Whirlpool confirms pact with Emerson Electric to acquire InSinkErator for $3B
Whirlpool (WHR) announced that it has entered into a definitive agreement with Emerson Electric (EMR) to acquire InSinkErator, the world’s largest manufacturer of food waste disposers and instant hot water dispensers for home and commercial use, in an all-cash transaction for $3B.
The acquisition is expected to be immediately accretive to Whirlpool Corporation’s margins, adding approximately $1.25 EPS accretion in fiscal 2023.
Whirlpool also expects to generate revenue upside by capitalizing on InSinkErator’s leading consumer brand preference, an installed base that is five times larger than the rest of the industry driving a recurring sales profile, the strong underlying secular tailwinds of the U.S. housing market, and the expansion of the InSinkErator brand into new markets and product offerings.
Whirlpool plans to initially fund the acquisition through available liquidity, with new debt put in place at a later date.
The acquisition, which has been approved by the Board of Directors of both companies, is subject to customary closing conditions, including regulatory approvals, and is expected to close in the fourth quarter. Whirlpool’s 2022 guidance remains unchanged.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Crane plans to split into two independent public companies
Crane (CR) announced that its Board of Directors has unanimously approved a plan to pursue a separation into two independent, publicly-traded companies to optimize investment and capital allocation, accelerate growth, and unlock shareholder value.
Upon completion, Crane Co.’s shareholders will benefit from ownership in two focused and simplified businesses that are both leaders in their respective industries and well-positioned for continued success:
Crane Co. will be a leading global provider of mission-critical, highly engineered products and solutions, with differentiated technology, respected brands, and leadership positions in its markets.
After the separation, Crane Co. will include the Aerospace & Electronics and Process Flow Technologies businesses.
This year, these businesses are expected to generate approximately $1.9B in annual sales with a pre-corporate Adjusted EBITDA margin of approximately 18.5%.
The company will be well-positioned to accelerate organic growth in its large and attractive end markets, benefit from favorable secular trends, and apply its proven processes to drive growth through new product development and commercial excellence.
Richard Teller Crane, Founder of Crane Co.
Crane Co. is expected to have a strong, well-capitalized balance sheet underpinning a capital deployment strategy focused on supporting the company’s organic and inorganic strategic growth objectives, while providing a dividend in-line with peers.
Crane Co. will be led by Max Mitchell, who will continue to serve as President and Chief Executive Officer, with Rich Maue continuing to serve as Chief Financial Officer.
The company intends to continue to be listed on the NYSE under its current ticker symbol, “CR”.
Crane NXT will be a premier Industrial Technology business with substantial global scale, a best-in-class margin profile, and strong free cash flow generation.
This year, the Payment and Merchandising Technologies business that will become Crane NXT is expected to achieve approximately $1.4 billion in sales with a pre-corporate Adjusted EBITDA margin of approximately 28%.
In addition to its market leading brands, Crane NXT will differentiate itself through its technology leadership, positioning it to leverage long-term secular drivers including automation, security and productivity, across several high-growth adjacent markets.
After the separation, Crane NXT will be positioned to drive earnings growth through continued investment in the business and value-enhancing bolt-on acquisitions. Its balance sheet and strong free cash flow will also allow it to support a robust and differentiated level of capital return to shareholders that is expected to include a competitive dividend.
Crane NXT’s shares are expected to be listed on the NYSE under the ticker symbol “CXT”. A process is currently underway to identify Crane NXT’s chief executive, including evaluation of both internal and external candidates.
The executives currently leading Crane’s PMT business will continue to serve in senior positions with Crane NXT.
The separation is expected to occur through a tax-free distribution of the Aerospace & Electronics and Process Flow Technologies businesses to the Company’s shareholders.
Payment & Merchandising Technologies will be renamed Crane NXT concurrent with the separation, and the Aerospace & Electronics and Process Flow Technologies businesses will retain the Crane Co. name.
Upon completion of the separation, shareholders will own 100% of the equity in both of the publicly traded companies.
The separation is expected to be completed within approximately 12 months of this announcement, subject to the satisfaction of customary conditions and final approval of the separation by Crane Co.’s Board of Directors. Shareholder approval is not required.
