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Notable Mergers and Acquisitions of the Day 12/21: (PNK)/(ASCA) (CR) (WWAY) (AV)

December 21, 2012 10:34 AM EST Send to a Friend
* Pinnacle Entertainment, Inc. (NYSE: PNK) and Ameristar Casinos, Inc. (Nasdaq: ASCA) have entered into a definitive agreement under which Pinnacle will acquire all of the outstanding common shares of Ameristar for $26.50 per share in cash, for a total enterprise value of $2.8 billion, including debt of $1.9 billion and cash on hand of $116 million as of September 30, 2012. This consideration represents a premium of 45% over the average closing price of Ameristar common stock for the 90 days ended December 20, 2012. The transaction has received the unanimous approval of both the Ameristar and Pinnacle Boards of Directors.

Pinnacle will benefit from increased operational and geographic diversity by more than doubling in size to 17 operating properties in 13 distinct geographies. The acquisition of Ameristar's properties will complement Pinnacle's existing portfolio by adding eight casino-resorts in some of the nation's best gaming markets, including: St. Charles near St. Louis, MO; Kansas City, MO; Council Bluffs, IA; Black Hawk, CO; Vicksburg, MS; East Chicago, IN; and Jackpot, NV.

The consideration represents an EBITDA multiple of 7.6x Ameristar's Adjusted EBITDA of $365 million for the trailing 12-month period ended September 30, 2012, excluding synergies Pinnacle expects to achieve. The combined enterprise would have generated net revenue of $2.4 billion and Combined Adjusted EBITDA of $649 million (excluding $40 million of synergies Pinnacle expects to achieve), over the trailing 12-month period ended September 30, 2012.

The transaction is subject to customary closing conditions, approval by Ameristar's shareholders and required regulatory approvals. Pinnacle expects the transaction to close by the end of the third quarter of 2013. Pinnacle has obtained committed financing for the transaction and the transaction is not subject to a financing contingency.

* Crane Co. (NYSE: CR) signed an agreement to purchase 100% of the equity interests in MEI Conlux Holdings (U.S.), Inc. and its affiliate MEI Conlux Holdings (Japan), Inc. from Bain Capital and Advantage Partners. The purchase price is approximately $820 million on a cash free and debt free basis, representing 9.6 times MEI’s estimated 2012 EBITDA of $85 million.

MEI, a leading provider of payment solutions for unattended transaction systems, serves customers in the transportation, gaming, retail, service payment and vending markets. Headquartered in Malvern, PA, and with sales of approximately $400 million in 2012, MEI has customers in over 100 countries and employs 820 people worldwide. From 2009 to 2012, MEI sales have grown at a 13% compound annual growth rate and EBITDA margins have increased to 21%. On a pro forma basis, the combined sales of MEI and Crane Payment Solutions will be approximately $575 million in 2012.

The purchase of MEI is contingent upon regulatory approvals and customary closing conditions. Crane Co. said that it intends to finance the acquisition through a combination of cash on hand and additional debt. Commitments are in place to cover 100% of the financing needs in order to facilitate the closing of the transaction, which is expected to be in the second quarter of 2013.

Crane’s Payment Solutions business has annual sales of $175 million with operating profit margins of approximately 14%. Crane acquired NRI, a niche European coin validation and dispensing business, in 1985 as part of the acquisition of UniDynamics Corporation. In recent years Crane has invested over $220 million to grow and broaden the payment solutions portion of its Merchandising Systems business segment. Cash Code, which specializes in niche applications for bill validation and dispensing devices, and Telequip, which provides coin dispensing equipment, were both acquired in 2006, substantially expanding the capabilities of NRI’s coin handling business. Money Controls, acquired in late 2010, produces a broad range of payment solutions for coins and bills, and further broadened the scope and scale of the business.

