Notable Mergers and Acquisitions 8/15: (MAA)/(PPS) (XYL) (SKUL) (GWR)/(PWX)

August 15, 2016 10:04 AM EDT

Get the Pulse of the Market with's Pulse Picks. Get your Free Trial here.

*** MAA (NYSE: MAA) and Post Properties, Inc. (NYSE: PPS) announced that they have entered into a definitive merger agreement under which Post Properties, Inc. will merge with and into MAA, creating a Sunbelt-focused, publicly traded, multifamily REIT with enhanced capabilities to deliver superior value for residents, shareholders and employees. The combined company is expected to have a pro forma equity market capitalization of approximately $12 billion and a total market capitalization of approximately $17 billion.

Under the terms of the agreement, each share of Post common stock will be converted into 0.71 shares of newly issued MAA common stock. On a pro forma basis, following the merger, former MAA equity holders will hold approximately 67.7 percent of the combined company's equity, and former Post equity holders will hold approximately 32.3 percent. The all-stock merger is intended to be a tax-deferred transaction. The merger is subject to customary closing conditions, including receipt of the approval of a majority of both the MAA and Post shareholders. The parties currently expect the transaction to close during the fourth quarter of 2016.

The merger brings together two highly complementary multifamily portfolios with a combined asset base consisting of approximately 105,000 multifamily units in 317 properties. The combined company will maintain strategic diversity across urban and suburban locations in large and secondary markets within the high-growth Sunbelt region of the U.S. The combined company's ten largest markets by unit count will be Atlanta, Dallas, Austin, Charlotte, Raleigh, Orlando, Tampa, Fort Worth, Houston and Washington, DC.

Commenting on the merger, H. Eric Bolton, Jr., MAA Chairman and CEO, said, "The combination of MAA and Post will establish the leading apartment real estate platform focused on the high-growth Sunbelt region of the country with significant competitive advantages to drive superior value for our shareholders, residents and employees. The combined company will capture a broader market and submarket footprint, with improved rental price-point diversification that will support an enhanced level of performance over the full real estate cycle. Further, the Post development platform, with a strong history of value accretive new development, supported by the newly combined company platform, will expand external growth and accretive capital recycling opportunities for MAA."

Said David P. Stockert, Post's CEO and President, "This merger redefines the combined company in terms of product, capability and capacity for consistent growth. Its unique position in the apartment REIT space and strength of its financial position should drive an advantageous cost of capital and value for shareholders of both companies. Post shareholders are receiving an attractive value for our assets and business and a 24 percent increase in the dividend, while preserving the continuing opportunity to participate in the combined company's ongoing success."

Leadership and Organization Both the Board of Directors of MAA and Board of Directors of Post have unanimously approved the merger. The number of directors on MAA's Board of Directors will be increased to 13, of which 3 directors will be designated by Post from its existing Board of Directors and appointed to the MAA Board. H. Eric Bolton, Jr., MAA's CEO and Chairman of the Board of Directors, will serve as CEO and Chairman of the Board of Directors of the combined company. Alan B. Graf, Jr. will continue to serve as Lead Independent Director for the combined company.

Upon completion of the merger, the company will retain the MAA name and will trade under the ticker symbol MAA (NYSE). Following the closing of the transaction, the combined company's corporate headquarters will be located in Memphis, TN with the company also maintaining a significant presence in Atlanta, GA and Dallas, TX, including management and resources supporting new development operations.

Anticipated Synergies Annual gross synergies are estimated to be approximately $20 million. The combined company is expected to benefit from the elimination of duplicative costs associated with supporting a public company platform. In addition, through enhanced scale and leveraging of the combined company's state-of-the-art technology and operating systems, MAA expects the combined company to capture enhanced operating margins. These savings and enhancements are expected to be realized upon full integration, which is expected to occur over the 12-month period following the closing of the merger.

Pro Forma Operations and Balance SheetBoth companies have high quality properties diversified across the high-growth Sunbelt region. On a consolidated basis the company will have a strong and balanced presence in both large and select secondary markets. With a significant regional and market overlap, meaningful opportunity for synergy and margin improvement is expected. The combined company is committed to a strategy aimed at driving superior long-term shareholder performance with a full-cycle performance profile and objective. In addition, the combined company is expected to have significant liquidity, a strong investment-grade balance sheet and a well-staggered debt maturity profile provided by long-standing lending partners.

