Notable Mergers and Acquisitions 11/7: (WIN)/(ELNK) (NILE) (UPS) (NSIT)/(DTLK)
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Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each EarthLink share owned. This ratio represents a 13 percent premium to the average exchange ratio of 0.721x over the month ended Nov. 3, 2016, the most recent unaffected trading day. Windstream expects to issue approximately 93 million shares of stock valued at approximately $673 million, based on the company’s closing stock price on Nov. 4, 2016. Upon closing of the transaction, Windstream shareholders will own approximately 51 percent and EarthLink shareholders will own approximately 49 percent of the combined company.
The combined company will have increased scale and scope giving it the ability to leverage best practices across a broader platform, and offer customers expanded products, services and enhanced enterprise solutions. The combination will result in an extensive national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed services, voice, internet and other value-added services. Customers will also benefit from combining Windstream’s scale in the Enterprise segment and EarthLink’s successful launch of SD-WAN.
“The combination with EarthLink further advances Windstream’s strategy by creating a stronger, more competitive business to serve our customers while increasing free cash flow and reducing leverage,” said Tony Thomas, president and chief executive officer at Windstream. “With this transaction, we are combining two highly complementary organizations with closely aligned operating strategies and business unit structures. We look forward to working with the talented EarthLink team to create significant benefits and drive value for all of our stakeholders.”
“We are pleased to join forces with a company that shares our core values and operating philosophies, and whose strategy complements our own,” said EarthLink Chief Executive Officer and President Joe Eazor. “In our work with Tony and his team, it’s become clear that we are two companies on parallel paths. We’ve both made significant progress as evidenced by our improving financial results and strengthening balance sheets. Now is the right time for us to come together. We look forward to working with the Windstream team to better serve our customers in a world that is becoming more network-centric every day.”
Compelling Strategic and Financial Benefits
- Strengthens operating position through complementary networks and increased scale: The combined company will have a robust nationwide network and deep footprint of 145,000 fiber route miles, including strategic routes located in the Southeast and Northeast U.S. In addition, Windstream’s assets add significant value to EarthLink’s existing business by providing cost savings and increased sales opportunities.
- Creates net present value of approximately $900 million from synergies, plus tax benefits: The companies have identified more than $125 million in annual operating and capital expense synergies that are expected to be fully realized within 36 months of closing. Approximately $50 million of these synergies are expected to be achieved within 12 months of closing and an incremental $50 million are expected to be achieved within 24 months. The remaining $25 million are expected to be realized within 36 months. The $125 million of synergies has a net present value of $900 million, representing value creation of more than $4.70 per Windstream share and $3.85 per EarthLink share after accounting for integration costs. These synergies will come primarily from the optimization of network and SG&A costs, the reduction of public company costs and the ability to leverage best practices and combined operating scale to drive efficiency. In addition to the synergies from operations, the combined company will benefit from EarthLink’s net operating losses, which are expected to have an estimated net present value of $95 million at closing.
- Enhances balance sheet and increases free cash flow: Including run-rate synergies, on a pro forma basis for the 12 months ended Sept. 30, 2016, the combined company would have a net leverage ratio of 3.2x. Further, the transaction will be significantly accretive to Windstream’s adjusted free cash flow allowing greater financial flexibility for strategic network investments and debt reduction while increasing dividend coverage.
Management Team, Board of Directors and Headquarters
After the transaction closes, Tony Thomas will serve as president and chief executive officer and Bob Gunderman will serve as chief financial officer of the combined company. Key EarthLink management members are expected to join the combined company to bring best-in-class talent and ensure a smooth integration.
Upon close, three of EarthLink’s existing directors will join the current Windstream board of directors, bringing the total number of directors of the combined company’s board to twelve.
The combined company, which will retain the Windstream name, will be headquartered in Little Rock, Ark., and maintain offices in key U.S. markets.
Dividend Practice and Debt Financing
Consistent with Windstream’s current dividend practice, the board of directors expects to maintain Windstream’s annual dividend of $0.60 per share after the transaction closes, providing meaningful benefits to shareholders in the form of long-term capital returns.At the time of closing, Windstream intends to refinance EarthLink’s gross debt of approximately $436 million.
Approvals and Anticipated Closing
The transaction is expected to close in the first half of 2017. It is subject to the satisfaction of certain customary conditions, including approval by the Federal Communications Commission, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable state-level regulatory approvals and approval by Windstream and EarthLink shareholders.
J.P. Morgan is acting as lead financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to Windstream in the transaction. Barclays also acted as financial adviser and delivered a fairness opinion to the Windstream board of directors in conjunction with the transaction.