Until the completion of this acquisition, MEI and Crane Payment Solutions will operate independently under their existing management structures. Following the acquisition, it is anticipated that Michael Hayes, President of MEI, will become president of the combined payment solutions businesses, headquartered in Malvern, PA. Mr. Hayes will report to Max Mitchell, Executive Vice President and COO of Crane. Kurt Gallo, President of Crane Payment Solutions, will assume the Chief Operating Officer role of the combined businesses, reporting to Mr. Hayes. Kiyoaki Takeda will continue as President of MEI Conlux Holdings (Japan). Brad Ellis, President of Crane’s Vending Solutions business will continue to report directly to Max Mitchell.

2012 EPS and Free Cash Flow Guidance Reaffirmed

The Company continues to expect 2012 EPS to be in the lower half of the previously communicated guidance range of $3.75 - $3.85, excluding Special Items. The EPS guidance includes $0.04 associated with the first half profits from discontinued operations, but excludes the following Special Items: the gain from the previously announced sale of two businesses ($0.33 per share) and repositioning costs ($0.26 per share). The 2012 EPS guidance also assumes a $0.05 per share benefit associated with a potential retroactive application of the Research and Development tax credit still under consideration in Congress. Full year 2012 free cash flow (cash provided by operating activities less capital spending) remains in a range of $150 - $180 million.

Preliminary 2013 Guidance

The Company’s preliminary outlook for 2013 includes core sales growth (excluding acquisition and foreign exchange impacts) of between 2% and 4%, and earnings per share in a range of $4.05 to $4.20. 2013 EPS guidance also assumes the restoration of the R&D tax credit ($0.05 per share). Preliminary 2013 guidance does not include potential impacts from the pending acquisition of MEI.

* Westway Group, Inc. (Nasdaq: WWAY) entered into a definitive agreement pursuant to which an affiliate of EQT Infrastructure II will acquire all of the outstanding equity securities of Westway Group, Inc. for approximately $419 million in aggregate cash consideration or $6.70 in cash per common share.

The Company also announced that it that has entered into a definitive agreement to sell its liquid feed supplement business and certain bulk liquid storage terminals located in Ireland, Denmark, Korea, and the United Kingdom to an affiliate of ED&F Man Holdings Limited, the Company's largest stockholder, for a purchase price of approximately $115 million, subject to adjustment.

Under the terms of the Merger Agreement, which was unanimously recommended by the Special Committee of the Westway Board of Directors and unanimously approved by Westway's Board of Directors, Westway's stockholders will receive $6.70 in cash for each outstanding share of Westway Class A Common Stock or Class B Common Stock they own, representing a 9.7% premium over the closing price on December 19, 2012, the last full trading day before today's announcement. Such per share price represents a 67.6% premium over the closing price on December 14, 2011, the last full trading day before the announcement that the Company had initiated a process to explore possible strategic alternatives.

Additionally, all outstanding in-the-money warrants of Westway Group, Inc. and all outstanding shares of Series A Convertible Preferred Stock will be acquired for $1.70 per in-the-money warrant and $6.79 per preferred share (inclusive of accrued dividends), respectively.

Both transactions are expected to close by the end of the first quarter of 2013.

In accordance with the terms of the Merger Agreement, affiliates of EQT Infrastructure II will commence a tender offer for all of the outstanding equity securities of Westway Group, Inc. Westway's Board of Directors has unanimously recommended that Westway's stockholders tender their shares into the offer. Under the terms of the agreement, the transaction is conditioned upon satisfaction of the minimum tender condition of a majority of the shares of Westway's common stock on a fully diluted basis, and preferred stock on a fully diluted basis, consummation of the transactions contemplated by the Purchase Agreement, the receipt of U.S. antitrust approval under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, certain third party consents and other customary closing conditions. Consummation of the transactions contemplated by the Merger Agreement is not subject to a financing condition.