Dividend Policy and Declaration The timing of the pre-closing dividends of MAA and Post will be coordinated such that, if one set of shareholders receives their dividend for a particular quarter prior to the closing of the merger, the other set of shareholders will also receive their dividend for such quarter prior to the closing of the merger.

Advisors Citigroup Global Markets Inc. is acting as financial advisor, and Goodwin Procter LLP and Bass, Berry & Sims are acting as legal advisors to MAA. JP Morgan is acting as financial advisor, and King & Spalding is acting as legal advisor to Post.

*** Genesee & Wyoming Inc. (G&W) (NYSE: GWR) announced that it has agreed to acquire Providence and Worcester Railroad Company (P&W)(Nasdaq: PWX) for $25.00 per share, or approximately $126 million. Subject to satisfaction of customary closing conditions, the acquisition is expected to close following the receipt of P&W shareholder approval in the fourth quarter of 2016.

Headquartered in Worcester, Mass., and operating in Rhode Island, Massachusetts, Connecticut and New York, P&W is contiguous with G&W’s New England Central Railroad (NECR) and Connecticut Southern Railroad (CSO). Rail service is provided by approximately 140 P&W employees with 32 locomotives across 163 miles of owned track and over approximately 350 miles under track access agreements, including exclusive freight access over Amtrak’s Northeast Corridor between New Haven, Conn., and Providence, R.I., and trackage rights over Metro-North Commuter Railroad, Amtrak and CSX Corp. (NASDAQ: CSX) between New Haven, Conn., and Queens, N.Y. P&W interchanges with G&W’s NECR and CSO railroads, as well as with CSX, Norfolk Southern (NYSE: NSC), Pan Am Railways, Pan Am Southern, the Housatonic Railroad and the New York and Atlantic Railroad, and also connects to Canadian National (NYSE: CNI) and Canadian Pacific (NYSE: CP) via NECR.

P&W serves a diverse mix of aggregates, auto, chemicals, metals and lumber customers in southeastern New England, handling approximately 43,000 carloads and intermodal units annually. In addition, P&W provides rail service to three ports (Providence, Davisville and New Haven) and to a U.S. Customs bonded intermodal terminal in Worcester, Mass., that receives inbound intermodal containers for distribution in New England. P&W also owns approximately 45 acres of undeveloped waterfront land in East Providence, R.I., that was initially created as a deep water, rail served port through a $12 million investment. G&W expects to sell this undeveloped land.

Upon approval by the Surface Transportation Board (STB), P&W would be managed as part of G&W’s Northeast Region, led by Senior Vice President Dave Ebbrecht. The addition of P&W to G&W’s existing presence in the region substantially enhances G&W’s ability to serve customers and Class I partners in New England, which is a highly competitive rail market with a premium placed on timely, efficient and safe rail service. The acquisition is anticipated to unlock significant cost savings through overhead, operational and long-term network efficiencies as well as to generate significant new commercial opportunities.

Jack Hellmann, President and Chief Executive Officer of G&W, commented: “The acquisition of P&W is an excellent strategic fit with G&W’s contiguous railroads, the New England Central and the Connecticut Southern. Following anticipated STB approval of the acquisition, our connectivity with the P&W enables us to realize substantial immediate cost savings, to share and optimize the utilization of equipment and other assets, and to unlock significant new customer opportunities across sister G&W railroads as well as connecting partners at two Canadian Class I Railroads, two U.S. Class I Railroads and two regional railroads. Our acquisition of the P&W will ultimately enhance the efficiency and customer service of rail in New England.”

“We are excited to welcome P&W’s employees to G&W as we work together to provide safe, reliable and efficient rail service to our customers for the long term. We also look forward to working with our Class I partners, Amtrak and Metro-North Commuter Railroad to ensure a smooth transition of services and build upon the success of P&W’s current operations.“

Financial Impact and Financing

In the first year of operation, G&W anticipates P&W will generate approximately $35 million of revenue and $12 million of EBITDA, including realization of $8 million of immediate overhead and operational cost savings. In the medium term, G&W anticipates additional operational efficiencies and commercial opportunities will generate a further $5 million of EBITDA that will be realized over the following two to three years.

G&W expects P&W will require approximately $3 million of annual capital expenditures and have depreciation and amortization expense of approximately $3 million. G&W expects annual diluted EPS accretion from the acquisition of approximately 2%, subject to finalization of acquisition accounting under U.S. GAAP.

