of the United Kingdom from the European Union could have a material adverse effect on Wiggle’s business.

On March 29, 2017, the United Kingdom formally notified the European Council of its intention to leave the European Union (“Brexit”). On January 24, 2020, a withdrawal agreement was entered into between the European Union, the European Atomic Energy Community and the United Kingdom, setting the terms of the withdrawal of the latter from the former two. On December 24, 2020, the United Kingdom and the European

 

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Union agreed to a trade and cooperation agreement (the “Trade and Cooperation Agreement”). The Trade and Cooperation Agreement took provisional effect from January 1, 2021 and provided for, among other things, zero-rate tariffs and zero quotas on the movement of goods between the United Kingdom and the European Union.

Due to the size and importance of the economy of the United Kingdom, the uncertainty and unpredictability concerning the United Kingdom’s future laws and regulations (including financial laws and regulations, tax and free trade agreements, immigration laws and employment laws) as well as its legal, political and economic relationships with Europe following its exit of the European Union may continue to be a source of instability in international markets, create significant currency fluctuations or otherwise adversely affect trading agreements or similar cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise)for the foreseeable future. The long-term effects of Brexit will depend on the implementation of the Trade and Cooperation Agreement and any future agreements (or lack thereof) between the United Kingdom and the European Union and, in particular, any potential changes in the arrangements for the United Kingdom to retain access to European Union markets. Brexit could result in adverse economic effects across the United Kingdom and Europe, which could have a material adverse effect on the Wiggle’s business, results of operations, financial condition and prospects. In addition, a portion of Wiggle’s staff in the United Kingdom are from other European countries and there is a risk that Brexit will affect the ability of Wiggle to recruit skilled workers from this wider European labor market for its operations in the United Kingdom.

Risks related to the Business Combination

TopCo has no operating or financial history and its results of operations may differ significantly from the unaudited pro forma financial data included in this document.

TopCo has been recently incorporated and has no operating history and no revenues. This document includes unaudited pro forma condensed combined financial information for TopCo. The unaudited pro forma condensed combined statement of profit or loss of TopCo for the twelve-month period ended September 30, 2020 combines the historical unaudited condensed combined statement of operations of Yucaipa for the period from June 4, 2020 (inception) through September 30, 2020, with the historical audited consolidated statement of profit or loss of SSU for the fiscal year ended September 30, 2020 and financial data from the Wiggle Group’s audited consolidated income statement for the 39 weeks ended September 27, 2020 and the Wiggle Group’s unaudited interim consolidated income statement for the 13 weeks ended December 27, 2020, and gives pro forma effect to the Business Combination and the Wiggle Acquisition as if it had been consummated as of October 1, 2019.

The unaudited pro forma condensed combined statement of profit or loss of TopCo for the six-month period ended March 31, 2021 combines Yucaipa’s audited statement of operations for the period from June 4, 2020 (inception) through December 31, 2020 subtracting Yucaipa’s unaudited condensed statement of operations for the period from June 4, 2020 (inception) through September 30, 2020 and adding Yucaipa’s unaudited condensed statement of operations for the three-month period ended March 31, 2021, SSU’s unaudited interim condensed consolidated statement of profit or loss for the six-months period ended March 31, 2021, and adding the Wiggle Group’s unaudited and interim consolidated income statement for the 26 weeks ended March 28, 2021.

The unaudited pro forma condensed combined balance sheet of TopCo combines the historical balance sheet of Yucaipa and the consolidated balance sheets of SSU and the Wiggle Group as of March 31, 2021 and gives pro forma effect to the Business Combination and the Wiggle Acquisition as if it had been consummated on such date.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination and the Wiggle Acquisition been consummated on the dates indicated above, or the future consolidated results of

 

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operations or financial position of TopCo. Accordingly, TopCo’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document.

The COVID-19 pandemic may trigger an economic crisis which may delay or prevent the consummation of the Business Combination.

In December 2019, the COVID-19 outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since being initially reported, the coronavirus has spread to over 200 countries and every state in the United States. Given the ongoing and dynamic nature of the COVID-19 crisis, it is difficult to predict the impact on the business of Yucaipa, SSU and TopCo, and there is no guarantee that efforts by Yucaipa, SSU and TopCo to address the adverse impact of COVID-19 will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others. If Yucaipa or SSU are unable to recover from a business disruption on a timely basis, the Business Combination and TopCo’s business and financial conditions and results of operations following the completion of the Business Combination would be adversely affected. The Business Combination may also be delayed and adversely affected by the coronavirus outbreak, for example it could become more costly. Each of Yucaipa, SSU and TopCo may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect its financial condition and results of operations.

During the pre-closing period, Yucaipa and SSU are prohibited from entering into certain transactions that might otherwise be beneficial to Yucaipa, SSU or their respective shareholders.

Until the earlier of consummation of the Business Combination or termination of the Business Combination Agreement, Yucaipa and SSU are subject to certain limitations on the operations of their businesses, each as summarized under the section entitled “The Business Combination Agreement and Ancillary Documents — Covenants of the Parties.” The limitations on Yucaipa’s and SSU’s conduct of their businesses during this period could have the effect of delaying or preventing other strategic transactions and may, in some cases, make it impossible to pursue business opportunities that are available only for a limited time.

Uncertainties about the Business Combination during the pre-closing period may cause a loss of key management personnel and other key employees.

SSU is dependent on the experience and industry knowledge of its key management personnel and other key employees to operate its business and execute its business plans. TopCo’s success following the Business Combination will depend in part upon its ability to retain SSU’s existing key management personnel and other key employees and attract new management personnel and other key employees. During the pre-closing period, current and prospective employees of SSU may experience uncertainty about their roles with TopCo or other circumstances relating to their willingness to continue their work for us after the Business Combination, which may adversely affect the ability of TopCo to retain or attract management personnel and other key employees.

Uncertainties about the Business Combination during the pre-closing period may cause third parties to delay or defer decisions concerning SSU or seek to change existing arrangements.

There may be uncertainty regarding whether the Business Combination will occur. This uncertainty may cause third parties to delay or defer decisions concerning SSU, which could negatively affect SSU’s business. Third parties may seek to change existing agreements with SSU as a result of the Business Combination for these or other reasons.

 

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Yucaipa Sponsor and each of Yucaipa’s officers and directors agreed to vote in favor of the Business Combination, regardless of how Yucaipa’s public shareholders vote.

Unlike other blank check companies in which the founders agree to vote their Founder Shares and any public shares purchased by them during or after such company’s initial public offering in accordance with the majority of the votes cast by the public shareholders in connection with an initial business combination, Yucaipa Sponsor and each of Yucaipa’s officers and directors agreed, and their permitted transferees will agree, pursuant to the terms of letter agreements entered into with Yucaipa, to vote any Founder Shares held by them, as well as any public shares owned by them, in favor the Business Combination. As of the record date for Yucaipa shareholders holding their shares in “street name,” the Yucaipa Initial Shareholders owned 19.9% of the issued and outstanding Yucaipa Ordinary Shares, including all of the Founder Shares, and will be able to vote all of such shares at the General Meeting. Accordingly, it is more likely that the necessary shareholder approval will be received for the Business Combination than would be the case if Yucaipa Sponsor and each of Yucaipa’s officers and directors agreed to vote any Yucaipa Ordinary Shares owned by them in accordance with the majority of the votes cast by Yucaipa’s public shareholders.

Yucaipa may waive one or more of the conditions to the Business Combination.

Yucaipa may agree to waive, in whole or in part, one or more of the conditions to Yucaipa’s obligations to complete the Business Combination, to the extent permitted by the Yucaipa amended and restated memorandum and articles of association and applicable laws. Yucaipa may not waive the condition that Yucaipa public shareholders approve the Business Combination Proposal or the Merger Proposal. Please see the section entitled “The Business Combination Agreement and Ancillary Documents — Conditions to Closing of the Business Combination” for additional information.

Subsequent to the consummation of the Business Combination, TopCo may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share price, which could cause you to lose some or all of your investment.

Although Yucaipa has conducted due diligence on SSU, Yucaipa cannot assure you that this diligence revealed all material issues that may be present in SSU’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Yucaipa’s and SSU’s control will not later arise. As a result, TopCo may be forced to later write-downs or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if Yucaipa’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with Yucaipa’s preliminary risk analysis. Even though these charges may be non-cash items and may not have an immediate impact on TopCo’s liquidity, the fact that TopCo reports charges of this nature could contribute to negative market perceptions about the post-combination company or its securities. In addition, charges of this nature may cause TopCo to be unable to obtain future financing on favorable terms or at all.

SSU is a private company about which little information is available, and Yucaipa’s management conducted a limited due diligence review of SSU; as a result, the Yucaipa Board and Yucaipa’s management may not have properly valued SSU.

As a private company, very little public information generally exists about SSU, and as a result, Yucaipa’s management and the Yucaipa Board were only able to conduct a limited due diligence review, based on the materials provided. As a result, Yucaipa’s management and the Yucaipa Board may not have made the necessary analyses and determinations regarding the Business Combination and the value of SSU.

 

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Risks Related to Ownership of TopCo Shares

The rights of TopCo’s shareholders and the duties of TopCo’s directors are governed by (i) Dutch law, (ii) the TopCo Articles of Association and (iii) internal rules and policies adopted by the TopCo Board, and differ in some important respects from the rights of shareholders and the duties of members of a board of directors of a Cayman Islands exempted company.

Upon completion of the Business Combination, TopCo will be a public limited liability company (naamloze vennootschap) under Dutch law. TopCo’s corporate affairs are governed by the TopCo Articles of Association, the rules of the TopCo Board, TopCo’s other internal rules and policies and by Dutch law. There can be no assurance that Dutch law will not change in the future or that it will serve to protect shareholders in a similar fashion afforded under corporate law principles in the Cayman Islands, which could adversely affect the rights of TopCo’s shareholders.

The rights of shareholders and the responsibilities of TopCo directors may be different from the rights and obligations of shareholders and directors in companies governed by the laws of the Cayman Islands. In particular, pursuant to Dutch law TopCo’s directors are required to act in the interest of the company and its business, and should be guided by promoting the sustainable success of its business, with an aim to creating long-term value, taking into account the interests of its employees, clients, shareholders and other stakeholders of the company, such as creditors and suppliers, as a whole and not only those of TopCo’s shareholders in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder.

For more information on relevant provisions of Dutch corporation law and of the TopCo Articles of Association, see “Description of TopCo Securities and Articles of Association” and “Comparison of Shareholder Rights.”

TopCo is organized and existing under the laws of the Netherlands, and, as such, the rights of TopCo shareholders and the civil liability of TopCo directors and executive officers will be governed in certain respects by the laws of the Netherlands.

TopCo is organized and existing under the laws of the Netherlands, and, as such, the rights of TopCo’s shareholders and the civil liability of TopCo’s directors and executive officers will be governed in certain respects by the laws of the Netherlands. The ability of TopCo’s shareholders in certain countries other than the Netherlands to bring an action against TopCo, its directors and executive officers may be limited under applicable law. In addition, substantially all of TopCo’s assets are located outside the United States.

As a result, it may not be possible for shareholders to effect service of process within the United States upon TopCo or its directors and executive officers or to enforce judgments against TopCo or them in U.S. courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. In addition, it is not clear whether a Dutch court would impose civil liability on TopCo or any of its directors and executive officers in an original action based solely upon the federal securities laws of the United States brought in a court of competent jurisdiction in the Netherlands.

As of the date of this proxy statement/prospectus, the United States and the Netherlands do not have a treaty providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. With respect to choice of court agreements in civil or commercial matters, the Hague Convention on Choice of Court Agreements has entered into force for the Netherlands, but has not entered into force for the United States. Accordingly, a judgment rendered by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized and enforced by the competent Dutch courts. However, if a person has obtained a final and conclusive judgment for the payment of money rendered by a court in the United States that is enforceable in the United States and files a claim with the competent Dutch court, the Dutch court will generally give binding effect to such foreign judgment insofar as it

 

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finds that (i) the jurisdiction of the U.S. court has been based on a ground of jurisdiction that is generally acceptable according to international standards, (ii) the judgment by the U.S. court was rendered in legal proceedings that comply with the Dutch standards of proper administration of justice including sufficient safeguards (behoorlijke rechtspleging), (iii) binding effect of such foreign judgment is not contrary to Dutch public order (openbare orde) and (iv) the judgment by the U.S. court is not incompatible with a decision rendered between the same parties by a Dutch court, or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns the same subject and is based on the same cause, provided that the previous decision qualifies for acknowledgment in the Netherlands. However, even if such a foreign judgment is given binding effect, a claim based on that foreign judgment may still be rejected if the foreign judgment is not or no longer formally enforceable.

Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against TopCo or its directors, representatives or certain experts named herein who are residents of the Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

Under the TopCo Articles of Association, and certain other contractual arrangements between TopCo and its directors, TopCo indemnifies and holds its directors harmless against all claims and suits brought against them, subject to limited exceptions. There is doubt, however, as to whether U.S. courts would enforce such indemnity provisions in an action brought against one of TopCo’s directors in the United States under U.S. securities laws.

TopCo does not anticipate paying dividends on TopCo Shares.

