Notable Mergers and Acquisitions of the Day 07/23: (CSCO)/(FIRE) (PACW)/(CSE) (DD) (TEF)
* Cisco (Nasdaq: CSCO) and Sourcefire (Nasdaq: FIRE) have entered a definitive agreement for Cisco to acquire Sourcefire, a leader in intelligent cybersecurity solutions. Cisco and Sourcefire will combine their world-class products, technologies and research teams to provide continuous and pervasive advanced threat protection across the entire attack continuum -- before, during and after an attack -- and from any device to any cloud.
Mobility, cloud and the evolution of the "Internet of Everything" are drastically changing today's IT security landscape, making traditional disparate products insufficient to protect organizations from dynamic threats. Sourcefire delivers innovative, highly automated security through continuous awareness, threat detection and protection across its industry-leading portfolio, including next-generation intrusion prevention systems, next-generation firewalls, and advanced malware protection.
The acquisition of Sourcefire adds a team with deep security DNA to Cisco and will accelerate delivery of Cisco's security strategy of defending, discovering, and remediating advanced threats. With world-class research teams, increased intelligence and expanded threat protection, customers will benefit from continuous security in more places across the network.
Under the terms of the agreement, Cisco will pay $76 per share in cash in exchange for each share of Sourcefire and assume outstanding equity awards for an aggregate purchase price of approximately $2.7 billion, including retention-based incentives. The acquisition has been approved by the board of directors of each company.
The acquisition is expected to close during the second half of calendar year 2013, subject to customary closing conditions and regulatory reviews. Cisco expects the acquisition to be slightly dilutive to non-GAAP earnings in fiscal year 2014 due to normal purchase accounting adjustments and integration costs. Once the transaction closes, Cisco will include Sourcefire into its guidance going forward. Prior to the close, Cisco and Sourcefire will continue to operate as separate companies. Upon completion of the transaction Sourcefire employees will join the Cisco Security Group led by Christopher Young.
Sourcefire was founded in 2001 and completed its initial public offering in 2007. The company is based in Columbia, MD, an area widely recognized as a center of excellence for security innovation, and has more than 650 employees worldwide. For the full year ended December 31, 2012, Sourcefire reported revenue of $223.1 million, an increase of 35 percent year-over-year.
* PacWest Bancorp (Nasdaq: PACW) and CapitalSource Inc. (NYSE: CSE) today announced the signing of a definitive agreement and plan of merger (the “Agreement”) whereby PacWest and CapitalSource will merge in a transaction valued at approximately $2.3 billion. The combined company will be called PacWest Bancorp and the combined subsidiary bank will be called Pacific Western Bank. The CapitalSource national lending operation will continue to do business under the name CapitalSource as a division of Pacific Western Bank. CapitalSource Inc., headquartered in Los Angeles, California, is the parent of CapitalSource Bank, a California Industrial Bank with approximately $8.7 billion in assets at June 30, 2013 and 21 branches located in southern and central California. In connection with the transaction, CapitalSource Bank will be merged into Pacific Western Bank, the Los Angeles-based wholly-owned subsidiary of PacWest Bancorp. Pacific Western Bank had $6.7 billion in assets at June 30, 2013 and 75 branches across 10 California counties.
The independent directors of PacWest and CapitalSource unanimously approved the transaction. Upon completion of the transaction, the combined company board will have thirteen directors, eight representatives from PacWest and five representatives from CapitalSource.
Matt Wagner, CEO of PacWest Bancorp and Chairman and CEO of Pacific Western Bank, will be CEO of the combined company and of Pacific Western Bank. James J. Pieczynski, Chief Executive Officer of CapitalSource, will become President of the new CapitalSource division of Pacific Western Bank, incorporating all of the current CapitalSource lending operations. John Eggemeyer, Chairman of PacWest Bancorp, will become Chairman of the combined company. Tad Lowrey, Chairman and CEO of CapitalSource Bank will become non-executive Chairman of Pacific Western Bank. The combined company will remain headquartered in Los Angeles and will have senior executives from each of the organizations in key positions.
