Notable Mergers and Acquisitions 10/27: (QCOM)/(NXPI) (GE) (AGN) (ZBH)
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NXP is a leader in high-performance, mixed-signal semiconductor electronics, with innovative products and solutions and leadership positions in automotive, broad-based microcontrollers, secure identification, network processing and RF power. As a leading semiconductor solutions supplier to the automotive industry, NXP also has leading positions in automotive infotainment, networking and safety systems, with solutions designed into 14 of the top 15 infotainment customers in 2016. NXP has a broad customer base, serving more than 25,000 customers through its direct sales channel and global network of distribution channel partners.
"With innovation and invention at our core, Qualcomm has played a critical role in driving the evolution of the mobile industry. The NXP acquisition accelerates our strategy to extend our leading mobile technology into robust new opportunities, where we will be well positioned to lead by delivering integrated semiconductor solutions at scale," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "By joining Qualcomm's leading SoC capabilities and technology roadmap with NXP's leading industry sales channels and positions in automotive, security and IoT, we will be even better positioned to empower customers and consumers to realize all the benefits of the intelligently connected world."
The combined company is expected to have annual revenues of more than $30 billion, serviceable addressable markets of $138 billion in 2020 and leadership positions across mobile, automotive, IoT, security, RF and networking. The transaction has substantial strategic and financial benefits:
- Complementary technology leadership in strategically important areas: The transaction combines leadership in general purpose and automotive grade processing, security, automotive safety sensors and RF; enabling more complete system solutions.
- Mobile: A leader in mobile SoCs, 3G/4G modems and security.
- Automotive: A leader in global automotive semiconductors, including ADAS, infotainment, safety systems, body and networking, powertrain and chassis, secure access, telematics and connectivity.
- IoT and Security: A leader in broad-based microcontrollers, secure identification, mobile transactions, payment cards and transit; strength in application processors and connectivity systems.
- Networking: A leader in network processors for wired and wireless communications and RF sub-segments, Wave-2 11ac/11ad, RF power and BTS systems.
- Enhanced go-to-market capabilities to serve our customers: The combination of Qualcomm's and NXP's deep customer and ecosystem relationships and distribution channels enables the ability to deliver leading products and platforms at scale in mobile, automotive, IoT, industrial, security and networking.
- Shared track record of innovation and commitment to operational discipline: Both companies have demonstrated a strong commitment to technology leadership and best-in-class product portfolios with focused investments in R&D. Qualcomm and NXP have both taken action to position themselves for profitable growth, while maintaining financial and operational discipline.
- Substantial financial benefits: Qualcomm expects the transaction to be significantly accretive to non-GAAP EPS immediately upon close. Qualcomm expects to generate $500 million of annualized run-rate cost synergies within two years after the transaction closes. The transaction utilizes Qualcomm's strong balance sheet and will be efficiently financed with offshore cash and new debt. The transaction structure allows tax efficient use of offshore cash flow and enables Qualcomm to reduce leverage rapidly.
Mollenkopf continued, "We have taken significant action to build a foundation for profitable growth and the acquisition of NXP is strongly aligned with our strategy. Our companies both have substantial expertise in delivering industry-leading solutions to our global customers, built upon a shared commitment to technology innovation, focused R&D investments and strong financial and operational discipline."
"The combination of Qualcomm and NXP will bring together all technologies required to realize our vision of secure connections for the smarter world, combining advanced computing and ubiquitous connectivity with security and high performance mixed-signal solutions including microcontrollers. Jointly we will be able to provide more complete solutions which will allow us to further enhance our leadership positions, and expand the already strong partnerships with our broad customer base, especially in automotive, consumer and industrial IoT and device level security," said Rick Clemmer, NXP Chief Executive Officer. "United in a common strategy, the complementary nature of our technologies and the scale of our portfolios will give us the ability to drive an accelerated level of innovation and value for the whole ecosystem. Such a strong fit will bring opportunities for our employees and customers, as well as provide immediate attractive value for our shareholders, in creating the semiconductor industry powerhouse."
Sir Peter Bonfield, Chairman of NXP's Board of Directors, said, "This is a major step in my ten years' Chairmanship of NXP, and I am very pleased to see that the board of NXP has unanimously approved the proposed transaction and fully supports and recommends the offer for acceptance to NXP shareholders."
Under the terms of the definitive agreement, a subsidiary of Qualcomm will commence a tender offer to acquire all of the issued and outstanding shares of NXP for $110.00 per share in cash.
