* After markets closed Monday, BGC Partners, Inc. (Nasdaq: BGCP) said it entered into an agreement pursuant to which it will sell its benchmark, on-the-run, U.S. Treasury fully electronic trading platform to NASDAQ OMX Group, Inc. (Nasdaq: NDAQ) (“NASDAQ OMX”). Total consideration for this transaction is up to $1.234 billion, consisting of $750 million in cash plus an earn-out of up to $484 million of NASDAQ OMX common stock[1] to be paid ratably over 15 years.
BGC is selling only its on-the-run, benchmark 2-, 3-, 5-, 7-, 10-, and 30-year fully electronic trading platform for U.S. Treasury Notes and Bonds. Over time, BGC has built these six instruments into some of the deepest and most liquid markets in the world. This platform, together with the directly related market data and co-location businesses, generated just under $100 million in revenues in 2012. BGC will retain all of its other voice, hybrid, and fully electronic trading, market data, and software businesses, including voice, hybrid and electronic brokerage of off-the-run U.S. Treasuries, as well as Treasury Bills, Treasury Swaps, Treasury Repos, Treasury Spreads, and Treasury Rolls. BGC will also continue to offer voice brokerage for on-the run U.S. Treasuries.
Under the terms of the purchase agreement, BGC will sell to NASDAQ OMX certain assets, including the eSpeed brand name and various contracts comprising the fully electronic portion of BGC’s benchmark, on-the-run, U.S. Treasury brokerage, market data and co-location service businesses. The agreement also includes the employment by NASDAQ OMX of certain members of BGC staff and BGC’s Rochelle Park data center. These assets will be sold to NASDAQ OMX for a purchase price of $750 million in cash, plus an earn-out of up to $484 million in NASDAQ OMX common stock to be paid ratably over 15 years following the closing. Should certain acceleration events occur, including NASDAQ OMX undergoing a change of control, whatever remains of the earn-out will be paid immediately at that time.
BGC has agreed not to compete with NASDAQ OMX in fully electronic, on-the-run, benchmark U.S. Treasury Notes and Bonds for 3 years following the close of this transaction. BGC retains the right to use the trading technology it has developed for this trading platform. BGC will continue to offer voice, hybrid and fully electronic trading, market data, and software solutions across the rest of its suite of financial products in Rates, Credit, Foreign Exchange, and Equities and Other Asset Classes. After the close of the transaction, the Company will also retain access to the trading, market data, and co-location products related to the assets BGC is selling. The Company will also retain its ownership stakes in ELX Futures and Epsilon Networks.[4]
The one-time gain related to the $750 million payment is expected to be accretive to BGC’s GAAP earnings per share upon closing, but will not be included in the Company’s results for distributable earnings.
The transaction is subject to certain closing conditions, including receipt of required regulatory approvals. The parties currently expect the deal to close sometime in mid-2013, subject to receipt of such approvals.
BGC Partners’ legal advisor in connection with the transaction was Wachtell, Lipton, Rosen & Katz. Cantor Fitzgerald & Co. served as the Company’s financial advisor.
* In a letter to the Board of Directors of Obagi Medical Products, Inc. (Nasdaq: OMPI) Merz Pharma Group today outlined a proposal to acquire all of the outstanding common stock of Obagi for $22 per share in cash. This proposal represents a 58% premium to Obagi’s closing share price on Thursday, March 14, 2013, the last trading day prior to the disclosure on Obagi’s fourth quarter earnings call that Obagi had engaged a financial advisor to help explore “all opportunities.”
On March 20, 2013, Obagi announced that it entered into a definitive merger agreement with Valeant Pharmaceuticals International, Inc (NYSE: VRX). At that time, Merz was engaged in ongoing discussions with Obagi regarding a potential combination, and was not made aware that Obagi was contemplating signing a deal with another party on an accelerated timeframe. Merz has delivered its proposal to Obagi’s Board and believes it constitutes a “Superior Proposal” under the terms of the Obagi/Valeant merger agreement. Importantly, the Merz proposal also represents a significant premium to the offer from Valeant.
Merz has the necessary cash on hand to fund the transaction and does not require additional due diligence. Merz is prepared to move forward immediately to complete this transaction.
Given Merz’s portfolio of injectables, Obagi is a natural fit for Merz. This combination would also expand its U.S. market presence and strengthen and diversify its dermatology portfolio through additional quality skin care options.
