Notable Mergers and Acquisitions 8/24: (PFE)/(AZN) (TRIP) (MNK) (SKUL)
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Under the terms of the agreement, Pfizer will make an upfront payment of $550 million to AstraZeneca upon the close of the transaction and a deferred payment of $175 million in January 2019. In addition, AstraZeneca is eligible to receive up to $250 million in milestone payments, up to $600 million in sales-related payments, as well as tiered royalties on sales of Zavicefta and ATM-AVI in certain markets.
“As we continue to reshape our Essential Health portfolio, we are focusing on areas that further address global public health needs and that complement our core capabilities and experience in therapeutic areas, including anti-infectives. We are committed to looking for ways to enhance our portfolio around the world where we offer patients and healthcare professionals access to more than 60 anti-infective and anti-fungal medicines. The addition of AstraZeneca’s complementary small molecule anti-infectives portfolio will help expand patient access to these important medicines and enhance our global expertise and offerings in this increasingly important area of therapeutics, in addition to providing the opportunity for near-term revenue growth,” said John Young, group president, Pfizer Essential Health.
Luke Miels, executive vice president for Europe and head of the Antibiotics Business Unit at AstraZeneca, said, “This agreement reinforces our strategic focus to invest in our three main therapy areas where we can make the greatest difference to patients’ lives. We’re pleased that our strong science in antibiotics will continue to serve a critical public health need through Pfizer’s dedicated focus on infectious diseases, ensuring these important medicines reach greater numbers of patients around the world.”
Zavicefta received European Commission approval for complicated urinary tract infections (cUTI), complicated intra-abdominal infections (cIAI), hospital acquired pneumonia/ventilator associated pneumonia (HAP/VAP) and ‘treatment of aerobic gram negative infections in adult patients with limited treatment options on June 28, 2016.
The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions, including antitrust clearance in certain jurisdictions. Pfizer’s legal advisor for the transaction was Ropes & Gray LLP.
This transaction will not impact Pfizer’s 2016 financial guidance.
*** TripAdvisor (Nasdaq: TRIP) acquired New York-based Citymaps, a social mapping platform that enables tourists to discover countless hidden gems and hot spots, near and far, all around the world. The website and app make it easy for consumers to find points of interest, navigate urban destinations and share favorite locations with friends.
“The Citymaps team understands how people experience their day through a maps lens,” said Adam Medros, senior vice president, global product, TripAdvisor. “We are excited to welcome the team to the TripAdvisor family of brands to help TripAdvisor ensure its mapping features best address the needs of its users who are increasingly accessing the site on mobile devices.”
“Over the past several years, we have built a popular mapping app that delivers socially-powered inspiration and exploration for travelers,” said Elliot Cohen, CEO and co-founder of Citymaps. “Given our shared focus on helping travelers plan and experience a great trip, we look forward to working with the TripAdvisor team.”
The importance of online mapping technology is increasingly significant in consumer usage for everyday situations, including tourism. In 2015, TripAdvisor’s “TripBarometer Connected Traveler Report” revealed that 81 percent of U.S. travelers use maps on their smartphones to find their way around¹.
TripAdvisor’s existing mapping features currently help consumers find, book and experience the best things destinations have to offer and receive millions of views per day.
Citymaps will continue to be run as a standalone business. Terms of the acquisition will not be disclosed.
*** Mallinckrodt plc (NYSE: MNK) announced that it has entered into a definitive agreement under which it will sell its Nuclear Imaging business to IBA Molecular (IBAM), for approximately $690 million before tax impacts, including up-front and contingent consideration and the assumption of long-term obligations.
MNK"Mallinckrodt's Nuclear Imaging operation has a long history going back 50 years, and has been a strong cash-generating business over time. Our team has made significant progress in driving profitability over the past few years," said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt.
"But with our strategic priorities focused on enlarging our portfolio in the high-growth specialty pharmaceuticals space," Trudeau continued, "we believe the sale of our Nuclear Imaging portfolio to IBAM is the best solution for both the business itself and Mallinckrodt."
Starting in the fourth quarter of fiscal 2016 (ending September 30, 2016), the company will report the Nuclear Imaging business as a discontinued operation.
Renaud Dehareng, Chief Executive Officer of IBAM, said, "We are very excited about this acquisition. IBAM's and Mallinckrodt's Nuclear Imaging business' complementary footprint and capabilities will substantially broaden our ability to serve patients globally. We are very pleased to welcome our new colleagues to IBAM upon closing and look forward to working together in this next chapter of our company's development."
Mallinckrodt's Nuclear Imaging business includes a portfolio of diagnostic imaging products. Though approved for use and sold for nuclear medicine procedures in many countries, approximately two-thirds of current annual revenues from Mallinckrodt's Nuclear Imaging business originate in the U.S. The business is a prominent global producer of the key medical isotope molybdenum-99, from which technetium-99m (Tc-99m) is derived. Tc-99m is used in roughly 80%1 of all nuclear medicine procedures worldwide, and Mallinckrodt is a significant U.S. and global supplier of this radioisotope2.
