Notable Mergers and Acquisitions 9/19: (BLOX) (TECD)/(AVT) (ERI)/(ISLE) (NUE)
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“Vista has an excellent track record of supporting and adding value to technology companies, and we are thrilled to bring on a partner of their caliber and strategic expertise,” said Jesper Andersen, President and CEO of Infoblox. “This transaction will provide immediate and substantial value to Infoblox stockholders, while also giving Infoblox greater flexibility to execute on our long-term strategy to drive increased DDI automation and DNS security into the enterprise market. We are excited to begin our partnership with Vista and look forward to leveraging their operational insights as we continue to deliver the industry-leading products, solutions and customer service on which our customers rely.”
“As all industries are moving to the cloud in record speed, and as connected devices proliferate, companies depend more than ever on network automation and security,” said Brian Sheth, Co-Founder and President of Vista Equity Partners. “Infoblox is the trusted market leader in DDI solutions, and their strategy and portfolio of secure automated networking solutions make the company uniquely positioned to deliver for its customers. We are looking forward to working with the talented team at Infoblox to support the company’s strategic vision and grow its industry leadership.”
Infoblox’s Board of Directors received and thoroughly evaluated multiple indications of interest before deciding to proceed with this transaction. The transaction will be effected by means of a tender offer followed by a merger, and the Infoblox Board of Directors unanimously recommends Infoblox stockholders tender their shares in the offer. The transaction is expected to close in Infoblox’s fiscal second quarter, subject to customary closing conditions and regulatory approvals. Infoblox will maintain its corporate headquarters in Santa Clara, California and continue to be led by its current executive team.
For further information regarding the terms and conditions contained in the definitive merger agreement, please see Infoblox’s Current Report on Form 8-K, which will be filed in connection with this transaction.
Morgan Stanley is acting as exclusive financial advisor and Fenwick & West LLP is acting as legal advisor to Infoblox. Vista’s legal advisor is Kirkland & Ellis LLP.
*** Avnet, Inc. (NYSE: AVT) announced that it has entered into an agreement to sell its Technology Solutions operating group to Tech Data Corporation (Nasdaq: TECD) in a stock and cash transaction valued at approximately $2.6 billion. Under the terms of the agreement, Avnet will receive $2.4 billion in cash and 2.8 million shares of Tech Data common stock, currently valued at approximately $200 million.
The sale of this business provides both Avnet and Tech Data with immediate opportunities to focus on core strategies and scale their respective businesses, ultimately delivering greater profitability to their shareholders.
“We believe the acquisition of Technology Solutions by Tech Data is the best decision for our employees, customers, suppliers and shareholders. This transaction presents us with the best strategic path for Avnet’s future success and profitability, and puts Technology Solutions in position to achieve breakthrough business results with Tech Data,” said William Amelio, chief executive officer of Avnet. “Moving forward, Avnet will focus its resources and investments on becoming a leader in design chain and supply chain services not only for our current customers and suppliers, but also for new markets. We will drive targeted investments in embedded solutions, Internet of Things (IOT) and critical digital platforms. By investing in these high growth areas, we can expand the breadth of our portfolio and attract new customers worldwide who depend on us to deliver world-class solutions.”
Avnet’s Technology Solutions operating group is a global IT solutions distributor serving customers and suppliers in more than 80 countries. It provides next generation solutions, marketing, training, resources and services that span the cloud to the data center and encompass the entire IT lifecycle. They work with value-added resellers to make it easier and more affordable to enter and excel in high-growth technology and vertical markets locally and around the world.
“This transformative transaction will position us as a premier global IT distributor with the most diverse end-to-end solutions from the data center to the living room,” said Bob Dutkowsky, chief executive officer of Tech Data. “Tech Data has competed with and admired Avnet Technology Solutions for many years. We’re thrilled to start this journey together and are confident that our customers, vendor partners, employees, and shareholders will appreciate and benefit from the value that we will bring to the market. We look forward to welcoming the Technology Solutions team to Tech Data and are excited for the opportunities that this combination creates.”
Additionally, Avnet and Tech Data intend to partner on delivering world class IOT end-to-end solutions to the market.
Upon completion of the transaction, Avnet expects to realize a gain of $3.75 to $4.75 per share. The closing of the transaction, which is subject to customary regulatory approvals, is anticipated to occur in the first or second quarter of calendar 2017.
