KKR Transaction Maximizes Value and Execution
Certainty for CIRCOR Shareholders
KKR, a leading global investment firm, today reaffirmed its
affiliates’ (such affiliates referred to herein as “KKR”) intention
to acquire CIRCOR International (“CIRCOR” or the “Company”) and
issued the following statement:
KKR is confident that its transaction to acquire CIRCOR
maximizes shareholder value while minimizing regulatory, market,
and industry risks. In sharp contrast to Arcline Investment
Management, whose funds own a direct competitor of CIRCOR called
Fairbanks Morse Defense (“FMD”), KKR believes its transaction
presents no risk of antitrust delays or failure to close at the
expense of CIRCOR shareholders given the lack of competitive
overlap. This is particularly important in the current regulatory
climate given heightened scrutiny around consolidation between
competing suppliers of the Defense Industrial Base. Any transaction
delays and uncertainty associated with antitrust considerations can
come at a material cost to CIRCOR shareholders, including
significant time value of money impact.
The KKR transaction is expected to close in the fourth quarter
of 2023. Any reasonable antitrust analysis indicates that a
transaction with funds that control a direct competitor to CIRCOR,
even if it receives regulatory approval which is by no means
certain, would close no sooner than the second half of 2024. KKR
and CIRCOR submitted their Hart-Scott-Rodino filings on June 20,
2023, and all other regulatory filings have been moving forward
smoothly.
KKR has also agreed to eliminate third party financing risk from
its transaction by providing a full equity backstop of the
transaction — something that few other buyers could offer and of
significant value to CIRCOR’s shareholders particularly in today’s
uncertain financing markets. Arcline’s proposal, on the other hand,
is contingent on obtaining debt financing, which creates meaningful
uncertainty for CIRCOR’s shareholders.
KKR has a long history of making successful investments in the
industrial and aerospace and defense sectors globally. KKR’s
support and resources established over its 47-year history will
help CIRCOR drive further growth by expanding its presence in
attractive flow control markets through new product development and
aftermarket expansion, as well as supporting further investments
into CIRCOR’s factories. KKR will also support CIRCOR in providing
all employees with the opportunity to participate in the benefits
of ownership in the Company, as it has for over a decade in prior
investments such as Capsugel, Capital Safety, C.H.I. Overhead
Doors, Ingersoll Rand and Minnesota Rubber & Plastics.
Regulatory Analysis Related to
Arcline’s Proposal
Arcline’s portfolio company FMD and specifically FMD’s Hunt
Valve business is a direct competitor to CIRCOR in the
manufacturing and sale of certain mission-critical valves for U.S.
Navy submarines. Arcline’s proposal would therefore result in a
reduction in an already limited qualified supplier base for these
key components on some of the most strategic platforms in the U.S.
military. Consolidation of two key suppliers for the U.S. Navy’s
highest priority programs, precisely at a moment when the
Department of Defense (DoD) seeks to ramp up their production while
controlling costs, is highly likely to draw exceptional scrutiny
from the U.S. Department of Justice (DOJ) or Federal Trade
Commission (FTC), the DoD, other executive branch agencies, the
U.S. Congress, and the defense prime shipbuilders.
A request for additional information and documentary material (a
“second request”) from the FTC/DOJ with respect to the Arcline
proposal is virtually certain, and the timeline for transactions
receiving second requests has been averaging 11-12 months (and
materially longer if there is a remedy or litigation to block the
deal, which would be a probable outcome for the Arcline proposal).
Following a second request, Arcline would likely not be able to
close the transaction absent remedies. However, in the current
administration, the DOJ and FTC have largely rejected remedies,
forcing parties to abandon deals or litigate. Arcline would
therefore need significant time (at least 18 months) to adequately
address the very real prospect of DOJ or FTC opposition to
necessary remedies, including by credibly threatening to litigate.
This means that a transaction with Arcline would likely not close,
and therefore CIRCOR shareholders would not receive the deal price,
before the second half of 2024, if ever.
