Notable Mergers and Acquisitions 9/7: (ARLZ) (MOD) (CGNT)

September 7, 2016 9:46 AM EDT
Get Alerts ARLZ Hot Sheet
Trade ARLZ Now!
Join SI Premium – FREE

Find out which companies are about to raise their dividend well before the news hits the Street with's Dividend Insider Elite. Sign-up for a FREE trial here.

*** Aralez Pharmaceuticals Inc. (Nasdaq: ARLZ) announced that it acquired the U.S. and Canadian rights to ZONTIVITY® (vorapaxar), pursuant to an asset purchase agreement entered into between Merck, known as MSD outside the United States and Canada, and Aralez Pharmaceuticals Trading DAC, a subsidiary of Aralez, based in Ireland. ZONTIVITY is the first and only approved therapy shown to inhibit the protease-activated receptor-1 (PAR-1), the primary receptor for thrombin, which is considered to be the most potent activator of platelets. In the U.S., ZONTIVITY is indicated for the reduction of thrombotic cardiovascular events in patients with a history of heart attack (myocardial infarction) or in patients with narrowing of leg arteries, called peripheral arterial disease (PAD), and should be used in combination with daily aspirin and/or clopidogrel according to their indications or standard of care. In Canada, ZONTIVITY (vorapaxar sulfate) co-administered with aspirin with or without clopidogrel, according to their standard of care, is indicated for the reduction of atherothrombotic events in adult high-risk patients with a history of myocardial infarction (MI).

The asset purchase agreement included an initial upfront payment of $25 million, which was paid from cash on hand. The transaction also includes graduated royalties and potential added future consideration in the form of payments for achieving certain aggregate annual sales-based milestones. In addition to the Asset Purchase Agreement, the parties simultaneously entered into a Supply Agreement, a License Agreement with respect to trademarks and certain proprietary know-how and a Transition Services Agreement. Under the terms of the Transition Services Agreement, Merck will continue to distribute the product on behalf of Aralez for up to twelve months while the product rights, packaging and labeling and other responsibilities are transferred to Aralez Pharmaceuticals Trading DAC.

The U.S. prescribing information for ZONTIVITY includes a boxed warning regarding bleeding risk. ZONTIVITY is not for use in patients with a history of stroke, transient ischemic attack (TIA) or intracranial hemorrhage (ICH), or active pathological bleeding. Antiplatelet agents, including ZONTIVITY, increase the risk of bleeding, including ICH and fatal bleeding.

ZONTIVITY is a once-daily tablet containing 2.08 mg of vorapaxar, equivalent to 2.5 mg of vorapaxar sulfate. There is no experience with use of ZONTIVITY as the only administered antiplatelet agent, because ZONTIVITY was studied only as an addition to aspirin and/or clopidogrel.

"ZONTIVITY represents a revenue-generating asset with NCE regulatory data exclusivity and patent protection potentially extending to 2027. It is an excellent strategic fit with our anchor therapeutic position in cardiovascular disease targeting high prescribing cardiologists alongside YOSPRALATM, pending FDA approval, and FIBRICOR®," said Adrian Adams, Chief Executive Officer of Aralez. "This transaction is consistent with our business model designed to build value organically through the approval and commercialization of YOSPRALA, currently pending FDA approval with a September 14, 2016 PDUFA date, and through seizing high potential growth opportunities through aggressive business development and licensing in our anchor positions in cardiovascular disease, pain management and other specialty therapeutic areas."

*** American Finance Trust, Inc. ("AFIN") announced that the special committee of the board of directors unanimously approved the acquisition of all of the outstanding common stock of American Realty Capital – Retail Centers of America, Inc. ("RCA") for approximately $1.4 billion, payable in a combination of AFIN common shares and cash plus the assumption of certain debt. This transaction creates a premier diversified REIT with a retail focus, with an enterprise value of approximately $3.9 billion1. The transaction enhances AFIN's scale by combining two highly complementary U.S. real estate portfolios comprised of 494 properties aggregating 20.8 million rentable square feet, while improving the Company's capital structure and creating accretion to AFIN's funds from operations per share in 2017.

The special committee of AFIN's board of directors, which consists of the independent members of the board of directors, was formed to evaluate the proposed transaction and has approved the transaction, subject to the approval of AFIN's shareholders and the shareholders of RCA.

Michael Weil, Chief Executive Officer of AFIN, commented, "We are pleased to announce today's transaction which will bring together two high quality real estate portfolios and will create a best-in-class diversified REIT with a retail focus. The combination of AFIN and RCA will help the Company achieve critical scale, afford improved access to capital markets, result in significant cost savings for shareholders, and increase coverage of our distributions. For AFIN, today's announcement is a key step forward in our plan to grow earnings."

David M. Gong, Lead Independent Director of AFIN, explained, "The board of directors of AFIN formed the special committee, which consists of the independent members of the board, to evaluate potential strategic transactions. It further empowered the special committee to negotiate terms of any transaction which the committee determined to pursue. The special committee believes that the combination of the two companies will significantly enhance shareholder value."

