Notable Mergers and Acquisitions of the Day 02/19: (COF)/(C) (RGC) (HLIT) (ODP)/(OMX)

February 19, 2013 10:24 AM EST
* Capital One Financial Corporation (NYSE: COF) today announced that it has reached an agreement to sell the portfolio of Best Buy (NYSE: BBY) private label and co-branded credit card accounts, with current loan balances of approximately $7 billion, to Citi (NYSE: C). In addition, Capital One and Best Buy have agreed to end their contractual credit card relationship early.

The sale of the loans to Citi, which is subject to customary closing conditions, and early termination of the Best Buy partnership are expected to be finalized in the third quarter of 2013. Upon closing, Capital One expects that the proceeds from the sale will approximate the book value of the accounts, resulting in no significant gain or loss on the transaction.

* Regal Entertainment Group (NYSE: RGC) has entered into an agreement to acquire Hollywood Theaters. The purchase price will consist of $191 million in cash, approximately $47 million of assumed lease obligations, comprised of capital leases and financing obligations, and certain working capital. The cash portion of the purchase price includes repayment of approximately $157 million of the sellers’ debt and is subject to customary post-closing adjustments.

The proposed acquisition would add a total of 43 theaters with 513 screens to Regal’s portfolio at a pre-synergy multiple of approximately 5.9 times cash flow and includes theaters in 16 states and 3 U.S. territories. The consummation of the acquisition is subject to customary closing conditions.

* Harmonic, Inc. (Nasdaq: HLIT) has reached an agreement to sell its Cable Access business to Aurora Networks, Inc. for $46 million in cash. The transaction is subject to customary closing conditions and is expected to be completed by the end of the first quarter of 2013. In addition, consistent with ongoing efforts to review its capital structure and to deliver value to all its stockholders, Harmonic`s Board of Directors has approved an increase to its current share repurchase program to include the net, after-tax cash proceeds from this transaction of approximately $35 million, contingent upon its closing.

The strategic decision to divest the Cable Access business reflects Harmonic`s commitment to the Video Production and Playout, Video Processing, and Cable Edge product areas, where it currently holds market share leadership. In contrast, Harmonic is not the market leader in the Cable Access product area, and there is limited strategic synergy between Cable Access and the Company`s other higher growth product lines. The Cable Access portfolio includes optical transmitters, amplifiers, receivers and nodes. Given Harmonic`s longstanding relationship with its customers in the Cable Access business, Harmonic is very pleased to work with Aurora Networks because of its scale, strategic focus and commitment to customer care.

Additional Financial Details

The Cable Access business generated $52.9 million of net revenue with gross margin of approximately 30% in calendar year 2012. Harmonic expects that the sale of the business will be neutral to diluted earnings per share for 2013, excluding the impact of the share repurchase program.

Results related to the Cable Access business will be recast for prior periods and reported as discontinued operations in the Company`s financial statements beginning with the first quarter ended March 29, 2013. The Company expects to recognize in discontinued operations an after-tax gain of approximately $12 million to $14 million related to the sale. The net, after-tax cash proceeds from the sale are expected to be approximately $35 million

* Monday, chatter surfaced that OfficeMax, Inc. (NYSE: OMX) and Office Depot (NYSE: ODP) might be in merger talks. Both are trading higher on the session as a result. For more color, click here.

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