Even if Arcline is somehow able to overcome the substantial
regulatory hurdles, the value to CIRCOR shareholders of the
per-share price offered by Arcline will be significantly impacted
by the delay in delivering the consideration. In today’s high
interest rate environment, these timing delays would cost CIRCOR
shareholders tens of millions of dollars in value. The extensive
delay also creates collateral deal certainty concerns for CIRCOR
shareholders (e.g., prolonged exposure of CIRCOR’s shareholders to
economic, market and financing risk, “material adverse effect”
risk, etc., especially in the context of the currently highly
uncertain economic, geopolitical and deal environment). Further,
the prolonged review process would have a material negative impact
on CIRCOR’s operations, customer relationships and talent
retention, resulting in a significant destruction of shareholder
value, which the CIRCOR shareholders will bear if the Arcline
Proposal is not consummated, which is a material risk.
Participants in the Solicitation
Cube Bidco, Inc. (“Parent”), CIRCOR and certain of their
affiliates, directors, executive officers and certain employees and
other persons may be deemed to be participants in the solicitation
of proxies from CIRCOR’s stockholders in connection with the
proposed transaction. Security holders may obtain information
regarding the names, affiliations and interests of CIRCOR’s
directors and executive officers in CIRCOR’s Annual Report on Form
10-K for the fiscal year ended December 31, 2022, which was filed
with the SEC on March 15, 2023. To the extent the holdings of
CIRCOR’s securities by CIRCOR’s directors and executive officers
have changed since the amounts set forth in CIRCOR’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2022, investors
may obtain additional information regarding the interests of
participants in the solicitation of proxies from CIRCOR’s
stockholders in connection with in the proposed transaction, which
may, in some cases, be different than those of CIRCOR’s
stockholders generally, by reading the proxy statement relating to
the proposed transaction when it is filed with the SEC and other
materials that may be filed with the SEC in connection with the
proposed transaction when they become available.
Additional Information About the Transaction and Where to
Find It
This press release relates to Parent’s proposed acquisition of
CIRCOR. This press release does not constitute a solicitation of
any vote or approval. In connection with the proposed transaction,
CIRCOR plans to file with the U.S. Securities and Exchange
Commission (the “SEC”) and mail or otherwise provide to its
stockholders a proxy statement regarding the proposed transaction.
CIRCOR may also file other documents with the SEC regarding the
proposed transaction. This document is not a substitute for the
proxy statement or any other document that may be filed by CIRCOR
with the SEC.
BEFORE MAKING ANY VOTING DECISION, CIRCOR’S STOCKHOLDERS ARE
URGED TO READ THE PROXY STATEMENT IN ITS ENTIRETY WHEN IT BECOMES
AVAILABLE AND ANY OTHER DOCUMENTS FILED BY CIRCOR WITH THE SEC IN
CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY
REFERENCE THEREIN BEFORE MAKING ANY VOTING OR INVESTMENT DECISION
WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE
PARTIES TO THE PROPOSED TRANSACTION.
Any vote in respect of resolutions to be proposed at a CIRCOR
stockholder meeting to approve the proposed transaction or related
matters, or other responses in relation to the proposed
transaction, should be made only on the basis of the information
contained in CIRCOR’s proxy statement. Stockholders may obtain a
free copy of the proxy statement and other documents CIRCOR files
with the SEC (when available) through the website maintained by the
SEC at www.sec.gov. CIRCOR makes available free of charge on its
investor relations website at investors.circor.com copies of
materials it files with, or furnishes to, the SEC.
The proposed transaction will be implemented solely pursuant to
the Agreement and Plan of Merger, as amended, by and among CIRCOR,
Cube Merger Sub, Inc. and Parent, dated as of June 5, 2023 (the
“Merger Agreement”), which contains the full terms and conditions
of the proposed transaction.