Strategic and Financial Benefits of the Merger

Enhances Size, Improves Access to Capital Markets, and Increases Liquidity Options: The combined company will become a premier diversified REIT with a retail focus, with an enterprise value of approximately $3.9 billion1. Increased scale will enhance access to capital markets and increase liquidity options.

Improves Capital Structure: AFIN will have lower leverage with manageable near-term debt maturities and ample near-term liquidity. The improved capital structure also provides AFIN with a strong balance sheet for continued growth and acquisitions.

Creates Accretive Transaction: The transaction is expected to be accretive to AFIN's funds from operations per share in 2017 and strengthens the Company's distribution coverage.

Broadens Tenant Diversification: The addition of RCA's retail portfolio will broaden AFIN's retail tenant base and reduce AFIN's top 10 tenant concentration to 48% from 75% on an annualized straight-line rent basis as of June 30, 2016.

Significantly Reduces Fees and Creates Meaningful Synergies: Expected $10.9 million of annual savings in 2017 from $6.1 million in contractual asset management fee savings and $4.8 million in general and administrative expense savings. Decreased management fees on future equity raised.

Creates Internalization Option: Creates a defined management internalization option under the AFIN advisory agreement benefiting shareholders at both companies.

Terms of the Transaction and Timing

Under the terms of the agreement, RCA shareholders will receive 0.385 shares of AFIN common stock and $0.95 in cash for each share of RCA common stock they own. Upon closing, RCA shareholders will own approximately 37% of the combined company. The approximately 90% stock component of the transaction is expected to be tax-free to shareholders.

The merger agreement also provides RCA with a go-shop period during which time RCA will have the right to actively solicit alternative proposals from third parties for 45 days. The merger agreement provides for RCA to pay a termination fee of $5.1 million to AFIN if RCA terminates the merger agreement in connection with a superior proposal that arises on or before the date that is fifteen days following the end of the go-shop period.

AFIN will add two independent directors to be appointed by RCA's board of directors, bringing to six the total number of directors for the combined company, five of them independent.

Completion of the transaction is subject to the approval of AFIN and RCA shareholders as well as satisfaction of customary closing conditions. The transaction is expected to close in the first quarter of 2017.

Financial Advisors

UBS Investment Bank is serving as exclusive financial advisor to the special committee of AFIN. Pepper Hamilton LLP is serving as legal counsel to the special committee of AFIN. Proskauer Rose LLP is serving as legal counsel to AFIN.

BMO Capital Markets is serving as exclusive financial advisor to the special committee of RCA. Arnold & Porter LLP is serving as legal counsel to the special committee of RCA. Proskauer Rose LLP is serving as legal counsel to RCA.

*** Modine Manufacturing Company (NYSE: MOD) announced that it has entered into a definitive agreement to acquire Luvata Heat Transfer Solutions (HTS) for a total consideration of approximately $422 million, to be financed through a combination of cash, debt, and $25 million of Modine common stock. Modine expects the transaction to close within calendar year 2016, subject to customary closing conditions, including regulatory review.


  • Addresses "Diversify" and "Grow" commitments in Modine's transformational strategy, announced in October 2015
  • Increases Modine's industrial business portfolio to approximately 40% of sales
  • Further leverages Modine's expertise in the global HVAC&R markets
  • Broadens Modine's customer base and reduces cyclical exposure
  • Expands margin and growth profile of the Company
  • Delivers immediate accretive value to EPS before the expected benefit of approximately $15 million of cost synergies

"We are excited to announce that we have taken the next step in our transformational Strengthen, Diversify and Grow corporate strategy through the upcoming addition of Luvata HTS," said Modine President and Chief Executive Officer, Thomas A. Burke. "Luvata HTS is the largest independent producer of HVAC&R coils and coatings globally. They bring an innovative culture and broad product offering that are highly complementary to Modine. Further, they bring a global footprint with manufacturing facilities spread over three continents, all of which are supported by best in class sales, engineering and support teams. Most importantly, the addition of Luvata HTS helps to expand our margin profile and future growth opportunities. We look forward to welcoming the Luvata HTS team to our family."

Luvata HTS is a leading manufacturer of commercial and industrial coils, coolers and related products, primarily for the HVAC&R markets. Luvata HTS's product offering covers a broad range of heat exchanger coils, commercial refrigeration and industrial coolers, complemented by anti-corrosion coating solutions. In addition, Luvata HTS is a significant player in the power generation and transformer cooler markets due to strong relationships with European OEMs. Luvata HTS has a highly diversified customer base with strong and long-standing relationships. With agile manufacturing capabilities in North America, Europe, and Asia, the company has a proven ability to attract and serve a wide range of customers across several industrial markets. In 2015, Luvata HTS had net sales of roughly $530 million and EBITDA of $59 million.

Dennis Appel, Luvata HTS President added, "Luvata and its owners are proud to have taken this important step toward combining the HTS Division with Modine, another proven industry leader and a true innovator in our industry. With Modine we are well positioned to continue our growth and be a part of a company that shares our passion for innovation and commitment to integrity. I am confident that together, we will provide even stronger service and solutions for our customers around the globe."