TopCo has never paid or declared any cash dividends in the past, and TopCo does not anticipate paying any cash dividends in the foreseeable future. TopCo intends to retain all available funds and any future earnings to fund the further development and expansion of its business. Under Dutch law, TopCo may only pay dividends and other distributions from its reserves to the extent its shareholders’ equity (eigen vermogen) exceeds the sum of its paid-in and called-up share capital plus the reserves TopCo must maintain under Dutch law or the TopCo Articles of Association and (if it concerns a distribution of profits) after adoption of TopCo’s statutory annual accounts by the TopCo General Meeting from which it appears that such dividend distribution is allowed. Subject to those restrictions, any future determination to pay dividends or other distributions from its reserves will be at the discretion of the TopCo Board and will depend upon a number of factors, including TopCo’s results of operations, earnings, cash flow, financial condition, future prospects, contractual restrictions, capital investment requirements, restrictions imposed by applicable law and other factors the TopCo Board deems relevant. See “Dividend Policy.”

Under the TopCo Articles of Association as they will read upon completion of the Business Combination, the TopCo Board may decide that all or part of the profits shown in TopCo’s adopted statutory annual accounts will be added to TopCo’s reserves. After reservation of any such profits, any remaining profits will be at the disposal of the TopCo General Meeting at the proposal of the TopCo Board for distribution on the TopCo Shares, subject to applicable restrictions of Dutch law. The TopCo Board is permitted, subject to certain requirements and applicable restrictions of Dutch law, to declare interim dividends without the approval of the TopCo General Meeting. Dividends and other distributions shall be made payable no later than a date determined by the TopCo Board. Claims to dividends and other distributions not made within five years from the date that such dividends or distributions became payable will lapse and any such amounts will be considered to have been forfeited to TopCo (verjaring).

TopCo may reclaim any distributions, whether interim or not interim, made in contravention of certain restrictions of Dutch law from shareholders that knew or should have known that such distribution was not permissible. In addition, on the basis of Dutch case law, if after a distribution TopCo is not able to pay its due and collectable debts, then its shareholders or directors who at the time of the distribution knew or reasonably should have foreseen that result may be liable to TopCo’s creditors.

 

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Since TopCo is a holding company, its ability to pay dividends will be dependent upon the financial condition, liquidity and results of operations of, and TopCo’s receipt of dividends, loans or other funds from, its subsidiaries. TopCo’s subsidiaries are separate and distinct legal entities and have no obligation to make funds available to TopCo. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which TopCo’s subsidiaries may pay dividends, make loans or otherwise provide funds to TopCo.

Each of Yucaipa Sponsor and SSU’s current equityholders will own a significant portion of TopCo Shares and will have representation on the TopCo Board. Yucaipa Sponsor and SSU’s current equityholders may have interests that differ from those of other shareholders.

Upon the completion of the Business Combination, approximately 2.9% of TopCo Shares will be owned by the Yucaipa Initial Shareholders (including Yucaipa Sponsor but not including Mr. Burkle or his assignee(s) under the Subscription Agreement to which he is a party with respect to the Sponsor PIPE), approximately 73.2% of TopCo Shares will be owned by the current SSU’s equityholders, approximately 9.0% of TopCo Shares will be owned by the PIPE Investors (including Mr. Burkle or his assignee(s) with respect to the Sponsor PIPE), and approximately 0.4% of TopCo Shares will be owned by SSU’s management. These levels of ownership interests assume that (A) no Class A Shares are elected to be redeemed by Yucaipa’s public shareholders and exclude the exercise of outstanding warrants, (B) that 30.2 million TopCo Shares are issued to the PIPE Investors in connection with the PIPE Financing, (C) Participating Shareholders represent 100% of the issued and outstanding shares of SSU, (D) the recipients of SAR Cash Proceeds required or permitted to reinvest such proceeds into TopCo in exchange for TopCo Shares will reinvest such proceeds as set forth in the Business Combination Agreement, and (E) the Converted Options are exercised in accordance with their terms and the dilutive effect of such options are calculated using the Treasury Stock Method. In addition, the 8,565,000 Founder Shares held by Yucaipa Sponsor prior to the Closing of the Business Combination will be exchanged for 9,815,000 TopCo Shares upon Closing of the Business Combination. For more information about factors that affect the assumptions above, please see the section entitled “The Business Combination — Ownership of TopCo.” In addition, one of TopCo’s director nominees were designated by Yucaipa Sponsor. As a result, Yucaipa Sponsor and SISH may be able to significantly influence the outcome of matters submitted for director action, subject to obligation of the TopCo Board to act in the interest of all of TopCo’s stakeholders, and for shareholder action, including the designation and appointment of the TopCo Board (and committees thereof) and approval of significant corporate transactions, including business combinations, consolidations and mergers. The influence of Yucaipa Sponsor and SISH over TopCo’s board of directors could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of TopCo, which could cause the market price of TopCo Shares to decline or prevent TopCo’s shareholders from realizing a premium over the market price for TopCo Shares. Additionally, Yucaipa Sponsor is controlled by Ronald W. Burkle, who is in the business of making investments in companies and who may from time to time acquire and hold interests in businesses that compete directly or indirectly with TopCo or that supply TopCo with goods and services. Mr. Burkle may also pursue acquisition opportunities that may be complementary to (or competitive with) TopCo’s business, and as a result those acquisition opportunities may not be available to TopCo. Prospective investors in TopCo Shares should consider that the interests of Yucaipa Sponsor and the current SSU’s equityholders may differ from their interests in material respects.

Provisions of the TopCo Articles of Association or Dutch corporate law might deter acquisition bids for TopCo that its shareholders might consider to be favorable and prevent, delay or frustrate any attempt to replace or remove the TopCo Board at the time of such acquisition bid.

Under Dutch law, various protective measures are possible and permissible within the boundaries set by Dutch law and Dutch case law.

 

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In this respect, certain provisions of the TopCo Articles of Association may make it more difficult for a third-party to acquire control of TopCo or effect a change in the composition of the TopCo Board. These include:

 

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a provision that TopCo Directors are appointed (i) until SISH, alone or together with its affiliates, no longer holds at least 10% of TopCo’s issued share capital, with respect to one, two or three TopCo Directors (depending on the size of the shareholding that SISH holds together with its affiliates), on the basis of a binding nomination prepared by SISH and (ii) for all other TopCo Directors on the basis of a binding nomination prepared by the TopCo Board, provided any that such nomination can only be overruled by a two-thirds majority of votes cast representing more than half of TopCo’s issued share capital;

 

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a provision that TopCo Directors may only be dismissed by the TopCo General Meeting by a two-thirds majority of votes cast representing more than half of TopCo’s issued share capital, unless the dismissal is proposed by (i) the TopCo Board or (ii) during the period when SISH is allowed to make a binding nomination as discussed above, with respect to a SISH nominated TopCo Director, at the proposal of SISH, in which latter case a simple majority of the votes cast would be sufficient;

 

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a provision allowing, among other matters, the former chairperson of the TopCo Board or TopCo’s former Chief Executive Officer (in each case, during the period when SISH is allowed to make a binding nomination as discussed above, together with a person designated by SISH for that purpose if the former chairperson or Chief Executive Officer, as applicable, was not a SISH nominated TopCo Director) to manage TopCo’s affairs if all of the TopCo Directors are dismissed and to appoint others to be charged with TopCo’s affairs, including the preparation of a binding nomination for TopCo Directors as discussed above, until new TopCo Directors are appointed by the TopCo General Meeting on the basis of such binding nomination; and

 

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a requirement that certain matters, including an amendment of the TopCo Articles of Association, may only be resolved upon by the TopCo General Meeting with a majority of at least 75% of the votes cast during the period when SISH is allowed to make a binding nomination as discussed above and in each case at the proposal of the TopCo Board.

Dutch law also allows for staggered multi-year terms of the TopCo Directors, as a result of which only part of the TopCo Directors may be subject to appointment or re-appointment in any given year.

In addition, in accordance with the DCGC, shareholders who have the right to put an item on the agenda for the TopCo General Meeting or to request the convening of a TopCo General Meeting shall not exercise such rights until after they have consulted the TopCo Board. If exercising such rights may result in a change in TopCo’s strategy (for example, through the dismissal of TopCo Directors), the TopCo Board must be given the opportunity to invoke a reasonable period of up to 180 days to respond to the shareholders’ intentions. If invoked, the TopCo Board must use such response period for further deliberation and constructive consultation, in any event with the shareholder(s) concerned and exploring alternatives. At the end of the response time, the TopCo Board shall report on this consultation and the exploration of alternatives to the TopCo General Meeting. The response period may be invoked only once for any given TopCo General Meeting and shall not apply (i) in respect of a matter for which a response period has been previously invoked or (ii) if a shareholder holds at least 75% of TopCo’s issued share capital as a consequence of a successful public bid. The response period may also be invoked in response to shareholders or others with meeting rights under Dutch law requesting that a general meeting be convened, as described in Description of Topco Securities and Articles Of Association; TopCo General Meeting of Shareholders and Voting Rights.

On May 1, 2021, a bill was enacted in the Netherlands which introduces a statutory cooling-off period of up to 250 days during which the TopCo General Meeting would not be able to dismiss, suspend or appoint members of the TopCo Board (or amend the provisions in the TopCo Articles of Association dealing with those matters) unless those matters would be proposed by the TopCo Board. This cooling-off period could be invoked by the TopCo Board in case:

 

a.

shareholders, using either their shareholder proposal right or their right to request a TopCo General Meeting, propose an agenda item for the TopCo General Meeting to dismiss, suspend or appoint a

 

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TopCo Director (or to amend any provision in the TopCo Articles of Association dealing with those matters); or

 

b.

a public offer for TopCo is made or announced without TopCo’s support, provided, in each case, that the TopCo Board believes that such proposal or offer materially conflicts with the interests of TopCo and its business.

The cooling-off period, if invoked, ends at occurrence of the earliest of the following events:

 

a.

the expiration of 250 days from:

 

i.

in case of shareholders using their shareholder proposal right, the day after the deadline for making such proposal expired;

 

ii.

in case of Shareholders using their right to request a TopCo General Meeting, the day when they obtain court authorization to do so; or

 

iii.

in case of a hostile offer being made, the first following day;

 

b.

the day after the hostile offer having been declared unconditional; or

 

c.

the TopCo Board voluntarily terminating the cooling-off period.

In addition, shareholders representing at least 3% of TopCo’s issued share capital may request the Dutch Enterprise Chamber of the Amsterdam Court of Appeals for early termination of the cooling-off period. The Enterprise Chamber must rule in favor of the request if the shareholders can demonstrate that:

 

a.

the TopCo Board, in light of the circumstances at hand when the cooling-off period was invoked, could not reasonably have come to the conclusion that the relevant shareholder proposal or hostile offer constituted a material conflict with the interests of TopCo and its business;

 

b.

the TopCo Board cannot reasonably believe that a continuation of the cooling-off period would contribute to careful policy-making;

 

c.

if other defensive measures have been activated during the cooling-off period and not terminated or suspended at the relevant shareholders’ request within a reasonable period following the request (i.e., no ‘stacking’ of defensive measures).

During the cooling-off period, if invoked, the TopCo Board must gather all relevant information necessary for a careful decision-making process. In this context, the TopCo Board must at least consult with shareholders representing at least 3% of TopCo’s issued share capital at the time the cooling-off period was invoked and with the TopCo’s works council (if any). Formal statements expressed by these stakeholders during such consultations must be published on TopCo’s website to the extent these stakeholders have approved that publication.

Ultimately one week following the last day of the cooling-off period, the TopCo Board must publish a report in respect of its policy and conduct of affairs during the cooling-off period on TopCo’s website. This report must remain available for inspection by shareholders and others with meeting rights under Dutch law at TopCo’s office and must be tabled for discussion at the next TopCo General Meeting.

We are aware of material control and accounting weaknesses in our current finance organization. If TopCo fails to maintain an effective system of internal control over financial reporting, TopCo may not be able to accurately report its financial results or prevent fraud. As a result, shareholders could lose confidence in TopCo’s financial and other public reporting, which is likely to negatively affect TopCo’s business and the market price of TopCo Shares.

As a public company, we will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies,

 

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in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for TopCo to provide reliable financial reports and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in TopCo’s implementation could cause TopCo to fail to meet its reporting obligations. In addition, any testing conducted by TopCo, or any testing conducted by TopCo’s independent registered public accounting firm, may reveal deficiencies in TopCo’s internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to TopCo’s financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in TopCo’s reported financial information, which is likely to negatively affect TopCo’s business and the market price of TopCo Shares. In connection with the audit of SSU’s consolidated financial statements for the fiscal years ended September 30, 2019 and 2020, SSU identified material weaknesses in SSU’s internal controls related to (i) the adequate number of individuals within its accounting and financial reporting function with sufficient training in IFRS and SEC reporting standards, (ii) the design and maintenance of formal and effective controls over certain general information technology controls for IT systems and (iii) control activities that are responsive to the identified fraud risks, including the risk of bias and management override of controls. We have developed and are in the process of implementing a remediation plan to address these control deficiencies, which we believe will address the underlying causes of our material weaknesses.

