Notable Mergers and Acquisitions of the Day 03/05: (AIG) (ARCL) (LXK) (PXD)

• American International Group, Inc. (NYSE: AIG) announced today that it has commenced a sale of ordinary shares of AIA Group Limited (AIA) by means of a placing to certain institutional investors. AIG expects the pricing of the placing to occur no later than March 6, 2012.
  
  AIG expects to use the net proceeds from the placing of AIA ordinary shares to reduce the balance due to the U.S. Department of the Treasury (Treasury) on Treasury’s preferred equity interest in the special purpose vehicle through which AIG holds the AIA ordinary shares.
  
  
• Archipelago Learning (Nasdaq: ARCL) announced today that it has entered into a definitive agreement under which PLATO Learning, a portfolio company of Thoma Bravo, LLC, will acquire Archipelago Learning for $11.10 per share in cash, representing an equity value of approximately $291 million. The transaction represents a premium of 23 percent to the closing price of $9.04 on March 2, 2012, and a premium of 17 percent to the company’s weighted average trading price for the last twelve months.
  
  The decision to enter into an agreement with Thoma Bravo’s PLATO Learning was the result of an extended evaluation of strategic alternatives by Archipelago Learning’s Board of Directors. As part of that review, the Board of Directors formed a Transaction Committee consisting of independent directors, and held discussions with a number of parties, including PLATO Learning, through a formal, competitive process. Further details of the transaction and background of the sale process will be included in the company’s preliminary proxy statement.
  
  Barclays Capital acted as sole financial advisor and Weil Gotshal & Manges LLP acted as legal advisor to Archipelago Learning. Vinson & Elkins LLP also provided legal advice to the Transaction Committee and Board of Directors.
  
  Archipelago Learning’s Board of Directors has unanimously approved the transaction and recommended that stockholders approve the merger agreement. In addition, Providence Equity Partners and select additional shareholders representing approximately 49 percent of the aggregate voting power of the company have entered into a voting agreement in support of the transaction.
  
  Following the close of the transaction, the combined companies’ customer base will include over 50,000 schools and 17 million pre-K through adult students. The expanded and complementary product portfolio will provide schools and districts cost effective, results-based, end-to-end online learning solutions. These solutions include virtual instruction, credit recovery, intervention, test preparation, formative and diagnostic assessment, supplemental classroom instruction, college and career readiness, and developmental education.
  
  Customers will continue to benefit from a large field sales, service and support organization that spans the United States, Canada, the United Kingdom, as well as dual operations centers in Bloomington, Minnesota and Dallas, Texas.
  
  Kirkland & Ellis LLP acted as legal advisor to PLATO Learning and Thoma Bravo.
  
  PLATO Learning has secured financing commitments from Credit Suisse and Jefferies Finance LLC.
  
  
• Lexmark International, Inc. (NYSE: LXK) today announced the acquisition of Luxembourg-based BDGB Enterprise, including its U.S. subsidiary Brainware, Inc., a Vista Equity Partners portfolio company, for a cash purchase price of approximately $148 million.
  
  Brainware now joins Perceptive Software, a stand-alone business unit within Lexmark. Brainware's chief executive officer, Carl Mergele, will report directly to Scott Coons, Perceptive Software's president and chief executive officer and Lexmark vice president.
  
  This acquisition is consistent with Lexmark's capital allocation framework of pursuing acquisitions to support the growth of the company while returning more than 50 percent of free cash flow to shareholders, on average, through quarterly dividends and share repurchases.
  
  In this quarter, the company executed an accelerated share repurchase agreement to purchase $30 million of the company's outstanding shares and announced a cash dividend of $0.25 per share that will be paid on March 16, 2012, to shareholders of record as of March 5, 2012. Lexmark retains a strong liquidity position with a long history of cash generation. Non U.S.-based cash was used for this acquisition.
  
  
• Pioneer Natural Resources Company (NYSE: PXD) has signed an agreement with a subsidiary of Carmeuse Holding S.A. (Luxemburg) to acquire its U.S. industrial sands business, Carmeuse Industrial Sands, for approximately $297 million, before normal closing adjustments.
  
  CIS is the number one producer of Hickory frac sand (Brady Brown) used as proppant for fracture stimulating oil and gas wells in the U.S. Hickory sand is considered to be the highest quality brown sand for fracture stimulation. CIS’ sand mine in Brady, Texas, has more than 30 years of proven brown sand reserve life and is the industry’s largest resource base for brown sand in the U.S. The Brady mine currently has sales capacity of approximately one million tons annually.
  
  Assuming Pioneer could replace its current brown sand supply at market prices and would have to substitute its incremental brown sand requirements (300 thousand tons in 2013) with white sand due to lack of brown sand availability, Pioneer estimates that it will save $65 million to $70 million per year by acquiring CIS. After taking into account an additional $10 million of annual cash flow from CIS’ other assets, Pioneer’s total annual savings are estimated to be $75 million to $80 million.
  
  The acquisition also provides Pioneer with significant upside potential. First, output from the Brady mine can be doubled from one million tons per year to two million tons per year, which would support any future increases in Spraberry vertical, horizontal Wolfcamp Shale and Barnett Shale Combo drilling activity above the Company’s currently announced drilling growth plans. Second, CIS has 23 million tons of white sand reserves in Wisconsin, where plans to develop a mine with a production capacity of up to one million tons per year are being progressed.

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