Notable Mergers and Acquisitions 9/23: (TWTR) (BIP)/(PBR) (CVBF) (EFUT) (CBOE)
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CNBC's David Faber believes a deal isn't imminent, but could happen by the end of the year.
*** Brookfield Infrastructure (NYSE: BIP) and institutional clients of Brookfield Asset Management (NYSE: BAM), including CIC Capital Corporation, GIC Private Limited and others (the "Consortium"), announced that they have reached agreement to acquire a 90% controlling stake in Nova Transportadora do Sudeste S.A. ("NTS" or the "Company"), a system of natural gas transmission assets in the southeast of Brazil currently owned by Petroleo Brasileiro S.A. ("Petrobras"), for approximately US$5.2 billion. Brookfield managed entities will hold a controlling interest in the Consortium. Brookfield Infrastructure's investment will be a minimum of approximately 20% of the transaction, representing approximately US$825 million of the transaction consideration payable on closing. The remainder will be owned by institutional partners. Petrobras, as a 10% owner in NTS, will have customary governance rights commensurate with the size of its interest.
"This is a unique opportunity to invest in a large-scale, high quality utility business and participate over time in Brazil's growing gas industry," said Sam Pollock, Chief Executive Officer of Brookfield Infrastructure. "We expect this business will contribute meaningfully to our results going forward by delivering stable, inflation-linked cash flows backed by long-term, fixed-price, off-take agreements. We are very pleased to be significantly expanding our utilities business in a sector and geography that we know well and that we believe will offer opportunities to deploy further capital at attractive risk-adjusted returns."
NTS is a 2,048 km pipeline system that provides the transportation network for natural gas in Brazil's most industrialized and populated states in the south-central region of the country. The majority of the Company's assets were installed in the last ten years, connecting the states of Rio de Janeiro, Sao Paulo and Minas Gerais with natural gas coming from Bolivia and Brazil's offshore oil and gas fields. These assets operate under long-term concessions with revenues derived from five "ship-or-pay" GTAs, subject to a regulated utility structure overseen by the national energy regulator.
The GTAs account for 100% of the pipeline capacity and provide the country's main gas supplier, Petrobras, access to end users including local distribution companies, gas fired power generation plants and industrial users. The weighted average remaining life of the GTAs is 14 years. In addition, upon expiry of the GTAs, NTS is entitled to continue to earn a return on and return of capital remaining in the business, plus recovery of all operating and maintenance costs until the end of the concessions in 2039 through 2041.
Under the terms of the transaction, the purchase price is payable in two tranches an up-front payment of US$4.3 billion due on closing of the transaction, and the balance payable on the fifth anniversary of this closing.
Brookfield Infrastructure will fund its proportionate share of the up-front payment (approximately US$825 million) from existing liquidity which totalled approximately US$2 billion at June 30, 2016.
As part of the transaction, Brookfield Asset Management has agreed to participate initially for an approximate 30% interest in the Consortium. Brookfield Asset Management expects to syndicate its holdings prior to closing of the transaction and Brookfield Infrastructure has priority rights to take up a portion of this syndication.
Initially, the pipelines will be operated by a subsidiary of Petrobras under a multi-year operations and maintenance contract. Over time, Brookfield Infrastructure will have the flexibility to transition NTS to a fully stand-alone operating business and internalize all management and operating functions, if desired.
Closing of the transaction remains subject to a number of conditions. These conditions include (among others) the finalization, to the satisfaction of the relevant Petrobras and Consortium parties, of terms and conditions of a number of long-term agreements relating to the ongoing operations of the business. The transaction is also subject to a number of other customary conditions, including regulatory approvals. Closing of the transaction is targeted for December 2016 or as soon as possible thereafter.
*** CVB Financial Corp. (Nasdaq: CVBF) and Valley Commerce Bancorp (OTC: VCBP) announced that they have entered into a merger agreement, pursuant to which CVB Financial Corp. (“CVBF”) will acquire Valley Commerce Bancorp (“VCBP”) the holding company for Valley Business Bank, with $416 million in assets as of June 30, 2016. Valley Business Bank has four locations in Visalia, Tulare, Fresno, and Woodlake.
