Notable Mergers and Acquisitions of the Day 07/16: (BIDU) (BYI)/(SHFL) (EQM)/(EQT) (KOOL)
* Baidu, Inc. (Nasdaq: BIDU) announced that it has signed a Memorandum of Understanding on the Proposed Acquisition of all equity interests in 91 Wireless Websoft Limited from NetDragon.
Pursuant to the MOU, Baidu will purchase the entire issued share capital of 91 Wireless for a total of US$1.9 billion. Baidu and NetDragon will further negotiate and agree on the relevant terms of the Proposed Acquisition in the definitive agreements by 14 August 2013 ("the Long Stop Date") to purchase NetDragon's 57.41% equity interest in 91 Wireless. Before the signing of definitive agreements or the Long Stop Date (whichever is earlier), NetDragon is restricted from approaching or discussing with any third parties the sale of 91 Wireless. Baidu intends to purchase the remaining equity interests in 91 Wireless from other shareholders based on terms and conditions similar to those offered to NetDragon, provided those shareholders are willing to sell by the Long Stop Date.
* Bally Technologies, Inc. (NYSE: BYI) announced that it has entered into a definitive agreement to acquire SHFL entertainment, Inc. (Nasdaq: SHFL) at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion. This consideration represents a premium of 24 percent to the closing price of SHFL common stock on July 15, 2013.
The transaction, which was unanimously approved by both the Bally and SHFL Boards of Directors, combines two best-in-class, highly complementary and customer-centric gaming technology companies with a shared commitment to innovation to create a company offering the gaming industry’s most diversified suite of products.
Bally will acquire all of the outstanding shares of SHFL for a per share price of $23.25 in cash, representing a total enterprise value of approximately $1.3 billion, including debt of $8 million and cash of $41 million as of April 30, 2013. Based on the respective trailing 12-month periods ended March 31, 2013 for Bally and April 30, 2013 for SHFL, the combined company generated approximately $1.3 billion in revenues, $644 million of which are recurring in nature, and Adjusted EBITDA of $415 million. In addition, once combined, the Company expects to achieve synergies of at least $30 million.
The transaction is subject to approval by SHFL’s shareholders, required regulatory and other approvals and customary closing conditions. The transaction is expected to close by the second quarter of calendar year 2014. The Company has obtained committed financing to complete the acquisition and the transaction is not subject to a financing contingency.
Financial and Legal Advisory
Goldman, Sachs & Co. and Groton Partners served as financial advisors and Gibson, Dunn & Crutcher LLP served as the legal advisor to Bally. Wells Fargo Bank, JPMorgan Chase Bank, N.A., Bank of America Merrill Lynch, Goldman Sachs Bank USA and Union Bank, N.A. provided the committed financing for the transaction.
Macquarie Capital served as SHFL’s exclusive financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to SHFL.
* Monday night, EQT Midstream Partners, LP (NYSE: EQM) and EQT Corporation (NYSE: EQT) announced that EQT Midstream Partners has agreed to acquire EQT Corporation’s (EQT) wholly owned subsidiary, Sunrise Pipeline, LLC (Sunrise), for $507.5 million cash and $32.5 million of common and general partners units. EQT Midstream Partners (Partnership) also agreed to pay additional consideration of $110 million to EQT upon the effectiveness of a new transportation agreement with a third-party that the Partnership expects to become effective post-closing. In addition, the Partnership announced a $0.40 cash distribution per unit for the second quarter 2013, which represents a $0.03 or 8% increase over the first quarter 2013 cash distribution per unit.
Sunrise AcquisitionThe primary assets of Sunrise consist of: (i) 41.5 miles of 24-inch diameter FERC-regulated pipeline that parallels and interconnects with the segment of the Partnership’s transmission and storage system from Wetzel County, West Virginia to Greene County, Pennsylvania; (ii) the Jefferson compressor station in Greene County; and (iii) an interconnect with the Texas Eastern pipeline in Greene County. The Sunrise pipeline has existing throughput capacity of approximately 400 BBtu per day, all of which is subscribed under firm transmission contracts with a weighted-average remaining contract life based on contracted revenues of approximately 10 years as of June 30, 2013. EQT Energy, LLC (EQT Energy), EQT’s marketing affiliate, has entered into a firm contract for 305 BBtu per day of capacity. In addition, 95 BBtu per day of capacity has been contracted with third-parties. These contracts provide $44.3 million in annual firm reservation revenue and up to $0.7 million of annual firm usage revenue, if fully utilized.
