Notable Mergers and Acquisitions 8/30: (RBA) (KKR) (MDLZ)/(HSY) (USMD)

August 30, 2016 9:41 AM EDT

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*** Ritchie Bros. Auctioneers Incorporated, the world's largest industrial auctioneer and a leading equipment distributor (NYSE: RBA), and IronPlanet, a leading online marketplace for used heavy equipment and other durable asset sales, jointly announced that they have entered into an agreement under which Ritchie Bros. will acquire IronPlanet for approximately US$758.5 million, subject to customary closing adjustments.

Founded in 1999, IronPlanet complements Ritchie Bros.' primarily end-user customer base, as it focuses largely on the needs of corporate accounts, equipment manufacturers, dealers and government entities in equipment disposition solutions. It conducts its sales primarily through online-only platforms, with weekly online auctions and in other equipment marketplaces. IronPlanet, a private company based in the United States, sold approximately US$787 million of Gross Merchandise Value (GMV)1 through their sales channels during 2015, and has achieved a 25.2% compounded growth rate in assets sold from 2013 through 2015. This growth momentum has continued, with a 41% increase in GMV during the first half of 2016 relative to the same period in 2015.

"This transformative transaction is the logical next step for Ritchie Bros., building on our multi-channel platform, global reach and long-standing customer relationships. Together with IronPlanet, we will create a combined company of trusted brands with the ability to provide customers around the world with a greater number of choices and platforms to sell, buy and list equipment when, where and how they want – whether onsite or online. Our commitment to diversifying our offerings is directly in line with customer demand for multiple selling and buying solutions," said Ravi Saligram, Chief Executive Officer of Ritchie Bros. "This acquisition will help accelerate our growth in revenue and earnings and add shareholder value by continuing to expand our capabilities in new channels, sectors, regions and customer segments. Ritchie Bros. and IronPlanet both have talented teams and winning cultures built on a passion for serving customers."

"This is an exciting day for IronPlanet, our customers, employees and shareholders. IronPlanet joining forces with Ritchie Bros. will allow the combined company to deliver a multi-channel marketplace that will provide a full range of equipment asset management and disposition solutions. IronPlanet has built a leading online marketplace and technology platform across a number of verticals, and when combined with Ritchie Bros.' strength in live onsite auctions, will prove to be a powerful combination in driving value for our customers," said Gregory J. Owens, Chairman and Chief Executive Officer of IronPlanet.

