Notable Mergers and Acquisitions 12/1: (PH)/(CLC) (KZ) (WAB) (CA)
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Under the terms of the agreement, Parker will purchase all of the outstanding shares of CLARCOR for $83.00 per share in cash. This represents a premium of approximately 17.8 percent to CLARCOR’s closing share price on November 30, 2016 and a premium of approximately 29.2 percent to CLARCOR’s volume weighted average share price over 90 days and a premium of approximately 17.1 percent to CLARCOR’s all-time and 52-week high. The transaction has been unanimously approved by the Board of Directors of each company.
CLARCOR, headquartered in Franklin, TN, is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products with annual sales of approximately $1.4 billion and 6,000 employees worldwide. CLARCOR adds a broad array of industrial air and liquid filtration products and technologies to Parker’s filtration portfolio.
“This strategic transaction is consistent with our stated objective to invest in businesses that accelerate Parker towards our goal of top quartile financial performance,” said Tom Williams, Chairman and Chief Executive Officer of Parker. “The combination of Parker and CLARCOR is highly complementary and offers a great opportunity to combine our strength in international markets and OEMs with CLARCOR’s strong U.S. presence and high percentage of recurring sales in the aftermarket.”
Williams added, “We also believe our cultures and values are an excellent match. CLARCOR, like Parker, prides itself on a long and successful history that reinforces entrepreneurialism and innovation. We’re confident that the goals and measures outlined in the Win Strategy™ will guide a seamless integration and generate significant synergies. This transaction delivers immediate cash value to CLARCOR shareholders and is expected to create sustained value for Parker shareholders. Together, Parker and CLARCOR will advance our commitment to engineer the success of our customers and team members and enhance shareholder value.”
“Joining Parker provides a terrific opportunity to accelerate our mission of making our world cleaner and safer while delivering an immediate and substantial cash premium to our shareholders and bolstering the confidence of our customers,” said Chris Conway, Chairman, President and Chief Executive Officer of CLARCOR. “We believe Parker is an ideal fit for CLARCOR as it shares both our culture and our passion for developing solutions to our customers’ complex filtration challenges. Becoming part of Parker, with its significant systems expertise and stellar reputation for quality and innovation, should only enhance and accelerate our strategic initiatives and technology development efforts, expand our growth plans and provide new opportunities for many of our employees. We are looking forward to working together with the Parker team to ensure a smooth combination of our businesses and operations and bring these goals to fruition.”
Compelling Financial and Strategic Benefits
- Significant Operating Synergies: Parker expects to realize annual run rate cost synergies of approximately $140 million three years after closing through a variety of initiatives, including the consolidation of the companies’ supply chains and a successful implementation of Parker’s Win Strategy™ throughout CLARCOR’s operations.
- Accretive to Parker’s Cash Flow, EPS and EBITDA Margin: The transaction is expected to be accretive to Parker’s Cash Flow, EPS and EBITDA margins, after adjusting for one-time costs.
- Significantly Enhances Parker’s Filtration Group: The combination of the companies’ complementary filtration offerings strengthens Parker’s position in a growing and resilient business.
- Strong Recurring Revenue Opportunities: Parker expects to benefit from increased recurring revenue streams as approximately 80 percent of CLARCOR’s revenue is generated through aftermarket sales. The addition of CLARCOR is expected to significantly increase recurring revenue in Parker’s Filtration Group.
- Enhances Parker’s Product Portfolio with Leading Brands: With the addition of CLARCOR’s leading and respected brands, including CLARCOR, Baldwin, Fuel Manager®, PECOFacet, Airguard, Altair, BHA®, Clearcurrent®, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator, Parker expects to be better positioned to deliver enhanced and expanded filtration solutions to its customers. In addition, this transaction strengthens Parker’s systems capabilities and enhances the rest of Parker’s technologies, enabling the company to provide even better motion and control systems solutions to customers.
- Complementary Products, Markets and Geographic Presence: Parker expects to be able to leverage both companies’ complementary filtration technologies to further accelerate growth.
Organization and Leadership
Upon closing of the transaction, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Williams added, “We look forward to working collaboratively with CLARCOR team members to jointly build on CLARCOR’s great history. CLARCOR is a premier filtration company due to strong leadership, a great culture that is highly complementary to Parker’s, and an impressive breadth of products and technologies with talented team members contributing daily to its success.”
Financing and Dividend
Parker plans to finance the transaction using cash and new debt. Following completion of the transaction, Parker expects to maintain a high investment grade credit profile. Parker intends to make debt reduction a priority in the near term.
The transaction is not expected to impact Parker’s dividend payout target of approximately 30 percent of net income, while maintaining its record of annual dividend increases.
Approvals and Time to Closing
The transaction is expected to be completed by or during the first quarter of Parker’s fiscal year 2018 and is subject to customary closing conditions, including approval by CLARCOR's shareholders and receipt of applicable regulatory approvals.
