Encore Wire (NASDAQ: WIRE) today announced that it has entered
into a definitive merger agreement under which Prysmian (BIT: PRY)
will acquire Encore Wire for $290.00 per share in cash (the
“Transaction”). The Transaction represents a premium of
approximately 20% to the 30-day volume weighted average share price
(VWAP) as of Friday, April 12, 2024 and approximately 29% to the
90-day VWAP as of the same date.
At the terms of the Transaction, Encore Wire’s implied
Enterprise Value is approximately €3.9 billion1 representing a
multiple of 8.2x EV/2023A EBITDA and 6.3x EV/2023A EBITDA including
run rate synergies.
“We are pleased to have reached an agreement that reflects the
remarkable value Encore Wire has created with our expansive
single-campus model, low-cost production, centralized distribution
and product innovation,” said Daniel L. Jones, Encore Wire’s
Chairman, President and Chief Executive Officer. “This transaction
maximizes value for Encore Wire shareholders and provides an
attractive premium for their shares. Encore Wire and Prysmian are
two highly complementary organizations, and we anticipate a bright
future for Encore Wire as part of Prysmian. Furthermore, as part of
a larger, global operation, we expect this transaction will bring
additional future opportunities for our employees, whose dedication
and hard work made this transaction possible. We look forward to
working with Prysmian to complete this value-enhancing combination
and realize the significant benefits that we expect it will bring
to all of our stakeholders.”
“The acquisition of Encore Wire represents a landmark moment for
Prysmian and a strategic and unique opportunity to create value for
our shareholders and customers,” said Massimo Battaini, Prysmian
designated Group CEO. “Through this acquisition, Prysmian will grow
its North American presence, enhancing its portfolio and geographic
mix, while significantly increasing the exposure to secular growth
drivers. We look forward to welcoming the Encore Wire team to
Prysmian and benefitting from the combined company’s enhanced
product offerings and customer relationships.”
Following closing of the Transaction, Prysmian expects to
maintain a significant presence at Encore Wire’s
vertically-integrated, single-site, McKinney, Texas campus.
Strategic Rationale2
Encore Wire is highly complementary to Prysmian’s strategy and,
in particular, the Transaction will allow Prysmian to:
- increase its exposure to secular growth drivers;
- enhance its exposure to North America;
- leverage Encore Wire’s operational efficiency and best in class
service across Prysmian’s portfolio;
- broaden Prysmian’s product offering enabling the combined
company to better address customers’ needs in North America;
and
- generate ~€140m in run-rate EBITDA synergies expected within 4
years from closing.
Pro Forma
Financials3
Based on pro forma aggregated results for the twelve months
ended December, 2023, the combined group would have posted net
sales of over €17.7 billion and adjusted EBITDA of approximately
€2.1 billion4.
The transaction will be financed through a mix of cash on
Prysmian’s Balance Sheet (€1.1bn) and newly committed debt
facilities (€3.4 billion).
Approvals and Timing
The Transaction, which has been unanimously approved by each
company’s Board of Directors and recommended to its shareholders by
Encore Wire’s Board of Directors, is expected to close in the
second half of 2024, subject to approval of Encore Wire’s
shareholders representing at least a majority of the outstanding
shares, regulatory approvals, and other customary closing
conditions.
Under the terms of the agreement, Encore Wire may solicit
alternative acquisition proposals from third parties during a
35-day “go-shop” period following the date of execution of the
merger agreement. There can be no assurances that the “go-shop”
will result in a superior proposal. Encore Wire does not intend to
disclose developments related to the solicitation process until it
determines whether such disclosure is appropriate or is otherwise
required.
J.P. Morgan Securities LLC is acting as sole financial advisor
to Encore Wire and O’Melveny & Myers LLP is acting as legal
advisor. Goldman Sachs Bank Europe SE, Succursale Italia is acting
as sole financial advisor to Prysmian and Wachtell, Lipton, Rosen
& Katz is acting as legal advisor.
