Belden Informing Digi’s Shareholders of Its Proposed $13.82 Per Share
Cash Offer
Proposal Represents 35% Premium to One Month Volume-Weighted Average
Price and 54% Premium to Enterprise Value
Transaction Delivers Substantial and Immediate Value to All Digi
Stakeholders
Transaction Would Enhance Belden’s Industrial IT Business
ST. LOUIS--(BUSINESS WIRE)--
Belden Inc. (NYSE: BDC) announced today that it has submitted a proposal
to the Board of Directors of Digi International Inc. (NASDAQ: DGII) to
acquire Digi in an all-cash transaction valued at approximately $380
million.
Under the terms of the proposal, Digi shareholders would receive $13.82
in cash for each Digi share, representing a 35% premium over Digi’s
trailing one month volume-weighted average price (“VWAP”), a 37% premium
over Digi’s trailing thirty-six month VWAP and a 25% premium over Digi’s
share price of $11.05 on Thursday, November 10, 2016. The offer
represents an implied enterprise value of $242 million, representing a
premium of 54% to Digi’s enterprise value of approximately $158 million
on Thursday, November 10, 2016 and a 10x EBITDA multiple based on the
high end of guidance provided by Digi to its shareholders on October 27,
2016. The acquisition would be fully funded with existing cash reserves
and therefore is not subject to any financing contingency.
This proposal, which was initially formalized on November 4, 2016, was
reiterated in a letter sent today to Digi’s Chairman, William
Priesmeyer, and President and Chief Executive Officer, Ronald Konezny,
after Belden received a letter from Digi on November 8, 2016 expressing
unwillingness to engage in discussions. Belden is disclosing the
contents of its letter in order to inform Digi’s shareholders of the
opportunity to realize a significant premium and the compelling
strategic fit inherent in a combination of the two companies.
The addition of Digi to Belden’s Industrial IT platform would create a
unique and broad portfolio of wireless and embedded solutions for
customers across a number of vertical markets. Further, Digi would
benefit from Belden’s proven business system which would provide access
to new growth markets. Belden and Digi have a history of commercial and
technical collaboration, which provides Belden confidence of the strong
strategic fit with Digi.
Belden has a strong track record of successfully acquiring and
integrating a diverse range of businesses. Since 2007, Belden has
deployed over $2.8 billion toward M&A to accelerate its strategic
transformation.
Belden is prepared to engage in discussions immediately to work toward a
successful completion of the proposed transaction, and Belden looks
forward to working with Digi’s management team and Board of Directors to
maximize value for all stakeholders. Although there can be no assurances
a definitive agreement will be reached between the companies, Belden is
committed to pursuing this transaction and will continue to update
shareholders on our progress as appropriate.
The full text of the letter is included below.
A discussion of the offer and strategic rationale is available on our
Investor Relations website now. The link to the webcast replay as well
as the presentation slides are available via the Internet at http://investor.belden.com.
A replay of this webcast will remain accessible in the investor
relations section of the Company’s Web site for a limited time.
______________________________________________________________________________
November 11, 2016
Board of Directors
Digi International Inc.
11001 Bren Road East
Minnetonka,
MN 55343
Attention: Mr. William N. Priesmeyer, Chairman of the Board
Attention:
Mr. Ron Konezny, President & Chief Executive Officer
Dear Members of the Board:
We are disappointed that the Digi Board is unwilling to engage in
discussions regarding an all-cash acquisition of Digi by Belden, as
expressed in your letter of November 8, 2016, sent in response to our
letter of November 4, 2016, and in subsequent email and telephone
interactions. Based on the commercial and technical collaboration
between our companies to date, we strongly believe that the strategic
fit between Digi and Belden’s Industrial IT business is excellent.
Digi’s capabilities in wireless and embedded networking would complement
Belden’s capabilities to create uniquely complete solutions for
customers in machine-to-machine applications. We remain convinced that
the combination presents a compelling opportunity for your shareholders
to receive an immediate and substantial premium to the value that would
be achievable as a standalone company and would create enhanced
opportunities for both companies’ employees.
While we remain hopeful that the two companies can engage in productive
discussions relating to the proposal, we are making the contents of this
letter public to ensure that the Digi shareholders are aware of the
value inherent in our proposal.
As previously communicated to you, Belden proposes to acquire 100% of
the fully-diluted outstanding Digi common shares for a price of $13.82
per share in cash at closing. This price represents a 35% premium over
Digi’s trailing one month volume-weighted average price (“VWAP”), a 37%
premium over Digi’s trailing thirty-six month VWAP and a 25% premium
over Digi’s share price of $11.05 on Thursday, November 10, 2016. The
offer represents an implied enterprise value of $242 million,
representing a premium of 54% to Digi’s enterprise value of
approximately $158 million on Thursday, November 10, 2016 and a 10x
EBITDA multiple based on EBITDA of $24 million implied by the high end
of guidance provided by Digi to its shareholders on October 27, 2016. We
believe the proposal recognizes the significant strategic value of a
combination of Digi with Belden and reflects a significant premium to
the value that Digi could achieve on a standalone basis.
The acquisition would be fully funded with existing cash reserves.
Therefore, the transaction would not be subject to any financing
contingencies.
Given our knowledge of Digi and our historical collaboration, we are
prepared to swiftly complete confirmatory due diligence and negotiate a
mutually acceptable definitive agreement in parallel with due diligence.
Closing the proposed transaction would be subject to the receipt of
standard regulatory approvals, such as Hart-Scott-Rodino anti-trust
filing requirements, and any required shareholder approvals. We have
engaged Guggenheim Securities as our financial advisor and Lewis Rice as
our legal advisor to assist us in this transaction.
