Notable Mergers and Acquisitions 9/13: (ISIL) (APC) (CTLT) (ACTS)

September 13, 2016 9:37 AM EDT

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*** Renesas Electronics Corporation and Intersil Corporation (Nasdaq: ISIL) announced they have signed a definitive agreement for Renesas to acquire Intersil for US$22.50 per share in cash, representing an aggregate equity value of approximately US$3.2 billion (approximately 321.9 billion yen at an exchange rate of 100 yen to the dollar). The transaction has been unanimously approved by the boards of directors of both companies. Closing of the transaction is expected in the first half of 2017, following approval by Intersil shareholders and the relevant governmental authorities.

The acquisition combines two long-standing industry leaders in their respective segments. Together, Renesas’ and Intersil’s deep expertise across a number of state-of-the-art technologies and end markets will enable the combined company to become a complete solution provider of embedded systems to customers. By combining Renesas’ market-proven microcontroller (MCU) and system-on-chip (SoC) products and technologies and Intersil’s leading power management and precision analog capability, Renesas will be well positioned to address some of the most exciting opportunities in key areas such as automotive, industrial, cloud computing, healthcare, and the Internet of Things (IoT). Strong product synergy and complementary customer and regional exposure will enable a larger global footprint and increase Renesas’ ability to serve customer system requirements. The acquisition is also expected to expand Renesas’ product portfolio, particularly for analog devices, where the market is expected to increase by approximately US$3.9 billion by 2020.

Renesas anticipates near- and long-term revenue expansion opportunities combined with the modest anticipated cost efficiencies associated with greater scale will eventually generate synergies of US$170 million. The transaction is expected to immediately increase both gross and operating margins and be accretive to Renesas’ non-GAAP earnings per share and free cash flows after closing.

“Renesas is accelerating its focus of resources in automotive, industrial, infrastructure, and the rapidly growing IoT segments to aggressively grow its global business and maintain its position as a leading provider. Intersil’s extensive portfolio of analog and power devices as well as its strength in the automotive, industrial, and broad-based segments complement many of Renesas’ initiatives in these areas,” said Bunsei Kure, Representative Director, President and CEO of Renesas Electronics Corporation. “We believe that this compelling and complementary combination will bring significant synergies and cross selling opportunities as well as a system solution proposition which will pave the way for Renesas to strengthen its position as a leader in the global semiconductor market while delivering value to its customers with a unique product offering.”

“Intersil has been part of the industry’s evolution for many decades, carving out key niches and developing core technology that provides tangible benefits over competing solutions,” said Necip Sayiner, President, CEO and Director of Intersil Corporation. “As we’ve embarked on the most recent transformation over the last three years, we have honed the company’s core capabilities and focused them on areas where we are uniquely positioned to solve customer system challenges. The success of that strategy and the ability to improve the quality of the business is what has brought us to this next and exciting phase. We see great potential in combining the Intersil and Renesas portfolios and gaining the scale that will provide a platform for accelerated growth.”

BofA Merrill Lynch and Morgan Stanley acted as financial advisers to Renesas; Morrison Foerster acted as Renesas’ legal counsel; McKinsey & Company provided strategic advice to Renesas. JP Morgan acted as exclusive financial adviser to Intersil; Jones Day and Covington & Burling acted as Intersil’s legal counsel; Foros Group provided strategic advice to Intersil.

*** Anadarko Petroleum Corporation (NYSE: APC) announced it has entered into a definitive agreement to acquire the deepwater Gulf of Mexico assets of Freeport McMoRan Oil & Gas for $2.0 billion. The transaction, effective Aug. 1, 2016, is expected to close prior to year end.

TRANSACTION HIGHLIGHTS

  • Doubles Anadarko's ownership in the Lucius development to approximately 49 percent
  • Adds approximately 80,000 net barrels of oil equivalent (BOE) per day, more than 80 percent of which is oil
  • Expands Anadarko's operated infrastructure throughout the Gulf of Mexico
  • Generates an estimated $3.0 billion of incremental Gulf of Mexico free cash flow(1) over the next five years at current strip prices
  • Enables accelerated investment in Anadarko's Delaware and DJ basin assets

