L3Harris Security Detection sold for $1 B

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.

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Anixter sold for $4.5 billion

Wesco to acquire Anixter in cash, stock deal valued at $4.5B

WESCO (WCC) and Anixter (AXE) announced that their boards of directors have unanimously approved a definitive merger agreement under which WESCO will acquire Anixter in a transaction valued at approximately $4.5 billion.

Anixter’s prior agreement to be acquired by Clayton, Dubilier & Rice, has been terminated, following CD&R’s waiver of its matching rights under the agreement.

Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive $70.00 in cash, 0.2397 shares of WESCO common stock and preferred stock consideration valued at $15.89, based on the value of its liquidation preference.

Based on the closing price of WESCO’s common stock on January 10 and the liquidation preference of the WESCO preferred stock consideration, the total consideration represents approximately $100 per Anixter share, giving effect to the downside protection described below.

Based on transaction structure and the number of shares of WESCO and Anixter common stock currently outstanding, it is anticipated that WESCO stockholders will own 84%, and Anixter stockholders 16%, of the combined company.

The combined company will have pro forma 2019 revenues of approximately $17 billion.

With an extensive global reach and increased international exposure, approximately 12% of revenues will be generated outside of North America.

Anixter sold to Wesco, Stockwinners

The increased scale will enable the combined company to accelerate digitization strategies and provide a platform for growth in attractive emerging markets.

WESCO expects to realize annualized run-rate cost synergies of over $200 million by the end of year three through efficiencies in corporate and regional overhead, including duplicative public company costs, branch and distribution center optimization, and productivity in procurement, field operations, and supply chain. In addition, WESCO expects incremental sales growth opportunities to result by cross-selling the companies’ complementary product and services offerings to an expanded customer base and capitalizing on the enhanced capabilities across both networks.

The combination is expected to be accretive to WESCO’s earnings in the first full year of ownership and, with the realization of synergies, substantially accretive thereafter.

WESCO also expects the transaction to generate significant margin expansion and EPS growth.

The combined company will have strong free cash flow generation, supporting continued investments in the business and enabling a return of capital to stockholders in the future.

Wesco to buy Anixter, Stockwinners

At closing, WESCO estimates that its pro forma leverage on a net debt to EBITDA basis will be approximately 4.5x.

WESCO intends to utilize the strength of the combined company’s cash flows, including significant synergies, to reduce its leverage quickly and ultimately intends to be within its long-term target leverage range of 2.0x to 3.5x within 24 months post-close.

Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive $70.00 in cash, 0.2397 shares of WESCO common stock, and preferred stock consideration consisting of 0.6356 depositary shares, each whole share representing a fractional interest in a newly created series of WESCO perpetual preferred stock.

The common stock consideration is subject to downside protection, such that if the average market value of WESCO common stock prior to closing is between $47.10 per share and $58.88 per share, then the cash consideration paid at closing will be increased commensurately by up to $2.82 per share, such that the reduction in value of the WESCO common stock is offset by an increase in the cash consideration within that range. $2.82 per share will also be paid if the value of WESCO stock is below $47.10.

The preferred stock consideration consists of 0.6356 depositary shares, with each whole depositary share representing a 1/1,000th interest in a share of WESCO Series A cumulative perpetual preferred stock, with a liquidation preference of $25,000 per preferred share and a fixed dividend rate calculated based on a spread of 325 basis points over the prevailing unsecured notes to be issued to effect the transaction.

The fixed dividend rate will be subject to reset and the Series A preferred stock will have a five year non-call feature.

WESCO has agreed to list the depositary shares representing the newly created series of preferred stock on the NYSE, and the security is expected to receive equity treatment from the rating agencies.

The 0.6356 depositary share to be issued in the merger per share of Anixter common stock is valued at $15.89 based on the liquidation preference of the underlying interest in the Series A preferred stock represented thereby.

Under the terms of the merger agreement, WESCO may elect to substitute additional cash consideration to reduce the amount of the preferred stock consideration on a dollar-for-dollar basis based on the value of the liquidation preference of the preferred stock consideration. WESCO and Anixter currently anticipate completing the transaction during the second or third quarter of 2020.