Prysmian
Prysmian is a global cabling solutions provider leading the
energy transition and digital transformation. By leveraging its
wide geographical footprint and extensive product range, its track
record of technological leadership and innovation, and a strong
customer base, the company is well-placed to capitalise on its
leading positions and win in new, growing markets. Prysmian’s
business strategy perfectly matches key market drivers by
developing resilient, high-performing, sustainable and innovative
cable solutions in the segments of Transmission, Power Grid,
Electrification and Digital Solutions. Prysmian is a public company
listed on the Italian Stock Exchange, with almost 150 years of
experience, about 30,000 employees, 108 plants and 26 R&D
centres in over 50 countries, and sales of over €15 billion in
2023.
Encore Wire
Encore Wire is a leading manufacturer of a broad range of copper
and aluminum electrical wire and cables, supplying power generation
and distribution solutions to meet our customers' needs today and
in the future. The Company focuses on maintaining a low-cost of
production while providing exceptional customer service, quickly
shipping complete orders coast-to-coast. Our products are proudly
made in America at our vertically-integrated, single-site, Texas
campus.
Additional Information About the Merger and Where to Find
It
This communication may be deemed to be solicitation material in
respect of the merger (the “Merger”)of Encore Wire Corporation,
(the “Company”), with an affiliate of Prysmian S.p.A, a company
organized under the laws of the Republic of Italy (“Parent”). The
Company intends to file relevant materials with the U.S. Securities
and Exchange Commission (the “SEC”), including a proxy statement in
preliminary and definitive form, in connection with the
solicitation of proxies for the proposed Merger. The definitive
proxy statement will contain important information about the
proposed Merger and related matters. BEFORE MAKING A VOTING
DECISION, STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT MATERIALS CAREFULLY
AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE MERGER.
Stockholders will be able to obtain copies of the preliminary and
definitive proxy statements and other relevant materials (when they
become available) and any other documents filed by the Company with
the SEC for no charge at the SEC’s website at www.sec.gov. In
addition, stockholders will be able to obtain free copies of the
proxy statement from the Company by going to the Company’s Investor
Relations page on its corporate website at
https://www.encorewire.com/investors/index.html.
Participants in the Solicitation
The Company, its directors—Daniel L. Jones, Gina A Norris,
William R. Thomas, W. Kelvin Walker, Scott D. Weaver, and John H.
Wilson—and Bret J. Eckert, the Company’s Executive Vice President
and CFO, may be deemed to be participants in the solicitation of
proxies from the Company’s stockholders in respect of the Merger.
As disclosed under “Security Ownership of Certain Beneficial
Owners, Directors and Named Executive Officers” in the Company’s
definitive proxy statement, filed with the SEC on March 28, 2024
and available on the SEC’s EDGAR website at:
https://www.sec.gov/Archives/edgar/data/850460/000110465924040592/0001104659-24-040592-index.html
(the “2024 Proxy Statement”), as of March 13, 2024 Mr. Jones
beneficially owned 5.36% of the Company’s common stock and Mr.
Eckert beneficially owned 1.55% of the Company’s common stock. None
of the other participants in the solicitation owns in excess of one
percent of the Company’s common stock. More detailed information
about the ownership interests of each director and Mr. Eckert can
be found in their respective SEC filings on Forms 3, 4, and 5, all
of which are available on the SEC’s website at www.sec.gov for no
charge. In connection with the Merger, the unvested portion of the
equity awards held by Mr. Jones and Mr. Eckert will be accelerated.
The section titled “Potential Payments upon Termination or
Change-in-Control beginning on page 45 of the 2024 Proxy Statement
(available on the SEC’s EDGAR website at:
https://www.sec.gov/Archives/edgar/data/850460/000110465924040592/0001104659-24-040592-index.html)
contains illustrative information on the payments that may be owed
to Mr. Jones and Mr. Eckert in a change of control of the Company.
Additional information regarding the participants in the
solicitation, including their direct or indirect interests, by
security holdings or otherwise, will be included in the definitive
proxy statement that the Company plans to file with the SEC in
connection with the solicitation of proxies to approve the
Merger.