Crane Co. will maintain its current capital deployment policies until the separation is completed.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Exxon Mobil announces plans to build plastic waste recycling facility
Exxon Mobil (XOM) plans to build its first, large-scale plastic waste advanced recycling facility in Baytown, Texas, and is expected to start operations by year-end 2022.
A smaller, temporary facility, is already operational and producing commercial volumes of certified circular polymers that will be marketed by the end of this year to meet growing demand.
The new facility follows validation of Exxon Mobil’s initial trial of its proprietary process for converting plastic waste into raw materials.
“We’ve proven our proprietary advanced recycling technology in Baytown, and we’re scaling up operations to supply certified circular polymers by year-end,” said Karen McKee, president of ExxonMobil Chemical Company. “Availability of reliable advanced recycling capacity will play an important role in helping address plastic waste in the environment, and we are evaluating wide-scale deployment in other locations around the world.”
To date, the trial has successfully recycled more than 1,000 metric tons of plastic waste, the equivalent of 200M grocery bags, and has demonstrated the capability of processing 50 metric tons per day.
Upon completion of the large-scale facility, the operation in Baytown will be among North America’s largest plastic waste recycling facilities and will have an initial planned capacity to recycle 30,000 metric tons of plastic waste per year.
Operational capacity could be expanded quickly if effective policy and regulations that recognize the lifecycle benefits of advanced recycling are implemented for residential and industrial plastic waste collection and sorting systems.
ExxonMobil is developing plans to build approximately 500,000 metric tons of advanced recycling capacity globally over the next five years.
In Europe, the company is collaborating with Plastic Energy on an advanced recycling plant in Notre Dame de Gravenchon, France, which is expected to process 25,000 metric tons of plastic waste per year when it starts up in 2023, with the potential for further expansion to 33,000 metric tons of annual capacity.
The company is also assessing sites in the Netherlands, the U.S. Gulf Coast, Canada, and Singapore.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Spectrum Brands agrees to sell Hardware & Home Improvement segment for $4.3B
Spectrum Brands Holdings (SPB) announced it has entered into a definitive agreement to sell its HHI segment to ASSA ABLOY (ASAZY) for $4.3B in cash, which it said represents over 14 times HHI’s expected FY21 Adjusted EBITDA.
Upon closing of the transaction, Spectrum Brands expects to receive approximately $3.5B in net proceeds, subject to final tax calculations and purchase price adjustments.
Spectrum Brands expects to use the proceeds from this transaction to repay debt and reduce its gross leverage ratio to approximately 2.5x times in the near term.
Excess proceeds are expected to be allocated to invest for organic growth, fund complementary acquisitions and return capital to shareholders.
The company expects to maintain its quarterly cash dividend of 42c per common share, which will be subject to the company’s continued review from time to time.
The sale of HHI is expected to close following the receipt of certain regulatory approvals and customary closing conditions.
The results of operations of HHI will be reported as discontinued operations beginning in the fourth quarter of 2021. David Maura, CEO of Spectrum Brands, said, “I am exceedingly proud of the fact that our Hardware & Home Improvement business nearly doubled its EBITDA under Spectrum Brands’ ownership.
I am pleased to know that HHI has found a new home with a great partner, and I am confident that ASSA ABLOY will take it to its highest potential, bringing great value and innovation to consumers for generations to come.
We believe this transaction demonstrates the tremendous value of Spectrum Brands as an owner and steward of our businesses and places the Company in a strong position for the future by allowing us to further reduce our leverage levels, and enhance our capital allocation strategy.
Our remaining business will be more focused, allowing us to prioritize innovation to accelerate organic growth and pursue synergistic acquisitions to further drive value creation in Global Pet Care and Home & Garden, while continuing to look for strategic and organic ways to enhance the value of Home and Personal Care.
After the closing, we will become a more pure play consumer staples company with higher growth rates and strong margins.”
The company added: “Spectrum Brands will be a simplified business consisting of three focused business units with leading market share, strong growth opportunities and consistent performance.
The pro forma business generated $3.0B in net sales and $386 million in Adjusted EBITDA representing a 13.0% margin for the LTM period ended July 4, 2021.
Spectrum Brands will report its fourth quarter 2021 results in mid-November and expects to provide Fiscal 2022 Earnings Framework at that time.”
