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Notable Mergers and Acquisitions of the Day 05/21: (YHOO) (ETN)/(CBE) (DVA) (BGC)/(RIO)

May 21, 2012 10:20 AM EDT
  • Sunday evening, Yahoo! (Nasdaq: YHOO) announced a multi-step plan to monetize its Alibaba stake that includes selling half now for $7.1 billion and the selling the remaining part when Alibaba goes public. The company also significantly raised is stock repurchase plan, returning most of the immediate proceeds to shareholders.

    Under the first part of the plan, Yahoo! is selling back one-half of its stake in the company, or approximately 20% of Alibaba's fully-diluted shares. The purchase price will have floor valuation of approximately US$35 billion. Based on this floor, Yahoo! will receive approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.

    With the remaining stake, when Alibaba goes public it will be required either to repurchase one-quarter of Yahoo!'s current stake at the IPO price or allow Yahoo! to sell those shares in the IPO. Next, following such an IPO, Yahoo! has registration rights and rights to marketing support from Alibaba to enable Yahoo! to dispose of its remaining shares, following a customary lock-up period.

    With the cash, Yahoo! plans to return substantially all of the after-tax cash proceeds to shareholders. Yahoo!'s board has already increased its share buyback plan by US $5 billion and seek to finalize how it will handle the remaining returns.

  • Eaton (NYSE: ETN) announced it will buy Cooper Industries (NYSE: CBE) in a deal valued at $11.8 billion.

    Under the terms of the Transaction Agreement, Cooper Shareholders will receive $39.15 in cash and 0.77479 shares of New Eaton for each Cooper share. Based on the Closing Price for Eaton common stock on Friday May 18, 2012, Cooper Shareholders will receive cash and shares valued at $72.00 per share, representing a premium of 29 percent and a total transaction equity value of approximately $11.8 billion3. Eaton Shareholders will receive one share of the new company for each share of Eaton that they own upon closing. The transaction will be taxable, for U.S. federal income tax purposes, to both the Eaton Shareholders and the Cooper Shareholders.

    At the close of the transaction, which is expected in the second half of 2012, Eaton and Cooper will be combined under a new company incorporated in Ireland, where Cooper is incorporated today. The newly created company, which is expected to be called Eaton Global Corporation Plc or a variant thereof, will be led by Alexander M. Cutler, Eaton’s current chairman and chief executive officer.

    The acquisition is expected to be accretive to operating earnings per share by $0.35 in 2014 and by $0.45 in 2015. Excluding the non-cash expense related to the amortization of intangibles arising from purchase accounting, the Acquisition is expected to be accretive to operating earnings per share by $0.65 in 2014 and by $0.75 in 20152. The Acquisition will be financed with a mixture of cash, debt, and equity.

  • DaVita Inc. (NYSE: DVA) and HealthCare Partners entered into a definitive merger agreement. The two companies expect to close the transaction early in the fourth quarter of this year. Upon closing, the combined company will be named DaVita HealthCare Partners Inc.

    The purchase price to be paid by DaVita is approximately $4.42 billion, subject to post-close adjustments and contingent consideration. The purchase price consists of $3.66 billion in cash and approximately 9.38 million shares of DaVita common stock (which had a value of $758 million based on the closing price of DaVita’s common stock on May 18, 2012). DaVita expects to fund the cash portion of the purchase price through a combination of available cash, additional borrowings under DaVita’s existing senior secured credit facilities (which are expected to be amended to permit these borrowings), and additional debt financing.

    HealthCare Partners’ 2011 revenue was approximately $2.4 billion. Total care dollars under management were approximately $3.3 billion. Its 2011 EBITDA was $527 million and operating income was $488 million. This represents an operating income margin of 15% on total care dollars under management.
    Upon completion of the merger, HealthCare Partners will operate as a separate subsidiary of DaVita HealthCare Partners. The current HealthCare Partners senior management team has committed to stay and continue to manage the existing business, and Dr. Margolis will join the board of directors and become Co-Chairman of the combined enterprise alongside Mr. Thiry. The transaction is subject to receipt of Hart-Scott-Rodino approval, obtaining the approval of HealthCare Partners’ owners, and other customary closing conditions.

    The merger agreement provides that as additional consideration, DaVita will pay to the owners of HealthCare Partners a total of up to an additional $275 million in cash if certain performance targets are achieved in 2012 and 2013 by the HealthCare Partners subsidiary of DaVita HealthCare Partners.

    JP Morgan Securities, LLC. served as financial advisor, Morrison & Forrester LLP served as lead counsel, and Sheppard Mullin Richter & Hampton LLP served as regulatory counsel to DaVita on the transaction. Munger, Tolles & Olson, LLP and Nossaman LLP served as legal advisors to HealthCare Partners on the transaction.

  • General Cable Corporation (NYSE: BGC) has agreed to acquire Alcan Cable, the wire and cable business of Rio Tinto plc (NYSE: RIO).

    The purchase price is $185 million in cash, subject to customary adjustments primarily related to working capital levels at closing as provided in the definitive purchase agreement. The Company expects to use its Asset Based Revolving Credit Facility to principally fund the transaction.

    The transaction is expected to close in the second half of 2012, subject to receipt of regulatory approval.
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