Recall backs $2.67 billion takeover bid by Iron Mountain
US company Iron Mountain last night struck an in-principle deal to acquire Australian rival Recall Holdings for $2.67 billion.
US storage and information company Iron Mountain has struck an in-principle deal to acquire Australian rival Recall Holdings for $2.67 billion after sweetening an initial approach made late last year.
Iron Mountain was able to boost its offer in the wake of the US dollar’s continued strength “and other favourable changes since our last proposal, particularly regarding transaction-related tax assumptions”, Iron Mountain chief executive William Meaney said last night.
Recall, which stores and manages companies’ physical and digital data in 306 facilities around the world, has long been viewed as a potential target for bigger document storage rival Iron Mountain.
Iron Mountain’s interest was also touted before Recall was eventually spun out of pallet company Brambles.
After negotiating since last year, Iron Mountain has agreed to pay 0.1722 of its shares for each Recall share, subject to due diligence. This was valued at $8.50 per share based in Iron Mountain’s last price. Recall closed at $7.62.
Recall shareholders will also be offered the option to receive a cash payment, subject to a proportional mechanism that will cap the total amount of the cash consideration at $225 million.
Iron Mountain will establish a secondary listing on the Australian Securities Exchange.
Recall chief executive Doug Pertz said the company was pleased to have reached an agreement with Iron Mountain on the key commercial terms of “a transaction that we believe is in the best interest of the company, our shareholders and our customers”.
He added: “The combined industry expertise of Recall and Iron Mountain will benefit customers and employees of both organisations, bringing the potential to produce material improvements in operations, enhanced quality of service and new product innovation for the information management industry.”
Mr Meaney said the proposed transaction “represents compelling value for Recall shareholders, and we look forward to reaching a definitive agreement quickly.”
Greencape Capital fund manager Matthew Ryland, whose fund has a 4 per cent stake in Recall, said: “$8.50 cash and a scrip option appears fair at first glance. We will digest the Iron Mountain result and speak with the companies before making a decision.’’
In a presentation sent to investors, Iron Mountain argued the deal would deliver synergies of $US125m-$US140m ($157m to $175m), driven by the broader geographic footprint, enhanced growth profile and economies of scale.
It claimed that with 50 per cent of the synergies achieved in the second year, the transaction was expected to generate high single-digit earnings per share accretion.
“An acquisition of Recall will accelerate Iron Mountain’s already successful strategy,” Mr Meaney said. “The combined company’s broader footprint, stronger infrastructure and increased economies of scale will enable us to better serve our customers and address unmet document storage and information management needs around the globe. Both companies’ shareholders stand to benefit from potential significant synergies and tax synergies to be achieved by way of REIT conversion.”
Recall, which is listed in Australia but led by Mr Pertz out of the US, has seen its shares soar 52 per cent since September when it was reported that Iron Mountain was considering a move.
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