Foros is acting as lead financial adviser and has delivered a fairness opinion to EarthLink’s board of directors. Goldman Sachs & Co. is also acting as financial adviser to EarthLink’s board of directors. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Troutman Sanders LLP are acting as legal advisers to EarthLink in the transaction.
*** Leading online jeweler Blue Nile (Nasdaq: NILE), announced that it has entered into a definitive agreement to be acquired by an Investor Group comprised of funds managed by Bain Capital Private Equity and Bow Street LLC (collectively the “Investor Group”).
The terms of the all-cash deal provide substantial value to Blue Nile’s stockholders. The Investor Group will acquire 100 percent of the outstanding shares of Blue Nile common stock for approximately $500 million. Blue Nile stockholders will receive $40.75 in cash per share, representing a premium of approximately 34 percent over Blue Nile’s closing price on November 4, 2016.
“Since its inception, Blue Nile’s guiding principle has been to provide value to its customers, suppliers, and shareholders, and this transaction provides tremendous value to all,” said Blue Nile Chairman, CEO and President Harvey Kanter. “Blue Nile will continue its innovative drive that has disrupted the diamond industry and made us the smartest, easiest, and most pressure-free way for consumers to buy a diamond.”
“This is an opportunity to acquire a true disruptor in a fundamentally attractive and growing segment of the diamond industry,” said Ryan Cotton, a Managing Director at Bain Capital Private Equity. “Blue Nile provides a clearly superior consumer value proposition and offers a convenient delivery model that enables choice and selection in a no-pressure environment. We believe the company will continue to grow as educated consumers continue to seek easy and convenient shopping experiences that deliver transparent pricing and enhanced value.”
“Blue Nile is a unique business with a strong platform in an industry that is rapidly evolving and migrating online,” said Howard Shainker, Managing Partner at Bow Street. “We are excited to work alongside Blue Nile management and Bain Capital to execute on the Company’s strategy.”
Blue Nile’s Board of Directors unanimously approved the deal and recommended that stockholders vote their shares in favor of the transaction. Blue Nile will become a privately-held company and continue to be headquartered in Seattle, WA. Closing of the deal is subject to customary closing conditions, including the approval of Blue Nile’s stockholders and required regulatory approvals. There are no financing conditions associated with the proposed acquisition.
The transaction is expected to close in the first calendar quarter of 2017. Under the terms of the merger agreement, Blue Nile may solicit alternative acquisition proposals from third parties during a 30-day "go-shop" period, following the date of execution of the merger agreement.
BofA Merrill Lynch is serving as exclusive financial advisor to Blue Nile, and Wilson Sonsini Goodrich & Rosati is serving as its legal advisor. Goldman Sachs & Co is providing debt for the transaction, and Kirkland & Ellis LLP is serving as legal advisor to the Investor Group.
Concurrent with this press release, Blue Nile announced in a separate earnings press release financial results for the third quarter of 2016. For the quarter ended October 2, 2016, Blue Nile’s net revenues in accordance with Generally Accepted Accounting Principles (“GAAP”) were $105.1 million and net income totaled $1.3 million, or $0.11 per diluted share.
*** UPS (NYSE: UPS) has entered into a definitive purchase agreement to acquire Marken, a global provider of supply chain solutions to the life sciences industry. The transaction, which provides UPS with growth opportunities across the life sciences customer base, is expected to close by Dec. 31, subject to customary conditions and regulatory approvals. Terms of the acquisition were not disclosed.
Clinical trials require strict regulatory compliance, streamlined logistics services and global reach. Marken operates a global network of clinical supply chain services to meet the increasingly complex demands of its clients. The acquisition of Marken follows multiple UPS acquisitions that have expanded the company’s healthcare logistics services portfolio.
“Healthcare logistics is a strategic market for UPS. Our acquisition of Marken strengthens our portfolio and demonstrates our commitment to customers,” said Teresa Finley, UPS Chief Marketing and Business Services Officer.
“We plan to offer new solutions to our customers and generate further growth opportunities for UPS.”
“We are excited to join the UPS organization,” said Wes Wheeler, Marken’s Chief Executive Officer. “UPS’s capabilities, particularly in mature markets, will provide many opportunities for us to enhance our service offerings in clinical trials logistics.
With UPS, we will improve our efficiency, while continuing to provide our clients with the high-touch, personalized services that they have come to expect from us.”
Wheeler will continue to lead the Marken business, which will operate as a wholly-owned subsidiary of UPS.
