TIDMJTWO TIDMJTOW
RNS Number : 9722K
J2 Acquisition Limited
03 September 2019
J2 Acquisition Limited to Acquire APi Group, Inc. for $2.9
Billion
A Market Leading Provider of Commercial Life Safety
Solutions
and Industrial Specialty Services
Tortola, British Virgin Islands, Sep. 3, 2019 - J2 Acquisition
Limited ("J2", LSE: JTWO) announced today that it has entered into
a definitive agreement to acquire APi Group, Inc. ("APi" or
"Company"), a market-leading provider of commercial life safety
solutions and industrial specialty services, for approximately $2.9
billion, subject to customary closing conditions (the
"Transaction"). J2 expects to list its shares on the New York Stock
Exchange ("NYSE") under the symbol APG and change its jurisdiction
of incorporation to Delaware in connection with the NYSE
listing.
APi is a market-leading provider of commercial life safety
solutions and industrial specialty services and a top-5 specialty
contractor in the U.S. with a diversified, blue chip customer base,
robust contracted services offering, and a track record of
successful acquisitions. The Company operates more than 40
nationally and regionally significant businesses with
market-leading brands in over 200 locations and generates over 95%
of its revenue in North America, primarily in the United States.
APi has historically delivered consistent and strong financial
results and expects to deliver approximately $4 billion in revenue
and approximately 10% adjusted EBITDA margins for the full year
2019.
APi provides J2 an ideal foundation of market leadership upon
which to build through a prudent strategy that prioritizes organic
growth, combined with strategic and opportunistic M&A. The J2
founders Martin E. Franklin, James E. Lillie, and Ian G.H. Ashken,
have decades of experience operating, growing, and investing in
multiple businesses using a similar strategy focused on organic
growth and disciplined acquisitions in niche markets and
industries, as well as on building winning cultures. APi, with
approximately 15,000 employees, has an industry leading employee
development program and, following its investment in APi, J2 plans
to continue to build on APi's operating strengths with a focus on
expanding the service portion of the business across its
portfolio.
Sir Martin E. Franklin, co-founder of J2, commented, "We believe
APi is an excellent foundation for J2's initial investment and is
solidly in line with our disciplined investment criteria. The
Company demonstrates similar qualities to Jarden, in that it
unlocks uncommon value from niche businesses and delivers a strong
track record of consistent organic performance complemented by
disciplined M&A. This Transaction meets our long established
acquisition criteria with significant potential for short and long
term value creation for our shareholders. We look forward to
working with Russ Becker, the President and CEO of APi, whose
leadership has positioned the Company for the strong growth
opportunities ahead."
James E. Lillie, co-founder of J2, added, "We were immediately
impressed by APi's management team, its strong culture, and its
commitment to leadership development, combined with consistent
delivery of margins and cash flow at the high end of its peer group
over the years. The business operates in resilient and dynamic
markets with attractive growth drivers and we believe that, with
the current management team, we can drive shareholder value by
guiding the business to even better levels of performance and
growth. We expect APi to deliver long-term value creation through
above industry average organic sales growth, its ability to
leverage SG&A, expansion of Adjusted EBITDA margins to 12%+ by
2023, continued free cash flow conversion of 80%+, high single
digit average earnings growth and maintenance of a long term
leverage ratio of 2.0x-2.5x."
APi's existing management team will remain in place, including
President and CEO Russell A. Becker and Thomas Lydon, who upon
closing will become the combined company's CEO and CFO
respectively. Martin E. Franklin and James E. Lillie will become
Co-Chairmen of the Company, Ian G.H. Ashken and Russell Becker will
join the board along with a number of other board additions to be
announced at closing of the Transaction. J2 intends to change its
name to APi Group Corporation upon closing.
Russell A. Becker, President and CEO of APi, commented, "The J2
team's decades of leadership experience operating large diverse
businesses, broad industrial knowledge, and disciplined acquisition
strategy - that they have employed successfully at previous
companies and ventures - will be instrumental in further growing
APi's inherent value and innovative, customer-centric approach over
the long term. The J2 team's approach has historically produced
impressive results and opportunities for shareholders, customers,
suppliers, the communities in which they operate, and importantly,
for employees, and is highly complementary to APi's existing
culture and strategy. We look forward to benefitting from J2's
successful operating experience and investment knowledge.
Additionally, I want to thank Lee Anderson for his 55+ years of
service at APi. Our tremendous growth and unique culture would not
have been possible without his leadership, commitment, sacrifice
and complete dedication to APi."
The Chairman of the J2 Board of Directors, Lord Myners of Truro
CBE stated "The J2 Board unanimously supports this transaction. We
believe APi is an excellent fit with J2 and congratulate the
founders of J2 and the management team of APi."