Sunrise is currently expanding its Jefferson compressor station, which will provide approximately 550 BBtu per day of additional capacity. The Partnership will invest $30 million for the expansion, which is fully subscribed and expected to be in service by September 1, 2014. EQT Energy has entered into a precedent agreement for approximately 295 BBtu per day of firm capacity over a 10-year term, commencing on the date the expansion is placed in service, which results in $26.9 million of annual firm reservation revenue.
Sunrise also entered into a precedent agreement with a third-party, over a 20-year term, for firm transportation capacity related to the Jefferson expansion. The precedent agreement is for approximately 252 BBtu per day of firm transportation capacity from November 1 through March 31 of each year and 62 BBtu per day of firm transportation capacity from April 1 through October 31 of each year. The agreement is expected to commence April 1, 2014, and result in $13.0 million of annual firm reservation revenue and up to $1.0 million of annual firm usage revenue, if fully utilized. If a transportation agreement becomes effective under the terms of the precedent agreement by December 31, 2014, the Partnership will make a payment of $110 million to EQT as additional consideration.
The Partnership currently operates the Sunrise assets as part of its transmission and storage system under a lease agreement with EQT. The lease is accounted for as a capital lease for GAAP purposes and, as a result, revenues and expenses associated with Sunrise are included in the Partnership’s financial statements; however, the monthly lease payment to EQT offsets the impact on the Partnership’s distributable cash flow. Effective with the close of the Sunrise transaction, the lease agreement will terminate.
Management expects the Sunrise acquisition to be immediately accretive to the Partnership’s distributable cash flow per unit. The Partnership valued Sunrise based on the present value of expected future cash flows, which are expected to ramp up significantly in 2014 and 2015 based on the growth provided by the Jefferson compressor station expansion and related contracts.
Upon completion of the Jefferson expansion, revenues generated under contracts are expected to be approximately $84 million annually. In addition, if fully utilized, revenues generated by firm usage could add up to $1.7 million annually, based on the terms of the previously described contracts. The Partnership expects ongoing operating expenses for the Sunrise assets, excluding depreciation and amortization, to be approximately $5 - $7 million per year.
The terms of the acquisition were approved by the Partnership's Conflicts Committee, which is comprised entirely of independent directors. The committee was advised by Evercore Partners Inc. regarding financial matters; and Richards, Layton & Finger P.A. regarding legal matters. The general partner and its affiliates were advised by Baker Botts L.L.P. regarding legal matters. * ThermoGenesis Corp. (Nasdaq: KOOL) and TotipotentRx Corporation announced that they have entered into a definitive merger agreement. The combined company is expected to become one of the first fully integrated regenerative medicine companies, developing clinically validated, commercially scalable, point-of-care cell therapies for major therapeutic markets, including orthopedic, cardiovascular and neurologic indications.
Under terms of the agreement, ThermoGenesis will issue approximately 12,491,000 shares of its common stock to TotiRx which equates to a value of approximately $18.6 million, based on ThermoGenesis' closing stock price of $1.49 on July 15, 2013. The merger agreement has been unanimously approved by the board of directors of each company. The transaction is expected to close in the fourth quarter of calendar year 2013 and is subject to customary closing conditions, certain financial conditions, regulatory approvals and approval by the shareholders of ThermoGenesis and TotiRx. The combined company is expected to be named Cesca Therapeutics and will continue to trade on NASDAQ under the ticker symbol KOOL.
Matthew T. Plavan Chief Executive Officer of ThermoGenesis will serve as Chief Executive Officer of the new organization, and Kenneth L. Harris, Chairman and Chief Executive Officer of TotiRx, will serve as President. In addition to his role as President, Mr. Harris will join the Board of Directors of the new company.
Roth Capital Partners acted as financial advisor to ThermoGenesis and rendered a Fairness Opinion to its Board of Directors in this transaction and Weintraub Tobin Chediak Coleman Grodin Law Corporation acted as legal counsel to ThermoGenesis.
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