Notable Mergers and Acquisitions 11/30: (ZAYO) (LDL) (FLIR)

November 30, 2016 10:01 AM EST

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*** Zayo Group Holdings, Inc. (NYSE: ZAYO) announced it has entered into an agreement to acquire Electric Lightwave, formerly known as Integra Telecom, for $1.42 billion in cash. Electric Lightwave, which provides infrastructure and telecom services primarily in the Western United States, has 8,100 route miles of long haul fiber and 4,000 miles of dense metro fiber in Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake City, Spokane and Boise, with on-net connectivity to more than 3,100 enterprise buildings and 100 data centers.

“Electric Lightwave provides us another unique and dense regional fiber network that advances our position as the only national independent infrastructure provider remaining in the U.S.,” said Dan Caruso, chairman and CEO, Zayo. “Electric Lightwave has both strong metro fiber assets in key West Coast markets and capacity and routes that will augment Zayo’s intercity footprint.”

Approximately 40 percent of Electric Lightwave’s existing revenue aligns with Zayo’s infrastructure-focused business segments and will be rapidly integrated into the core Zayo organization, processes and systems. The remainder, which is a valuable and viable cash-flow generating business, has a customer base that aligns well with Zayo’s Canadian SME and voice businesses. “Zayo has a proven track record of integrating key fiber infrastructure assets while also maximizing the value of more traditional telecom business units,” added Caruso.

Zayo expects to achieve significant revenue and cost synergies over the coming quarters, driven by the efficiencies of scale and achieved via Zayo’s proven, streamlined integration process. Zayo’s Tranzact platform and Salesforce.com implementation will provide seamless online access to viewing, purchasing and managing the combined customers and network.

Under the terms of the agreement, Zayo will acquire Electric Lightwave for a total cash consideration of $1.42 billion, representing a pre-synergized multiple of less than eight times LQA EBITDA of $180 million. In addition, Zayo anticipates more than $40 million in annual cost synergies to be realized throughout the integration process and will benefit from more than $400 million in net operating loss carryforwards acquired in the transaction. Zayo expects to close in the first calendar year quarter of 2017, subject to customary regulatory approvals and closing conditions. The transaction will be funded with a combination of cash on hand and debt.

Zayo will host a conference call today, November 30, at 8:00 a.m. EST to discuss this transaction. The conference call can be accessed by dialing 800-909-4761 using conference ID: 21836860. A live webcast of the conference call and associated presentation materials will be available on the investor relations section of Zayo’s website at http://investors.zayo.com.

Gibson Dunn & Crutcher LLP served as legal advisor to Zayo on the transaction. Latham & Watkins and Gray Plant Mooty served as legal advisors to Electric Lightwave.

*** Lydall, Inc. (NYSE: LDL) announced that it has entered into an agreement to acquire MGF Gutsche GmbH & Co. KG (Gutsche) for approximately $58 million in cash. The transaction will further position Lydall as a global leader in needle punch nonwoven filtration solutions and strengthen the Company’s position as a premier provider of engineered technical materials. The acquisition will expand the Company’s filtration product offerings into attractive adjacencies and diversify the Company's geographic revenue base. The transaction is expected to close at year end, subject to receipt of customary merger control approval from German competition authorities and the completion of specified closing conditions.

Gutsche is a leading producer of nonwoven needle punch materials serving the industrial filtration and high performance nonwoven segments. The business consists of operations in Germany and China.

Gutsche’s fiscal year ends on December 31, 2016 and revenue and EBITDA are forecasted by Gutsche to be approximately $50 million and $6 million, respectively. Lydall expects the business to be fully integrated by the end of 2019. Lydall expects to leverage its operating discipline, business efficiencies, and economies of scale to generate annual cost savings of approximately $3 million.

