Recall Holdings Limited (ASX:REC) (“Recall&rdquo
today announced that it has reached an agreement in principle with Iron Mountain Incorporated (NYSE: IRM) (“Iron Mountain&rdquo to be acquired by way of a recommended court approved Scheme of Arrangement.
Key points
- Recall shareholders to receive 0.1722 Iron Mountain shares for each Recall share they hold as of the record date for the proposed transaction
- A$8.50 per share cash option available to Recall shareholders, subject to a total cash pool of A$225 million
- The proposed transaction provides significant value for Recall shareholders through a substantial premium to the share price and the potential for further upside from realization of significant synergies and potential share appreciation of Iron Mountain common stock
- Iron Mountain and Recall to undertake reciprocal confirmatory due diligence and to seek to finalize a binding scheme implementation agreement reflecting the agreed key commercial terms
- The Recall Board intends to recommend the proposed transaction to shareholders, subject to no superior proposal being made and an independent expert confirming that the transaction is in the best interests of Recall shareholders
Recall Chairman Ian Blackburne said, “The combination of our two businesses makes strong commercial sense and the transaction terms represent attractive value for Recall shareholders. The terms also recognize the potential synergies that we expect the combined group will be able to achieve. We look forward to working with Iron Mountain to formally bring this transaction to shareholders and to bring about the formation of a leading information management company strongly positioned to better service its customers globally.”
Recall President and Chief Executive Officer Doug Pertz said, “We are pleased to have reached agreement with Iron Mountain on the proposed acquisition of Recall and believe the value and commercial terms are highly attractive to our shareholders. The revised offer represents a substantial improvement from the original offer in December 2014 and reflects the significant value that Recall and its employees have created since becoming an independent company. In addition both companies’ shareholders stand to benefit from the expected significant synergies and the potential future share price appreciation.”
“This is a transformational acquisition in terms of the potential value it can create for our customers, our employees and our shareholders,” said William L. Meaney, CEO and president of Iron Mountain. “Recall has a great business that has the potential to provide Iron Mountain with significant synergies. The savings from these synergies will allow us to further our investments in delivering innovative products and services and a superior customer experience within our highly competitive and dynamic marketplace.
Key terms
Under the terms of the proposed transaction, Recall shareholders will receive 0.1722 of an Iron Mountain common share for each Recall share (“Share Consideration&rdquo.
In addition, Recall shareholders will be offered the option to elect to receive consideration of A$8.50 per Recall share in cash. The cash option will be structured to provide preferential access to the cash pool for any Recall shareholder’s first 5,000 shares, subject to a total cash pool of A$225 million. Based on Recall’s share register as at 27 April 2015, this would enable approximately 98% of Recall’s shareholders to receive cash consideration for their entire shareholding.
Iron Mountain will establish a secondary listing on the Australian Securities Exchange to allow Australian Recall Shareholders to trade Iron Mountain shares locally in the form of CHESS Depository Interests (“CDIs&rdquo.
The terms of the proposed transaction will not be adjusted for any dividends which Recall or Iron Mountain pay in the ordinary course or any dividends which Iron Mountain is required to pay to maintain compliance with its REIT status obligations between now and closing of the proposed transaction. In addition, the exchange ratio for the Share Consideration will be adjusted to protect Recall shareholders from specific dilutive actions before closing.
It is intended that two members of the Recall Board will become Directors of Iron Mountain following completion of the proposed transaction.
Strategic Rationale
Recall considers the proposed transaction to be a compelling proposition that appropriately shares the potential value creation from the combination of the two businesses.
Recall shareholders will own up to approximately 21% of the combined entity and will share in the expected synergies of combining the two companies, including:
- creation of a leading global information management solutions company with unmatched operational and geographic reach;
- increased economies of scale, enhanced growth profile and better ability to serve customers and address unmet needs within the industry;
- greater financial strength and scale from which to pursue growth opportunities;
- potential to realize substantial synergies; and
- significant EPS and cash flow per share accretion.
Based on the value of the cash option available to shareholders of A$8.50 per Recall share, the proposed transaction values the fully diluted share capital of Recall at A$2,726 million and an implied enterprise value of A$3,434 million, and represents:
- a premium of 33% to the closing price of Recall shares of A$6.40 on Friday 12 December 2014, being last day prior to the announcement of Iron Mountain’s initial proposal;
- a premium of 69% to the closing price of Recall shares of A$5.02 on 29 September 2014, being the day before public market speculation about a transaction began;
- a premium of 103% to the 1 month VWAP of Recall shares of $4.18 from 10 December 2013, being the first month of trading following Recall’s demerger from Brambles; and
- a multiple of 13.0x Recall’s 12 month trailing EBITDA to 31 December 2014 of US$207.5 million.