DETROIT, and SOUTHFIELD, Mich., Nov.
3, 2016 /PRNewswire/ -- American Axle &
Manufacturing Holdings, Inc. (AAM), (NYSE: AXL) and Metaldyne
Performance Group Inc. (MPG) (NYSE: MPG) today announced that
the companies have entered into a definitive merger agreement under
which AAM will acquire MPG for approximately $1.6 billion in cash and stock, plus the
assumption of $1.7 billion in net
debt. The combination brings together highly complementary
businesses and forms a premier, global Tier 1 supplier with broad
capabilities across powertrain, drivetrain and driveline product
lines, as well as diversified customer base and end-markets.
Under the terms of the agreement, each share of MPG's common
stock will be converted into the right to receive $13.50 per share in cash and 0.5 share of AAM
common stock. Upon closing of the transaction, AAM's shareholders
will own approximately 70% of the combined company and MPG's
shareholders will own approximately 30%. The transaction has
been unanimously approved by the boards of directors of both
companies and is anticipated to close in the first half of 2017
subject to shareholder and regulatory approval and other customary
closing conditions.
Concurrent with the signing of the merger agreement, AAM entered
into a voting agreement with an affiliate of American Securities
LLC, the controlling stockholder of MPG, pursuant to which American
Securities LLC has agreed to vote in favor of and otherwise support
the transaction, subject to the terms of the voting agreement.
Following the transaction, an affiliate of American Securities LLC
will own approximately 23% of the combined company.
"AAM's transformational acquisition of MPG brings together two
complementary Tier 1 organizations to create a company with greater
scale and increased diversity across products, customers and end
markets," said David C. Dauch, AAM's
Chairman and Chief Executive Officer. "MPG's expertise in
complex, highly-engineered powertrain components and its global
footprint will be tremendous assets to AAM. We are excited about
the powerful industrial logic in this combination that will allow
us to create additional value for our customers and other key
stakeholders. Together, we are forming a company with
increased earnings potential and enhanced cash flow generation that
will allow us to rapidly reduce leverage while fueling growth and
delivering value to our shareholders."
George Thanopoulos, MPG's Chief
Executive Officer, added, "This compelling transaction offers MPG
shareholders an immediate premium and significant participation in
the growth potential of the combined organization and its talented
associates. MPG and AAM share a similar culture and
value system, laser focused on quality, operational excellence and
technology leadership, which creates a natural fit and clear path
to value creation for stakeholders of both companies."
Compelling Strategic
Rationale
- Creates a global leader in powertrain, drivetrain and
driveline: The combined company will have the power to deliver
a wide range of quality, highly engineered components, modules and
sub-systems across multiple engine, transmission and driveline
applications.
- Diversified global customer base and end markets:
Accelerates AAM's profitable growth and diversification objectives,
significantly reducing product, customer and end-market
concentrations.
- Complementary technologies focused on light-weighting, fuel
efficiency, vehicle safety and performance solutions:
Expertise in complementary product, process and systems
technology strongly position the company to address the global
automotive mega trends for both mechanical and alternative
propulsion systems.
- Stronger financial profile through greater size, scale and
enhanced cash flow generation: On a pro forma basis, the
combined entity will represent nearly $7
billion of annual sales and have the potential to generate
over $1.2 billion of EBITDA and
$400 million of free cash flow after
full integration.
- Powerful industrial logic with significant
synergies: Estimated annual run rate of targeted cost
synergies estimated to be between $100 and
$120 million by 2018.
Financial Highlights
The acquisition of MPG meets AAM's strategic and financial criteria
for disciplined capital allocation. MPG has a strong free
cash flow profile, market leading products and profitability
metrics, and attractive growth characteristics.
The transaction is expected to be accretive to cash flow and EPS
in the first full year following the transaction. By 2018,
AAM expects the combined company to achieve annual run-rate cost
synergies of between $100 and $120
million, primarily derived from optimizing the operating
structure, eliminating redundant public company costs, achieving
purchasing leverage advantages and operational economies of
scale. The cash portion of the merger consideration will be
financed through a combination of cash on hand and debt.
