Senior management team to rollover a
portion of their shares in the Purchaser
LONGUEUIL, QC, July 11,
2024 /CNW/ - Héroux-Devtek Inc. (TSX: HRX)
("Héroux-Devtek" or the "Corporation"), a
leading international manufacturer of aerospace products
and the world's third-largest landing gear manufacturer, today
announced that it has entered into an arrangement agreement with an
affiliate (the "Purchaser") of Platinum Equity Advisors, LLC
("Platinum Equity"), a U.S. based private equity firm, pursuant to
which the Purchaser will acquire all the issued and outstanding
common shares of the Corporation, other than the shares to be
rolled over by members of senior management of the Corporation (the
"Rollover Shareholders"), for $32.50
in cash per share, representing a total enterprise value of
approximately $1.35 billion, subject
to customary closing conditions (the "Transaction").
The consideration offered to the Corporation's shareholders
under the Transaction represents a 28% premium to the closing share
price on July 10, 2024 and a 47%
premium to the 90-day volume weighted average trading price per
share on the Toronto Stock Exchange for the period ending on
July 10, 2024.
The arrangement agreement is the result of a review of strategic
alternatives available to the Corporation that was led by a Special
Committee comprised solely of independent directors of the
Corporation.
"After an extensive and robust strategic review process, we are
pleased to have agreed on the terms of a transaction with Platinum
Equity that has the full support of Héroux-Devtek's Board of
Directors," said Louis Morin,
Chairman of the Special Committee. "After careful deliberation, the
Special Committee and the Board of Directors have unanimously
concluded that the transaction is in the best interests of the
Corporation and its stakeholders."
"We have admired Héroux-Devtek's growth for many years and have
great respect for the business Gilles and his team have built,"
said Louis Samson, Co-President of
Platinum Equity. "We believe the company's engineering prowess and
emphasis on R&D have contributed to its success as a
service-oriented supplier that delivers for its customers. Platinum
Equity values Héroux-Devtek's commitment to customer service
excellence and we are excited to partner with the company's
management team in the next phase of its growth journey."
"Héroux-Devtek has established an impressive and well-deserved
reputation for delivering innovative, high-quality products for the
international aerospace and defence market," said Platinum Equity
Managing Director Delara Zarrabi.
"We believe the company has an opportunity to make an even larger
impact on a global stage and we will deploy our financial and
operational resources to help the company grow organically and
through strategic acquisitions."
Rollover Shareholders
As part of the Transaction, members of senior management of the
Corporation, including Gilles Labbé, Executive Chairman of the
Board, and Martin Brassard,
President and Chief Executive Officer, will roll over a
portion of their common shares of the Corporation in the Purchaser
for an amount per share equal to the consideration received by the
Corporation's shareholders.
"We have come a long way since my business partner and I bought
Héroux Inc. in 1985. Thanks to the hard work and dedication of our
employees and the trust of our customers and business partners, we
have grown into a
leading international manufacturer of aerospace products
and the world's third-largest landing gear manufacturer. In the
coming years, our Saint-Hubert R&D Centre will pursue its
mission by developing innovative solutions and products aligned
with our customers' evolving needs," said Gilles Labbé, Executive
Chairman of the Board of the Corporation.
"I joined Héroux-Devtek 30 years ago and I have always been
impressed with the breadth and depth of our people. We design and
manufacture amazing products and I look forward to working with
Louis, Delara and the Platinum Equity team to further the execution
of our growth plan," said Martin
Brassard, President and Chief Executive Officer of the
Corporation.
Héroux-Devtek to Remain a Québec-Based, International
Leader
In connection with the proposed acquisition and pursuant to
discussions with Caisse de dépôt et placement du Québec ("CDPQ"),
Platinum Equity said Héroux-Devtek will maintain and invest in its
headquarters and other operations in Québec, including its
manufacturing operations. Additionally, the headquarters will
continue to be responsible for the management functions of the
business at an overall level consistent with current
activities.
"Born and raised in Québec, I have great respect for the long
tradition and proud history of the aerospace sector in the province
and the contributions Héroux-Devtek has made to the industry," said
Samson, who grew up in Québec City before moving to New York 25 years ago. "We will maintain the
company's headquarters in Longueuil and continue investing in its
R&D center in Saint-Hubert,
which employs some of the best engineers in the industry."
