Notable Mergers and Acquisitions 11/29: (ALL) (PPC) (BAH) (CHKE)

November 29, 2016 9:44 AM EST

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*** The Allstate Corporation (NYSE: ALL) confirmed an earlier disclosure that it agreed to acquire SquareTrade, a rapidly growing consumer protection plan provider that distributes through many of America's major retailers. The privately held company will be purchased for approximately $1.4 billion from a group of shareholders, including Bain Capital Private Equity and Bain Capital Ventures, in a transaction expected to close in January 2017.

"Allstate's consumer-focused strategy of providing unique products will be further enhanced with the acquisition of SquareTrade," said Tom Wilson, chairman and chief executive officer of Allstate. "This acquisition expands Allstate's customer relationships with 25 million protection plans for consumer electronics and connected devices. SquareTrade's exceptional customer service, innovative product design, analytics and supply-chain logistics have led to a four-fold increase in revenue over the last five years and are consistent with Allstate's history of product innovation. The SquareTrade team under Ahmed Khaishgi has built strong relationships with major retailers, including Amazon, Costco, Sam's Club, Target, Staples, Office Depot and Toys "R" Us, and further expands our customer reach," concluded Wilson.

"Joining Allstate will enable SquareTrade to expand into new markets and products that Steve Abernethy and I did not imagine possible when we founded the company in 1999," said Khaishgi, co-founder and chief executive officer of SquareTrade. "We put customers first and provide them the peace of mind that if their television, cell phone or computer breaks, SquareTrade can get them back to normal so they can stay connected with the world. With Allstate, we will gain a broad set of capabilities enabling us to further leverage our distribution, brand and team, while retaining our entrepreneurial spirit," concluded Khaishgi.

"Allstate acquiring SquareTrade is exactly the right next step for the company," added Phil Loughlin, managing director, Bain Capital. "It has been a privilege to help SquareTrade scale, innovate and disrupt a $20 billion industry, and we look forward to seeing its continued success."

Allstate will acquire SquareTrade utilizing corporate cash and debt issuance, subject to market conditions, with no impact on Allstate's existing share repurchase program. The transaction is expected to be dilutive to Allstate's earnings per share for three years, including the amortization of intangible assets, and is subject to regulatory approvals and customary closing conditions.

Ardea Partners, Lazard and Willkie Farr & Gallagher advised Allstate in the transaction, while Financial Technology Partners and Ropes & Gray advised SquareTrade.

*** Pilgrim's Pride Corporation (Nasdaq: PPC) announced a definitive agreement to acquire GNP Company, a leading provider of premium branded chicken products in the Upper Midwest, in an all cash, $350 million transaction. The proposal has the unanimous support of the Pilgrim’s Board of Directors, as well as the support of JBS S.A., the majority owner of Pilgrim’s. It is anticipated that the proposed transaction would close during the first quarter of 2017, subject to regulatory review and approval and customary closing conditions.

"The Pilgrim’s team is excited to combine the collective strengths of Pilgrim’s Pride and GNP Company,” said Bill Lovette, Pilgrim’s Chief Executive Officer. “GNP Company boasts outstanding state-of-the-art assets in geographic areas where Pilgrim’s is not currently present, providing Pilgrim’s the opportunity to expand our production and customer bases, while maintaining our high standards for quality service and great-tasting products.”

In addition, GNP Company’s operational competencies and use of innovative technologies, including gas stunning, aeroscalding and automated deboning, will enable Pilgrim’s to significantly increase the rate of adoption of new technologies in existing facilities, enhancing the company’s production efficiencies and operational excellence.

The addition of the GNP Company’s portfolio of Just BARE® Certified Organic and Natural/American Humane CertifiedTM/No-Antibiotics-Ever (NAE) product lines to Pilgrim’s existing NAE and organic production capabilities, further positions Pilgrim’s as a leading provider of high quality products in the fastest growing chicken segments.

The $350 million enterprise value of the transaction reflects an expected EBITDA multiple of 5.2x, excluding any potential synergy gains. The acquisition complements Pilgrim’s existing business both in geography and differentiated branded products, presenting an opportunity to immediately strengthen the company’s position in fast growing and higher margin branded retail product categories, such as natural and organic.

“Today’s announcement is a clear demonstration of Pilgrim’s commitment to our growth strategy of disciplined acquisitions that enhance both our portfolio of value-added products and our ability to provide key customers with the high quality products demanded by consumers,” Lovette continued. “We look forward to welcoming GNP Company’s team members and family farmer partners to the Pilgrim's team as we continue to position Pilgrim’s as the preferred choice of consumers and retail and foodservice partners across the country.”