ASSA ABLOY AB is a Swedish company that provides door opening products, solutions, and services for the institutional, commercial, and residential markets in Europe, the Middle East, Africa, North and South America, Asia, and Oceania. In addition, the company offers entrance automation products, services, and components, such as automatic swing, sliding, and revolving doors; industrial doors; garage doors; high-performance doors; docking solutions; hangar doors; gate automation products; components for overhead sectional doors and sensors; and high security fencings and gates. The company provides its products primarily under the ASSA ABLOY, Yale, and HID brands.
Spectrum’s Hardware & Home Improvement segment offers hardware products under the National Hardware and FANAL brands; locksets and door hardware under the Kwikset, Weiser, Baldwin, EZSET, and Tell Manufacturing brands; and plumbing products under the Pfister brand. Its Home and Personal Care segment provides home appliances under the Black & Decker, Russell Hobbs, George Foreman, Toastmaster, Juiceman, Farberware, and Breadman brands; and personal care products under the Remington and LumaBella brands.
The company’s Global Pet Care segment provides rawhide chewing, dog and cat clean-up and food, training, health and grooming, small animal food and care, and rawhide-free products under the 8IN1 (8-in-1), Dingo, Nature’s Miracle, Wild Harvest, Littermaid, Jungle, Excel, FURminator, IAMS, Eukanuba, Healthy-Hide, DreamBone, SmartBones, ProSense, Perfect Coat, eCOTRITION, Birdola, and Digest-eeze brands.
ASAZY is down 38 cents to $15.53 per share while SPB is up $15 to $94.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Middleby to acquire Welbilt in an all-stock transaction
The Middleby Corporation (MIDD) and Welbilt (WBT) have entered into a definitive agreement under which Middleby will acquire Welbilt in an all-stock transaction, enhancing the Middleby Commercial Foodservice platform with an attractive portfolio of products, brands and technologies.
This transaction will bring together two complementary businesses, accelerate the Middleby growth strategy into key markets globally and increase core capabilities in highly attractive segments.
The combined company will have approximately $3.7B in combined 2020 sales, 73% of which will come from the Commercial Foodservice segment.
Under the terms of the agreement, Welbilt shareholders will receive a fixed exchange ratio of 0.1240x shares of Middleby common stock for each share of Welbilt common stock in an all-stock transaction, with an implied enterprise value of $4.3B.
Based on Middleby’s volume-weighted average price during the 30 consecutive trading days ending April 20, the offer price represents a 28% premium to Welbilt’s 30-day VWAP.
Upon closing, Middleby shareholders will own approximately 76% and Welbilt shareholders will own approximately 24% of the combined company on a fully diluted basis.
The Boards of both companies have unanimously approved the transaction. In addition, Carl C. Icahn, Welbilt’s largest shareholder with an 8.4% ownership position, has entered into a support agreement in favor of the transaction.
Following closing, Timothy FitzGerald will continue as CEO and as a member of the Middleby Board of Directors. Bryan Mittelman will continue to serve as Middleby’s CFO.
Middleby will expand its Board to include two new directors from the Welbilt board, Chairperson Cynthia Egnotovich and William Johnson. Middleby intends to refinance Welbilt’s existing debt through its committed Senior Secured Facility.
Based on the expected pro forma leverage ratio at closing, the interest on the incremental financing would be approximately L + 162.5 bps.
The transaction is expected to close in late 2021, subject to customary closing conditions, including regulatory and Middleby and Welbilt shareholder approvals.
The Middleby Corporation designs, manufactures, markets, distributes, and services a range of foodservice, food processing, and residential kitchen equipment.
Welbilt, Inc., designs, manufactures, and supplies foodservice equipment for commercial foodservice market worldwide. The company offers commercial upright and undercounter refrigerators and freezers, blast freezers and chillers, and cook-chill systems under the Delfield brand; and walk-in refrigerators, coolers and freezers, and prefabricated cooler and freezer panels under the Kolpak brand.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Cleveland-Cliffs to acquire ArcelorMittal USA for $1.4B in cash, stock
Cleveland-Cliffs (CLF) announced that it has entered into a definitive agreement with ArcelorMittal (MT), pursuant to which Cleveland-Cliffs will acquire substantially all of the operations of ArcelorMittal USA and its subsidiaries for approximately $1.4B.
