Notable Mergers and Acquisitions 10/12: (PII) (SWK)/(NWL) (DAN) (PKG)

October 12, 2016 10:00 AM EDT

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*** Polaris Industries Inc. (NYSE: PII) announced that it has entered into an agreement to acquire Transamerican Auto Parts Company (“TAP”), a privately held, vertically integrated manufacturer, distributor, retailer and installer of off-road Jeep and truck accessories, for an aggregate consideration of $665 million, subject to customary closing adjustments. After adjusting for the $115 million estimated net present value of future tax benefits, the purchase price implies a multiple of approximately 9.0 times TAP’s EBITDA for the 12 months ended September 30, 2016.

TAP is a leader in the highly fragmented and growing $10+ billion Jeep and truck accessory market. TAP sells and installs an extensive line of accessories for Jeep and truck enthusiasts, including products manufactured under its seven proprietary, industry-leading aftermarket brands: PRO COMP®, RUBICON EXPRESS, SMITTYBILT®, POISON SPYDER™, G2™, LRG® and TRAIL MASTER®. TAP is the largest retailer and installer in the North American market, selling through its own retail and on-line network while also supporting numerous independent accessory retailers/installers. For the last 12 months ended September 30, 2016, TAP generated approximately $740 million in sales, and from 2012 through 2015, achieved compound annual sales growth of 15 percent and compound annual EBITDA growth of 17 percent.

“We are excited to add TAP’s market leading multi-channel business, proprietary brands, proven management team and experienced employees to the Polaris portfolio,” said Polaris Chairman and Chief Executive Officer Scott W. Wine. “This transaction is consistent with our long term strategy, provides us an immediate leadership position in a growing market, and allows us to accelerate Polaris’ growth and profitability. TAP’s products and services for customers in the off-road four-wheel-drive (‘4WD’) market correspond closely to our Off-Road Vehicle (‘ORV’) business. Further, by broadening TAP’s proprietary product lines, expanding its retail and distribution footprint, where appropriate, and cross-selling both companies’ extensive product offerings to a large combined installed base, we believe we will create significant value for our stakeholders. Our similar cultures, centered on innovative brands and performance, make TAP a great addition to Polaris’ expanding portfolio.”

“Over the past 55 years, our employees have built a company that prides itself on serving our customers with quality products at competitive prices,” said Greg Adler, TAP’s President and Chief Executive Officer. “We see tremendous opportunity for further growth as we become an integral part of the Polaris organization. Combining TAP with Polaris’ aftermarket brand portfolio facilitates significant synergies, while Polaris’ financial resources provide the backing we need to pursue a variety of growth prospects we have identified across the organization.”

Strategic and Financial Benefits

  • Highly Complementary Product Lines: This acquisition creates a leading company across the 4WD off-road enthusiast market and extends Polaris’ presence in aftermarket accessories to attract new consumers to Polaris’ existing portfolio. In particular, TAP’s four-wheel-drive aftermarket products are highly complementary to Polaris ORV business.
  • Expanded Accessories Portfolio and New Product Innovation Capabilities: Significant opportunities exist to incorporate TAP’s considerable off-road product development expertise into the creation of innovative accessories and capabilities for Polaris Engineered product offerings, while utilizing Polaris’ financial strength to accelerate TAP’s product development for its Jeep and truck customers.
  • Significant Growth Potential: TAP manufactures and sources seven proprietary brands and sells and distributes products through multiple channels, including 75 4Wheel Parts stores and two robust online platforms ( and TAP sells its brands, as well as more than 200 non-proprietary leading brands, through its own distribution channels and various independent retailers/installers. Polaris’ financial strength creates opportunities to accelerate TAP’s market penetration, and where appropriate, sell select Polaris aftermarket brands through TAP’s retail outlets.
  • Compelling Financial Benefits: The transaction is expected to be accretive to Polaris’ earnings per share, excluding purchase accounting/acquisition costs, for the full year 2017. The Company expects meaningful annual cost savings within three years following closing, primarily from efficiencies related to procurement, distribution, and expanded product offerings.

The transaction is subject to regulatory approval and other customary closing conditions, and is expected to close by year-end 2016. Following the closing of the transaction, TAP will operate as a distinct business unit reporting to Steve Eastman, Polaris’ PG&A President. Polaris expects to fund the acquisition with borrowings under existing credit facilities.

BofA Merrill Lynch acted as exclusive financial advisor to Polaris, and Faegre Baker Daniels LLP acted as Polaris’ legal advisor. Jefferies acted as lead financial advisor to Transamerican. Houlihan Lokey also served as financial advisor to TAP and Sullivan & Cromwell acted as TAP’s legal advisor.

*** Newell Brands Inc. (NYSE: NWL) announced it has entered into a definitive agreement to sell its Tools business, including the Irwin®, Lenox® and Hilmor® brands, to Stanley Black & Decker. This agreement has been reached in the context of a series of strategic changes announced last week related to the company’s new corporate strategy.

