Notable Mergers and Acquisitions of the Day 9/24: (SBUX) (STRZA)/(FOXA) (ACOR) (OBCI)
September, 25th 2014
Starbucks Coffee (Nasdaq: SBUX) announced that it will acquire the remaining 60.5% share of Starbucks Coffee Japan, Ltd. (Starbucks Japan) that the company currently does not own through a two-step tender offer process, further elevating Starbucks growth and innovation in its second-largest market when measured by retail store sales. The acquisition positions Starbucks to accelerate growth across multiple channels in Japan, including the potential introduction of new concepts, such as Teavana. Before the end of the first quarter of fiscal year 2015, Starbucks expects to have a controlling interest and will consolidate Starbucks Japan into the company’s results. Starbucks expects this transaction will be immediately accretive on a non-GAAP basis when excluding certain items noted later in this release. Starbucks Japan is a joint venture between Starbucks and Sazaby League that operates Starbucks branded retail stores in Japan. Since the inception of their joint venture agreement in 1995, Starbucks and Sazaby together introduced the coffeehouse experience to Japanese customers and built one of Starbucks top-performing markets globally. Starbucks Japan’s business today is marked by strong brand recognition and deep customer loyalty built through delivering an unparalleled Starbucks Experience. Starbucks stores have been remarkably consistent performers despite ongoing macro-economic challenges in Japan.
“Nearly 20 years ago we opened the first Starbucks store outside of North America in Tokyo’s Ginza district with lines around the block,” said Howard Schultz, chairman, president and ceo of Starbucks Coffee Company. “Japan is a market we know well and care deeply about, with more than 25,000 partners serving millions of customers every week at more than 1,000 stores. Full ownership of Starbucks Japan enables us to build on the amazing foundation of customer trust and loyalty our partners have achieved by continuing to take care of our people, delivering the highest quality coffee and innovating in product, store design and the digital experience.”
“We would like to thank all of our partners in Japan who wear the green apron with pride and deliver the Starbucks Experience to our customers each and every day,” commented John Culver, group president China/ Asia Pacific, Channel Development and Emerging Brands. “Their efforts have built an admired brand and delivered the strong financial results that have made Starbucks Japan a meaningful contributor to the growth and profitability in our China/ Asia Pacific segment. We wish Sazaby the best and sincerely appreciate the operational excellence and leadership that they have contributed to Starbucks Japan’s success and the solid foundation they have helped us build for the opportunities ahead.”
Over the summer, Sazaby approached Starbucks about selling its Starbucks Japan ownership stake to Starbucks and exiting the business in a smooth and orderly manner in advance of the expiration of Starbucks Japan’s retail franchise rights. Starbucks credits Sazaby with establishing and growing Starbucks Japan’s healthy business and is excited for this next chapter in Starbucks Japan’s evolution which will leverage existing infrastructure, systems and expertise to continue disciplined retail growth and expanded presence in other channels.
“It has been an honor for Sazaby to be part of the Starbucks family for nearly two decades,” said Masatoku Mori, President and Representative Director, Sazaby. “We are deeply grateful for the opportunity we have had to introduce the Starbucks Experience and the world’s best coffee to Japan. We have full confidence that Starbucks will continue to care for our dedicated partners, loyal customers and neighboring communities with the same personalized attention and respect they’ve provided since opening our first Starbucks store in 1996.”
The first step in the two-step tender offer process begins with Sazaby tendering its shares, which will commence on September 26th. The purchase price for Sazaby’s 39.5% stake is ¥965 per share, for a total of ¥55 billion, or approximately $505.0 million with Japanese Yen converted into US Dollars at a reference conversion rate of 108.93 JPY to USD. Upon final settlement of this first tender offer step, which is anticipated to occur during the middle of Starbucks first quarter of fiscal 2015, Starbucks will own a controlling 79% interest in Starbucks Japan.
Shortly after the settlement of the first step in the tender offer and following the release of Starbucks Japan’s second quarter earnings results, Starbucks will initiate the second step for the remaining 21% ownership interest held by public shareholders and option holders of Starbucks Japan’s common stock. The tender offer purchase price for this second step is ¥1,465 per share, for a total of ¥44.5 billion, or approximately $408.5 million at the above referenced conversion rate. The public price per share of ¥1,465 represents an 11.6% premium to the 30-day average price of Starbucks Japan’s stock, a 4.7% premium to the closing price on Monday, September 22, and a 51.8% premium to the price Starbucks is paying Sazaby for its shares.
All steps of this tender offer process have been unanimously approved by the boards of directors of Starbucks, Sazaby and Starbucks Japan, and the transactions are expected to be fully completed during the first half of calendar 2015.
The consolidation of Starbucks Japan’s financial results into Starbucks financials will commence after the final settlement of the first step of the tender offer, at which time Starbucks will record the required purchase accounting adjustments, such as the step-up in fair value of Starbucks existing ownership interest in Starbucks Japan, as well as newly acquired tangible and intangible assets. This information will be included in Starbucks first quarter of fiscal 2015 externally reported financial results.
Financial targets for Starbucks fourth quarter and fiscal year 2014 provided in conjunction with Starbucks 2014 third quarter earnings on July 24th are unchanged as a result of this transaction. Starbucks expects this transaction to be slightly accretive to the company’s fiscal year 2015 non-GAAP financial results, when excluding: 1) an anticipated acquisition-related gain in the first quarter of fiscal 2015 resulting from a fair value adjustment of Starbucks current 39.5% ownership interest in Starbucks Japan; 2) ongoing amortization expense of significant acquired intangible assets related to the transaction; and 3) transaction and integration costs.
