Notable Mergers and Acquisitions 10/10: (CPN) (PRMW) (LLL) (AYA)

October 10, 2016 9:43 AM EDT

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*** Calpine Corporation (NYSE: CPN) announced that it has entered into an agreement to purchase Noble Americas Energy Solutions, LLC (NAES), the nation’s largest independent supplier of power to commercial and industrial retail customers, for a purchase price of $800 million plus an estimated $100 million of net working capital at closing. Calpine expects to recover approximately $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year, resulting in expected net cash deployed of approximately $700 million (including working capital), or approximately five times NAES’ recent and expected run-rate Adjusted EBITDA.

“We are excited to be acquiring the best commercial and industrial direct energy sales platform in the U.S. The acquisition of this well-regarded organization known for providing sophisticated customers with highly customized products is a natural fit with Calpine’s customer-centric culture and will allow us to build upon the success we have experienced since our entry into retail last year through the Champion Energy platform,” said Thad Hill, Calpine’s President and Chief Executive Officer. “In addition to expanding our retail customer sales channels and product offerings, we will more than double the volume of retail load we are capable of serving across the country from our complementary wholesale power generation fleet.

“Financially, this transaction is highly cash flow and credit accretive, given a rapidly amortizing bridge loan, the achievement of collateral synergies and the ongoing generation of stable and substantial cash flows,” concluded Hill. “In addition to delivering strong annual cash flow, the strong sales effort by the NAES team has continued to build the mark-to-market value of their book over the last several years, which will help ensure future success of the business. We look forward to welcoming the entire NAES team to the Calpine family.”

NAES

NAES currently serves commercial and industrial customers in 18 states nationwide, including California, Texas, the Mid-Atlantic and Northeastern United States, where Calpine’s wholesale power generation fleet is primarily concentrated. The organization will remain headquartered in San Diego and will continue to operate under the leadership of Jim Wood, President of NAES.

“We are thrilled to be joining the Calpine team,” said Wood. “Our customers should know that we will continue to provide the same high level of services and product offerings during the ownership transition and, when under the Calpine banner, we expect to provide even greater value-added products and services.”

Funding and Credit Support

Calpine expects to fund the acquisition with a combination of cash on hand and temporary bridge loan financing of up to $550 million. The company intends to repay the bridge facility during 2017 with proceeds from announced asset sales as well as cash from operations, including that generated from the anticipated collateral synergies.

Under Calpine ownership, anticipated collateral needs are expected to be met with approximately $240 million in letters of credit and $20 million of surety bonds, leaving almost $1.2 billion of Calpine Corporate Revolver capacity remaining at closing.

Approvals and Time to Close

Calpine will acquire the business from Noble Americas Gas & Power Corp., a subsidiary of Noble Group Ltd. The transaction is expected to close by year end 2016, subject to customary closing conditions, approval by shareholders of Noble Group Ltd., approval from the Federal Energy Regulatory Commission and antitrust review under the Hart-Scott-Rodino Act.

*** Implant Sciences (IMSC) announced that it has entered into an asset purchase agreement to sell the explosives trace detection (ETD) assets to L-3 Communications (NYSE: LLL) for $117.5 million in cash, plus the assumption of specified liabilities. Following the proposed acquisition, the assets will be integrated into L-3's Security & Detection Systems division within its Electronic Systems segment.

Pursuant to the terms of the agreement, L-3 will acquire the worldwide rights to the QS-B220 desktop and the QS-H150 handheld ETD systems as well as all other product and technology assets of Implant Sciences. Over 5,000 of IMSC's non-radioactive ion mobility spectrometry systems have been deployed in more than 70 nations for aviation security, infrastructure protection, mass transit security, military operations, VIP protection, and corporate security. The company's ETD systems have received approvals and certifications from several international regulatory agencies including the US Transportation Security Administration (TSA), the European Civil Aviation Commission (ECAC) and the Ministry of Public Safety in China. In September 2016, the TSA placed a delivery order for an additional 1,353 of the QS-B220 systems and related supplies.