The Transaction is expected to be funded through a combination
of J2's cash on hand, new debt financing, early warrant exchange
(as described below), and rollover equity from existing
shareholders. For Transaction valuation purposes, Russell Becker's
investment of 50% of his net sale proceeds and other existing
shareholders rollover equity is valued at $10.25 per share, the
same price as the Warrant Financing. Current APi shareholders will
receive approximately $2.05 billion in cash and 28.373 million
ordinary shares in J2 and will own approximately 14.5% of the
company at closing, primarily held by the Company's existing
employee stock ownership plan. The Company's net debt leverage
ratio at closing is expected to be 2.8x, assuming the full warrant
exercise.
The Transaction includes a tax asset with a net present value of
approximately $180 million, resulting in a net purchase price
multiple of 7.4x last-twelve-months June 30, 2019 Adjusted EBITDA
of $371 million. The Transaction is expected to close in the fourth
quarter of 2019, subject to customary closing conditions.
It is expected that the listing of the ordinary shares and
warrants on the standard segment of the Official List will be
suspended by the UK Financial Conduct Authority at J2's request
with effect from 7.30 a.m. (London time) on 3 September 2019, as,
in accordance with the requirements of the UK Listing Rules, the
Transaction is treated as a reverse takeover. Trading of the
ordinary shares and warrants on the London Stock Exchange (the
"LSE") is expected to be suspended from this time and it is not
expected that trading will resume. However, shares may trade on the
OTC market in the U.S. under the symbol JJAQF. It is anticipated
that J2's listing of shares and warrants on the LSE will be
cancelled on or shortly after the NYSE listing is achieved.
J2 expects shortly to announce an early warrant exercise
financing (the "Warrant Financing") and consent solicitation to
replace part of the committed debt funding as part of the
Transaction. Warrant holders will be given the opportunity (i) to
commit to the early exercise of their warrants, conditional upon
consummation of the Transaction, at a reduced exercise price of
$10.25 per whole ordinary share (the "Reduced Exercise Price"), and
(ii) to consent to an amendment to shorten the subscription period
for the warrants to expire upon the consummation of the Transaction
(subject to certain limited exceptions) (the "Warrant Amendment").
In order to participate in the Warrant Financing at the Reduced
Exercise Price, warrantholders must also consent to the Warrant
Amendment (unless and until such time that J2 announces that the
Warrant Amendment has been effected, following which all
warrantholders may participate in the Warrant Financing at the
Reduced Exercise Price). Each of (i) Mariposa Acquisition V, LLC, a
Delaware limited liability that is affiliated with Martin E.
Franklin, James E. Lillie, and Ian G.H. Ashken representing
approximately 8.0% of all outstanding warrants, and (ii) entities
managed by Viking Global Investors LP, representing approximately
20% of all outstanding warrants, have committed to exercise all of
their warrants in connection with the Warrant Financing at $10.25
per ordinary share, representing approximately $34.1 million and
$85.4 million, respectively, and consent to the Warrant
Amendment.
Please refer to Annex 1 for more financial information on APi
and Annex 2 for certain pro forma financial information.
UBS Investment Bank acted as financial advisor, Citigroup as
capital markets advisor and Greenberg Traurig acted as legal
advisor to J2 on this Transaction. Citigroup, Bank of America,
Barclays and UBS have committed to provide financing for the
Transaction.
William Blair & Company acted as financial advisor and
Faegre Baker Daniels and Fredrikson & Byron acted as legal
advisors to the Company on this Transaction.
Conference Call Information:
Dial in Number:
1-877-830-2596 (U.S.)
1-785-424-1743 (International)
Conference ID:
93112
Webcast Link:
https://event.on24.com/wcc/r/2075263-1/CCFE25D84727E8842EDFB66448727F26
Forward-Looking Statements and Disclaimers:
APi's financial information contained herein is derived from
APi's historical financial statements (the "APi Historical
Financial Statements"). APi's Historical Financial Statements have
historically been prepared based on the U.S. accounting standards
and principles applicable to private companies. Following the
completion of the Transaction, APi's Historical Financial
Statements will be revised to comply with U.S. GAAP applicable to
public companies (such revised Target Historical Financial
Statements being referred to herein as the "Public Company
Financial Statements"). The Public Company Financial Statements,
which have not yet been finalized, may differ materially from, and
may not be comparable to, APi's Historical Financial Statements.
The Public Company Financial Statements may not be reflective of,
and may differ materially from, the financial position or results
of operations of APi as set forth in the Target Historical
Financial Statements.
This announcement does not constitute or form part of any offer
or invitation to purchase, otherwise acquire, issue, subscribe for,
sell or otherwise dispose of any securities, nor any solicitation
of any offer to purchase, otherwise acquire, issue, subscribe for,
sell, or otherwise dispose of any securities.
The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore
persons in such jurisdictions into which this announcement is
released, published or distributed should inform themselves about
and observe such restrictions.