Upon closure of the transaction, Cleveland-Cliffs will be the largest flat-rolled steel producer in North America, with combined shipments of approximately 17M net tons in 2019.
The company will also be the largest iron ore pellet producer in North America, with 28M long tons of annual capacity.
Cleveland Cliff goes shopping
ArcelorMittal USA will be acquired by Cleveland-Cliffs on a cash-free and debt-free basis, with a combination of 78.2M shares of Cleveland-Cliffs common stock, non-voting preferred stock with an approximate aggregate value of $373M and $505M in cash.
The enterprise value of the transaction is approximately $3.3B, which takes into consideration the assumption by Cleveland-Cliffs of pension/OPEB liabilities and working capital.
In 2018 and 2019, ArcelorMittal USA averaged annual revenues of approximately $10.4B and annual adjusted EBITDA of approximately $700M.
The assets acquired include s steelmaking facilities, eight finishing facilities, two iron ore mining and pelletizing operations, and three coal and coke making operations.
The transaction is anticipated to be EPS accretive, and Cleveland-Cliffs expects the acquisition to reduce the company’s leverage from 4.3x to 3.6x on a pro-forma 2019 adjusted EBITDA basis, including the expectation of approximately $150M in estimated annual cost savings.
Facilities in play
The acquisition is also expected to increase the company’s liquidity substantially due to an increased ABL borrowing base.
The facilities included in the transaction are: Steelmaking: Indiana Harbor, Burns Harbor, Cleveland Coatesville, Steelton, Riverdale. Finishing: Columbus , Conshohocken, Double G. Coatings JV, Gary Plate, I/N Tek JV with Nippon Steel, I/N Kote JV with Nippon Steel and Weirton. Mining and Pelletizing: Hibbing JV and Minorca. Met Coal / Cokemaking: Monessen, Princeton and Warren.
The transaction has been approved by the board of directors of both companies and is expected to close in Q4, subject to the receipt of regulatory approval and the satisfaction of other customary closing conditions.
The cash consideration from Cleveland-Cliffs is expected to be financed using available cash on hand and liquidity. Cleveland-Cliffs has received commitments to increase its existing asset based lending facility.
MT last traded at $13.36, CLF last changed hands at $6.47.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
NRG Energy to acquire Direct Energy from Centrica for $3.63B in cash
NRG Energy (NRG) announced it has entered into a definitive agreement with UK’s Centrica (CPYYY) under which NRG will acquire Direct Energy, a North American subsidiary of Centrica PLC for $3.63B in an all-cash transaction.
NRG Energy said in a release, “The transaction builds on NRG’s status as a growing, customer-driven integrated energy provider, adding more than three million retail customers across 50 states and Canada.
NRG goes shopping
The transaction on closing is expected to generate approximately $740M in annual run-rate Adjusted EBITDA, while enhancing free cash flow strength and stability and providing earnings diversification.
With operations in all 50 U.S. states and 6 Canadian provinces, Direct Energy is one of North America’s leading retail providers of electricity, natural gas, and home and business energy-related products and services.
Centrica sells Direct Energy
For NRG, the acquisition builds on and complements its integrated model, enabling better matching of power generation with customer demand.
It also broadens NRG’s presence into states and locales where it does not currently operate, supporting NRG’s objective to diversify its business.
The combination will deliver greater efficiencies and enable continued investment in NRG’s award-winning customer service, operational best practices and reliability.
Direct Energy fetches $3.63B
With NRG’s decades of participation in electricity markets throughout the U.S., NRG has broad insights into energy market dynamics and trends to inform innovative solutions and products for the combined company’s customers.
NRG will acquire Direct Energy for $3.63B in cash, subject to a working capital adjustment. Closing for the transaction is targeted by year end 2020.”
NRG Energy, Inc. operates as an energy company in the United States. It operates through Generation and Retail segments. The company is involved in the producing, selling, and delivering electricity and related products and services to 3.7 million residential, industrial, and commercial consumers. It generates electricity using natural gas, coal, oil, solar, nuclear, and battery storage.
