Notable Mergers and Acquisitions 5/26: (NYRT) (MGT) (SMT) (WPX)
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The combined company's portfolio will span over 14.5 million square feet of office, residential and retail properties across the gateway markets of New York City and Washington, D.C., concentrated in transportation served, urban-infill submarkets. Approximately 22% of the portfolio, by rentable square feet ("RSF"), will be located in New York City, with the balance of approximately 78% located in premier submarkets within the Washington, D.C. Metro area. The combined portfolio includes over 9.7 million RSF of high quality office assets, approximately 1.0 million RSF of retail assets, and approximately 4,500 residential units. In addition, a meaningful portion of the company's assets are in mixed-use districts involving a high density mix of commercial and residential buildings with anchor, specialty and neighborhood retail.
The combination transaction is subject to certain conditions, including approval by the NYRT stockholders of the issuance of common stock and operating partnership units in the transaction. JBG has received all required approvals for the transaction from its owners and JBG Fund Advisory Committee members. The Board of Directors of NYRT has approved the combination agreement and recommends that its stockholders approve the issuance of common stock and operating partnership units in the transaction.
Under the agreement, JBG will receive 319.9 million shares of common stock and operating partnership units of NYRT in exchange for the direct and indirect interests in the contributed JBG properties and the contribution of its management company (which equity consideration is subject to adjustment for certain cash payments and the possible exclusions of a limited number of designated properties if required consents are not obtained). Upon closing of the transaction, NYRT stockholders at the time of completion will own approximately 34.8% of the combined company's shares and units and JBG equityholders will own approximately 65.2%.
As part of the transaction, NYRT's external management contract will be terminated upon closing and the combined company will be internally managed by JBG's current management team. W. Matt Kelly will be named Chief Executive Officer, David Paul will be named President and Chief Operating Officer, James Iker will be named Chief Investment Officer and Interim Chief Financial Officer, and Brian Coulter will be named Chief Development Officer. Michael Happel, NYRT's current President and Chief Executive Officer has agreed to assist in the transition and will serve as a consultant to the combined company for a transition period.
Upon closing, the new Board of Directors of the combined company will be comprised of nine members, a majority of whom will be independent. The new Board of Directors will include: Michael J. Glosserman, to be named Co‐Chairman, Robert Stewart, to be named Co‐Chairman, both of whom are current executives of JBG, W. Matt Kelly, Michael D. Barnello, President and Chief Executive Officer, LaSalle Hotel Properties, Z. Jamie Behar, Managing Director, Real Estate & Alternative Investments, General Motors Investment Management Corporation (retired), Scott A. Estes, Executive Vice President and Chief Financial Officer, Welltower, Inc., Alan S. Forman, Yale University Investments Office, Director, Real Estate Investments, Glenn H. Hutchins, Chairman, North Island and Co‐Founder of Silver Lake, and Randolph C. Read, currently Chairman of the Board of NYRT. It is anticipated that Mr. Hutchins will serve as the Lead Independent Director of the Board of Directors.
Pro forma for the combination, the Yale University Investments Office and JBG employees including senior management, the two largest stakeholders in JBG, will own approximately 10% and 15%, respectively, of the combined company.
Randolph C. Read, Chairman of the Board of NYRT, commented, "We are extremely pleased to be able to announce this transaction with The JBG Companies which is nothing short of transformative for New York REIT. This combination creates a substantial REIT in New York City and Washington, D.C. We believe that the expertise of the JBG management team is recognized throughout the industry and that this combination will provide the NYRT stockholders with a unique opportunity to participate in the value creation potential that this combination will bring."
W. Matt Kelly, Chief Executive Officer of The JBG Companies, commented, "This combination creates a stabilized real estate platform focused on two of the world's gateway markets. We have been actively evaluating ways to bring our unique capabilities and strategy to the New York City market for some time and believe the portfolio of the combined company will provide tremendous opportunities for value creation. We believe the combined company will be positioned for strong stockholder returns with an attractive, stabilized in-place portfolio combined with substantial growth potential. We are extremely excited to be joining forces with NYRT."