Pilgrim's expects to achieve approximately $20 million in annualized synergies, primarily from the optimization of production and distribution, and cost savings in purchasing, production, logistics and SG&A. In addition to operational synergies, the company anticipates capturing an estimated present value of approximately $28 million in tax savings and a post synergies EBITDA multiple of 3.9x. Pilgrim’s expects the acquisition will be accretive to the company's diluted earnings per share in 2017 and believes that the combined company will have a strong financial position, improved capital structure and substantial cash flow generation capability.

*** Booz Allen Hamilton (NYSE: BAH) announced that it has entered into an agreement to acquire the Laurel, MD-based digital services firm eGov Holdings, Inc. (d/b/a Aquilent), a premiere architect of .gov solutions for the Federal government, for whom it deploys cutting-edge digital, agile, DevOps, and cloud capabilities. Booz Allen has agreed to pay a purchase price of $250 million in connection with the transaction, subject to customary purchase price adjustments and customary escrows.

The transaction will bolster Booz Allen’s growing technology capabilities and talent base, particularly its emphasis on building citizen-focused digital services. Aquilent will be the Laurel, MD hub of Booz Allen’s Digital business. Upon closing of the transaction, eGov Holdings, Inc. will be a wholly-owned subsidiary of Booz Allen Hamilton Inc. The transaction is expected to close by December 31, 2016, and is subject to customary closing conditions.

Aquilent employs approximately 350 professionals who currently provide digital and cloud services for the U.S. Department of Health and Human Services, U.S. Postal Service (USPS), U.S. General Services Administration (GSA), and other federal clients. Aquilent has grown rapidly, with revenues growing at a 28% compounded annual growth rate over the last five years. For the remainder of Booz Allen’s fiscal year 2017, the transaction is expected to add approximately $30 million to $35 million of revenue. It is expected to be accretive to Booz Allen earnings and to add to operating margin in fiscal year 2018.

The acquisition will further expand Booz Allen’s ability to blend its consulting heritage with advanced technical expertise to deliver to clients cloud, mobile and modular technology services using advanced methodologies such as Agile, DevOps and open source.

“This acquisition further advances our long-term growth strategy,” said Horacio Rozanski, President and Chief Executive Officer of Booz Allen. “We are driving sustainable quality growth through client solutions that blend technical capabilities and talent with our consulting heritage. This exciting addition to Booz Allen will bolster our capacity to provide digital transformation to clients.”

“Aquilent builds on Booz Allen’s existing digital capabilities, bringing greater expertise to deliver the digital services that citizens expect the Federal government to provide in a modern, 24/7 environment,” said Greg Wenzel, Executive Vice President for Booz Allen’s digital business. “This acquisition expands our network of digital solutions offerings with a team of technologists and a modern facility where we can advance cutting-edge solutions for our clients and take advantage of growth opportunities in the market for large digital projects.”

Aquilent Chief Executive Officer David Fout said, “Joining a firm like Booz Allen, which aligns so closely with our expertise, offers the chance to expand into new areas of digital work, expands capabilities for our clients through the breadth of their relationships, and is a great opportunity for the people of Aquilent. We look forward to working together to support existing and future clients.”

In 2016, Aquilent was ranked by Inc. as one of the 50 Best Workplaces in the U.S. and was named the 2015 Cloud Service Provider of the Year by Micro Trend.

Booz Allen has continued to invest in technical capabilities in recent years as part of the firm’s long-term growth strategy, called Vision 2020. The firm sees growth opportunities driven by client demand for technology innovation in areas such as cloud, big data and mobility, advanced development methodologies and more rapid solution deployments.

The firm’s differentiator in digital solutions is its unique ability to network its broad range of technical capabilities and talent across the country, delivering a deep understanding of its clients’ missions and sensitivity to the management challenges of organizational adaptation and adoption.

*** Cherokee Global Brands (Nasdaq: CHKE) announced that it intends to enter into a share purchase agreement to acquire Hi-Tec Sports International Holdings B.V. (“Hi-Tec”), a global footwear company.

Founded in 1974 and based in the Netherlands, Hi-Tec is a privately-held branded footwear company that designs, markets and sells footwear globally, primarily under the Hi-Tec and Magnum brands. Hi-Tec’s brands are sold in over 110 countries, predominately in the United Kingdom, Continental Europe, the United States, Canada, South and Central America and Asia through major retailers, independent distributors, licensees and direct to consumers. In 2015, Hi-Tec recorded revenue of approximately $143 million (based on a 1.1 Euros to each U.S. dollar exchange rate, which represents the average exchange rate for calendar year 2015), on worldwide wholesale sales estimated by third-party research to be approximately $288 million, including products sold under the Hi-Tec and Magnum brands.

