Notable Mergers and Acquisitions of the Day 11/28: (KCG) (BP) (SNN) (KEX) - InvestingChannel

Notable Mergers and Acquisitions of the Day 11/28: (KCG) (BP) (SNN) (KEX)

GETCO Strategic Investments, LLC, a large holder of Knight Capital Group (NYSE: KCG) stock, sent the following letter to Knight’s Board today:

November 28, 2012

Board of Directors of Knight Capital Group, Inc.

c/o Thomas M. Joyce

Chairman and Chief Executive Officer

Knight Capital Group, Inc.

545 Washington Boulevard

Jersey City, New Jersey 07310

Dear Members of the Board:

On behalf of GETCO Holding Company, LLC (âGETCOâ), I am pleased to submit this proposal for a business combination (âMergerâ) between GETCO and Knight Capital Group, Inc. (âKnightâ). The specific terms of our proposal described below have been unanimously approved by GETCOâs Board of Directors. I am convinced that this Merger would unlock tremendous value for the shareholders of both firms while establishing a global leader in market-making and agency execution.

As significant as its near-term financial benefits are, this Mergerâs long-term strategic rationale is equally compelling. Underpinned by Knightâs customer franchise, GETCOâs industry-leading technology and an unmatched reservoir of talent and capital, the combined company would be a leader in market-making and agency execution across geographies, market structures, and asset classes. The combined companyâs scale, footprint, and capability set would be a magnet to customers, talented traders and technologists, which is especially important in an environment of lower trading volumes and higher regulatory engagement.

The proposed Merger values Knightâs common shares at a price of $3.50 per share â a 41% premium to the closing price on November 23, 2012, the last day before rumors of possible offers for Knight were published in the press, and a 7.4% premium to tangible book value. The proposal is structured to allow Knightâs shareholders to receive a significant cash payment while being able to retain a meaningful equity stake to share in the upside of the publicly-traded, combined company.

The Merger would be accomplished through a two-step process that is designed to provide maximum flexibility for your shareholders. The first step would be a Knight holding company reorganization / GETCO merger with GETCO shareholders receiving approximately 242 million newly issued shares of Knight and warrants to purchase Knight common stock as follows: 23 million ($4 strike price, 4 year expiration), 23 million ($4.50 strike price, 5 year expiration), and 23 million ($5 strike price, 6 year expiration). Based on September 30, 2012 financials, Knightâs tangible book value would accrete to $3.50 per share pro-forma for the Merger. As a result of this first step, the 57 million shares of Knight currently owned by GETCO would be retired.

The second step would be an issuer tender offer for up to 154 million shares of Knight (representing 50% of the outstanding shares of Knight not currently owned by GETCO) at a cash price of $3.50 per share (total consideration of approximately $539 million). The tender offer would launch before the closing of the Merger and would be contingent upon, and close immediately after, the Merger closing. GETCO and its former owners would not participate in the tender offer.

The optionality embedded in the tender structure means that to the extent some Knight shareholders decide to keep more than 50% of their shares, those Knight shareholders that have a higher preference for cash would be able to tender more than 50% of their shares. As such, we believe this two-step structure is an efficient and highly executable way to accomplish the financial goals of our proposal, but we would be open to discussing other transaction structures that achieve the same outcome.

After completion of the Merger, assuming full participation in the tender offer, no shareholder would individually own more than 20% of the combined company and most large shareholders would be under 10% ownership.

In order to provide deal certainty, we have lined up $950 million of fully-committed financing from a large financial institution. This includes the financing necessary to consummate the Merger and, in order to better position the combined company, the financing necessary to refinance all of GETCOâs and Knightâs outstanding debt. The financing will be on customary and market terms for financings of this type.

I will be the chief executive officer and a Board member of the combined company and Tom Joyce will be non-executive Chairman of the Board. In addition, the Board will include four directors nominated by former GETCO shareholders and three directors currently serving on the Knight Board of Directors. We place a high value on Knight employees and would work to ensure significant retention of them.

