Sponsored by Odyssey Corporate Finance
Contact: Tom McCarthy, Director, Odyssey Corporate Finance
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04 Oct 18. Smiths Group to buy aircraft engine parts maker United Flexible in $345m deal. Smiths Group (SMIN.L) said on Thursday it would buy United Flexible Inc, a U.S.-based maker of parts for aircraft engines, from private equity firm Arlington Capital Partners for an enterprise value of $345m. United Flexible, which has operations in the United States and Europe, makes products that are used in Airbus (AIR.PA) A320neo aircraft and United Technologies’ (UTX.N) Pratt & Whitney PW1000G and F135 engines. The deal comes after the British engineering group’s talks with U.S.-based ICU Medical Inc (ICUI.O) over a possible £7bn-plus merger of their healthcare businesses fell through last month. Smiths Group expects to fund the deal from existing cash and bank facilities, and said that United Flexible would be integrated into its Flex-Tek division, which provides heating components to the aerospace, construction and medical industries. United Flexible is expected to generate sales of $157m and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $32m for 2018, it said. Gleacher Shacklock LLP was financial adviser to Smiths Group on the transaction. (Source: Reuters)
03 Oct 18. Houlihan Lokey Advises S2 Security. Houlihan Lokey announced that S2 Security has been acquired by UTC Fire & Security Americas Corp., Inc. (UTC), a subsidiary of United Technologies Corp. (NYSE:UTX). The transaction closed on October 1, 2018. S2 Security is the leading developer of software-based enterprise physical security solutions, including access control, video surveillance, event monitoring, digital signage, live internet-sourced real-time data, and information feeds. The company offers a complete security management ecosystem delivered on premises or via cloud-based and mobile applications. S2 is the security technology solution of choice for education, healthcare, pharmaceutical, technology, Fortune 500, and SMB end users around the world. Founded in 2003 and headquartered in Framingham, Massachusetts, S2 employs approximately 130 employees globally. This transaction reinforces key trends in the security technology market:
- Strong organic growth and financial performance associated with unified security management platforms that integrate access control, video surveillance, and situational awareness within an integrated ecosystem
- Security integrators and end users embracing the benefits of mobile and cloud-based security management systems
- High level of strategic interest in technology-enabled security companies of size and scale that own every aspect of their technology portfolio
UTC Fire & Security, a subsidiary of United Technologies Corp., provides a portfolio of safety and security solutions for residential, commercial, and enterprise applications. UTC’s world-class fire, safety, and security solutions include alarms, extinguishers, detectors, and access control and video surveillance systems. UTC goes to market under a variety of trusted brands, including Lenel, Interlogix, Edwards, and Kidde.
This transaction exemplifies the continued success of Houlihan Lokey’s dedicated coverage of the security technology market, with complementary expertise in physical security, software, and cloud-based platforms to deliver an outstanding result to selling shareholders.
02 Oct 18. Current NRC Group Owner J.F. Lehman & Company Announces $50m Strategic Investment in Hennessy Capital’s Proposed Business Combination. Hennessy Capital Acquisition Corp. III (NYSE American: HCAC.U, HCAC, HCAC.WS) (“HCAC” or the “Company”) today announced that investment affiliates of J.F. Lehman & Company, LLC (“JFLCo”) have committed to a $50m equity investment in the proposed business combination (the “Business Combination”) with NRC Group Holdings, LLC (“NRC Group”).
“JFLCo’s investment in the Company underscores the compelling opportunity of the proposed business combination,” said Daniel J. Hennessy, Chairman and CEO of HCAC. “JFLCo has owned NRC since 2012 and played an instrumental role in driving the company’s strategy and value creation plan to date, including the merger with Sprint to form NRC Group in June of this year. We expect their representation on our board and now their strategic investment to further support our growth plan.”
Commenting on its investment, JFLCo Partner and planned HCAC Board Member C. Alexander Harman said: “We believe the transaction with HCAC and subsequent public listing will strengthen NRC Group’s ability to achieve its growth targets. NRC Group is a unique business characterized by its consistent and repeatable financial performance and significant barriers to entry. Along with supportive market conditions and a strong industry outlook, we believe this combination to be highly compelling.”
JFLCo’s equity investment, which consists of both preferred and common stock, is being made pursuant to the terms of the previously disclosed subscription agreement dated June 25, 2018 between the Company and JFLCo and will close substantially concurrent with the Business Combination, which the parties expect to complete promptly following HCAC’s special meeting of stockholders scheduled for October 17, 2018.
