Notable Mergers and Acquisitions of the Day 12/22: STT, BA, SNS, ESEA

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State Street Corporation (NYSE: STT) announced today that it has signed an acquisition agreement with Intesa Sanpaolo, one of Italy's premier banking groups, to acquire Intesa Sanpaolo's Securities Services business, with operations in Italy and Luxembourg, for approximately EUR1.28 billion ($1.87 billion) in cash at closing. State Street expects to support the acquired ISPSS balance sheet with approximately EUR560 million ($800 million) of additional capital at the closing. ISPSS is a leading provider of securities services in the Italian market and has a significant presence in the Luxembourg market. State Street would acquire the global custody, depository banking, correspondent banking (banca corrispondente), and fund administration portions of the ISPSS business. In addition, assuming the cash balances in the business are consistent with levels at June 30, 2009, State Street expects to acquire approximately EUR11 billion ($16 billion) in cash deposits at closing.

Revenue in 2009 for the ISPSS businesses that would be acquired by State Street is expected to be approximately EUR293 million ($427 million). The agreement also includes a long-term investment servicing arrangement with ISP to service all of its investment management affiliates, including Eurizon Capital, the largest fund manager in Italy with approximately EUR135 billion ($197 billion) in assets under management as of September 30, 2009.

"Today's acquisition represents a significant milestone in State Street's strategy to become a truly global provider," said Ronald E. Logue, chairman and CEO of State Street. "With the addition of Intesa Sanpaolo's securities services business, we will enhance our ability to provide high-value services to institutional investors around the world and generate long-term value for our shareholders and our employees."

State Street expects to finance the acquisition through available capital. The closing is anticipated to occur during the second quarter of 2010, subject to regulatory approvals and satisfaction of other closing conditions. State Street expects its capital ratios would remain strong after closing. Based on IBES earnings estimates and assuming there are no material factors impacting capital other than earnings for 2010, following closing of the transaction in the second quarter of 2010, State Street's total capital ratio is estimated to be approximately 16.8%, tier 1 capital ratio is estimated to be approximately 15.6%, tier 1 leverage ratio is expected to be approximately 7.4%, and tangible common equity ratio is estimated to be approximately 5.5%. For more information related to estimated capital ratios, see the "Additional Information Concerning Capital Ratios" section of this press release.

Assuming a second quarter 2010 closing, State Street expects to incur approximately EUR80 million ($120 million) in pre-tax merger and integration costs over five years, primarily occurring in the first three years, and to achieve approximately EUR60 million ($90 million) in cost savings over five years, primarily from technology and operations. With a closing during the second quarter of 2010, the acquisition is estimated to be modestly accretive to State Street's operating earnings in fiscal year 2010, excluding merger and integration costs and depending on the closing date of the acquisition.

In the first half of 2009, ISPSS had approximately EUR343 billion ($500 billion) of average assets under custody, and approximately EUR141 billion ($200 billion) of average assets under depository bank services. ISPSS' Luxembourg business, which is a leader in offshore fund servicing, accounted for approximately 20% of ISPSS' 2008 revenues.

With this acquisition, based on ISPSS' expected 2009 revenue, State Street continues to progress toward its long-term goal of generating 50% of its revenue from outside the United States. Total State Street revenue derived from non-US operations was 35% for 2008 and, adjusted for the proposed acquisition, would be 38%.

"This transaction is consistent with our long-term strategic plan to increase State Street's scale and presence in high-growth markets outside of the United States," said Jay Hooley, president and chief operating officer of State Street. "It will also provide State Street with access to a new customer base to which we can cross-sell additional products and services and will give us additional traction in the insurance market. Additionally, it will build on our leadership position in the high-growth areas of fund accounting and offshore fund servicing. Lastly, this acquisition will provide us with a long-term servicing relationship with one of Europe's premier fund managers."

Upon closing, State Street would assume approximately 555 new employees, with approximately 420 in Italy and 135 in Luxembourg.

