Notable Mergers and Acquisitions of the Day 03/27: (UTSI) (EVBS) (BMR)

March 27, 2013 10:31 AM EDT Send to a Friend
* Large UTStarcom Holdings (Nasdaq: UTSI) holder Shah Capital Management is offering to acquire the company for $3.20 per Ordinary Share.

Below is an excerpt from a 13D filed with the U.S. SEC earlier:

On March 27, 2013, the Consortium Members entered into a consortium agreement (the “Consortium Agreement”), pursuant which the Consortium Members will cooperate in good faith in connection with the acquisition of all of the outstanding Ordinary Shares that are not already owned by the Consortium Members for US$3.20 in cash per Ordinary Share (the “Proposed Transaction”). The Consortium Agreement provides, among other things, for: cooperation in arranging financing; engaging advisors; sharing all information reasonably necessary to evaluate the Company; cooperation in obtaining applicable governmental, statutory, regulatory or other consents, licenses, waivers or exemptions required for the consummation of the Proposed Transactions; and cooperation in preparing and negotiating definitive agreements with respect to the Proposed Transaction. During the period beginning on the date of the Consortium Agreement and ending on the first to occur of (i) the date nine months after the date of the Consortium Agreement, and (ii) the termination of the Consortium Agreement pursuant to a mutual written agreement of Shah Opportunity, Mr. Shah and Mr. Lu, the Consortium Members have agreed to work exclusively with each other to implement the Proposed Transaction.

On March 27, 2013, the Consortium Members submitted a preliminary, nonbinding proposal (the “Proposal”) to the Company’s board of directors (the “Board”) in connection with the Proposed Transaction. In the Proposal, the Consortium Members, among other things, (i) indicated that the Consortium Members are interested only in pursuing the Proposed Transaction and are not interested in selling their Ordinary Shares in any other transaction involving the Company, (ii) informed the Board of the financing arrangement, and (iii) requested that the Board grant a timely opportunity to conduct customary business, legal, financial and accounting due diligence on the Company.

The description of the Consortium Agreement and the Proposal in this Item 4 is qualified in its entirety by reference to the complete text of the Consortium Agreement and the Proposal, which have been filed as Exhibit 99.2 and 99.3 to this Schedule 13D and are incorporated by reference in their entirety into this Item 4.

If the Proposed Transaction is carried out and consummated, the Ordinary Shares will no longer be traded on the NASDAQ Stock Market LLC and the Company’s obligation to file periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) would be terminated. In addition, consummation of the Proposed Transaction could result in one or more of the actions specified in clauses (a)-(j) of Item 4 of Schedule 13D, including the acquisition or disposition of securities of the Company, a merger or other extraordinary transaction involving the Company, a change to the Board (as the surviving company in the merger) to consist solely of persons to be designated by the Consortium Members, and a change in the Company’s memorandum and articles of association to reflect that the Company would become a privately held company. In connection with the Proposed Transaction, approximately 30% of the Ordinary Shares managed by Shah Management in separately managed accounts which are owned by certain accredited investors will be transferred to Shah Opportunity before the consummation of the Proposed Transaction. The remaining portion of the Ordinary Shares managed by Shah Management will be sold to third parties in the open market before or at the consummation of the Proposed Transaction. No assurance can be given that any proposal, any definitive agreement or any transaction relating to the Proposed Transaction will be entered into or be consummated. The Proposal provides that no binding obligation on the part of the Company or the Consortium Members shall arise with respect to the Proposed Transaction unless and until definitive agreements have been executed.

The Reporting Persons reserve their right to change their plans and intentions in connection with any of the actions discussed in this Item 4 including among others, the purchase price for the Proposed Transaction and the debt and/or equity financing arrangements. Any action taken by the Reporting Persons may be effected at any time or from time to time, subject to any applicable limitations imposed thereon by any applicable laws.

* Eastern Virginia Bankshares Inc. (Nasdaq: EVBS) has entered into securities purchase agreements with affiliates of Castle Creek Capital Partners ("Castle Creek") and GCP Capital Partners ("GCP Capital") and certain other institutional investors pursuant to which it expects to raise aggregate gross proceeds of $45.0 million through private placements of approximately 4.6 million shares of common stock and 5.2 million shares of a new series of non-voting mandatorily convertible non-cumulative preferred stock, each at $4.55 per share. The closing of the private placements is subject to shareholder approval and other conditions. The Company also announced plans to conduct a $5.0 million rights offering to allow existing shareholders to purchase common stock at the same purchase price per share as the investors in the private placements. The closing of the rights offering will be conditioned on the closing of the private placements. The Company intends to use the gross proceeds from these capital raises for general corporate purposes, including strengthening its balance sheet and pursuing certain strategic initiatives discussed below.