Citi and Allen & Company LLC are acting as financial advisors to Avnet, while Gibson, Dunn & Crutcher LLP, is acting as legal advisor.
*** Eldorado Resorts, Inc. (Nasdaq: ERI) and Isle of Capri Casinos, Inc. (Nasdaq: ISLE) announced that they have entered into a definitive merger agreement whereby Eldorado will acquire all of the outstanding shares of Isle of Capri for $23.00 in cash or 1.638 shares of Eldorado common stock, at the election of each Isle of Capri shareholder, reflecting total consideration of approximately $1.7 billion, inclusive of $929 million of long-term debt of Isle of Capri and its subsidiaries. The exchange ratio for stock consideration to be issued in the merger is fixed and was determined based on Eldorado’s 30-trading day volume weighted average price as of September 18, 2016 of $14.04. Elections are subject to proration such that the outstanding shares of Isle common stock will be exchanged for aggregate consideration comprised of 58% cash and 42% Eldorado common stock. The transaction is expected to be immediately accretive to Eldorado’s free cash flow and diluted earnings per share, inclusive of identified cost synergies of approximately $35 million in the first year following the completion of the transaction and giving effect to Isle’s previously announced divestiture of Isle of Capri Casino Hotel Lake Charles. The transaction consideration represents an approximate 36% premium over the closing share price of Isle of Capri on September 16, 2016.
Following the completion of the transaction, Eldorado will benefit from increased operational and geographic diversity as it will add thirteen casino–resorts to its portfolio, for a total of 20 properties in ten states. After giving effect to the completion of the transaction and the sale of Isle of Capri Casino Hotel Lake Charles, the combined operations of Eldorado and Isle would have generated approximately $1.8 billion in revenue for the twelve months ended June 30, 2016. Eldorado’s expanded property portfolio will feature approximately 20,800 slot machines and VLTs, more than 560 table games and over 6,500 hotel rooms. No single market accounted for more than 15% of the combined entity’s Adjusted EBITDA for the twelve month periods ended the last day of the most recent fiscal quarter for each of Eldorado and Isle.
Gary Carano, Chairman and Chief Executive Officer of Eldorado, commented, “The acquisition of Isle of Capri represents a transformational growth opportunity for Eldorado and is a significant milestone in the successful ongoing execution of our long-term strategy to opportunistically expand our regional gaming platform through accretive acquisitions. In the last two years we have created tremendous value for our shareholders as the scale of Eldorado Resorts will grow from two wholly-owned properties and a 50% interest in a third property in two markets in 2014 to 20 properties in ten states after completing the transaction. Financially, the transaction is expected to be accretive to our operating results upon closing. For the twelve month periods ended the last day of the most recent fiscal quarter for each of Eldorado and Isle, the revenues of the combined company were almost double Eldorado’s revenues on a standalone basis and combined Adjusted EBITDA was approximately $400 million, inclusive of the cost synergies we have identified. Strategically, the combination builds the scale of our gaming operations and further diversifies the geographic reach of our operations without any overlap with our existing properties.
“We intend to implement our strategy of focusing on margin enhancement and customer service and experiences across the portfolio by marrying best practices from both companies. Led by our proven gaming, hotel management and food and beverage teams with a long-term record of operating execution and M&A integration we believe that Eldorado Resorts will be positioned for long-term success. Combining the assets, management, personnel, operations and other resources of these two organizations is expected to create substantial near- and long-term synergies."
Eric Hausler, Chief Executive Officer of Isle of Capri, added, “We are pleased to reach this agreement with Eldorado Resorts, which provides Isle of Capri shareholders with substantial and immediate value, as well as the opportunity to participate in the upside potential of the combined company. The premium value our shareholders will be receiving reflects the culmination of several years of hard work by many dedicated Isle of Capri employees and the determination and guidance of our Board of Directors in creating and driving value. I am thankful for the hard work and dedication of our talented employees, and I am confident they will continue to make many valuable contributions as part of a larger and stronger organization. I look forward to working closely with the Eldorado team to bring our companies together to realize the benefits of this compelling combination and ensure a smooth transition.”