Upon closing, AAM expects a pro forma 2016E Net Debt / Adjusted
EBITDA ratio of approximately 3.5x. AAM expects the combined
company to generate significant operating profitability and cash
flow that will facilitate rapid debt reduction. AAM is
targeting a Net Debt / Adjusted EBITDA ratio of 2x by the end of
2019.
Governance and Leadership
David C. Dauch will continue to
serve as Chairman and Chief Executive Officer of AAM, which will
remain headquartered in Detroit. Effective as of the closing
of this transaction, AAM's board of directors will be expanded to
11 members with three designees of American Securities LLC joining
AAM's current board, including George
Thanopoulos.
Advisors
Representing AAM as lead financial advisor is Greenhill & Co.,
LLC, with Shearman & Sterling LLP acting as legal
advisor. J.P. Morgan also represents AAM as a financial
advisor and is providing committed debt financing.
Representing MPG as exclusive financial advisor is BofA Merrill
Lynch and Weil, Gotshal & Manges LLP is acting as its legal
advisor.
Conference Call Information
AAM and MPG will conduct a joint conference call and webcast today
at 8:00 a.m. ET to discuss the
proposed transaction and third quarter 2016 results for both
companies. Each company reported its financial results for
the third quarter 2016 in separate press releases this
morning. Interested participants may listen to the live
conference call by logging onto AAM's investor website at
investor.aam.com or MPG's investor relations website at
investors.mpgdriven.com or by calling (855) 681-2072 from
the United States or (213)
358-0831 from outside the United States. A replay will be
available from 1:00 p.m. ET on
November 3, 2016 until 11:59 p.m. ET November 10,
2016 by dialing (855) 859-2056 from the United States or (404) 537-3406 from
outside the United States. When prompted, callers should
enter conference reservation number 12791647. A written
transcript of the call will be posted on the investor websites of
both companies within 48 hours and the briefing audio will be
archived on AAM's website for one year.
The investor presentation slides related to this transaction and
to be referenced during the call can be found on AAM's investor
website at investor.aam.com prior to the conference call. In
light of today's conference call, AAM's previously scheduled
earnings conference call on November 4,
2016 will no longer occur.
About AAM
AAM is a world leader in the manufacturing, engineering, design and
validation of driveline and drivetrain systems and related
components and modules, chassis systems, electric drive systems and
metal-formed products for light trucks, sport utility vehicles,
passenger cars, crossover vehicles and commercial vehicles.
In addition to locations in the United
States (Michigan,
Ohio, and Indiana), AAM also has offices or facilities
in Brazil, China, Germany, India, Japan,
Luxembourg, Mexico, Poland, Scotland, South
Korea, Sweden and
Thailand. AAM has approximately
13,000 employees globally.
About MPG
MPG is a leading provider of highly-engineered lightweight
components for use in powertrain and suspension applications for
the global light, commercial and industrial vehicle markets. MPG
produces these components and modules using complex metal-forming
manufacturing technologies and processes for a global customer base
of vehicle OEMs and Tier I suppliers. MPG has a global footprint
spanning more than 60 locations in 13 countries across North America, South
America, Europe and
Asia with approximately 12,000
employees.
Forward Looking Statements
Certain information set forth in this communication, including
statements as to the expected timing, completion and effects of the
proposed transaction, constitutes "forward-looking
statements" within the meaning of the federal securities laws,
including the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by words such as
"expects," "intends," "anticipates," "plans," "projects,"
"believes," "seeks," "targets," "forecasts," "will," "would," or
similar expressions, and variations or negatives of these words,
and often address, but are not limited to, statements regarding
expected future business, prospects and financial performance and
financial condition. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain, such as
statements about the consummation of the proposed merger and the
anticipated benefits thereof (including future financial and
operating results) and statements based on management's current
expectations and assumptions (including expectations and intentions
with respect to the combined company), which are subject to
inherent uncertainties, risks and changes in circumstances that are
difficult to predict and that are outside of the control of AAM and
MPG. These and other forward-looking statements are not guarantees
of future results and are subject to risks, uncertainties and
assumptions that could cause actual results to differ materially
from those expressed in any forward-looking statements.
