DEERFIELD, Ill., and
ATLANTA, April 12, 2018 /PRNewswire/ -- Essendant
(Nasdaq: ESND) and Genuine Parts Company (NYSE: GPC) today
announced that the companies have entered into a definitive
agreement to combine Essendant and Genuine Parts Company's S.P.
Richards business. The transaction, which has been unanimously
approved by the Boards of Essendant and Genuine Parts Company, is
expected to be tax free to the companies' respective shareholders.
Together, Essendant and S.P. Richards will form a stronger, more
competitive business products distributor with greater scale and
service capabilities and an enhanced ability to support
customers.
Bringing together leadership and operational expertise from
Essendant and S.P. Richards and combining the best elements of each
business' operations will create an even stronger company with the
ability to harness each organization's unique strengths and
capitalize on opportunities to create value, including:
- Greater resources to support and partner with the independent
dealer channel and resellers in other sales channels, and invest to
drive enhanced value for customers, consumers and
shareholders;
- Optimized product assortment of branded and private-label
products across a broad set of categories;
- Enhanced capability to develop and offer innovative solutions
to our customers, including value-added marketing and analytics to
drive demand; and
- Consolidated distribution network with greater efficiencies
throughout the entire supply chain.
Ric Phillips, Essendant President
and Chief Executive Officer, who will lead the combined company,
said, "By bringing together two businesses with long histories,
complementary product lines and a shared customer-centric approach,
we are creating a much stronger, better positioned company.
Combining resources, leadership and operational expertise from both
teams, and the unique strengths of both businesses will enhance our
ability to compete and help our customers succeed in the face of a
rapidly evolving market. In addition, through increased scale,
improved service capabilities and an enhanced financial profile –
including significant cost savings, increased free cash flow and a
stronger balance sheet – we will be able to drive more profitable
growth and create meaningful value for shareholders."
Paul Donahue, Genuine Parts
Company President and Chief Executive Officer, added, "This
transaction is the result of a comprehensive process to maximize
the value of S.P. Richards and represents a key step in the
execution of Genuine Parts Company's long-term strategy by enabling
us to increase our focus on our larger, core global automotive and
industrial businesses. In addition, the merger provides substantial
upside to Genuine Parts Company shareholders through the
significant value proposition of the combined company that will be
better equipped to succeed in a dynamic and changing marketplace.
We have tremendous respect for Essendant and believe the
combination with S.P. Richards' strong, diversified business and
talented team will bring together two highly complementary cultures
with a shared commitment to serving customers. For employees, the
new company will have the scale and depth to compete more
effectively, and we look forward to supporting the S.P. Richards
and Essendant teams in facilitating a seamless integration."
Value Creation for Both Companies' Shareholders
The transaction creates a company with pro forma 2017 net sales
of approximately $7 billion,
$300 million in Adjusted EBITDA, 4.2%
Adjusted EBITDA margins.1 The combined
company will have a stronger and more flexible balance sheet, which
will enable it to reduce leverage, invest in the business and
provide value to shareholders.
In addition to creating a platform with greater scale and the
enhanced ability to serve customers, the combination is expected to
unlock more than $75 million in
annual run-rate cost synergies and more than $100 million in working capital improvements. The
cost synergies will primarily be driven by sourcing, supply chain
and selling, general and administrative efficiencies. The combined
company expects 90% of the cost synergies to be realized within two
years post-closing and to incur less than $50 million in one-time cash costs to realize the
synergies.
Transaction Details
The transaction combining Essendant and S.P. Richards is
structured as a Reverse Morris Trust, in which Genuine Parts
Company will separate S.P. Richards into a standalone company and
spin off that standalone company to Genuine Parts Company
shareholders, immediately followed by the merger of Essendant and
the spun-off company. The transaction implies a valuation of S.P.
Richards of approximately $680
million, reflecting the value of the Essendant shares to be
issued at closing plus one-time cash payments to Genuine Parts
Company of approximately $347
million, subject to adjustments at closing. Upon closing,
Genuine Parts Company shareholders will own approximately 51% and
Essendant shareholders will own approximately 49% of the combined
company on a diluted basis, with approximately 80 million diluted
shares expected to be outstanding. The transaction is expected to
be tax-free to Essendant and Genuine Parts Company
shareholders.