In addition to creating an industry leader in market making and agency execution that is well positioned across multiple product lines globally, the work completed by our respective management teams to date indicates that there are large and achievable cost and revenue synergies attainable through a Merger. The integration of our firmsâ operations would generate substantial earnings accretion going forward. Moreover, the larger capital base and higher regulatory capital of the combined company would provide strong support for existing customer operations as well as an attractive currency for potential future acquisitions.

We believe this Merger offers Knightâs shareholders a clear path to reaping the benefits of this unique opportunity, and would be very attractive to both our shareholder bases. In addition, by structuring the transaction with both cash and equity components, Knight shareholders are able to realize an immediate return on investment, as well as preserve the opportunity to participate in the future growth of the combined company.

This proposal is subject to standard conditions of a transaction of this nature, including, but not limited to, completion of our due diligence and the satisfactory negotiation and execution of a definitive agreement.

GETCO is prepared to move expeditiously to complete the due diligence process and finalize the terms of a definitive agreement. We believe that we could enter into such an agreement by no later than December 3, 2012 and we propose that the parties enter into an exclusivity agreement for that period.

We and our advisors are available to address any questions you have on this proposal. In addition, I would welcome the opportunity to present this proposal directly to you and answer any questions you may have. You can reach me at xxx-xxx-xxxx.

Very truly yours,

/s/ Daniel Coleman Daniel Coleman Chief Executive Officer

GETCO Holding Company, LLC

cc:

Len Amoruso

(Knight Capital Group)

BP plc (NYSE: BP) announced today that it has agreed to sell its interests in a number of central North Sea oil and gas fields to TAQA for $1.058 billion plus future payments which, dependent on oil price and production, BP currently expects will exceed $250 million. The assets included in the sale are BPâs interests in the BP-operated Maclure, Harding and Devenick fields and non-operated interests in the Brae complex of fields and the Braemar field.

The sale is subject to third party and regulatory approvals and the companies currently expect the sale to complete in 2Q 2013.

Bob Dudley, BP group chief executive, said: âThis transaction is in line with BPâs strategy to focus on a smaller number of higher-value assets with long-term growth potential and to continue the simplification of our portfolio with a further reduction of operated infrastructure and wells.â

Trevor Garlick, regional president, North Sea, said: âIt has made strategic sense for BP and for the buyer to combine our non-operated interests in the Braes and Braemar fields with Harding, Maclure and Devenick. BP continues with a focused investment programme in the UK and Norway, which includes planned capital spending of $10 billion over five years.â

With todayâs announcement, BP has now entered into agreements to sell assets with a value of around $37 billion since the beginning of 2010. BP expects to divest assets with a total value of $38 billion between 2010 and 2013 as it focuses its business around the world on its strengths and opportunities for growth.

Jefferies acted as financial adviser to BP in relation to this transaction.

Smith & Nephew plc (NYSE: SNN) announced that it is strengthening its global position in advanced wound care by entering into an agreement through its subsidiaries to acquire substantially all the assets of Healthpoint Biotherapeutics (âHealthpointâ), a leader in bioactive debridement, dermal repair and regeneration wound care treatments, for $782 million in cash.

Details of Healthpoint

Healthpoint is a privately held company focused on the development and commercialisation of novel, cost-effective bioactive solutions for debridement, dermal repair and regeneration.

Its principal marketed product is Collagenase SANTYL® Ointment (âSANTYLâ), an enzymatic debrider for dermal ulcers and burns. Healthpointâs offering also includes the OASIS® family of leading acellular skin substitutes for venous leg ulcers and diabetic foot ulcers and REGRANEX®, a growth factor for treating diabetic foot ulcers.

The companyâs research and development strategy is centred on next-generation bioactive therapies for the treatment of chronic wounds. The principal pipeline product is HP802-247 for the treatment of venous leg ulcers, using cell-based therapy containing keratinocytes and fibroblasts. In August 2011 Healthpoint reported positive data from a Phase 2b clinical trial for HP802-247 in the treatment of venous leg ulcers, demonstrating that the compound met both its primary and secondary endpoints. The compound has recently entered Phase 3 trials for this indication and commercial launch could occur as early as 2017.