Merz is publicly disclosing this letter in order to ensure that Obagi stockholders have an opportunity to benefit from its superior proposal. The full text of the Merz letter is below:
April 2, 2013
Board of DirectorsObagi Medical Products, Inc.c/o Albert J. Fitzgibbons III, Chairman3760 Kilroy Airport Way, Suite 500Long Beach, CA 90806
Dear Members of the Board of Directors:
We were very surprised by, and disappointed with, Obagi’s recently announced merger agreement with Valeant, especially in light of our ongoing discussions with Obagi and its financial adviser and legal counsel immediately prior to the announcement. Unfortunately, we were not made aware that Obagi was contemplating signing a deal with another party on an accelerated timeframe and were never asked for our best and final bid or provided a bid date by which you were going to collect bids from other parties. Nonetheless, we remain resolute in our objective to acquire Obagi.
In that regard, as you are aware, Merz Pharma Group has been very interested in acquiring Obagi for some time, as evidenced by, among other things: (i) the written proposal that we provided to Obagi on January 18, 2013; (ii) the many conversations between our financial adviser, Deutsche Bank, and your financial adviser, Morgan Stanley; (iii) the many conversations between our outside legal counsel, Weil, Gotshal & Manges LLP, and your legal counsel, Jenner & Block; and (iv) the extensive due diligence investigation that we had been conducting since the management presentation that we attended on February 21, 2013.
We are proposing to acquire all of Obagi’s outstanding common stock for $22.00 per share in cash â subject, of course, to the termination of your existing merger agreement with Valeant and the entering into of a new merger agreement with Merz. This consideration represents:
A 58% premium above Obagi’s closing share price on Thursday, March 14, 2013 (the last trading day prior to the disclosure on your fourth quarter earnings call that you had engaged a financial advisor to help you explore “all opportunities”);
A $2.25 per share premium to the offer from Valeant;
A revenue multiple of 3.2x â based net sales of $120.7m for FY2012; and
An EBITDA multiple of 17.9x â based on adjusted EBITDA of $21.4m for FY2012.[1]
We have the necessary cash on hand to fund the transaction; therefore, there is absolutely no financing risk. We are attaching a copy of the proposed merger agreement that we would be willing to enter into with Obagi, together with a marked version showing changes from your existing merger agreement with Valeant. As you will note, we contemplate that a transaction with us would be structured in the same way as your transaction with Valeant (that is, as a negotiated two-step cash tender offer) and we would agree to the same terms as those set forth in your existing merger agreement with Valeant, other than minor changes that are appropriate given the circumstances. Finally, we want to be clear that we are ready to proceed immediately and do not require any additional due diligence. We would, however, prefer to review the disclosure schedule provided to Valeant and will contact you in due course in that regard.
Our proposal is clearly superior to the Valeant transaction. We are confident that your stockholders will appreciate the enhanced value that our proposal would deliver to them and will enthusiastically support it. As we stated before, Merz has great respect for Obagi, including its business, products, operations and employees, and believes that a combination of Merz and Obagi is compelling and will create a leading US aesthetics company.
Because of your existing merger agreement with Valeant, this proposal is not binding on either Obagi or Merz; however, we expect to be in a position to provide you with a binding offer immediately after we engage in discussions with you as permitted by your existing merger agreement with Valeant.
We view time as being of the essence in this matter. As you know, throughout this entire process we have preferred to work with you privately to consummate a transaction. As a result of your decision to enter into an agreement with Valeant, we are now compelled to pursue a different approach. Given the short time frame remaining for your stockholders to have the opportunity to benefit from our superior proposal, we believe that it is best to provide this letter to you and make it public at the same time.
We look forward to promptly engaging with you. We will be contacting you and your financial and legal advisers promptly to discuss our proposal and next steps to enter into discussions and negotiations with us consistent with your obligations under the existing merger agreement with Valeant.
* The Principal Financial Group (NYSE: PFG) announced its subsidiary, Principal Global Investors, LLC, a leading global asset manager, has agreed to sell a minority stake in Post Advisory Group, LLC (Post) to Nippon Life Insurance Company (Nippon Life).
Post is a leading manager of high-yield fixed income based in Santa Monica, Calif., with approximately $11.8 billion in assets under management1 and additional offices in New York and London. Nippon Life is a leading global financial services firm headquartered in Osaka with total assets of more than $600 billion. The transaction will bring significant new distribution opportunities for Postâs products and enhance Nippon Lifeâs fixed income investment products.
The transaction is expected to close in the second quarter of 2013.
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