Liberty Mutual Insurance announced today it has signed a definitive agreement to acquire Ironshore Inc., a premier global specialty lines company, from Fosun International Limited.
The transaction is expected to close in the first half of 2017 pending regulatory approvals and customary closing conditions. Upon closing, Liberty Mutual will acquire a 100 percent ownership interest in Ironshore. The purchase price will equate to 1.45x Ironshore's actual tangible book value as of year-end 2016, and is estimated to be approximately $3 billion. The purchase price is subject to closing price adjustments.
Once the transaction is closed, Ironshore will continue to operate with the same management team and brand, but as part of the larger Liberty Mutual organization, which has a focus on growing its specialty lines operations.
“We are pleased to have Ironshore and its proven management team led by CEO Kevin H. Kelley join Liberty Mutual,” said David H. Long, Liberty Mutual Insurance Chairman and CEO. “Ironshore has a track record of profitably underwriting global and diverse specialty risks insurance and is an ideal complement to Liberty Mutual, providing additional scale, expertise, innovation and market relationships to our $5 billion Global Specialty business.”
Ironshore, which was founded in 2006, had gross premiums written of $2.2 billion in 2015 and is one of the ten largest Excess & Surplus lines insurers in the U.S. The company, which has approximately 800 employees located in 15 countries worldwide, is organized into three operating hubs based in the United States, Bermuda and London.
“The combination of Ironshore and Liberty Mutual is a win-win proposition and value creating for both companies,” said Kevin H. Kelley, Ironshore CEO. “Ironshore will become part of another ‘A’ rated company with a global reach, a strong balance sheet, wide client base and a much greater capacity to drive profitable growth.”
Barclays Capital Inc. acted as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice to Liberty Mutual Insurance in the transaction.
*** Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) announced it has entered into a definitive agreement to acquire FairPoint Communications, Inc. (Nasdaq: FRP) in an all-stock merger transaction valued at approximately $1.5 billion, including debt. The agreement and the proposed merger have been unanimously approved by the boards of directors at both companies.
“This transaction combines two companies with extensive fiber networks and complementary strategies focusing on being the leading business and broadband solutions provider,” said Bob Udell, president and chief executive officer of Consolidated Communications. “This merger positions Consolidated to leverage its extensive product and services portfolio and consultative sales approach across 24 states bringing advanced solutions and a better experience to customers. We are well positioned to ensure a smooth transition for customers and employees as we leverage a solid track record of successful integrations.”
“I am very proud of my team and our employees and all that we have accomplished in the last several years,” said Paul Sunu, chief executive officer of FairPoint. “This transaction offers a number of benefits for FairPoint's shareholders including the enhanced scale of the combined company, the opportunity to benefit from the realization of synergies and the receipt of an attractive dividend going forward. I am confident the new combined company will accelerate our progress and bring numerous benefits to our customers, employees and shareholders. Together, FairPoint and Consolidated Communications create a highly competitive business and broadband company with a superior network to deliver a best-in-class experience to carrier, commercial and consumer customers.”
“The financial benefits associated with the combination in the form of synergies and reduced leverage provide us additional operating and strategic flexibility going forward,” Udell added. “The transaction is meaningfully accretive to free cash flow per share in the first year, strengthening the dividend payout ratio while maintaining our current dividend policy to shareholders.”
Under the terms of the agreement, FairPoint shareholders will receive a fixed exchange ratio of 0.7300 shares of Consolidated Communications common stock for each share of FairPoint common stock. This equates to a premium of 17.3 percent to the 30-day average exchange ratio as of Dec. 2, 2016. After closing, Consolidated’s shareholders will own approximately 71.3 percent of the pro forma combined company and FairPoint’s shareholders will own 28.7 percent.
On a pro forma basis, the combined company generated more than $1.5 billion in revenue and $566 million in adjusted EBITDA before synergies or $621 million after synergies for the 12 months ending Sept. 30, 2016. The combined markets are expected to strengthen Consolidated’s growth opportunities, enhancing its scale with a fiber-rich network that will extend across 24 states. Together, Consolidated Communications and FairPoint will expand upon the strong reputations each has built with its customers and in the communities they serve.
The transaction is expected to generate annual operating synergies of approximately $55 million, which are expected to be achieved within two years after completion of the merger.
FairPoint, based in Charlotte, N.C., has operations in 17 states with the largest network in northern New England. FairPoint operates a robust fiber network of approximately 21,000 fiber route miles. FairPoint had approximately $830 million in revenue for the trailing 12 months (TTM), ended Sept. 30, 2016. FairPoint has approximately 2,600 employees.
After the transaction closes, Bob Udell will continue to serve as president and chief executive officer of the combined company and one director from the FairPoint Board will join the Consolidated Communications Board of Directors. The combined company will retain the Consolidated Communications name and will be headquartered in Mattoon, Ill.
Dividend Practice
Consolidated Communications’ Board of Directors has declared a quarterly dividend of $0.38738 per share consistently for 46 quarters since its initial public offering in 2005. The Consolidated Communications Board of Directors expects to maintain its annual dividend of $1.55 per share after the transaction closes.
