L3Harris to acquire Aerojet Rocketdyne for $4.7bn

BY Richard Summerfield

L3Harris Technologies Inc. has agreed to acquire rocket engine manufacturer Aerojet Rocketdyne Holdings Inc. in a deal valued at around $4.7bn.

Under the terms of the deal, which is expected to close in 2023, subject to required regulatory approvals and clearances and other customary closing conditions, L3Harris will pay $58 per share, in an all-cash transaction valued at $4.7bn, inclusive of net debt. L3Harris will use existing cash and issue new debt to fund the deal

The deal marks L3Harris’ second acquisition announcement of 2022 after previously agreeing to acquire Viasat’s tactical data links unit, which provides data and voice communications systems for military vehicles, aeroplanes and ships, for $1.96bn.

Lockheed Martin, the world’s largest defence contractor by revenue, tried to buy the Rocketdyne for $4.4bn before abandoning the bid after federal regulators sued in January to block it. The Federal Trade Commission (FTC) noted that Lockheed would use its ownership of Aerojet to damage other defence companies and would ultimately control multiple defence programmes critical to national security.

“We’ve heard the DoD leadership loud and clear: they want high-quality, innovative and cost-effective solutions to meet both current and emerging threats, and they’re relying upon a strong, competitive industrial base to deliver those solutions,” said Christopher E. Kubasik, chief executive and chair of L3Harris. “With this acquisition, we will use the combined talents of more than 50,000 employees to drive continuous process improvement, enhance business operations and elevate the performance of this crucial national asset.”

“This agreement will accelerate innovation for national security propulsion solutions while providing a premium cash value for our shareholders and tremendous benefits for our employees, customers, partners and the communities in which we operate,” said Eileen P. Drake, chief executive and president of Aerojet Rocketdyne. “Joining L3Harris is a testament to the world-class organization and team we’ve built and represents a natural next phase of our evolution. As part of L3Harris, we will bring our advanced technologies together with their substantial expertise and resources to accelerate our shared purpose: enabling the defense of our nation and space exploration. This is an exciting new chapter for Aerojet Rocketdyne and our over 5,200 dedicated team members, providing them with additional opportunities, and we look forward to working closely with L3Harris to complete this transaction.”

Aerojet Rocketdyne currently generates around $2.3bn in annual revenue. The company’s employees operate out of advanced manufacturing facilities across the US. L3Harris has more than $17bn in annual revenue and customers in more than 100 countries.

News: Defense firm L3Harris to buy Aerojet for $4.7 bln with eye on missile demand

FedNat files for Chapter 11 bankruptcy protection

BY Fraser Tennant

Three months after the liquidation of FedNat Insurance Company, regional insurance holding company FedNat and certain of its wholly-owned subsidiaries have filed for Chapter 11 bankruptcy.

The Florida-based FedNat filed for bankruptcy after an increase in severe weather events in the state weighed on its balance sheet. In 2021, catastrophe losses cost FedNat $800m on a gross basis, although reinsurance and other recoveries reduced that loss to $86m, according to bankruptcy court papers.

Listing $33.8m of assets and $171m of debts in its petition in the United States Bankruptcy Court for the Southern District of Florida, FedNat’s bankruptcy filing underscores Florida’s deepening home insurance crisis, where average premiums are nearly triple the national average.

As an industry, the Florida property insurance industry lost over $1.6bn in 2020 and over $1.5bn in 2021, thanks to losses from catastrophes, higher reinsurance costs and litigation abuse. In addition, at least five other Florida insurers have been put into receivership by the state’s regulator in 2022.

As part of the Chapter 11 process, the company has stated that it will evaluate all strategic alternatives to maximise value for stakeholders, whether that be a reorganisation of its business or a sale of its assets.

FedNat has approximately $6.5m of cash on hand, which will provide liquidity to support day to day operations during the Chapter 11 process, enabling the company to operate business uninterrupted, including the timely payment of employee wages and benefits and continued servicing of customers.

Additionally, the company will file customary “First Day” motions to allow it to maintain operations in the ordinary course. The company intends to pay its employees in the usual manner and continue their primary benefits and certain customer programmes without disruption.

FedNat expects to receive court approval for all these routine requests.

To manage the restructuring process, FedNat has engaged GGG Partners, LLC as financial advisers and Nelson Mullins Riley & Scarborough LLP as legal advisers.

FedNat is an insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through its subsidiaries, equity investments and contractual relationships with independent agents and general agents.

News: Three Months After Liquidation, FedNat Holding Co. Files Chapter 11 Bankruptcy

Weber taken private in $3.7bn deal

BY Richard Summerfield

Grill manufacturer Weber Inc. has agreed to be taken private by BDT Capital Partners in a $3.7bn deal.

BDT, Weber’s controlling shareholder with a 48.2 percent stake in the company, has agreed to buy all of the outstanding shares in Weber that it does not already own for $8.05 per share. The purchase price represents a 60 percent premium to Weber’s closing price on 24 October, the last trading day before BDT submitted its takeover offer.

Upon completion of the transaction, Weber will become a privately held company majority owned by investment funds managed by BDT. The deal is expected to close in the first half of 2023, subject to customary closing conditions. The transaction has been approved by the written consent of the holders of the requisite number of shares of common stock of Weber, such that no additional stockholder approval is required.

In connection with the transaction, BDT managed investment funds will provide Weber with an additional unsecured loan facility in the aggregate principal amount of $350m. Weber intends to use the loan to repay existing debt and fund working capital for the 2023 outdoor cooking season. The previous $60m loan agreement that Weber entered into with BDT managed investment funds on 8 November 2022, will remain outstanding, the companies confirmed in a statement.