Qualcomm intends to fund the transaction with cash on hand and new debt. The transaction is structured to enable tax efficient use of offshore cash flow to rapidly reduce leverage. Qualcomm is committed to maintaining its strong investment-grade credit ratings.
The solid combined cash flow profile will support Qualcomm's current dividend and dividend growth. Qualcomm is committed to anti-dilutive repurchases of its common stock as it de-levers its balance sheet to pre-transaction leverage levels. The pro forma cash flow profile provides a strong foundation for long-term capital returns to stockholders.
The tender offer is not subject to any financing condition. The transaction is expected to close by the end of calendar 2017 and is subject to receipt of regulatory approvals in various jurisdictions and other closing conditions. The tender offer is conditioned on the tender of at least 95% of the outstanding ordinary shares of NXP or, if NXP shareholders approve the asset sale contemplated in the purchase agreement, the tender of at least 80% of the outstanding ordinary shares of NXP. An Extraordinary General Meeting of NXP's shareholders will be convened in connection with the offer to adopt, among other things, certain resolutions relating to the transaction.
The offer will be described in more detail in a tender offer statement on Schedule TO to be filed by a subsidiary of Qualcomm and a solicitation/recommendation statement on Schedule 14D-9 to be filed by NXP.
Goldman Sachs & Co. and Evercore served as financial advisors to Qualcomm and provided fairness opinions to the Qualcomm Board. Goldman Sachs & Co. and J.P. Morgan are providing committed debt financing for the transaction. Centerview Partners LLC served as financial advisor and provided a fairness opinion to the Qualcomm Board. Paul, Weiss, Rifkind, Wharton & Garrison LLP; Cravath, Swaine & Moore LLP and Allen & Overy LLP served as legal counsel to Qualcomm. DLA Piper LLP (US) served as legal counsel to the Qualcomm Board.
Qatalyst Partners is acting as lead financial advisor to NXP, and Skadden, Arps, Slate, Meagher & Flom LLP and De Brauw Blackstone Westbroek are serving as legal counsel to NXP. Barclays and Credit Suisse are also acting as financial advisor to NXP.
Privately-held Concept Laser has more than 200 employees and is headquartered in Lichtenfels, Germany, with significant operations in the United States (Grapevine, Texas), China, and a global network of more than 35 distributors and agents. Concept Laser is a pioneer in the field of metal additive manufacturing.
Concept Laser designs and manufacturers powder bed-based laser additive manufacturing machines. Its customer base is focused on the aerospace, medical and dental industries, with a meaningful presence in automotive and jewelry. Concept Laser’s machine range incorporates both the largest and smallest build envelopes currently available on the market and are capable of processing various powder materials including titanium, nickel-base, cobalt-chromium and precious metal alloys, as well as hot-work and high-grade steels and aluminum.
“Concept Laser founder Frank Herzog and his team are true pioneers in metal laser melting technology,” said David Joyce, GE Vice Chairman and President & CEO of GE Aviation. “We are committed to enhancing Concept Laser’s technologies and product offerings across a well-established customer base.”
Herzog commented, “GE shares our vision regarding the potential for additive manufacturing to lead the digital transformation of industrial production. We are delighted that together we will be able to accelerate development of the technology to the benefit of our customers. We have some exciting new product offerings due to come to market, including our innovative AM Factory of Tomorrow modular concepts, and with GE’s support we will be at the center of Industrie 4.0.”
Herzog will continue as CEO of Concept Laser and will also assume a senior leadership position within GE.
In order to support the growth potential of the business, GE has committed to invest significantly into Lichtenfels, which will continue to be Concept Laser’s headquarters and will become a new German center for GE. GE will retain Concept Laser’s management and employees. In addition, the close partnership that exists between Concept Laser and Hofmann Tool Manufacturing will continue.
Concept Laser sets the stage for GE to sell additive manufacturing equipment across several industries. Mr. and Mrs. Herzog founded Concept Laser in 2000 and commercialized the first metal additive manufacturing machine in 2001. Over the past 16 years, Concept Laser has industrialized the technology with its patented LaserCUSING® process and remains at the forefront of the industry.
Concept Laser has a comprehensive product offering ranging from small machines up to the machine with the world’s largest build envelope. The company’s machines with multi-laser technology are among the fastest and highest-quality laser melting machines in the world. Concept Laser has won multiple awards for innovation excellence in recent years and continues to invest heavily in customer centric technologies, including real time monitoring of the process through its QMmeltpool offering. At the forthcoming Formnext trade fair, Concept Laser will announce the sales launch of the new machine concept with fully modular machine technology along with the series production offering of the AM Factory of Tomorrow.