Important risk factors that may cause actual results to differ
from those described in the forward-looking statements include the
following: (i) the occurrence of any event, change or other
circumstance that could give rise to the termination of the merger
agreement or otherwise affect the completion of the proposed
transaction on the anticipated terms and timing, including the risk
that MPG's stockholders may not approve the merger or that AAM's
stockholders may not approve the share issuance in connection with
the merger, that the necessary regulatory approvals may not be
obtained or may be obtained subject to conditions that are not
anticipated, that AAM might fail to obtain alternative financing in
the event of any failure of its existing financing commitments for
the transaction, or that any of the closing conditions to the
proposed merger may not be satisfied in a timely manner; (ii) the
ability of AAM and MPG to integrate their businesses successfully
and to realize the anticipated benefits of the merger; (iii)
potential litigation relating to the proposed merger; (iv) risks
related to disruptions to ongoing business operations, including
disruptions to management time, related to the proposed merger; (v)
the effect of the announcement of the proposed merger on the
ability of MPG or AAM to retain and hire key personnel; (vi)
potential adverse reactions or changes to business relationships
resulting from the announcement or completion of the merger; (vii)
legislative, regulatory and economic developments (including those
resulting from the United
Kingdom's vote to exit the European Union) and the potential
incurrence of significant costs, liabilities and obligations in
connection therewith; (viii) volatility in the global economy
impacting demand for new vehicles and automotive products; (ix) a
decline in vehicle production levels, particularly with respect to
platforms for which AAM or MPG is a significant supplier, or the
financial distress of any of AAM's or MPG's major customers; (x)
cyclicality and seasonality in the light vehicle, industrial and
commercial vehicle markets; (xi) the performance and results of
operations of AAM's and MPG's significant competitors; (xii) AAM's
and MPG's dependence on large-volume customers for current and
future sales and their ability to attract new customers and
programs for new products; (xiii) a reduction in outsourcing by
AAM's or MPG's customers, the loss or discontinuation of material
production or programs, or AAM's or MPG's failure to secure
sufficient alternative programs; (xiv) AAM's or MPG's inability to
realize all of the sales expected from awarded business or to fully
recover pre-production costs, their inability to achieve cost
reductions required to sustain cost competitiveness, or their
failure to increase production capacity or over-expanding its
production in times of overcapacity; (xv) a disruption in AAM's or
MPG's supply or delivery chains which causes one or more of its
customers to halt production; (xvi) work stoppages or production
limitations at one or more of AAM's or MPG's customer's facilities;
(xvii) a catastrophic loss of one of AAM's or MPG's key
manufacturing facilities or the incurrence of significant costs if
AAM or MPG closes any of its manufacturing facilities; (xviii)
AAM's or MPG's failure to protect its know-how and intellectual
property; (xix) supply shortages or significant increases in the
prices of the raw materials and commodities AAM and MPG use; (xx)
the risk of the incurrence of material costs related to legal
proceedings or regulatory matters, including liabilities arising
from warranty claims, product recall or field actions, and risks of
noncompliance with environmental laws and regulations or risks of
environmental issues that could result in unforeseen costs at AAM's
or MPG's facilities; (xxi) any failure to maintain satisfactory
labor relations and potential liabilities associated with pension
and other postretirement benefit obligations; (xxii) risks related
to AAM's and MPG's global operations, including exposure to foreign
exchange rate fluctuations, threats posed by entering new markets,
and AAM's and MPG's exposure to a number of different tax
uncertainties, including the impact of the mix of AAM's and MPG's
profits and losses in various jurisdictions affecting its tax rate;
(xxiii) AAM's or MPG's inability, or the inability of their
respective customers or suppliers, to obtain and maintain
sufficient debt financing, including working capital lines, (xxiv)
AAM's and MPG's reliance on key machinery and tooling to
manufacture components that cannot be easily replicated and (xv)
program launch difficulties.
Additional risks and uncertainties are contained in AAM's and
MPG's filings with the SEC and may be included in the joint proxy
statement/prospectus. While the list of factors presented here is
considered representative, no such list should be considered to be
a complete statement of all the potential risks, uncertainties or
assumptions that could have a material adverse effect on AAM's or
MPG's consolidated financial condition or results of operations or
cause AAM's or MPG's current expectations or beliefs to change.