Notwithstanding the actions already taken, management’s attention may be diverted from other business concerns and TopCo may be required to hire and train additional employees or engage outside consultants to comply with these requirements and additional Sarbanes-Oxley Act requirements applicable to TopCo in the future, which would increase costs and expenses. Any compliance failure could harm TopCo’s reputation and have a material adverse effect on TopCo’s business, financial condition, results of operations and prospects. For further information please refer to the risk factors entitled “Our management team has limited experience managing a public company, and publicly traded company reporting and compliance requirements could divert resources from the day-to-day management of our business.”

TopCo will be required to disclose changes made in its internal controls and procedures on a quarterly basis and its management will be required to assess the effectiveness of these controls annually. As long as TopCo is an “emerging growth company” under the JOBS Act, its independent registered public accounting firm will not be required to attest to the effectiveness of TopCo’s internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. TopCo expects to remain an “emerging growth company” until the Closing of the Business Combination. An independent assessment of the effectiveness of TopCo’s internal controls could detect problems that TopCo’s management’s assessment might not. Undetected material weaknesses in TopCo’s internal controls could lead to financial statement restatements and require TopCo to incur the expense of remediation.

The market price and trading volume of TopCo Shares and TopCo Public Warrants may be volatile and could decline significantly following the Business Combination.

The stock markets, including NYSE on which TopCo intends to apply to list the TopCo Shares and TopCo Public Warrants under the symbols “SSU” and “SSUW,” respectively, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for TopCo Shares and TopCo Public Warrants following the Business Combination, the market price of TopCo Shares and TopCo Public Warrants may be volatile and could decline significantly. In addition, the trading volume in TopCo Shares and TopCo Public Warrants may fluctuate and cause significant price variations to occur. If the market price of TopCo Shares and TopCo Public Warrants declines significantly, you may be unable to resell your securities at or above the market price as of the date of the consummation of the Business Combination. TopCo cannot assure you that the market price of the TopCo Shares and TopCo Public Warrants

 

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will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

 

•

the realization of any of the risk factors presented in this proxy statement/prospectus;

 

•

actual or anticipated differences in TopCo’s estimates, or in the estimates of analysts, for TopCo’s revenues, results of operations, liquidity or financial condition;

 

•

additions and departures of key personnel;

 

•

failure to comply with the requirements of NYSE;

 

•

failure to comply with the Sarbanes-Oxley Act or other laws or regulations;

 

•

future issuances, sales or resales, or anticipated issuances, sales or resales, of TopCo Shares;

 

•

publication of research reports about TopCo;

 

•

the performance and market valuations of other similar companies;

 

•

broad disruptions in the financial markets, including sudden disruptions in the credit markets;

 

•

material and adverse impact of the COVID-19 pandemic on the markets and the broader global economy;

 

•

speculation in the press or investment community;

 

•

actual, potential or perceived control, accounting or reporting problems; and

 

•

changes in accounting principles, policies and guidelines.

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert TopCo’s management’s attention and resources, which could have a material adverse effect on TopCo.

If securities or industry analysts do not publish research, publish inaccurate or unfavorable research or cease publishing research about TopCo, its share price and trading volume could decline significantly.

The market for TopCo Shares will depend in part on the research and reports that securities or industry analysts publish about TopCo or its business. Securities and industry analysts do not currently, and may never, publish research on TopCo. If no securities or industry analysts commence coverage of TopCo, the market price and liquidity for TopCo Shares could be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover TopCo downgrade their opinions about TopCo Shares, publish inaccurate or unfavorable research about TopCo, or cease publishing about TopCo regularly, demand for TopCo Shares could decrease, which might cause its share price and trading volume to decline significantly.

Even if the Business Combination is consummated the TopCo Public Warrants may never be in the money, and they may expire worthless.

The exercise price for the TopCo Public Warrants is $11.50 per TopCo Share. The TopCo Public Warrants may never be in the money prior to their expiration, and as such, the warrants may expire worthless.

TopCo Shareholders may not be able to exercise pre-emption rights and, as a result, may experience substantial dilution upon future issuances of TopCo Shares or rights to subscribe for TopCo Shares.

In the event of an issue of TopCo Shares or a grant of rights to subscribe for TopCo Shares, subject to certain exceptions, each holder of TopCo Shares will have a pro rata pre-emption right in proportion to the aggregate nominal value of such holder’s TopCo Shares. These pre-emption rights may be restricted or excluded

 

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by a resolution of the TopCo General Meeting or by another corporate body designated by the TopCo General Meeting. Prior to the completion of the Business Combination, the TopCo Board will be authorized for a period of five years from the completion of TopCo’s corporate reorganization to issue shares or grant rights to subscribe for shares up to TopCo’s authorized share capital from time to time (which is anticipated to be approximately, but no more than, five times the issued share capital of TopCo immediately following the closing of the Business Combination) and to limit or exclude pre-emption rights in connection therewith. Accordingly, holders of TopCo Shares may not have any pre-emptive rights in connection with, and may be diluted by, an issue of new shares and it may be more difficult for a shareholder to obtain control over the TopCo General Meeting. This could cause existing shareholders to experience substantial dilution of their interest in us.

TopCo is not obligated to, and does not, comply with all best practice provisions of the Dutch Corporate Governance Code.

Upon the closing of the Business Combination, TopCo will be subject to the DCGC. The DCGC contains principles and best practice provisions on corporate governance that regulate relations between the board of directors and the general meeting and matters in respect of financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC is based on a “comply or explain” principle. Accordingly, companies must disclose in their statutory annual reports whether they comply with the provisions of the DCGC. If a company subject to the DCGC does not comply with those provisions, that company would be required to give the reasons for such non-compliance. TopCo will not comply with all best practice provisions of the DCGC. See “Description of TopCo Securities and Articles of Association” This may affect your rights as a shareholder and you may not have the same level of protection as a shareholder in a Dutch company that fully complies with the DCGC.

The JOBS Act permits “emerging growth companies” like TopCo to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

TopCo currently qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, TopCo takes advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. As a result, TopCo shareholders may not have access to certain information they deem important. TopCo expects to remain an emerging growth company until the completion of the Business Combination.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as it is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. TopCo has elected to avail itself of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, TopCo, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of TopCo financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

TopCo cannot predict if investors will find TopCo Ordinary Shares less attractive because it relies on these exemptions. If some investors find TopCo Ordinary Shares less attractive as a result, there may be a less active

 

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trading market and share price for TopCo Ordinary Shares may be more volatile. TopCo does not expect to qualify as an emerging growth company after the last day of the fiscal year in which the Business Combination is consummated and may incur increased legal, accounting and compliance costs associated with Section 404 of the Sarbanes-Oxley Act.

As a foreign private issuer and as permitted by the listing requirements of NYSE, TopCo follows certain home country governance practices rather than the corporate governance requirements of NYSE.

TopCo will be a foreign private issuer. As a result, in accordance with the listing requirements of NYSE TopCo will rely on home country governance requirements and certain exemptions thereunder rather than relying on the corporate governance requirements of NYSE. In accordance with Dutch law and generally accepted business practices, the TopCo Articles of Association do not provide quorum requirements generally applicable to general meetings. To this extent, TopCo’s practice varies from the requirement of NYSE Listed Company Manual §310.00, which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum required for any meeting of the holders of common stock should be sufficiently high to insure a representative vote. Although TopCo must provide its shareholders with an agenda and other relevant documents for the TopCo General Meeting, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands, thus TopCo’s practice will vary from the requirement of NYSE Listed Company Manual §402.04(A). As permitted by the listing requirements of NYSE, TopCo has also opted out of the requirements of NYSE Listed Company Manual §303A.05(a)), which requires, among other things, an issuer to have a compensation committee that consists entirely of independent directors, NYSE Listed Company Manual §303A.04(a), which requires independent director oversight of director nominations, and NYSE Listed Company Manual §303A.01, which requires an issuer to have a majority of independent directors on its board. TopCo will also rely on the phase-in rules of the SEC and NYSE with respect to the independence of our audit committee. These rules require that a majority of TopCo Directors must be independent and all members of TopCo’s audit committee must meet the independence standard for audit committee members within one year of TopCo’s listing on NYSE. In addition, TopCo has opted out of shareholder approval requirements, as included in the NYSE Listing Rules, for the issuance of securities in connection with certain events such as the acquisition of shares or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of our company and certain private placements. To this extent, TopCo’s practice varies from the requirements of NYSE Listed Company Manual § 312.03, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events. For an overview of TopCo’s corporate governance principles, see “Description of TopCo Securities and Articles of Association” Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to these NYSE requirements.

TopCo’s and SSU’s tax positions could be adversely affected by the future application and interpretation of applicable tax laws by tax authorities.

The tax treatment of TopCo’s, SSU’s and their respective affiliates depends in some instances on determinations of fact and interpretations of complex provisions of applicable tax law for which no clear precedent or authority may be available. Relevant tax rules are consistently under review by persons involved in the legislative process and taxing authorities, which may result in revised interpretations of established concepts, statutory changes, new reporting obligations, revisions to regulations and other modifications and interpretations. The present tax treatment of TopCo’s, SSU’s and their respective affiliates may be modified by administrative, legislative or judicial interpretation at any time, and any such action may apply on a retroactive or retrospective basis. TopCo’s, SSU’s and their respective affiliates’ effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. TopCo, SSU and their respective affiliates continue to assess the impact of such changes in tax laws and interpretations on their businesses and may determine that changes to their structure, practice, tax positions or the manner in which they conduct their businesses are necessary in light of such changes and developments in the tax laws of

 

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the jurisdictions in which TopCo, SSU and their respective affiliates operate. Such changes may nevertheless be ineffective in avoiding an increase in tax liability, which could adversely affect the financial conditions, results of operations and cash flows.

The original treatment of a tax-relevant matter in a tax return, tax assessment or otherwise could later be found incorrect and as a result, TopCo’s, SSU’s and their respective affiliates may be subject to additional taxes, interest, penalty payments and/or social security payments. Such reassessment may be due to an interpretation or view of laws and/or facts by tax authorities in a manner that deviates from TopCo’s, SSU’s and their respective affiliates’ view and may emerge as a result of tax audits or other review actions by the relevant financial or tax authorities. TopCo’s, SSU’s and their respective affiliates are subject to tax audits by the respective tax authorities on a regular basis. As a result of future tax audits or other reviews by the tax authorities, additional taxes could be imposed that exceed the provisions reflected in previous financial statements. This could lead to an increase in TopCo’s, SSU’s and/or their respective affiliates tax obligations, either as a result of the relevant tax payment being assessed directly against them or as a result of becoming liable for the relevant tax as a secondary obligor due to the primary obligor’s failure to pay. Consequently, TopCo’s, SSU’s and/or their respective affiliates may have to engage in tax litigation to defend or achieve results reflected in prior estimates, declarations or assessments which may be time-consuming and expensive.

Further, current tax losses and tax loss carry-forwards existing with SSU or its German affiliates forfeit if, within a period of five years, more than 50% of the subscribed capital, membership rights, participation rights or voting rights of the respective company are transferred directly or indirectly to an acquirer or to persons closely associated with such an acquirer or a group of several acquirers with aligned interest, or if a comparable situation exists. By exception, tax losses and tax loss carry-forwards do not forfeit upon a harmful transfer of shares or any other comparable instrument as described, if, inter alia, to the extent such losses and loss carry forwards do not exceed the total taxable hidden reserves of the business assets of SSU or its German affiliates existing in Germany at the time of the harmful event. Various aspects of this loss forfeiture rule are unclear as of today and not yet determined by case law.

As SSU intends to operate in various countries and taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by taxing authorities of these jurisdictions. Generally, if two or more affiliated companies are located in different countries, the tax laws or regulations of each country will typically require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that appropriate documentation is maintained to support the transfer prices. In addition, existing transfer pricing documentation may be considered to be insufficient by the relevant tax authorities which may also result in penalties and additional tax payments. It is not uncommon for taxing authorities in different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. If taxing authorities in any of these countries were to successfully challenge SSU’s transfer prices as not reflecting arm’s length transactions, they could require SSU to adjust its transfer prices and thereby reallocate its income to reflect these revised transfer prices, which could result in a higher tax liability to SSU. In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, potentially resulting in double taxation. If taxing authorities were to allocate income to a higher tax jurisdiction, subject SSU’s income to double taxation or assess interest and penalties, it would increase SSU’s tax liability, which could adversely affect its financial condition, results of operations and cash flows. Further, with a view that TopCo is a Dutch corporation with effective place of management in Germany, Dutch and German tax authorities may have deviating views as to their respective entitlement under tax assets and income.

We may become taxable in a jurisdiction other than Germany and this may increase the aggregate tax burden on us.

