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Notable Mergers and Acquisitions of the Day 11/12: (JEF)/(LUK) (NLY)/(CXS) (PCP)/(TIE) (CHMT)

November 12, 2012 10:07 AM EST Send to a Friend
  • Leucadia National Corporation (NYSE: LUK) and Jefferies Group, Inc. (NYSE: JEF) today announced that the Boards of Directors of both companies have approved a definitive merger agreement under which Jefferies’ shareholders (other than Leucadia, which currently owns approximately 28.6% of the Jefferies outstanding shares) will receive 0.81 of a share of Leucadia common stock for each share of Jefferies common stock they hold. This exchange is intended to be tax-free to Jefferies’ shareholders. The merger, which is expected to close during the first quarter of 2013, is subject to customary closing conditions, including approval to effect the merger by both Leucadia and Jefferies shareholders. In order to avert the possibility that the transaction would result in the application of tax law limitations to the use of certain of Leucadia’s tax attributes, the merger agreement limits the amount of Leucadia shares that can be issued to certain persons that would otherwise become holders of 5% of the combined Leucadia’s common shares by reason of the merger.

    Concurrently with the execution of the merger agreement, Leucadia, Richard Handler, Chief Executive Officer and Chairman of Jefferies, and Brian Friedman, Chairman of the Executive Committee of Jefferies and one of its Directors, have each agreed pursuant to separate voting agreements, among other things, to vote their respective shares in favor of the transaction; and Ian Cumming, Leucadia’s Chief Executive Officer and Chairman, and Joseph Steinberg, Leucadia’s President and one of its Directors, have each agreed pursuant to separate voting agreements, among other things, to vote their respective shares in favor of the transaction. These voting agreements represent approximately 18.3% and 31.5% of the outstanding shares of Leucadia and Jefferies, respectively.

    Upon the closing of the merger, Mr. Handler will become the Chief Executive Officer of Leucadia, as well as one of its Directors, and also remain Jefferies’ Chief Executive Officer and Chairman; Mr. Friedman will become Leucadia’s President and one of its Directors, and also remain Chairman of the Executive Committee of Jefferies; and Mr. Steinberg will become Chairman of the Board of Leucadia and will continue to work full time as an executive of Leucadia. Mr. Cumming will retire as Chairman of the Board and Chief Executive Officer of Leucadia upon the closing of the transaction and remain a Leucadia Director. The other Leucadia officers will continue in their present positions. In addition, upon the closing of the transaction, the four independent members of the Board of Directors of Jefferies also will join the Leucadia Board of Directors; the size of the Leucadia Board of Directors will be increased to fourteen.

    Leucadia will continue to operate in its current form, except that the merger agreement contemplates that Leucadia’s Crimson Wine Group, with a book value of $197 million, will be spun out in a distribution that is intended to be tax-free to current Leucadia shareholders prior to the completion of the merger.

    Jefferies, which will be the largest business of Leucadia, will continue to operate as a full-service global investment banking firm in its current form. Jefferies will retain a credit rating that is separate from Leucadia’s. Jefferies’ existing long-term debt will remain outstanding and Jefferies intends to remain an SEC reporting company, regularly filing annual, quarterly, and periodic financial reports.

    Following the transaction, 35.3% of Leucadia’s common stock will be owned by Jefferies’ shareholders (excluding the Jefferies shares owned today by Leucadia and including Jefferies vested restricted stock units). Leucadia’s Board of Directors has approved a new share repurchase program authorizing the repurchase from time to time of up to an aggregate of 25 million Leucadia common shares, inclusive of prior authorizations. Leucadia’s Board also has indicated its intention to continue to pay dividends at the annual rate of $0.25 per common share, but on a quarterly basis following the merger.

    Jefferies & Company, Inc. acted as financial advisors to Jefferies. Citigroup Global Markets Inc. acted as financial advisors and provided a fairness opinion to the Transaction Committee of the Jefferies Board of Directors (“Transaction Committee”), and J.P. Morgan acted as financial advisors to Jefferies. Morgan, Lewis & Bockius acted as legal advisors to Jefferies, and Wachtell, Lipton, Rosen & Katz acted as legal advisors to the Transaction Committee. Rothschild acted as financial advisors to Leucadia, and UBS Investment Bank acted as financial advisors and provided a fairness opinion to the Leucadia Board of Directors. Weil Gotshal & Manges acted as legal advisors to Leucadia, and Proskauer Rose LLP acted as legal advisors to the Leucadia Board of Directors.

  • Titanium Metals Corporation (NYSE: TIE) today announced that it has entered into a definitive merger agreement under which Precision Castparts Corp. (“PCC”) (NYSE: PCP), has agreed to acquire all of the common stock of TIMET for $16.50 per share in cash. The total equity value of the transaction is approximately $2.9 billion. The cash consideration represents a premium of 36% over the 30-day average of TIMET shares and a 44% premium to the closing price of TIMET shares on November 8, 2012.