Jim Phalen, executive vice president and head of international operations for State Street's investment servicing and investment research and trading businesses, commented, "With attractive savings rates and a growing pensions market in Italy, we are confident that ISPSS will enhance our ability to deliver investment solutions to this key market. State Street has an excellent track record of acquiring and integrating servicing operations, and has set a goal of retaining 90% of the revenue of the ISPSS business to be acquired by State Street. Following the closing, we look forward to servicing the Italian market and to ensuring a smooth transition for ISPSS' customers and employees."
Boeing (NYSE: BA) said today it has acquired Alenia North America's half of Global Aeronautica, LLC, a South Carolina fuselage subassembly facility for Boeing's 787 Dreamliner, and is now the sole owner of that entity. Alenia North America is a subsidiary of Italy's Alenia Aeronautica, a Finmeccanica company.

Operationally, Boeing will integrate the Global Aeronautica facility with the rest of Boeing's organization in North Charleston, S.C.

"The Boeing Charleston site is critical to the success of the 787 program," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes. "Through this acquisition, Boeing benefits by joining together two solid operations – including their talented employees and state-of-the-art facilities – into one Boeing team. Ultimately, we believe integration of the site will increase productivity for the 787 program and allow us to maintain our long-term competitiveness."

"We are proud of the major contribution we have made over the past four years through our partnership in Global Aeronautica to the 787 program and to the state of South Carolina," said Giuseppe Giordo, president and CEO of Alenia North America. "We are confident that the foundation we have developed will continue to flourish as it is integrated into Boeing Charleston."

The acquisition was effected through a wholly owned subsidiary of Boeing; other terms were not disclosed.
The Steak n Shake Company (NYSE: SNS) announced today its intent to acquire 100% of the issued and outstanding shares of common stock of Fremont Michigan InsuraCorp, Inc. that it does not already own, through an appropriate acquisition entity for $24.50 per share. 50% of the Purchase Price would be paid in cash, and 50% would be paid in shares of the common stock of Steak n Shake. Stockholders of Fremont would be given an opportunity to elect to receive the Purchase Price in cash, shares of Steak n Shake, or a combination thereof, so that the consideration will be subject to proration if the elections do not equal 50% cash and 50% stock. The offer is not subject to any financing contingency. The offer price represents an 11.3% premium to today's closing price of Fremont's common stock.
Euroseas Ltd. (NASDAQ: ESEA) announced today that it sold and delivered to their new owners the two oldest vessels in its fleet, M/V Gregos and M/V Artemis. M/V Gregos, a 38,691 dwt geared drybulk carrier built in 1984, was sold for further trading for approximately $7.9 million. M/V Artemis, a 2,098 TEU gearless containership built in 1987, was sold for scrap for $282/lwt, or approximately $3.2 million; the M/V Artemis had been laid-up and was sold "as is." The Company will take a book loss of approximately $8.7 million as a result of such sales.

The Company also announced that it has entered into a non-binding Letter of Intent with Eton Park Capital Management, L.P. on behalf of one or more funds managed by it and Rhne Capital III L.P. to form a joint venture to pursue investment opportunities in shipping. The Company is expected to invest up to $25 million while Eton Park and Rhne are each expected to invest up to $75 million. Management of acquired vessels will be performed by the Company and its affiliates. The arrangement also is expected to include the option by Eton Park and Rhne, exercisable at any time after the two year anniversary of the formation of the joint venture, to exchange all or part of their interest in the joint venture for equity of the Company at a price to be based on the comparable values of the joint venture and the Company at the time of exercise. In addition, the arrangement contemplates that the Company will grant the joint venture certain rights of first refusal in respect of vessel acquisition opportunities presented to the Company. The agreement is subject to the execution of definitive documentation and customary closing conditions and is expected to close by the end of February 2010. During this time the Company has agreed to negotiate exclusively with Eton Park and Rhne with respect to this or any similar transaction.