Pharmaceutical companies, clinical research organizations and contract manufacturers rely on Marken for collection and transportation of clinical trial material and investigational medicinal products to 49,000 clinical trial sites, as well as the shipment of biological samples from these sites to central laboratories. These shipments are time- and temperature-sensitive, and their rapid, on-spec delivery is a key factor in the treatment of patients and the success of the clinical trial. The company has more than 650 employees with an asset-light operating structure and 44 locations worldwide, including 10 depots that are compliant with Good Manufacturing Practices (GMP). Marken provides high-touch service to pharmaceutical companies, manufacturers and contract research organizations engaged in all phases of the clinical trials process.
“UPS is focused on the logistics complexity of clinical trials, and the acquisition fits well into our long-term growth plans in the biopharma segment,” Finley said. “Marken’s significant industry expertise and flexible network, combined with UPS’s vast integrated global air and ground networks, will provide the life sciences industry with an attractive portfolio of global logistics options.”
UPS offers a broad array of specialized services for healthcare and life science companies. In July, UPS announced expanded logistics capabilities for clinical trials. The company’s network includes temperature-sensitive storage and transportation (from ambient and controlled-room temperature, to frozen and cryogenics), 24-hour monitoring and security.
UPS now has more than 100 healthcare-dedicated facilities with 60 GMP-compliant locations strategically positioned within global markets. Shippers have the ability to customize solutions from the UPS Temperature True™, UPS Proactive Response™, UPS WorldShip™, UPS Quantum View™ and other portfolios that leverage expertise in packaging, labeling, monitoring and storage capabilities.
J.P. Morgan served as the financial advisor to UPS. UBS Investment Bank acted as the financial advisor to Marken.
*** Insight Enterprises (Nasdaq: NSIT), an Intelligent Technology Solutions provider (“Insight” or “the Company”), and Datalink Corporation (Nasdaq: DTLK), a leading provider of IT services and enterprise data center solutions (“Datalink”), have entered into a definitive merger agreement under which Insight will acquire Datalink for $11.25 per share in cash, representing a 19% premium to Datalink’s closing share price on November 4, 2016. The transaction implies an equity purchase price of approximately $258 million and an enterprise value of approximately $196 million (net of cash and debt acquired).
Datalink is a premier provider of IT services and solutions headquartered near Minneapolis, Minn., with offices in 35 locations in the United States and approximately 570 teammates. Datalink delivers value to Fortune 1000 and public sector clients by providing complete IT solutions that include hardware, software and services to create business impact for their clients.
Insight expects to achieve approximately $20 million in run-rate cost savings within two years after closing, primarily related to corporate efficiencies, duplicative functions and IT system integration. The transaction is expected to be accretive to 2017 adjusted earnings per share (excluding transaction and integration expenses).
“The data center is at the core of our clients’ strategic investments. With the increasing number of options from converged to hyper-converged solutions as well as hybrid cloud options, the landscape has become more complex and clients are looking for help as they evaluate alternatives. The acquisition of Datalink is a significant step in strengthening the foundation of our data center practice as we add the expertise and depth of the Datalink team to our portfolio. We are excited about the combination and look forward to welcoming the Datalink team to our organization,” said Ken Lamneck, CEO of Insight.
“The strength of Datalink’s world-class data center capabilities combined with Insight’s scale and breadth of offerings will bolster our ability to deliver solutions for complex business problems across an expanded footprint of clients. This combination gives our team significant new opportunities to help more organizations elevate and transform their IT,” said Shawn O’Grady, Chief Operating Officer of Datalink.
The combination of the two organizations brings a full complement of end-to-end technology solutions in supply chain, application and data center architecture, implementation and managed solutions. “Our clients, partners and teammates will experience exciting opportunities for growth and development as a result of this acquisition,” said Steve Dodenhoff, president of Insight’s US business.
“Our decision to join forces with Insight is based on our shared commitment to deliver best in class technology, operations and services to meet our clients’ need for IT transformation. Our enterprise solutions platform, sophisticated offerings, talented professionals and our client base will bring a rich dimension to the Insight organization,” said Paul Lidsky, CEO of Datalink.
Terms and Financing
The transaction is subject to certain closing conditions, including regulatory approvals and approval of Datalink’s shareholders, and is expected to close in the first quarter of 2017.
Insight intends to finance the transaction through a combination of cash on hand and borrowings under its existing revolving credit facilities.
J.P. Morgan Securities LLC is acting as financial advisor to Insight. Insight’s legal advisor is Sullivan & Cromwell LLP.
Raymond James & Associates is acting as financial advisor and Faegre Baker Daniels LLP is acting as legal advisor to Datalink.
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Related EntitiesUBS, JPMorgan, Goldman Sachs, Raymond James, Merrill Lynch, Bank of America, Bain Capital, Barclays, Dividend, Notable Mergers and Acquisitions, Earnings, Definitive Agreement
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