Concurrent with the execution and delivery of the Merger Agreement, Agman Louisiana, Inc., Francis Jenkins, Jr. and John Toffolon, Jr. representing in the aggregate approximately 79% of Westway's fully diluted shares outstanding, have each entered into separate agreements with affiliates of EQT Infrastructure II and the Company pursuant to which each has agreed to tender the shares of common or preferred stock beneficially owned by them into the tender offer, as well as providing certain covenants not to sue and releases related to the transactions contemplated by the Merger Agreement.

Under the terms of the Purchase Agreement, which was unanimously approved by the Special Committee of the Westway Board of Directors, Westway agreed to sell all of its outstanding equity interests in Westway Feed Products and the Foreign Terminals as well as certain Canadian assets to an affiliate of ED&F Man Holdings Limited for a purchase price of approximately $115 million. Under the terms of the Purchase Agreement, the transaction is conditioned upon launch of the tender offer pursuant to the Merger Agreement, certain third party consents and other customary closing conditions.

* Aviva plc (NYSE: AV) has agreed to sell Aviva USA Corporation, its US life and annuities business and related asset management operations, to Athene Holding Ltd (“Athene”), for $1.8 billion (£1.1 billion). Aviva will retain the North American asset management activities of Aviva Investors that are focused on third parties, and Aviva plc assets outside of the USA.

(Note: Headline price equates to cash payment of $1,550m plus retirement of an external loan financing agreement of $257m. Total US dollar headline price is converted to pounds sterling at £1/$1.62.)

The transaction represents significant further progress in narrowing the group's focus on businesses and markets where Aviva enjoys leadership positions and is able to generate attractive returns with a high probability of success. The transaction will increase Aviva's pro forma economic capital surplus coverage ratio by 17 percentage points to 165% (or the economic capital surplus by approximately £1.1 billion) placing the group within its target range of 160-175% of required capital (FY11: 130%). The sale will reduce the group's credit risk exposure by approximately 25%, and also reduce the sensitivity of the group's economic capital results to credit spread movements by approximately 30%.

Aviva will receive sale proceeds of US$1.55 billion (£1.0 billion) in cash, after the repayment of external debt. Of this, an amount of up to $250 million may be received in the form of an interest-bearing vendor loan, repayable in cash within 12 months of completion. Cash proceeds will increase central group liquidity and will be used for general corporate purposes.

The transaction values Aviva USA at 7.9x 2011 US GAAP earnings and 0.6x US Statutory Capital Surplus at 30 June 2012. Had the transaction occurred at 30 September 2012, Aviva’s IFRS net assets would have reduced by £2.3 billion to £9.3 billion, IFRS NAV per share would have reduced from 397p to 318p, and MCEV NAV would have increased by £0.2 billion.

Aviva USA generated an IFRS operating profit of £223 million in 2011 and held £3.2 billion IFRS net assets and £39 billion IFRS total assets as at 30 June 2012.

Athene Holding is a life insurance holding company focused principally on the retirement market and whose business, through its subsidiaries, is focused primarily on issuing and reinsuring fixed and equity indexed annuities.

Completion, which is subject to regulatory approvals, is expected in 2013.

Goldman, Sachs & Co. and Morgan Stanley and Co. International plc acted as financial advisers to Aviva.

* General Electric (NYSE: GE) has agreed to purchase the aviation business of Avio S.p.A., an Italy-based manufacturer of aviation propulsion components and systems for civil and military aircraft, for $4.3 billion U.S. (€3.3 billion).

The announcement was made today in Milan, Italy, by David Joyce, president and CEO of GE Aviation, and Nani Beccalli, president and CEO of GE Europe.

GE plans to acquire Avio’s aviation business from Cinven, a leading European private equity firm that has owned Avio since 2006, and Finmeccanica, the Italian aerospace group. The transaction is subject to regulatory and governmental approvals. GE will not be purchasing Avio’s space unit.

The acquisition of Avio’s aviation business, which provides components for GE Aviation and other engine companies, would further GE’s participation in jet propulsion, one of the most attractive sectors of the aviation industry.

