Notable Mergers and Acquisitions 10/13: (TBIO) (K) (CIR) (ATHM)
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Transgenomic has filed to complete a reverse stock split of between one-for-ten and one-for-thirty before the merger closes, and the company’s outstanding debt is expected to convert into common and preferred shares. The companies expect that shares of the combined company will be listed on the NASDAQ exchange and trade under the “PRPO” ticker (subject to filing and approval by NASDAQ). The merger agreement provides that, Ilan Danieli, Precipio founder and Chief Executive Officer, will serve as the Chief Executive Officer of the combined company. BV Advisory Partners is acting as advisor to the transaction.
Paul Kinnon, Transgenomic President and Chief Executive Officer, said “In recent years we have transitioned from a provider of conventional life science tools and diagnostic services into an innovative biotechnology enterprise focused on advancing precision medicine. We have done this through our revolutionary ICE COLD-PCR (ICP) technology, which enables accurate, non-invasive tumor profiling using circulating DNA in patient plasma. We have established a solid platform for commercialization of ICP, with leading global distributors and a solid pipeline of potential agreements with partners and customers. This is a good time to join forces with Precipio, which shares our commitment to accurate and timely advanced cancer diagnostics and has established an impressive infrastructure of academic experts and a growing customer base, validated by successful case studies. I look forward to working with my new colleagues to ensure a successful transition.”
Ilan Danieli, Precipio founder and Chief Executive Officer, said “We are proud of Precipio’s progress in building a growing platform that provides unique services to cancer patients and their physicians by providing a demonstrated superior level of diagnostic accuracy, ensuring that patients receive the best possible treatment. Cancer misdiagnosis is an all too common and underappreciated problem, which frequently has a negative impact on patient treatment, and may cause needless loss of life. We provide both primary and second opinion screening, and our network of leading academic cancer researchers and advanced diagnostic technologies have proven to be an invaluable resource for patients and physicians. Our entire team is committed to ensuring that our services are made widely available. To that end we will continue building out our sales team to accelerate adoption and revenue growth. We believe Transgenomic’s ICP technology and commercial infrastructure fit well with our values and our business model, and look forward to this next stage of growth, as we work together to integrate our teams, technologies and services.”
Keith Barksdale, Founder of BV Advisory Partners, commented, “Transgenomic and Precipio have complementary strengths with the potential to be a dynamic and strong competitor in the rapidly growing market for advanced cancer diagnostics. ICP is a revolutionary mutation detection technology that is now available through global distributors, and adoption by drug researchers and developers is ramping up. The technology is also available to help guide cancer diagnosis and treatment through Transgenomic’s CLIA laboratory. Precipio’s platform of leading academic cancer experts provides superior diagnostic accuracy level to oncologists and their patients; it represents a unique resource that can benefit from and leverage the power of ICE COLD-PCR. We look forward to working with the combined company going forward to help assure its growth and success.”
Transgenomic’s ICE COLD-PCR offers major advantages over current sequencing technologies. It delivers at least a 100-fold improvement in sensitivity compared to standard methodologies, allowing detection of both known and previously unknown genetic alterations in any exon of any gene using a single assay. It is robust, easy to use and easily implemented, requiring minimal disruption to established sequencing workflows. It is available as ICEme™ Kits that deliver up to a 500-fold increase in mutation detection compared to most current methods, with levels of detection routinely achievable down to 0.01%. This ultra-high sensitivity enables detection of low level mutations and allows accurate patient monitoring as well as stratification of cancer sub-populations. ICEme Kits are compatible with most patient samples, including tissue, blood, plasma, urine and other biofluids. The kits are simple to use and work with most of the genomic analysis platforms available in laboratories today. They are easily customizable for use with single mutations or multiple mutations in combination. The current menu includes approximately 20 clinically relevant, actionable mutations that are associated with important cancers. The ICP range of mutation targets is being expanded on an ongoing basis.
ICE COLD-PCR was originally developed by the laboratory of Dr. Mike Makrigiorgos at the Dana-Farber Cancer Institute, which has exclusively licensed rights to the technology exclusively to Transgenomic.
*** Kellogg Company (NYSE: K) announced it has entered into an agreement to acquire Ritmo Investimentos, controlling shareholder of Parati S/A, Afical Ltda and Pádua Ltda ("Parati Group"), a leading Brazilian food group. The acquisition, the company's largest in Latin America, furthers two of Kellogg's strategic priorities — becoming a global snacking powerhouse and expanding its presence in emerging markets.
Parati Group offers a wide range of iconic regional brands, including Parati, Pádua, Minueto, Zoo Cartoon and Hot Cracker biscuits, which make up approximately half of the company's business. The rest of the business is comprised of Trink powdered beverages, Parati Lamen instant noodles and Parati dried pasta. Parati Group Net Sales are expected to be approximately R$600 million (or about US$190 million at current exchange rates).