The transaction, currently expected to close in the first quarter of 2014, is subject to customary conditions, including the approval of bank regulatory authorities and the stockholders of both companies. Certain stockholders of CapitalSource and PacWest, including all current directors, have agreed to vote in favor of the transaction.
As of June 30, 2013, on a pro forma consolidated basis, the combined company would have had approximately $15.4 billion in assets with 96 branches throughout California. The combined institution would be the 6th largest publicly-owned bank headquartered in California, and the 8th largest commercial bank headquartered in California (out of more than 232 financial institutions in the state).
Under the terms of the Agreement, CapitalSource shareholders will receive $2.47 in cash and 0.2837 shares of PacWest common stock for each share of CapitalSource common stock. The total value of the CSE per share merger consideration, based on the closing price of PacWest shares on July 19, 2013 of $32.32, is $11.64.
The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and CapitalSource shareholders are not expected to recognize gain or loss to the extent of the stock consideration received. Giving effect to the transaction, existing shareholders of PacWest are expected to own approximately 45% of the outstanding shares of the combined company and CapitalSource shareholders are expected to own approximately 55%.
* DuPont (NYSE: DD) is realigning its leadership team to accelerate its integrated science execution across the company and is exploring strategic alternatives for its Performance Chemicals segment. These steps are part of DuPont's transformation to a higher growth, less cyclical company that integrates its unique scientific capabilities in biology, chemistry and materials to develop differentiated, high-value solutions in the attractive agriculture and nutrition, industrial biosciences and advanced materials markets worldwide.
For more color from DuPont, click here.
* The Telefónica (NYSE: TEF) Board of Directors has approved the acquisition of E-Plus, KPN’s subsidiary in Germany. The operation is subject to obtaining both the relevant regulatory approval and clearance at KPN’s and Telefónica Deutschland’s Extraordinary Shareholders’ Meeting. The deal will result in a new leader in the German mobile market with 43 million mobile customers and combined revenues of €8.6 billion euros. The transaction is expected to be closed during the first half of 2014.
The transaction provides significant synergy potential, particularly with respect to distribution, customer service and network services. The total value of the synergies expected from the transaction is estimated in between 5 and 5.5 billion euros net of integration costs. Net savings will be positive from year.
The transaction is divided into two phases. In the first phase, Telefónica Deutschland will acquire 100% of E-Plus for €3.7 billion euros in cash and a stake of 24.9% in the combined entity. This cash payment will be financed via a rights issue for 3.7 billion euros, of which, Telefónica S.A. will subscribe 76.8%, in proportion to its current stake, corresponding to 2.84 billion euros.
In the second phase, Telefónica S.A. will acquire from KPN a stake of 7.3% in the combined entity for a total of 1.3 billion euros. As a result, Telefónica SA and KPN will hold 65% and 17.6% of Telefónica Deutschland, respectively, while the remaining percentage will be free float. Therefore, of the 5 billion euros paid in cash to KPN, the total amount required by Telefónica S.A to finance this operation equals 4.14 billion euros.
With this agreement, Telefónica will become Europe’s second largest operator by number of mobile clients and volume of revenue and will improve both its growth and cash generation profile. Additionally, Telefónica will gain a leading position in the largest and one of the most dynamic mobile markets in Europe. The company will also become the leading operator in terms of number of accesses, network quality and distribution network in three of its main markets: Germany, Brazil and Spain.
Creating a leading, sustainable and innovative Digital Telco focusing on mobile data and LTE development in Germany is a natural strategic step for Telefónica.
This announcement follows a decisive year in Telefónica’s transformation process, fostered by a series of initiatives that have allowed a significant strategic shift in the company. Twelve months ago, Telefónica set itself the strategic objective of increasing financial flexibility and reducing leverage via several initiatives, which included proactive management of its asset portfolio.
As a result of this, the company has reduced net debt by approximately 10 billion euros since June 2012, including the recently announced disinvestments. This process has enabled the company to resume dividend payments, as approved at the AGM last May, giving continuity to the shareholder policy of dividend payment year after year.
Finally, it is important to highlight that this transaction will mainly be financed via financial instruments, which will enable to maintain Telefónica’s leverage ratio stable. In this respect, Telefónica reiterates its objective to place net financial debt below 47 billlion euros by the end of 2013.
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