Notable Mergers and Acquisitions of the Day 12/10: (IN)/(HON) (IR) (HLYS) (AMGN) (AIG)
Article Stock Quotes (7) Comments (0)
FREE Breaking News Alerts from StreetInsider.com!
E-mail Address
Top News Most Read Highlighted
Get Alerts IN Hot Sheet
BUY ( Up)
* Intermec, Inc. (NYSE: IN) announced a definitive agreement under which Honeywell International Inc. (NYSE: HON), a diversified technology and manufacturing leader, will acquire Intermec for $10.00 per share in an all-cash transaction valued at approximately $600 million, net of cash and debt acquired.
Businesses around the world increasingly require more robust asset tracking and data capture applications and the combined entity will be a technology and information management solutions leader in the Auto Identification and Data Capture (AIDC) industry.
Under the terms of the agreement, which has been approved by both companies’ Boards of Directors, Honeywell will acquire all of the outstanding common shares of Intermec for $10.00 per share in cash. The transaction represents a 48% premium to Intermec’s closing stock price on November 1, 2012, the last trading day prior to Intermec announcing it had retained BofA Merrill Lynch. The transaction, which is subject to the approval of Intermec stockholders, regulatory approvals and customary closing terms and conditions, is expected to close by the end of the second quarter 2013.
* Ingersoll-Rand plc (NYSE: IR) has unanimously approved a plan to spin off its commercial and residential security businesses (the “new security” company). The separation will result in two standalone companies: Ingersoll Rand, a world leader in creating comfortable, sustainable and efficient environments through its industrial, transport refrigeration, and heating, ventilation and air conditioning (HVAC) businesses; and the new security company, a leading global provider of electronic and mechanical security products and services, delivering comprehensive solutions to commercial and residential customers. Ingersoll Rand expects the spin-off, which is intended to be tax free to shareholders, to be completed in approximately 12 months.
“Given the distinct strengths and strategies of the two proposed companies, the Board believes that this structure will enable investors to value our different businesses separately, creating value for both companies and their shareholders,” said Michael W. Lamach, Ingersoll Rand’s chairman and chief executive officer. “We believe the spin-off, which is the result of an in-depth review of strategic alternatives by our Board and management, will allow both companies to enhance value by allocating capital and deploying resources in a more focused way, while preserving and increasing synergies within their businesses. At the same time, it will position the new security company to build scale and make the necessary investments for the future.
“The new proposed standalone companies will leverage leading market positions, well-known brands and experienced people. We believe both companies will be well positioned to better execute their respective strategic plans to capitalize on future market opportunities, serve customers, create sustainable growth, and enhance shareholder value,” said Lamach, who will continue after the spin-off to serve in his current role as Ingersoll Rand’s chairman and chief executive officer.
Two Industry-Leading Companies with Distinct Strengths and Focus
About Ingersoll Rand
Ingersoll Rand will continue to build on its industrial, transport refrigeration and HVAC businesses. The company will serve customers globally through a number of leading brands, including Ingersoll Rand, Trane, American Standard, Ameristar, Thermo King, Aro and Club Car.
Following the separation, the company will have annualized revenue of approximately $12 billion on a pro forma basis based on 2011 revenues. The company is expected to maintain a strong balance sheet and financial policies consistent with an investment grade credit rating.
Ingersoll Rand benefits from strong brand recognition, leading market shares, and differentiated positioning in geographic and end markets. The company will continue to enjoy benefits from synergistic opportunities in sourcing, engineering and technology across its Industrial Technologies, Climate Solutions and Residential HVAC businesses. Moreover, the company expects to benefit from increased organizational focus and continued progress on operational excellence initiatives to drive significant margin improvement. These foundational strengths, combined with growing energy demand and energy-efficiency regulations that are driving industry transformation, will further position the company to generate profitable, sustainable growth.
About New Security Company
Under the plan, Ingersoll Rand’s existing commercial security business (currently known as the Security Technologies sector) will be combined with its residential security business (currently part of the Residential Solutions sector) to form a leading global safety product and services provider. This new company’s portfolio of brands will include Schlage, LCN, Von Duprin, Interflex, CISA, Briton, Bricard, BOCOM Systems, Dexter, Kryptonite, Falcon and Fusion Hardware Group.
