Notable Mergers and Acquisitions of the Day 04/09: (MSFT)/(AOL) (T) (CRRB) (WOLF)

• AOL (NYSE: AOL) has agreed to a $1.056 billion patent deal with Microsoft (Nasdaq: MSFT).
  
  Under the agreement, AOL will sell over 800 patents and the related applications to Microsoft and also grant Microsoft a non-exclusive license to its retained patent portfolio. AOL also received a license to the patents being sold to Microsoft.
  
  
  The patent sale includes the sale of the stock of an AOL subsidiary upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial. Additionally, AOL expects to utilize approximately $40 million of its existing deferred tax assets, representing approximately 20 percent of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio.
  
  AOL management and its Board of Directors intend to return a significant portion of the sale proceeds to shareholders and will determine the most efficient and effective method to do so prior to the closing of the transaction. Pro forma for the sale and license, as of December 31, 2011, AOL would have had approximately $15 per share of cash on hand.
  
  The transaction is expected to be completed by the end of 2012.
  
  
• AT&T (NYSE: T) announced that an affiliate of Cerberus Capital Management, L.P. (Cerberus) has agreed to acquire AT&T Advertising Solutions and AT&T Interactive. For the business units, AT&T will receive approximately $750 million in cash, subject to adjustment primarily related to timing of closing, a $200 million note and a 47-percent equity interest in YP.
  
  YP will include:
  • Approximately 1,200 The Real Yellow Pages® print directory titles reaching about 150 million homes and businesses in 22 states;
    
    
  • YP.com, a top 40 website according to a leading global digital measurement firm;
    
    
  • The YPSM Local Ad Network, which includes more than 300 mobile and online publisher websites nationwide providing digital reach to more than 71 million monthly unique visitors; and
    
    
  • The YPmobile app, which allows users to search local businesses from their mobile devices.
  The business units generated approximately $3.3 billion in revenues in 2011. Among other agreements, YP has agreed to honor existing union contracts.
  
  The transaction includes assets of AT&T Advertising Solutions, which delivers sales and customer support, and AT&T Interactive, which conducts interactive product development. It does not include the recently formed AT&T AdWorks, a New York-based operation that sells advertising offerings across 3-screen platforms (online, mobile and TV).
  
  AT&T expects a minimal effect on 2012 earnings from the transaction and does not expect to record a material gain or loss on the transaction.
  
  
• Great Wolf Resorts, Inc. (Nasdaq: WOLF) received an unsolicited letter from KSL Capital Partners proposing to acquire Great Wolf for $7.00 per share in cash, subject to certain conditions, including due diligence and certain conditions related to debt waivers.
  
  Apollo (NYSE: APO) recently increased its offer to $6.75 per share.
  
  Great Wolf’s Board of Directors, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, will consider and evaluate this new proposal from KSL Capital Partners, and will pursue the course of action that it determines is in the best interests of Great Wolf and its stockholders. Great Wolf will have no further comment on this matter at this time.
  
  Deutsche Bank Securities Inc. is serving as financial advisor to the Company, and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Young Conaway Stargatt & Taylor, LLP are serving as the Company’s legal advisors.
  
  
• Jefferson Bancorp, Inc., parent company for Bay Bank, FSB and Carrollton Bancorp (Nasdaq: CRRB), parent company for Carrollton Bank, announced the execution of a definitive agreement for merger of Jefferson Bancorp, Inc., and Carrollton Bancorp (“Carrollton”). The subsidiary banks, Bay Bank, FSB and Carrollton Bank will also merge, with Bay Bank, FSB being the surviving entity. The transaction is currently valued at approximately $25 million in stock and cash, representing $15.4 million in consideration to Carrollton shareholders and repayment of $9.1 million in TARP funding to the US Treasury. The transaction will combine the strengths of the two organizations in the Maryland market with a combined 12 bank branches in the Baltimore/Washington market.
  
  On a pro forma consolidated basis, the new Carrollton will have approximately $472.3 million in total assets, $382.8 million in gross loans, and $412.9 million in total deposits, after purchase accounting adjustments. The combined bank will have tangible common equity in excess of 10% and reduced levels of non-performing assets relative to capital as compared to Carrollton on a stand-alone basis. Furthermore, the revenue synergies and cost savings in the transaction are expected to demonstrably improve profitability and return on capital as compared to Carrollton on a stand-alone basis. The new Carrollton Board of Directors will consist of six existing Jefferson directors and three directors from the legacy Carrollton Board.
  
  The transaction, which has been approved by both Carrollton’s and Jefferson’s boards of directors, is expected to close in the third quarter of 2012. The transaction is subject to certain customary conditions, including the approval by Carrollton’s shareholders and regulatory approvals.
  
  Monocacy Financial Advisors, LLC acted as financial advisor to Carrollton and K&L Gates is acting as Carrollton’s legal counsel. Arnold & Porter LLP is acting as legal counsel to Jefferson.

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