Notable Mergers and Acquisitions 8/29: (MCUR) (DK) (USG)

August 29, 2016 9:48 AM EDT

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*** Leap Therapeutics, Inc. and Macrocure Ltd. (Nasdaq: MCUR) announced the signing of a definitive merger agreement. Under the terms of the agreement, Macrocure will become a wholly owned subsidiary of Leap, and Leap will become a public company. In connection with the transaction, Leap will apply to have the shares of the combined entity listed for trading on NASDAQ upon completion of the merger.

Under the terms of the agreement, Macrocure shareholders will exchange their Macrocure shares for newly issued shares of Leap common stock. In addition, existing Leap investors, including entities affiliated with HealthCare Ventures, have committed to invest an additional $10 million at the closing of the transaction. On a pro forma basis, after giving effect to the merger and the investment, Macrocure equity holders are expected collectively to own approximately 31.8%, and Leap equity holders are expected collectively to own approximately 68.2%, of the combined company, subject to certain possible adjustments based on Macrocure's net cash level at closing. Existing Leap shareholders will receive the right to a royalty, under certain circumstances, based on future net sales. The combined company is expected to have a minimum of $30 million of cash at closing to finance future operations.

"The combination with Macrocure positions our organization as a leading immuno-oncology company with sufficient capital to advance our pipeline of first-in-class monoclonal antibodies through significant value-creating events," commented Christopher K. Mirabelli, PhD, CEO of Leap. "Importantly, we anticipate achieving substantial clinical milestones over the course of 2016 and 2017. We plan to present data and initiate randomized studies for DKN-01, our lead development candidate, which has demonstrated clinical activity in esophageal cancer and cholangiocarcinoma when combined with chemotherapy; and we expect to report data from a repeat-dose study of TRX518, a novel GITR agonist monoclonal antibody which is believed to enhance an immune anti-tumor response."

"After careful review of many alternatives, the executive team and Board of Directors of Macrocure believe this transaction provides great potential for our shareholders," said Nissim Mashiach, President and Chief Executive Officer of Macrocure Ltd. "Leap Therapeutics has a maturing pipeline of novel drug candidates focused on key immuno-oncology targets that are designed to provide new and valuable treatment options for patients suffering from aggressive cancers. Furthermore, Leap's experienced management team has a track record relating to public and private companies and drug development success."

The executive team of Leap Therapeutics will remain in their positions in the combined entity that will be based out of Leap Therapeutics' current corporate office in Cambridge, Massachusetts. The combined entity's leadership team will consist of Christopher K. Mirabelli, PhD, who will serve as Chief Executive Officer and Chairman of the Board of Directors, Augustine Lawlor as Chief Operating Officer, and Douglas E. Onsi as Chief Financial Officer. At the closing, two Macrocure designated individuals, including Nissim Mashiach, will join Leap's Board of Directors.

The Board of Directors of both companies have unanimously approved the proposed merger. Macrocure's shareholders who hold approximately 51% of Macrocure's voting shares, have entered into agreements in support of the proposed transaction. While these agreements assure the approval of the merger, all Macrocure shareholders will be asked to vote on the merger at a meeting of shareholders. Additionally, entities affiliated with HealthCare Ventures and Eli Lilly, which own all of Leap's outstanding voting shares, have entered into agreements in support of the proposed transaction. The transaction is expected to close near year-end, subject to shareholder approval and other customary closing conditions which are set forth in the merger agreement.

Raymond James is serving as exclusive financial advisor to Macrocure Ltd.

Leap expects to file a registration statement on Form S-4 with the U.S. Securities and Exchange Commission to register the shares of common stock to be issued in the merger. The registration statement will contain more detailed information about the transaction, as well as information about the respective companies. In addition, Macrocure expects to file a current report on Form 6-K shortly regarding the transaction. Macrocure also will be mailing a proxy statement to its shareholders, which will be filed on a current report on Form 6-K and attached as an appendix to Leap's Form S-4 registration statement.

*** Delek US Holdings, Inc. (NYSE: DK) announced that it has entered into a definitive agreement with Compañía de Petróleos de Chile COPEC S.A. pursuant to which Delek will sell MAPCO Express, Inc., and certain related affiliated companies, to a U.S. subsidiary of COPEC for total cash consideration of $535 million plus MAPCO’s cash on hand at closing. This transaction is subject to customary closing conditions and is expected to close by year end.

Following a strategic review by Delek of options to unlock the value of its retail assets, which included a potential drop down to Delek Logistics Partners, LP (NYSE: DKL), Delek determined that the sale to COPEC was an efficient and prudent way to unlock value for Delek’s shareholders. Debt associated with the retail assets, which was approximately $160.0 million at June 30, 2016, will be repaid at closing. As part of this Transaction, Delek will continue to supply fuel to certain MAPCO retail locations under an 18-month supply agreement.

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek, said, “We have unlocked the value of our retail assets through this transaction with COPEC. I want to thank the MAPCO team for their efforts in developing the MAPCO brand. The compelling valuation we were able to achieve is a direct result of their hard work. This transaction creates an exciting opportunity for MAPCO and its employees as it becomes a key component of COPEC’s U.S. growth strategy. Delek also gains a partner in retail fuel sales and will continue to supply locations through its wholesale business and space on the Colonial Pipeline system. As a result, our consolidated RINs position should not be significantly changed by this transaction. At June 30, 2016, we had approximately $377.0 million of cash, and the completion of this transaction should give us additional financial flexibility. This flexibility can be used to support Delek Logistics Partners as it explores growth opportunities, as well as continuing to evaluate strategic opportunities to create long term value for our shareholders.”