"Implant Sciences' innovative technology has resulted in the development and deployment of leading-edge Explosives Trace Detectors. Our pioneering efforts in the use of non-radioactive ionization methods provide a flexible and expandable technology platform and have enabled our products to rapidly penetrate the aviation security market and truly become a market leader," stated Dr. William McGann, Implant Sciences' CEO. "We are excited about the opportunity to participate in L-3's growth vision with our technology, products, and solutions."

The asset purchase agreement constitutes L-3 as the lead bidder in a sale process being conducted under Section 363 of the U.S. Bankruptcy Code. As the bidder, L-3 will be entitled to a break-up fee and expense reimbursement in certain circumstances, including if it does not prevail as the successful bidder at any subsequent auction. L-3's role as the lead bidder, and the sale itself, are subject to approval by the Bankruptcy Court.

In connection with the sale, IMSC and its subsidiaries today filed voluntary petitions under Chapter 11 of the US Bankruptcy Code in the Bankruptcy Court for the District of Delaware. IMSC intends to seek and obtain customary relief from the bankruptcy court to permit it to continue to operate its business in the ordinary course without interruption during the sale period. In addition, IMSC has obtained commitments for debtor-in-possession financing of approximately $5.7 million, which is subject to approval of the court.

The company intends to use the cash from the sale of the ETD asset to pay its creditors and continue on with the strategic plan as previously communicated to its shareholders.

IMSC is being advised by Chardan Capital markets LLC1 and Noble Financial Capital Markets as its financial advisors and Willkie Farr & Gallagher LLP as legal counsel.

*** Primo Water Corporation (Nasdaq: PRMW) and Glacier Water Services, Inc., a leading provider of high-quality drinking water dispensed to consumers through self-service refill water machines, today announced that they have executed a definitive merger agreement pursuant to which Primo will acquire all outstanding shares of Glacier.

With the strategic acquisition, Primo will have approximately 46,000 retail locations throughout the U.S. and Canada. The transaction will unite two highly complementary brands and is intended to generate significant operating scale through an expansive refill and exchange network. Additionally, the acquisition will drive future cross-selling opportunities, significant cost savings and consistent cash flows. On a pro forma trailing twelve months (“TTM”) basis ended June 30, 2016, the acquisition creates a combined company with approximately $272.6 million in net sales, $14.3 million in income from operations and $45.4 million in adjusted EBITDA. The acquisition will provide retail partners and consumers a diversified, high-quality water and water dispenser offering. For consumers, the combination will provide access to purely amazing water throughout leading U.S. and Canadian retailers, almost doubling Primo’s existing location total.

“We are excited to announce the acquisition of Glacier Water, an industry leader in self-service refill water with an exceptional brand. Together, we will continue to drive our mission of Inspiring Heathier Homes thru Better Water. This acquisition provides the opportunity to create significant value for our shareholders and offers strong benefits for our consumers and retail partners,” commented Billy D. Prim, Primo’s Chairman and Chief Executive Officer.

“Glacier and Primo have a common mission and together we intend to build upon our respective strengths to further develop our service model and drive efficiencies as we broaden our consumer demographics through complementary customer bases across North America,” stated Brian McInerney, Chief Executive Officer of Glacier Water.

Compelling Strategic RationalePrimo believes the acquisition will provide the following strategic and financial benefits:

  • Doubles key financial results and achieves significant scale – Primo will scale immediately, more than doubling revenue, operating income and adjusted EBITDA with minimal shareholder dilution, creating long-term value.
  • Diversifies retailer concentration – With the minimal overlap of retail partners and an enhancement in the retail channels, the combined Company will drive greater diversification in revenue and cash flow concentration. Additionally, Primo will significantly increase the size of the overall recurring water business as a percentage of the Company’s sales, minimizing the impact of fluctuations in Dispenser sell-in.
  • Creates operational and shared service synergies – The combination is expected to generate approximately $6.0 to $7.0 million in annual operational and shared service synergies within 36 months of closing, creating incremental value for Primo stockholders over time.
  • Offers cross-selling opportunities – The combination is expected to expand retailer partnerships with significant opportunities for cross-selling in more diverse retail channels. Additionally, the combination provides more opportunities for Primo dispenser customers to connect with Primo & Glacier water locations.
  • Supports rapid deleveraging with strong cash flows – Primo’s track record of growing cash flows along with its ability to de-leverage is enhanced with the addition of Glacier Water’s recurring revenues and cash flows. Primo expects this to help achieve a senior debt leverage ratio of less than 3.0x by 2018.