The Business Combination is subject to customary closing conditions, including Company stockholder approval and the receipt of proceeds from the proposed equity financing activities. Following the satisfaction of these customary closing conditions and upon consummation of the Business Combination, HCAC will trade on the NYSE American under the ticker NRCG.
About NRC Group and JFLCo
NRC Group is a portfolio company of JFLCo, a leading middle‐market private equity firm focused exclusively on the aerospace, defense, maritime, government and environmental sectors. NRC Group is a global provider of comprehensive environmental, compliance and waste management services to the marine and rail transportation, general industrial and energy markets. NRC Group’s broad range of capabilities includes standby, environmental and waste disposal services, and enable it to provide a global reach to meet the critical, non-discretionary needs of its more than 5,000 customers across diverse end markets. NRC Group was established in June 2018 through the combination of two businesses, National Response Corporation and Sprint Energy Services, both previously operating separately under the ownership of investment affiliates of JFLCo. For more information, please visit www.nrcc.com. For more information on JFLCo, please visit www.jflpartners.com. No portion of the websites referenced in this paragraph is incorporated by reference into or otherwise deemed to be a part of this news release.
About Hennessy Capital Acquisition Corp. III
Hennessy Capital Acquisition Corp. III is a blank check company founded by Daniel J. Hennessy and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company’s acquisition and value creation strategy is to identify, acquire and, after its initial business combination, build an industrial/infrastructure manufacturing, distribution or services business.
The proposed Business Combination will be submitted to stockholders of the Company for their consideration. The Company has filed with the Securities and Exchange Commission (the “SEC”) a definitive proxy statement on October 1, 2018 in connection with the Business Combination and related matters and will mail the definitive proxy statement and other relevant documents to its stockholders as of the October 1, 2018 record date established for voting on the proposed transaction. The Company’s stockholders and other interested persons are advised to read the definitive proxy statement, in connection with the Company’s solicitation of proxies for its special meeting of stockholders to be held to approve, among other things, the Business Combination, because this document will contain important information about the Company, NRC Group and the Business Combination. Stockholders may also obtain a copy of the definitive proxy statement as well as other documents filed with the SEC regarding the Business Combination and other documents filed with the SEC by HCAC, without charge, at the SEC’s website located at www.sec.gov or by directing a request to Nicholas A. Petruska, Executive Vice President, Chief Financial Officer, 3485 North Pines Way, Suite 110, Wilson, Wyoming 83014 or by telephone at (312) 803-0372.
Participants in the Solicitation
The Company, JFLCo, NRC Group, and certain of their respective directors, executive officers and other members of management and employees may, under SEC rules, be deemed to be participants in the solicitations of proxies from the Company’s stockholders in connection with the Business Combination. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of the Company’s stockholders in connection with the Business Combination is set forth in the Company’s definitive proxy statement dated October 1, 2018 on file with the SEC. You can find more information about the Company’s directors and executive officers in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 2, 2018. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests are included in the Company’s definitive proxy statement, which can be obtained free of charge from the sources indicated above. (Source: BUSINESS WIRE)
01 Oct 18. Gulfstream Officially Acquires Nordam G500 and G600 Nacelle Line. Gulfstream Aerospace Corp. today announced that it has acquired The NORDAM Group Inc. manufacturing line that produces nacelles for the Gulfstream G500 and Gulfstream G600. Gulfstream had been operating the Tulsa, Oklahoma-based line since early September as part of an agreement with NORDAM to address its July bankruptcy filing. NORDAM had been producing the nacelles for Gulfstream’s G500 and G600 engine supplier, Pratt & Whitney Canada.
NORDAM filed an agreement in a Delaware bankruptcy court in September that allowed Gulfstream to restart the manufacturing program and provided for the eventual transfer of the program’s assets to the Savannah-based business-jet manufacturer. A U.S. bankruptcy judge approved the transfer Sept. 26, allowing Gulfstream to complete the acquisition. Further details of the agreement will not be disclosed.
“Gulfstream has a 60-year history of manufacturing and product excellence that will serve our customers well as we assume responsibility for nacelle production,” said Mark Burns, president, Gulfstream. “The manufacturing of this component is firmly in our wheelhouse, especially since we also manufacture the wings and empennages for these aircraft.”