As we have continually communicated, we stand ready to work with you to
bring this value-enhancing transaction to fruition. Our senior
management team and advisors are prepared to meet with you and your
representatives at any time to discuss the proposal in more detail.
We look forward to your prompt and favorable reply.
Yours sincerely,
John Stroup
President and Chief Executive Officer
This Proposal is neither a legally enforceable contract nor a binding
offer to enter into a contract. It does not contain all matters
upon which agreement must be reached for any proposed transaction and
does not constitute an offer or commitment on our part to submit a
definitive proposal at a future time. A binding agreement will
result only from the execution of a definitive written agreement not yet
negotiated or executed by the parties.
_____________________________________________________________________________________
Forward-Looking Statements
This release contains, and statements made by us concerning the release
may contain, forward-looking statements, including our expectations for
our business following a potential combination with Digi International
Inc. (“Digi”). Forward-looking statements also include statements
regarding future financial performance (including revenues, expenses,
earnings, margins, cash flows, dividends, capital expenditures and
financial condition), plans and objectives, and related assumptions. In
some cases these statements are identifiable through the use of words
such as “anticipate,” “believe,” “estimate,” “forecast,” “guide,”
“expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,”
“should,” “will,” “would” and similar expressions. Forward-looking
statements reflect management’s current beliefs and expectations and are
not guarantees of future performance. Actual results may differ
materially from those suggested by any forward-looking statements for a
number of reasons, including, without limitation: the impact of a
challenging global economy or a downturn in served markets; the cost and
availability of raw materials including copper, plastic compounds,
electronic components, and other materials; the competitiveness of the
global broadcast, enterprise, and industrial markets; disruption of, or
changes in, the Company’s key distribution channels; volatility in
credit and foreign exchange markets; the inability to execute and
realize the expected benefits from strategic initiatives (including
revenue growth, cost control, and productivity improvement programs);
the inability to successfully complete and integrate acquisitions in
furtherance of the Company’s strategic plan; the inability of the
Company to develop and introduce new products and competitive responses
to our products; assertions that the Company violates the intellectual
property of others and the ownership of intellectual property by
competitors and others that prevents the use of that intellectual
property by the Company; risks related to the use of open source
software; the inability to retain senior management and key employees;
disruptions in the Company’s information systems including due to
cyber-attacks; variability in the Company’s quarterly and annual
effective tax rates; perceived or actual product failures; political and
economic uncertainties in the countries where the Company conducts
business, including emerging markets; the impairment of goodwill and
other intangible assets and the resulting impact on financial
performance; the impact of regulatory requirements and other legal
compliance issues; disruptions and increased costs attendant to
collective bargaining groups and other labor matters; and other factors.
For a more complete discussion of risk factors, please see our Annual
Report on Form 10-K for the year ended December 31, 2015, filed with the
SEC on February 25, 2016. Although the content of this release
represents our best judgment as of the date of this report based on
information currently available and reasonable assumptions, we give no
assurances that the expectations will prove to be accurate. Deviations
from the expectations may be material. For these reasons, Belden
cautions readers to not place undue reliance on these forward-looking
statements, which speak only as of the date made. Belden disclaims any
duty to update any forward looking statements as a result of new
information, future developments, or otherwise, except as required by
law.
Additional Information
This communication does not constitute an offer to buy or solicitation
of an offer to sell any securities. This communication relates to a
proposal that Belden Inc. has made for a business combination with Digi.
No tender offer for the shares of Digi has commenced at this time. In
connection with the proposed transaction and subject to future
developments, Belden (and Digi if a negotiated transaction is agreed to)
may file one or more proxy statements, tender offer documents or other
documents with the U.S. Securities and Exchange Commission. This
communication is not a substitute for any proxy statement, tender offer
document or other document that Belden and/or Digi may file with the SEC
in connection with the proposed transaction. Any definitive proxy
statement (if and when available), definitive tender offer documents or
other documents will be mailed to stockholders of Digi. INVESTORS AND
SECURITY HOLDERS OF DIGI ARE URGED TO READ THESE AND OTHER DOCUMENTS
FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors and security holders will be able to
obtain free copies of these documents (if and when available) and other
documents filed with the SEC by Belden through the web site maintained
by the SEC at http://www.sec.gov.
This communication does not constitute a solicitation of a proxy from
any stockholder. However, Belden and/or Digi and their respective
directors, executive officers and other employees may be deemed to be
participants in any solicitation of proxies in respect of the proposed
transaction. You can find information about Belden’s directors and
executive officers in Belden’s definitive proxy statement for its 2016
annual meeting of stockholders, which was filed with the SEC on April 6,
2016, and Belden’s annual report on Form 10-K for the fiscal year ended
December 31, 2015, which was filed with the SEC on February 25, 2016.
You can find information about Digi’s directors and executive officers
in Digi’s definitive proxy statement for its 2016 annual meeting of
stockholders, which was filed with the SEC on December 11, 2015, and
Digi’s annual report on Form 10-K for the fiscal year ended September
30, 2015, which was filed with the SEC on November 30, 2015. Additional
information regarding the interests of such potential participants will
be included in one or more proxy statements or other relevant documents
filed with the SEC if and when they become available. You may obtain
free copies of these documents using the sources indicated above.
About Belden
Belden Inc., a global leader in high-quality, end-to-end signal
transmission solutions, delivers a comprehensive product portfolio
designed to meet the mission-critical network infrastructure needs of
industrial, enterprise and broadcast markets. With innovative solutions
targeted at reliable and secure transmission of rapidly growing amounts
of data, audio and video needed for today’s applications, Belden is at
the center of the global transformation to a connected world. Founded in
1902, the company is headquartered in St. Louis and has manufacturing
capabilities in North and South America, Europe and Asia. For more
information, visit us at www.belden.com;
follow us on Twitter @BeldenInc.
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Source: Belden Inc.