The acquisition will be integrated into Lydall’s Technical Nonwovens segment. The Company plans to maintain manufacturing presence in the UK, Europe, and China and, through restructuring initiatives, to increase efficiencies and unlock operational synergies. The acquisition will be dilutive to Lydall’s earnings in 2017 on an all-in basis, which includes the effect of purchase accounting, restructuring and other non-recurring expenses. The acquisition is expected to be accretive to Lydall’s earnings by mid-2018.

The transaction is expected to be financed through a combination of cash on hand and borrowings from the Company’s revolving credit facility.

Dale G. Barnhart, Lydall’s President and Chief Executive Officer, stated, “The acquisition of Gutsche is very appealing as it combines two complementary companies in the industrial filtration and technical materials markets. With the addition of Gutsche, we gain an experienced management team and an attractive footprint to serve Europe as well as secure a strong filtration position in the fast growing waste-to-energy incineration market. In addition, we are able to complement our China-based sales with a focus on the greater Asia-Pacific export markets. Gutsche is a well-known leading brand in the industry with an excellent reputation for high quality products and a proven culture of innovation. We look forward to welcoming their employees to the Lydall family.”

Michael Gutsche, Chief Executive Officer of Gutsche, commented, “I am very excited for Gutsche to become a part of the growing Lydall organization. We have found the ideal partner that shares our passion for delivering the most advanced and highest quality products in the industry. Our combined focus on profitable growth and the complementary nature of markets we serve will only further strengthen the excellent relationships we have with our suppliers and customers.”

*** FLIR Systems, Inc. (Nasdaq: FLIR) announced that it has acquired Prox Dynamics AS, a leading developer and manufacturer of nano-class unmanned aerial systems (UAS) for military and para-military intelligence, surveillance, and reconnaissance applications, for approximately $134 million in cash.

Based in Oslo, Norway and founded in 2007 by pioneers in nano helicopter technologies, Prox Dynamics develops, manufactures, and distributes aerial sensors that are revolutionarily small, light, and covert surveillance systems. Prox Dynamics' Personal Reconnaissance System (PRS) features their Black Hornet aerial sensor and a hand controller, a system that is pocket sized and hand-launched by a soldier in the field, enabling a significant advantage in situational awareness and mission planning. The Black Hornet aerial sensor utilizes FLIR's Lepton micro thermal camera, visible spectrum cameras, advanced low-power rotor technology, and proprietary software for flight control, stabilization, and communications. The Black Hornet helicopter is one of the lightest, stealthiest, and safest drones in the market, offering a highly advanced, lifesaving surveillance solution for traditional military forces and special operations forces. Weighing less than one ounce, the Black Hornet helicopter can fly for up to 25 minutes at line-of-sight distances of up to one mile.

The addition of the Prox Dynamics business will augment FLIR's Surveillance segment by extending FLIR's Airborne sensor product line and fully leveraging Lepton technology. FLIR intends to invest in optimizing the PRS platform to further enhance the range, cost, flexibility, and performance of the system. The Prox Dynamics team will benefit from close interaction with FLIR's thermal sensor development group as well as the ability to leverage FLIR's brand, distribution, and customer support infrastructure to better serve a global base of users. The business will become FLIR's Unmanned Aerial Systems (UAS) line of business operating within the Surveillance segment.

"This acquisition adds a unique unmanned aerial systems capability to our portfolio. The Prox Dynamics team has created a highly-differentiated solution, incorporating our Lepton sensor, for advanced intelligence, surveillance, and reconnaissance that fits well with our vision for growth for our Surveillance segment," said Andy Teich, President and CEO of FLIR. "The team at Prox Dynamics operates with a commercial mindset, which is a great fit for FLIR's 'commercially developed, military qualified,' or 'CDMQ,' operating philosophy. We are excited to welcome the Prox Dynamics team to FLIR and look forward to working together to further advance this remarkable system capability."

FLIR anticipates the business and related transaction costs will be approximately $0.01 dilutive to its 2016 earnings per share.

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