Morgan Stanley & Co. LLC is acting as financial advisor to Parker and Jones Day and Thompson Hine, LLP are acting as legal advisors. Goldman, Sachs & Co. is acting as financial advisor to CLARCOR and Bass, Berry & Sims PLC and Baker & McKenzie LLP are acting as legal advisors.
*** KongZhong Corporation (Nasdaq: KZ) announced that it has entered into a definitive agreement and plan of merger (the "Merger Agreement") with Linkedsee Limited ("Parent") and Wiseman International Limited ("Merger Sub"), a wholly owned subsidiary of Parent, pursuant to which the Company will be acquired by an investor consortium in an all-cash transaction with a transaction value of approximately $299 million.
Pursuant to the terms of the Merger Agreement, at the effective time of the merger, each ordinary share of the Company issued and outstanding immediately prior to the effective time of the merger (each a "Share") will be cancelled in exchange for the right to receive $0.18875 in cash, and each American depositary share (each an "ADS") of the Company, representing 40 Shares, will be cancelled in exchange for the right to receive $7.55 in cash, except for (a) (i) Shares (including Shares represented by ADSs) owned by Mr. Leilei Wang, Chairman and Chief Executive Officer of the Company ("Mr. Wang") and certain of his affiliates, who will be rolled over in the transaction, (ii) Shares (including Shares represented by ADSs) owned by Parent, Merger Sub, the Company or any of their respective wholly-owned subsidiaries, and (iii) Shares (including Shares represented by ADSs) reserved but not yet allocated by the Company for settlement upon the exercise or vesting of any Company share awards, each of which will be cancelled without any conversion thereof or consideration paid therefor, and (b) Shares held by shareholders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the merger pursuant to Section 238 of the Companies Law of the Cayman Islands (the "Dissenting Shares"), which will be cancelled in exchange for the right to receive the payment of fair value of the Dissenting Shares in accordance with Section 238 of the Companies Law of the Cayman Islands.
The merger consideration represents a premium of 17.8% to the closing price of the Company's ADSs on August 24, 2016, the last trading day prior to the Company's announcement of its receipt of a revised "going-private" proposal, a premium of 29.0% to the average closing price of the Company's ADSs during the 90 trading days prior to its receipt of the revised "going-private" proposal, and a premium of 13.4% to the closing price of the Company's ADSs on November 30, 2016, the last trading day prior to the this announcement.
The investor consortium comprises, among others, Mr. Wang, Gongqingcheng Wujiang Xingyao Investment Management Partnership (Limited Partnership), Hexie Chengzhang Phase II (Yiwu) Investment Center (Limited Partnership) and/or their respective affiliates.
The Company's board of directors (the "Board"), acting upon the unanimous recommendation of a committee of independent and disinterested directors established by the Board (the "Special Committee"), approved the Merger Agreement and the merger and resolved to recommend that the Company's shareholders vote to authorize and approve the Merger Agreement and the merger. The Special Committee negotiated the terms of the Merger Agreement with the assistance of its independent financial and legal advisors.
The merger is subject to customary closing conditions including the approval of the Merger Agreement by the affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy at a meeting of the Company's shareholders convened to consider the approval of the Merger Agreement and the merger. Mr. Wang, his affiliates, IDG-Accel China Growth Fund II L.P., and IDG-Accel China Investors II L.P. have agreed to vote all of the Shares and ADSs they beneficially own, which represent approximately 24.7% of the voting rights attached to the outstanding Shares as of the date of the Merger Agreement, in favor of the authorization and approval of the Merger Agreement and the merger. If completed, the merger will result in the Company becoming a privately-owned company and its ADSs will no longer be listed on the NASDAQ Stock Market.
Duff & Phelps, LLC is serving as independent financial advisor to the Special Committee, Skadden, Arps, Slate, Meagher & Flom LLP is serving as independent U.S. legal counsel to the Special Committee and Maples and Calder LLP is serving as independent Cayman Islands legal counsel to the Special Committee.
Davis Polk & Wardwell LLP is serving as U.S. legal counsel to the investor consortium and Walkers is serving as Cayman Islands legal counsel to the investor consortium.
Sullivan & Cromwell LLP is serving as U.S. legal counsel to the Company.
*** Wabtec Corporation (NYSE: WAB) has acquired majority ownership of Faiveley Transport S.A., after completing the purchase of the Faiveley family’s stake, which represented about 51% of the company’s shares outstanding. Wabtec plans to launch a tender offer for the remaining public shares in December.
Faiveley Transport is a leading global provider of value-added, integrated systems and services for the railway industry with annual sales of about $1.2 billion.
Albert J. Neupaver, executive chairman of Wabtec, said: “The acquisition of Faiveley Transport is an excellent strategic fit, expanding our geographic presence, broadening our product and service capabilities, and strengthening our technology and innovation initiatives. The combination of two rail industry leaders creates compelling growth opportunities and synergies, and strengthens the diversity of our revenue base. We’re pleased to welcome the Faiveley family as long-term Wabtec shareholders with representation on our Board of Directors.”