“We believe this transaction provides us with a tremendous opportunity to expand and diversify our geographic footprint and retail relationships, create operational synergies and drive future growth in sales, cash flow and profitability, all while providing consumers access to high-quality water at economical prices,” stated Matt Sheehan, Primo’s President and Chief Operating Officer.

Transaction Highlights

The total preliminary transaction consideration is approximately $263 million, consisting of approximately $50 million in cash, approximately $36 million in Primo common stock, approximately $177 million of net indebtedness and preferred stock being assumed or retired, and five-year warrants to purchase 2.0 million shares of Primo’s common stock at an exercise price of $11.88 per share, subject to adjustments based on any increases in Glacier’s debt and certain transaction expenses. The assumed indebtedness includes Glacier’s trust preferred securities due in 2028, which will remain outstanding and will not be affected by the transaction. The acquisition agreement has been unanimously approved by the Board of Directors of both companies. The transaction is expected to close in late 2016, subject to customary closing conditions.

The transaction will add a talented group of executives to the Company, with tenured backgrounds and proven track records. Upon closing of the transaction, Brian McInerney, CEO of Glacier Water, and key management will remain in place and operate the combined refill businesses, reflecting their commitment in the future success of the combined company. The combined company will continue to be headquartered in Winston-Salem, NC and will keep a presence in Vista, CA post-closing.

Advisors

The BMO Capital Markets acted as financial advisor to Primo Water. Primo Water intends to fund the cash portion of the transaction consideration through a fully committed financing provided by Goldman Sachs Bank. Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. and K&L Gates LLP acted as legal counsel to Primo Water. Primo has also hired Montgomery, Coscia & Greilich LLP as an integration consultant to assist in the integration planning.

J.P. Morgan Securities LLC acted as financial advisor to Glacier. Ervin, Cohen & Jessup LLP acted as legal counsel to Glacier.

*** The Boards of William Hill PLC and Amaya Inc. (Nasdaq: AYA) note the recent press speculation and confirm that they are in discussions regarding a potential all share merger of equals.

Amaya has been undertaking a review of its strategic alternatives since February 2016. Over recent months, the Board of William Hill has been evaluating options to accelerate William Hill's strategy of increasing diversification by growing its digital and international businesses.

The potential merger would be consistent with the strategic objectives of both William Hill and Amaya and would create a clear international leader across online sports betting, poker and casino.

These discussions are ongoing and there can be no certainty that an agreement will be reached.

The Potential Merger would be classified as a reverse takeover under the Listing Rules of the Financial Conduct Authority and is not subject to the City Code on Takeovers and Mergers. William Hill is required to provide certain confirmations to ensure that there is sufficient information available to the public with regard to the potential reverse takeover in order to avoid a suspension of William Hill's shares. Pursuant to LR 5.6.12G(2) of the Listing Rules, William Hill confirms that Amaya has its shares listed on the Toronto Stock Exchange and Nasdaq Global Select Market and that Amaya has complied with the disclosure requirements applicable on these markets, that information disclosed pursuant to those requirements can be obtained at www.amaya.com/investors and www.amaya.com/press/corporate and that there are no material differences between those disclosure requirements and the disclosure requirements under the Market Abuse Regulation and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

Citigroup Global Markets Limited, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the FCA and the Prudential Regulation Authority, is acting as financial adviser to William Hill and for no one else in connection with matters set out in this announcement and will not be responsible to anyone other than William Hill for providing the protections afforded to its clients or for providing advice in relation to matters set out in this announcement.

Macquarie Capital (Europe) Limited, which is regulated in the United Kingdom by the FCA, and Macquarie Capital (USA) Inc. (together "Macquarie Capital"), are acting exclusively as financial adviser to William Hill and no one else in connection with the matters described in this announcement. In connection with such matters, Macquarie Capital, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than William Hill for providing the protections afforded to clients of Macquarie Capital or for providing advice in connection with the matters described in this announcement or any matter referred to herein.

Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the FCA and the Prudential Regulation Authority, is acting exclusively for Amaya and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than Amaya for providing the protections afforded to clients of Barclays nor for providing advice in relation to the matters described in this announcement.

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