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February 27, 2008 |
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MOBILE MINI: To Merge with Mobile Storage in US$701.5 Mln Deal Mobile Mini, Inc. and Mobile Storage Group, Inc. of Glendale, California have entered into a definitive merger agreement, under which Mobile Storage will merge into Mobile Mini in a transaction valued at approximately US$701.5 million. The transaction will establish the combined company as a global provider of portable storage solutions in the United States and the United Kingdom. Upon consummation of the merger, Mobile Mini will significantly expand its geographic footprint and will be positioned to cover most major markets for portable storage in both the US and the UK. "This represents a highly strategic transaction for Mobile Mini," stated Mobile Mini's Chairman, President and Chief Executive Officer, Steven Bunger, "which substantially increases Mobile Mini's ability to service an expanded customer base, provides the employees of both companies with enhanced career opportunities, and offers our stockholders an opportunity to benefit from a transaction that we believe will be solidly accretive to our earnings in the first full year of the combination." The merged company will include senior executives from both companies. Steve Bunger will serve as Chairman, President and Chief Executive Officer and Larry Trachtenberg will continue as Chief Financial Officer. Doug Waugaman, CEO of Mobile Storage Group, will join Mobile Mini as COO of Integration, reporting directly to Mr. Bunger. Jody Miller, Bill Armstead and Ron Halchishak, senior executives at Mobile Storage Group, will also assume senior roles with the combined organization. "A key goal of this merger is to retain the top sales professionals, branch managers and operating field personnel of the combined organizations, both in the US and the UK, to position Mobile Mini with the most knowledgeable, experienced and motivated employee base in the portable storage industry," Mr. Bunger stated. "This merger is predicated on bringing together the best in class employees of our two organizations and I am excited by the expanded opportunities to be offered to much of our talented employee base," Mr. Waugaman added. Mobile Storage Group is majority owned by the private equity firm Welsh, Carson, Anderson & Stowe, who, together with the other equity holders, through this transaction, will be converting substantially all of their equity ownership of Mobile Storage group into Mobile Mini preferred stock. Following consummation of the merger, two WCAS representatives will be elected to Mobile Mini' Board of Directors. WCAS is one of the largest private equity investors in the US focused on the information & business services and healthcare industries. Since its founding in 1979, WCAS has organized 14 investment partnerships with total capital in excess of US$16 billion. Pursuant to the merger, Mobile Mini will assume approximately US$535.0 million of Mobile Storage Group's outstanding indebtedness and will acquire all outstanding shares of Mobile Storage Group for US$12.5 million in cash and shares of newly issued Mobile Mini convertible preferred stock with a liquidation preference of US$154.0 million. The convertible preferred stock will be convertible into approximately 8.55 million Mobile Mini common shares, representing a conversion price of US$18.00 per Mobile Mini share and resulting in fully diluted ownership in Mobile Mini of approximately 19.8% for Mobile Storage Group stockholders. The preferred stock will be mandatorily convertible into Mobile Mini common stock if, after the first year following the issuance of the preferred stock, Mobile Mini's common stock trades above US$23.00 share for a period of 30 consecutive days. The preferred stock will not have any cash or payment-in-kind dividends, will impose no covenants upon Mobile Mini, and will include an optional redemption feature following the tenth year after the issue date. The merger is expected to generate cost synergies of at least US$25 million on an annualized basis, which are expected to be fully realized by the end of fiscal 2009. The cost synergies are a result of the significant overlap in corporate functions and branch infrastructure. Mobile Mini believes that the combination with Mobile Storage will add 21 new locations in the US and 14 locations in the UK. This combination of new branches as well as proximate locations offers opportunities for both additional growth and substantial cost synergies via branch consolidation. The transaction is expected to be slightly accretive to earnings in 2008 (excluding merger-related expenses), and should generate substantial EPS accretion of 25% or more, over current analyst EPS estimates, in 2009, including the benefit of expected synergies. "As the integration of our companies is executed, we expect to achieve meaningful cost synergies by combining certain overlapping branch locations, consolidating corporate functions and headquarters and reducing certain combined operating expenses, which we estimate will ultimately generate a minimum of US$25 million of savings on an annualized basis," Mr. Bunger stated. "These cost synergies, in combination with an improved revenue growth potential through implementing Mobile Mini's growth model into newly acquired Mobile Storage Group branches, should add to Mobile Mini's future earnings growth." The transaction has been structured to maintain a strong balance sheet with sufficient liquidity after the combination. Pro forma for the acquisition, Mobile Mini estimates that total debt will approximate US$960 million. In 2007, Mobile Mini generated EBITDA of US$133.9 million (excluding stock compensation expense) and Mobile Storage Group generated EBITDA of US$86.1 million (adjusted for certain items and excluding stock compensation expense). With the US$25 million of forecast cost synergies, the adjusted EBITDA for 2007 is approximately US$245.0 million, resulting in pro forma leverage of approximately 3.9x. Going forward, management expects to fund both fleet expansion and debt reduction with cash flow from operations. In addition, Mobile Mini believes it will have excess availability of over US$300 million under its expected US$1.0 billion asset-based revolving credit facility at closing of the transaction. Closing of the transaction is subject to approval by Mobile Mini stockholders, obtaining required governmental approvals, receipt of a new US$1.0 billion asset-based revolving credit facility and customary closing conditions. Mobile Mini has received a fully underwritten commitment from Deutsche Bank AG, Bank of America and JP Morgan for a US$1.0 billion asset-based revolving credit facility to fund the transaction. A special meeting of Mobile Mini stockholders will be scheduled for the purpose of submitting the issuance of the preferred stock and related matters to Mobile Mini's stockholders for approval. No date for the stockholders meeting has been set. Depending on the timing of various disclosure requirements, the stockholder meeting, and regulatory approvals, the transaction is expected to close as early as June 2008. Oppenheimer & Co. Inc. and Deutsche Bank Securities Inc. acted as financial advisors to Mobile Mini, and White & Case LLP acted as legal counsel. Lehman Brothers Inc. acted as financial advisor to Mobile Storage Group and Kirkland & Ellis LLP acted as legal counsel. The company plans to update its 2008 guidance to factor in the Mobile Storage Group merger and related integration, consolidation and other costs around the time of closing. About Mobile Storage Headquartered in Burbank, California, Mobile Storage Group Inc. aka Mobile Services Group Inc. -- http://www.mbilestorage.com/ --provides portable storage in the United States and the United Kingdom. About Mobile Mini Headquartered in Tempe, Arizona, Mobile Mini Inc. (Nasdaq GS: MINI) -- http://www.mobilemini.com/ -- provides portable storage solutions through its total fleet of over 165,000 portable storage units and portable offices with 66 branches in U.S., United Kingdom, Canada and The Netherlands. |
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