Persons reading this announcement are cautioned against relying on
any forward-looking statements, which speak only as of the date
hereof and should be read in conjunction with the other cautionary
statements that are included elsewhere herein, in the joint proxy
statement/prospectus and in AAM's and MPG's public filings,
including those described under "Risk Factors" in their respective
Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q. Neither AAM nor MPG assumes any obligation, and each
expressly disclaims any obligation, to publicly provide revisions
or updates to any forward-looking statements, except as otherwise
required by securities and other applicable laws.
Non-GAAP Information
AAM has provided certain information, which includes non-GAAP
financial measures. Management believes that these non-GAAP
financial measures are useful to both management and its
stockholders in their analysis of the Company's business and
operating performance. Management also uses this information for
operational planning and decision-making purposes.
We define EBITDA to be earnings before interest expense, income
taxes, depreciation and amortization. Adjusted EBITDA is defined as
EBITDA excluding the impact of special charges and other
non-recurring items.
We define net debt to be total debt, net less cash and cash
equivalents.
We define free cash flow to be net cash provided by operating
activities less capital expenditures net of proceeds from the sale
of property, plant and equipment and from government grants.
Non-GAAP financial measures are not and should not be considered
a substitute for any GAAP measure. Additionally, non-GAAP financial
measures as presented by AAM may not be comparable to similarly
titled measures reported by other companies.
Certain of the forward-looking financial measures included in
this release are provided on a non-GAAP basis. A reconciliation of
forward-looking financial measures to the most directly comparable
financial measures calculated and presented in accordance with GAAP
is not practical given the difficulty of projecting event driven
transactional and other non-core operating items in any future
period. The magnitude of these items, however, may be
significant.
Important Information for Stockholders and
Investors
This communication is not intended to and shall not constitute an
offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication may be deemed to be
solicitation material in connection with the proposed merger of MPG
with a wholly-owned subsidiary of AAM, pursuant to which MPG would
become a wholly-owned subsidiary of AAM. In connection with the
proposed merger, AAM intends to file with the U.S. Securities and
Exchange Commission (the "SEC") a registration statement on Form
S-4 that will constitute a prospectus of AAM and that will also
include a joint proxy statement of MPG and AAM. MPG and AAM may
also file other documents with the SEC regarding the proposed
merger. STOCKHOLDERS OF MPG AND AAM ARE URGED TO READ THE JOINT
PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT
ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS THERETO, CAREFULLY AND IN THEIR ENTIRETY BECAUSE
THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER AND RELATED MATTERS. Investors and security holders
may obtain free copies of the joint proxy statement/prospectus
(when available) and other documents if and when filed with the SEC
by AAM and MPG through the website maintained by the SEC at
www.sec.gov. Copies of documents filed with the SEC by AAM will be
made available free of charge on AAM's investor relations website.
Copies of documents filed with the SEC by MPG will be made
available free of charge on MPG's investor relations website.
Participants in Solicitation
AAM, MPG and their respective directors and executive officers may
be deemed to be participants in the solicitation of proxies from
their respective stockholders in respect of the proposed
merger. Information regarding AAM's directors and executive
officers is contained in AAM's proxy statement for its 2016 Annual
Meeting of Stockholders, which was filed with the SEC on
March 24, 2016. Information
regarding MPG's directors and executive officers is contained in
MPG's proxy statement for its 2016 Annual Meeting of Stockholders,
which was filed with the SEC on April
11, 2016. Other information regarding the participants
in the proxy solicitation and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
Contacts
For AAM:
Investor Contact
Jason P. Parsons
Director, Investor Relations
(313) 758-2404
jason.parsons@aam.com
Media Contact
Christopher M. Son
Director, Marketing & Communications
(313) 758-4814
chris.son@aam.com
Or visit AAM's website at www.aam.com.
For MPG:
Investor Contact
David Gann
Vice President, Investor Relations & Communications
(248) 727-1841
investors@mpgdriven.com
Media Contact
Erin Millerschin
The Millerschin Group
(248) 276-1970 (office)
(248) 701-5828 (cell)
emillerschin@millerschingroup.com
Photo -
http://photos.prnewswire.com/prnh/20160505/364361LOGO
Photo -
http://photos.prnewswire.com/prnh/20150311/181160LOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/aam-announces-acquisition-of-mpg-300356683.html
SOURCE American Axle & Manufacturing Holdings, Inc.