The transaction is expected to close before the end of 2018,
subject to regulatory and Essendant shareholder approvals and other
customary closing conditions.
Leadership and Governance
Upon close of the transaction, the combined company, which will
be called Essendant, will be led by Essendant President and CEO
Ric Phillips, and Janet Zelenka will serve as CFO. S.P. Richards
President and CEO Rick Toppin will
be appointed Chief Operating Officer of the combined company.
Additional leadership roles will be mutually determined as part of
the integration process.
Charles K. Crovitz, current
Chairman of the Board of Essendant, will serve as Chairman of the
Board of the combined company. He will be joined by three
Essendant-appointed Directors, four Genuine Parts Company-appointed
Directors, and four Directors appointed by mutual agreement.
The combined company will maintain headquarters in both
Deerfield, IL and Atlanta, GA.
Advisors
Citigroup Global Markets Inc. is acting as financial advisor and
Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal
counsel to Essendant. J.P. Morgan is acting as financial advisor
and Davis Polk & Wardwell LLP is
acting as legal counsel to Genuine Parts Company.
Conference Call
Essendant and Genuine Parts will hold a conference call today at
8:30 AM ET / 7:30 AM CT to discuss the transaction. Investors
may participate in the conference call by dialing (877) 358-2531 in
the U.S. and Canada or (412)
902-6623 if international and ask to be joined into the Essendant
call. A webcast will also be available at Essendant and Genuine
Parts Company's investor websites (http://investors.essendant.com/
& http://genuineparts.investorroom.com/). Interested parties
can access an archived version of the call, this news release, and
a slide presentation related to the transaction, also located on
Essendant and Genuine Parts Company's investor websites after the
call ends.
Cautionary Statements
This press release contains forward-looking statements,
including statements regarding the proposed business combination
transaction between Essendant Inc. ("Essendant") and Genuine Parts
Company ("GPC") in which GPC will separate its Business Products
Group and combine this business with Essendant. From time to time,
oral or written forward-looking statements may also be included in
other information released to the public. These forward-looking
statements are intended to provide management's current
expectations or plans for our future operating and financial
performance, based on assumptions currently believed to be valid.
Forward-looking statements often contain words such as "expects,"
"anticipates," "estimates," "intends," "plans," "believes,"
"seeks," "will," "is likely to," "scheduled," "positioned to,"
"continue," "forecast," "predicting," "projection," "potential" or
similar expressions. Forward-looking statements may include
references to goals, plans, strategies, objectives, projected costs
or savings, anticipated future performance, results, events or
transactions of Essendant or the combined company following the
proposed transaction, the anticipated benefits of the proposed
transaction, including estimated synergies, the expected timing of
completion of the transaction and other statements that are not
strictly historical in nature. These forward-looking statements are
based on management's current expectations, forecasts and
assumptions. This means they involve a number of risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied here, including but not limited to:
the ability of Essendant and GPC to receive the required regulatory
approvals for the proposed transaction and approval of Essendant's
stockholders and to satisfy the other conditions to the closing of
the transaction on a timely basis or at all; the occurrence of
events that may give rise to a right of one or both of Essendant
and GPC to terminate the merger agreement; negative effects of the
announcement or the consummation of the transaction on the market
price of Essendant's common stock and/or on its business, financial
condition, results of operations and financial performance; risks
relating to the value of the Essendant shares to be issued in the
transaction, significant transaction costs and/or unknown
liabilities; the possibility that the anticipated benefits from the
proposed transaction cannot be realized in full or at all or may
take longer to realize than expected; risks associated with
contracts containing consent and/or other provisions that may be
triggered by the proposed transaction; risks associated with
transaction related litigation; the possibility that costs or
difficulties related to the integration of the businesses will be
greater than expected; and the ability of the combined company to
retain and hire key personnel. There can be no assurance that the
proposed transaction or any other transaction described above will
in fact be consummated in the manner described or at all.