Direct Energy LP is a North American retailer of energy and energy services. The company was founded in Toronto in 1986 and now has more than four million customers in Canada and the United States.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Mississippi Retirement System sues the carpet maker
In January, the Public Employees’ Retirement System of Mississippi filed a lawsuit claiming accounting fraud at Mohawk (MHK). The suit did not get a lot of attention at the time, but new filings submitted in late June add significant details about the allegations.
According to analysts, the filing includes testimony from a former Mohawk employee who claims the company has used fictitious sales to artificially boost revenue since 2017.
JPMorgan
JPMorgan analyst Michael Rehaut noted earlier that the Public Employees’ Retirement System of Mississippi, as part of a consolidated class action complaint filing dated June 29, gave “significant incremental details” regarding claims that Mohawk engaged in channel stuffing at the end of the quarter and intentionally overproduced product.
MPERS sues Mohawk Industries
While “the veracity of these accusations will likely not be determined until after an extended legal process” of several months if not longer, Rehaut sees the lawsuit as likely to remain an overhang on the stock until this matter concludes.
He also sees the “fairly granular level of detail across the allegations” and quotes from interviews with several former employees creating a higher level of risk for the company from this lawsuit, added the analyst, who keeps a Neutral rating on Mohawk shares.
SunTrust
A shareholder lawsuit filed earlier this year has recently added new court filings that allege multiple issues inside Mohawk Industries, the most damaging allegation being its revenue recognition practices which included shipping goods on the last day of the quarter and then having those as returns in the following quarter, SunTrust analyst Keith Hughes tells investors in a research note.
The allegations being made during the company’s quiet period “have hamstrung any response,” says Hughes, who admits “it is hard to say as an outsider whether these have merit at this point.” However, given the size of Mohawk, it would need “widespread practices to boost revenues via the method” alleged, adds the analyst, who keeps a Buy rating on Mohawk with a $119 price target.
Wells Fargo
Wells Fargo analyst Truman Patterson notes that the Public Employees’ Retirement System of Mississippi has filed a Class Action Complaint against Mohawk and CEO Jeff Lorberbaum, claiming the company engaged in a “fraudulent scheme to fabricate revenues through fictitious ‘sales’ of products that were not delivered to customers and to conceal from investors the true reasons for the company’s ballooning inventory,” damaging shareholders between April 2017 and July 2019.
While Mohawk stakeholders have known about the lawsuit since early January, filings have only recently become publicly available, which the analyst believes drove shares down on Wednesday. Patterson expresses no opinion on the validity of the allegations against the company, but acknowledges that they would clearly be a negative if proven to be true, likely damaging shareholder confidence in management. The analyst has an Underweight rating and an $80 price target on the stock.
The stock is down 19% to $74.10. The question now shifts to whether the allegations will result in a full SEC investigation.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Boeing 737-Max Recertification Flight is scheduled for later this month
Boeing (BA) is targeting late June for a recertification flight on the grounded 737 Max, Bloomberg’s Alan Levin and Julie Johnsson report.
Boeing 737-Max recertification flight set for late June
The company separately is notifying airlines of an important fix to the grounded jetliner’s wiring, said two people familiar with the planning who asked not to be named discussing sensitive matters.
A draft of revised pilot training for the plane, which has been parked around the world since March 2019 as a result of two fatal crashes that killed 346 people, is also being shared with airlines, the people said.
Grounded 737-Max planes
The moves were strong indications that Boeing is finally nearing the end of the jet’s 15-month grounding and controversy that has engulfed the company after the two fatal crashes.
The flight by Federal Aviation Administration pilots to certify that the plane meets safety regulations is one of the critical remaining milestones. However, the people cautioned that the date hasn’t been finalized and has shifted repeatedly as Boeing completed its final work for regulators.
Boeing’s goal has been to return the 737 Max, a critical source of revenue, to commercial service in the third quarter. The company restarted manufacturing the single-aisle jet late last month, ending a five-month halt to work in its 737 factory in the Seattle suburb of Renton, Washington.
The company is revising a software system implicated in the two crashes that repeatedly drove down the noses of the jets due to a malfunction. Reviews of the plane’s safety following its March 13, 2019, grounding also discovered additional flaws that needed upgrading, including its flight-control computer, how electrical wires were bundled and software issues.