Certain statements in this announcement are forward-looking
statements which are based on J2's expectations, intentions and
projections regarding the Company's future performance, anticipated
events or trends and other matters that are not historical facts,
including expectations regarding: (i) the anticipated closing date
of the Transaction; (ii) the ability of J2 to consummate the debt
financing and the Warrant Financing (including effecting the
Warrant Amendment); (iii) the ability of J2 to effect the NYSE
listing; (iv) the future operating and financial performance of
APi, including expectations regarding revenue and adjusted EBITDA
margins in 2019, (v) the ability to drive shareholder value and
estimates of organic growth, SG&A, target operating Adjusted
EBITDA margins, free cash flow conversion, average earnings growth
and long term leverage ratios, (vi) the post-closing composition of
the board of directors, (vii) the anticipated sources of funding
the purchase price and (viii) the anticipated post-closing net debt
ratio. These statements are not guarantees of future performance
and are subject to known and unknown risks, uncertainties and other
factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements,
including: (i) economic conditions, competition and other risks
that may affect APi's future performance; (ii) the occurrence of
any event, change or other circumstances that could give rise to
the termination of the definitive agreement entered into among the
parties thereto in connection with the acquisition (the
"Transaction Agreement"); (iii) the risk that securities markets
will react negatively to the Transaction or other actions by J2,
APi and/or the combined company after completion of the
Transaction; (iv) the risk that the Transaction disrupts current
plans and operations as a result of the announcement and
consummation of the Transaction described herein; (v) the ability
to recognize the anticipated benefits of the combination of J2 and
APi and of the combined company to take advantage of strategic
opportunities; (vi) costs related to the Transaction; (vii) the
limited liquidity and trading of J2's securities; (viii) changes in
applicable laws or regulations; (ix) the possibility that J2 or APi
may be adversely affected by other economic, business, and/or
competitive factors; and (x) other risks and uncertainties.
Given these risks and uncertainties, prospective investors are
cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements speak only as of the date of
such statements and, except as required by applicable law, neither
J2 nor APi undertake any obligation to update or revise publicly
any forward-looking statements, whether as a result of new
information, future events or otherwise. Nothing in this
announcement constitutes or should be construed as constituting a
profit forecast.
This announcement contains inside information as defined in
article 7 of the Market Abuse Regulation (EU) No 596/2014.
About APi:
APi Group Inc. ("APi") is a market leading provider of
commercial life safety solutions and industrial specialty services.
With a national and regional focus, the Company operates three
segments in over 200 locations across the U.S., Canada, and the UK.
APi is the leading independent life safety services provider and a
top-5 specialty services contractor in the U.S. with a diversified,
blue chip customer and supplier base, a robust service offering,
and a track record of successful acquisitions. More information can
be found at https://www.apigroupinc.com/.
About J2:
J2 Acquisition Limited (LSE: JTWO) is a publicly-listed
acquisition company that listed in October 2017 to undertake an
acquisition of a target company. More information on J2 is
available at
http://www.j2acquisitionlimited.com/access-gateway.
Media Contacts:
Liz Cohen
Kekst CNC
+1 212-521-4845
Liz.Cohen@kekstcnc.com
Annex 1:
Adjusted EBITDA Reconciliation
LTM
($ in millions) 2016 2017 2018 6/30/2019
Reported Net Income $103.8 $112.4 $122.5 $133.2
Adjustments to reconcile to net income (loss)
Interest (income)/expense 5.1 8.3 22.1 25.9
Foreign & state income taxes 8.8 8.1 10.4 10.6
Depreciation and amortization 92.0 97.3 132.7 139.7
Earnout expense
(1) 18.2 5.6 28.9 28.5
Timing adjustments
(2) (23.6) 1.1 (5.8) (5.4)
Prior ownership change adjustments
(3) 23.2 30.9 30.2 29.1
Non-cash compensation 9.1 10.2 3.5 3.0
Non-recurring expenses 0.1 15.0 6.2 5.8
Pro-forma acquisition adjustments
(4) 73.7 52.3 - -
Adjusted EBITDA $310.3 $341.1 $350.7 $370.5
Notes:
1. Reflects contingent consideration paid based on financial performance of acquired businesses.
2. To reflect year end timing adjustments on a like-for-like basis.
3. Includes normalization of costs that would cease post-closing.
4. Represents the pro forma EBITDA that would have been
generated from acquired entities had they been acquired as of
January 1.
Annex 2:
Pro Forma Earnings Per Share for J2 Based on Standalone
APi
($ in millions, except per share value)
Adjusted EBITDA (1) $370.5
Depreciation & amortization 73.1
Annualized interest expense
(2) 54.0
Tax (as adjusted tax rate
of 23%) (3) 56.0
Adjusted Net Income 187.4
Diluted shares outstanding
(4) 195.1
Adjusted EPS $0.96
Notes:
1. Please see above EBITDA reconciliation.
2. Represents 2019 annualized full-year interest expense based
on 10/1/19 close, debt of $1,080 million, and an effective rate of
5.0%.
3. Adjusts the expected GAAP effective tax rate to take account
of the long-term annualized cash tax benefit of the Company's tax
asset arising from the transaction with APi.
4. Assumes early exercise of 100% of warrants and issuance of J2
shares as part of the purchase consideration, both at $10.25 per
share.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACQUGUQWBUPBGRP
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