Details Disclosed for Lexmark Acquisition Deal

Yesterday we at RT Media reported on the acquisition of Lexmark by a consortium of investors led by Apex Technology Co., Ltd. (Apex) and PAG Asia Capital (PAG). The transaction is expected to be approximately $3.63 billion.

Following the transaction, Apex and PAG, in collaboration with Legend Capital, will jointly set up Cayman Subsidiary I in the Cayman Islands, with Apex holding 51.18% of the shares, PAG 42.94% and Legend Capital 5.88%. Following that, Cayman Subsidiary I will set up Cayman Subsidiary II in the Caymans, which will then set up a consolidated subsidiary in Delaware, U.S.A. to implement this transaction.

As agreed, Lexmark will be acquired for $40.50 per share in the transaction. As of April, 13 2016, Lexmark had issued 62,639,833 common stocks. After considering the impact of restricted stocks and options on diluted shares, the number of fully diluted shares of Lexmark was 66,661,904, totaling $2.7 billion for all Lexmark shareholders (the final transaction will be subject to the actual payment on the date of the final settlement).

Meanwhile, according to Lexmark’s debt agreement, Lexmark is required to refinance all interest-bearing debts prior to the handover. The net amount of all Lexmark interest-bearing debts had reached $0.914 billion as of December, 31 2015. Taking into consideration the approximately $0.43 billion budget for potential debts, the transaction would pay for an actual enterprise value of $40.44 billion.

To avoid backdoor listing by major asset restructuring, Apex, PAG, and Legend Capital will invest $2.332 billion in cash, or RMB equivalent, for the transaction, with Apex contributing $1.19 billion, PAG $0.93 billion, and Legend Capital $0.2 billion. The remaining will go to a consortium led by China Bank and China Citic Bank for a loan.

Due to the costs of the buyout, as well as integration, Lexmark reported a net profit of $80million in 2014, and losses of $ 40 million in 2015. Excluding the impact of non-recurring gains and losses, the net profits turned out to be $0.253 billion and $0.218 billion respectively in the years 2014 and 2015.

According to the merger agreement, should the occurrence of any assumed condition in the agreement cause a termination to the transaction, Apex has to pay the target company a termination fee of $0.15 billion or $95million, depending on the situation.

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