Since our incorporation we have had, on a continuous basis, our place of “effective management” in Germany. We will therefore qualify as a tax resident of Germany on the basis of German domestic law. As an

 

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entity incorporated under Dutch law, however, we also qualify as a tax resident of the Netherlands for Dutch corporate income tax, Dutch dividend withholding tax and Dutch withholding tax purposes on the basis of Dutch domestic law. However, based on our current management structure and the current tax laws of the United States, Germany and the Netherlands, as well as applicable income tax treaties, and current interpretations thereof, we should qualify solely as a tax resident of Germany for the purposes of the 2012 Convention between the Federal Republic of Germany and the Kingdom of the Netherlands for the avoidance of double taxation with respect to taxes on income (the “double tax treaty between Germany and the Netherlands”) due to the “effective management” tie-breaker included in Article 4(3) of the double tax treaty between Germany and the Netherlands and the current reservation made by Germany under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”), with respect to the tie-breaker provision included in Article 4(3) of the double tax treaty between Germany and the Netherlands (the “MLI tie-breaker reservation”).

The test of “effective management” is largely a question of fact and degree based on all the circumstances, rather than a question of law. Nevertheless, the relevant case law and OECD guidance suggest that we are likely to be regarded as having become a German tax resident from incorporation and remaining so if, as our company intends, (i) most meetings of its management board are prepared and held in Germany (and none will be held in the Netherlands) with a majority of managing directors present in Germany for those meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic issues affecting our company and its subsidiaries; (iii) those meetings are properly minuted; (iv) a majority of our managing directors, together with supporting staff, are based in Germany; and (v) our company has permanent staffed office premises in Germany. We may, however, become subject to limited income tax liability in other countries with regard to the income generated in the respective other country, for example, due to the existence of a permanent establishment or a permanent representative in such other country.

The applicable tax laws or interpretations thereof may change, including the MLI tie-breaker reservation. Furthermore, whether we have our place of effective management in Germany and are as such tax resident in Germany is largely a question of fact and degree based on all the circumstances, rather than a question of law, which facts and degree may also change. Changes to applicable laws or interpretations thereof, changes to applicable facts and circumstances (for example, a change of directors or the place where board meetings take place), or changes to applicable income tax treaties, including a change to the MLI tie-breaker reservation, may result in us becoming (also) a tax resident of the Netherlands or another jurisdiction. See “— If we do pay dividends, we may need to withhold tax on such dividends payable to holders of our shares in both Germany and the Netherlands.” As a consequence, our overall effective income tax rate and income tax expense could materially increase, which could have a material adverse effect on our business, results of operations, financial condition and prospects, which could cause our share price and trading volume to decline. In addition, as a consequence, dividends distributed by us, if any, may become subject to dividend withholding tax in more than one jurisdiction. The double taxation of income and the double withholding tax on dividends may be reduced or avoided entirely under the double tax treaty between Germany and the Netherlands or under a double tax treaty between the Netherlands and the respective other country.

If we do pay dividends, we may need to withhold tax on such dividends payable to holders of TopCo Shares in both Germany and the Netherlands.

We do not intend to pay any dividends to holders of TopCo Shares. See “— TopCo does not anticipate paying dividends on TopCo Shares.” However, if we do pay dividends, we may need to withhold tax on such dividends both in Germany and the Netherlands.

As an entity incorporated under Dutch law, any dividends distributed by us are subject to Dutch dividend withholding tax on the basis of Dutch domestic law. However, on the basis of the double tax treaty between Germany and the Netherlands, the Netherlands will be restricted in imposing these taxes if we are also a tax resident of Germany and our effective management is located in Germany (the “withholding tax restriction”). See

 

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also “— We may become taxable in a jurisdiction other than Germany and this may increase the aggregate tax burden on us.” The withholding tax restriction does, however, not apply, and Dutch dividend withholding tax is still required to be withheld from dividends, if and when paid to Dutch resident holders of our common shares (and non-Dutch resident holders of our common shares that have a permanent establishment in the Netherlands to which their shareholding is attributable). As a result, upon a payment of dividends, we will be required to identify our shareholders in order to assess whether there are Dutch residents (or non-Dutch residents with a permanent establishment in the Netherlands to which the common shares are attributable) in respect of which Dutch dividend withholding tax has to be withheld. Such identification may not always be possible in practice. If the identity of our shareholders cannot be determined, withholding of both German and Dutch dividend withholding tax may occur upon a payment of dividends.

Furthermore, the withholding tax restriction referred to above is based on the current MLI tie-breaker reservation. If Germany changes its MLI tie-breaker reservation, we will not be entitled to any benefits of the double tax treaty between Germany and the Netherlands, including the withholding tax restriction, as long as Germany and the Netherlands do not reach an agreement on our tax residency for purposes of the double tax treaty between Germany and the Netherlands, and, as a result, any dividends distributed by us during the period no such agreement has been reached between Germany and the Netherlands, may be subject to dividend withholding tax both in Germany and the Netherlands.

TopCo may be or may become a PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders.

If TopCo (or its predecessor Yucaipa) or any of its subsidiaries is a PFIC for any taxable year, or portion thereof, that is included in the holding period of a U.S. Holder (as defined in the section of this registration statement captioned “U.S. Federal Income Tax Considerations to U.S. Holders”), such U.S. Holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. TopCo and its subsidiaries are not currently expected to be treated as PFICs for U.S. federal income tax purposes for the taxable year of the Business Combination or for foreseeable future taxable years. However, this conclusion is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to change. Accordingly there can be no assurance that TopCo or any of its subsidiaries will not be treated as a PFIC for any taxable year. Moreover, TopCo does not expect to provide a PFIC annual information statement for 2021 or future taxable years. Please see the section entitled “U.S. Federal Income Tax Considerations to U.S. Holders — PFIC Considerations” for a more detailed discussion with respect to TopCo’s PFIC status. U.S. Holders are urged to consult their tax advisors regarding the possible application of the PFIC rules to holders of the TopCo Shares and TopCo Public Warrants.

Risks Related to Yucaipa

The Yucaipa Initial Shareholders and Yucaipa’s other current officers and directors have interests in the Business Combination that are different from or are in addition to other Yucaipa shareholders in recommending that Yucaipa shareholders vote in favor of approval of the Business Combination Proposal, the Merger Proposal and approval of the other proposals described in this proxy statement/prospectus.

When considering the Yucaipa Board’s recommendation that Yucaipa shareholders vote in favor of the approval of the Business Combination Proposal and the Merger Proposal, Yucaipa shareholders should be aware that aside from their interests as shareholders, the Yucaipa Initial Shareholders and Yucaipa’s other current officers and directors have interests in the Business Combination that are different from, or in addition to, those of other Yucaipa shareholders generally. These interests include:

 

•

the fact that the Yucaipa Initial Shareholders and Yucaipa’s other current officers and directors have agreed not to redeem any Yucaipa Ordinary Shares held by them in connection with a shareholder vote to approve a proposed initial business combination;

 

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•

the fact that Yucaipa Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination;

 

•

the fact that the Yucaipa Initial Shareholders and Yucaipa’s other current officers and directors have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if Yucaipa fails to complete an initial business combination by August 6, 2022;

 

•

the fact that Yucaipa Sponsor paid an aggregate of $8,900,000 for its 5,933,333 Private Placement Warrants and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 6, 2022;

 

•

the fact that, in connection with the PIPE Financing, Mr. Burkle (or, if assigned pursuant to the terms of the Subscription Agreement, one or more of his affiliates or assignees) will purchase 5,000,000 TopCo Shares for an aggregate of $50,000,000;

 

•

the right of the Yucaipa Initial Shareholders to receive TopCo Shares, subject to certain lock-up periods;

 

•

the anticipated designation by the Yucaipa Initial Shareholders of Richard d’Abo as a non-executive director of TopCo following the Business Combination;

 

•

the continued indemnification of Yucaipa’s existing directors and officers and the continuation of Yucaipa’s directors’ and officers’ liability insurance after the Business Combination;

 

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the fact that Yucaipa Sponsor and Yucaipa’s officers and directors will lose their entire investment in Yucaipa and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 6, 2022;

 

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the fact that if the Trust Account is liquidated, including in the event Yucaipa is unable to complete an initial business combination within the required time period, Yucaipa Sponsor has agreed to indemnify Yucaipa to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which Yucaipa has entered into an acquisition agreement or claims of any third party for services rendered or products sold to Yucaipa, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; and

 

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the fact that the 8,565,000 Founder Shares held by Yucaipa Sponsor prior to the Closing of the Business Combination will be exchanged for 9,815,000 TopCo Shares.

The Yucaipa Initial Shareholders, including Yucaipa Sponsor and Yucaipa’s independent directors, hold a significant number of Yucaipa Ordinary Shares. They will lose their entire investment in Yucaipa if a business combination is not completed.

The Yucaipa Initial Shareholders hold an aggregate of 8,625,000 Founder Shares, representing 19.9% of the total outstanding Yucaipa Ordinary Shares upon completion of the Yucaipa IPO. The Founder Shares will be worthless if Yucaipa does not complete a business combination by August 6, 2022. In addition, the 8,565,000 Founder Shares held by Yucaipa Sponsor will be exchanged for 9,815,000 TopCo Shares upon Closing of the Business Combination.

The personal and financial interests of Yucaipa’s officers and directors may have influenced their motivation in identifying and selecting SSU and completing a business combination with SSU and may influence their operation of TopCo following the Business Combination.

 

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Since Yucaipa Sponsor and Yucaipa’s executive officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses if a business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for a business combination.

At the Closing of the Business Combination, Yucaipa Sponsor and Yucaipa’s executive officers and directors, and any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on Yucaipa’s behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred in connection with activities on Yucaipa’s behalf. These financial interests of Yucaipa Sponsor and Yucaipa’s executive officers and directors may influence their motivation in identifying and selecting a target business combination and completing the Business Combination.

The Yucaipa Initial Shareholders will control the election of the Yucaipa Board until consummation of a business combination and hold a substantial interest in Yucaipa. As a result, they will elect all of Yucaipa’s directors and may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not support.

The Yucaipa Initial Shareholders own 19.9% of the issued and outstanding Yucaipa Ordinary Shares. In addition, the Founder Shares, all of which are held by the Yucaipa Initial Shareholders, entitle the holders thereof to elect all of Yucaipa’s directors prior to the initial business combination. In addition, the 8,565,000 Founder Shares held by Yucaipa Sponsor prior to the Closing of the Business Combination will be exchanged for 9,815,000 TopCo Shares upon Closing of the Business Combination. Holders of Class B Shares have the exclusive right prior to Yucaipa’s initial business combination to elect Yucaipa’s directors. Accordingly, as holders of the Class A Shares, Yucaipa public shareholders will not have the right to vote on the election of directors prior to consummation of the Business Combination. These provisions of the Yucaipa amended and restated memorandum and articles of association may only be amended by a special resolution passed by holders representing a majority of the Founder Shares. As a result, holders of Yucaipa public shares will not have any influence over the election of directors of Yucaipa prior to an initial business combination.

In addition, as a result of their substantial ownership in Yucaipa, the Yucaipa Initial Shareholders may exert a substantial influence on other actions requiring a shareholder vote, potentially in a manner that Yucaipa shareholders do not support, including amendments to the Yucaipa amended and restated memorandum and articles of association and approval of major corporate transactions, including the Business Combination. If the Yucaipa Initial Shareholders purchase any Class A Shares in the aftermarket or in privately negotiated transactions, this would increase their influence over these actions. Accordingly, the Yucaipa Initial Shareholders will exert significant influence over actions requiring a shareholder vote at least until the completion of a business combination.

Yucaipa Sponsor and Yucaipa’s other directors, executive officers, advisors and their affiliates may elect to purchase shares from Yucaipa public shareholders, which may influence a vote on the Business Combination.

Yucaipa Sponsor or Yucaipa’s other directors, executive officers, advisors or their affiliates may purchase Class A Shares in privately negotiated transactions or in the open market prior to the completion of the Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record holder of the Class A Shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that Yucaipa Sponsor or Yucaipa’s other directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases would be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining shareholder approval of the Business Combination or to satisfy the Aggregate TopCo Transaction Proceeds Condition, where it appears that such condition would otherwise not be met. This may result in the completion of the Business Combination that may not otherwise have been possible.

 

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You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your Yucaipa Public Units, Class A Shares or Yucaipa Public Warrants, potentially at a loss.

Yucaipa’s public shareholders will be entitled to receive funds from the Trust Account only upon the earlier to occur of: (i) the completion of an initial business combination; (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend the Yucaipa amended and restated memorandum and articles of association to modify the substance or timing of Yucaipa’s obligation to redeem 100% of the public shares if Yucaipa does not complete a business combination by August 6, 2022; and (iii) the redemption of all of the public shares if Yucaipa is unable to complete a business combination by August 6, 2022, subject to applicable law. In no other circumstances will a public shareholder have any right or interest of any kind in the Trust Account. Accordingly, to liquidate your investment, you may be forced to sell your Yucaipa Public Units, Class A Shares or Yucaipa Public Warrants, potentially at a loss.

If Yucaipa is unable to complete a business combination by August 6, 2022 Yucaipa will cease all operations except for the purpose of winding up and Yucaipa will redeem the public shares and liquidate.

Yucaipa Sponsor and Yucaipa’s executive officers and directors have agreed that Yucaipa must complete a business combination by August 6, 2022. If Yucaipa has not completed an initial business combination within such time period, it will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest, net of tax (less up to $10.00 of such net interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of Yucaipa’s remaining shareholders and the Yucaipa Board, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to Yucaipa’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Yucaipa IPO. In addition, if Yucaipa fails to complete an initial business combination by August 6, 2022, there will be no redemption rights on liquidating distributions with respect to Yucaipa Public Warrants or the Private Placement Warrants, which will expire worthless.

