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Notable Mergers and Acquisitions of the Day 01/07: (NSM) (ILMN) (ES) (ATHN)/(EPOC) (SFLY)

January 7, 2013 10:05 AM EST Send to a Friend
* Nationstar Mortgage Holdings Inc. (NYSE: NSM) (“Nationstar”) announced today that Nationstar Mortgage LLC, a wholly-owned subsidiary, has signed a definitive agreement to acquire approximately $215 billion in residential mortgage servicing rights (“MSRs”), as measured by unpaid principal balance (“UPB”) as of November 30, 2012, and certain other assets from Bank of America (NYSE: BAC).

Approximately 47% of the servicing portfolio, as measured by UPB, consists of loans that are owned, insured or guaranteed by Fannie Mae (OTCBB: FNMA), Freddie Mac, and Ginnie Mae, with approximately 53% of the portfolio consisting of loans in private-label securitizations. With this transaction, Nationstar anticipates adding more than 1.3 million customers to an existing customer base of 1.2 million. Nationstar’s total servicing portfolio is approximately $425 billion, pro-forma for this transaction plus an additional $13 billion Bank of America government servicing portfolio acquisition that closed in Q4 2012 and Nationstar’s UPB as of September 30, 2012.

The purchase price for the mortgage servicing rights is approximately $1.3 billion. The MSR portfolio purchases will close as investor and other third-party approvals are received, which Nationstar expects the majority to occur in Q1 2013. In addition to the MSRs, Nationstar will also be acquiring approximately $5.8 billion in related servicing advance receivables as the associated portfolios are boarded during 2013. Nationstar expects to enter into third-party financing agreements to fund the servicing advances.

Nationstar estimates that this transaction will be accretive with incremental AEBITDA per share of $2.20 - $2.55 and EPS of $0.70 - $0.80 in 2013, and AEBITDA per share of $4.65 - $5.40 and EPS of $2.30 - $2.70 in 2014. Including the portfolio acquisitions, Nationstar anticipates total company AEBITDA per share of $9.50 - $11.05 and total company EPS of $3.70 - $4.35 in 2013, and AEBITDA per share of $12.30 - $14.30 and EPS of $5.60 - $6.50 in 2014.

Nationstar will fund approximately $680 million of the MSR purchase price with the proceeds of a co-investment by Newcastle Investment Corp. (NYSE: NCT) and Fortress-managed funds, similar in structure to previous transactions. Nationstar will fund its $665 million portion of the MSR acquisition price with investable cash.

* EnergySolutions, Inc. (NYSE: ES) has entered into a definitive acquisition agreement to be acquired by a subsidiary of Energy Capital Partners II, LLC, in a transaction with an enterprise value of $1.1 billion. Under the terms of the agreement, EnergySolutions' shareholders will receive $3.75 in cash for each share of common stock. This represents a premium of approximately 20% over the average closing share price of EnergySolutions' common stock for the 30 days ended January 4, 2013.

The definitive acquisition agreement has been unanimously approved by the EnergySolutions' Board of Directors.

Under the terms of the merger agreement, EnergySolutions may solicit superior proposals from third parties through February 6, 2013. The EnergySolutions Board of Directors, with the assistance of its advisors, will actively solicit acquisition proposals during this period. There are no guarantees that this process will result in a superior proposal. EnergySolutions and the Board of Directors do not intend to disclose developments with respect to the solicitation process unless and until the Board of Directors has made a decision.

ECP plans to operate EnergySolutions as a standalone business operation with the current management team remaining in place.

The ECP acquisition of EnergySolutions is subject to customary closing conditions, including regulatory approvals in the U.S. and U.K. and clearance under the Hart-Scott-Rodino Act. In addition, the transaction is subject to approval by EnergySolutions' stockholders.

Under the terms of the merger agreement, EnergySolutions may solicit superior proposals from third parties through February 6, 2013. The EnergySolutions Board of Directors, with the assistance of its advisors, will actively solicit acquisition proposals during this period. There are no guarantees that this process will result in a superior proposal. EnergySolutions and the Board of Directors do not intend to disclose developments with respect to the solicitation process unless and until the Board of Directors has made a decision.

Goldman, Sachs & Co. is serving as financial advisor to EnergySolutions and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to EnergySolutions. Morgan Stanley is serving as financial advisor and Latham & Watkins, LLP is acting as legal advisor to ECP. Morgan Stanley is also committing to provide senior secured credit facilities to help finance the acquisition, and will act as a lead arranger and book-runner in the financing.

