Notable Mergers and Acquisitions of the Day 08/11: AIG/FIG, ASCA, KTOS

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American International Group, Inc. (NYSE: AIG) and Fortress Investment Group LLC (NYSE: FIG) announced today a definitive agreement whereby certain Fortress managed funds and affiliates will acquire 80% of American General Finance Inc. (AGF), a leading provider of consumer credit, from AIG. AIG will retain a 20% interest in the AGF business. Terms of the transaction were not disclosed. The transaction is expected to close by the end of the first quarter of 2011 subject to regulatory approvals and customary closing conditions.

Founded in 1920, AGF provides loans, retail financing and other credit related products to more than a million families across the U.S., Puerto Rico, the Virgin Islands, and the United Kingdom. AGF specializes in providing financing solutions for consumers across America, with products and services including bill consolidation loans, home equity loans, personal loans, home improvement loans, and loans to help consumers manage unexpected expenses.

“AGF is an exceptional franchise with a strong management team and a leading platform for serving the financing needs of consumers nationwide,” said Wesley R. Edens, Co-Chairman and founder of Fortress Investment Group. “We believe that AGF is well-positioned for significant growth in an underserved market.”

“This transaction marks another important step in our ongoing restructuring process as we seek to monetize non-core assets and pay back U.S. taxpayers,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “In Fortress, we have found an excellent partner for this terrific franchise. We believe in AGF’s solid business model, which is why we are retaining a 20% percent stake in the business as part of this transaction.”

As a result of the transaction, AGF, which has assets of approximately $20 billion and liabilities of approximately $18 billion, including $17 billion of debt, will be deconsolidated from AIG’s financial statements.
Shares of Ameristar Casinos Inc. (Nasdaq: ASCA) are moving higher today on reports from the New York Post, the company has hired investment bank Lazard to explore a possible sale.

Shares of the regional casino operator are up up 13 percent today to $16.46.

Lazard has begun to contact potential bidders, but a formal sale process is not expected to start until the fall.
Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS) announced today that it has acquired DEI Services Corporation (DEI), a privately-held, premier provider of simulation and training devices to military customers.

Founded in 1996 and headquartered in Orlando, Florida, DEI designs, manufactures and markets full-scale training simulation products. In addition to the engineering and construction of physical simulators for air and ground military vehicles, the company provides instructional design, courseware creation, learning application programming and other supporting services. Among the company's most successful products are training and simulation solutions for fixed-wing aircraft (including the Tiger, Harrier and Prowler aircrafts), rotor-wing aircraft (including Blackhawk, Chinook and Sea Stallion helicopters) and Ground Combat Vehicles (including M1 Abrams Main Battle Tank and M2 Bradley Fighting Vehicle).

"With the acquisition of DEI, Kratos is taking another step toward delivering on our vision to provide a full suite of Workforce Learning, Performance and Training solutions to support the warfighter as well as our other defense, security and government customers," said Phil Carrai, President of Kratos' IT Solutions. "DEI has earned an exceptional reputation for the quality and effectiveness of their solutions and it is a pleasure to have them on our team."

DEI will operate as the Training and Simulations unit within Kratos' IT Solutions (ITS) Division. The ITS Division specializes in supporting network-centered defense, intelligence and government agencies and commercial customers with products and services that maximize Network Operations, Cyber Security, Enterprise Information Management and Workforce Performance.

"We are extremely excited to be joining forces with Kratos," said Jose A. Diaz, Founder and CEO of DEI, who will continue to lead the unit within Kratos. "We share the same dedication to excellence, to an entrepreneurial culture, and to supporting our customers with outcomes-based, technologically advanced learning solutions."

Completion of the transaction is effective immediately. DEI is expected to contribute at least $15 to $20 million of revenue in 2011. Net of certain expected excess DEI working capital items, and the assumption of debt, the base net purchase price is expected to be approximately $6 million, or approximately 4X EBITDA. DEI's stockholders will also have the opportunity to achieve additional consideration if certain revenue, EBITDA and backlog amounts are achieved in 2010, 2011 and 2012, above agreed-to base amounts.