    Under the terms of the merger agreement, PCC will commence by November 20, 2012 an all-cash tender offer to acquire 100 percent of the outstanding common stock of TIMET for $16.50 per TIMET share, net to the tendering holder in cash. PCC will acquire any TIMET shares that are not purchased in the tender offer in a second-step merger, at the same price per share paid in the tender offer. Completion of the tender offer will be subject to certain customary conditions, including tender of the majority of the outstanding shares of TIMET common stock not owned by TIMET’s principal stockholders, Contran Corporation (“Contran”) and its affiliates, who in the aggregate own approximately 54% of the outstanding shares of TIMET common stock, and the receipt of anti-trust approvals in the United States and the EU. The tender offer is expected to be completed in December 2012, subject to fulfillment of the conditions. Contran and certain of its affiliates, who collectively hold 45% of the outstanding shares of TIMET common stock, have committed to tender their shares in the tender offer. There can be no assurance that the tender offer will be completed, or if completed, that it will be completed in December 2012.

    The merger agreement has been approved by the PCC Board of Directors. TIMET's board of directors established a special committee consisting of independent members of the board which, with the assistance of their legal and financial advisors, evaluated, negotiated, and determined that the merger agreement and the tender offer were advisable, fair and in the best interest of TIMET and its stockholders (other than Contran and its affiliates). The TIMET board of directors approved the merger agreement, following the recommendation of the special committee.

    The merger agreement includes a "go shop" provision whereby the special committee of the TIMET board of directors, with the assistance of its independent advisors, will actively solicit superior acquisition proposals from third parties for 45 days following the signing of the merger agreement. TIMET does not intend to disclose developments with respect to this solicitation process unless and until the special committee has made a decision with respect to the alternative proposals, if any, it receives. No assurances can be given that the solicitation of superior proposals will result in an alternative transaction.

    Morgan Stanley & Co. LLC is acting as financial advisor to the special committee of TIMET’s board of directors, and Weil, Gotshal & Manges LLP is acting as the special committee’s legal advisor.

  • Annaly Capital Management, Inc. (NYSE: NLY) has proposed to the Board of Directors of CreXus Investment Corp. (NYSE: CXS) (“CreXus”) to acquire for cash all of the shares of CreXus that Annaly does not currently own.

    CreXus has approximately 76,630,528 shares of common stock outstanding, of which Annaly holds 9,527,778 shares, or approximately 12.4%.

    PROPOSAL TERMS

    Under the terms of the proposal, Annaly proposes to acquire all the CreXus shares it does not already own for $12.50 per share in cash. This represents approximately a 13% premium to CreXus’ last reported share price, approximately a 16% premium to the last 3-month average price and approximately a 5% premium to the common stock book value per share as reported in CreXus’ earnings release for the third quarter of 2012. The proposal states that it is subject to satisfactory negotiation of mutually acceptable definitive documentation, which documentation will not have any financing condition to close.

    Given that Fixed Income Discount Advisory Company (“FIDAC”), a wholly owned subsidiary of Annaly, manages CreXus, and two employees of FIDAC are on CreXus’ Board of Directors, Annaly expects that CreXus’ Board will create a Special Committee consisting entirely of directors who are independent of Annaly to consider the proposal contained in Annaly’s letter and to negotiate the terms of any transaction resulting from that proposal.

    A copy of the Company’s proposal to the Board of Directors of CreXus is set forth below.

    Advisors

    BofA Merrill Lynch is acting as financial advisor and K&L Gates LLP is acting as legal advisor to Annaly in connection with this proposal.

  • Chemtura Corporation (NYSE: CHMT) has entered into an asset purchase agreement to sell its Antioxidant and UV Stabilizers business, including dedicated manufacturing plants in the U.S, France, and Germany, to an affiliate of SK Capital Partners, for $200 million and the assumption of certain liabilities. The purchase price is subject to a post-closing net working capital adjustment. The transaction is subject to customary closing conditions. Proceeds from the sale will be used for repayment of debt and investment in Chemtura’s continued growth. The transaction is expected to close by the end of 2012 or in early 2013.

    “This divestiture simplifies our business portfolio as we continue to invest in businesses with less economic sensitivity that make greater contributions to our strategy of focusing on specialty products and applications with greater growth potential in our strategic industry segments and in faster-growing regions,” said Craig A. Rogerson, Chemtura Chairman, President and CEO. “The purchase price for the Antioxidant and UV Stabilizers business represents a 6.4X multiple on adjusted EBITDA for the 12 months ended Sept. 30, 2012. The revenues of the business in the same period were approximately $390 million.”
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