Stockholders, potential investors and other readers are urged to
consider these risks and uncertainties in evaluating
forward-looking statements and are cautioned not to place undue
reliance on the forward-looking statements. For additional
information on identifying factors that may cause actual results to
vary materially from those stated in forward-looking statements,
please see Essendant's and GPC's reports on Forms 10-K, 10-Q and
8-K filed with or furnished to the U.S. Securities and Exchange
Commission (the "SEC") and other written statements made by
Essendant and/or GPC from time to time. The forward-looking
information herein is given as of this date only, and neither
Essendant nor GPC undertakes any obligation to revise or update
it.
Additional Information
In connection with the proposed transaction, Essendant will file
with the SEC a registration statement on Form S-4 containing a
proxy statement/prospectus of Essendant and Rhino SpinCo, Inc., a
wholly-owned subsidiary of GPC created for the proposed transaction
("Rhino SpinCo, Inc."), will file with the SEC a registration
statement on Form 10. INVESTORS AND SECURITY HOLDERS ARE
URGED TO READ THE REGISTRATION STATEMENTS, THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders will be able to
obtain the registration statements and the proxy
statement/prospectus free of charge from the SEC's website or from
Essendant or GPC. The documents filed by Essendant with the SEC may
be obtained free of charge at Essendant's website at
www.essendant.com, at the SEC's website at www.sec.gov or by
contacting Essendant's Investor Relations Department at (847)
627-2900. The documents filed by Rhino SpinCo, Inc. with the SEC
may be obtained free of charge at GPC's website at www.genpt.com,
at the SEC's website at www.sec.gov or by contacting GPC's Investor
Relations Department at (678) 934-5000.
Participants in the Solicitation
Essendant, GPC and their respective directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transaction. Information about Essendant's
directors and executive officers is available in Essendant's proxy
statement for its 2017 annual meeting of stockholders, which was
filed with the SEC on April 12, 2017,
its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC
on February 21, 2018, and its Current
Reports on Form 8-K, which were filed with the SEC on May 2, 2017, June 13,
2017, July 17, 2017,
October 25, 2017, December 28, 2017 and March 8, 2018. Information about GPC's directors
and executive officers is available in GPC's proxy statement for
its 2018 annual meeting of shareholders, which was filed with the
SEC on February 27, 2018. 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
registration statements, the proxy statement/prospectus and other
relevant documents to be filed with the SEC regarding the proposed
transaction.
No Offer or Solicitation
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
About Essendant
Essendant Inc. is a leading national distributor of workplace
items, with 2017 net sales of $5.0
billion. The company provides access to a broad assortment
of over 170,000 items, including janitorial and breakroom supplies,
technology products, traditional office products, industrial
supplies, cut sheet paper products, automotive products and office
furniture. Essendant serves a diverse group of customers, including
independent resellers, national resellers and e-commerce
businesses. The Company's network of distribution centers enables
the Company to ship most products overnight to more than ninety
percent of the U.S.
About Genuine Parts Company
Genuine Parts Company is a global distributor of automotive
replacement parts in the U.S., Canada, Mexico,
Australasia, France, the UK, Germany and
Poland. The Company also distributes industrial replacement
parts and electrical and electronic components in the U.S.,
Canada and Mexico through its Industrial Parts
Group. S. P. Richards Company, the Business Products Group,
distributes a variety of business products in the U.S. and in
Canada. Genuine Parts Company had 2017 revenues of $16.3
billion.
About S.P. Richards
S.P. Richards, the Business Products Group of Genuine Parts
Company, is a leading business products distributor throughout the
U.S. and Canada, with 2017
revenues of approximately $2.0
billion. S.P. Richards equips reseller customers with an
expansive offering of general business products, including everyday
essentials like copy paper, office and printer supplies, as well as
office furniture, business technology products and facilities,
breakroom and safety supplies. S.P. Richards distributes more than
98,000 items to over 9,700 resellers and distributors from a network of 54
distribution centers.
Essendant Contacts
Janet Zelenka – Senior Vice
President and CFO – (847) 627-7000
Ryon Wharton – Vice President
Finance and Investor Relations – (847) 627-2900
Genuine Parts Contacts
Carol Yancey – Executive Vice
President and CFO – (678) 934-5044
Sid Jones – Senior Vice President,
Investor Relations – (678) 934-5628
1 Includes the assumption of $75 million in annualized cost synergies,
excluding one-time expenses required to achieve the synergies
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SOURCE Essendant Inc.