In the news release, J2 Acquisition Limited to Acquire APi
Group, Inc. for $2.9 Billion, issued
03-Sep-2019 by J2 Acquisition Limited
over PR Newswire, we are advised by the company that the date and
time have now been added to the Conference Call Information
section. The complete, corrected release follows:
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, Sept. 3, 2019
/PRNewswire/ -- 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:
Date and Time:
Sept. 3, 2019, 8:30 a.m.
ET
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
|
$370.5
|
Notes:
- Reflects contingent consideration paid based on financial
performance of acquired businesses.
- To reflect year end timing adjustments on a like-for-like
basis.
- Includes normalization of costs that would cease
post-closing.
- Represents the pro forma EBITDA that would have been generated
from acquired entities had they been acquired as of January 1.
Annex 2:
Pro Forma Earnings
Per Share for J2 Based on Standalone APi
|
($ 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:
- Please see above EBITDA reconciliation.
- 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%.
- 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.
- Assumes early exercise of 100% of warrants and issuance of J2
shares as part of the purchase consideration, both at $10.25 per share.
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SOURCE J2 Acquisition Limited