Upon closing of the transaction, Cherokee will sell substantially all assets related to Hi-Tec’s wholesale operations to new operating partners, the proceeds from which shall fund a portion of the Hi-Tec acquisition purchase price. Concurrently, the new operating partner licensees are entering into license agreements with Hi-Tec Sports International Holdings B.V., a wholly owned subsidiary of Cherokee Inc., pursuant to which each operating partner will pay Cherokee royalties for the future use of Hi-Tec intellectual property. The headquarters of Hi-Tec will remain in Amsterdam.

In view of the founder’s strong ties with Africa, the subsidiary Hi-Tec Sports South Africa has been purchased by Hi-Tec’s founder, Frank van Wezel himself. He has negotiated a license and distribution agreement with Cherokee which enables him to grow the company and its brands (such as Hi-Tec, Magnum, Carrick and Interceptor) strongly in that part of the world.

“The acquisition of the Hi-Tec and Magnum brands aligns with our strategic focus of diversifying and building upon our active lifestyle portfolio as we continue to grow our global footprint,” stated Henry Stupp, Chief Executive Officer of Cherokee Global Brands. “Hi-Tec’s high-equity brands will build upon our presence in the active, outdoor markets, and we are excited by the potential to further expand these brands into additional categories including apparel, accessories, wearables, outdoor products and more.”

Mr. Stupp continued, “Consistent with our business model and strategy, we will convert the Hi-Tec business to a branded licensing model. We look forward to maintaining and working alongside Hi-Tec’s exceptional leadership and product development team to identify and secure additional wholesale and retail licensing partners that will help commercialize the brands, and to continuing relationships with the well-established supply chain as it transitions to our new operating partner licensees.”

“Hi-Tec’s global customer base adds significant wholesale and retail opportunities that we expect will deliver compelling cross-selling opportunities between the CGB and Hi-Tec andMagnum brand portfolios,” Stupp added.

Founder and Chairman, Frank van Wezel, of Hi-Tec Sports is delighted to make this announcement: “I believe the future of the Hi-Tec company is in good hands with Cherokee Global Brands. When I started the company in 1974, I could not have foreseen the global success of the company until this day. It has been a wonderful experience, and I am happy to remain with the new company as Chairman Emeritus and Ambassador for at least the next five years. It is now time to turn the management over to the capable management team led by my son, Ed.”

“This is an exciting time, and we are pleased to join Cherokee Global Brands,” stated Ed Van Wezel, CEO of Hi-Tec. “Cherokee Global Brands has built a compelling global platform, that combined with the new brand licensing model will allow us to adapt to the fast-changing retail and consumer environment, broaden the reach and offering of Hi-Tec’s core brands while we build upon our select distribution channels that have been established over the past 40 years. I look forward to working directly with Henry Stupp and the Cherokee Global Brand’s team. We look forward to making Hi-Tec’s products available to an even broader global customer base, as we expand our existing relationships through new product category introductions.”

Assuming the Hi-Tec acquisition is consummated, Cherokee expects Hi-Tec to contribute approximately $19 million of licensing revenue and $7 million in Adjusted EBITDA during the first full fiscal year after the closing of the acquisition.

Cherokee intends to fund the purchase price through cash on hand, proceeds from a new credit facility with Cerberus Business Finance, LLC (“Cerberus”), proceeds from the sale of assets, including to the new operating partner licensees, a receivables funding loan to be provided by its Chairman of the Board and the net proceeds from the proposed public offering of common stock as further detailed in the preliminary prospectus supplement filed by the Company on November 28, 2016.

The acquisition will be effected by a share purchase agreement under which Cherokee Global Brands will acquire all the issued and outstanding share capital of Hi-Tec Sports International Holdings B.V., for an aggregate cash purchase price of approximately $95.8 million on a cash-free debt-free basis, based on normalized working capital. Subject to post-closing adjustments, and after giving effect to the asset sales and the other transactions in this release, Cherokee expects that the purchase price for the Hi-Tec intellectual property assets to be retained by it will be approximately $62 million. The parties expect the transaction documents to become effective on November 29, 2016 and the transactions to close in the current fiscal quarter ending January 28, 2017.

NIBC Bank is acting as exclusive financial advisor to Hi-Tec, and Houthoff Buruma is acting as legal advisor to Hi-Tec. Houlihan Lokey and Symphony Investment Partners are acting as financial advisors to Cherokee, while Morrison & Foerster is acting as legal advisor.

To keep up on all the Mergers & Acquisitions data in real-time, go to our M&A Insider page.



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