Delek’s exclusive financial advisor was RBC Capital Markets, LLC. COPEC’s financial advisor was Raymond James & Associates, Inc. and legal advisor was Simpson Thacher & Bartlett LLP.

*** ABC Supply Co., Inc. and USG Corporation (NYSE: USG) announced that they have entered into a definitive agreement in which ABC Supply will acquire USG’s building product distribution business, L&W Supply Corporation (“L&W Supply”), for total cash consideration of $670 million (the "Transaction"). The Transaction is subject to customary closing conditions, including regulatory approvals, and is expected to be completed before the end of 2016.

“We are thrilled to welcome the associates, customers, and suppliers of L&W Supply into the ABC family,” said Keith Rozolis, ABC Supply’s President and Chief Executive Officer. “As a world-class distributor of interior building materials, L&W reinforces ABC’s leadership position in building materials distribution, and helps set the stage for our next phase of growth”.

“The sale of L&W Supply is transformative for USG Corporation, enabling us to right-size our balance sheet and accelerate profitable growth,” said James S. Metcalf, Chairman, President, and CEO of USG Corporation. “This transaction sharpens our focus on manufacturing and innovation and creates a new strategic relationship with ABC Supply.”

Completion of the Transaction will allow USG to reduce debt and achieve its target leverage ratio, accelerate high return investments in its Gypsum and Ceilings businesses through advanced manufacturing initiatives, and position the company to consider future capital returns to shareholders. The sale of L&W Supply is also expected to dampen USG’s overall earnings cyclicality as well as provide opportunity for growth in the independent specialty dealer channel.

L&W Supply is one of the largest distributors of gypsum wallboard and suspended ceiling tiles in the United States, serving its customers from a nationwide footprint of 136 distribution branches. ABC Supply is the nation’s largest wholesale distributor of roofing, siding, windows and gutter materials. The acquisition of L&W Supply will allow it to expand into the interior of the building through the sale of gypsum wallboard and suspended ceiling tiles and grid.

J.P. Morgan Securities LLC and Goldman, Sachs & Co. are serving as financial advisers to USG in connection with the Transaction. Jones Day is serving as legal adviser to USG. RBC Capital Markets and Deutsche Bank are serving as financial advisers and Kirkland & Ellis, Leo Law, and McDerrmott, Will & Emery as legal advisers to ABC Supply.

*** Aleris Corporation, a global aluminum rolled products producer, announced today that it has entered into a definitive agreement to be acquired by Zhongwang USA LLC, a company majority-owned and led by Mr. Liu Zhongtian, founder of China Zhongwang Holdings Limited. The aggregate value of Aleris amounts to $2.33 billion, comprising $1.11 billion in cash for the equity to be paid by Zhongwang USA, plus $1.22 billion in net debt.

Aleris will continue to be headquartered in Cleveland, Ohio, and will be operated as an independent entity. The Aleris management team will remain in place, providing continuity for Aleris employees and customers and supporting the continued implementation of the Aleris strategy.

Aleris will retain its name and continue to serve its customers with no changes to current operations, contracts or commitments. It will continue with the implementation of all strategic growth projects, including its major expansion project in Lewisport, Kentucky, which will enable Aleris to meet the North American automotive industry's growing demand for aluminum auto body sheet.

"We are excited about this transition to strategic ownership as it will allow us to accelerate our strategy to expand our capabilities to support the production of high-value advanced materials for the global automotive and aerospace markets, while maintaining our position as a leading supplier to critical regional markets like building and construction," said Sean Stack, President and CEO of Aleris. "We expect the transition to be seamless for our employees and customers, and that the new strategic shareholder will provide us with greater financial flexibility to continue to anticipate and meet the needs of our customers well into the future."

The acquisition of Aleris reflects Mr. Liu's commitment to disciplined operating investments over the long-term in an industry to which he has been committed for two decades. In addition to his role at Zhongwang USA, Mr. Liu is also the chairman and founder of China Zhongwang, the second largest aluminum extrusions product developer and manufacturer in the world and the largest in Asia. With the acquisition of Aleris, Mr. Liu will now oversee companies that have complementary geographic footprints and capabilities.

"This acquisition is an international expansion to establish a complementary business foothold, as I strongly believe in the potential and prospects of Aleris and the aluminum industry as a whole," Mr. Liu said. "Aleris has a strong management team, talented employees and industry-leading capabilities with a complementary geographic footprint. As the company enters the final phase of its Lewisport automotive project, I believe Aleris is well-positioned to capitalize on the positive demand trends we see globally, and I look forward to supporting the Aleris management team in implementing their growth strategies and pursuing continued success with expanded resources and financial and operational flexibility."

Since 2010, Aleris has been owned and controlled by a group led by certain investment funds of Oaktree Capital Management, L.P., with affiliates of Apollo Management, L.P., and Sankaty Advisors, LLC owning minority interests.

The transaction is expected to close in the first quarter of 2017 following the customary regulatory approvals and closing conditions.

Credit Suisse acted as financial advisor to Aleris. Fried, Frank, Harris, Shriver and Jacobson, LLP acted as legal advisors. Moelis & Co. advised the Aleris Board on certain aspects of this transaction. Paul, Weiss, Wharton & Garrison LLP acted as legal advisors to Oaktree Capital Management.

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