Joe A. Shearin, President and Chief Executive Officer commented, "We are excited about the capital raise and our partnership with Castle Creek and GCP Capital. This capital raise significantly strengthens our balance sheet and will allow for the resolution of our most significant remaining problem assets and better position the Bank and the Company to expeditiously exit the Written Agreement, which currently restricts us from paying dividends to our shareholders, and TARP. Additionally, we are excited about the financial and strategic flexibility this capital will provide us."

Continuing, Shearin said, "I am very pleased that representatives of Castle Creek and GCP Capital will be joining our Board of Directors, and believe that their expertise and guidance will help contribute to the future success of the Company."

Strategic Initiatives

The Company plans to use the gross proceeds from the private placements and the rights offering for general corporate purposes, including strengthening its balance sheet, the accelerated resolution and disposition of assets adversely classified by the Company and the optimization of its balance sheet through the restructuring of FHLB advances, with ultimate goals of repurchasing its preferred stock and warrants issued to the U.S. Treasury through the Troubled Asset Relief Program and exiting from the previously disclosed Written Agreement with the Federal Reserve Bank of Richmond and the Virginia Bureau of Financial Institutions.

The Company intends to remove risk from its balance sheet by accelerating the disposition of a portion of the assets adversely classified by the Company, including approximately $13 million in classified loans through a combination of asset sales and "A/B note" structures and approximately $3 million in other real estate owned ("OREO"). Management has also identified approximately $7.5 million in additional adversely classified assets that it expects the Company to retain on the balance sheet and work out over the next twelve months. The ultimate effect of disposing and working out the $23.5 million of adversely classified assets on the Company's after-tax earnings will depend on ongoing market conditions and other factors.

Given currently favorable market conditions, the Company also intends to optimize its balance sheet by restructuring the $117.5 million in FHLB advances on its balance sheet as of December 31, 2012. The Company currently anticipates pre-paying approximately $94 million in FHLB advances, funded in part by the sale of assets in the Company's securities portfolio, which pre-payment would result in an estimated pre-tax penalty fee of approximately $14 million. With respect to the balance of the FHLB advances, the Company intends to either pay off the remaining advances at scheduled maturities or to lower existing interest rates through "blend and extend" transactions. Under current market and interest rate conditions, the Company estimates that the restructuring could increase the net interest margin by approximately 60 basis points and annual pre-tax net interest income by approximately $2.9 million.

Investment by Castle Creek, GCP Capital and Other Institutional Investors

The Company has entered into securities purchase agreements with Castle Creek and GCP Capital and certain other institutional investors pursuant to which it expects to raise aggregate gross proceeds of $45.0 million through the issuance and sale of approximately 4.6 million shares of common stock and 5.2 million shares of a new series of non-voting mandatorily convertible non-cumulative preferred stock, each at $4.55 per share. No investor will own more than 9.9% of the Company's voting securities (or securities that convert into voting securities in the hands of such investor) or 33.3% of the Company's total equity outstanding, each as calculated under the applicable regulations of the Board of Governors of the Federal Reserve System. The investments are subject to shareholder approval and satisfaction of certain other conditions, which the Company presently expects to be satisfied in the second quarter of 2013.

Pro forma for these private placements, excluding the impact of the rights offering, Castle Creek and GCP Capital will each beneficially own approximately 9.9% of the Company's voting common stock and 32.0% and 14.1% of the Company's total equity, respectively. One other investor will beneficially own approximately 9.0% of the Company's voting common stock and 6.1% of the Company's total equity. The remainder of the investors will each beneficially own varying ownership interests, in all cases below 4.9% of the Company's voting common stock and total equity.

The common stock and preferred stock will be issued pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended. The Company has agreed to promptly file a registration statement with respect to the shares of common stock and preferred stock being issued in the private placement and the shares of common stock issuable upon conversion of the shares of preferred stock being issued. The shares of preferred stock to be issued will convert into shares of common stock in the hands of a transferee immediately upon the consummation of certain permitted transfers and under certain other circumstances, each as detailed in the terms of the preferred stock.

Upon closing of the private placements, each of Castle Creek and GCP Capital are entitled to have one representative appointed to both the Company's and Bank's Board of Directors, subject to applicable regulatory approvals and corporate governance requirements. In the event one or both of these investors exercise such rights and the requisite approvals are received, these representatives will serve alongside the 13 current directors.