The JBG Companies
Established in 1960, JBG is one of the premier real estate companies in the Washington, D.C. Metro area and owns one of the largest high-quality portfolios of urban-infill office, multifamily and retail assets in the region. JBG has investment, development (and redevelopment), operations, and private capital raising expertise across multiple property types and has a particular focus on mixed-use assets in infill markets. JBG's primary approach to value creation involves a series of complementary disciplines in a process referred to as "Placemaking™", involving strategically mixing high-quality multifamily and commercial buildings with anchor, specialty and neighborhood retail, in a high density, thoughtfully planned and curated public space environment.
JBG expects to contribute 72 operating properties with an aggregate of more than 11.3 million RSF, predominantly located near major transportation nodes in some of the most attractive high-barrier submarkets in the Washington, D.C. Metro area. In addition to its operating portfolio, JBG is also contributing its management company, an approximately 1.2 million RSF construction pipeline, an approximately 1.4 million RSF pre-development pipeline and a land bank with an estimated potential density of approximately 14.8 million square feet, providing the combined company with compelling value creation opportunities.
JBG's management team is a proven steward of investor capital and has a long track record of creating value for investors through numerous economic cycles. From the beginning of 1999 through December 31, 2015, JBG has raised over $3.6 billion of discretionary fund investment capital for nine real estate investment funds and has invested in more than 250 assets on behalf of these funds. JBG's realized investments during this period have generated a levered IRR of 36.6% p.a., and an equity multiple of 2.3x. Preqin Ltd. has named JBG as one of the top Consistent Performing Closed End Private Real Estate Fund Managers every year since 2011, the only real estate fund manager to receive this designation in each of the past five years.
The combination of NYRT and The JBG Companies is expected to create an industry-leading REIT focused on New York City and Washington, D.C., whose stockholders will benefit from the following attributes:
- Enhanced positioning from a combination with a premium, urban-infill, transit-oriented portfolio with substantial embedded growth.
- Leadership from a premier management team with a track record of value creation through market cycles, a proven history as a best-in-class fiduciary, and a significant investment in the combined company.
- Expanded platform capabilities from a fully internalized management structure with strong shareholder alignment, with management and employee ownership in the combined company of approximately 15%.
- Plans to reduce the leverage of the combined company following closing without dilution through a combination of the disposition and/or recapitalization of certain properties through strategic joint ventures to facilitate growth.
- A new credit facility of up to $1.5 billion led by Bank of America Merrill Lynch to refinance certain indebtedness, pay transaction costs, and provide additional liquidity for the Company.
Alongside the addition of JBG's contributed high quality Washington, D.C. Metro area portfolio, the combined company will maintain a dedicated New York City presence with the existing NYRT on-the-ground asset management and investments team remaining in place. Integration of NYRT's New York City platform will be led by Todd Rich, a JBG partner and member of its management committee who was formerly with Tishman Speyer in its New York, London, Chicago, and Washington, D.C. offices prior to joining JBG. Building upon the existing NYRT portfolio, the combined company intends, over time, to acquire and redevelop or develop a concentrated collection of high-quality, mixed-use properties in New York City neighborhoods in which the firm's Placemaking™ capabilities can drive attractive value creation opportunities.
Following the close of the transaction, the combined company intends to pursue strategic joint ventures, recapitalizations, and the disposition of select non-core properties in order to repay certain outstanding debt obligations, enabling the company to take advantage of opportunities to create value without the need for equity issuances. In addition, the combined company intends to obtain a new senior unsecured credit facility of up to $1.5 billion to be led by Bank of America Merrill Lynch, which is expected to be completed in conjunction with the closing.
NYRT Strategic Process
This transaction represents the conclusion of a strategic process NYRT has been conducting to consider all options to maximize long-term stockholder value. These options included consideration of an outright sale of NYRT for cash or stock, a sale of individual assets, a sale of all or substantially all of NYRT's assets through a plan of liquidation approved by NYRT's stockholders, continuing operations as a standalone entity, and acquiring assets and bringing in new investors for minority or majority positions. After this extensive review process, and with the assistance of its legal, tax and financial advisors, the Board concluded that the combination with JBG was in the best interests of NYRT and its stockholders.