Wabtec acquired the family stake for about $212 million in cash and 6.3 million shares of Wabtec common stock. Through the tender offer, the public shareholders of Faiveley Transport will have the option to elect to receive €100 per share of Faiveley Transport in cash or 1.1538 Wabtec common shares per share of Faiveley Transport. The total purchase price for 100% of the shares of Faiveley Transport is about $1.7 billion, including assumed debt and net of cash acquired. The $1.2 billion cash portion of the transaction will be funded from about $325 million of cash on hand, the net proceeds from a recent $750 million senior notes offering and the company’s existing revolving credit facility and term note.
The strategic combination of Wabtec and Faiveley Transport creates one of the world’s leading rail equipment companies, with revenues of about $4.2 billion and a presence in all key transit and freight rail regions worldwide. Wabtec now expects to realize at least $50 million in annual pre-tax synergies from the combination by year three, and the transaction will be accretive to Wabtec’s earnings per diluted share in 2017.
Raymond T. Betler, Wabtec’s president and chief executive officer, said: “Our combination with Faiveley Transport brings Wabtec many complementary products, a strong presence in the European and Asia Pacific transit industries, and solid relationships with blue-chip, global customers. Together, we will be a more efficient global competitor, with a focus on technology, quality and customer service, and a singular mission: to help customers improve their safety, productivity, and efficiency.”
Stéphane Rambaud-Measson, chairman of the Management Board and chief executive officer of Faiveley Transport, has joined Wabtec as president and CEO of its Transit Group and as a corporate executive vice president, reporting to Betler. Also, Philippe Alfroid and Erwan Faiveley were elected as new members of the Wabtec Board of Directors.
Rambaud-Measson said: “Wabtec’s Transit Group, under the Faiveley Transport brand name, will pursue its objective to be a global leader in railway equipment and services. The passenger transit business typically provides a steady flow of new projects and aftermarket growth opportunities, and we are well positioned in key global markets such as Europe and Asia Pacific.”
*** CA Technologies (Nasdaq: CA) announced it has signed a definitive agreement to acquire Automic Holding GmbH, a leader in business automation software that drives competitive advantage by automating IT and business processes. The transaction, valued at approximately 600 million euros, net of cash and cash equivalents acquired, has been unanimously approved by both Boards of Directors, and is expected to close in the fourth quarter of CA’s fiscal 2017. Headquartered in Vienna, Austria, Automic has approximately 600 employees across Europe, North America and Asia.
With Automic, CA will add new cloud-enabled automation and orchestration capabilities across the portfolio and increase its reach into the European market. Automic’s European presence coupled with CA’s worldwide expertise and broad portfolio, offers customers a global solution that complements their existing technology investments to address the challenges of automation across the enterprise.
CA will add Automic’s automation and orchestration capabilities to its portfolio to give customers options that address their IT operations and DevOps needs on-premise, in the cloud and hybrid cloud environments. With real-time analytics incorporated into the end-to-end platform approach, customers will benefit from increased business agility with solutions that move from IT-centric task automation to business-centric intelligent automation and orchestration.
“Global businesses need the flexibility and agility to move workloads to the most appropriate locations across heterogeneous hybrid cloud environments, with continuous availability, to stay ahead of their competition,” said Ayman Sayed, president and chief product officer, CA Technologies. “With the acquisition of Automic, we will deliver automation, scale work flows and business processes while reducing costs and greatly improving accuracy. This level of intelligent automation will give our customers the insights to achieve more agility and realize business value. We are pleased to welcome Automic, which is profitable and growing at a healthy clip, into CA. Strategically, it accelerates our position with its cloud enabled platform. Operationally, it expands our reach across Europe. And, financially, it meets our rigorous hurdle rates while providing the highest likely return on offshore cash.”
Automic’s automation technology underpins digital transformation by helping enterprises move from siloed automation to intelligent and orchestrated automation with real-time analytics.
“Enterprise customers are engaging with vendors to support their digital transformation initiatives to increase velocity, reliability and scalability among their businesses processes,” said Todd DeLaughter, Chief Executive Officer, Automic. “Together with CA Technologies, we will help organizations further propel their intelligent automation capabilities to the next level, driving the agility and speed demanded in this era of Digital Transformation.”
Founded in 1985, Automic has offices in Vienna, Paris, Asia Pacific Japan (APJ), and Bellevue, Washington and serves a wide range of customers in the energy, financial services, healthcare, manufacturing, retail and telecommunications sectors.
Foros acted as financial advisor to CA Technologies on this acquisition.
Assuming the transaction closes in early January, CA’s preliminary expectation compared with its previous fiscal year 2017 guidance, is that the acquisition will:
- Add one-half percentage point of revenue, both as reported and in constant currency
- Adversely affect GAAP and non-GAAP total company operating margin by 1 percentage point and will primarily impact the Enterprise Solutions segment
- Be modestly dilutive to cash flow from operations and GAAP and non-GAAP diluted earnings per share, both as reported and in constant currency
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