If the Business Combination is not completed, potential target businesses may have leverage over Yucaipa in negotiating a business combination and Yucaipa’s ability to conduct due diligence on a business combination as it approaches its dissolution deadline may decrease, which could undermine Yucaipa’s ability to complete a business combination on terms that would produce value for Yucaipa’s shareholders.

Any potential target business with which Yucaipa enters into negotiations concerning a business combination will be aware that Yucaipa must complete an initial business combination by August 6, 2022. Consequently, if Yucaipa is unable to complete this Business Combination, a potential target may obtain leverage over Yucaipa in negotiating a business combination, knowing that Yucaipa may be unable to complete a business combination with another target business by August 6, 2022. This risk will increase as Yucaipa gets closer to the timeframe described above. In addition, Yucaipa may have limited time to conduct due diligence and may enter into a business combination on terms that Yucaipa would have rejected upon a more comprehensive investigation.

 

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Because of Yucaipa’s limited resources and the significant competition for business combination opportunities, if this Business Combination is not completed, it may be more difficult for Yucaipa to complete an initial business combination. In addition, resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If Yucaipa is unable to complete an initial business combination by August 6, 2022, Yucaipa’s public shareholders may receive only approximately $10.00 per share, on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against Yucaipa that Yucaipa Sponsor is unable to indemnify), and the Yucaipa Public Warrants will expire worthless.

If Yucaipa is unable to complete this Business Combination, Yucaipa would expect to encounter intense competition from other entities having a business objective similar to its business objective, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses Yucaipa could acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than Yucaipa does and Yucaipa’s financial resources will be relatively limited when contrasted with those of many of these competitors. While Yucaipa believes there are numerous target businesses Yucaipa could potentially acquire with the net proceeds of the Yucaipa IPO and the sale of the Private Placement Warrants, Yucaipa’s ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by Yucaipa’s available financial resources. This inherent competitive limitation may give others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if Yucaipa is obligated to pay cash for the public shares redeemed and, in the event Yucaipa seeks shareholder approval of a business combination, Yucaipa makes purchases of its public shares, potentially reducing the resources available to Yucaipa for a business combination. Any of these obligations may place Yucaipa at a competitive disadvantage in successfully negotiating a business combination.

Yucaipa anticipates that, if Yucaipa is unable to complete this Business Combination, the investigation of other specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If Yucaipa decides not to complete a specific business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if Yucaipa reaches an agreement relating to a specific target business, Yucaipa may fail to complete such business combination (including the Business Combination described in this proxy statement/prospectus) for any number of reasons including those beyond Yucaipa’s control. Any such event will result in a loss to Yucaipa of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.

If Yucaipa does not complete this Business Combination and is unable to complete an initial business combination by August 6, 2022, Yucaipa’s public shareholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against Yucaipa that Yucaipa Sponsor is unable to indemnify) and the Yucaipa Public Warrants will expire worthless.

The exercise of discretion by Yucaipa’s directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Business Combination Agreement may result in a conflict of interest when determining whether such changes to the terms of the Business Combination Agreement or waivers of conditions are appropriate and in the best interests of the public shareholders of Yucaipa.

In the period leading up to the closing of the Business Combination, other events may occur that, pursuant to the Business Combination Agreement, would require Yucaipa to agree to amend the Business Combination Agreement, to consent to certain actions or to waive rights that Yucaipa is entitled to under those agreements.

 

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Such events could arise because of changes in the course of SSU’s business, a request by the SSU shareholders or SSU to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on SSU’s business and would entitle Yucaipa to terminate the Business Combination Agreement. In any of such circumstances, it would be in the discretion of Yucaipa, acting through the Yucaipa Board, to grant its consent or waive its rights. The existence of the financial and personal interests of Yucaipa’s directors described elsewhere in this proxy statement/prospectus may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for Yucaipa and the public shareholders of Yucaipa and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, Yucaipa does not believe there will be any changes or waivers that Yucaipa’s directors and officers would be likely to make after shareholder approval of the Business Combination has been obtained. While certain changes could be made without further shareholder approval, if there is a change to the terms of the Business Combination that would have a material impact on the shareholders, Yucaipa will be required to circulate a new or amended proxy statement/prospectus or supplement thereto and resolicit the vote of the Yucaipa public shareholders with respect to the Business Combination Proposal.

Yucaipa will incur significant transaction and transition costs in connection with the Business Combination.

Yucaipa has incurred and expects to incur significant, non-recurring costs in connection with consummating the Business Combination. All expenses incurred in connection with the Business Combination Agreement and the transactions contemplated thereby (including the Business Combination), including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs.

Yucaipa’s transaction expenses as a result of the Business Combination are currently estimated at approximately $[●], including $12.1 million in deferred underwriting commissions to the underwriters of the Yucaipa IPO.

If third parties bring claims against Yucaipa, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $10.00 per share.

Yucaipa’s placing of funds in the Trust Account may not protect those funds from third-party claims against Yucaipa. Although Yucaipa will seek to have all vendors, service providers (other than Yucaipa’s independent auditors), prospective target businesses or other entities with which Yucaipa does business execute agreements with Yucaipa waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of Yucaipa’s public shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against Yucaipa’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, Yucaipa’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to Yucaipa than any alternative.

Examples of possible instances where Yucaipa may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by Yucaipa Management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where Yucaipa Management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with Yucaipa and will not seek recourse against the Trust Account for any reason. Upon redemption of Yucaipa’s public shares, if Yucaipa is unable to complete the

 

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Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Business Combination, Yucaipa will be required to provide for payment of claims of creditors that were not waived that may be brought against Yucaipa within the ten years following redemption. Accordingly, the per-share redemption amount received by Yucaipa’s public shareholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.

Yucaipa Sponsor has agreed that it will be liable to Yucaipa if and to the extent any claims by a vendor for services rendered or products sold to Yucaipa, or a prospective target business with which Yucaipa has discussed entering into a Business Combination Agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under Yucaipa’s indemnity of the underwriters of the Yucaipa IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Yucaipa Sponsor will not be responsible to the extent of any liability for such third-party claims. Yucaipa has not independently verified whether Yucaipa Sponsor has sufficient funds to satisfy its indemnity obligations and believes that Yucaipa Sponsor’s only assets are securities of Yucaipa. Yucaipa Sponsor may not have sufficient funds available to satisfy those obligations. Yucaipa has not asked Yucaipa Sponsor to reserve for such eventuality, and therefore, no funds are currently set aside to cover any such obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for a business combination and redemptions could be reduced to less than $10.00 per public share. In such event, Yucaipa may not be able to complete a business combination, and Yucaipa shareholders would receive such lesser amount per share in connection with any redemption of public shares.

Yucaipa’s directors may decide not to enforce the indemnification obligations of Yucaipa Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to Yucaipa’s public shareholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per share or (ii) other than due to the failure to obtain such waiver, such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and Yucaipa Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, Yucaipa’s independent directors would determine whether to take legal action against Yucaipa Sponsor to enforce its indemnification obligations. While Yucaipa currently expects that its independent directors would take legal action on its behalf against Yucaipa Sponsor to enforce its indemnification obligations to Yucaipa, it is possible that Yucaipa’s independent directors in exercising their business judgment may choose not to do so in any particular instance. If Yucaipa’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to Yucaipa’s public shareholders may be reduced below $10.00 per share.

If, before distributing the proceeds in the Trust Account to Yucaipa public shareholders, Yucaipa files a bankruptcy petition or an involuntary bankruptcy petition is filed against Yucaipa that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of Yucaipa’s shareholders and the per-share amount that would otherwise be received by Yucaipa’s shareholders in connection with Yucaipa’s liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to Yucaipa public shareholders, Yucaipa files a bankruptcy petition or an involuntary bankruptcy petition is filed against Yucaipa that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in

 

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Yucaipa’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Yucaipa’s shareholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by Yucaipa’s shareholders in connection with its liquidation may be reduced.

Yucaipa’s public shareholders may be held liable for claims by third parties against Yucaipa to the extent of distributions received by them upon redemption of their public shares.

If Yucaipa is forced to enter into an insolvent liquidation, any distributions received by public shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, Yucaipa was unable to pay its debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by Yucaipa’s shareholders. Furthermore, Yucaipa’s directors may be viewed as having breached their fiduciary duties to Yucaipa or its creditors and/or may have acted in bad faith, and thereby exposing themselves and Yucaipa to claims, by paying public shareholders from the Trust Account prior to addressing the claims of creditors. Yucaipa cannot assure you that claims will not be brought against it for these reasons. Yucaipa and its directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of Yucaipa’s share premium account while it was unable to pay its debts as they fall due in the ordinary course of business would be guilty of an offense and may be liable to a fine of approximately $18,000 and to imprisonment for five years in the Cayman Islands.

If, after Yucaipa distributes the proceeds in the Trust Account to its public shareholders, Yucaipa files a bankruptcy petition or an involuntary bankruptcy petition is filed against Yucaipa that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of the Yucaipa Board may be viewed as having breached their fiduciary duties to Yucaipa’s creditors, thereby exposing the members of the Yucaipa Board and Yucaipa to claims of punitive damages.

If, after Yucaipa distributes the proceeds in the Trust Account to its public shareholders, Yucaipa files a bankruptcy petition or an involuntary bankruptcy petition is filed against Yucaipa that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Yucaipa’s shareholders. In addition, the Yucaipa Board may be viewed as having breached its fiduciary duty to Yucaipa’s creditors and/or having acted in bad faith, thereby exposing itself and Yucaipa to claims of punitive damages, by paying public shareholders from the Trust Account prior to addressing the claims of creditors.

Because Yucaipa is incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited.

Yucaipa is an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for Yucaipa public shareholders to effect service of process within the United States upon Yucaipa’s directors or executive officers, or enforce judgments obtained in the United States courts against Yucaipa’s directors or officers.

Yucaipa’s corporate affairs are governed by its amended and restated memorandum and articles of association, the Cayman Islands Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of Yucaipa’s directors to Yucaipa under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of Yucaipa’s shareholders and the fiduciary responsibilities of Yucaipa’s directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States,

 

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and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, shareholders of Cayman Islands companies may not have standing to initiate a shareholders derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like Yucaipa have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of the register of members of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

The courts of the Cayman Islands are unlikely (i) to recognize or enforce against Yucaipa judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state, and (ii) in original actions brought in the Cayman Islands, to impose liabilities against Yucaipa predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be: (i) one in respect of which the foreign court had jurisdiction over the defendant according to Cayman Islands conflict of law rules; (ii) final and conclusive; (iii) either for a liquidated sum not in respect of penalties or taxes or a fine or similar fiscal or revenue obligations or, in certain circumstances, for in personam non money relief; and (iv) neither obtained in a manner, nor is of a kind enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. As a result of English case law, which will likely be highly persuasive in the Cayman Islands, the Cayman Islands courts may also have discretion to enforce judgments obtained in foreign bankruptcy proceedings in other circum-stances. Cayman Islands courts may stay enforcement proceedings if concurrent proceedings are brought elsewhere.

As a result of all of the above, Yucaipa public shareholders may have more difficulty in protecting their interests in the face of actions taken by Yucaipa management, members of the Yucaipa Board or controlling shareholders of Yucaipa than they would as public shareholders of a United States company.

Yucaipa shareholders may have limited remedies if their shares suffer a reduction in value following the Business Combination.

Any shareholders who choose to remain shareholders following a business combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value, unless they are able to successfully claim that the reduction was due to the breach by Yucaipa’s officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy statement relating to a business combination contained an actionable material misstatement or material omission.

 

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GENERAL INFORMATION

Presentation of Financial Information

This proxy statement/prospectus contains:

 

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the audited consolidated financial statements of SSU as of and for the fiscal years ended September 30, 2019 and September 30, 2020, prepared in accordance with IFRS as issued by the IASB;

 

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the unaudited interim condensed consolidated financial statements of SSU as of and for the six months ended March 31, 2021, prepared in accordance with International Accounting Standard IAS 34 – “Interim Financial Reporting”;

 

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the audited financial statements of Yucaipa for the fiscal year from June 4, 2020 (inception) ended December 31, 2020 and the unaudited interim condensed financial statements of Yucaipa as of and for the three-months from January 1, 2021 to March 31, 2021, each prepared in accordance with U.S. GAAP;

 

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the audited consolidated financial statements of the Wiggle Group for the 39 weeks ended September 27, 2020 and prepared in accordance with IFRS; and

 

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the unaudited interim consolidated financial statements of the Wiggle Group for the 26 weeks ended March 28, 2021 prepared on the basis of IFRS applicable for interim financial reporting (IAS 34);

 

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the unaudited pro forma condensed combined statements of profit or loss of TopCo for the twelve-month period ended September 30, 2020, and for the six-month period ended March 31, 2021, and the unaudited pro forma condensed combined balance sheet as of March 31, 2021 prepared in accordance with Article 11 of Regulation S-X.