Tom Reeg, President and Chief Financial Officer of Eldorado, concluded, “This acquisition marks further progress toward our goal of strategically expanding our property base to realize benefits of scale, increasing long-term strategic and financial flexibility, and driving shareholder value. Our experience and success over the last two years in integrating the MTR assets and Silver Legacy and Circus Circus operations will serve us well as we add the Isle of Capri assets to our operating base. With our experienced management team, operating discipline and return-focused approach to capital expenditures, we believe the acquisition of Isle of Capri offers a meaningful opportunity for Eldorado Resorts, our shareholders and Isle shareholders. Notably, after giving effect to the transaction, the incurrence of debt to fund the cash portion of the purchase price, transaction expenses, and the expected first year cost synergies of $35 million, we expect our net leverage ratio to be approximately 5.1x at closing. We plan to use the free cash flow expected to be generated by the combined company to reduce leverage and pursue future growth opportunities.”
Eldorado has received committed financing for the transaction totaling $2.1 billion from J.P. Morgan. The completion of the transaction is not subject to a financing contingency.
The transaction has been unanimously approved by the Boards of Directors of both Eldorado Resorts, Inc. and Isle of Capri Casinos, Inc. The transaction is subject to approval of the stockholders of Eldorado Resorts and Isle of Capri, the approval of applicable gaming authorities, the expiration of the applicable Hart-Scott-Rodino waiting period and other customary closing conditions, and is expected to be consummated in the second quarter of 2017. Certain stockholders of Eldorado and Isle of Capri who control approximately 24% and 35% of the outstanding shares of common stock of Eldorado and Isle of Capri, respectively, have signed agreements to vote in favor of the transaction. Upon completion of the transaction, Eldorado and Isle of Capri shareholders will hold approximately 62% and 38%, respectively, of the combined company’s outstanding shares. In addition, subject to mutual agreement by both companies, two members of the Isle of Capri Board of Directors will be designated as members of the Eldorado Board of Directors effective immediately following the closing of the transaction.
J.P. Morgan is acting as exclusive financial advisor and Milbank Tweed Hadley & McCloy LLP is acting as legal counsel to Eldorado in connection with the proposed transaction. Credit Suisse is acting as exclusive financial advisor and Mayer Brown LLP is acting as legal counsel to Isle of Capri in connection with the proposed transaction.
*** Nucor Corporation (NYSE: NUE) announced that it has agreed to acquire Independence Tube Corporation (ITC), a leading independent manufacturer of hollow structural section (HSS) steel tubing, for $435 million, or approximately 6x average EBITDA over the 2013-2015 period.
"Independence Tube is a natural fit with Nucor. Their business model is similar to ours with extremely efficient manufacturing facilities and a highly variable cost structure. Our companies' cultures are also similar, sharing a belief in continual improvement, operating efficiency and the value of our employees," said John Ferriola, Chairman, CEO and President of Nucor. "This acquisition is another important step in our long-term strategy to increase the number of value-added products we can offer our customers. It also adds to our portfolio another growth platform for our team to use to grow our company."
HSS is used in a broad array of structural and mechanical applications including nonresidential construction, infrastructure, and agricultural and construction equipment end-use markets. ITC has the second highest market share in HSS, selling its products primarily through service centers, which are also an important channel to market for Nucor. ITC is primarily a producer of HSS and does not focus on products for energy or other pipe and tube segments. The addition of ITC to Nucor's portfolio will allow Nucor to offer a wider selection of products to its fabricator and service center customers and strengthens the company's presence in the key nonresidential construction market.
ITC and Nucor are highly complementary. Nucor is installing a large diameter tube mill at an existing facility in Iuka, Mississippi. Adding large size HSS to ITC's already comprehensive product line will create the widest product offering in North America for HSS solutions. Nucor is North America's most comprehensive provider of steel solutions to the construction and infrastructure markets with leadership positions in plate, bar and structural steels, as well as joist, decking, metal buildings and rebar fabrication. The addition of HSS further differentiates Nucor from its steel competitors as the leader in providing solutions to its customers.
ITC operates four strategically located state-of-the-art facilities in Illinois and Alabama that annually produce roughly 600,000 tons and employ approximately 335 teammates. ITC purchases hot-rolled coil from suppliers to produce its HSS steel tubing. The company's manufacturing plants are located in close proximity to Nucor's sheet mills in Decatur, Alabama; Crawfordsville, Indiana; and Ghent, Kentucky.
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