Healthpoint has its headquarters in Fort Worth, Texas and is an affiliate company of DFB Pharmaceuticals, Inc. It has approximately 460 employees, including an established sales force of 215.

Healthpoint generated revenues of $151 million in the year to 31 December 2011 and is forecast to deliver around $190 million in 2012. We expect that Healthpointâs current product portfolio will deliver growth at a mid-teen percentage rate for the next few years. It delivered a trading profit of $11 million ($34 million before R&D expenses) in 2011. We expect to realise the benefit of the significant operational gearing in Healthpointâs cost structure.

As at 31 December 2011, Healthpoint had gross assets of $98 million and net operating assets of $61 million. All figures are unaudited.

Integration plans

Smith & Nephew intends to build upon Healthpointâs strong presence in the US, established commercial organisation and complementary product range. The business will continue to be headquartered in Fort Worth.

We will continue to invest in Healthpointâs bioactive R&D capability, including funding the HP802-247 Phase 3 trials and commercialisation over the next 5 years. We expect this investment will drive annual R&D spend in the medium term to around $40-50 million per annum.

Healthpoint will be integrated into our Advanced Wound Management division. In order to minimise business disruption, we intend to integrate gradually. We expect to achieve annual cost synergies of around $20 million by 2015 and incur integration cash costs over this period of around $25 million.

Financial implications

The purchase price of $782 million in cash will be financed from Smith & Nephewâs existing cash resources and bank facilities. In the event that the transaction is not completed by the end of 2012, a further $10 million consideration will be paid.

The transaction is value and growth enhancing for Smith & Nephew. It is expected to generate a return exceeding Smith & Nephewâs cost of capital in the third full year following acquisition, and to be broadly EPSA neutral in 2013 and accretive thereafter, including the significant R&D investment in HP802-247.

The acquisition is structured as the purchase of assets (mainly in US), which will provide Smith & Nephew with a material cash tax benefit.

Smith & Nephew expects the anti-trust clearances and other customary requirements, to be fulfilled in time to enable completion of the transaction by the end of 2012.

Deutsche Bank is serving as financial adviser to Smith & Nephew on the transaction and BofA Merrill Lynch and JP Morgan as financial advisers to Healthpoint.

Kirby Corporation (NYSE: KEX) announced today that it has entered into an agreement to acquire Penn Maritime Inc. and Maritime Investments LLC, an operator of tank barges and tugboats participating in the coastal transportation of primarily black oil products in the United States.

The total value of the transaction is approximately $295 million (before post-closing adjustments and transaction fees) and will consist of cash, Kirby common stock and the retirement of Penn’s debt.

The transaction will be financed through a combination of borrowing under Kirby’s revolving credit facility, issuance of new unsecured fixed rate senior notes, and the issuance of Kirby common stock. The closing of the transaction is expected to occur in mid-to-late December 2012, subject to certain conditions.

Under the terms of the agreement, the total value of the transaction is approximately $295 million (before post-closing adjustments and transaction fees), consisting of $180 million for all of the voting and nonvoting equity interests in Penn Maritime Inc. and Maritime Investments LLC and approximately $115 million for the retirement of Penn’s debt. The $180 million consideration paid to Penn equity holders will include a combination of cash of approximately $152 million and 500,000 shares of Kirby common stock.

The new unsecured fixed rate senior notes are scheduled to close in mid-December and provide for $500 million in fixed rate debt with $150 million at a 7-year maturity and $350 million at a 10-year maturity. The pricing, inclusive of the amortization of up-front fees, is 2.79% for the 7-year and 3.34% for the 10-year maturities. Kirby anticipates drawing up to $300 million for the closing of Penn prior to year end, with the balance drawn in February 2013 to replace the $200 million of senior notes due February 27, 2013.

Penn operates a fleet of 18 heated, double-hulled tank barges, with a capacity of 1.9 million barrels, and 16 tugboats along the East Coast and Gulf Coast of the United States. Penn’s tank barge fleet has an average age of approximately 13 years with a product mix that consists primarily of refinery feedstocks, asphalt and crude oil. Penn’s customers include major oil companies and refiners, nearly all of whom are current Kirby customers for inland tank barge services.