The new company will have annualized revenue of approximately $2 billion on a pro forma basis based on 2011 revenues. The new security company is expected to generate strong free-cash flow and have the financial flexibility to take advantage of future growth opportunities.
The new security company is also expected to have strong margins, as well as strong brand recognition and market-leading products and solutions, to set a solid foundation for future growth. The company will benefit from synergies in sourcing, technology, and assembly operations across the residential and commercial security markets. It also will have the opportunity to invest in key markets to take advantage of growing trends around increased security concerns, electronics connectivity, product life-cycle costs and rapid demand growth in emerging markets.
Transaction Information
Execution of the transaction requires further work on structure, management, governance and other significant matters. Management is developing detailed plans for the Board’s further consideration and approval. The leadership team of the new security company will be announced prior to the completion of the spin-off. Upon completion of the spin-off, Ingersoll-Rand plc will cease to have any ownership interest in the new security company, and the new security company will become an independent publicly traded company. The new security company is anticipated to be an Irish plc.
The completion of the spin-off is subject to certain customary conditions, including receipt of regulatory approvals, receipt of a ruling from the U.S. Internal Revenue Service as to the tax-free nature of the spin-off, as well as certain other matters relating to the spin-off, receipt of legal opinions, execution of intercompany agreements, effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and final approval of the transactions contemplated by the spin-off, as may be required under Irish law. The company noted that there can be no assurance that any separation transaction will ultimately occur, or, if one does occur, its terms or timing.
Shareholder-Focused Capital Structure and Allocation Strategy
Ingersoll Rand also announced a revised capital structure and allocation strategy designed to improve efficiency and return additional capital to shareholders through the following actions authorized by the Board of Directors:
An increase in the level of overall indebtedness and leverage ratio while still preserving a solid investment grade credit rating.
A new share repurchase program of up to $2 billion of the company’s ordinary shares. The share repurchase program will begin in 2013, with an expected completion in the first quarter of 2014. The timing of the program will be dependent on the company’s access to the capital markets, available liquidity and cash flow, and general market conditions. The repurchase program may be executed through various methods, including open market repurchases.
The declaration of a quarterly dividend of 21 cents per ordinary share, reflecting an increase of 31 percent. The dividend is payable March 28, 2013, to shareholders of record on March 12, 2013. Upon completion of the transaction, Ingersoll Rand and the new security company are initially expected to pay a combined quarterly dividend approximately equal in sum to the Ingersoll Rand dividend at the time of the closing.
Lamach said, “Over the past several years, we have generated substantial free cash flow, even through tough economic times. Our outlook has not changed in this regard. This prudent and revised capital structure and allocation strategy will accelerate our efforts to continue to deliver attractive returns for our shareholders while maintaining a strong balance sheet to fund future investments and growth.”
* Heelys, Inc. (Nasdaq: HLYS) and Sequential Brands Group, Inc. (OTCBB: SQBG) announced today they have entered into an agreement and plan of merger dated December 7, 2012 (the “Merger Agreement”), pursuant to which Sequential will acquire all of the outstanding shares of common stock of Heelys for $2.25 per share in cash, or approximately $63.2 million.
Heelys also announced that, before entering into the Merger Agreement with Sequential, the Company’s board of directors (the “Board”) unanimously determined that the Merger Agreement constitutes a “superior proposal” under the terms and provisions of the Company’s previously-announced asset purchase agreement dated October 22, 2012 among The Evergreen Group Ventures, LLC (“Evergreen”), the Company and its subsidiaries (the “Evergreen Purchase Agreement”). Heelys has terminated the Evergreen Purchase Agreement, and the Company has agreed to pay Evergreen a termination fee, which, pursuant to the Merger Agreement, will be reimbursed by Sequential.
The proposed merger with Sequential, which is subject to customary closing conditions, including receipt of Heelys stockholder approval, is expected to close in the first quarter of 2013. In connection with the Merger Agreement, Capital Southwest Venture Corporation and another stockholder of the Company, who collectively hold approximately 35.1% of the issued and outstanding shares of the Company’s common stock, have entered into voting agreements with Sequential pursuant to which they have agreed, among other things, to vote their shares in favor of the merger.
