Notable Mergers and Acquisitions of the Day 08/16: (ITW) (VQ) (AONE)


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August 16, 2012 10:42 AM EDT Send to a Friend
  • Illinois Tool Works Inc. (NYSE: ITW) entered into a definitive agreement to divest a 51 percent stake in its Decorative Surfaces segment, consisting of Wilsonart and related international businesses, to a fund managed by Clayton, Dubilier & Rice, LLC (CD&R). Through a combination of CD&R's equity investment of $395 million and borrowing by the new company, ITW will receive cash proceeds of approximately $1.05 billion at closing and will retain a 49 percent equity interest in the business. ITW intends to utilize a majority of after-tax transaction proceeds to repurchase shares to help offset associated earnings dilution.

    The Wilsonart, Resopal and Arborite brands were acquired in 1999 by ITW as part of the Premark International transaction. In 2011, the Decorative Surfaces segment had revenues of $1.1 billion and operating margins of 12 percent. Located in North America, Europe and Asia, the Decorative Surfaces segment manufactures and distributes a variety of laminate and work surface products for the construction market including commercial, residential and renovation applications. Products include decorative laminate, solid surface, adhesives and custom edging. The business will become a new, independent company operating as Wilsonart International Holdings, LLC (Wilsonart).

    The transaction is expected to be completed in the fourth quarter of 2012, and will be subject to regulatory reviews. The Decorative Surfaces segment results will continue to be reported in ITW's operating income for the third quarter of 2012. Based on the expected completion date, the company is maintaining its third quarter 2012 income per share from continuing operations guidance range of $1.03 to $1.11. Upon completion of the transaction, ITW's ownership interest in the decorative surfaces businesses will be reported using the equity method of accounting and ITW will adjust its full-year forecast accordingly.

  • Venoco, Inc. (NYSE: VQ) is higher early Thursday after it said it has been informed by Denver Parent Corporation, an affiliate of Timothy Marquez, Venoco's Executive Chairman, that DPC is engaged in advanced discussions regarding the financing of the merger contemplated by the merger agreement among Venoco, Mr. Marquez, DPC and another affiliate of Mr. Marquez.

    DPC has advised Venoco that it expects the $436.5 million financing package to consist of a $21.5 million initial draw on a new first lien revolving credit facility with an initial borrowing base of $125 million, a $175 million second lien term loan at Venoco, an asset sale from Venoco to DPC in the amount of $210 million and capital raises by DPC in the amount of $240 million, including a volumetric production payment on the assets sold to DPC by Venoco. All of the financing transactions, including Venoco's new credit facility and term loan and its asset sale to DPC, would be structured to close contemporaneously with the closing of the merger contemplated by the Merger Agreement. Thus, the loan transactions and asset sale would not occur unless the merger is consummated. A completion date of the financing and closing of the merger has not been set although the transactions are currently expected to close prior to September 14, 2012.

  • A123 Systems (Nasdaq: AONE), announced the execution of definitive agreements with Wanxiang Group Corporation, which follows the non-binding memorandum of understanding (MOU) that A123 signed with Wanxiang on August 8, 2012. Wanxiang is China's largest automotive components manufacturer and one of China's largest non-government-owned companies. Under the terms of the agreements, Wanxiang plans to invest up to $465 million in A123, which includes an initial credit extension of $25 million that A123 expects to receive this week. The full investment from Wanxiang is expected to provide A123 with the capital necessary to strengthen the company's competitive position in the global vehicle electrification and grid energy storage markets.

    Pursuant to the terms of the definitive agreements, Wanxiang would provide A123 with up to $75 million in initial debt financing under a Senior Secured Bridge Facility. In addition to the initial credit extension of $25 million, $50 million would be funded after the satisfaction of certain closing conditions. Subsequently, upon satisfaction of certain closing conditions, Wanxiang would purchase $200 million aggregate principal amount of A123's 8.00% Senior Secured Convertible Notes. The agreements also include the potential for Wanxiang to invest up to an additional $190 million by exercising the warrants that will be issued in connection with the Bridge Facility and the 8.00% Convertible Notes for cash. Incurrence of the remaining $50 million of loans under the Senior Secured Bridge Facility is subject to the satisfaction of certain approvals and conditions, including receipt of favorable determination from the Committee on Foreign Investment in the United States and receipt of Chinese government approvals. Issuance of the 8.00% Convertible Notes and the related warrants are also subject to additional conditions, including approval from A123's shareholders, termination of the Hart-Scott-Rodino waiting period, the conversion or redemption of all the outstanding 6.00% Senior Convertible Notes due 2013 and related warrants and the repurchase or retirement of at least 90 percent of A123's outstanding 3.75% Convertible Subordinated Notes due 2016.

    If the entire amount of the initial debt financing is provided to A123, the 8.00% Convertible Notes are issued and the full amount of the warrants are exercised for cash, Wanxiang's total capital investment in A123 from these agreements would total approximately $465 million. The total amount of shares of A123's common stock issuable upon exercise and conversion of the warrants and 8.00% Convertible Notes would represent approximately 80 percent of the fully diluted common stock of A123 outstanding at that time.
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Comments

Aone Future
Stephan Attia on Aug 16, 2012 11:52 AM
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This stock is bound to soar. Wise is the one whom buys it now before it hit the 5 dollars margin.


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