“Newell Brands’ new strategic plan establishes a sharp set of portfolio choices and investment priorities that will focus resources on the businesses with the greatest potential for growth,” said Michael Polk, Newell Brands Chief Executive Officer. “The actions we are taking will strengthen the underlying performance of the company and help unlock the unique opportunity for transformative value creation connected to the combination of Newell Rubbermaid and Jarden Corporation. While our Tools brands have been very good contributors to our results, we believe they will benefit from being part of Stanley Black & Decker, a global leader in the tools category."

Gross proceeds from the divestiture are expected to be $1.95 billion, which includes retained accounts receivable, subject to customary working capital and transaction adjustments. Net sales for the divested business were approximately $760 million for the last twelve months. The transaction is expected to close in the first half of 2017, subject to certain customary conditions, including regulatory approvals. Proceeds will be primarily used to pay down debt in furtherance of the company’s stated goal of achieving a leverage ratio of 3 to 3.5 times EBITDA by the end of 2018. If the transaction were to be completed on December 31, 2016, the company would expect normalized EPS dilution of approximately $0.15 on an annualized basis after the benefit of short term cost actions and lower interest expense related to accelerated debt repayment. J.P. Morgan acted as financial advisor to Newell Brands on the transaction.

As previously announced, as the result of a recently completed strategic review of its portfolio, Newell Brands has taken the decision to hold a number of other businesses for sale including its two winter sports units, Völkl® and K2®, within the Outdoor Solutions Segment, its Heaters, Humidifiers, and Fans business within the Consumer Solutions Segment and the Rubbermaid® Consumer Storage business within the Home Solutions segment. Newell Brands will retain its Dymo® Industrial labeling business within the reported Tools segment. The total 2015 net sales of the remaining businesses held for sale is approximately $700 million. Sales processes are underway and the company hopes to complete the divestiture of the remaining assets held for sale within the first half of 2017.

*** Dana Incorporated (NYSE: DAN) announced a definitive agreement to purchase strategic assets of SIFCO S.A., a leading producer of forged and machined components located in Brazil.

Under the terms of the proposed purchase, Dana would acquire manufacturing and other assets of SIFCO. This acquisition will enable Dana to enhance its vertically integrated supply chain, which will further improve the company's cost structure and customer satisfaction by leveraging SIFCO's extensive experience and knowledge of sophisticated forged components.

"For nearly 70 years, Dana has operated in Brazil, which has long been one of the top ten economies in the world," said James Kamsickas, president and chief executive officer of Dana. "This is an opportune time to invest in strategic and selective assets in Brazil that will further strengthen our position as one of the most trusted, top-tier suppliers to the mobility industry – thus positioning us for future profitable growth throughout the region."

By expanding manufacturing capabilities in Brazil, the acquisition will also enable Dana to help vehicle manufacturers better accommodate local content requirements, which reduce import and other region-specific costs. It will also further strengthen Dana's position as a central source for products that use forged and machined components throughout the region.

"Dana has worked with SIFCO for 40 years as a supplier of key components used in vehicle drivelines," said Mark Wallace, president of Dana Commercial Vehicle Driveline Technologies. "This acquisition will add the talent and capabilities needed to help us meet the requirements of our commercial-vehicle customers and provide value for our light-vehicle and off-highway customers, as well."

SIFCO has operated under judicial restructuring since 2014, and the transaction is subject to closing conditions, including bankruptcy court and regulatory approvals. Final financial terms of the agreement are subject to the outcome of closing conditions. The transaction is expected to be completed by the end of 2016.

Dana designs, manufactures, and distributes products in Brazil for virtually every major global producer of passenger vehicles, commercial trucks, and off-highway equipment.

*** Packaging Corporation of America (NYSE: PKG) announced that it has entered into a definitive agreement to acquire substantially all of the assets of Columbus Container, Inc., an independent corrugated products producer, in a cash-free, debt-free transaction for a cash purchase price of $100 million. Under the terms of the agreement, PCA will acquire a full-line corrugated products facility located in Columbus, Indiana, five warehousing facilities and other related operations located in Indiana and Illinois. The transaction is structured as a purchase of assets resulting in a full step-up of the assets to fair market value.

Columbus Container, Inc. is a full-service provider of corrugated packaging products utilizing state-of-the-art technologies and design centers to provide customers a solution for nearly any packaging need.

As a result of the acquisition, PCA's containerboard integration level is expected to increase by over 30,000 tons and will allow for further optimization and enhancement of mill capacity. The value of the increased containerboard integration, the expected synergies and the tax benefit of the step-up of assets, plus Columbus Container’s LTM EBITDA, results in a purchase price multiple of approximately 3.3 times EBITDA. The acquisition will be accretive to earnings immediately.

PCA Chairman and CEO Mark Kowlzan said, “Following our acquisition of Timbar, this acquisition will further enhance our operations both geographically and strategically through additional integration and optimization of our warehousing and logistics capabilities.” PCA Executive Vice President, Tom Hassfurther, added “Like previous acquisitions, the addition of Columbus Container is a great strategic fit for PCA. They have in place an excellent management team that leads a highly skilled and dedicated group of employees and have earned an outstanding reputation in the marketplace.”

Closing is subject to certain customary conditions and regulatory approval and is expected in the fourth quarter of 2016. The company expects to finance the transaction with available cash on hand.

PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. PCA operates eight mills and 95 corrugated products plants and related facilities.

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