Compelling Strategic and Financial Rationale

  • Ideal and complementary fit to expand Ritchie Bros.' strategy to create a more diversified, multi-channel company with greater scale that can provide even more choice to customers. Equipment sellers frequently choose to sell their assets across multiple sales solutions. The transaction will bring together Ritchie Bros.' strength in live, onsite and integrated online auctions with IronPlanet's leading position as an online marketplace, creating a broader multi-format equipment sales and asset management platform, with solutions including:
    • Ritchie Bros. Auctioneers live onsite and online simulcast auctions
    • IronPlanet online-only auctions, including a Reserved Daily Marketplace & Buy-Now formats
    • Cat Auction Services live onsite and online simulcast auctions (auctions anchored by Caterpillar dealers)
    • Kruse Energy & Equipment AuctioneersSM live onsite and online simulcast auctions (for the oil & gas industry)
    • EquipmentOne online auction and marketplace
    • Mascus sales listing service
    • TruckPlanet®, GovPlanet®, SalvageSale and other sector-specific online sales channels
    • Ritchie Bros. Private Treaty
    • Ritchie Bros. Financial Services
  • Creates a more valuable marketplace and expands addressable market. Customers will benefit from a larger marketplace with more buyers and sellers, as well as a greater number of choices and services. As an example of the value the combined company's multi-channel transactional platforms and greater scale can deliver, Ritchie Bros. also announced today that it has entered into a historic, long-term strategic alliance with Caterpillar, which will significantly strengthen its relationship with Caterpillar dealers. Ritchie Bros. will become Caterpillar's preferred global partner for live onsite and online auctions under the agreement, which will take effect upon completion of the IronPlanet acquisition. The addition of IronPlanet provides Ritchie Bros. with access to new, large customer segments, including government surplus and oil & gas. Furthermore, the wider range of sales solutions offered by the combined company will allow it to more effectively meet customer preferences in many key international locations, including the U.K., Germany, Japan and China – where Ritchie Bros.' established infrastructure will provide a platform to launch IronPlanet solutions.
  • Strengthens digital capabilities to provide enhanced levels of customer service. The combined entity will have an integrated technology platform to provide customers with more tailored solutions that meet their needs and enhance the overall customer experience. These solutions, including multiple dealer portal options, valuable business intelligence, amplified data analytics and multiple online sales channels, position the combined company to provide comprehensive asset management solutions. Together, Ritchie Bros. and IronPlanet are better positioned to cater to evolving consumer preferences, with more transactions being conducted online. Collectively, Ritchie Bros. and IronPlanet (on a pro forma basis) sold more than US$3.0 billion of assets through online transactions during the 12 months trailing June 30, 2016 – ranking the combined business among the world's top 50 B2B e-commerce companies, based on value sold2.
  • Expected to deliver long-term growth and profitability. The transaction is expected to be accretive to earnings within the first year (excluding transaction costs) and significantly bolster growth in Gross Auction Proceeds (GAP), revenue and earnings over the long term. The combination will also enhance the generation of free cash flow, which will enable Ritchie Bros. to support strategic growth priorities, return value to shareholders and reduce debt.
  • Presents tremendous opportunities to build on Ritchie Bros.' business model and strong heritage. Ritchie Bros. and IronPlanet share a passion for serving customers and providing them with easy-to-use solutions. Bringing together Ritchie Bros.' scale, geographic footprint and brand strength with IronPlanet's complementary online models will offer customers more options to move more of their inventory across multiple sales channels. Transparency and a customer focus will continue to be the cornerstones of the combined company, as it leverages best practices from both organizations, including IronPlanet's successful inspection and IronClad Assurance® equipment condition certification.

Transaction terms

Under the terms of the transaction, Ritchie Bros. will acquire 100% of the equity of IronPlanet for approximately US$740 million in cash and the assumption of unvested equity interests in IronPlanet, subject to adjustment, that brings the total transaction value to approximately US$758.5 million. This represents a 13.0x multiple of IronPlanet's 2017 Estimated Adjusted EBITDA, inclusive of the expected $100 million net present value of tax synergies and $20 million in run-rate cost synergies. Ritchie Bros. intends to finance the transaction through a combination of cash on hand and new debt, and has bridge financing commitments from Goldman Sachs Bank USA subject to customary terms and conditions to facilitate the transaction close. Following the close of the transaction and the required financing, Ritchie Bros. is expected to have a net debt to EBITDA ratio of no more than 3.0x.

Ritchie Bros. has secured employment agreements with key executives, who will supplement the strength of Ritchie Bros.' global management team. Mr. Owens has agreed to join the combined company's executive committee upon closing.

The transaction was approved by the Boards of Directors of both companies and is expected to close by the first half of 2017, subject to regulatory clearances and the satisfaction of other customary closing conditions.

Advisors

Goldman, Sachs & Co. is serving as financial advisor to Ritchie Bros. and Skadden, Arps, Slate, Meagher & Flom LLP and Dechert LLP are serving as legal advisors. J.P. Morgan Securities LLC is serving as financial advisor to IronPlanet and Orrick, Herrington & Sutcliffe LLP is serving as legal advisor.

*** Calabrio and KKR (NYSE: KKR) announced that they have entered into a definitive purchase agreement whereby KKR will acquire Calabrio. Financial terms of the transaction were not disclosed.