The FAA on Wednesday said it won’t approve the plane for passenger service until it is satisfied that all safety-related issues have been addressed.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Boeing starts involuntary layoffs with 6,770 U.S. workers losing jobs
Boeing (BA) President and CEO Dave Calhoun issued a letter to employees today providing an update on workforce actions, which stated in part, “Following the reduction-in-force announcement we made last month, we have concluded our voluntary layoff program.
And now we have come to the unfortunate moment of having to start involuntary layoffs. We’re notifying the first 6,770 of our U.S. team members this week that they will be affected.
Boeing beings involuntary layoffs
We will provide all the support we can to those of you impacted by the ILOs – including severance pay, COBRA health care coverage for U.S. employees and career transition services.
Covid19 related layoffs are adding up
Our international locations also are working through workforce reductions that will be communicated locally on their own timelines in accordance with local laws and benefit terms.
Boeing plans to cut 10% of it’s workforce
The COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices.
We have done our very best to project the needs of our commercial airline customers over the next several years as they begin their path to recovery. I wish there were some other way.”
Green Shoots
In another announcement, Dave Calhoun stated “We are seeing some green shoots. Some of our customers are reporting that reservations are outpacing cancellations on their flights for the first time since the pandemic started. Some countries and U.S. states are starting cautiously to open their economies again.
And some parts of our business, most notably on the defense side, will continue hiring to meet customer commitments and fill critical skill positions.
Boeing CEO Dave Calhoun
The Defense, Space & Security and defense services teams have achieved a number of milestones recently, including the successful return to orbit of the reusable and autonomous X-37B Orbital Test Vehicle.
We’re moving forward with our plan to restart 737 MAX production in Renton, Washington, as our return-to-service efforts continue.
And our Global Services team is changing its organization to ensure it is lean and focused on the post-COVID needs of its customers. But these signs of eventual recovery do not mean the global health and economic crisis is over. Our industry will come back, but it will take some years to return to what it was just two months ago.”
Company executives said last month that Boeing planned to cut about 10% of its global workforce this year as it reduces jetliner production, and union officials say the initial wave of layoffs was focused on Boeing’s Seattle-area commercial airplanes operation.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Loral Space & Communications declares $5.50 per share special dividend
Loral Space & Communications (LORL) announced that its board of directors has declared a special dividend of $5.50 per share for an aggregate dividend of approximately $170.5M.
The dividend is payable on May 28 to holders of record of Loral voting and non-voting common stock as of the close of business on May 14.
Loral declares a one time $5.50 special dividend, Stockwinners
Michael Targoff, Vice Chairman of Loral’s Board of Directors, explained that, “in an effort to maximize shareholder value, we have for some time been exploring, and are now in advanced discussions with our Canadian co-owner in Telesat, Public Sector Pension Investment Board, regarding the combination of Loral and Telesat into one public company.
Telesat to combine with Loral Space, Stockwinners
“Given the advanced state of the discussions regarding the combination transaction, it is now appropriate to pay to our shareholders a significant portion of the $243M cash distribution that we previously received from Telesat.”
“It is our intention,” Mr. Targoff continued, “to request that the Board declare an additional distribution to our shareholders in coordination with signing definitive agreements for the combination transaction.”
The company added: “Notwithstanding the advanced state of the discussions regarding the potential combination transaction, there can be no assurance as to whether or when Loral will be able to conclude the ongoing negotiations, that Loral will enter into any agreement that provides for a strategic transaction involving Telesat or Loral’s interest therein, that any strategic transaction will occur, or that any particular economic, tax, structural or other objectives or benefits with respect to any strategic transaction will be achieved.”
Loral Space & Communications Inc. offers satellite-based communications services to the broadcast, telecom, corporate, and government customers worldwide.
Telesat, formerly Telesat Canada, is a Canadian satellite communications company. The company is now the fourth-largest fixed satellite services provider in the world. It owns a fleet of satellites, with others under construction, and operates additional satellites for other entities.
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This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Aon plc to combine with Willis Towers Watson in all-stock transaction
Aon plc (AON) and Willis Towers Watson (WLTW) announced a definitive agreement to combine in an all-stock transaction with an implied combined equity value of approximately $80B.
The combined company, to be named Aon, will be “the premier, technology-enabled global professional services firm focused on the areas of risk, retirement and health,” the companies stated.
