Notable Mergers and Acquisitions 8/12: (KBR) (MDLZ) (HPE)/(SGI) (CVRR)/(DK)

August 12, 2016 9:39 AM EDT

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*** KBR, Inc. (NYSE: KBR) announced it has entered into a definitive agreement to acquire Honeywell Technology Solutions, Inc. (HTSI), a leading professional, technical and mission support services organization providing an array of mission-critical services and customized solutions throughout the world primarily to U.S. government agencies.

HTSI is headquartered in Columbia, MD and has approximately 3,550 employees operating primarily in the U.S., the Middle East and Asia. Through its three business lines -- Space, Mission Support, and Security Solutions -- HTSI offers services throughout the satellite mission lifecycle, military equipment prepositioning and logistics services, and cyber security capabilities to protect customers' digital information and physical security. HTSI's primary customers include NASA, the U.S. Department of Defense, and the U.S. Intelligence community.

HTSI will be integrated into KBRwyle, a wholly owned subsidiary of KBR, to create a total capability government services organization that spans the spectrum of the life-cycle of aerospace and defense programs from research and development, through test and evaluation, to operations, maintenance, and field logistics. HTSI's specialized, technical expertise provides KBR with complete lifecycle service capabilities, including cyber security and IT capabilities. The addition of HTSI secures KBR's position as a leader in high end technical engineering and mission support, logistics and equipment maintenance, and provides access to new opportunities from aerospace logistics to core services for intelligence clients.

"This acquisition is in-line with our previously announced strategy to expand our government service offerings into higher end technical services that tend to carry increased margins and reduced levels of risk," said Stuart Bradie, President and CEO of KBR, Inc.

"Adding HTSI's highly specialized and differentiated offerings to KBR's government services portfolio grows our capabilities as well as our geographic footprint, and provides us access to new funding streams as well as an outstanding record of past performance. The inclusion of HTSI further diversifies KBR's offerings and provides more balance between the Engineering & Construction (E&C) segment of our business and the rest of KBR's business which is a combination of our Government Services (GS) and the Technology & Consulting (T&C) businesses. This balance provides KBR with a strong base load of high value, low-risk, more predictable and long-term earnings capabilities to balance the more cyclical E&C sector while expanding our ability to share resources between the segments," Bradie continued.

Bradie also added: "With HTSI, we create additional synergies between our businesses, specifically between the project and program management skills in E&C and GS providing further opportunity to transfer personnel between the two. Further, with the addition of HTSI, we continue to lower KBR's risk profile, with further opportunity for higher margin, cost-reimbursable work in GS."

The transaction is expected to be accretive to KBR's earnings per share in 2017. Annual estimated revenues for HTSI are approximately $600 million.

The transaction price to KBR is $266 million, after adjustments for approximately $34 million of acquired tax benefits, and subject to other customary adjustments, including for net working capital of HTSI. The transaction will initially be funded through KBR's existing line of credit facility.

The transaction has been unanimously approved by the KBR Board of Directors and is subject to certain regulatory approvals and customary closing conditions. The transaction is expected to close by the end of October 2016.

*** Mondelēz International (Nasdaq: MDLZ) announced an agreement to purchase from Burton’s Biscuit Company the license that enables the company to manufacture, market and sell Cadbury-branded biscuits around the world, including in the UK, France, Ireland, North America and Saudi Arabia, subject to regulatory approval.

“Ownership of the Cadbury biscuits license offers us exciting opportunities to accelerate global growth and innovation, as we expand our leading position in biscuits, globally and in Europe,” said Hubert Weber, Executive Vice President and President, Mondelēz Europe. “The transaction will help us to unify and expand our global Cadbury biscuits portfolio in key markets and enable us to explore delicious new products by using the best of our chocolate and biscuit innovation platforms.”

Mondelēz International and Burton’s Biscuit Company have agreed that Cadbury-branded biscuits will continue to be manufactured in Burton’s factories by their employees under a co-manufacturing agreement. The companies have agreed not to disclose financial terms of the transaction.

*** SGI (Nasdaq: SGI), a global leader in high-performance solutions for compute, data analytics, and data management, today announced that it has signed a definitive agreement to be acquired by Hewlett Packard Enterprise (NYSE: HPE) for $7.75 per share in cash, a transaction valued at approximately $275 million, net of cash and debt.

SGI products and services are used for high-performance computing (HPC) and big data analytics in the scientific, technical, business and government communities to solve challenging data-intensive computing, data management and virtualization problems. The company has approximately 1,100 employees worldwide, and had revenues of $533 million in fiscal 2016.

"At HPE, we are focused on empowering data-driven organizations," said Antonio Neri, executive vice president and general manager, Enterprise Group, Hewlett Packard Enterprise. "SGI's innovative technologies and services, including its best-in-class big data analytics and high performance computing solutions, complement HPE's proven data center solutions designed to create business insight and accelerate time to value for customers."

The explosion of data -- in volume and variety, across all sectors and applications -- is driving organizations to adopt high-end computing systems to run compute-intensive applications and big data workloads that traditional infrastructure solutions cannot handle. This includes investments in big data analytics to quickly and securely process massive data sets and enable real-time decision making. High-end systems are being used to advance research in weather, genomics and life sciences, and enhance cyber defenses at organizations around the world.

As a result of this demand, according to International Data Corporation (IDC), the $11 billion HPC segment is expected to grow at an estimated 6-8% CAGR over the next three years(1), with the data analytics segment growing at over twice that rate.

SGI's highly complementary portfolio, including its in-memory high performance data analytics technology, will extend and strengthen HPE's current leadership position in the growing mission critical and high performance computing segments of the server market. The combined HPE and SGI portfolio, including a comprehensive services capability, will support private and public sector customers seeking larger supercomputer installations, including U.S. federal agencies as well enterprises looking to leverage high-performance computing for business insights and a competitive edge.

"Our HPC and high performance data technologies and analytic capabilities, based on a 30+ year legacy of innovation, complement HPE's industry-leading enterprise solutions. This combination addresses today's complex business problems that require applying data analytics and tools to securely process vast amounts of data," said Jorge Titinger, CEO and president, SGI. "The computing power that our solutions deliver can interpret this data to give customers quicker and more actionable insights. Together, HPE and SGI will offer one of the most comprehensive suites of solutions in the industry, which can be brought to market more effectively through HPE's global reach."

HPE and SGI believe that by combining complementary product portfolios and go-to-market approaches they will be able to strengthen the leading position and financial performance of the combined business.

Overall, HPE expects the acquisition to be neutral to earnings in the first full year following close and accretive thereafter.

The transaction is expected to close in the first quarter of HPE's fiscal year 2017, subject to regulatory approvals and other customary closing conditions.

*** CVR Energy (NYSE: CVI), which is controlled by activist investor Carl Icahn, is preparing to make an offer for Delek US Holdings (NYSE: DK), according to the New York Post. Icahn may also be building a personal stake in Delek. The report also said Icahn is planning to take full ownership of CVR Energy.

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