“Concept Laser machines are being used by leading manufacturers of medical, aerospace and dental components in series production as well as for prototyping and design. We are hitting an inflection point in demand as customers increasingly understand the possibilities that additive manufacturing presents and the technology advances to be able to turn these possibilities into reality. With GE’s broader investment into additive manufacturing, we believe that this process will only accelerate,” said Herzog.
Additive manufacturing (also called 3D printing) involves taking digital designs from computer aided design (CAD) software, and laying horizontal cross-sections to manufacture the part. Additive components are typically lighter and more durable than traditional forged parts because they require less welding and machining. Because additive parts are essentially “grown” from the ground up, they generate far less scrap material. Freed of traditional manufacturing restrictions, additive manufacturing dramatically expands the design possibilities for engineers.
GE is a leading end user and innovator in the additive manufacturing space. GE has invested approximately $1.5 billion in manufacturing and additive technologies at GE’s Global Research Center (GRC), developed additive applications across six GE businesses and are pioneering services applications across the company.
GE Aviation introduced into airline service this year its first additive jet engine component – complex fuel nozzle interiors – with the LEAP jet engine. The LEAP engine is the new, best-selling engine from CFM International, a 50/50 joint company of GE and Safran Aircraft Engines of France. More than 11,000 LEAP engines are on order with 20 fuel nozzles in every engine, thus setting the stage for sustainably high and long-term additive production at GE Aviation’s Auburn, Alabama, manufacturing plant. Production will ramp up to more than 40,000 fuel nozzles using additive by 2020.
GE Aviation is also using additive manufacturing to produce components in its most advanced military engines. In the general aviation world, GE is developing the Advanced Turboprop Engine (ATP) for a new Cessna aircraft with a significant portion of the entire engine produced using additive manufacturing.
The deal is subject to customary regulatory reviews.
Concept Laser is being advised by PJT Partners, Lacore, Allen & Overy and Ernst & Young.
*** Allergan plc. (NYSE: AGN) and Rhythm Holding Company, LLC, which owns Motus Therapeutics, Inc. a biopharmaceutical company developing peptide therapeutics for the treatment of gastrointestinal (GI) disorders, announced the top line results of a Phase 2b clinical trial assessing the efficacy and safety of relamorelin (RM-131), Motus' ghrelin agonist, for the treatment of gastroparesis in patients with type 1 and type 2 diabetes. Allergan also announced that it has exercised its option to acquire Motus Therapeutics. Motus (formerly known as Rhythm Health) is a wholly-owned subsidiary of Rhythm Holding Company, LLC.
In the Phase 2b study, relamorelin administered for 12 weeks demonstrated substantial efficacy for the key diabetic gastroparesis symptoms of nausea, post-prandial fullness, abdominal pain and bloating (measured both individually and as a composite endpoint), along with a potent prokinetic effect on gastric motility. Patients receiving relamorelin also experienced an approximately 75 percent reduction in vomiting frequency across all doses compared to baseline (the primary endpoint), similar to the effect seen in the Phase 2a trial. However, an unusually high placebo response for vomiting frequency, extending well beyond that expected from previous studies, limited the ability to demonstrate treatment efficacy on the vomiting frequency endpoint.
"The clinical results with relamorelin in this Phase 2b trial in diabetic gastroparesis are very encouraging. Based on these results and the results observed in the earlier phase 2a trial, Allergan has exercised its option to acquire Motus Therapeutics and intends to initiate Phase 3 clinical trials of relamorelin," said David Nicholson, Executive Vice President of Global Research and Development for Allergan. "We very much look forward to sharing this phase 2b data with the US Food and Drug Administration and to discussing our plans to conduct Phase 3 trials."
The Phase 2b trial was designed to evaluate the effect of relamorelin on the key signs and symptoms of gastroparesis identified in the draft FDA guidance for gastroparesis, as well as gastric emptying and safety in patients with moderate to severe diabetic gastroparesis and with symptoms of vomiting at baseline. The randomized, double-blind, placebo-controlled study evaluated the safety and efficacy of dosing regimens ranging from 10 to 100 mcg administered twice daily over three months. The trial enrolled 393 patients with diabetic gastroparesis at clinical sites in the U.S. and Europe.
"Patients with diabetic gastroparesis suffer greatly and have very limited treatment options," said Michael Camilleri, MD, gastroenterologist at Mayo Clinic who was an advisor on the design and interpretation of the study. "The findings in this trial support initiating Phase 3 clinical trials to confirm these Phase 2b results with relamorelin for the treatment of moderate to severe diabetic gastroparesis."