"We are excited and honoured to have the opportunity to support
a Québec industry champion like Héroux-Devtek and to continue to
grow its presence as a global leader," added Samson.
"CDPQ has contributed to Héroux-Devtek's expansion and
development since 1987, enabling it to become a global champion in
its industry today. Following nearly 40 years of support, it was
imperative that the company continue to grow while remaining
anchored in Québec. With Platinum Equity's strong commitments to
activities in Québec, CDPQ supports this transaction," said
Kim Thomassin, Executive
Vice-President and Head of Québec at CDPQ. "We want to underscore
the leadership and entrepreneurial vision of Gilles Labbé and his
teams who have contributed to the success of this leading
aeronautics company."
Héroux-Devtek Board Recommendation
Héroux-Devtek's Board of Directors, having received the
unanimous recommendation of the Special Committee, has unanimously
determined (with interested directors abstaining from voting) that
the Transaction is in the best interests of Héroux-Devtek and is
fair to its shareholders (other than the Rollover Shareholders),
and unanimously recommends that Héroux-Devtek's shareholders
approve the Transaction.
Each of National Bank Financial Inc. and Scotiabank, as
financial advisors to the Corporation and the Special Committee,
and Desjardins Capital Markets, retained to provide independent
financial advisory services to the Special Committee, has provided
a fairness opinion to the Board of Directors and the Special
Committee to the effect that, as at July 10,
2024, and based upon and subject to the assumptions,
limitations and qualifications stated therein, the consideration to
be received by shareholders pursuant to the Transaction is fair,
from a financial point of view, to the shareholders of
Héroux-Devtek (other than the Rollover Shareholders).
Desjardins Capital Markets has also delivered to the Board of
Directors and the Special Committee an independent formal valuation
of the common shares completed under the supervision of the Special
Committee, to the effect that, as at July
10, 2024 and based upon and subject to the assumptions,
limitations and qualifications stated therein, the fair market
value of the common shares is in the range of $28.50 to $33.00
per share.
Transaction Details
The Transaction will be implemented by way of a plan of
arrangement under the Business Corporations Act (Québec) and
is expected to close before the end of the Corporation's current
fiscal year ending March 31, 2025,
subject to customary closing conditions, including the receipt of
required shareholder approval, the approval of the Superior Court
of Québec, and regulatory approvals and clearances in Canada, the United
States, the United Kingdom
and Spain. The Transaction is not
subject to any financing condition.
Required shareholder approval for the Transaction will consist
of (i) at least 66⅔% of the votes cast on the Transaction by
holders of common shares at a special meeting of shareholders of
the Corporation, and (ii) at least a majority of the votes cast on
the Transaction by holders of common shares, excluding shares held
by the Rollover Shareholders and any other shares required to be
excluded pursuant to Multilateral Instrument 61-101 – Protection of
Minority Security Holders in Special Transactions, at such
meeting.
Concurrently with the execution of the arrangement agreement,
the Purchaser has entered into voting support agreements with CDPQ,
members of senior management and directors, together holding shares
representing approximately 25% of the issued and outstanding common
shares of the Corporation, pursuant to which they have agreed to
vote all shares held by them in favour of the Transaction, subject
to customary exceptions.
The arrangement agreement contains non-solicitation covenants on
the part of the Corporation, subject to the customary "fiduciary
out" provisions. A termination fee of $40
million would be payable by the Corporation to the Purchaser
in certain circumstances, including in the context of a superior
proposal supported by the Corporation. The Corporation would also
be entitled to a reverse termination fee of $63 million if the Transaction is not completed
in certain circumstances.
Following completion of the Transaction, the Corporation will
become a privately held company and will apply to cease to be a
reporting issuer under Canadian securities laws and the common
shares will no longer be publicly traded on the Toronto Stock
Exchange.
Additional information regarding the Transaction will be
included in an information circular that the Corporation will
prepare, file and mail to its shareholders in advance of the
special meeting to be held to consider and approve the Transaction.
