Belden (BDC) Proposes to Buy Digi International (DGII) for $380M

November 11, 2016 4:02 PM EST

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Belden Inc. (NYSE: BDC) announced today that it has submitted a proposal to the Board of Directors of Digi International Inc. (NASDAQ: DGII) to acquire Digi in an all-cash transaction valued at approximately $380 million.

Under the terms of the proposal, Digi shareholders would receive $13.82 in cash for each Digi share, representing a 35% premium over Digi’s trailing one month volume-weighted average price (“VWAP”), a 37% premium over Digi’s trailing thirty-six month VWAP and a 25% premium over Digi’s share price of $11.05 on Thursday, November 10, 2016. The offer represents an implied enterprise value of $242 million, representing a premium of 54% to Digi’s enterprise value of approximately $158 million on Thursday, November 10, 2016 and a 10x EBITDA multiple based on the high end of guidance provided by Digi to its shareholders on October 27, 2016. The acquisition would be fully funded with existing cash reserves and therefore is not subject to any financing contingency.

This proposal, which was initially formalized on November 4, 2016, was reiterated in a letter sent today to Digi’s Chairman, William Priesmeyer, and President and Chief Executive Officer, Ronald Konezny, after Belden received a letter from Digi on November 8, 2016 expressing unwillingness to engage in discussions. Belden is disclosing the contents of its letter in order to inform Digi’s shareholders of the opportunity to realize a significant premium and the compelling strategic fit inherent in a combination of the two companies.

The addition of Digi to Belden’s Industrial IT platform would create a unique and broad portfolio of wireless and embedded solutions for customers across a number of vertical markets. Further, Digi would benefit from Belden’s proven business system which would provide access to new growth markets. Belden and Digi have a history of commercial and technical collaboration, which provides Belden confidence of the strong strategic fit with Digi.

Belden has a strong track record of successfully acquiring and integrating a diverse range of businesses. Since 2007, Belden has deployed over $2.8 billion toward M&A to accelerate its strategic transformation.

Belden is prepared to engage in discussions immediately to work toward a successful completion of the proposed transaction, and Belden looks forward to working with Digi’s management team and Board of Directors to maximize value for all stakeholders. Although there can be no assurances a definitive agreement will be reached between the companies, Belden is committed to pursuing this transaction and will continue to update shareholders on our progress as appropriate.

The full text of the letter is included below.

A discussion of the offer and strategic rationale is available on our Investor Relations website now. The link to the webcast replay as well as the presentation slides are available via the Internet at http://investor.belden.com. A replay of this webcast will remain accessible in the investor relations section of the Company’s Web site for a limited time.

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November 11, 2016

Board of DirectorsDigi International Inc.11001 Bren Road EastMinnetonka, MN 55343Attention: Mr. William N. Priesmeyer, Chairman of the BoardAttention: Mr. Ron Konezny, President & Chief Executive Officer

Dear Members of the Board:

We are disappointed that the Digi Board is unwilling to engage in discussions regarding an all-cash acquisition of Digi by Belden, as expressed in your letter of November 8, 2016, sent in response to our letter of November 4, 2016, and in subsequent email and telephone interactions. Based on the commercial and technical collaboration between our companies to date, we strongly believe that the strategic fit between Digi and Belden’s Industrial IT business is excellent. Digi’s capabilities in wireless and embedded networking would complement Belden’s capabilities to create uniquely complete solutions for customers in machine-to-machine applications. We remain convinced that the combination presents a compelling opportunity for your shareholders to receive an immediate and substantial premium to the value that would be achievable as a standalone company and would create enhanced opportunities for both companies’ employees.

While we remain hopeful that the two companies can engage in productive discussions relating to the proposal, we are making the contents of this letter public to ensure that the Digi shareholders are aware of the value inherent in our proposal.

As previously communicated to you, Belden proposes to acquire 100% of the fully-diluted outstanding Digi common shares for a price of $13.82 per share in cash at closing. This price represents a 35% premium over Digi’s trailing one month volume-weighted average price (“VWAP”), a 37% premium over Digi’s trailing thirty-six month VWAP and a 25% premium over Digi’s share price of $11.05 on Thursday, November 10, 2016. The offer represents an implied enterprise value of $242 million, representing a premium of 54% to Digi’s enterprise value of approximately $158 million on Thursday, November 10, 2016 and a 10x EBITDA multiple based on EBITDA of $24 million implied by the high end of guidance provided by Digi to its shareholders on October 27, 2016. We believe the proposal recognizes the significant strategic value of a combination of Digi with Belden and reflects a significant premium to the value that Digi could achieve on a standalone basis.

The acquisition would be fully funded with existing cash reserves. Therefore, the transaction would not be subject to any financing contingencies.

Given our knowledge of Digi and our historical collaboration, we are prepared to swiftly complete confirmatory due diligence and negotiate a mutually acceptable definitive agreement in parallel with due diligence. Closing the proposed transaction would be subject to the receipt of standard regulatory approvals, such as Hart-Scott-Rodino anti-trust filing requirements, and any required shareholder approvals. We have engaged Guggenheim Securities as our financial advisor and Lewis Rice as our legal advisor to assist us in this transaction.

As we have continually communicated, we stand ready to work with you to bring this value-enhancing transaction to fruition. Our senior management team and advisors are prepared to meet with you and your representatives at any time to discuss the proposal in more detail.

We look forward to your prompt and favorable reply.

Yours sincerely,

John StroupPresident and Chief Executive Officer

This Proposal is neither a legally enforceable contract nor a binding offer to enter into a contract. It does not contain all matters upon which agreement must be reached for any proposed transaction and does not constitute an offer or commitment on our part to submit a definitive proposal at a future time. A binding agreement will result only from the execution of a definitive written agreement not yet negotiated or executed by the parties.

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