WESCO International, Inc. distributes electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturers products and construction materials in North America and internationally. 

Anixter International Inc. distributes enterprise cabling and security solutions, electrical and electronic wire and cable solutions, and utility power solutions worldwide. 

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PolyOne buys Claiant’s color business for $1.45B

PolyOne acquires Clariant color and additive masterbatch business for $1.45B

PolyOne (POL) announced that it has entered into an agreement with Switzerland’s Clariant to purchase its global color and additive masterbatch business.

In addition, PolyOne has entered into an agreement with Clariant Chemicals India Ltd. to purchase its color and additive masterbatch business.

The combined net purchase price is $1.45B, representing an 11.1x multiple of last twelve months adjusted EBITDA, or 7.6x including anticipated synergies.

Polyone buys paint business of Clariant, Stockwinners

“This will be a truly transformational acquisition for both PolyOne and Clariant customers and employees around the world. Together, we will benefit from the combined ingenuity, passion and expertise of two global leaders in color design, additive technologies and sustainable solutions,” said Robert M. Patterson, Chairman, President and Chief Executive Officer, PolyOne Corporation.

Clariant’s color and additive masterbatch business, which had sales of $1.15 billion for the last twelve months, includes specialty technologies and solutions for high-growth global end markets, such as consumer, packaging, and healthcare.

Polyone buys Clariant’s color biz for $1.45B, Stockwinners

The Clariant business includes 46 manufacturing operations and technology centers in 29 countries and approximately 3,600 employees, who will join PolyOne’s Color, Additives and Inks segment.

PolyOne Corporation provides specialized polymer materials, services, and solutions in the United States, Canada, Mexico, Europe, South America, and Asia. It operates in four segments: Color, Additives and Inks; Specialty Engineered Materials; Performance Products and Solutions; and Distribution. 

POL is up 0.89 to $36.86.

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Anixter sold for $3.8 billion

Anixter to be acquired by Clayton, Dubilier & Rice for $81.00 per share in cash

Anixter (AXE) has entered into a definitive agreement with an affiliate of Clayton, Dubilier & Rice to be acquired in an all cash transaction valued at approximately $3.8B.

Anixter sold for $3.8B, Stockwinners

The transaction will result in Anixter becoming a private company and is expected to close by the end of the first quarter of 2020.

Under the terms of the merger agreement, CD&R-managed funds will acquire all of the outstanding shares of Anixter common stock for $81.00 per share in cash.

This represents a premium of approximately 13% over Anixter’s closing price on October 29, and a premium of approximately 27% over the 90-day volume-weighted average price of Anixter’s common stock for the period ended October 29.

Clayton, Dubilier & Rice buys Anixter, Stockwinners

Anixter International Inc. distributes enterprise cabling and security solutions, electrical and electronic wire and cable solutions, and utility power solutions worldwide. The company operates through Network & Security Solutions (NSS), Electrical & Electronic Solutions (EES), and Utility Power Solutions (UPS) segments. 

It is anticipated that upon completion of the transaction, Bill Galvin, along with other members of Anixter’s executive management team, will continue to lead the company.

Anixter’s Board of Directors has unanimously approved the agreement with CD&R and recommends that Anixter stockholders approve the proposed merger and merger agreement.

Anixter expects to hold a Special Meeting of Stockholders to consider and vote on the proposed merger and merger agreement as soon as practicable after the mailing of the proxy statement to its stockholders.

Under the terms of the merger agreement, Anixter may solicit superior proposals from third parties for a period of 40 calendar days continuing through December 9, 2019.

In accordance with the merger agreement, Anixter’s Board of Directors, with the assistance of its advisors, intends to solicit superior proposals during this period.

In addition, Anixter may, at any time, subject to the provisions of the merger agreement, respond to unsolicited proposals that are reasonably likely to result in a superior proposal.

Anixter advises that there can be no assurance that the solicitation process will result in an alternative transaction.

To the extent that a superior proposal received prior to December 9, 2019 or, in certain circumstances, 10 days thereafter leads to the execution of a definitive agreement, Anixter would be obligated to pay a $45M break-up fee to CD&R.

Anixter does not intend to disclose developments with respect to this solicitation process unless and until it determines it is appropriate to do so.