"There has not been a drug approved for gastroparesis by the FDA since 1983. Relamorelin may offer a much needed opportunity for patients with diabetic gastroparesis to have symptom relief and improved quality of life, said Richard McCallum, MD, of Texas Tech University." It is particularly impressive that relamorelin can be delivered through SC injections because these patients are not able to absorb medications once they start vomiting. Relamorelin may be a major advance in the armamentarium of physicians who manage diabetic gastroparesis."
Overall, relamorelin was safe and well-tolerated in the phase 2b study with high compliance and completion rates over the course of the study. There was some evidence of dose-related adverse events related to worsening of glycemic control in some patients.
Motus Therapeutics previously completed a successful 4-week Phase 2 clinical trial of relamorelin in diabetic gastroparesis, in which patients treated with relamorelin 10 mcg twice daily demonstrated statistically significant improvements in gastric emptying and vomiting frequency and in a pre-specified subgroup also showed statistically significant improvements in the other symptoms of gastroparesis.
"We are very excited that Allergan has exercised its option to acquire Motus and that relamorelin will now advance into Phase 3 trials," said Bart Henderson, President and Founder of Rhythm Holding. "Relamorelin has enormous potential to improve the lives of patients with GI functional disorders, and Allergan has the skill and resources to develop and commercialize this promising drug to its fullest potential."
"The need for better treatments for diabetic gastroparesis is urgent," said Keith Gottesdiener, MD, CEO of Rhythm Holding. "This is a devastating condition that affects several million people in the U.S., with only one drug approved by the FDA in the past 30 years. In this clinical trial, relamorelin improves gastric function, and shows substantial efficacy for the debilitating symptoms of DG. We thank everyone who has participated in this clinical trial. And we thank Allergan for joining with us to help advance this potentially breakthrough treatment for patients who may benefit from it."
Rhythm Holding and Allergan plan to submit the data for presentation at a major gastrointestinal medical conference in 2017.
*** Zimmer Biomet Holdings, Inc. (NYSE: ZBH) announced the acquisition of RespondWell, an award-winning telerehabilitation technology designed to provide personalized, clinician-supervised post-surgical physical therapy in the comfort of a patient's home. The acquisition strengthens the Company's recently announced Zimmer Biomet Signature Solutions commercial offering by integrating a comprehensive, at-home telerehabilitation capability designed to enhance patient compliance with physical therapy and improve the quality of recovery.
"The new value-based reimbursement environment compels hospitals and providers to assume responsibility for patient outcomes well after discharge and through the critical rehabilitation period," said David Nolan, Group President, Biologics, Extremities, Sports Medicine, Surgical, Trauma, Foot and Ankle and Office Based Technologies. "Integrating an innovative and comprehensive telerehabilitation program into our Zimmer Biomet Signature Solutions offering addresses the emerging need for healthcare providers to oversee and optimize post-surgical recovery outcomes in order to maximize value across the entire episode of care."
"I believe RespondWell's innovative telerehabilitation platform will help our clinical care team enhance the quality and outcomes of post-op patient care by providing an interactive and motivating physical therapy experience that encourages patient engagement and compliance to physical therapy in a convenient environment, the patient's home," said Ronald A. Navarro, M.D., Regional Coordinating Chief of Orthopedic Surgery, Kaiser Permanente.
Zimmer Biomet Signature Solutions is a strategically-curated suite of technologies and services designed to help hospitals and providers streamline delivery of care and succeed in today's value-based reimbursement environment. The Zimmer Biomet Signature Solutions remote rehabilitation platform, known as Therapy@Home, features a personalized rehabilitation plan designed by a patient's clinical care team, video-gaming-style exercise system with on-screen digital instructors to coach and encourage patients, and built-in reward features earned through increased patient participation and consistency. The system also allows the patient's clinical care team to remotely monitor patient progress and activity and digitally communicate with the patient, potentially reducing the costs associated with follow-up visits and clinic-based rehabilitation programs. Zimmer Biomet is currently launching research partnerships for the Zimmer Biomet Signature Solutions suite at selected academic research institutions in the U.S., with a broader commercial release scheduled for 2017.
"Telerehabilitation represents the future of optimal and efficient post-surgical patient care, and we are excited to integrate our remote rehabilitation platform into the Zimmer Biomet Signature Solutions suite," said Ted Spooner, Co-founder and CEO of RespondWell.
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