“We appreciate the Special Committee’s comprehensive evaluation of BDT’s offer and are confident that this transaction provides immediate and fair value to Weber minority shareholders,” said Alan Matula, interim chief executive of Weber. “For over a decade, BDT has been a longstanding strategic partner for Weber. With their continued support, our global team will move forward in executing our long-term strategy with consumers and customers as our top priorities. And we’ll continue to sharpen our focus on doing what we do best: delivering the outdoor cooking industry's most innovative, best-performing, highest-quality products and engaging millions worldwide who love to gather together and cook outside.”

“Weber is the #1 brand and global category leader in outdoor cooking, and it has demonstrated a relentless commitment to quality and innovation over its 70-year history,” said Kelly Rainko, a partner at BDT and non-executive chair of the board of Weber. “We look forward to continuing our partnership with the company and the founding Stephen family in its next chapter.”

News: Grill maker Weber to go private with BDT Capital in $3.7 bln deal

NRG Energy agrees $2.8bn Vivint deal

BY Richard Summerfield

NRG Energy Inc has agreed to acquire Vivint Smart Home Inc in a $2.8bn all-cash deal. Under the terms of the agreement, NRG will pay $12 per share for the company, a premium of 33.5 percent to Vivint’s closing stock price on Monday, the last day of trading before the deal was announced. NRG will also take on $2.4bn of debt as part of the deal.

According to a statement announcing the agreement, the deal will have an implied multiple of 6.3 times run-rate enterprise value to adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA).

The deal is expected to close in the first quarter of 2023, subject to customary closing conditions. Upon completion of the transaction, NRG intends to maintain a significant presence in the state of Utah, where Vivint is headquartered. The agreement has been unanimously approved by the boards of directors of both companies.

The deal will not impact NRG’s 2023 capital allocation plans, according to the company’s chief financial officer Alberto Fornaro, NRG also plans to fully execute its $1bn stock buyback authorisation. The company plans to fund the deal with about $600m in cash, $900m from its revolving credit facility and $1.39bn in new debt and preferred equity.

“Last year at our Investor Day, we presented our strategic roadmap to becoming the leading provider of essential services for homes and businesses, informed by consumer trends and underpinned by disciplined execution,” said Mauricio Gutierrez, president and chief executive of NRG. “The acquisition of Vivint is a transformational step in achieving our vision. Customers want simple, connected, and customized experiences that provide peace of mind. Vivint’s smart home technology strengthens our retail platform, improves our customer experience, and increases customer lifetime value. I am excited to welcome Vivint to the NRG family.”

“We are pleased to announce a transaction that delivers immediate and compelling cash value to Vivint’s stockholders while also presenting significant opportunities to drive our company’s continued success in the years to come,” said David Bywater, chief executive of Vivint Smart Home. “Our agreement with NRG is the culmination of our Board’s ongoing pursuit of maximizing value for Vivint stockholders and is a testament to the strength of the Vivint brand, capabilities, and proven industry leadership. We look forward to working with NRG to create exciting opportunities for Vivint as part of a larger platform. On behalf of our Board and management team, I thank the hard-working Vivint employees for the significant role they have played in this important milestone.”

The deal will increase NRG’s customer base to about 7.4 million across North America. The company is one of the largest US independent power producers and operates a fleet of natural gas, coal and other generating plants totalling 18 gigawatts. It is also one of the biggest retail electricity providers in Texas.

News: NRG Energy to buy Vivint Smart Home for $2.8 bln

Corteva acquires Stoller Group in $1.2bn transaction

BY Fraser Tennant

In a deal that reinforces its commitment to driving value for farmers through innovative, sustainable solutions, agricultural chemical and seed company Corteva, Inc. is to acquire independent biologicals firm Stoller Group, Inc. for $1.2bn.

With operations and sales in more than 60 countries and 2022 forecasted revenues of more than $400m, the Houston-based Stoller brings immediate scale and profitability, with earnings before interest, taxes, depreciation and amortisation (EBITDA) margins that will be accretive to Corteva.

Moreover, the biologicals market is expected to grow by high-single digits annually through 2035, representing approximately 25 percent of the overall crop protection market by 2035. Over the past three years, Corteva has expanded its biologicals business through external and internal innovation, R&D collaborations, licensing and distribution agreements, and acquisitions.

“Biologicals provide farmers with sustainably-advantaged tools that complement crop protection technologies, and collectively, can work to address global challenges around food security and climate change,” said Chuck Magro, chief executive of Cortevo. “Stoller represents a leader in the biologicals industry given its commercial presence and market expansion potential, while also delivering attractive growth and operating margins.”

In fact, Stoller is the second biologicals acquisition for Corteva in 2022, following its recent acquisition of Symborg, an expert in microbiological technologies based in Murcia, Spain. Corteva will bring together the complementary commercial and technical strengths of both Stoller and Symborg as part of its biologicals strategy.

“In Stoller’s 50-plus year history, we have successfully helped growers around the world increase their productivity and improve their sustainability,” said Guillermo de la Borda, chief executive of Stoller. “We are proud to join forces with Corteva as we share a vision of helping farmers succeed in growing the nutritious food the world relies on.”

The transaction is expected to be completed in the first half of 2023 following regulatory approvals and satisfaction of customary closing conditions.

Mr Magro concluded: “In combination with Corteva’s leading innovation organization, Stoller provides a platform for expanding and accelerating Corteva’s biologicals business to become one of the largest players in the rapidly expanding biologicals market.”

News: Corteva to Buy Stoller in $1.2 Billion Deal to Boost Biologicals