Notable Nergers and Acquisitions of the Day 02/17: WAG, FIG, FSTR/PRPX, ITT

February 17, 2010 10:13 AM EST
  • Walgreen Co. (NYSE: WAG) and New York-based drugstore chain Duane Reade Holdings, Inc. today announced a definitive agreement under which Walgreens will acquire Duane Reade from affiliates of Oak Hill Capital Partners in a cash transaction for a total enterprise value of $1.075 billion, which includes the assumption of debt.

    The transaction is subject to customary conditions, including receiving regulatory approvals and would include all 257 Duane Reade stores located in the New York City metropolitan area, as well as the corporate office and two distribution centers. Walgreens will fund the purchase with existing cash and anticipates the transaction will close in its current fiscal year, which ends Aug. 31.

    Duane Reade is a compelling strategic acquisition that will immediately provide Walgreens with a leading position in the largest drugstore market in the U.S., said Walgreens President and CEO Greg Wasson. In addition, Duane Reade’s recent initiatives in urban retailing, customer loyalty and private brand products support and accelerate Walgreens strategy to enhance the customer experience in our network of more than 7,100 stores across the country.

    Duane Reade had unaudited net sales of $1.8 billion for the latest 12-month period ending Dec. 26, 2009, and has the highest sales per square foot in the retail drugstore industry nationwide.

    "This transaction is consistent with the capital allocation objectives we outlined last fall, which included investing in strategic opportunities that reinforce the company’s core strategies and meet return requirements," said Wasson. By combining the strengths of our two companies, we can improve our position as the most convenient provider of consumer goods and services, and pharmacy, health and wellness services in the country.

    The company anticipates the transaction to be dilutive to earnings per share in the first 12 months after closing, and accretive in the next 12 months and beyond. Walgreens expects to achieve synergies between $120-$130 million in the third year after closing the transaction. Additionally, the company will benefit from Duane Reade’s existing net operating losses which will provide additional value over time.

    We are very pleased that this national leader has recognized the successful transformation under way at Duane Reade, which is built upon a 50-year history of serving the needs of New Yorkers and has been supported by our shareholders, including Oak Hill Capital Partners, said Duane Reade Chairman and CEO John A. Lederer. We will continue to be the drugstore New Yorkers turn to, just as Walgreens has been a trusted community pharmacy in other markets for more than 100 years.

    Duane Reade will continue to operate under its brand name after the transaction closes. With Walgreens currently operating 70 stores in the New York City metropolitan area, decisions will be made over time as to the best, most effective way to harmonize the Walgreens and Duane Reade brands. Walgreens expects to retain Duane Reade’s store, pharmacy and distribution center employees and many members of Duane Reade’s senior management team following the acquisition. Over time, consolidation of core functions at the corporate offices will occur.

    Duane Reade, which opened in 1960 and is named after its first store located on Broadway between Duane and Reade streets in Manhattan, is the largest drugstore chain in the New York City metropolitan area. Over the past two years, Duane Reade has embarked upon a significant brand transformation initiative based upon extensive market research. Improvements include: dramatic new store designs with wide aisles and contemporary décor; a much improved pharmacy featuring lower service counters for more personalized patient interaction; introduction of “Doctor on Premises” walk-in health care; and a store-within-a-store prestige beauty concept called Look Boutique, which elevates the merchandising of cosmetics and skin care products and features many prestige beauty brands. Positive changes also include the launch of a family of exciting new private brands including food and beverage brand DR Delish; and a much expanded customer loyalty program called FlexRewards.

    To date, Duane Reade has opened or converted 30 stores to the new format and has plans for up to 30 more new or remodeled stores in 2010. The continued rollout of Look Boutique is also planned for a growing number of stores across the network.

    Duane Reade’s transformation initiatives correspond to Walgreens current Customer Centric Retailing (CCR) initiative to reinvent the shopping experience. To date, CCR has been implemented in more than 600 Walgreens stores nationwide, with plans to have as many as 3,000 stores converted by the end of fall 2010.

    Lederer said, We are pleased that Walgreens shares our commitment to finding new and innovative ways to serve local communities, and we look forward to seeing our customers benefit from Walgreens unparalleled pharmacy and operational expertise as we continue with our ongoing transformation. Duane Reade plans to continue accepting all of its current prescription insurance plans after the transaction closes.

    Peter J. Solomon Co. acted as financial advisor to Walgreens in the transaction, and the law firm of Wachtell, Lipton, Rosen & Katz served as legal counsel for Walgreens. Goldman Sachs & Co. acted as lead financial advisor, and Bank of America Merrill Lynch acted as co-financial advisor to Oak Hill Capital Partners and Duane Reade. The law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Duane Reade and its shareholders, including Oak Hill Capital Partners.