Willis Tower Watson merges with AON, Stockwinners
Aon will maintain operating headquarters in London, United Kingdom. John Haley will take on the role of Executive Chairman with a focus on growth and innovation strategy.
The combined firm will be led by Greg Case and Aon Chief Financial Officer Christa Davies.
AON merges with Willis Tower Watson
Under the terms of the agreement unanimously approved by the Boards of Directors of both companies, each Willis Towers Watson shareholder will receive 1.08 Aon ordinary shares for each Willis Towers Watson ordinary share, and Aon shareholders will continue to own the same number of ordinary shares in the combined company as they do immediately prior to the closing.
Upon completion of the combination, existing Aon shareholders will own approximately 63% and existing Willis Towers Watson shareholders will own approximately 37% of the combined company on a fully diluted basis.
Aon anticipates that the transaction will provide annual pre-tax synergies and other cost reductions of $800M by the third full year of combination, thereby allowing the firm to continue significant investment in innovation and growth. Potential revenue synergies due to complementary capabilities are expected but not included in the synergy estimates.
The transaction is expected to be accretive to Aon adjusted EPS in the first full year of the combination with peak adjusted EPS accretion in the high teens after full realization of $800M of pre-tax synergies.
Willis Towers Watson and Aon anticipate savings of $267M in the first full year of the combination, reaching $600M in the second full year, with the full $800M achieved in the third full year.
Free cash flow accretion is expected to breakeven in the second full year of the combination with free cash flow accretion of more than 10% after full realization of synergies.
The transaction is expected to generate over $10B of shareholder value creation from the capitalized value of the expected pre-tax synergies, based on the blended 2020 price to earnings ratio of Willis Towers Watson and Aon UK on 6 March 2020, net of $2.0B in one-time transaction, retention and integration costs.
WTLW last traded at $193.13. AON last traded at $192.15.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
AVX to be acquired by Kyocera for $21.75 per share in cash
AVX Corp. (AVX) announced that Kyocera and AVX have entered into a definitive merger agreement providing for the acquisition by Kyocera of all the outstanding shares of common stock of AVX not owned by Kyocera pursuant to an all-cash tender offer for $21.75 per share, followed by a squeeze-out merger in which all of the outstanding shares of AVX common stock not tendered in the Tender Offer will be converted into the right to receive $21.75 per share of common stock, in cash.
Kyocera currently owns approximately 72% of the outstanding shares of AVX common stock.
Following completion of the Transaction, AVX will become a wholly owned subsidiary of Kyocera.
Kyocera buys the rest of AVX shares that it did not own, Stockwinners
The $21.75 offer price represents a 44.6% premium over AVX’s closing price on November 26, 2019 and a 42.1%, 42.4%, and 34.9% premium over AVX’s 1-, 3- and 12- month average closing share price, respectively.
As previously announced, following receipt of a proposal from Kyocera to acquire all of the outstanding shares of AVX common stock that Kyocera does not own for a price of $19.50 in cash, the AVX board of directors appointed a special committee consisting of three independent directors of AVX for purposes of evaluating and negotiating a potential transaction with Kyocera.
AVX Corp. sold to Kyocera, Stockwinners
Following the formation of the Special Committee, Kyocera and the Special Committee have been in discussions and negotiations regarding Kyocera’s proposal to acquire all of the outstanding shares of common stock of AVX not owned by Kyocera.
The board of AVX, acting on the recommendation of the Special Committee, has approved the Transaction and determined to recommend that the AVX stockholders tender their shares in the Tender Offer.
The Transaction is subject to customary closing conditions and is not subject to any financing condition. Kyocera has announced that it currently expects the Transaction to close in the fourth quarter of Kyocera’s fiscal year ending March 2020.
The Tender Offer will be subject to customary conditions and will not be subject to any minimum condition.
AVX is a leading worldwide manufacturer, supplier, and reseller of a broad line of electronic components, interconnect, sensing and control devices, and related products. Electronic components and connector, sensing and control products manufactured or resold by AVX are used in many types of end use products, including those in telecommunications, automotive, transportation, energy harvesting, consumer electronics, military/aerospace, medical, computer, and industrial markets.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Leidos to acquire L3Harris security detection, automation businesses
Leidos (LDOS) announced that it has entered into a definitive agreement to acquire L3Harris Technologies’ (LHX) security detection and automation businesses, for $1B in cash.