Burke concluded, "We examined several interesting acquisition opportunities as part of our strategic review process, but Luvata HTS was the most logical and compelling fit. While the company already operates a fairly lean enterprise, we do expect to achieve annual cost synergies of roughly $15 million within the first three to four years, in particular through the ongoing optimization of manufacturing and procurement organizations and cost structures. We also believe revenue synergies will emerge as we look to sell Luvata HTS's products into Modine's broad client base, utilize Luvata HTS's sales team to sell Modine's coil and other products into Luvata HTS's client base, and pursue other larger geographic and adjacent product line opportunities in the future."

J.P. Morgan Securities LLC serves as Modine's exclusive financial advisor and Kirkland & Ellis serves as Modine's primary legal advisor.

*** Cogentix Medical, Inc. (Nasdaq: CGNT) announced that it has entered into a securities purchase agreement with Accelmed Growth Partners, L.P. Under the terms of the securities purchase agreement, Accelmed would purchase $25 million of Cogentix Medical common stock from the Company at $1.55 per share, a 29% premium over the closing price of the stock on September 6, 2016 and a premium of 36% over the average closing price over the last 30 days. The securities purchase agreement is subject to various closing conditions, including approval by the shareholders of Cogentix Medical. Accelmed is a premier capital resource for the medical device industry and is based in New York, NY and Hertzeliya, Israel. Cogentix would apply the proceeds to working capital as well as the implementation of a business development strategy to acquire growth technologies addressing the urology market.

As a condition to Accelmed closing the equity investment, the Company will convert into common shares all the outstanding debt and accrued interest owed to Lewis C. Pell, one of the Company's Class I directors. Cogentix currently owes a total of $29.5 million ($28.5 million of principal and $1.0 million of accrued interest) to Mr. Pell. The Company and Mr. Pell have entered into a definitive agreement under which the debt owed by Cogentix to Mr. Pell will be converted into Cogentix common stock at a price per share of $1.67 immediately prior to closing the Accelmed securities purchase agreement. The agreement also provides that, simultaneously with the conversion of such debt, all outstanding warrants to purchase Cogentix common stock that are held by Mr. Pell will be cancelled. The agreement with Mr. Pell is subject to approval of the shareholders of Cogentix Medical.

"The proposed transaction with Accelmed has the ability to transform Cogentix Medical," said Darin Hammers, President and CEO of Cogentix Medical. "While our team has been successfully executing our sales strategy and building our business in the urology market, we have been resource constrained in terms of providing our sales organization with additional products to bring to our growing customer base. Accelmed is one of the world's leading private equity firms focused on the medical device industry, and as Israel's largest med-tech investor, has a proven track record of integrating Israeli technologies into established US med-tech companies. Accelmed believes the Cogentix platform provides an excellent foundation from which to build a broad based leader providing innovative, cost effective and clinically proven solutions to the growing urology marketplace. Overall, the proposed transactions significantly increase our cash resources, eliminate all of our outstanding debt and dramatically improve our capital structure, all at valuations that are 29% higher than what the market is currently awarding our company."

Upon closing of the proposed transactions, there would be approximately 60.3 million shares of common stock outstanding of which Mr. Pell would own approximately 33% and Accelmed would own approximately 27%. The current debt and accrued interest outstanding of $29.5 million would be eliminated and Cogentix would have approximately $28 million of cash and marketable securities.

In addition, the terms of the proposed transaction call for Accelmed to have the right to nominate two members to the Cogentix Medical Board of Directors, which currently has six members. One of these directors would be Uri Geiger, who will become Chair of the Cogentix board. Mr. Geiger cofounded Accelmed in 2009 and is currently a managing partner of Accelmed. Mr. Geiger has extensive entrepreneurial, management and investment expertise having created and developed many successful medical device companies.

The Board of Directors of Cogentix Medical established a Special Committee of the Board, comprised solely of independent directors, to review these transactions and provide a recommendation to the full Board. The Special Committee engaged Duff & Phelps, LLC to serve as its independent financial advisor and to provide an opinion in connection with the proposed transactions. The Special Committee retained Duff & Phelps based on Duff & Phelps' qualifications, reputation, and experience in providing fairness opinions, and its experience in valuing companies in the medical device industry. Duff & Phelps has rendered its opinion that the financial terms of the proposed transactions taken as a whole are fair to the unaffiliated public stockholders of the Company. The Special Committee recommended to the full Board that it approve the transactions, and the Cogentix Medical Board of Directors has unanimously approved the transactions.

"We have admired the revenue growth of Cogentix Medical under the leadership of Darin and his team, and believe that with the appropriate resources and a well-planned business development strategy, Cogentix could expand into being one of the leaders in the urology marketplace," said Mr. Geiger. "As a reflection of our confidence in the management team as well as the potential for the company, we have agreed to make this investment at a premium to the current market price and look forward to working with the board and management to execute on a shared vision for Cogentix."

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

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Special Reports

Related Entities

UBS, JPMorgan, BMO Capital, BRIC, Notable Mergers and Acquisitions, Earnings, Definitive Agreement, PDUFA

Add Your Comment