The G500 earned its type and production certificates from the U.S. Federal Aviation Administration (FAA) on July 20. The aircraft features Pratt & Whitney Canada’s PW814GA engine, while the G600 has the PW815GA engine. Both the engines and nacelles have FAA and Transport Canada certification. Gulfstream delivered the first G500 aircraft Sept. 27. The G600 is progressing toward certification this year and customer deliveries in 2019. (Source: ASD Network)
01 Oct 18. General Electric replaces CEO with outsider; shares soar. General Electric Co (GE.N) ousted Chief Executive Officer John Flannery in a surprise move on Monday, replacing him with outsider and board member Larry Culp, and said it would take a roughly $23bn charge to write off goodwill in its power division, primarily from a large 2015 acquisition. The struggling energy, health and transportation conglomerate also said it would fall short of its forecast for free cash flow and earnings per share for 2018 due to weakness in its power business, something analysts had expected.
GE shares jumped 7 percent to close at $12.09 as investors bet that Culp could re-energize the GE brand and more quickly transform its portfolio. The stock was the top percentage gainer on the S&P 500 .SPX. The shares had more than halved since Flannery, a three-decade GE veteran, became CEO in August 2017 to replace Jeff Immelt, who had led GE since 2001. With a market capitalization below $100bn as of Friday, GE was worth less than a fifth of its peak value a generation ago.
GE Power’s falling profits last year forced GE to slash its overall profit outlook and cut its dividend for only the second time since the Great Depression.
GE’s board, meeting in the last few days, unanimously picked Culp as its new CEO. Culp, 55, who was named to GE’s board in February, was CEO of industrial equipment supplier Danaher Corp (DHR.N) from 2000 to 2014, helping grow the company into a broader conglomerate through a series of acquisitions, while also growing earnings.
Some analysts said that GE Power likely missed financial targets for the third quarter, contributing to Flannery’s ouster. GE, scheduled to report results on Oct. 25, declined to comment.
The broad strategies are likely to be similar because the plan laid out by Flannery was made in conjunction with heavy involvement from the board, which included Culp, said Gabelli & Co analyst Justin Bergner.
SHADOW OF ITS FORMER SELF
GE’s board was unhappy with the pace of the company’s turnaround under Flannery, and when the size of the writedown in the power plant division, which makes electric generating equipment, became apparent, the board was persuaded to seek a new CEO, according to a person familiar with the matter who requested anonymity to discuss confidential deliberations.
However, GE will not be changing its announced breakup plan, which calls for spinning off healthcare and shedding its stake in oil services company Baker Hughes (BHGE.N), the source added.
Culp indicated that he will tackle the company’s problems aggressively. “We will move with urgency. … We have a lot of work ahead of us to unlock the value of GE,” he said in a statement.
The troubles in the power plant unit have been intensifying, as Reuters reported in July, with the news that one of its most valuable clients, Saudi Arabia, was lining up competitors to bid against GE for lucrative power plant work.
GE doubled down on fossil fuels in 2015 under Immelt with the $10.3bn purchase of French group Alstom SA’s (ALSO.PA) power business. The deal expanded GE’s exposure to gas, coal and nuclear power. It added employees, dozens of factories and service centers at a time when GE was trying to cut costs.
“The board is signaling to the market that we are not going to give anyone free reign like we did with Jeff Immelt,” said Morningstar analyst Joshua Aguilar.
The power division’s outlook appeared to worsen last month when GE said several power plants equipped with its newest turbines had to be shut down because of a part failure.
Changing CEOs “won’t fix short-term problems at power, but Larry, as an outsider, will be able to make the difficult decisions on cost,” said Scott Davis, an analyst at Melius Research in New York. “GE is bloated and its culture is destroyed.”
Davis said the stock price has probably already adjusted to expectations of no contribution from power.
A slimmed down General Electric – a 126-year-old conglomerate that was once the most valuable U.S. corporation and a global symbol of American business power — will focus on jet engines, power plants and renewable energy.
In June, GE lost its spot in the blue-chip Dow Jones Industrial Average .DJI after over a century.
“Investors grew impatient with the lack of improvement and with the sheer scale of the problems uncovered. However, these problems were not created under [Flannery’s] tenure,” CFRA analyst Jim Corridore said in a note. “The market seems to be welcoming a change in leadership but the new CEO will be facing many of the same problems.”