G&W expects to fund the approximately $126 million acquisition through its revolving credit facility under which it had available capacity of $542 million as of June 30, 2016. As previously noted, G&W expects to sell the land in East Providence, R.I., which was developed through a $12 million investment.

Closing Conditions

The closing of the transaction is subject to the approval of the Surface Transportation Board (STB). G&W will seek confirmation from the staff of the STB that, if the STB has not yet approved the transaction, G&W may close the transaction into a proposed form of voting trust, which will be managed by an independent voting trustee until G&W is granted approval from the STB to control P&W.

The closing of the transaction is also subject to satisfaction of customary closing conditions, including without limitation the approval by the holders of at least a majority of the outstanding shares of P&W’s common stock and preferred stock entitled to vote.

*** Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today announced that it has signed a definitive agreement to acquire Sensus for approximately $1.7 billion in cash.

Sensus, owned by investment funds affiliated with The Jordan Company and GS Capital Partners 2000, is a leading provider of smart meters, network technologies, and advanced data analytics services for the water, electric and gas industries. It has more than 80 million metering devices installed globally, and its distinctive FlexNet® communications network technology uses licensed spectrum in the U.S. and other geographies and provides secure connectivity solutions that support multiple applications.

Sensus generated $837 million in adjusted revenue and $159 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in fiscal 2016, which ended March 31, 2016. The $1.7 billion cash purchase price is 10.7x Sensus’ fiscal year 2016 adjusted EBITDA. Xylem expects to achieve at least $50 million in annual cost synergies to be substantially realized within three years of closing as Xylem extends its proven global procurement and continuous improvement initiatives into this business, with significant additional revenue synergy potential. The transaction is expected to be accretive to Xylem’s adjusted earnings in 2017.

“With Sensus, we will acquire a strategically valuable asset that will accelerate our ability to bring systems intelligence solutions to customers across the water and energy industries, establish a foundation for future growth and create significant shareholder value,” said Patrick Decker, Xylem President and Chief Executive Officer. “This will be an important milestone in our strategy to move Xylem’s portfolio of solutions up the technology curve. The combination of Xylem’s world-class brands and products with Sensus’ leading-edge smart technologies will create a differentiated offering that will better meet our customers’ evolving needs, including greater energy efficiency, water conservation, and improved life-cycle costs.

“Sensus has a very broad product portfolio in metering and is well positioned in the advanced metering infrastructure (AMI) segment,” continued Mr. Decker. “The AMI segment is growing at nearly twice the rate of the total metering space, driven in part by regulations and customers’ growing need for real-time data and reduced operational costs. Our expansive customer relationships will be able to extend the reach of Sensus’ products and technologies to new markets globally, particularly in emerging markets. As a combined company, we expect Xylem to grow faster and be more profitable.”

Mr. Decker added, “This move will also advance the innovation strategy we outlined at our Investor Day last year. Combining the advanced technology and R&D expertise and capabilities of both companies, we anticipate accelerating our delivery of innovative solutions to our customers, particularly in the area of advanced analytics across the water, wastewater and outdoor water sectors. Sensus’ network platform, FlexNet®, can support many of Xylem’s connected product offerings and enable expansion into adjacent Internet of Things markets. We also see natural opportunities to extend the company’s advanced data analytics platform, which provides actionable insights for customers, to Xylem products. Both platforms provide a powerful foundation for future organic and inorganic growth opportunities.”

In addition to its strong presence in the smart water sector, Sensus generates approximately 24 percent of its revenues from sales to electric and gas utilities. The projected growth rate of smart metering, particularly AMI, is even higher in these sectors than in water, and Sensus is well positioned to capture that growth with its network-enabled solutions.

Mr. Decker concluded, “We are very pleased with the opportunity to add the world-class talent of Sensus to Xylem. As a unified company, we look forward to providing customers with an even more compelling offering that will add measurable value to their operations, and create significant incremental value for our shareholders.”

Randy Bays, President of Sensus, said, “Xylem is a highly respected company and we are confident that, together, we will have the resources and scale to continue advancing differentiated technology and delivering innovative solutions to our customers around the world. We look forward to working with the Xylem team to ensure a smooth transition and completing the combination as quickly as possible.”