"This immediately accretive, bolt-on transaction strengthens our industry-leading position in the Gulf of Mexico and is a catalyst for the company's oil-growth objectives, with quality assets being acquired at an attractive price to create significant value," said Anadarko Chairman, President and CEO Al Walker. "We expect these acquired assets to generate substantial free cash flow,(1) enhancing our ability to increase U.S. onshore activity in the Delaware and DJ basins. Our current plans are to add two rigs in each play later this year, and to increase activity further thereafter, with an expectation of more than doubling our production to at least 600,000 BOE per day collectively from these two basins over the next five years. This increased activity would drive a company-wide 10- to 12-percent compounded annual growth rate in oil volumes over the same time horizon in a $50 to $60 oil-price environment, while investing within cash flows. Additionally, the transaction expands Anadarko's infrastructure in the Gulf, adds to our unmatched inventory of low-cost, subsea tieback opportunities, and bolsters optionality with new exploration prospects. The company's Gulf of Mexico position, with the addition of these properties, will have net sales volumes of approximately 155,000 BOE per day, comprised of approximately 85-percent oil."

DOUBLING OWNERSHIP IN LUCIUS

Anadarko's operated Lucius facility in the deepwater Gulf of Mexico continues to achieve strong reservoir performance and facility productivity. As a result of this performance, the company is increasing the estimated ultimate recovery of the field to more than 400 million BOE from the previous 300-plus million BOE. Additionally, gross oil sales volumes through the facility recently surpassed 100,000 barrels of oil per day (BOPD). Under the terms of the transaction, Anadarko will increase its working interest in Lucius to approximately 49 percent from its previous 23.8-percent ownership, enabling the company to further capitalize on additional future value-adding opportunities at Lucius.

ATTRACTIVE ACQUISITION METRICS

The acquisition and development cost of the acquired properties, excluding a total of approximately $300 million of materials inventory and seismic, is approximately $13.50 per BOE for the estimated proved reserves to be acquired. The assets are being acquired at an estimated EBITDAX multiple(1)(2) of 1.5 for the expected sales volumes over the coming 12 months, using the current futures strip price for oil and natural gas. Please see the supplemental information available at www.anadarko.com for additional details on the transaction.

GUIDANCE

Upon closing, the transaction is expected to add approximately 80,000 BOE per day to Anadarko's sales-volume guidance – more than 80 percent of which is comprised of oil. The company also is expected to increase its 2016 full-year capital guidance, not including the acquisition, to a range of $2.8 to $3.0 billion, primarily reflecting the increased activity in the Delaware and DJ basins.

Jefferies Group LLC and Latham & Watkins LLP are serving as advisors to Anadarko on the acquisition.

*** Catalent, Inc. (NYSE: CTLT) announced an agreement for Catalent, through its wholly owned subsidiary, Catalent Pharma Solutions, Inc., to acquire Pharmatek Laboratories, Inc., a West Coast, U.S.-based specialist in drug development and clinical manufacturing. The acquisition will add extensive early-phase drug development capabilities from discovery to clinic, bring spray drying into Catalent’s portfolio of drug formulation and delivery technologies, and expand Catalent’s capability for handling highly potent compounds. The addition of spray drying will also provide Catalent customers with a comprehensive suite of bioavailability enhancement solutions, while complementing and expanding Catalent’s OptiForm® Solution Suite platform, a science-driven parallel screening approach to identify the optimal formulation pathway for poorly soluble compounds. No financial details have been disclosed.

Founded in 1999, Pharmatek provides dosage form development and clinical-scale cGMP manufacturing of oral, injectable and topical products for more than 100 customers globally. At its San Diego facility, Pharmatek offers a fully integrated drug development platform, with discovery formulation screening for lead selection and optimization, comprehensive formulation development and analytical services, and finished dose form manufacturing for clinical supply. Additional services include first-in-man strategies, solutions for poorly soluble compounds, controlled release formulations, and specialized facilities and controls for potent compound handling.

“Catalent continues to expand its industry-leading drug development and delivery technologies to help its pharmaceutical partners to fully unlock the potential of their molecules and provide better treatments for patients,” said Barry Littlejohns, President of Catalent’s Drug Delivery Solutions business. He added, “Combined with Catalent’s existing technologies and network, the addition of Pharmatek’s well-established scientific expertise and spray dry capabilities will create an unparalleled drug development platform, while the San Diego facility will expand our West Coast presence and provides additional access to the Asia-Pacific markets.”

Pharmatek’s site in San Diego is a cGMP facility that employs nearly 200 people, whose experience and expertise will complement Catalent’s existing development and analytical services teams, based at multiple locations globally. Pharmatek provides development and analytical services for more than 120 molecules annually, and its facility comprises 68,000 square feet of laboratory, manufacturing and support space, with 2 analytical labs, 2 formulation labs, 4 engineering rooms and 9 Certified ISO Class 8 manufacturing suites. The site also features 18,000 square feet of laboratory, manufacturing and support space dedicated to development and manufacturing of highly-potent compounds.