Avio will strengthen GE’s global supply chain capabilities as its engine production rates continue to rise to meet growing customer demand. Avio and its customers will benefit from GE’s planned investment in expanding Avio’s products and services. Additionally, GE sees excellent opportunity in the acquisition of Avio related to margin expansion.

The purchase price to be paid by GE for Avio’s aviation business represents a multiple of approximately 8.5x based on 2012 estimated earnings before interest, taxes, depreciation and amortization.

Avio has supplied components to GE Aviation since 1984 and has content on engines ranging from the large GE90 and GEnx turbofan engines for the commercial aircraft sector, to the smaller CT7/T700 turboshaft engine family for civil and military helicopters. These GE engines are among the best-selling in aviation and are expected to provide a profitable, long-term revenue stream for the company.

This acquisition will create additional opportunities to offer Avio’s products and services beyond the aviation industry. GE plans to pursue new opportunities for Avio in power-generation, oil, and marine products. For example, Avio’s capabilities in transmission systems present potential growth opportunities in multiple sectors.

* ShangPharma Corp. (NYSE: SHP) has entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with ShangPharma Holdings Limited ("Holdings"), ShangPharma Parent Limited ("Parent") and ShangPharma Merger Sub Limited ("Merger Sub"), pursuant to which Parent will acquire the Company for US$0.50 per ordinary share or US$9.00 per American Depositary Share, each representing eighteen ordinary shares ("ADS"). This represents a 30.8% premium over the closing price of $6.88 per ADS as quoted by the New York Stock Exchange (the "NYSE") on July 5, 2012, the last trading day prior to the Company's announcement on July 6, 2012 that it had received a "going private" proposal, and a 44.8% and 34.2% premium to the volume-weighted average closing price of the Company's ADSs during the 30 and 60 trading days prior to August 13, 2012, respectively. The consideration to be paid to holders of ordinary shares and ADSs implies an equity value of the Company at approximately US$173 million, on a fully diluted basis.

Pursuant to the Merger Agreement and subject to the satisfaction or waiver of its terms and conditions, Merger Sub, which is wholly owned by Parent, will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent (the "Merger"). In connection with and at the effective time of the Merger, all of the Company's ordinary shares issued and outstanding immediately prior to the effective time of the Merger (including ordinary shares represented by ADSs) will be canceled and converted into and exchanged for the right to receive US$0.50 per ordinary share or US$9.00 per ADS, in each case, in cash and without interest, except for the (i) ordinary shares (including ordinary shares represented by ADSs) owned by certain shareholders of the Company, including affiliates of Mr. Michael Xin Hui, the chairman of the board of directors and chief executive officer of the Company, Mr. Kevin Penghui Chen, a director of the Company, and TPG Star Charisma Limited and TPG Biotech II Charisma Limited (collectively "TPG"), which are subject to a contribution agreement with Holdings and Parent whereby such shareholders have agreed to contribute such ordinary shares (the "Rollover Shares") to Holdings in exchange for ordinary shares of Holdings (ii) ordinary shares owned by the Company as treasury shares and ordinary shares (including ordinary shares represented by ADSs) owned by ChemExplorer Investment Holdings Limited and ChemPartner Investment Holdings Limited as are required to fully settle any and all vested but unsettled restricted share units as of the closing date of the Merger Agreement that were granted under (A) the Founder's 2008 Equity and Performance Incentive Plan, or (B) the Company's 2010 Share Incentive Plan, which will be canceled for no consideration; and (iii) ordinary shares owned by holders of such ordinary shares who have validly exercised and not lost their appraisal rights pursuant to Section 238 of the Cayman Islands Companies Law, as amended, which will be canceled and will entitle the former holders thereof to receive the appraised value thereon in accordance with such holder's appraisal rights under the Cayman Islands Companies Law.