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Milacron sold for $2 billion

Hillenbrand to acquire Milacron in cash, stock deal valued around $2B

Milacron sold for $2 billion, Stockwinners

Hillenbrand (HI) and Milacron (MCRN) announced that they have entered into a definitive agreement under which Hillenbrand will acquire Milacron in a cash and stock transaction valued at approximately $2B, including net debt of approximately $686M as of March 31.

Under the terms of the agreement, which has been unanimously approved by the boards of both companies, Milacron stockholders will receive $11.80 in cash and a fixed exchange ratio of 0.1612 shares of Hillenbrand common stock for each share of Milacron common stock they own.

Based on Hillenbrand’s closing stock price on July 11, the last trading day prior to the announcement, the implied cash and stock consideration to be received by Milacron stockholders is $18.07 per share, representing a premium of approximately 34% to Milacron’s closing stock price on July 11, and a premium of approximately 38% to Milacron’s 30-day volume-weighted average price as of the close on July 11.

Hillenbrand pays $2 billion to buy one of its suppliers, Stockwinners

Upon closing, Hillenbrand shareholders will own approximately 84% of the combined company, and Milacron stockholders will own approximately 16%.

Milacron will benefit from the Hillenbrand Operating Model, or HOM, and Hillenbrand expects to leverage Milacron’s global shared services center to drive operational efficiency.

The transaction is expected to generate annualized, run-rate cost synergies of approximately $50M within three years following close, primarily through reducing public company costs, realizing operating efficiencies, and capturing direct and indirect spend opportunities.

The transaction is also expected to generate revenue synergies, driven by opportunities to cross-sell extruder and material handling equipment, and to leverage the combined service footprint to further penetrate the product aftermarket.

These efficiencies will be driven across the combined organization through utilizing the HOM, while maintaining a commitment to serving customers with excellence and innovation.

The transaction, which is expected to close in Q1 of 2020, is subject to customary closing conditions and regulatory approvals, including the approval of stockholders of Milacron.

About the Companies

Hillenbrand, Inc. operates as a diversified industrial company in the United States and internationally. The company operates in two segments, Process Equipment Group and Batesville. The Process Equipment Group segment designs, engineers, manufactures, markets, and services process and material handling equipment and systems for various industries, including plastics, food and pharmaceuticals, chemicals, fertilizers, minerals and mining, energy, wastewater treatment, forest products, and other general industrials.

Milacron Holdings Corp. manufactures, distributes, and services engineered and customized systems within the plastic technology and processing industry in the United States and internationally. 

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Lord Corporation sold for $3.7 billion

Parker-Hannifin to acquire LORD Corporation for $3.7B in cash

Parker Hannifin to buy Lord Corp., Stockwinners

Parker Hannifin (PH) announced that it has entered into a definitive agreement to acquire LORD Corporation for approximately $3.675B in cash.

The transaction has been approved by the Board of Directors of each company and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

LORD, headquartered in Cary, North Carolina, is a privately-held company founded in 1924 offering a broad array of advanced adhesives, coatings and specialty materials as well as vibration and motion control technologies.

Lord Corp. sold for $3.7 billion in cash, Stockwinners

LORD’s products are used in the aerospace, automotive and industrial markets. LORD has annual sales of approximately $1.1B and employs 3,100 team members across 17 manufacturing and 15 research and development facilities globally.

“This strategic transaction will reinforce our stated objective to invest in attractive margin, growth businesses, such as engineered materials, that accelerate us towards top-quartile financial performance,” said Tom Williams, Chairman and CEO of Parker.

“LORD will significantly expand our materials science capabilities with complementary products, better positioning us to serve customers in growth industries and capitalize on emerging trends such as electrification and lightweighting.

Upon closing of the transaction, LORD will be combined with Parker’s Engineered Materials Group.

Parker plans to finance the transaction using new debt.

Following the completion of the transaction, Parker expects to maintain a high investment grade credit profile.

The transaction is not expected to impact Parker’s dividend payout target averaging approximately 30-35% of net income over a five-year period, while maintaining its record of annual dividend increases.