James L. Nelson, an independent director of NYRT, commented "I am extremely pleased with the thorough and robust strategic review process that the board of NYRT conducted in analyzing a wide range of scenarios to create long-term stockholder value. Throughout the process, the Board maintained an overriding focus on what we reasonably believed to be the maximum value for NYRT's stockholders over the long term. I believe this transaction with JBG accomplishes that goal."
The completion of the transactions contemplated by the combination agreement is subject to certain conditions, including (i) NYRT stockholder approval of the issuance of common stock and operating partnership units, (ii) the expiration of applicable waiting periods under the Hart-Scott-Rodino Act, (iii) the receipt of certain third party consents, and (iv) the combined company closing on a new credit facility.
In connection with the proposed transaction, NYRT expects to file a preliminary proxy statement with the SEC. After the SEC completes its review of the proxy statement, NYRT will mail a definitive proxy statement to its stockholders, and stockholders will vote at a special meeting on a date to be announced, for the issuance of common stock and operating partnership units in the transaction. NYRT expects the transaction will close by the end of 2016, if approved by its shareholders.
The Eastdil Secured group of Wells Fargo Securities, LLC acted as exclusive financial advisor to NYRT. Proskauer Rose LLP acted as legal advisor to NYRT and Venable acted as Maryland counsel to NYRT. BofA Merrill Lynch and Morgan Stanley acted as financial advisors to JBG. The Advisory and Consulting Group of Green Street Advisors acted as a strategic advisor to JBG. Hogan Lovells US LLP served as legal advisor to JBG.
*** MGT Capital Investments, Inc . (NYSE: MGT) announced today that it has entered into a definitive asset purchase agreement to acquire certain technology and assets from Demonsaw LLC , a provider of a secure and anonymous file sharing software platform. Using multiple layers of encryption (both symmetric and asymmetric), Demonsaw offers users full control of data and also offers private router services . Demonsaw is a fully decentralized, mesh-based network that does not use P2P, providing protection of IP addresses. Demonsaw is available in 32-bit and 64-bit versions for Windows, Apple OSX, Android, Raspberry Pi and Ubuntu.
In conjunction with the anticipated acquisition, MGT is pleased to announce the proposed appointment of Eric J. Anderson as Chief Technology Officer upon closing of the transaction. Mr. Anderson, who is well known as "Eijah" in the hacker community, is the founder of Demonsaw. For the past five years he was an Associate Technical Director and Lead Programmer for Rockstar Games where he architected core engine and artificial intelligence code for Grand Theft Auto, among the world's highest grossing video game franchises. Before that Eric was Lead Programmer for Guitar Hero 6 at Activision and also served as Portfolio Architect of Security at American Express. Eric has been a college faculty member, keynote speaker at DEF CON and Hack Miami conferences, and holds a Master's Degree in Computer Science from Arizona State University. He is an active member of the hacking community and is an avid proponent of Internet freedom.
Closing of the acquisition is contingent on customary conditions including approval by MGT's stockholders. Major terms of the deal include the payment to Demonsaw LLC members of 20.0 million restricted shares of MGT common stock. The proposed share issuance is expected to amount to approximately 28% of the Company's common stock on a pro-forma fully diluted basis at closing, inclusive of shares of common stock to be issued in connection with the Company's previously announced transaction with D-Vasive, Inc. More detailed information can be found in the Company's Form 8-K filed this morning with the Securities and Exchange Commission, available at www.sec.gov, or the MGT website at www.mgtci.com.
John McAfee, proposed Executive Chairman and Chief Executive Officer of MGT, stated, "Artificial intelligence will be crucial to the next generation of cybersecurity systems. Eijah's proposed appointment as Chief Technology Officer will cement our edge in the creation of cybersecurity products in this new paradigm of cyber threats."
Mr. McAfee, concluded with this comment, "I want to reiterate my personal commitment towards the creation of a major force in cybersecurity. As a listed company with proper corporate governance and regulatory standards, MGT will be the vehicle I use to create wealth for all stockholders."
