ATLANTA, May 16, 2018 /PRNewswire/ -- Genuine Parts
Company (NYSE: GPC) ("GPC") today commented on its previously
announced definitive merger agreement (the "Merger Agreement") to
combine GPC's S.P. Richards business (the "Business Products
Group") with Essendant (NASDAQ: ESND) in response to the
announcement of Staples, Inc.'s conditional, non-binding proposal
to acquire Essendant for $11.50 per
share in cash. Staples is privately owned by Sycamore Partners,
which filed a Schedule 13D reporting its acquisition of a 9.9%
ownership stake in Essendant.
GPC issued the following statement:
As announced on April 12, 2018, GPC entered into a definitive
agreement to combine our S.P. Richards business with Essendant. We
are confident that combining the best elements of both businesses
will create an even stronger company with the ability to capitalize
on opportunities to create value for all of our stakeholders. We
continue to make progress on our integration planning, and we
remain committed to completing this transaction, which is on track
to close before the end of 2018.
On May 7,
2018, GPC demonstrated its confidence in the upside value
creation of this merger by proposing to Essendant enhanced
transaction terms under which, in addition to owning 49% of the
combined company on a diluted basis, Essendant shareholders would
receive a Contingent Value Right ("CVR") for each Essendant share
held immediately prior to the closing of the transaction. Through
the CVR, GPC would provide Essendant shareholders with a potential
cash payment of up to $4.00 per CVR
based on how Essendant shares trade during a 20-day measurement
period at the later of the end of 2019 or 12 months from the
closing of the transaction. The cash payment would be equal to
$12.00 minus the greater of the
weighted average share price of the combined company during the
measurement period or $8.00.
We do not believe Staples'
conditional, non-binding proposal to acquire Essendant for
$11.50 per share in cash to be a
superior proposal nor reasonably likely to lead to a superior
proposal as defined under the terms of the Merger Agreement.
Indeed, given the proposed enhanced terms and the expected
financial benefits of more than $75
million in annual run-rate cost synergies and more than
$100 million in working capital
improvements, we are confident that the merger between S.P.
Richards and Essendant delivers superior value to Essendant's
shareholders. Based on our preliminary analysis, we estimate an
implied trading multiple for the combined company of approximately
8.0x EBITDA, in which case these expected synergies would result in
an additional $700 million in
shareholder value, or approximately $8.75 per share.1
Further, as a stronger, more
competitive business products distributor with greater scale and
service capabilities, the combined company will have an enhanced
ability to support customers, including:
- Greater resources to support and partner with the independent
dealer channel and resellers in other sales channels, and to make
investments 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 customers, including value-added marketing and analytics to
drive demand; and
- Consolidated distribution network with greater efficiencies
throughout the entire supply chain.
Through increased scale, improved
service capabilities and an enhanced financial profile, the
combination of S.P. Richards and Essendant will drive more
profitable growth and create meaningful value for shareholders over
the long term.
J.P. Morgan is acting as financial advisor and Davis Polk & Wardwell LLP is acting as legal
counsel to GPC.
Cautionary Statement
This press release contains forward-looking statements,
including statements regarding the proposed business combination
transaction between GPC and Essendant 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 believed
at that time to be valid. 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 occurrence of events that may give rise to a right of one or
both of GPC and Essendant to terminate the Merger Agreement,
including Staples' proposal to acquire Essendant, the ability of
GPC and Essendant to receive the approval of Essendant's
stockholders and required regulatory approvals for the proposed
transaction and to satisfy the other conditions to the closing of
the transaction on a timely basis or at all; negative effects
resulting from the transaction process (including announcements
such as this press release) or the consummation of the transaction
on the market price of GPC's or Essendant's common stock and/or on
their respective businesses, 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 GPC's and Essendant's reports on Forms 10-K, 10-Q and 8-K filed
with or furnished to the SEC and other written statements made by
GPC and/or Essendant from time to time. The forward-looking
information provided by the Company is given as of this date only,
and GPC does not undertake 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.
("SpinCo"), a wholly owned subsidiary of GPC created for the
proposed transaction, 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 GPC or Essendant. 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. 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.
Participants in the Solicitation
GPC, Essendant 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 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. Information about Essendant's directors and executive
officers is available in Essendant's proxy statement for its 2018
annual meeting of stockholders, which was filed with the SEC on
April 13, 2018.
No Offer or Solicitation
This communication 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 GPC
Genuine Parts Company is a distributor of automotive replacement
parts in the U.S., Canada,
Mexico, Australasia, France, the U.K., Germany and Poland. The Company also distributes
industrial replacement parts and electrical and electronic
materials in the U.S., Canada and
Mexico through its Industrial
Products Group. S.P. Richards Company, the Business Products Group,
distributes a variety of business products in the U.S. and
Canada.
_______________________________________________
1 As stated in the April 12,
2018 press release, the combined company expects to incur
less than $50 million in one-time
cash costs to realize synergies.
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SOURCE Genuine Parts Company