As soon as practicable, the Company will call a meeting of its shareholders for the purpose of approving the issuance and conversion of the privately placed securities under stock exchange rules and approving an amendment of the Company's bylaws to expand the permitted range of the size of the Board of Directors. The Company intends to hold its annual meeting to elect directors at the same time. The directors and executive officers of the Company have entered into support agreements pursuant to which they have generally agreed to vote their shares in favor of the proposals to be voted upon in connection with the private placements.

* After markets closed Tuesday, BioMed Realty Trust, Inc. (NYSE: BMR) entered into a definitive agreement to merge with Wexford Science & Technology, LLC, a subsidiary of Wexford Equities, LLC, furthering BioMed Realty's position as the leading provider of real estate to the life science industry.

Wexford Science & Technology is a private real estate investment and development company that owns and develops institutional quality life science real estate for academic and medical research organizations, and that boasts well-regarded skills for urban development and redevelopment of life science real estate.

The aggregate consideration for Wexford Science & Technology is approximately $640 million, excluding transaction costs and subject to adjustment based on working capital levels and construction and development costs incurred prior to closing. Wexford Science & Technology will operate as a wholly owned subsidiary of BioMed Realty.

Approximately $551 million of the initial consideration is for Wexford Science & Technology's operating portfolio which includes approximately 1.6 million rentable square feet of newly developed, state-of-the-art research facilities in high-barrier sites located on or immediately adjacent to leading academic, medical system and research institution campuses and in close proximity to the local market demand drivers. The operating portfolio, all of which was developed and delivered between 2005 and 2011, is approximately 86% leased, with 66% of annualized base rents generated from academic and medical institutions and A-rated life science companies having an average remaining lease term of 13 years. Top tenants by annualized base rents include, among others: the University of Pennsylvania Health System; Washington University in St. Louis; Wake Forest University; the University of Maryland; the University of Miami; Old Dominion University; the Illinois Institute of Technology and Penn State University.

Approximately $89 million of the initial consideration is for projects currently under development. Wexford Science & Technology has approximately 935,000 square feet of rentable space currently under construction in three projects that are, collectively, approximately 68% pre-leased, anchored by the University of Pennsylvania Health System, Wake Forest University and Washington University in St. Louis. Wexford Science & Technology also owns parking garages in Philadelphia and Baltimore with 419 and 638 stalls, respectively, that support Wexford Science & Technology's life science developments, and owns additional land parcels that can support an estimated 300,000 square feet in additional development potential.

Kent Griffin, President and Chief Operating Officer of BioMed Realty, commented, "Beyond the opportunity to add the high-quality assets of the operating portfolio and the attractive development pipeline, we are particularly excited about the strategic opportunity to further penetrate the university segment with the addition of the team from Wexford Science & Technology. This group, which includes seasoned life science real estate experts with a successful track record of serving the specialized needs of universities, university-related institutions and healthcare systems, will continue to operate under the leadership and direction of James Berens, providing additional depth of skills and breadth of capabilities to our operating platform."

Commenting on the merger, Mr. Berens said, "BioMed Realty is the ideal partner for Wexford Science & Technology because of their leadership position in the life science industry, and our shared technical expertise and understanding of and approach to life science real estate. In addition, BioMed Realty brings scale, financial strength, industry reach and a breadth of relationships that enhance our value proposition to our clients and our opportunity set within the academic and medical research communities. Equally important is the cultural fit of the two companies, where commitments to long-term relationships and supporting transformational research and groundbreaking science are values woven into the fabric of both companies."

Transaction Benefits

* Further penetration of high-quality university and medical system segment of life science real estate;
* Contribution of rents from universities and research institutions increases from 13% of annualized base rents to 18% of annualized base rents;
* Contribution of rents from A-rated public life science companies, universities and research institutions increases to 41% of annualized base rents;
* Addition of depth of expertise and key relationships in the academic and medical research segment of life science real estate;
* Potential for accelerated external growth opportunities, including active development program expanded from 53,000 square feet to approximately 988,000 square feet;
* Realization of expanded size, scale and diversification on a pro forma basis;
* Total portfolio of approximately 15.9 million square feet, upon completion of active developments;
* Annualized base rents of approximately $497 million;
* Reduction in top ten tenant concentration from 50% to 45% of annualized base rents; and
* Further geographic diversification, with Boston/Cambridge remaining the largest market at 32% of annualized base rents.

The figures above are as of December 31, 2012, giving pro forma effect to BioMed Realty's previously announced February 2013 acquisition of Woodside Technology Park in Redwood City, California and the expected merger with Wexford Science & Technology. Annualized base rents represent the monthly contractual rent as of December 31, 2012, or if rent had not yet commenced, the first monthly rent payment due at each rent commencement date, annualized. Tenant classifications are based on management's estimates. Pro forma estimates are not necessarily indicative of actual or future results.

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