Unless indicated otherwise, financial data presented in this document has been taken from the audited consolidated financial statements of Yucaipa included in this document, and the audited consolidated financial statements of SSU included in this document. Where information is identified as “unaudited,” it has not been subject to an audit.

Cautionary Note Regarding Forward-Looking Statements

This proxy statement/prospectus contains forward-looking statements. Forward-looking statements provide TopCo’s current expectations or forecasts of future events. Forward-looking statements include statements about TopCo’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will” and “would,” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements regarding TopCo’s disclosure concerning SSU’s operations, cash flows, financial position and dividend policy.

Forward-looking statements appear in a number of places in this proxy statement/prospectus including, without limitation, in the sections entitled “SSU’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Yucaipa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business of Yucaipa and Certain Information About Yucaipa” and “Business of SSU and Certain Information About SSU.” The risks and uncertainties include, but are not limited to:

 

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future operating or financial results;

 

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future payments of dividends and the availability of cash for payment of dividends;

 

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SSU’s expectations relating to dividend payments and forecasts of its ability to make such payments;

 

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future acquisitions, business strategy and expected capital spending;

 

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assumptions regarding interest rates and inflation;

 

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business disruptions arising from the recent coronavirus outbreak;

 

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the combined company’s financial condition and liquidity, including its ability to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;

 

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estimated future capital expenditures needed to preserve TopCo’s capital base;

 

•

ability of the combined company to effect future acquisitions and to meet target returns;

 

•

changes in general economic conditions in the Federal Republic of Germany (“Germany”), including changes in the unemployment rate, the level of consumer prices, wage levels, etc.;

 

•

the further development of online sports markets, in particular the levels of acceptance of internet retailing;

 

•

SSU’s behavior on mobile devices and its ability to attract mobile internet traffic and convert such traffic into purchases of its goods;

 

•

SSU’s ability to offer its customers an inspirational and attractive online purchasing experience;

 

•

demographic changes, in particular with respect to Germany;

 

•

changes affecting interest rate levels;

 

•

changes in the competitive environment and in the competition level;

 

•

changes affecting currency exchange rates;

 

•

the occurrence of accidents, terrorist attacks, natural disasters, fire, environmental damage, or systemic delivery failures;

 

•

inability to attract and retain qualified personnel;

 

•

political changes;

 

•

changes in laws and regulations; and

 

•

other factors discussed in “Risk Factors.”

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in “Risk Factors” in this proxy statement/prospectus. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus. TopCo undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks TopCo describes in the reports it will file from time to time with the SEC after the date of this proxy statement/prospectus.

In addition, statements that “TopCo believes” and similar statements reflect TopCo’s beliefs and opinions on the relevant subject. These statements are based on information available to TopCo as of the date of this proxy statement/prospectus. And while TopCo believes that information provides a reasonable basis for these statements, that information may be limited or incomplete. TopCo’s statements should not be read to indicate that it has conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.

 

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Although TopCo believes the expectations reflected in the forward-looking statements were reasonable at the time made, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither TopCo nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward looking statements contained in this proxy statement/prospectus and any subsequent written or oral forward-looking statements that may be issued by TopCo or persons acting on its behalf.

 

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EXTRAORDINARY GENERAL MEETING OF YUCAIPA SHAREHOLDERS

This proxy statement/prospectus is being provided to Yucaipa shareholders as part of a solicitation of proxies by the Yucaipa Board for use at the General Meeting of Yucaipa Shareholders to be held on [●], 2021, and at any adjournment or postponement thereof. This proxy statement/prospectus contains important information regarding the General Meeting, the proposals on which you are being asked to vote and information you may find useful in determining how to vote and voting procedures.

This proxy statement/prospectus is being first mailed on or about [●], 2021 to all shareholders of record of Yucaipa as of [●], 2021, the record date for the General Meeting for Yucaipa Shareholders that hold their shares in “street name.” For “street name” shareholders, all shareholders of record who owned Yucaipa Ordinary Shares at the close of business on the record date are entitled to receive notice of, attend and vote at the General Meeting. On the record date, there were 43,155,000 Yucaipa Ordinary Shares outstanding. Yucaipa shareholders that hold their shares in registered form on the day of the General Meeting are entitled to vote their shares at the General Meeting.

Date, Time and Place of General Meeting

The General Meeting will be held at [●] a.m., New York City time, on [●], 2021 at the offices of Kirkland & Ellis LLP located at 601 Lexington Avenue, 50th Floor, New York, New York 10022, and via a virtual meeting, or at such other time, on such other date and at such other place to which the meeting may be adjourned, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

Proposals at the General Meeting

At the General Meeting, Yucaipa shareholders will vote on the following proposals:

 

•

Business Combination Proposal — To adopt, as an ordinary resolution, the Business Combination Agreement and approve the Business Combination;

 

•

Merger Proposal — To authorize and approve, as a special resolution, the Plan of Merger and the remaining transactions contemplated thereby; and

 

•

Adjournment Proposal — To consider and vote upon a proposal to adjourn the General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal or the Merger Proposal. The Adjournment Proposal will only be presented to Yucaipa shareholders in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal or the Merger Proposal.

 

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THE YUCAIPA BOARD RECOMMENDS THAT

YOU VOTE “FOR” EACH OF THESE PROPOSALS.

Voting Power; Record Date

As a shareholder of Yucaipa, you have a right to vote on certain matters affecting Yucaipa. The proposals that will be presented at the General Meeting and upon which you are being asked to vote are summarized above and fully set forth in this proxy statement/prospectus. If you are a shareholder that holds your shares in “street name,” you will be entitled to vote or direct votes to be cast at the General Meeting if you owned Yucaipa Ordinary Shares at the close of business on [●], 2021, which is the record date for the General Meeting. You are entitled to one vote for each Yucaipa Ordinary Share that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 43,125,000 Yucaipa Ordinary Shares outstanding, of which 34,500,000 are public shares and 8,625,000 are Founder Shares held by the Yucaipa Initial Shareholders. For the avoidance of doubt, the record date does not apply to Yucaipa shareholders that hold their shares in registered form and are registered as shareholders in Yucaipa’s register of members. Yucaipa shareholders that hold their shares in registered form are entitled to one vote on each proposal presented at the General Meeting for each Yucaipa Ordinary Share held on the date of the General Meeting.

Vote of the Yucaipa Initial Shareholders and Yucaipa’s Other Directors and Officers

Prior to the Yucaipa IPO, Yucaipa entered into agreements with the Yucaipa Initial Shareholders and the other current directors and officers of Yucaipa, pursuant to which each agreed to vote any Yucaipa Ordinary Shares owned by them in favor of an initial business combination. These agreements apply to the Yucaipa Initial Shareholders, including Yucaipa Sponsor, as it relates to the Founder Shares and the requirement to vote all of the Founder Shares in favor of the Business Combination Proposal, the Merger Proposal and for all other proposals presented to Yucaipa shareholders in this proxy statement/prospectus. As of the record date, the Yucaipa Initial Shareholders and the other current directors and officers own 8,625,000 Founder Shares, representing 19.9% of the Yucaipa Ordinary Shares then outstanding and entitled to vote at the General Meeting.

The Yucaipa Initial Shareholders and the other current directors and officers of Yucaipa have waived any redemption rights, including with respect to Class A Shares purchased in the Yucaipa IPO or in the aftermarket, in connection with Business Combination. The Founder Shares held by the Yucaipa Initial Shareholders have no redemption rights upon the liquidation of Yucaipa and will be worthless if no business combination is effected by Yucaipa by August 6, 2022. However, the Yucaipa Initial Shareholders and the other current directors and officers of Yucaipa are entitled to redemption rights upon the liquidation of Yucaipa with respect to any public shares they may own.

Quorum and Required Vote for Proposals for the General Meeting

The approval of the Business Combination Proposal requires the affirmative vote of holders of a majority of the Yucaipa Ordinary Shares that are entitled to vote and are voted at the General Meeting. Accordingly, a Yucaipa shareholder’s failure to vote by proxy or to vote in person at the General Meeting will not be counted towards the number of Yucaipa Ordinary Shares required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Business Combination Proposal. Broker non-votes and abstentions will be counted in connection with the determination of whether a valid quorum is established, but will have no effect on the Business Combination Proposal. The Yucaipa Initial Shareholders have agreed to vote their Founder Shares and any public shares purchased by them during or after the Yucaipa IPO in favor of the Business Combination Proposal.

The approval of the Merger Proposal requires the affirmative vote of holders of at least two-thirds of the Yucaipa Ordinary Shares that are entitled to vote and are voted at the General Meeting. Accordingly, a Yucaipa

 

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shareholder’s failure to vote by proxy or to vote in person at the General Meeting will not be counted towards the number of Yucaipa Ordinary Shares required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Merger Proposal. Broker non-votes and abstentions will be counted in connection with the determination of whether a valid quorum is established, but will have no effect on the Merger Proposal. The Yucaipa Initial Shareholders have agreed to vote their Founder Shares and any public shares purchased by them during or after the Yucaipa IPO in favor of the Merger Proposal.

The approval of the Adjournment Proposal requires the affirmative vote of holders of a majority of the Yucaipa Ordinary Shares that are entitled to vote and are voted at the General Meeting. Accordingly, a Yucaipa shareholder’s failure to vote by proxy or to vote in person at the General Meeting will not be counted towards the number of Yucaipa Ordinary Shares required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Adjournment Proposal. Broker non-votes and abstentions will be counted in connection with the determination of whether a valid quorum is established, but will have no effect on the Adjournment Proposal.

One or more shareholders who together hold a majority of the issued and outstanding Yucaipa Ordinary Shares entitled to vote at the General Meeting must be present, in person or represented by proxy, at the General Meeting to constitute a quorum and in order to conduct business at the General Meeting. Broker non-votes and abstentions will be counted as present for the purpose of determining a quorum. The Yucaipa Initial Shareholders, who currently own 19.9% of the issued and outstanding Yucaipa Ordinary Shares, will count towards this quorum. In the absence of a quorum, the chairman of the General Meeting has power to adjourn the General Meeting. As of the record date for the General Meeting for Yucaipa shareholders that hold their shares in “street name,” 21,577,500 Yucaipa Ordinary Shares would be required to achieve a quorum.

The closing of the Business Combination is conditioned upon the approval of the Business Combination Proposal and the Merger Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

It is important for you to note that, in the event that the Business Combination Proposal or the Merger Proposal does not receive the requisite vote for approval, Yucaipa will not consummate the Business Combination. If Yucaipa does not consummate the Business Combination and fails to complete an initial business combination by August 6, 2022, Yucaipa will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the public shareholders.

Recommendation to Yucaipa Shareholders

The Yucaipa Board believes that each of the Business Combination Proposal, the Merger Proposal and the Adjournment Proposal to be presented at the General Meeting is in the best interests of Yucaipa and its shareholders and recommends that its shareholders vote “FOR” each of the proposals.

When you consider the recommendation of the Yucaipa Board in favor of approval of the Business Combination Proposal or the Merger Proposal, you should keep in mind that Yucaipa Sponsor and certain members of the Yucaipa Board and officers of Yucaipa have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a shareholder. Shareholders should take these interests into account in deciding whether to approve the proposals presented at the General Meeting, including the Business Combination Proposal and the Merger Proposal. These interests include, among other things:

 

•

the fact that the Yucaipa Initial Shareholders and Yucaipa’s other current officers and directors have agreed not to redeem any Yucaipa Ordinary Shares held by them in connection with a shareholder vote to approve a proposed initial business combination;

 

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•

the fact that Yucaipa Sponsor paid an aggregate of $25,000 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination;

 

•

the fact that the Yucaipa Initial Shareholders and Yucaipa’s other current officers and directors have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if Yucaipa fails to complete an initial business combination by August 6, 2022;

 

•

the fact that the Registration Rights Agreement will be entered into by the Yucaipa Initial Shareholders;

 

•

the fact that Yucaipa Sponsor paid an aggregate of $8,900,000 for its 5,933,333 Private Placement Warrants to purchase Class A Shares and that such Private Placement Warrants will expire worthless if a business combination is not consummated by August 6, 2022;

 

•

the fact that, in connection with the PIPE Financing, Mr. Burkle (or, if assigned pursuant to the terms of the Subscription Agreement, one or more of his affiliates or assignees) will purchase 5,000,000 TopCo Shares for an aggregate of $50,000,000;

 

•

the right of the Yucaipa Initial Shareholders to receive TopCo Shares, subject to certain lock-up periods;

 

•

the anticipated designation by the Yucaipa Initial Shareholders of Richard d’Abo as a non-executive director of TopCo following the Business Combination;

 

•

the continued indemnification of Yucaipa’s existing directors and officers and the continuation of Yucaipa’s directors’ and officers’ liability insurance after the Business Combination;

 

•

the fact that Yucaipa Sponsor and Yucaipa’s officers and directors will lose their entire investment in Yucaipa and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by August 6, 2022;

 

•

the fact that if the Trust Account is liquidated, including in the event Yucaipa is unable to complete an initial business combination within the required time period, Yucaipa Sponsor has agreed to indemnify Yucaipa to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which Yucaipa has entered into an acquisition agreement or claims of any third party for services rendered or products sold to Yucaipa, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; and

 

•

the fact that the 8,565,000 Founder Shares held by Yucaipa Sponsor prior to the Closing of the Business Combination will be exchanged for 9,815,000 TopCo Shares.