Founded in 2007, Calabrio provides products and services to help companies better understand their customers and leverage insights to catalyze growth. The Calabrio ONE® software suite is a unified workforce optimization (WFO) solution -- including call recording, quality management, workforce management and voice-of-the-customer analytics -- that records, captures and analyzes customer engagement center interactions to improve the customer experience and drive top-line business growth. Calabrio solutions are built on an intuitive, web-based architecture that positions and accelerates the contact center as an epicenter for customer insight. The company is a member of the Cisco Solution Partner Program and the Avaya DevConnect Program, and recently announced a global strategic partnership with Five9.

Calabrio has been recognized with a number of industry accolades, including being named a "Leader" in the 2015 Gartner Magic Quadrant for Customer Engagement Center Workforce Optimization, on Star Tribune's Top Workplaces list for three consecutive years, winning TMC's CUSTOMER magazine 2016 CRM Excellence Award and named Frost & Sullivan's 2016 Workforce Optimization Solutions Company of the Year.

"We have worked to transform contact centers into customer engagement centers and we pride ourselves on empowering everyone in an organization -- from contact center agents to the CEO -- with easy-to-use tools that provide companies with a better understanding of their customer to help them grow," said Tom Goodmanson, president and CEO of Calabrio. "KKR shares our vision of putting the customer at the center of corporate strategy and we look forward to leveraging its deep technology industry knowledge and experience to fulfill our mission."

He added, "We also want to thank Split Rock Partners and BlueStream Ventures for their 2007 investment in our business. Without their initial belief in our vision, we would not be in the position we find ourselves today."

More than 4,000 companies worldwide trust Calabrio with their multi-channel contact centers, including Boeing, Maersk, REI and VITAS Healthcare.

"Evaluating data to measure and improve upon success is not only the direction the WFO market is heading, but where the world is heading," said Vincent Letteri, director at KKR and a member of KKR's technology team. "From its start, Calabrio has been forward-thinking in its innovative approach to customer engagement through analytical insights. We look forward to working with the team to continue to build upon its pioneering model of customer service."

A 2015 PwC survey of CEOs ranked data mining and analytics as the second most strategically important digital technology and organization capability, only behind mobile technologies for customer engagement. According to the survey, CEOs also believe that data and analytics is the most important capability for delivering a better customer experience and business efficiencies.

John Park, director at KKR and a member of KKR's technology team, added, "Calabrio has become one of the fastest-growing, quality companies in workforce optimization and customer engagement. With our partnership, we hope to accelerate the company's growth even further as the world continues to move toward a customer engagement model through omnichannel integration."

*** Mondelēz International, Inc. (Nasdaq: MDLZ) announced it has ended discussions with The Hershey Company (NYSE: HSY) regarding a possible combination of the two companies.

“As the world’s leading snacking company, we remain focused on successfully executing our strategy to deliver both sustainable top-line growth and significant margin expansion and are well-positioned to continue to deliver value to our shareholders,” said Chairman and CEO Irene Rosenfeld. “Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands. Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement. While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term.”

*** USMD Holdings (Nasdaq: USMD) disclosed the following on Tuesday morning:

On August 29, 2016, USMD Holdings, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WellMed Medical Management, Inc., a Texas corporation (“WellMed”), and Project Z Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of WellMed (“Merger Sub”). Subject to the terms and conditions set forth in the Merger Agreement, WellMed will acquire the Company through the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving as a wholly-owned subsidiary of WellMed.

Upon completion of the Merger, each outstanding share of the Company’s common stock, par value $0.01 per share (each, a “Share” and collectively, the “Shares”), issued and outstanding immediately prior to the effective time of the Merger will be automatically cancelled, cease to exist and be converted into the right to receive $22.34 in cash, payable without interest, less any required withholding taxes, except that any holder of Shares who properly demands appraisal of its Shares in compliance with the General Corporation Law of the State of Delaware (the “DGCL”) will be entitled to payment of the fair value of its Shares unless such demand is subsequently withdrawn.

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