The transaction is subject to customary closing conditions and is expected to close in the next few weeks. Catalent intends to pay for this all-cash acquisition through a combination of existing cash and borrowings under Catalent's existing revolving credit facility. The acquisition will not change Catalent's fiscal 2017 financial guidance. The purchase price will not be disclosed as it is not material to Catalent’s financial results.

*** Actions Semiconductor Co., Ltd. (NASDAQ: ACTS) entered into a definitive merger agreement on September 12, 2016 pursuant to which the Company will be acquired by a consortium of investors (the "Buyer Consortium"), including Supernova Investment Ltd. ("Parent") and other certain shareholders of the Company: Surrey Glory Investments Inc., Tongtong Investment Holding Co., Ltd., Perfectech Int'l Ltd, Allpremier Investment Limited, Octovest International Holding Co., Ltd., Ventus Corporation, Middlesex Holdings Corporation Inc, Rich Dragon Consultants Limited, Nutronics Technology Corporation, Uniglobe Securities Limited, New Essential Holdings Limited, Embona Holdings (Malaysia) Limited, Suffolk Dragon Ventures Ltd and Top Best Development Limited (together with Parent, the "Rollover Shareholders").

Pursuant to the terms of the Merger Agreement, at the effective time of the merger, a wholly owned subsidiary of Parent will merge with and into the Company, with the Company continuing as the surviving company (the "Surviving Company"), and each of the Company's ordinary shares, par value US$0.00001 per share, issued and outstanding immediately prior to the effective time of the merger (the "Shares") will be cancelled and cease to exist in exchange for the right to receive US$0.366 in cash without interest, and each American Depositary Share ("ADS") of the Company, every ADS representing six Shares, will be cancelled in exchange for the right to receive US$2.20 in cash without interest, except for (a) certain Shares owned by the Rollover Shareholders, each of which will continue to exist and become one ordinary share, par value of $0.00001 each, of the Surviving Company, (b) Shares (including Shares represented by ADSs) owned by the Company or any of its subsidiaries, (c) Shares reserved (but not yet issued and allocated) by the Company for issuance and allotment upon exercise of any share incentive awards issued under the Company's employee share incentive plans, and (d) Shares held by shareholders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the merger pursuant to Section 238 of the Companies Law of the Cayman Islands (the "Dissenting Shares"), which will be cancelled and cease to exist in exchange for the right to receive the payment of fair value of the Dissenting Shares in accordance with Section 238 of the Companies Law of the Cayman Islands.

The merger consideration represents a premium of 49.7% to the closing price of the Company's ADSs on May 18, 2016, the last trading day prior to the Company's announcement of its receipt of a "going-private" proposal, and a premium of 40.6% to the volume weighted average closing price of the Company's ADSs during the 30 trading days prior to its receipt of a "going-private" proposal. The Buyer Consortium intends to fund the merger through available cash of the Company and its subsidiaries.

The Company's board of directors (the "Board"), acting upon the unanimous recommendation of a committee of independent and disinterested directors established by the Board (the "Special Committee"), approved the Merger Agreement and the merger and resolved to recommend that the Company's shareholders vote to authorize and approve the Merger Agreement and the merger. The Special Committee negotiated the terms of the Merger Agreement with the assistance of its independent financial and legal advisors.

The merger, which is currently expected to close during the last quarter of 2016, is subject to customary closing conditions including the approval of the Merger Agreement by an affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy at a meeting of the Company's shareholders which will be convened to consider the approval of the merger agreement and the merger. Pursuant to a voting and support agreement entered among Parent and the other Rollover Shareholders, the Rollover Shareholders have agreed to vote all the Shares and ADSs beneficially owned by them in favor of the authorization and approval of the Merger Agreement and the merger. If completed, the merger will result in the Company becoming a privately-held company and its ADSs will no longer be listed on The NASDAQ Select Global Market.

The Company will prepare and file with the U.S. Securities and Exchange Commission (the "SEC") a Schedule 13E-3 transaction statement, which will include a proxy statement of the Company. The Schedule 13E-3 will include a description of the Merger Agreement and contain other important information about the merger, the Company and the other participants in the merger.

In connection with the merger, Houlihan Lokey (China) Limited is serving as financial advisor to the Special Committee; Jones Day is serving as U.S. legal counsel to the Special Committee; Maples and Calder is serving as Cayman Islands legal counsel to the Special Committee. K&L Gates LLP is serving as U.S. legal counsel to the Buyer Consortium.

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



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