Holdings, Parent, and Merger Sub are all newly-formed Cayman Islands exempted companies with limited liability. Immediately after the completion of the Merger, Parent will be beneficially owned by ChemExplorer Investment Holdings Limited, ChemPartner Investment Holdings Limited, Joint Benefit Group Limited, Han Ming Tech Investment Limited and TPG (collectively, the "Buyer Group"). Each of ChemExplorer Investment Holdings Ltd. and ChemPartner Investment Holdings Limited is a British Virgin Islands company beneficially owned by Mr. Michael Xin Hui and three trusts, of which Mr. Michael Xin Hui and his family members are beneficiaries. Joint Benefit Group Limited is beneficially owned by Hui Family Trust, of which Mr. Michael Xin Hui's family members are beneficiaries. Han Ming Tech Investment Limited is beneficially owned by Mr. Kevin Penghui Chen, a director of the Company. The Buyer Group collectively beneficially owns approximately 66% of the outstanding shares of the Company (excluding outstanding options of the Company).

Holdings, Parent and Merger Sub intend to fund the Merger consideration through a combination of a cash contribution from TPG Star Charisma Ltd., TPG Biotech II Charisma Ltd., and Joint Benefit Group Limited, pursuant to customary equity commitment letters, and the proceeds from a committed loan facility from Standard Chartered Bank (Hong Kong) Limited, pursuant to a debt commitment letter.

The Company's board of directors, acting upon the unanimous recommendation of the independent committee ("Independent Committee") formed by the board of directors, approved the Merger Agreement and the Merger and resolved to recommend that the Company's shareholders vote to authorize and approve the Merger Agreement and the Merger. The Independent Committee, which is composed solely of directors of the Company who are unaffiliated with any of Holdings, Parent, Merger Sub, the Buyer Group or any of the management members of the Company, exclusively negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors.

The Merger, which is currently expected to close during the first or second quarter of 2013, is subject to customary closing conditions as well as the approval by an affirmative vote of shareholders representing two-thirds or more of the ordinary shares present and voting in person or by proxy as a single class at a meeting of the Company's shareholders which will be convened to consider the approval of the Merger Agreement and the Merger. In the event that the Company's board of directors changes its recommendation with respect to the Merger Agreement and the Merger, and the Merger Agreement has not subsequently been terminated by Parent as a result of such change in recommendation, the approval of the Merger Agreement and the Merger will also require the affirmative vote of holders of ordinary shares (other than Rollover Shares) representing a majority of the outstanding ordinary shares (other than the Rollover Shares) present and voting in person or by proxy at the meeting of the Company's shareholders convened to approve the Merger Agreement and the Merger.

Concurrently with the execution of the Merger Agreement, the members of the Buyer Group have entered into a voting agreement with Parent and the Company whereby they have agreed, among other things, to vote in favor of approval of the Merger Agreement and Merger. This represents voting commitments from shareholders beneficially owning approximately 66% of the Company's outstanding shares. If completed, the Merger will result in the Company becoming a privately-held company and its ADSs will no longer be listed on the NYSE.

J.P. Morgan Securities (Asia Pacific) Limited is serving as financial advisor to the Independent Committee. O'Melveny and Myers LLP is serving as U.S. legal advisor to the Independent Committee and Conyers Dill & Pearman is serving as Cayman Islands legal advisor to the Independent Committee. Kirkland and Ellis LLP is serving as U.S. legal advisor to J.P. Morgan Securities (Asia Pacific) Limited.

Ropes & Gray LLP is serving as U.S. legal advisor to the Buyer Group and to TPG. Latham & Watkins LLP is serving as U.S. legal advisor to Mr. Michael Xin Hui. Maples and Calder and Fangda Partners are serving as Cayman Islands and PRC legal advisor to the Buyer Group, respectively.

Skadden, Arps, Slate, Meagher & Flom LLP is serving as U.S. legal advisor to the Company.

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