Broker Non-Votes and Abstentions

Broker non-votes and abstentions are considered present for the purposes of establishing a quorum, but will have no effect on the Business Combination Proposal, the Merger Proposal or the Adjournment Proposal.

In general, if your shares are held in “street name” and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your shares, your broker, bank or other nominee, in its sole discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters.

 

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None of the proposals at the General Meeting are routine matters. As such, without your voting instructions, your brokerage firm cannot vote your shares on any proposal to be voted on at the General Meeting.

Voting Your Shares — Shareholders of Record

If you hold your shares in “street name” and are a Yucaipa shareholder of record, you may vote by mail or in person at the General Meeting. Each Yucaipa Ordinary Share that you own in your name entitles you to one vote on each of the proposals for the General Meeting. Your one or more proxy cards show the number of Yucaipa Ordinary Shares that you own.

Voting by Mail. You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the General Meeting in the manner you indicate. You are encouraged to sign and return the proxy card even if you plan to attend the General Meeting so that your shares will be voted if you are unable to attend the General Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the General Meeting. If you sign and return the proxy card but do not give instructions on how to vote your shares, your Yucaipa Ordinary Shares will be voted as recommended by the Yucaipa Board. The Yucaipa Board recommends voting “FOR” the Business Combination Proposal, “FOR” the Merger Proposal and “FOR” the Adjournment Proposal. Votes submitted by mail must be received by [●] p.m., New York City time, on [●], 2021.

Voting in Person at the Meeting. If you attend the General Meeting and plan to vote in person, you will be provided with a ballot at the General Meeting. If your shares are registered directly in your name, you are considered the shareholder of record and you have the right to vote in person at the General Meeting. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the General Meeting and vote in person, you will need to bring to the General Meeting a legal proxy from your broker, bank or nominee authorizing you to vote these shares. That is the only way Yucaipa can be sure that the broker, bank or nominee has not already voted your Yucaipa Ordinary Shares.

Voting Your Shares — Beneficial Owners

If your shares are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of shares held in “street name” and this proxy statement/prospectus is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the shareholder of record for purposes of voting at the General Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement/prospectus. As a beneficial owner, if you wish to vote at the General Meeting, you will need to bring to the General Meeting a legal proxy from your broker, bank or other nominee authorizing you to vote those shares. Please see “— Attending the General Meeting” below for more details.

Attending the General Meeting

Only Yucaipa shareholders on the record date (if the shares are held in “street name”) or their legal proxy holders may attend the General Meeting. To be admitted to the General Meeting, you will need a form of photo identification and valid proof of ownership of Yucaipa Ownership Shares or a valid legal proxy. If you have a

 

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legal proxy from a shareholder of record, you must bring a form of photo identification and the legal proxy to the General Meeting. If you have a legal proxy from a “street name” shareholder, you must bring a form of photo identification, a legal proxy from the record holder (that is, the bank, broker or other holder of record) to the “street name” shareholder that is assignable, and the legal proxy from the “street name” shareholder to you. Shareholders may appoint only one proxy holder to attend on their behalf. Shareholders that hold their shares in registered form on the date of the General Meeting are entitled to attend and vote at the General Meeting.

Revoking Your Proxy

If you give a proxy, you may revoke it at any time before the General Meeting or at the General Meeting by doing any one of the following:

 

•

you may send another proxy card with a later date;

 

•

you may notify Yucaipa’s Secretary in writing to Yucaipa, at 9130 West Sunset Boulevard, Los Angeles, California 90069, Attn.: Secretary, before the General Meeting that you have revoked your proxy; or

 

•

you may attend the General Meeting, revoke your proxy, and vote in person, as indicated above.

No Additional Matters

The General Meeting has been called only to consider the approval of the Business Combination Proposal, the Merger Proposal and the Adjournment Proposal. Under the Yucaipa amended and restated memorandum and articles of association, other than procedural matters incident to the conduct of the General Meeting, no other matters may be considered at the General Meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the General Meeting.

Who Can Answer Your Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your Yucaipa Ordinary Shares, you may call [●], Yucaipa’s proxy solicitor, at [●] (toll free), or banks and brokerage firms, please call collect at [●].

Redemption Rights

Pursuant to Yucaipa’s amended and restated memorandum and articles of association, any holders of Yucaipa public shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account, less taxes payable, calculated as of two business days prior to the consummation of the Business Combination. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account which holds the proceeds of the Yucaipa IPO and a portion of the proceeds from the sale of the Private Placement Warrants (calculated as of two business days prior to the consummation of the Business Combination, less taxes payable). For illustrative purposes, based on the fair value of marketable securities held in the Trust Account of approximately $345.0 million as of March 31, 2021, the estimated per share redemption price would have been approximately $10.00.

In order to exercise your redemption rights, you must:

 

•

if you hold Yucaipa Public Units, separate the underlying Class A Shares and Yucaipa Public Warrants;

 

•

prior to 5:00 p.m., New York City time, on [●], 2021 (two business days before the initially scheduled General Meeting), identify yourself in writing as a beneficial holder and provide your legal

 

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name, phone number and address to the Transfer Agent in order to validly redeem your shares and tender your shares physically or electronically and submit a request in writing that Yucaipa redeem your public shares for cash to Continental Stock Transfer & Trust Company, the Transfer Agent, at the following address:

Continental Stock Transfer & Trust Company

1 State Street

New York, New York 10004

Attention: Francis Wolf & Celeste Gonzalez

and

 

•

deliver your public shares either physically or electronically through DTC’s DWAC system to the Transfer Agent at least two business days before the initially scheduled General Meeting. Shareholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. Shareholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, it may take longer than two weeks. Shareholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically. If you do not submit a written request and deliver your public shares as described above, your shares will not be redeemed.

You do not have to be a record date holder in order to exercise your redemption rights. Shareholders seeking to exercise their redemption rights, whether they are registered holders or hold their shares in “street name” are required to either tender their certificates to the Transfer Agent prior to the date set forth in this proxy statement/prospectus, or up to two business days prior to the initially scheduled vote on the Business Combination Proposal and the Merger Proposal at the General Meeting, or to deliver their shares to the Transfer Agent electronically using DTC’s DWAC system, at such shareholder’s option. The requirement for physical or electronic delivery prior to the General Meeting ensures that a redeeming shareholder’s election to redeem is irrevocable once the Business Combination is approved.

Holders of outstanding Yucaipa Public Units must separate the underlying Class A Shares and Yucaipa Public Warrants prior to exercising redemption rights with respect to the public shares.

If you hold Yucaipa Public Units registered in your own name, you must deliver the certificate for such units to the Transfer Agent with written instructions to separate such units into Class A Shares and Yucaipa Public Warrants. This must be completed far enough in advance to permit the mailing of the public share certificates back to you so that you may then exercise your redemption rights upon the separation of the Class A Shares from the Yucaipa Public Units.

If a broker, dealer, commercial bank, trust company or other nominee holds your Yucaipa Public Units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to the Transfer Agent. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of an equal number of Class A Shares and Yucaipa Public Warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the public shares from the Yucaipa Public Units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your Yucaipa Public Units to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

Each redemption of Class A Share by Yucaipa’s public shareholders will reduce the amount in the Trust Account, which held marketable securities with a fair value of approximately $345.0 million as of March 31,

 

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2021. The Business Combination Agreement provides that SSU’s obligation to consummate the Business Combination is conditioned on the amount of cash in the Trust Account (net of the Cash Redemption Amount) together with the Aggregate PIPE Proceeds (net of any unpaid transaction expenses of SSU and Yucaipa) being at least the Minimum Cash Amount. The conditions to closing in the Business Combination Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Shares by Yucaipa’s public shareholders, the Aggregate TopCo Transaction Proceeds Condition is not met or is not waived, then SSU may elect not to consummate the Business Combination. In addition, in no event will Yucaipa redeem its Class A Shares in an amount that would cause its net tangible assets to be less than $5,000,001, as provided in the Yucaipa amended and restated memorandum and articles of association and as required as a closing condition to each party’s obligation to consummate the Business Combination under the terms of the Business Combination Agreement.

Prior to exercising redemption rights, Yucaipa shareholders should verify the market price of the Class A Shares, as shareholders may receive higher proceeds from the sale of their Class A Shares in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. There is no assurance that you will be able to sell your Class A Shares in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in the Class A Shares when you wish to sell your shares.

If you exercise your redemption rights, your Class A Shares will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the aggregate amount then on deposit in the Trust Account. You will no longer own those shares and you will not receive any TopCo Shares in the Business Combination. You will have no right to participate in, or have any interest in, the future growth of TopCo, if any. You will be entitled to receive cash for your Class A Shares only if you properly and timely demand redemption.

If the Business Combination is not approved and Yucaipa does not consummate an initial business combination by August 6, 2022, Yucaipa will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the public shareholders and all of Yucaipa’s warrants will expire worthless.

The Cayman Islands Companies Act provides that a shareholder of a Cayman company shall be entitled to payment of the fair value of that person’s shares upon dissenting from a merger or consolidation (the “Dissenter Rights”). However, such rights are not available in respect of the shares of any class for which an open market exists on a recognized stock exchange where, upon the merger or the consolidation, the shareholder receives, amongst other things, either:

 

(a)

shares of a surviving or consolidated company, or depository receipts in respect thereof; or

 

(b)

shares of any other company, or depository receipts in respect thereof, which shares or depository receipts at the effective date of the merger or consolidation, are either listed on a national securities exchange or designated as a national market system security on a recognized interdealer quotation system or held of record by more than two thousand holders.

With respect to the Merger, (i) NYSE is a recognized stock exchange and is a national securities exchange, (ii) Yucaipa shareholders will receive shares of the surviving company and (iii) immediately following receipt of shares of the surviving company, Yucaipa shareholders will then exchange such shares for TopCo Shares that will be listed on NYSE. Accordingly, Dissenter Rights will not be available in respect of the Merger. The absence of Dissenter Rights does not impede a shareholder’s ability to exercise such shareholder’s redemption rights as outlined in the Yucaipa amended and restated memorandum and articles of association.

Appraisal rights are not available to holders of SSU Shares in connection with the Business Combination.

 

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Proxy Solicitation Costs

Yucaipa is soliciting proxies on behalf of the Yucaipa Board. This proxy solicitation is being made by mail, but also may be made by telephone or in person. Yucaipa has engaged [●] to assist in the solicitation of proxies for the General Meeting. Yucaipa and its directors, officers and employees may also solicit proxies in person. Yucaipa will ask banks, brokers and other institutions, nominees and fiduciaries to forward this proxy statement/prospectus and the related proxy materials to their principals and to obtain their authority to execute proxies and voting instructions.

Yucaipa will bear the entire cost of the proxy solicitation, including the preparation, assembly, printing, mailing and distribution of this proxy statement/prospectus and the related proxy materials. Yucaipa will pay [●] a fee of $[●], plus disbursements, reimburse [●] for its reasonable out-of-pocket expenses and indemnify [●] and its affiliates against certain claims, liabilities, losses, damages and expenses for their services as Yucaipa’s proxy solicitor. Yucaipa will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding this proxy statement/prospectus and the related proxy materials to Yucaipa shareholders. Directors, officers and employees of Yucaipa who solicit proxies will not be paid any additional compensation for soliciting.

 

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THE BUSINESS COMBINATION

General

On June 10, 2021, Yucaipa, SSU, TopCo, Merger Sub and SISH entered into the Business Combination Agreement, which provides for, among other things, the following transactions:

 

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the Topco-Yucaipa Business Combination, including the Merger, pursuant to which (a) each Yucaipa Ordinary Share will ultimately be exchanged for a TopCo Share (except that the 8,565,000 Class B Shares held by Yucaipa Sponsor will entitle Yucaipa Sponsor to a claim for equity securities in Merger Sub, which, upon contribution in kind to TopCo, will be exchanged for 9,815,000 TopCo Ordinary Shares), and (b) each outstanding Yucaipa Warrant will be exchanged for a TopCo Public Warrant;

 

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immediately thereafter, each of the shareholders of SSU that duly executed and delivered a Shareholders’ Undertaking agreeing to participate in the transaction prior to the Closing will participate in, and TopCo will give effect to, the Exchange;

 

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immediately after giving effect to the Exchange, TopCo will undertake the Change in Legal Form of TopCo; and

 

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the Wiggle Acquisition.

For more information about the transactions contemplated in the Business Combination Agreement, please see the section entitled “The Business Combination Agreement and Ancillary Documents.” A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A.

Effect of the Transactions on Existing Yucaipa Equity in the Business Combination

Subject to the terms and conditions of the Business Combination Agreement, the Business Combination will result in, among other things, the following:

 

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each Class A Share will be converted into the right to receive a corresponding equity security in Merger Sub, which will be exchanged for one fully paid and non-assessable TopCo Share;

 

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each Founder Share will be converted into the right to receive a corresponding equity security in Merger Sub, which will be exchanged for one fully paid and non-assessable TopCo Share (except that the 8,565,000 Class B Shares held by Yucaipa Sponsor will be entitled to a claim for 9,815,000 equity securities in Merger Sub, which will be exchanged for 9,815,000 fully paid and non-assessable TopCo Shares); and

 

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each Yucaipa Warrant will be converted into a TopCo Public Warrant.