More than 800 Mallinckrodt employees in manufacturing, commercial, operations, and shared service roles in North America and Europe are focused on supporting the Nuclear Imaging business. Mallinckrodt has two manufacturing plants focused on nuclear medicine products and sterile-fill pharmaceutical manufacturing in Maryland Heights, Missouri and Petten, the Netherlands. This workforce and these facilities are included in the transaction and will be transferred to IBAM upon closing.
The total consideration of approximately $690 million (before tax impacts) consists of approximately $574 million of up-front consideration, the assumption of approximately $39 million of long-term obligations, and approximately $77 million of contingent consideration.
The transaction is subject to a number of closing conditions, including approval from the U.S. Nuclear Regulatory Commission and the Committee on Foreign Investment in the United States, and clearance from relevant competition authorities. It is not subject to financing conditions as IBAM has secured all necessary debt and equity commitments required to close the transaction. Closing is expected in the first half of calendar 2017.
TAP Advisors acted as exclusive financial advisor to Mallinckrodt on the transaction.
*** Skullcandy, Inc. (Nasdaq: SKUL) announced the termination of the previously announced merger agreement (the “Incipio Merger Agreement”) with Incipio, LLC (“Incipio”), and the entry into a new merger agreement (the “Mill Road Merger Agreement”) with MRSK Hold Co. and MRSL Merger Co., entities affiliated with Mill Road Capital Management LLC (collectively, “Mill Road”). Under the terms of the Mill Road Merger Agreement, outstanding shares of common stock of Skullcandy will be exchanged for $6.35 per share in cash at the completion of the merger, or a total of approximately $196.6 million.
On August 17, 2016, Skullcandy’s Board of Directors (the “Skullcandy Board”) received a written offer from Mill Road to acquire all outstanding shares of Skullcandy’s common stock for a price of $6.35 per share in cash, which the Skullcandy Board determined constituted a “Superior Proposal” under the Incipio Merger Agreement. On August 23, 2016, the period during which Incipio was entitled to negotiate with Skullcandy to amend the Incipio Merger Agreement pursuant to its terms expired, and Incipio informed Skullcandy that it did not intend to submit a proposed amendment to the Incipio Merger Agreement. As a result, later on August 23, 2016, the Skullcandy Board authorized Skullcandy to terminate the Incipio Merger Agreement, pay the termination fee to Incipio and enter into the Mill Road Merger Agreement.
Hoby Darling, Skullcandy, Inc. President and CEO commented, “We are extremely pleased with Mill Road’s interest in partnering with Skullcandy. For our public stockholders, the merger represents a significant premium to the share price prior to the initial announcement of a potential strategic transaction in June. At the same time, returning to private ownership under Mill Road provides us with the flexibility and resources to continue to expand our uniquely positioned business. We believe Mill Road’s experience stewarding branded consumer companies will help accelerate the growth of our Skullcandy and Astro brands. We look forward to accessing the experience, operational expertise and capital that partnering with Mill Road affords as we step up our efforts to excite our consumers and retail partners through our world-class audio and gaming platforms.”
Thomas Lynch, Mill Road’s Founder, stated, “We are excited to welcome Skullcandy and Astro Gaming to our growing portfolio of high quality, distinctively branded companies. We have followed Skullcandy for several years and look forward to working with the company as it takes this important step in its history. We are impressed by how the company has grown and have the highest confidence in the company’s future. We are pleased to be able to increase our 9.8% ownership stake in the company.”
The purchase price pursuant to the Mill Road Merger Agreement represents approximately a 4% premium over the existing Incipio offer of $6.10 per share in cash and approximately a 43% premium over Skullcandy’s closing share price on June 22, 2016, the last trading day prior to the initial announcement of the Incipio Merger Agreement.
The transaction with Mill Road is not subject to a financing condition.
Terms of the Agreement
Under the terms of the Mill Road Merger Agreement, an affiliate of Mill Road will commence a cash tender offer to acquire Skullcandy’s outstanding shares of common stock for $6.35 per share, net to each holder in cash. Following receipt of required regulatory approvals and the satisfaction of other customary closing conditions, and after such time as all shares tendered in the tender offer are accepted for payment, the Mill Road Merger Agreement provides for the parties to effect, as promptly as practicable, a merger which would result in all shares not tendered in the tender offer being converted into the right to receive $6.35 per share in cash. The transaction has been approved by the Skullcandy Board and Mill Road’s Investment Committee and is expected to close in the third quarter of 2016.
The Mill Road Merger Agreement contains non-solicitation provisions, pursuant to which Skullcandy must cease all existing discussions and may not solicit or participate in any additional discussions with third parties regarding alternative proposals, subject to certain exceptions.
Peter J. Solomon Company is acting as financial advisor and Latham & Watkins LLP is acting as legal advisor to Skullcandy. Foley Hoag LLP is acting as legal advisor to Mill Road and its affiliates.
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