CVBF expects the transaction to result in modest earnings accretion in 2017, excluding one-time transaction costs. CVBF estimates tangible book value dilution at close of approximately 1% to be earned back within three years.
Christopher D. Myers, President and Chief Executive Officer of CVBF and Citizens Business Bank, remarked, “Valley Business Bank is a strong community bank and an excellent strategic and geographic fit for Citizens. We look forward to welcoming their customers, associates, and shareholders.”
“Citizens Business Bank is the perfect fit for Valley Business Bank, and most importantly, our customers and employees. We are excited to be partnering with them,” said Allan Stone, President and Chief Executive Officer of VCBP. “Citizens Business Bank will expand upon our reach, our capabilities and our product offerings while continuing our commitment to providing excellent service to our business and consumer customers. Our shareholders will benefit from the opportunity to own CVBF’s NASDAQ-listed stock with 108 quarters of consecutive cash dividend payments. Based on our similar cultures, we are looking forward to a smooth transition.”
In exchange for all of VCBP’s common stock and options, CVBF will pay aggregate consideration consisting of $23.4 million in cash and 1,942,673 shares of CVBF stock, currently valued at $57.5 million assuming CVBF’s current stock price of $17.56 as of September 22, 2016. In addition, the merger agreement provides for VCBP to pay a special dividend to its shareholders conditioned upon VCBP’s equity exceeding a minimum equity target prior to the close. Assuming the exercise of all outstanding stock options and based on common equity at June 30, 2016, VCBP stockholders would have received approximately $12.8 million as a special dividend. Based on VCBP’s current outstanding common shares and options and the estimated special dividend as of June 30, 2016, the aggregate value of the transaction to VCBP shareholders is $70.3 million or $23.43 per VCBP share. The amount of the special dividend to be paid by VCBP will change depending on VCBP’s net earnings and changes in equity through the month end prior to the close. Giving effect to the transaction, VCBP shareholders would hold, in aggregate, approximately 1.8% of CVBF’s outstanding common stock following the merger.
Upon completion of the merger, Valley Business Bank will operate as Citizens Business Bank and will continue to deliver the high-touch level of service that its customers expect, with an expanded branch and ATM network and a broad range of products and services, including expertise in personal, small business, private and corporate banking, as well as treasury management and trust services.
The boards of directors of Valley Commerce Bancorp and Valley Business Bank and the boards of directors of CVBF and Citizens Business Bank, respectively, have unanimously approved this transaction. Closing of the transaction is subject to customary regulatory approvals and the approval of VCBP shareholders.
Keefe, Bruyette, and Woods, Inc. served as financial advisor to CVBF, and Manatt, Phelps & Phillips, LLP served as legal counsel to CVBF. Gary S. Findley & Associates served as financial advisor to VCBP and Gary Findley,
*** eFuture Holding Inc. (Nasdaq: EFUT) announced it has entered into an agreement and plan of merger (the "Merger Agreement") with Shiji (Hong Kong) Limited ("Parent") and eFuture CI Limited ("Merger Subsidiary"), a wholly-owned subsidiary of Parent. Parent and Merger Subsidiary are indirect, wholly-owned subsidiaries of Beijing Shiji Information Technology Co Ltd. ("Shiji"), a joint-stock company listed on the Shenzhen Stock Exchange of the PRC.
Pursuant to the Merger Agreement, Parent will acquire all the outstanding ordinary shares of the Company not currently owned by Parent and its affiliates for cash consideration equal to US$6.42 per share of the Company (each, a "Share"). This price represents an approximately 18% premium over the closing Share price as quoted by NASDAQ Capital Market ("NASDAQ") on June 3, 2016, the last trading day immediately prior to the Company's announcement on June 6, 2016 that it had received a preliminary non-binding proposal from Parent.
