Notable Mergers and Acquisitions of the Day 11/05: (MDF)/(HUM) (SF)/(KBW) (MSW) (PENN) (BCO)

• Humana Inc. (NYSE: HUM) and Metropolitan Health Networks, Inc. (NYSE: MDF) announced that they have entered into a definitive agreement pursuant to which Humana will acquire Metropolitan in a transaction valued at approximately $850 million plus transaction costs. Headquartered in Boca Raton, Florida, Metropolitan is a Medical Services Organization that provides and coordinates medical care for approximately 87,500 Medicare Advantage, Medicaid, and other beneficiaries, primarily in Florida utilizing a primary care-centric business model.
  
  Under the terms of the agreement, which has been approved by both companies’ boards of directors, Metropolitan stockholders will receive $11.25 per share in cash from Humana for each Metropolitan share. Humana will also repay all of Metropolitan’s outstanding debt.
  
  Metropolitan’s integrated care delivery systems include 35 state-of-the-art primary care medical centers and a robust network of affiliated physicians serving mainly Humana members.
  
  The transaction is subject to Metropolitan shareholder approval and customary closing conditions including expiration of the Hart-Scott-Rodino anti-trust waiting period and is expected to close by the end of the first quarter of 2013. Humana expects to finance this transaction with a combination of cash and debt. Humana anticipates the transaction to be modestly accretive to its earnings for the year ending December 31, 2013.
  
  
• Stifel Financial Corp. (NYSE: SF) and KBW, Inc. (NYSE: KBW) today announced that they have entered into a definitive merger agreement to create the premier middle-market investment bank with a specialized focus on the financial services industry.
  
  Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, KBW shareholders will receive $17.50 per share, comprised of $10.00 per share in cash and $7.50 per share in Stifel common stock. Additionally, holders of certain restricted KBW shares, that will continue to vest post closing, will receive $17.50 in Stifel common stock. The stock component of the consideration is fixed at $7.50 per share, subject to a collar, provided that the volume weighted average closing price of Stifel common stock for the ten days prior to closing is between $29.00 and $35.00 per share. If the volume weighted average price rises above $35.00 per share, the exchange ratio will be fixed at 0.2143 shares of Stifel common stock for each share of KBW, and if it falls below $29.00 per share, the exchange ratio will be fixed at 0.2586 shares of Stifel common stock for each share of KBW.
  
  The transaction is valued in excess of $575 million, which includes the outstanding shares and restricted stock awards of KBW. Approximately $250 million in excess capital on KBW's balance sheet is expected to be immediately available to Stifel upon closing.
  
  The combined company will provide investment banking, sales and trading, and research in the financial services vertical through KBW's Keefe, Bruyette & Woods broker-dealer subsidiary, which will continue to operate as an independent subsidiary of Stifel following completion of the transaction. Stifel will utilize KBW's preeminent market brand as a highly focused, specialized financial services platform of choice.
  
  Stifel has identified significant synergies that will leverage the integrated platforms and take advantage of Stifel's robust global wealth management capabilities. Annualized net revenues for the two companies are approximately $1.8 billion, based upon 2012 results through September 30, 2012.
  
  The merger is subject to approval by KBW shareholders and customary regulatory approvals. Thomas Michaud will join Stifel's board and management team upon completion of the merger and will remain Chief Executive Officer of the KBW business unit.
  
  
• Mission West Properties, Inc. (Nasdaq: MSW) entered into two agreements to dispose of all of its real estate assets for an enterprise value of approximately $1.3 billion, which was unanimously approved by its Board of Directors. Mission West has agreed to sell certain of its real estate assets to a joint venture entity sponsored by affiliates of Divco West and TPG Real Estate in exchange for approximately $400 million in cash and $398 million in assumed debts and other obligations. In addition, Mission West has agreed that certain operating partnerships (each, an "O.P.") will retain their remaining assets and liabilities with an approximate net value of $525 million and the non-converting limited partners will retain an ownership interest in those operating partnerships.
  
  Following completion of these transactions, Mission West intends to liquidate after satisfying outstanding debts, applicable taxes and related transaction costs. Mission West currently estimates these transactions will result in a distribution to stockholders (and the O.P. unit holders that elect to redeem their O.P. units) in the range of $9.20 to $9.28 per share in cash, although the amount ultimately distributed to stockholders may be below this range. The estimated distribution amount includes the sales proceeds and an allocation for the final 2012 annual dividend in accordance with the REIT's statutory distribution requirements.
  
  Mission West currently expects the transactions to close by year end. However, Mission West's ability to consummate the transactions is subject to stockholder approval and satisfaction of certain other conditions to closing. It is anticipated that Mission West stockholders of record as of November 2, 2012, the record date set for the special meeting, will be entitled to vote on the proposed transactions shortly before the proposed closing.
  