* Starz (Nasdaq: STRZA) has hired an investment bank to explore a possible sale of the company, the Wall Street Journal reported Wednesday. Yesterday, Starz met with Twenty-First Century Fox (Nasdaq: FOXA) to discusses the possibility of a deal although source called the meeting "courtesy" and said Twenty-First Century Fox is not interested in a takeover of the company.
* Acorda Therapeutics (Nasdaq: ACOR) announced that it entered into an agreement to acquire Civitas Therapeutics, a privately-held biopharmaceutical company, for $525 million in cash. Acorda will obtain worldwide rights to CVT-301, a Phase 3 treatment candidate for OFF episodes of Parkinson’s disease (PD). The acquisition also includes rights to Civitas’ proprietary ARCUSTM pulmonary delivery technology and manufacturing facility with commercial-scale capabilities based in Chelsea, MA.
“This acquisition marks a great day for Acorda and Civitas. Both companies share a passion for developing novel therapies that can restore function to people with neurological diseases. We also see substantial synergies between our capabilities, people and pipelines,” said Ron Cohen, M.D., Acorda's President and CEO. “The acquisition adds an exciting product candidate to Acorda’s pipeline that addresses a significant unmet need in Parkinson’s disease. It also leverages Acorda’s existing development and commercial capabilities and creates an opportunity for us to develop a global presence. In addition, Civitas’ ARCUS technology adds a proprietary platform with the potential for future development opportunities.”
Dr. Cohen added, “CVT-301 is a potentially transformative therapy for people with Parkinson’s disease to rapidly and predictably treat OFF episodes. Strongly positive data from a recent Phase 2b trial, together with a clearly defined regulatory pathway and extensive IP protection, make this a compelling opportunity, with estimated U.S. sales expected to exceed $500 million.”
There are approximately one million people in the U.S. and between seven to ten million worldwide diagnosed with PD. Symptoms include tremors at rest, rigidity and impaired movement. The current standard of care is oral levodopa (L-dopa). While efficacious, there are significant challenges in creating a dosing regimen that consistently maintains drug levels within a therapeutic range. This can lead to unexpected and rapid return of PD symptoms, referred to as OFF episodes. These are poorly addressed by available therapies.
CVT-301 is a system comprised of a dry powder L-dopa formulation that is contained within blister-packed capsules and administered via a proprietary, pocket-size, reusable inhaler. CVT-301 can provide rapid delivery of L-dopa in conjunction with a patient’s optimized oral L-dopa regimen.
The pivotal Phase 3 study for treatment of OFF episodes in people with PD is expected to begin enrolling in early 2015 and if successful, a filing for regulatory approval in the United States is expected by the end of 2016.
“We are excited about collaborating with our new colleagues at Acorda to continue development of CVT-301. Our shared conviction in the potential of CVT-301 and the ARCUS technology, combined with a mutual passion for improving the lives of people with neurological diseases, make this acquisition an ideal match of expertise, vision and culture. We are proud of what our team at Civitas achieved with the successful development of CVT-301 through Phase 2b,” said Mark Iwicki, CEO of Civitas Therapeutics.
Of the total consideration, $35 million will be used to pay costs related to a Civitas change-in-control. Subject to customary closing conditions, the acquisition is expected to be completed in the fourth quarter of 2014.
MTS Health Partners, L.P. and Lazard served as Acorda Therapeutics' financial advisors, and Cadwalader, Wickersham & Taft LLP served as its legal advisor in connection with the transaction. J.P. Morgan and BofA Merrill Lynch served as Civitas Therapeutics’ financial advisors and Ropes & Gray LLP served as its legal advisor.
* Ocean Bio-Chem, Inc. (Nasdaq: OBCI) announced the acquisition, of the membership interest in OdorStar Technology, LLC. (OdorStar) that it previously did not own from its joint venture partner, BBL Distributors, LLC (BBL). As a result of the acquisition, OdorStar is now a wholly-owned subsidiary of Ocean Bio-Chem.
OdorStar owns patents relating to a device for producing chlorine dioxide. The Company markets disinfectant products incorporating the device under the brand name Performacide®.
Under the agreement relating to the acquisition of the membership interests, Ocean Bio-Chem provided a cash payment to BBL and released BBL from certain indebtedness and other monetary claims, while BBL released a Company subsidiary from certain royalty claims. BBL was also provided purchase rights with regard to products containing the patented device.
Ocean Bio-Chem, Inc. President and CEO Peter Dornau stated: "The acquisition gives our company complete ownership of OdorStar's patents. In addition, as a result of the agreement, the Company also has exclusive rights to the Performacide® trade name. We are optimistic that Performacide® will begin to contribute to our earnings in 2015."
Mr. Dornau continued: "The Company will highlight Performacide® at the International Sanitary Supply Association (ISSA)/Interclean trade show in Orlando, Florida, which is to be held November 5-7, 2014."
On August 19, 2014, the Center for Disease Control and Prevention (CDC) issued interim guidance for environmental infection control in hospitals for the Ebola virus. The CDC recommendations include use of a U.S. Environmental Protection Agency (EPA) registered hospital disinfectant with a label claim on non-enveloped viruses (such as norovirus, rotovirus, adenovirus and poliovirus) for surfaces in rooms of patients with suspected or confirmed Ebola virus infection. The EPA has accepted labeling for Performacide® claiming effectiveness as, among other things, a viruscide against the non-enveloped viruses referred to above, as well as other viruses, and a disinfectant against a number of different types of bacteria. Performacide® is registered with the EPA and 42 states; registrations are pending in the other states.