The boards of both companies unanimously approved the transaction. L3Harris’ security detection and automation businesses provide airport and critical infrastructure screening products, automated tray return systems and other industrial automation products.
L3Harris sells its security division for $1B, Stockwinners
With headquarters in Tewksbury, Massachusetts and Luton, England, the combined businesses have 1,200 employees and a global sales and services operations footprint with more than 20,000 systems deployed world-wide across more than 100 countries.
The businesses serve customers in the aviation, transportation, government and critical infrastructure markets.
Leidos goes on $1B shopping spree, Stockwinners
This acquisition adds products that expand Leidos’ offerings to create a security and detection platform.
These products include checkpoint security products like checkpoint CT scanners, people scanners, comprehensive explosives trace detectors, checked baggage screeners and automated tray return systems, or ATRS.
This business expands customer penetration internationally, helping deliver on a stated objective to diversify revenue globally.
The deal will increase Leidos’ international security products revenue more than six-fold. The acquisition also enables the company to leverage technology investments across the combined portfolio to accelerate innovation and improve service efficiency for customers.
The transaction is expected to be immediately accretive to Leidos’ revenue growth, EBITDA margins, and non-GAAP diluted earnings per share upon closing.
Leidos expects to fund the $1B cash transaction through a combination of cash on hand and incremental debt.
The transaction is expected to close by the end of Q2, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
Comtech to acquire Gilat Satellite Networks for $10.25 per share
Comtech Telecommunications Corp. (CMTL) and Gilat Satellite Networks Ltd. (GILT) jointly announced that Comtech has agreed to acquire Gilat in a cash and stock transaction for $10.25 per Gilat ordinary share of which 70% will be paid in cash and 30% in Comtech common stock, resulting in an enterprise value of approximately $532.5 million.
Gilat sold for $522M, Stockwinners
Founded in 1987 with its headquarters in Israel, Gilat is a worldwide leader in satellite networking technology, solutions and services with market leading positions in the satellite ground station and in-flight connectivity solutions markets and deep expertise in operating large network infrastructures.
Comtech goes shopping by buying Gilat, Stockwinners
Based on Comtech’s fiscal year 2019 actual results and Gilat’s trailing twelve-month results through June 30, 2019, on a pro-forma basis, Comtech would have reported approximately $926.1M of revenue with Adjusted EBITDA of approximately $130.2M.
The combined companies would employ approximately 3,000 people and offer best-in-class satellite technology, public safety and location technology and secure wireless solutions to commercial and government customers around the world.
Fred Kornberg, Chairman of the Board and CEO of Comtech, said,
“I am excited to have reached this agreement with Gilat and believe this combination is beneficial to the stakeholders of both companies. The acquisition better positions Comtech to take advantage of key marketplace trends, particularly the growing demand for satellite connectivity and the enormous long-term opportunity set that is emerging in the secure wireless communications market.
I believe that the combination of accelerating satellite connectivity demand and the increasing availability of low-cost satellite bandwidth, makes this a perfect time to unify Comtech and Gilat’s solutions and offer our combined customers best-in-class platform-agnostic satellite ground station technologies.
Gilat is an exceptional business that has developed extraordinary technology and has a well-respected product portfolio supported by strong research and development capabilities. I welcome Gilat’s entire talented workforce to the Comtech family.”
Dov Baharav, Chairman of the Board of Gilat, said, “The Gilat Board of Directors and management believe this highly strategic combination is compelling.
It is an excellent outcome for our shareholders who receive both cash and an equity interest in a strong company with a broader range of products and the benefits of combined expertise and resources that is well positioned to create future value against a highly favorable industry backdrop.
I have long admired Comtech’s commitment to technology leadership and I firmly believe that employees will have expanded opportunities for career development. No doubt, the future will be very bright for Comtech and Gilat and all of our stakeholders.”
In light of the agreement between Comtech (CMTL) and Gilat (GILT), Gilat has cancelled its fourth quarter and fiscal 2019 year-end conference call and webcast previously scheduled for February 19, 2020. Once the transaction closes, Comtech will provide combined revenue, Adjusted EBITDA and diluted earnings per share guidance in a future announcement.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.