Debt Financing
As of Sept. 30, 2016, FairPoint had net debt of approximately $887 million. Pro forma for the transaction, the combined net debt of the combined company will be approximately $2.3 billion, which represents a 3.8x net leverage as of Sept. 30, 2016, down from Consolidated’s 4.4x net leverage as of Sept. 30, 2016. Consolidated Communications has secured committed debt financing in conjunction with the acquisition that in addition to cash on hand or other sources of liquidity, will be used to refinance FairPoint debt and pay fees and expenses associated with the transaction. Consolidated has received financing commitments from Morgan Stanley Senior Funding, Inc., MUFG, TD Securities (USA) LLC and Mizuho Bank, LTD.
Approvals and Anticipated Closing
The transaction is subject to standard closing conditions including federal and state regulatory approvals and the approval of both Consolidated Communications’ and FairPoint’s shareholders. The merger is expected to close by mid-2017.
Morgan Stanley & Co. LLC acted as lead financial advisor on the transaction and rendered a fairness opinion to the Board of Directors of Consolidated Communications. Wells Fargo Securities, LLC and Foros acted as additional financial advisors and Schiff Hardin LLP acted as legal advisor to Consolidated Communications. Evercore acted as the sole financial advisor to FairPoint and rendered a fairness opinion to the Board of Directors of FairPoint. Paul Hastings acted as legal advisor to FairPoint.
*** CEMEX (NYSE: CX) announced that one of its indirect subsidiaries, Sierra Trading, will present an offer and take-over bid (the “Offer”) to all shareholders of Trinidad Cement Limited, a company publicly listed in Trinidad and Tobago, Jamaica and Barbados, to acquire up to 132,616,942 ordinary shares in TCL for TT$4.50 in cash per TCL share, which together with Sierra’s existing share ownership in TCL of approximately 39.5%, would, if successful, result in Sierra holding up to 74.9% of the equity share capital in TCL. Full acceptance of the Offer would result in a cash payment by Sierra of approximately TT$597 million (U.S.$89 million). The Offer price represents a premium of 33.1% over the December 1, 2016, closing price of TCL’s shares in the Trinidad and Tobago Stock Exchange.
Among other conditions, the Offer will be conditional on Sierra acquiring at least an amount of TCL shares that would allow CEMEX to consolidate TCL. Unless extended, the Offer period is expected to close on January 10, 2017.
If the Offer is successful, TCL will continue operating as usual. Additionally, TCL will be maintained as a publicly listed company on the Trinidad and Tobago Stock Exchange with the benefit of a strong local shareholding together with the enhanced benefit of proven management and operational expertise from CEMEX.
TCL’s main operations are in Trinidad and Tobago, Jamaica and Barbados. TCL is the majority shareholder of Caribbean Cement Company Limited (“CCCL”), a main cement producer in Jamaica.
As of September 30, 2016, TCL and its subsidiaries had EBITDA of approximately U.S.$77 million for the last twelve months, net debt of approximately U.S.$113 million, representing a net financial leverage of approximately 1.5x. If the Offer is successful, TCL would be consolidated by CEMEX.
“This Offer represents a clear sign of our commitment to TCL and the region. In addition, although we believe that our Offer is attractive given the premium to the current share price, as part of this commitment, it is also important to us that TCL remains a listed company, so that local investors can continue to benefit from the development of TCL in the future,” said Fernando A. Gonzalez, CEO of CEMEX. “We look forward to continuing our strong relationship with TCL.”
CEMEX is a global building materials company that provides high quality products and reliable service to customers and communities in more than 50 countries. Celebrating its 110th anniversary, CEMEX has a rich history of improving the well-being of those it serves through innovative building solutions, efficiency advancements, and efforts to promote a sustainable future.
*** Federal-Mogul Motorparts, a division of Federal-Mogul Holdings Corporation (Nasdaq: FDML), announced the acquisition of the Beck/Arnley brand and certain associated assets. Based in Smyrna, Tenn., Beck/Arnley is a leading provider of premium OE quality parts and fluids for foreign nameplate vehicles in North America. The announcement marks a significant product line expansion that is consistent with Federal-Mogul Motorparts’ strategy to deliver the broadest range of high quality products to the global independent aftermarket.
The acquisition, which is effective immediately, adds several complementary product lines to the Federal-Mogul Motorparts product portfolio, such as Beck/Arnley fluids, engine management, cooling, electrical parts and electronic components. In addition, the acquisition adds additional foreign nameplate coverage to Federal-Mogul Motorparts’ current offerings. To ensure continued operational excellence, Beck/Arnley will maintain its own team and independent distribution organization in Smyrna.
“We welcome the employees of Beck/Arnley to the Federal-Mogul Motorparts team. With this acquisition, we’re adding a recognized and successful foreign nameplate brand to Federal-Mogul’s existing globally-recognized brand portfolio,” said Paul Stanecki, vice president, quality & aftermarket solutions, Federal-Mogul Motorparts. “We’re also adding a nimble, successful organization to our own, which will help us continue to meet the needs of automotive service providers, who will now benefit from the addition of well-respected Beck/Arnley products to Federal-Mogul Motorparts’ extensive product portfolio. Federal-Mogul Motorparts also brings its research and development, engineering, global sourcing, sales and marketing capabilities to the table, which we believe will expand Beck/Arnley’s reach and presence in the market.
“Through the combination of our two organizations, our customers will now have streamlined access to OE-pedigree parts from Federal-Mogul Motorparts’ global operations, thus expanding and strengthening Beck/Arnley’s OE quality product offerings which are so critical to the foreign nameplate market,” Stanecki added.
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