Cautionary Statement Regarding Forward-Looking
Statements
This press release includes forward-looking statements that are
subject to risks, uncertainties and other factors that could cause
actual results to differ materially from those implied by the
forward-looking statements. All statements other than statements of
historical fact are statements that could be deemed forward-looking
statements, including all statements regarding the intent, belief
or current expectation of Parent and its affiliates and can
typically be identified by words such as “believe,” “expect,”
“estimate,” “predict,” “target,” “potential,” “likely,” “continue,”
“ongoing,” “could,” “should,” “intend,” “may,” “might,” “plan,”
“seek,” “anticipate,” “project” and similar expressions, as well as
variations or negatives of these words. Forward-looking statements
include, without limitation, statements regarding the proposed
transaction, similar transactions, prospective performance, future
plans, events, expectations, performance, objectives and
opportunities and the outlook for the Company’s business; the
expected timing of the completion of the transaction; the ability
to complete the transaction considering the various closing
conditions; and the accuracy of any assumptions underlying any of
the foregoing. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties and are cautioned not to place
undue reliance on these forward-looking statements. Actual results
may differ materially from those currently anticipated due to a
number of risks and uncertainties. Risks and uncertainties that
could cause the actual results to differ from expectations
contemplated by forward-looking statements include: uncertainties
as to the timing of the merger; uncertainties as to how many of the
Company’s stockholders will vote their stock in favor of the
transaction; the occurrence of any event, change or other
circumstance that could give rise to the termination of the Merger
Agreement, including circumstances requiring a party to pay the
other party a termination fee pursuant to the Merger Agreement, and
including the receipt by CIRCOR of an unsolicited proposal from a
third party (including affiliates of Arcline Capital); the ability
of the parties to consummate the proposed transaction on a timely
basis or at all; the satisfaction of the conditions precedent to
the consummation of the proposed transaction, including the ability
to secure regulatory approvals and stockholder approval on the
terms expected, at all or in a timely manner; the effects of the
transaction (or the announcement or pendency thereof) on
relationships with associates, customers, manufacturers, suppliers,
employees (including the risks relating to the ability to retain or
hire key personnel), other business partners or governmental
entities; transaction costs; the risk that the merger will divert
management’s attention from the Company’s ongoing business
operations or otherwise disrupts the Company’s ongoing business
operations; changes in the Company’s businesses during the period
between now and the closing; certain restrictions during the
pendency of the proposed transaction that may impact the Company’s
ability to pursue certain business opportunities or strategic
transactions; risks associated with litigation relating to the
proposed transaction; inability to achieve expected results in
pricing and cost cut actions and the related impact on margins and
cash flow; the effectiveness of the Company’s internal control over
financial reporting and disclosure controls and procedures; the
remediation of the material weaknesses in the Company’s internal
controls over financial reporting or other potential weaknesses of
which the Company is not currently aware or which have not been
detected; and the uncertainty associated with the current worldwide
economic conditions and the continuing impact on economic and
financial conditions in the United States and around the world,
including as a result of COVID-19, rising inflation, increasing
interest rates, natural disasters, military conflicts, including
the conflict between Russia and Ukraine, terrorist attacks and
other similar matters. All forward-looking statements are based on
information currently available to Parent, and Parent assumes no
obligation to update any forward-looking statements, whether as a
result of new information, future developments or otherwise, except
as may be required by applicable law. The information set forth
herein speaks only as of the date hereof.
About KKR
KKR is a leading global investment firm that offers alternative
asset management as well as capital markets and insurance
solutions. KKR aims to generate attractive investment returns by
following a patient and disciplined investment approach, employing
world-class people and supporting growth in its portfolio companies
and communities. KKR sponsors investment funds that invest in
private equity, credit and real assets and has strategic partners
that manage hedge funds. KKR’s insurance subsidiaries offer
retirement, life and reinsurance products under the management of
Global Atlantic Financial Group. References to KKR’s investments
may include the activities of its sponsored funds and insurance
subsidiaries. For additional information about KKR & Co. Inc.
(NYSE: KKR), please visit KKR’s website at www.kkr.com and on
Twitter @KKR_Co.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230628041690/en/
Julia Kosygina (212) 750-8300 media@kkr.com
KKR (NYSE:KKR)
Historical Stock Chart
From Jun 2024 to Jul 2024
KKR (NYSE:KKR)
Historical Stock Chart
From Jul 2023 to Jul 2024