  • Fortress Investment Group LLC (NYSE: FIG) announced today the signing of a definitive agreement to acquire Logan Circle Partners, L.P. from Guggenheim Partners, LLC. Logan Circle is a fixed income asset manager with approximately $12 billion in assets under management. Logan Circle manages portfolios for institutional investors in strategies that include core/core plus, short, intermediate and long duration, corporate and high yield.

    With this acquisition, Fortress will expand its investment management business to offer fixed income products to investors worldwide. Fortress plans to enhance the Logan Circle platform over time to continue to serve an expanded global client base.

    We believe this is a unique opportunity to diversify and expand Fortress’s investment management business. Logan Circle has a high quality management team and a fundamental credit focus which is complementary to our existing approach, commented Daniel Mudd, Fortress’s Chief Executive Officer.

    I am delighted that Jude Driscoll and his team will join Fortress. Jude and his portfolio management and research team have a strong track record and extensive experience, which will immediately broaden our market perspective.

    Mr. Driscoll, founder of Logan Circle Partners, added, I’m extremely excited for Logan Circle to join Fortress. While our investment approach and the day-to-day operations of Logan Circle will remain the same, Fortress’s size and global infrastructure, along with its intellectual capital and transaction flow will meaningfully enhance our ability to build our platform.

    Under the terms of the agreement, Fortress will pay approximately $21 million in cash with the potential for an additional payment at the end of 2011, contingent on the growth and performance of Logan Circle’s business. The transaction is expected to close by the end of the second quarter of 2010 and is subject to customary approvals. Post closing, Mr. Driscoll and the senior leadership team at Logan Circle will continue to manage the business, which will report directly to Daniel Mudd.

  • L. B. Foster Company (NASDAQ: FSTR) and Portec Rail Products, Inc. (NASDAQ: PRPX) , both headquartered in Pittsburgh, PA, today jointly announced the signing of an Agreement and Plan of Merger, under which L. B. Foster will make, through its wholly owned acquisition subsidiary, a cash tender offer to acquire all of Portec's outstanding shares of common stock for $11.71 per share.

    "The proposed acquisition will bring together two organizations with a rich history of successfully delivering products and services to the global rail industry," said Stan Hasselbusch, L . B. Foster's President and Chief Executive Officer. "The addition of Portec will complement our existing array of products and furthers our strategic initiative of becoming a premier provider of products and services below the wheel for Class 1, transit, shortline and regional railroads and contractors in North America, as well as to governmental agencies and rail contractors globally."

    Richard J. Jarosinski, Portec's President and Chief Executive Officer, commented "Both companies have a strong reputation for quality and operational excellence in providing a wide range of products for the rail industry. We couldn't be more pleased than to be joining forces with the Foster team."

    This transaction is subject to the satisfaction of certain conditions, including Hart-Scott-Rodino antitrust clearance, at least 65% of Portec's outstanding shares being tendered and customary closing conditions, and is expected to close before the end of the second quarter 2010.

  • ITT Corporation (NYSE: ITT) today announced its agreement to purchase Nova Analytics Corporation. Nova Analytics is a privately held, leading manufacturer of premium quality laboratory, field, portable, and on-line analytical instruments used in water and wastewater, environmental, medical, and food and beverage applications. Financial terms of ITT’s agreement were not disclosed.

    This acquisition fits perfectly with ITT’s strategy to expand into categories adjacent to our core businesses and build on our global leadership positions in water, wastewater and industrial process, and products for the food & beverage market, said Gretchen McClain, president of ITT Fluid and Motion Control group. Nova offers ITT a collection of leading brands and technologies, robust distribution, and a strong platform in the $6 billion analytical instrumentation market from which to establish a new growth platform for the corporation.

    McClain sees the acquisition as a natural extension of ITT’s $4.7 billion Fluid and Motion Control business, with presence in more than 130 countries and established brands including Flygt, Sanitaire, Jabsco, Totten, Goulds, Bell & Gossett, Lowara, WEDECO and Leopold.

    Adding Nova’s recognized brands such as WTW, SI Analytics, Global Water and Aanderaa to our existing portfolio of water and wastewater pumps and treatment systems will enable us to more fully address our customers’ needs when it comes to fluid transport, testing and treatment, and to assist them in more effectively meeting the increasingly stringent regulatory, environmental, and energy efficiency requirements they are facing, McClain said.

    By combining Nova’s WTW branded instrument and sensor portfolio with our current offerings, ITT will have one of the industry’s broadest sensor and instrument ranges for wastewater plant process monitoring and control. This combined portfolio will allow ITT to better address all of our customers’ treatment plant process design, operation and control needs, and assist them in controlling their operating and construction expenses.

    The transaction is expected to close within the first quarter of 2010, pending customary regulatory approvals.

    ITT is the perfect acquirer for Nova Analytics”, said Jim Barbookles, Chairman and CEO of Nova Analytics. The combination of Nova’s brands, premium technology and dedicated employees will enhance ITT’s competitive position in Analytical Instruments.
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