Speaking on behalf of the Xylem Board of Directors, Xylem Chairman Markos I. Tambakeras said, “This is an excellent transaction and we are enthusiastic about the future combination of these two companies. We have full confidence in the management team’s ability to execute a smooth integration and significantly enhance shareholder value.”

Sensus has approximately 3,300 employees and major locations in the U.S., United Kingdom, Germany, Slovakia, and China. Nearly 70 percent of 2016 revenues were generated in the U.S.

Xylem will finance the all-cash transaction with the deployment of approximately $400 million of Xylem’s non-U.S. cash, new and existing credit facilities, and a combination of short- and long-term debt. There is no change to Xylem’s full-year 2016 adjusted earnings outlook. Xylem expects to maintain quarterly dividend payments to shareholders.

The transaction is subject to customary closing conditions and regulatory review, including approval by the Federal Communications Commission of the transfer of certain spectrum licenses. The transaction is expected to close in the fourth quarter of 2016.

Supplemental information on Xylem’s definitive agreement to acquire Sensus and reconciliations for non-GAAP items are posted at


Lazard is serving as financial advisor to Xylem and Gibson, Dunn & Crutcher LLP is serving as legal counsel. Credit Suisse and Goldman, Sachs & Co. are serving as financial advisors and Mayer Brown LLP as legal advisor to Sensus.

*** Skullcandy, Inc. (Nasdaq: SKUL), which creates world-class audio experiences through its Skullcandy® and Astro Gaming® brands, announced that, on August 14, 2016, it received an unsolicited acquisition proposal from Mill Road Capital Management LLC (“Mill Road”) to acquire Skullcandy for $6.25 per share in cash (the “August 14 Mill Road Proposal”). The August 14 Mill Road Proposal represented a premium to the price of the current transaction with Incipio, LLC (“Incipio”) pursuant to the previously announced definitive merger agreement (the “Merger Agreement”) of $0.15 per share, or 2.5%. Skullcandy received the August 14 Mill Road Proposal the day following its receipt of an unsolicited proposal from Mill Road to acquire Skullcandy for $6.50 per share in cash (the “August 13 Mill Road Proposal”), but the August 13 Mill Road Proposal was rescinded concurrently with the delivery of the August 14 Mill Road Proposal. Mill Road had not obtained the approval of its proposed debt financing sources in connection with the August 14 Mill Road Proposal, and Mill Road indicated to Skullcandy that it was not currently prepared to execute the proposed merger agreement if the Skullcandy Board of Directors (the “Skullcandy Board”) were to determine to enter into a transaction with Mill Road. Mill Road also informed Skullcandy that it would be unwilling to pay the $6.6 million termination fee that would become payable to Incipio if Skullcandy were to terminate the Merger Agreement to enter into a transaction with Mill Road. The Strategic Transactions Committee (the “Strategic Transactions Committee”) of the Skullcandy Board, upon evaluation of, among other things, the additional potential risks involved with closing the potential transaction contemplated by the August 14 Mill Road Proposal, including Skullcandy’s obligation to pay the termination fee to Incipio, Mill Road’s history of negotiations with Skullcandy and the timing of such a transaction relative to the current transaction with Incipio, and weighing those factors against the proposed increase in purchase price, determined that the August 14 Mill Road Proposal was not reasonably likely to lead to a “Superior Proposal” as defined in the Merger Agreement.

As indicated above, on August 13, 2016, Skullcandy received the August 13 Mill Road Proposal, which offered to acquire Skullcandy at a price of $6.50 per share in cash, but Mill Road rescinded the August 13 Mill Road Proposal concurrently with its delivery of the August 14 Mill Road Proposal. The Strategic Transactions Committee had determined that the August 13 Mill Road Proposal was reasonably likely to lead to a Superior Proposal prior to its rescission.

Based on the Strategic Transactions Committee’s determination that the August 14 Mill Road Proposal was not reasonably likely to lead to a Superior Proposal, pursuant to the terms of the Merger Agreement, Skullcandy is obligated to cease negotiations and discussions with Mill Road.

The Skullcandy Board continues to recommend that Skullcandy stockholders tender their shares pursuant to the transaction with Incipio.

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

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Special Reports

Related Entities

Credit Suisse, JPMorgan, Citi, Lazard, Dividend, Mill Road Capital, Notable Mergers and Acquisitions, Earnings, Definitive Agreement

Add Your Comment