Aggregate TopCo Transaction Proceeds

The Aggregate TopCo Transaction Proceeds will be used for general corporate purposes after the Business Combination, including to support future growth through strategic acquisitions.

Conditions to Closing of the Business Combination

Conditions to Each Party’s Obligations

The respective obligations of each party to the Business Combination Agreement to consummate the Business Combination, are subject to the satisfaction, or written waiver by the party for whose benefit such condition exists, at or prior to the Closing of the following conditions:

 

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there must not be in effect any order or law issued by any court of competent jurisdiction or other governmental entity or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the Business Combination Agreement;

 

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this proxy statement/prospectus must have become effective in accordance with the provisions of the Securities Act, no stop order has been issued by the SEC and remain in effect with respect to the proxy statement/prospectus, and no proceeding seeking such a stop order has been threatened or initiated by the SEC and remain pending;

 

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the approval, at the General Meeting, of the Business Combination Proposal, by an ordinary resolution, and the Merger Proposal, by a special resolution, in accordance with Yucaipa’s governing documents;

 

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the Required Company Shareholders’ Consent must continue to be in full force and effect (as described more fully below in the section entitled “— Covenants of SSU, TopCo and Merger Sub”);

 

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after giving effect to the transactions contemplated by the Business Combination Agreement, TopCo must have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) immediately after the Closing;

 

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the Wiggle Acquisition will be consummated simultaneously with the Closing; and

 

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the Master Agency Agreement Termination and Reimbursement must have been consummated.

Other Conditions to Yucaipa’s Obligations

The obligations of Yucaipa to consummate the Business Combination, are subject to the satisfaction, or written waiver by Yucaipa, at or prior to the Closing of the following conditions:

 

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the representations and warranties of SSU, SISH, TopCo and Merger Sub regarding corporate organization, due authorization, capitalization and brokers fees and change of control payments owed by SSU must be true and correct, disregarding any qualifications contained therein relating to Company Material Adverse Effect or materiality, in all material respects as of the date of the Business Combination Agreement and the Closing Date as if made at and as of such time (or, if given as of an earlier date, as of such earlier date);

 

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the representations and warranties of SSU regarding the capitalization of SSU, its subsidiaries, TopCo and Merger Sub must be true and correct in all respects (except for de minimis inaccuracies) as of the date of the Business Combination Agreement and the Closing Date as if made at and as of such time (or, if given as of an earlier date, as of such earlier date);

 

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the other representations and warranties of SSU, SISH, TopCo and Merger Sub, disregarding any qualifications contained therein relating to Company Material Adverse Effect (as defined in the Business Combination Agreement) or materiality, must be true and correct as of the date of the Business Combination Agreement and the Closing Date as if made at and as of such time (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties to be true and correct, taken as a whole, does not cause a Company Material Adverse Effect;

 

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SSU, TopCo and Merger Sub must have performed and complied with in all material respects its covenants and agreements under the Business Combination Agreement required to be performed or complied with at or prior to the Closing;

 

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since the date of the Business Combination Agreement, no Company Material Adverse Effect (as defined in the Business Combination Agreement) has occurred;

 

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the TopCo Shares issuable in connection with the Business Combination must be duly authorized by the general meeting, management board or board of directors of TopCo and TopCo’s governing documents;

 

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the Conversion must have occurred;

 

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the Roll-Up must have occurred;

 

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the Shareholders’ Undertakings, pursuant to which the shareholders of SSU approved the Business Combination Agreement and agreed to otherwise support the transaction, must still be in effect;

 

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the Yucaipa must have received a certificate executed and delivered by an authorized officer of SSU confirming that the conditions set forth in the first four bullet points above have been satisfied; and

 

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Yucaipa must have received a copy of the Registration Rights Agreement duly executed by TopCo and certain shareholders of SSU that have agreed to participate in the transaction.

Other Conditions to SSU’s, TopCo’s and Merger Sub’s Obligations

The respective obligations of SSU, TopCo and Merger Sub to consummate the Business Combination, are subject to the satisfaction, or written waiver by SSU, TopCo and Merger Sub, at or prior to the Closing of the following conditions:

 

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the representations and warranties of Yucaipa regarding corporate organization, due authorization, brokers fees and the capitalization of Yucaipa must be true and correct in all material respects as of the date of the Business Combination Agreement (except for de minimis inaccuracies with respect to the capitalization of Yucaipa) and the Closing Date as if made at and as of such time (or, if given as of an earlier date, as of such earlier date);

 

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the representations and warranties of Yucaipa regarding the capitalization of Yucaipa must be true and correct in all respects (except for de minimis inaccuracies) as of the date of the Business Combination Agreement and the Closing Date as if made at and as of such time (or, if given as of an earlier date, as of such earlier date);

 

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the other representations and warranties of Yucaipa disregarding any qualifications contained therein relating to materiality or any similar limitation, must be true and correct as of the date of the Business Combination Agreement and the Closing Date as if made at and as of such time (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties to be true and correct, taken as a whole, does not have, or would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Yucaipa to consummate the Business Combination;

 

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Yucaipa must have performed and complied with in all material respects its covenants and agreements under the Business Combination Agreement required to be performed or complied with at or prior to the Closing;

 

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SSU must have received a certificate executed and delivered by an authorized officer of Yucaipa confirming that the conditions set forth in the four immediately preceding bullet points have been satisfied;

 

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the Aggregate TopCo Transaction Proceeds Condition;

 

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TopCo’s initial listing application with the NYSE in connection with the transactions contemplated by the Business Combination Agreement shall have been conditionally approved and, immediately following the closing of the business combination transaction, TopCo shall satisfy any applicable initial and continuing listing requirements of the NYSE and TopCo shall not have received any notice of non-compliance therewith that has not been cured prior to, or would not be cured at or immediately following the closing of the business combination transaction, and the TopCo Shares shall have been approved for listing on the NYSE, subject only to official notice of issuance thereof; and

 

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SSU must have received a copy of the Registration Rights Agreement duly executed by Yucaipa Sponsor.

 

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The consummation of the Wiggle Acquisition, which is a condition to the Closing of the Business Combination, is subject to the following conditions and regulatory approvals:

 

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the cessation of the suspension obligations under German and Austrian merger control rules following the submission of merger control filings to the competent competition authorities;

 

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the United Kingdom Competition and Markets Authority having communicated to SSU that it has no further questions in respect of the briefing paper (containing details of the Wiggle Acquisition) submitted to them or having announced that it does not intend to refer the Wiggle Acquisition or any part of it or any matters arising therefrom to its chair for the constitution of a group under Schedule 4 of the Enterprise and Regulatory Reform Act 2013 (which approval has already been obtained as of the date of this filing);

 

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the Financial Conduct Authority (“FCA”) having notified (and not withdrawn) its approval (as required in accordance with Part XII of the Financial Services and Markets Act 2000) in relation to each new controller’s proposed interest in Wiggle Limited and Chain Reaction Cycles Retail Limited resulting from the Wiggle Acquisition or the FCA being deemed as having given such approval; and

 

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confirmation having been given by SSU that the Business Combination Agreement has become unconditional in all respects.

Ownership of TopCo

It is anticipated that, upon completion of the Business Combination: (i) Yucaipa’s public shareholders (other than the PIPE Investors) will own approximately 10.3% of TopCo; (ii) the PIPE Investors (including Ronald W. Burkle or his assignee(s) under the Subscription Agreement to which he is a party with respect to the Sponsor PIPE) will own approximately 9.0% of TopCo; (iii) the Yucaipa Initial Shareholders (including Yucaipa Sponsor but not including Mr. Burkle or his assignee(s) with respect to the Sponsor PIPE) will own approximately 2.9% of TopCo; (iv) the sellers in the Wiggle Acquisition will own approximately 4.2% of TopCo; (v) the SSU equityholders will own approximately 73.2% of TopCo; and (vi) SSU’s management will own approximately 0.4% of TopCo. These levels of ownership assume (A) no Class A Shares are elected to be redeemed by Yucaipa’s public shareholders, (B) that 30,200,000 TopCo Shares are issued to the PIPE Investors in connection with the PIPE Financing and (C) Participating Shareholders represent 100% of the issued and outstanding shares of SSU. If the actual facts are different than these assumptions (which they are likely to be), the relative ownership percentages in TopCo will be different.

The ownership percentages with respect to TopCo following the Business Combination do not take into account the warrants to purchase TopCo Shares that will remain outstanding immediately following the Business Combination, but do include Founder Shares, which will be exchanged for TopCo Shares at the closing of the Business Combination on a one-for-one basis (except that the 8,565,000 Class B Shares held by Yucaipa Sponsor will entitle Yucaipa Sponsor to a claim for equity securities in Merger Sub, which upon contribution in kind to TopCo, will be exchanged for 9,815,000 TopCo Shares).

The following table illustrates varying ownership levels in TopCo immediately following the consummation of the Business Combination, assuming (i) no redemptions by the public shareholders, (ii) the maximum number of redemptions by the public shareholders such that the Aggregate TopCo Transaction Proceeds Condition will still be satisfied (assuming that 30,200,000 TopCo Shares are issued in connection with the PIPE Financing), (iii) that the amount in the Trust Account is $345.0 million (which was the approximate value of the Trust

 

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Account as of March 31, 2021), (iv) unpaid transaction expenses of SSU and Yucaipa are $60 million and (v) Participating Shareholders represent 100% of the issued and outstanding shares of SSU.

 

		Share Ownership in TopCo
		No Redemptions								Maximum Redemptions
		Number of Shares				Percentage of Outstanding Shares				Number of Shares				Percentage of Outstanding Shares
SSU shareholders(1)			246,189,168				73.2				246,189,168				75.3
SSU management			1,293,200				0.4				1,293,200				0.4
Wiggle Sellers			14,222,018				4.2				14,222,018				4.4
Yucaipa public shareholders			34,500,000				10.3				24,932,844				7.6
Yucaipa Sponsor(2)			9,815,000				2.9				9,815,000				3.0
Yucaipa directors(3)			90,000				0.0				90,000				0.0
PIPE Investors(4)			30,200,000				9.0				30,200,000				9.2
			336,309,386				100.0				326,742,230				100.0

 

(1)	Excludes 51,000,000 Earn-Out Shares

(2)	Does not include the $50 million PIPE investment of Mr. Burkle or his assignee(s)

(3)	Does not include the $50 million PIPE investment of Mr. Burkle or his assignee(s)

(4)	Includes $50 million PIPE investment of Mr. Burkle or his assignee(s)

Background of the Business Combination

Yucaipa is a blank check company incorporated on June 4, 2020 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The Business Combination Agreement is the result of a comprehensive search for potential transactions utilizing the global network of Yucaipa’s management team and the Yucaipa Board. The terms of the Business Combination Agreement were the result of extensive arm’s length negotiations among representatives of Yucaipa and SSU.

On June 13, 2020, prior to Yucaipa’s IPO, the Yucaipa Sponsor purchased an aggregate of 8,625,000 Class B Shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. Prior to the initial investment in Yucaipa of $25,000 by the Yucaipa Sponsor, Yucaipa had no assets, tangible or intangible.

On August 6, 2020, Yucaipa completed the Yucaipa IPO of 34,500,000 units at a price of $10.00 per unit generating gross proceeds of $345,000,000, which includes the full exercise of the underwriter’s option to purchase an additional 4,500,000 units at the initial public offering price to cover over-allotments. Each unit consists of one Class A Share, and one-third of one redeemable Yucaipa Public Warrant. Each Yucaipa Public Warrant entitles the holder thereof to purchase one Class A Share at a price of $11.50 per share, subject to certain adjustments. In addition, the 8,565,000 Founder Shares held by Yucaipa Sponsor prior to the Closing of the Business Combination will be exchanged for 9,815,000 TopCo Shares upon Closing of the Business Combination.

Concurrently with the completion of the Yucaipa IPO, the Yucaipa Sponsor purchased an aggregate of 5,933,333 Private Placement Warrants at a price of $1.50 per warrant, for gross proceeds of $8,900,000 to Yucaipa. Certain proceeds of the sale of the Private Placement Warrants were added to the net proceeds of the IPO and placed in the Trust Account such that the Trust Account held $345,000,000 at the close of the Yucaipa IPO. Each whole Private Placement Warrant entitles the holder thereof to purchase one Class A Share at a price of $11.50 per share, subject to certain adjustments.

Citigroup Global Markets Inc. (“Citi”) served as representative of the underwriters in the Yucaipa IPO and, in connection with its role in the Yucaipa IPO, Citi will be entitled to a deferred underwriting commission upon the consummation of Yucaipa’s initial business combination.

Yucaipa did not select any business combination target in advance of the Yucaipa IPO and did not, nor did anyone on its behalf, initiate any substantive discussions, directly or indirectly, with any business combination target in advance of the Yucaipa IPO.

 

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