Notable Mergers and Acquisitions of the Day 09/02: PAR/HPQ, BKC, HTZ/DTG/CAR
- The unprecedented bidding war for 3Par Inc. (NYSE: PAR) continued on Thursday morning, as the data storage company confirmed that Hewlett Packard Co. (NYSE: HPQ) has increased its offer for the company to $33 per share from a previous offer of $30 per share.
The latest offer for 3Par from HP came in ahead of rival Dell Inc.’s (NASDAQ: DELL) most recent offer of $32 per share. Dell's previous bid had been $27 per share.
Bidding for 3Par began on August 16, when Dell had agreed to acquire the company for $18 per share, which at time time was a significant premium to the $9.65 prior day close. With the bid now nearly doubling, it remains to be seen just how much further Dell wishes to go in this pursuit.
HP and Dell are making it clear that they would like to get more involved in businesses other than computers, as the profit margins are higher.
The two companies have made sophisticated PCs affordable through price wars in recent years, but the cost of parts has risen and profits have shrunk. The companies see previously little known 3Par as a tool to improving their “cloud computing” businesses, as more companies are moving to in to the cloud rather than buying their own servers.
The agreement between Dell and 3Par will allow Dell to have time to match offers for the company such as that of HP.
Shares of 3Par are up 4.58 percent to $33.55 in premarket trade Thursday, while shares of HP are trading flat at $39.21 and Dell shares are down 8 cents to $12.04.
***Note: Dell has ceded in the bidding war. 3PAR will pay Dell a $72 million break-up fee.
- Burger King Holdings Inc. (NYSE: BKC) has agreed to be acquired for $3.26 billion by the private-equity firm 3G Capital, or $4 billion with the assumption of the company’s debt.
According to the terms of the deal, shareholders of Burger King will receive $24 per share in cash, representing a 46 percent premium to the stock’s price before rumors of a sale surfaced in media reports on Wednesday.
“We are pleased that 3G Capital recognizes the value we have created in revitalizing the brand and enhancing operations over the past seven years,” said Burger King Chairman and Chief Executive Officer John W. Chidsey. “We look forward to partnering with 3G Capital, whose proven track record as an investor, together with its financial and consumer brands experience, will serve to further strengthen the Company, our restaurants and franchisees worldwide.”
The company said that the deal is expected to close in the fourth quarter of this year.
“Its solid franchisee network and great product offerings make this a perfect fit for 3G Capital, which has a strong track record of long-term investments in global consumer brands and retail companies,” Alex Behring, Managing Partner of 3G Capital, said.
Over the past decade, the company has been publicly owned, then went private and back to public. With an apparent move back to being privately owned, the fast food chain is being criticized for too many changes in ownership and not enough innovations within its restaurants.
The company was taken private in 2002 by a consortium of firms that included TPG, Bain Capital and Goldman Sachs Group Inc. (NYSE: GS). The consortium still maintains a 32 percent stake in Burger King.
The company has struggled in recent years to keep up with its biggest rival McDonald’s Corp. (NYSE: MCD) in innovations, while also dealing with its prime demographic, those aged 18 to 34 years being hit hard by the recession.
Shares of Burger King are up 23.33 percent to $23.36 in early market trade Thursday.
- Avis Budget Group, Inc. (NYSE: CAR) today issued the following statement regarding its outstanding offer to acquire Dollar Thrifty Automotive Group, Inc. (NYSE: DTG):
Avis Budget is increasing the cash portion of its offer from $39.25 to $40.75 per share (which would include the proceeds of a pre-closing special dividend to be paid by Dollar Thrifty consistent with our previous proposal). Our revised offer of $40.75 in cash and 0.6543 shares of Avis Budget stock, represents a premium of more than 22% over the Hertz Global Holdings, Inc. (NYSE: HTZ) offer.
The Avis Budget offer is clearly superior to the Hertz offer in the two ways that matter -- we are offering a substantially higher price and a more meaningful divestiture commitment.
Contrary to certain Dollar Thrifty and Hertz statements, a reverse termination fee has nothing to do with certainty of closing. Economic compensation for failing to close does not impact whether a deal is reasonably likely to close. The Hertz deal is no more likely to be approved by the FTC simply because Hertz agreed in the context of a negotiated deal to pay a fee to Dollar Thrifty if it is not approved.