The Company’s Special Meeting of Stockholders scheduled for December 13, 2012 to consider and vote upon, among other things, the transactions contemplated by the Evergreen Purchase Agreement, the change of the Company’s name and the dissolution of the Company pursuant to a Plan of Liquidation and Dissolution (“Plan of Dissolution”), has been canceled. The Company’s stockholders are instructed to disregard the Company’s previously filed proxy statement and related solicitation materials regarding the Evergreen Purchase Agreement, the name change, and the dissolution of the Company pursuant to the Plan of Dissolution.
Additional information regarding the Sequential Transaction will be included in a proxy statement the Company intends to file with the Securities and Exchange Commission and distribute to its stockholders. The Company’s proxy statement will include information regarding the timing of a Special Meeting of the Company’s stockholders to adopt the Merger Agreement.
Roth Capital Partners, LLC is serving as exclusive financial advisor to Heelys and has delivered a fairness opinion in connection with the merger. Gardere Wynne Sewell LLP is serving as legal advisor to Heelys. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor to Sequential.
* Amgen, Inc. (NASDAQ: AMGN) announced an agreement to acquire deCODE Genetics, a global leader in human genetics, headquartered in Reykjavik, Iceland, for $415 million.
This transaction does not require regulatory approval, and is expected to close before the end of 2012.
* American International Group, Inc. (NYSE: AIG) and an investor group led by Mr. Weng Xianding, the Chairman of New China Trust Co. Ltd., announced today that they have entered into an agreement under which AIG will sell up to a 90% stake in International Lease Finance Corporation (ILFC), a non-core asset, to the investor group in a transaction that values ILFC at approximately US$5.28 billion.
The investor group comprised of New China Trust Co. Ltd., China Aviation Industrial Fund and P3 Investments Ltd. has agreed to acquire 80.1% of ILFC for approximately US$4.23 billion, with an option to acquire an additional 9.9% stake. Upon receipt of required Chinese regulatory approvals and exercise of the option, the investor group is expected to be expanded to include New China Life Insurance Co. Ltd. and an investment arm of ICBC International.
The transaction, which is expected to close in the second quarter of 2013, marks another success in the disposition of AIG’s non-core assets. At closing of the transaction, AIG will retain at least a 10% ownership stake in ILFC, allowing it to continue to participate in the growth of ILFC’s unique franchise, including the benefits that the investor group will bring to the company.
The transaction is subject to required regulatory approvals, including all applicable U.S. and Chinese regulatory reviews and approvals, and other customary closing conditions. When the transaction meets the criteria for “held for sale” accounting treatment, AIG expects to record a non-operating loss of approximately US$4.4 billion, which includes a non-cash charge of approximately $1.8 billion associated with the utilization of tax net operating loss carry forwards from this transaction.
Mr. Weng Xianding, Chairman of New China Trust Co. Ltd said, “Our group shares a commitment to ILFC’s experienced management team, its operating philosophy, and its presence in the United States. This transaction allows ILFC to continue to serve its worldwide partners in the aviation industry with world-class service while accelerating its growth in important markets, including Asia.”
ILFC is a leading independent aircraft lessor with a global customer base of approximately 200 airlines in 80 countries. ILFC’s portfolio consists of over 1,000 owned or managed aircraft, as well as commitments to purchase 229 new high-demand, fuel-efficient aircraft and rights to purchase an additional 50 such aircraft.
Under the new owners, ILFC will retain operational independence and continue to be headquartered in Los Angeles, CA. ILFC’s Chief Executive Officer Henri Courpron and President Frederick S. Cromer will continue to operate and manage the business. ILFC currently employs approximately 560 people, including more than 450 people based in the U.S., and expects to hire additional U.S.-based staff to replace AIG-supported operations. ILFC will remain incorporated in the U.S. following the closing of this transaction and will continue to be registered with the U.S. Securities and Exchange Commission.
Upon closing, a distinguished new Board of Directors for ILFC will be appointed. A majority of the new Board will include leading independent U.S. and European aerospace and financial industry experts, including Mr. Benmosche from AIG. The balance of the Board will be comprised of representatives of the investor group. The Board will continue to uphold “best practice” governance standards and practices.
Credit Suisse is acting as financial advisor to the investor group in connection with this transaction, and Simpson Thacher & Bartlett is acting as legal advisor to the investor group.
To keep up on all the Mergers & Acquisitions data in real-time, go to our new M&A Insider page.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items – JOIN NOW