  
• Penn National Gaming, Inc. (Nasdaq: PENN) announced today that having received requisite regulatory approvals, it has completed its acquisition of the stock of the Harrah’s St. Louis gaming and lodging facility from Caesars Entertainment (Nasdaq: CZR) for total consideration of approximately $610 million.
  
  Peter M. Carlino, Chief Executive Officer of Penn National, commented, “The acquisition of Harrah’s St. Louis further expands and diversifies Penn National’s regional operating platform with a facility that is extremely well-positioned in another large, stable metropolitan market. Our planned facility upgrades include the introduction of Penn National’s Hollywood brand – which has been successfully deployed at thirteen other properties across the country – and will invoke the glamor of 1930s’ art deco Hollywood.
  
  
• Shamrock Holdings Inc., shareholder in The Brink’s Company (NYSE: BCO), announced that President Stanley P. Gold sent a letter to the Board of Directors urging the immediate consideration of strategic alternatives, including the sale of the company, in the wake of a five-year stock price decline of more than 60%, "years of empty promises and failed initiatives" and continuing deficiencies in corporate governance.
  
  Below is the text of Mr. Gold’s letter to the Brink’s board:
  
  November 2, 2012
  
  Board of Directors
  The Brink's Company
  P.O. Box 181001801 Bayberry Court
  Richmond, VA 23226-8100Attention:
  
  Murray D. Martin, Lead Director
  
  Ladies and Gentleman:
  
  We are shareholders of The Brink's Company, and we are writing to urge the Board of Directors to address meaningfully Brink's continuing underperformance by launching an immediate exploration of strategic alternatives, including a sale of the company.
  
  The Brink's shareholders have suffered through years of empty promises and failed initiatives. In the last five years, Brink's stock price has declined by over 60%. Brink's stock price has also consistently lagged behind the stock price of its key competitors. In the last year alone, Brink's was on the bottom with an approximate 11% drop in share price. In contrast, G4S plc, Loomis AB and Prosegur, Compania de Seguridad, S.A. (which are competitors listed in the Company's 10-K) all increased their share value by at least 5%.
  
  Unfortunately, we do not believe there is a realistic chance for improvement by continuing on the existing path with current management. Over the past nine months, the situation has only worsened under the tenure of new management. The Company's earnings per share during this period plummeted from $.66 per share to $.28 per share, a drop of over 57%. The more than 7% drop in Brink's stock price since the Company's earnings announcement is simply more evidence of the shareholders' lack of faith that the Company can turn itself around.
  
  Brink's also has failed to address significant concerns regarding its corporate governance. At the Company's 2012 annual meeting, almost 45% of the shareholders followed ISS' recommendation and voted against the proposal on executive officer compensation. Given this shareholder outcry, we would have thought that the Company would have been proactive in responding to the shareholders' clarion call for change. However, more than seven months after Michael Dan's departure was announced, the Board elevated board member Thomas Schievelbein from an interim CEO and Chairman position to the permanent CEO, President and Chairman of the Board. Taken at face value, this is an inexplicable result that calls into question the effectiveness of the Board's oversight over, and apparent lack of, succession planning and execution, all in contravention of the Company's own corporate governance policies. Moreover, by declining to separate the CEO and Chairman role, the Board continued to demonstrate its arrogance in dismissing shareholder concerns regarding the Board's poor corporate governance.
  
  We do not think that current management has the skills to revive this once dominant brand and company. Accordingly, we believe that the Company's best alternative to improve shareholder value is to launch a thorough review of all strategic alternatives, including a sale of the entire company. In our view, Brink's would be an attractive acquisition target. Just last month, Garda World Security announced it will be acquired by a private equity company at a 30% premium. Applying the transaction metrics in the Garda transaction, Brink's would be valued at approximately $40 per share, or a 57% premium to the current stock price. Moreover, Brink's may be appealing to strategic acquirers who are looking to expand in the U.S. or buttress their operations in Europe or Latin America. We do not believe this management continuing to operate under the supervision of this Board could come close to approaching the shareholder value that can be obtained in a sale. Even if management could devise a recovery plan, the execution risk associated with its implementation would make this track far less desirable for shareholders than a sale. Accordingly, the Board should promptly form a special committee comprised of independent directors to explore all strategic alternatives for the Company before shareholder value is further eroded.
  
  We would like to participate in the effort to create value for all Brink's shareholders by engaging the independent directors of the Board in a constructive discussion about these areas of critical concern, which we believe that other shareholders share. Given the drop in Brink's share price and persistent underperformance, we hope the Board does not continue to turn a tin ear to its shareholders and agrees to meet with us promptly. Please contact me as soon as possible so we can set up a time to meet.
  Very truly yours,
  
  
  Stanley P. Gold

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