Copies of the arrangement agreement and the information circular
will be available under the Corporation's profile on SEDAR+ on
www.sedarplus.ca.
Advisors
National Bank Financial Inc. and Scotiabank are acting as
financial advisors to the Corporation and to the Special Committee
and Desjardins Capital Markets was retained to provide independent
financial advisory services to the Special Committee. Fasken
Martineau DuMoulin LLP and Hogan Lovells LLP are acting as legal
advisors to the Corporation and to the Special Committee, and
Stikeman Elliott LLP and Latham & Watkins LLP are acting as
legal advisors to Platinum Equity. BMO Capital Markets is acting as
financial advisor to Platinum Equity and as the lead arranger for
the financing.
ABOUT HÉROUX-DEVTEK
Héroux-Devtek Inc. (TSX: HRX) is an international company
specializing in the design, development, manufacture, repair and
overhaul of aircraft landing gear, hydraulic and electromechanical
actuators, custom ball screws and fracture-critical components for
the Aerospace market. The Corporation is the third-largest landing
gear company worldwide, supplying both the defence and commercial
sectors. Approximately 94% of the Corporation's sales are outside
of Canada, including about 57% in
the United States. The
Corporation's head office is located in Longueuil, Québec with facilities in
Canada, the United States, the United Kingdom and Spain.
ABOUT PLATINUM EQUITY
Founded in 1995 by Tom Gores,
Platinum Equity is a global investment firm with more than
US$48 billion of assets under
management and a portfolio of approximately 50 operating companies
that serve customers around the world. Platinum Equity specializes
in mergers, acquisitions and operations – a trademarked strategy it
calls M&A&O® – acquiring and operating companies
in a broad range of business markets, including manufacturing,
distribution, transportation and logistics, equipment rental,
metals services, media and entertainment, technology,
telecommunications and other industries. Over the past 28 years
Platinum Equity has completed more than 450 acquisitions.
FORWARD-LOOKING STATEMENTS
Except for historical information provided herein, this press
release contains information and statements of a forward-looking
nature, including statements relating to the anticipated benefits
of the Transaction for the Corporation and its stakeholders,
regulatory, shareholder and Court approvals, the intent of members
of senior management to rollover their shares in the Purchaser and
the anticipated timing of completion of the Transaction.
Forward-looking statements are based on assumptions and on
management's best possible evaluation of future events and are
subject to risks, uncertainties and other important factors that
could cause the Corporation's actual performance to differ
materially from expected results expressed in or implied by such
statements. Such factors include, but are not limited to: the
possibility that the Transaction will not be completed on the terms
and conditions, or on the timing, currently contemplated, and that
it may not be completed at all, due to a failure to obtain or
satisfy, in a timely manner or otherwise, required regulatory,
shareholder and Court approvals and other conditions to the closing
of the Transaction or for other reasons; the failure to complete
the Transaction which could negatively impact the price of the
shares or otherwise affect the business of the Corporation; the
dedication of significant resources to pursuing the Transaction and
the restrictions imposed on the Corporation while the Transaction
is pending; the uncertainty surrounding the Transaction that could
adversely affect the Corporation's retention of customers and
business partners; the occurrence of a material adverse effect
leading to the termination of the arrangement agreement; customers,
supply chain, the aerospace industry and the economy in general;
the impact of other worldwide geopolitical and general economic
conditions; industry conditions including changes in laws and
regulations; increased competition; the lack of availability of
qualified personnel or management; availability of commodities and
fluctuations in commodity prices; financial and operational
performance of suppliers and customers; foreign exchange or
interest rate fluctuations; and the impact of accounting policies
issued by international standard setters. For further details,
please see the Risk Management section under Additional Information
in the Corporation's MD&A. Readers are cautioned that the
foregoing list of factors is not exhaustive and undue reliance
should not be placed on forward-looking statements. As a result,
readers are advised that actual results may differ materially from
expected results. Unless otherwise required by applicable
securities laws, the Corporation expressly disclaims any intention,
and assumes no obligation to update or revise any forward-looking
statements whether as a result of new information, future events or
otherwise.
SOURCE Héroux-Devtek Inc.