Subject to the terms and conditions set forth in the Merger Agreement, Merger Subsidiary will merge with and into the Company, with the Company continuing as the surviving company (the "Surviving Company") and becoming a wholly-owned subsidiary of Parent (the "Merger"). Each Share which is issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) will be cancelled in consideration for the right to receive US$6.42 per Share, in cash, without interest, except for (i) Shares held by the Company or any of its subsidiaries (if any) and Shares beneficially owned by Parent, Merger Subsidiary or their affiliates, which Shares will be cancelled at the Effective Time for no consideration, or (ii) Shares owned by holders 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, which such Shares will be cancelled at the Effective Time for the right to receive the fair value of such Shares determined in accordance with the provisions of Section 238 of the Companies Law of the Cayman Islands. The transactions contemplated by the Merger Agreement, including the Merger, will be financed by the equity capital of Parent and its affiliates.
At the Effective Time, (A) each option (the “Company Options”) to purchase Shares granted under the Company’s share incentive plans that is then vested, outstanding and unexercised will be cancelled and converted into the right to receive, net of any applicable withholding taxes, cash in an amount equal to (x) the total number of Shares issuable upon exercise of such Company Option immediately prior to the Effective Time multiplied by (y) the excess, if any, of (1) US$6.42 over (2) the exercise price payable per Share issuable under such Company Option; provided, however, that if the exercise price payable per Share issuable under any Company Option is greater than $6.42, such Company Option will be cancelled for no payment; (B) each Company Option that is then outstanding and not vested on or prior to the Effective Time will be cancelled and converted into a restricted cash incentive award (“RCA”) in an amount equal to (x) the total number of Shares issuable upon exercise of such Company Option immediately prior to the Effective Time multiplied by (y) the excess, if any, of (1) US$6.42 over (2) the exercise price per Share issuable under such Company Option; provided that each RCA will be subject to the same vesting terms and conditions applicable to the Company Option from which such RCA was converted; and (C) each restricted share granted under the Company’s share incentive plans (whether vested or unvested) that is then outstanding will be cancelled and converted into the right to receive, net of any applicable withholding taxes, cash in an amount equal to US$6.42.
The special committee of independent directors (the "Special Committee") formed by the Board of Directors of the Company (the "Company Board"), with full power and authority delegated by the Company Board, unanimously approved the Merger Agreement, the plan of merger required to be filed with the Registrar of Companies of the Cayman Islands in connection with the Merger and the transactions contemplated thereby (the "Transactions"), including the Merger, and resolved to recommend that the Company's shareholders vote to approve the Merger Agreement and the Transactions, including the Merger. The Special Committee, which is composed entirely of independent directors, exclusively negotiated the terms of the Merger Agreement with Parent and Merger Subsidiary with the assistance of its independent financial and legal advisors.
The consummation of the Merger is subject to customary closing conditions, including the approval by an affirmative vote of Company shareholders holding two-thirds or more of the votes represented by the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting, which will be convened to consider the approval of the Merger Agreement and the Transactions, including the Merger. If completed, the Transactions will result in the Company becoming a privately-held company and its Shares will no longer be listed on NASDAQ.
Concurrently with the execution of the Merger Agreement, Parent entered into a support agreement with the Company (the “Support Agreement”), pursuant to which Parent has agreed to vote all the Shares beneficially owned by it in favor of the authorization and approval of the Merger Agreement and the Merger. As of the date of this press release, Parent beneficially owns Shares representing approximately 52.24% of the total voting power of the outstanding Shares (without taking into account any outstanding options or restricted shares granted pursuant to the Company’s share incentive plans).
The Company and certain other participants in the Transactions will prepare and file with the U.S. Securities and Exchange Commission (the “SEC”) a Schedule 13E-3 transaction statements, 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.
Duff & Phelps, LLC is serving as financial advisor to the Special Committee. Gibson, Dunn & Crutcher LLP is serving as U.S. legal advisor to the Special Committee and Campbells is serving as Cayman Islands legal advisor to the Special Committee. Blank Rome LLP is serving as U.S. legal advisor to the Company.
Cleary Gottlieb Steen & Hamilton LLP is serving as U.S. legal advisor to Parent and Maples and Calder is serving as Cayman Islands legal advisor to Parent.
*** CBOE Holdings (Nasdaq: CBOE) is in talks to acquire Bats Global Market (BATS: BATS), Bloomberg reported after markets closed on Thursday citing people familiar with the matter.
A deal could be announced in the next few weeks but it is not finalized and could still fall, the report stated.
A Bats spokeswoman declined to comment and the CBOE could not be reached for comment.
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