Merger LGTOU

Southland Holdings and Legato Merger Corp. II Announce Merger

, SPAC Research

Privately held Southland Holdings, LLC and Legato Merger Corp. II (NASDAQ: LGTO, LGTOU and LGTOW), a special purpose acquisition company, today jointly announced that they have signed a definitive agreement for a business combination transaction, which would result in Southland becoming a direct wholly-owned subsidiary of Legato II.

 As a wholly-owned subsidiary of Legato II, Southland will continue to execute its growth strategies under the leadership of Southland’s current management. Legato II’s Board of Directors will include five directors designated by Southland and two directors designated by Legato II. Brian Pratt, Legato II’s current Chairman and former Chairman and CEO of Primoris Service Corporation, will continue to serve as Chairman of Legato II. It is expected that at the time of the Business Combination, Legato II will change its name to “Southland Holdings, Inc.”

With roots dating back to 1900, Southland and its subsidiaries, together, make up one of the largest construction companies in North America, with experience throughout the world. The company has built transportation infrastructure that connects the nation, constructed water pipelines and built treatment facilities to carry water across vast regions, bored tunnels through some of the world’s most challenging geology, and completed some of the nation’s most iconic structural landmarks. The Southland family of companies are innovators in construction technology and means-and-methods engineering, bringing unique solutions to challenging construction projects.

Southland’s holders will receive a combination of cash and stock valued at up to $498 million. The transaction is expected to add $220 million of cash to Southland’s balance sheet (without taking into account any redemption of Legato public shares), and at closing implies a pro forma enterprise value of $810 million, inclusive of contingent consideration. Southland’s existing holders will receive $343 million of Legato II common stock and $50 million in cash at closing. In addition, Southland’s existing holders may receive an additional 10.3 million shares of Legato II common stock valued at $105 million, contingent upon achievement of specified Adjusted EBITDA targets for calendar years 2022 and 2023. The pro forma valuation of the combined business, assuming a $10.15 stock price, represent a great value opportunity for Legato stockholders.   Following completion of the transaction, and assuming all of the contingent consideration is paid and without taking into account redemptions of any shares by Legato II’s public stockholders, Southland’s current holders and management team will hold approximately 55% of Legato II’s outstanding common stock and Legato II’s current stockholders will hold approximately 45% of Legato II’s outstanding common stock.  

Legato II is represented by Graubard Miller and Southland is represented by Winstead PC. D.A. Davidson & Co. and Thompson Davis & Co. are acting as capital market advisors to Legato II.

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