GE said the power division’s goodwill balance is about $23bn and the impairment charge would eliminate most of it. The non-cash charge primarily relates to GE’s acquisition of power assets from Alstom in 2015, GE said. GE’s long stock slide means the once-largest U.S. industrial company is now only sixth in terms of market capitalization, behind Boeing Co (BA.N), 3M Co (MMM.N), Honeywell International Inc (HON.N), United Technologies Corp (UTX.N) and others. (Source: Reuters)
01 Oct 18. U.S. approves United Tech purchase of Rockwell Collins. U.S. aerospace and industrial company United Technologies Corp (UTX.N) has won U.S. approval to buy avionics maker Rockwell Collins Inc (COL.N), as long as it sells certain assets, with Chinese approval of the deal still pending. The acquisition, announced in September 2017, would be the largest in aerospace history and create a new player in the top echelon of suppliers to Boeing (BA.N), Airbus (AIR.PA), Bombardier (BBDb.TO) and other plane makers. To win U.S. approval for the $23bn deal, UTC agreed to sell two Rockwell Collins’ businesses – one that sells systems that de-ice planes and another that sells trimmable horizontal stabilizer actuators that help aircraft maintain altitude, the Justice Department said on Monday.
The deal won antitrust approval from the European Union in May, but it is still awaiting a go-ahead from Beijing.
UTC chief executive Gregory Hayes said in mid-September that the Chinese would not approve the proposed transaction until the Justice Department signed off on it. China’s antitrust enforcers have already killed a massive deal this year. In July, frustrated with Chinese regulatory delays, Qualcomm let a merger agreement with NXP expire, scrapping the deal. That said, Beijing has approved others, including Toshiba Corp’s (6502.T) sale of its chip unit for $18bn to a consortium led by U.S. private equity firm Bain Capital. (Source: glstrade.com/Reuters)
02 Oct 18. Justice Department Requires UTC to Divest Two Aerospace Businesses to Proceed With Acquisition of Rockwell Collins. The U.S. Department of Justice has announced that it will require United Technologies Corporation (UTC) to divest two businesses critical to the safe operation of aircraft to proceed with its acquisition of Rockwell Collins. First, UTC will divest Rockwell Collins’s pneumatic ice protection systems business. Pneumatic ice protection systems remove ice from the wing of an aircraft by means of an inflatable rubber de-icing boot. Second, UTC will divest Rockwell Collins’s trimmable horizontal stabilizer actuators (THSAs) business. THSAs ensure that an aircraft maintains altitude during flight by adjusting the angle of the horizontal tail surface. The Department’s Antitrust Division has filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to enjoin the proposed acquisition, along with a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit. (Source: glstrade.com)
01 Oct 18. Reuters reported yesterday that Humvee maker AM General is up for sale, sources say. AM General has put itself up for sale and has hired investment bank Macquarie Group Ltd to seek potential bidders in a deal that could value the builder of Humvee military vehicles at more than $2bn, people familiar with the matter said on Monday.
Potential bidders include competitors in the military ground vehicle market, such as General Dynamics (GD.N), Oshkosh Corp (OSK.N) and BAE Systems PLC (BAES.L) according to two people familiar with the matter. Auto makers like FIAT Chrysler (FCHA.MI) and General Motors Co (GM.N) may also be potential buyers, one of the sources added.
AM General and Macquarie did not immediately return a request for comment. General Dynamics and BAE declined to comment. Representatives for Oshkosh did not immediately respond to a request for comment. The South Bend, Indiana-based company is currently owned by private equity firms, including MacAndrews & Forbes Inc and The Renco Group Inc. A possible sale of AM General follows a rash of deals over the past 18 months among defense contractors. But relatively fewer makers of defense equipment have gone on the auction block.
Last year, United Technologies Corp (UTX.N) acquired Rockwell Collins for $30bn, and in March, TransDigm Group (TDG.N) continued its acquisition spree with a $525mi deal for Extant Components Group.
AM General could fetch about 10 times its annual earnings of $160m, one of the people said.
The company’s favorable tax treatment because of its current status as an limited liability corporation, would allow a buyer to reduce the company’s taxable earnings for 15 years. That coupled with recent contract awards could push the ultimate value of the company to over $2bn in a sale.
The sale, should it happen, comes as the U.S. Army is gearing up for a broad effort to modernize its forces, including seeking prototypes of its Next-Generation Combat Vehicle in fiscal year 2022.
Last month, AM General was awarded an Army contract for as many as 2,800 new M997A3 High Mobility Multipurpose Wheeled Vehicle (HMMWV) ambulances. The contract could be worth as much as $800m if all options were exercised, AM General said at the time.
