Notable Mergers and Acquisitions of the Day 03/28: (PNR)/(TYC) (CSCO) (AMLN)/(BMY)
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- Today, Pentair, Inc. (NYSE: PNR) and Tyco International Ltd. (NYSE: TYC) entered a definitive agreement to combine Tyco's Flow Control business with Pentair in a tax-free, all-stock merger.
The transaction values Tyco Flow at approximately $4.9 billion, including assumed net debt and minority interest. Upon completion of the transaction, which has been unanimously approved by the boards of both companies, Tyco shareholders will own approximately 52.5% of the combined company and Pentair shareholders will own approximately 47.5%.
The new company will be named Pentair and will be led by Randall J. Hogan, Pentair's current Chairman and Chief Executive Officer.
he combination will be tax-free to both companies' shareholders and is expected to result in immediate earnings accretion, adding approximately $0.40 per share to Pentair's adjusted earnings in 2013. The new company expects to achieve earnings per share of greater than $5.00 by 2015 reflecting an expected $200 million of annual pre-tax cost synergies through the elimination of duplicate public company costs, greater economies of scale and further streamlined operations, in addition to greater tax efficiencies of approximately $50 million annually. The combined company expects to incur approximately $230 million in one-time costs related to the transaction over the next 12 to 24 months, including transaction related costs, non-cash inventory step-up charges and costs to achieve the synergies. The new company will have an enhanced capital structure and the ability to generate strong cash flow.
Tyco shareholders will own 52.5% of a company whose global scale, growth prospects, financial strength and more predictable earnings growth profile are more compelling than Tyco Flow as a standalone company. Tyco shareholders will also participate in the substantial value-creation opportunities through the revenue, operating and tax synergies that would not be available to Tyco Flow on its own. As a highly complementary strategic partner, Pentair has the successful execution track record to deliver that value proposition. Moreover, as a result of completing the transaction through this structure, the benefits of the tax-free spin-off are preserved for Tyco shareholders.
Tyco is proceeding with the separation plan announced on September 19, 2011 and continues to expect to complete the transactions at the end of September 2012, including the combination of Tyco Flow and Pentair announced today. The transaction is subject to the approval of the planned spin-off by Tyco shareholders, the approval of the merger by Pentair shareholders, regulatory approvals and customary closing conditions.
The transaction combining Tyco Flow and Pentair is structured as a Reverse Morris Trust in which Tyco will complete the spin-off of Tyco Flow to Tyco shareholders, immediately followed by the merger of Pentair into a subsidiary of Tyco Flow. Upon closing, Tyco shareholders will own approximately 52.5% and Pentair shareholders will own approximately 47.5% of the combined company on a diluted basis, with approximately 214 million diluted shares expected to be outstanding. As part of the transaction, the new Pentair will assume approximately $275 million of Tyco Flow debt, net of cash. At Pentair's closing price of $40.26 yesterday, the transaction values Tyco Flow at $4.9 billion, including the net debt and $94 million of minority interest. The transaction is expected to be tax-free to both companies as well as to Pentair and Tyco shareholders.
Deutsche Bank Securities Inc. is acting as financial advisor to Pentair and Cravath, Swaine & Moore LLP and Foley & Lardner LLP are providing legal counsel. Goldman, Sachs & Co. is serving as financial advisor to Tyco and Simpson Thacher & Bartlett LLP and McDermott Will & Emery are providing legal counsel. Greenhill & Co. LLC provided an additional fairness opinion to Pentair's Board of Directors and Goldman, Sachs & Co. provided a fairness opinion to Tyco's Board of Directors. Lazard is serving as financial advisor to Tyco's Board of Directors.
- Cisco (Nasdaq: CSCO) announces intent to purchase ClearAccess. Terms of the deal are undisclosed.
Service providers are faced with growing network complexity, exploding video and data traffic, and an increasing number of devices connected to their networks. With the proliferation of these devices, service providers are looking for ways to immediately lower operating expense while delivering and enabling new services. ClearAccess' management and software capabilities will augment Cisco Prime -- Cisco's network management software portfolio -- by offering service providers a set of powerful tools for managing the connected home, including monitoring and managing bandwidth usage, parental controls, diagnostics and analytics.
- Amylin (Nasdaq: AMLN) is said to have rejected a $22 per share bid from Bristol-Myers (NYSE: BMY), according to Bloomberg. Amylin shares closed Tuesday's session at $15.39.
Bloomberg's sources said the offer was sent in a letter to Amylin last month. Bristol-Myers has reportedly not approached Amylin since the company rejected the offer.
An Amylin spokesperson has declined to comment on the reports. Alice Izzo said, "as a matter of company policy, Amylin does not comment on market rumors or speculation."
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