*** SMART Technologies Inc. (Nasdaq: SMT) and Foxconn Technology Group ("Foxconn") announced they have entered into an arrangement agreement (the "Arrangement Agreement") under which Foxconn has agreed to acquire all of the outstanding common shares of SMART ("Common Shares") for a cash payment of US$4.50 per Common Share (the "Arrangement"). The US$4.50 per Common Share purchase price represents a premium of approximately 21% to the volume weighted average price over the last 90 trading days prior to announcement of the Arrangement on the NASDAQ Stock Market ("NASDAQ").
"We are very excited by the proposed acquisition of SMART by Foxconn, who is the world's largest electronics manufacturer," said Neil Gaydon, President and CEO of SMART. "SMART has built an enviable global brand in both the education and enterprise spaces. The proposed transaction with Foxconn provides us with one of the strongest global electronics partners with access to significant resources, a broad range of new technologies, markets and financial resources that will enable us to accelerate our strategy and position SMART for significant future growth."
The Arrangement Agreement
The Arrangement Agreement provides for the implementation of the Arrangement by means of a plan of arrangement under the Business Corporations Act (Alberta). The Arrangement Agreement contains customary representations and warranties of each party, non-solicitation and interim operations covenants by SMART, and right to match provisions in favour of Foxconn. The Arrangement Agreement provides that any subsidiary of Hon Hai Precision Industry Co., Ltd. may participate in the investment in SMART, and strategic partners designated by Hon Hai Precision Industry Co., Ltd. may, collectively, participate in up to 33 1/3% of the investment. Further, the Arrangement Agreement provides that a termination fee of US$8.9 million will be payable by SMART in certain circumstances, including if SMART enters into an agreement with respect to a superior proposal or if its Board of Directors fails to recommend the proposed Arrangement to shareholders in the prescribed manner.
The Arrangement is subject to customary conditions for a transaction of this nature, which include court and regulatory approvals (including the approval of the TSX) and the approval of 66 2/3% of the votes cast by SMART shareholders represented in person or by proxy at a meeting of SMART shareholders to be called to consider the Arrangement (the "Special Meeting").
All of the directors, certain of the officers of SMART and certain of its shareholders, representing an aggregate of approximately 68% of the issued and outstanding Common Shares, have entered into lockup agreements pursuant to which they have agreed to, among other things, support the Arrangement and vote their Common Shares in favour of the Arrangement, subject to the terms of such agreements.
An information circular regarding the Arrangement is expected to be mailed to shareholders in June 2016 and a meeting of shareholders is expected to be held in July 2016 with closing to occur thereafter. A copy of the Arrangement Agreement will be filed on SMART's profile on SEDAR and EDGAR and will be available for viewing at www.sedar.com and www.sec.gov, respectively.
Recommendation of the Board of Directors
After consulting with its financial and legal advisors, the Board of Directors of SMART unanimously approved the Arrangement. The Board of Directors recommends that shareholders vote in favour of the Arrangement.
Advisors and Legal Counsel
Evercore is acting as lead financial advisor to SMART in connection with the Arrangement and Bennett Jones LLP and Sidley Austin LLP are serving as legal counsel. RBC Capital Markets is also acting as financial advisor to SMART. Moelis & Company LLC is acting as exclusive financial advisor to Hon Hai and Akin Gump Strauss Hauer & Feld LLP and Gowling WLG are serving as legal counsel.
*** Citadel, a global investment firm, today announced that it has agreed to acquire a portfolio of natural gas pipeline transportation capacity through 2032 in the Western U.S. from WPX Energy (NYSE: WPX). The acquisition is expected to close in the third quarter of 2016 and is subject to customary closing conditions and regulatory approvals.
Today's announcement, which follows the successful launch of the firm's physical natural gas business in 2014, underscores Citadel's commitment to expanding its presence in the natural gas market.
"We see natural gas transportation as a foundation for the growth of our physical business and are excited to be expanding in this market," said Mark Stainton, Head of Commodities at Citadel. "This transaction builds on our track-record of success in commodities and commitment to providing our investors with access to attractive opportunities in the energy space."
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