Forward-Looking Statements Safe Harbor
The matters in this press release include forward-looking
statements, including statements related to the expected timing of
the closing of the pending Merger and expectations following the
closing of the Merger. Forward-looking statements can be identified
by words such as: “anticipate”, “intend”, “plan”, “goal”, “seek”,
“believe”, “project”, “estimate”, “expect”, “strategy”, “future”,
“likely”, “may” and similar references to future periods.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based on
current beliefs, expectations and assumptions regarding the future
of the Company, our business, future plans and strategies,
projections, anticipated events and trends, the economy and other
future conditions. Because forward-looking statements relate to the
future, such statements are subject to certain risks and
uncertainties. Should one or more of these risks or uncertainties
materialize, actual results may vary materially from those
anticipated, estimated or projected. Risks and uncertainties that
could cause actual results to differ materially from those
indicated in the forward-looking statements include: (i) the
possibility that the Company may be unable to obtain the required
stockholder approval, antitrust or other regulatory approvals or
that other conditions to consummation of the Merger may not be
satisfied, such that the Merger may not be consummated or that the
consummation may be delayed; (ii) the reaction of distributors,
vendors, other partners and employees to the announcement or
consummation of the Merger; (iii) general macro-economic
conditions, including risks associated with unforeseeable events
such as pandemics, wars and other hostilities, emergencies or other
disasters; (iv) risks associated with certain covenants in the
Agreement and Plan of Merger, dated April 14, 2024, by and among
the Company, Parent, Applause Merger Sub Inc., a Delaware
corporation and a wholly owned subsidiary of Parent (“Merger Sub”),
and solely as provided in Section 9.12 therein, Prysmian Cables and
Systems USA, LLC, a Delaware limited liability company
(“Guarantor”) (the “Merger Agreement”) that may limit or disrupt
our current plans and operations; (v) the amount of the costs,
fees, expenses and charges related to the Merger that may not be
recovered if the Merger is not consummated for any reason; (vi) the
outcome of any legal proceedings that may be brought related to the
Merger; (vii) the occurrence of any event, change or other
circumstances that could give rise to the termination of the Merger
Agreement; and (viii) other risks and uncertainties described in
the Company’s periodic reports on Forms 10-K and 10-Q that the
Company files with the SEC. All forward-looking statements speak
only as of the date hereof. The Company expressly disclaims any
duty to update or revise any of the forward-looking statements to
conform to actual results, except as required by law.
Additional Disclosures
The term “EBITDA” is used by Encore Wire in presentations,
quarterly conference calls and other instances as appropriate.
EBITDA is defined as net income before interest, income taxes,
depreciation and amortization. Encore Wire presents EBITDA because
it is a required component of financial ratios reported by Encore
Wire to the Encore Wire’s banks, and is also frequently used by
securities analysts, investors and other interested parties, in
addition to and not in lieu of measures of financial performance
calculated and presented in accordance with US GAAP, to compare to
the performance of other companies who also publicize this
information. EBITDA is not a measurement of financial performance
calculated and presented in accordance with US GAAP and should not
be considered an alternative to net income as an indicator of the
Encore Wire’s operating performance or any other measure of
financial performance calculated and presented in accordance with
US GAAP.
EBITDA for the fiscal year 2023 is calculated and reconciled to
net income as follows:
In Thousands
Net Income
$
372,399
Income Tax Expense
112,242
Interest Expense
408
Depreciation and Amortization
32,052
EBITDA
$
517,101
1 Equivalent to $4.2 billion , converted at 1.08x USD/EUR FX
2 Information provided by Prysmian and not independently
verified by Encore Wire
3 Information provided by Prysmian and not independently
verified by Encore Wire
4 Based on PF EBITDA of €2,102m (Prysmian €1,628m + Encore Wire
$517m converted at 1.08x USD/EUR FX of €479m). Encore Wire
financials based on US GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240414157751/en/
For more info:
Encore Wire
Investors Bret J. Eckert Executive Vice President & CFO
972-562-9473
Media Joseph Sala, Mahmoud Siddig, Allison Sobel or Lyle Weston
Joele Frank, Wilkinson Brimmer Katcher 212-355-4449
Encore Wire (NASDAQ:WIRE)
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Encore Wire (NASDAQ:WIRE)
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