Last year, the Pentagon awarded AM General a $550m contract to deliver HMMWVs for use as protected weapons carriers, cargo transporters and ambulances to Afghanistan, Iraq, Ukraine, Jordan, Slovenia, Bahrain, Columbia, Bosnia and Kenya as a part of a larger Foreign Military Sales agreement. The sale of AM General which designs, engineers and manufactures specialized vehicles for military and commercial customers, offers an opportunity to purchase a prime contractor that delivers a finished product to the Pentagon, and not just an add-on system or service. Mergers and acquisitions news service Dealreporter published news of the talks last week. (Source: glstrade.com/Reuters)
30 Sep 18. ON Semiconductor Corporation (Nasdaq: ON) and Fujitsu Semiconductor Limited today announced that ON Semiconductor will complete the incremental 20 percent share purchase of Aizu Fujitsu Semiconductor Manufacturing Limited, Fujitsu’s 8-inch wafer fab in Aizu-Wakamatsu, on Oct. 1, 2018. ON Semiconductor will hold a 60 percent majority ownership in the joint venture, and a brand transition will occur following the Oct. 1 close. Consequently, the company name of Aizu Fujitsu Semiconductor Manufacturing Limited will transition to ON Semiconductor Aizu Co., Ltd on Oct. 1, 2018.
The two companies entered into an agreement in 2014 under which ON Semiconductor obtained a 10 percent ownership interest in Fujitsu’s Aizu 8-inch fab. Initial transfers began in 2014, and successful production and ramp up of wafers began in June 2015. In October 2017, the two companies further agreed on an incremental share purchase of Fujitsu’s Aizu 8-inch fab by ON Semiconductor, and based on the agreement ON Semiconductor increased its ownership interest in Fujitsu’s Aizu 8-inch fab to 40 percent in April 2018. ON Semiconductor continues to increase production at the Aizu 8-inch fab, and both companies believe that further strategic partnership will maximize the value for both companies. ON Semiconductor plans to increase its ownership to 100 percent in the first half of 2020. This additional capacity will allow ON Semiconductor to continue to scale its operations to meet forecasted demand and enable increased supply chain flexibility. (Source: BUSINESS WIRE)
24 Sep 18. Can OneWeb Cross the Valley of Death? An in depth review/report is available from NSR regarding OneWeb and the company’s finances, plans, changes of schedule and cost that has raised a few eyebrows. NSR’s report The Bottom Line, Can OneWeb Cross the Valley of Death? addresses OneWeb, with its FCC filing approval in 2017, which re-introduced the concept of offering global, affordable, high speed Internet with a bigger – and in some respects – better LEO satellite constellation than its predecessors. In terms of size and (advertised) capability, OneWeb is leading the LEO Constellations 2.0 era. In many ways, the future trends of the industry – directly or indirectly – depends on the success of OneWeb as it sets out to open new doors, raising confidence amongst investors in similar new ventures.
Amidst other players in this domain (past and present), OneWeb has accomplished a significant feat by raising the most funding – $1.7bn – offering it a tremendous benefit over other similar LEO constellations. However, despite this notable amount, the question remains – is it enough to support and sustain this mega constellation, or is it just buzz and hype? Despite the diversity in various differing business models, all new ventures follow a similar general trend, which is encapsulated in the start-up lifecycle. One of the biggest challenges for most start-ups is to endure and survive the “valley of death” phase. This is the period when the start-up idea starts to move from conceptual phase to the implementation stages. NSR considers OneWeb is currently placed between the technology transfer and product launch phases and will soon enter the said valley. Learn more here. (Source: Satnews)
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Odyssey is an independent corporate finance firm which advises on acquisitions, business sales, management buy-outs and raising finance, typically in the £5m to £100m range. We have extensive experience in the niche manufacturing sector with our most recent completed deal being the sale of MacNeillie to Babcock Plc. Details can be seen at: http://www.odysseycf.com/case-study-macneillie/
As a result of this and related projects we have developed relationships with buyers and funders looking to acquire or invest in the sector. We would be happy to share further insights into the sector and to carry out reviews of businesses whose shareholders are considering an exit, acquisition or fundraise.
The review will include:
* Valuation
* Market review
* Comparative deals and structures
* Initial thoughts on buyers/ investors/ targets
* MBO viability
* Feasibility review and identification of any issues to be addressed pre-deal
There is no charge for this review.
If this is of interest we would be happy to meet at your convenience.
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