* athenahealth, Inc. (NASDAQ: ATHN) signed a definitive agreement to acquire Epocrates, Inc. (Nasdaq: EPOC), a mobile health pioneer widely recognized for developing the most-widely adopted point-of-care medical application among U.S. physicians.

The board of directors of each of athenahealth and Epocrates has agreed to a price of $11.75 per share, in cash, for an aggregate purchase price of approximately $293 million.

The closing of the transaction is subject to the approval of Epocrates shareholders and other customary closing conditions and is currently expected to occur early in the second quarter of 2013.

* Illumina, Inc. (Nasdaq: ILMN) has signed a definitive agreement to acquire Verinata Health, Inc., a leading provider of non-invasive tests for the early identification of fetal chromosomal abnormalities, for consideration of $350 million plus up to $100 million in milestone payments through 2015. Upon completion of the acquisition, Illumina will have access to Verinata’s verifi® prenatal test, the broadest non-invasive prenatal test (NIPT) available today for high-risk pregnancies, and to the most comprehensive intellectual property portfolio in the non-invasive prenatal test industry. As non-invasive prenatal testing is one of the most rapidly growing areas utilizing next-generation sequencing, Illumina is uniquely positioned to be at the forefront of providing superior prenatal testing options.

Available through a physician, the verifi test analyzes cell-free fetal DNA naturally found in a pregnant woman’s blood to look for missing or extra copies of chromosomes (referred to as aneuploidies). Specifically, the test detects Down syndrome (trisomy 21 or T21), Edwards syndrome (trisomy 18 or T18) and Patau syndrome (trisomy 13 or T13). It is the first non-invasive prenatal test that offers the option to include evaluation of sex chromosome aneuploidies, such as Turner syndrome (Monosomy X), Triple X (XXX), Klinefelter syndrome (XXY) and Jacobs syndrome (XYY) – the most common fetal sex chromosome abnormalities.

Compared to other testing options, the verifi prenatal test provides more definitive information than risk score-based tests (traditional protein serum screens), which calculate probabilities, and does not carry the risk of complications that an invasive procedure, such as an amniocentesis, can have. The robust technology behind the verifi test leverages the power of massively parallel next-generation sequencing with a highly optimized algorithm to provide accurate aneuploidy detection, with the ability to look across the entire genome.

Based on ACOG and SMFM guidelines for high-risk pregnancies in the United States, the addressable NIPT market is estimated to be more than $600 million in 2013. The total domestic market is estimated to grow to 1.5 to 2 million tests performed annually within the next five years. Working with our partners in this space, Illumina expects to service a significant portion of that market. Including the impact of synergies, the transaction is expected to be approximately $0.20 dilutive to Illumina's non-GAAP earnings per share in 2013 before turning accretive beginning in 2014 and beyond. Fiscal year 2013 guidance, including the impact of this transaction, will be provided during the Company's fourth quarter and fiscal year 2012 earnings call. The transaction will be financed primarily with cash on hand and is expected to close after the satisfaction of customary regulatory approval.

Bank of America Merrill Lynch acted as financial advisor to Illumina, and Covington & Burling LLP acted as legal counsel.

* Shutterfly, Inc. (Nasdaq: SFLY) announced that it has acquired ThisLife, a cloud-based solution offering intuitive photo and video organization, storing and sharing. The combination of ThisLife with Shutterfly’s seamless creation paths, multi-channel platform and robust cloud, which stores 18 billion images, provides a unified, end-to-end solution for customers to intelligently organize, store, share and create physical and digital products across web and mobile devices.

“Since 1999, Shutterfly has made it easier for consumers to be more creative with their memories,” said Jeffrey Housenbold, president and chief executive officer of Shutterfly. “The combination of ThisLife’s best in class cloud organization and storage solution with Shutterfly’s award-winning product creation paths, uniquely positions Shutterfly to be the leading full service solution for storing, organizing, and sharing life most important memories.“

In the coming months, Shutterfly will layer ThisLife’s technology onto the Shutterfly platform to enable richer storytelling and easier product creation. Consumers will be able to safely and easily preserve, organize and share their memories, regardless of where photos are stored – from Facebook to Picasa to mobile phones. ThisLife’s intelligent organization platform offers features like facial recognition and presents photos and albums in an elegant timeline for convenient sharing and product creation. ThisLife’s employees, including founders Andrea and Matt Johnson, will join Shutterfly.

The ThisLife platform also includes mobile capabilities for the iPhone and iPad. By leveraging the recent acquisitions of Photoccino and Penguin Digital, Shutterfly is building the next generation, fully integrated, platform agnostic solution for organizing, storing, sharing and creating physical and digital products from the web or mobile devices. The company will share additional details about the acquisition on its Q4 2012 earnings call.

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