The transaction is expected to be completed within the next four to six months and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

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Newell Brands tumbles on outlook

Newell Brands announces resignation of three directors from board

Newell Brands exploring portfolio reconfiguration to simplify operations

Newell Brands tumbles on outlook, Stockwinners.com
Newell Brands tumbles on outlook

Newell Brands (NWL) announced preliminary estimated results for 2017.

The company currently anticipates core sales growth of approximately 0.8%, down from previous guidance 1.5% to 2.0%, and normalized EPS in the range of $2.72-$2.76, down from previous guidance $2.80-$2.85.

Sees approximately $1B of operating cash flow generated in the fourth quarter of 2017, resulting in full year operating cash flow of approximately $930M, versus previous guidance of $700M-$800M.

The company’s core sales results were impacted by an acceleration of the gap between sell-in and sell-through results due to a continuation of retailer inventory rebalancing in the U.S. and the bankruptcy of a leading baby retailer.

Margins were impacted by the negative mix effect of lower Writing sales and a reduction of fixed cost absorption due to shorter cycle runs on self-manufactured products, designed to reduce inventories and maximize operating cash flow.

Newell Brands CEO says majority of brands performing well despite difficult 2H17

“We believe that exiting non-strategic assets, reducing complexity and focusing on our key consumer-focused brands will make us more effective at unlocking value and responding to the fast-changing retail environment,” said Michael Polk, Newell Brands CEO.

“Despite a very difficult commercial outcome in the second half of 2017, the vast majority of our brands are performing well in the marketplace.

Our e-commerce business grew at a strong double-digit pace, our market shares have continued to increase and sell-through growth has accelerated with Q4 2017 growth rates ahead of Q3 2017 in the U.S., which strengthens our confidence in our brand, design and innovation-led strategy.

Importantly, our early efforts to improve working capital metrics look to have yielded good results with operating cash flow of nearly $1 billion dollars in Q4, despite the increased margin pressure from planned downtime in our factories and input cost inflation. We are committed to achieving our transformation objectives and are taking decisive action with speed to adapt our agenda to the unprecedented volatility in our retailer landscape,” Polk added.

PORTFOLIO CHANGES

Newell Brands announced that it will explore a series of strategic initiatives to accelerate its transformation plan, improve operational performance and enhance shareholder value.

Key components include: Focusing Newell’s portfolio on nine core consumer divisions with approximately $11B in net sales and $2B of EBITDA;

Exploring strategic options for industrial and commercial product assets, including Waddington, Process Solutions, Rubbermaid Commercial Products and Mapa;

Exploring strategic options for the smaller consumer businesses, including Rawlings, Goody, Rubbermaid Outdoor, Closet, Refuse and Garage, and U.S. Playing Cards;

Newell Brands exploring portfolio reconfiguration to simplify operations. Stockwinners.com
Newell Brands exploring portfolio reconfiguration

 

Execution of these strategic options would result in a significant reduction in operational complexity through a 50% reduction in the company’s global factory and warehouse footprint, a 50% reduction in its customer base and the consolidation of 80% of global sales on two ERP platforms by end of 2019.

If fully actioned, Newell Brands would expect to be an approximately $11B focused portfolio of leading consumer-facing brands with attractive margins and growth potential in global categories. These brands would leverage the company’s advantaged capabilities in brands, innovation, design and e-commerce.

The company expects proceeds after tax to be greater than that required to achieve a leverage ratio below the lower end of its current leverage ratio target range.

Newell Brands intends to begin the evaluation process immediately and expects any resulting transactions to be completed by the end of 2019.

DOWNGRADES

Barclays analyst Lauren #Lieberman downgraded Newell Brands to Equal Weight from Overweight and cut her price target for the shares to $26 from $35.

“Put simply, we’ve lost confidence,” the analyst says following this morning’s preannounced Q4, announced strategic overhaul and departure of certain board members.

Lieberman has concerns given the scale of Newell’s transformation expected in 2018. She also sees a lack of visibility around cash flow.

SunTrust said Newell reset the bar with a number of announcements today announcing Q4 results, below consensus 2018 guidance, a new strategic initiative to simplify its portfolio, and BOD changes.

The firm’s analyst actually views today’s announcements as a positive and said the news makes shares even more investable for 2018.

NWL is down 22% to $24.20.


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