"With its outstanding portfolio of popular consumer brands, Parati Group is an excellent strategic fit for Kellogg and our business in Latin America," said John Bryant, Kellogg Company Chairman and CEO. "Brazil is the largest economy in Latin America and this acquisition will allow us to accelerate our growth and improve our margins in the region. This means more growth for the core Parati Group business and our well-loved Kellogg brands."
Parati Group has 3,200 employees, including a salesforce of approximately 1,300 people serving about 60,000 customers directly. This includes a strong presence in small to medium – or high-frequency – retail stores in Brazil, which are critical to reaching the country's growing population. The company also has five distribution centers and two production facilities with room for expansion.
"The combination of Parati's portfolio and sales and distribution capabilities with Kellogg's global resources – including innovation expertise, extensive shopper insights and customer marketing strength – provides tremendous opportunity. Bringing our companies together enables us to expand our footprint in a rapidly growing market," said Maria Fernanda Mejia, President, Kellogg Latin America.
"Parati Group has built a very successful business over the past four decades and we have a great deal of admiration and respect for them," continued Mejia. "They are highly entrepreneurial and strive to provide great-tasting foods consumers love while also fulfilling their founder's legacy. We are thrilled to welcome Parati Group to the Kellogg family."
Today's announcement marks Kellogg's fourth emerging market acquisition in the last two years. In that time, Kellogg has acquired companies in each of its international regions, including Europe (Bisco Misr and Mass Food Group in Egypt) and Asia Pacific (a 50 percent stake in Multipro in Nigeria and Ghana). The addition of Parati further enhances the company's emerging market growth strategy.
Financial Details of the Transaction
The acquisition by Kellogg, through its subsidiary Pringles Serviços e Comércio de Alimentos Ltda, is subject to customary closing conditions and is expected to close in late 2016. The purchase price is R$1.38 billion, or roughly US$429 million at current exchange rates, and it will be an all-cash transaction. To preserve financial flexibility, Kellogg intends to reduce its expected share repurchases in 2016 to $450-550 million, versus previous guidance of $700-750 million.
The profitability of this business, along with expected revenue and cost synergies, should create financial value for shareowners relatively quickly, even accounting for an initially reduced level of share repurchases. In 2016 and 2017, it is expected to be neutral to Comparable-basis EPS, depending on exchange rates, with only a slight impact on Reported EPS because of one-time costs of $(0.01) per-share in both years. The acquisition is expected to be accretive on both Comparable and Reported EPS in 2018 and thereafter.
*** CIRCOR International, Inc. (NYSE: CIR) announced that it has signed a definitive agreement to acquire Critical Flow Solutions (CFS) for $210 million. The Utah-based company manufactures critical severe-service equipment for refining operations. CFS recorded revenue of approximately $120 million with EBITDA margins over 20% for the fiscal year ended June 30, 2016. The acquisition is anticipated to close shortly and become accretive in the first 12 months of combined operations. CIRCOR plans to use its existing credit facility to finance the acquisition.
“We are very excited to welcome the CFS team to CIRCOR,” said Scott Buckhout, President and Chief Executive Officer of CIRCOR International. “This acquisition diversifies CIRCOR’s revenue base as we further penetrate the stable downstream refining market. CFS brings an impressive portfolio of high technology valves and automation equipment for severe-service applications. CFS generates strong margins due to its unique technology, large installed base, and high proportion of aftermarket sales.”
This transaction is expected to:
- Add differentiated technology and leading positions in niche markets with high barriers to entry;
- Broaden CIRCOR’s revenue base by expanding its presence in the stable downstream refining end market;
- Provide earnings accretion with strong margins;
- Increase exposure to high margin aftermarket sales to support a large installed base; and
- Offer opportunities for significant cost synergies.
“CFS has highly differentiated products, strong patent protection, and an excellent track record of developing and commercializing new products,” added Buckhout. “We look forward to working with the CFS team to continue providing excellent service to our customers and capitalize on the growth opportunities in this market.”
Critical Flow Solutions delivers a range of products and services to the petroleum refining industry. The DeltaValve brand is the market leader and offers solutions for the delayed coking process in refineries. The TapcoEnpro brand provides market leading solutions for the fluid catalytic cracking process in refineries. CFS has a total of approximately 200 employees at its Salt Lake City, Utah headquarters, Houston, Texas facilities and Barnsley, UK service center. CIRCOR expects to operate the newly acquired business as part of the Energy Group.
*** Autohome Inc. (NYSE: ATHM) announced that the special committee of the board of directors of the Company (the “Special Committee”) has recently received a notice from Mr. James Zhi Qin (“Mr. Qin”), on behalf of the Consortium which included Mr. Qin, Boyu Capital Advisory Co. Ltd, Hillhouse TBC Holdings L.P. and Sequoia China Investment Management LLP, stating that the Consortium would like to withdraw the non-binding going private proposal (the “Proposal”) dated April 16, 2016. The notification stated that the Consortium had determined not to proceed with the Proposal under the current circumstances. As a result, the Special Committee was dissolved on October 12, 2016.
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