Both deals raise complex and similar antitrust issues and face comparable divestiture analyses. Hertz resorts to antitrust as a scare tactic and a smoke screen -- a last-ditch effort to deflect attention from its clearly inferior offer -- but Hertz is wrong on the process and wrong on the facts. Although outcomes of governmental reviews cannot be predicted with certainty, both companies are cooperating with an ongoing FTC review. Both companies have similar airport revenue shares and derive more than half of their revenues from leisure travelers -- although, significantly, Hertz has higher leisure renter revenues than Avis and Budget combined.
Both companies compete with Dollar Thrifty. In fact, Hertz uses its exclusive relationship with AAA to generate more than $500 million of annual revenues at low price points -- typically lower than Dollar and Thrifty rates -- targeted to compete directly with Dollar, Thrifty and other value brands. Through the value-oriented AAA relationship "brand," Hertz competes aggressively and successfully with other value brands and generates revenues that are comparable to Thrifty's U.S. corporate location revenues.
Furthermore, nothing blocks any of the market participants from renting cars to value and leisure oriented customers as there are no barriers to entry (with the exception of the Hertz exclusive agreement with AAA, which covers 50 million members). Pricing can be adjusted in seconds on each company's respective corporate websites and the related travel oriented websites.
Hertz's "Dollar Thrifty Transaction Update," filed on August 31, 2010, does not change any of this. Hertz's "analysis" conveniently ignores the many hundreds of millions of dollars Hertz makes through low-priced rentals under its AAA discount program and through its share-leading position in low-priced rentals through Hotwire, Priceline and other channels. In its "Update," Hertz cherry- picks data and time periods, and uses deeply flawed modeling, to present baseless and inflated divestiture numbers for an Avis Budget transaction. Proper economic analysis shows that Hertz and Avis Budget are comparably competitive with Dollar Thrifty. And Hertz invents new industry segmentation, artificially grouping Dollar and Thrifty together with Budget to try to manufacture an antitrust issue, knowing full well that Budget and Alamo are positioned as mid-tier brands while Dollar, Thrifty and Enterprise -- on all relevant metrics -- are in a value segment that falls below the mid-tier.
Avis Budget is fully committed to completing the acquisition of Dollar Thrifty. Avis Budget has already spent millions of dollars, and devoted substantial time and resources, in pursuit of this transaction, despite Dollar Thrifty not yet having signed an agreement with Avis Budget. Avis Budget has been cooperating with antitrust authorities, and has submitted over a million pages of documents and vast quantities of data to the FTC in response to the FTC's Second Request with the intention of completing its response very shortly.
In addition, the exclusion of a reverse termination fee from our offer is entirely consistent with the Hertz transaction's reciprocity approach that sets the reverse termination fee to be exactly equal to the break-up fee payable by Dollar Thrifty in the event it accepts a superior proposal. A fair and level playing field should be created that would allow Dollar Thrifty shareholders the benefit of a competitive sale process -- a process that, to date, they have been denied. To that end, we have removed the traditional break-up fee that would operate in our favor -- fairness and the Hertz reciprocity approach dictate that the reverse termination fee also be eliminated.
Nonetheless, it appears that the clearly inferior Hertz offer will be put to a vote of Dollar Thrifty shareholders with the support of the Dollar Thrifty Board of Directors. The Hertz offer significantly undervalues Dollar Thrifty -- in fact, the current value of the Hertz offer represents a discount to the Dollar Thrifty share price prior to the Hertz deal announcement. And since that announcement, the stand-alone value of Dollar Thrifty has, no doubt, only increased as a result of Dollar Thrifty's strong financial results and repeatedly increased earnings projections. Our offer properly delivers that premium to the Dollar Thrifty shareholders rather than allowing it to be diverted to Hertz.
We remain ready to deliver on the revised premium offer that we are announcing today. Moreover, we will increase our offer to Dollar Thrifty shareholders by the amount of any reduction in the Dollar Thrifty break-up fee payable or paid to Hertz.
Our message is clear: We are confident that the Dollar Thrifty shareholders will prefer the premium Avis Budget offer to the Hertz offer. As such, in the event that the Hertz transaction is rejected by the Dollar Thrifty shareholders at the September 16, 2010 special meeting, we will commit to sign the merger agreement we previously delivered to Dollar Thrifty (together with the disclosure schedules previously delivered to us) at any time within five days of that September 16 special meeting.
Citigroup and Morgan Stanley & Co. Incorporated are acting as financial advisors to Avis Budget Group, and Kirkland & Ellis LLP and Arnold & Porter LLP are acting as legal counsel.
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- Notable Mergers and Acquisitions
- Dollar Thrifty Takeover
- 3Par/Dell/HP
- Burger King/3G
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