There has been plenty of merger and acquisition activity in Wisconsin in the past year, even after the COVID-19 pandemic introduced new uncertainty and slowed the pace of deals for several months.
One of the biggest deals of the past 12 months was just announced in mid-February as Milwaukee-based Rexnord Corp. will spin off its process and motion control business, which is the legacy portion of the company, and then merge it with Beloit-based Regal Beloit Corp.
The deal is valued at $3.68 billion and would leave Rexnord shareholders with around 39% ownership of Regal Beloit. The two companies share a lot of overlapping shareholders and so they are structuring the deal as a reverse Morris trust transaction, potentially making it tax free for Rexnord and its shareholders.
Choosing that structure adds work as the companies move toward closing. Rexnord and Regal will be seeking a letter from the IRS on how to handle their combined shareholders and need to calculate adjustments just before closing.
If the deal does close, Regal Beloit would keep its corporate name while the combination of its power transmission segment and Rexnord’s PMC business would operate under the Rexnord name. That segment would be headquartered in Milwaukee.
The company currently known as Rexnord Corp. would be left with a smaller operation, around $700 million in annual revenue, focused on water management. The heart of that business currently is the Zurn brand, which is also headquartered in Milwaukee.
Rexnord and Regal Beloit set an initial closing deadline of Nov. 15, but that can be extended in certain circumstances until May 2022. The termination fee for either side to walk away from the deal is set at $150 million, according to securities filings.
Outside of southeastern Wisconsin but still in the state, Madison-based Exact Sciences Corp. announced two deals in October for a combined $2.56 billion.
The larger of the two was a $2.15 billion cash and stock offer for Massachusetts-based Thrive Earlier Detection Corp. Exact Sciences had previously invested in two funding rounds for Thrive, which is developing an early-stage cancer screening test. The deal was completed in early January.
The second deal was to acquire England-based epigenetics company Base Genomics for $410 million in cash, which also helped the company expand its cancer screening capabilities. The deal was completed in the fourth quarter of 2020.
The multi-billion-dollar investments came a year after Exact Sciences paid $2.8 billion in cash and stock to acquire California-based Genomic Health.
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Exact Sciences Corp.[/caption]
Bankruptcy-related deals
The past year has also seen several bankruptcy-related sales of companies, with the highest profile of these being Wauwatosa-based Briggs & Stratton Corp.
In March 2020, just before the pandemic took hold, Briggs executives were outlining an ambitious new strategic direction that focused on developing battery power options, growing its commercial engines line and improving the profitability of its residential products. Briggs said it would sell most of its turf care, power wash and portable generator lines, expecting to generate more than the $195 million it needed to meet looming debt payments.
But the COVID-19 pandemic made selling those businesses difficult and the company quickly found itself looking for new financing instead. By July, the company entered Chapter 11 bankruptcy with a $550 million stalking horse bid from KPS Capital Partners, a private equity firm that owns TaylorMade Golf and previously owned Waupaca Foundry. KPS was also able to reach a new agreement with local union members who had not had a new deal since 2017.
Other companies, including Generac, expressed interest in all or parts of Briggs, but no other qualifying bids were submitted and KPS’ bid won out.
After closing on the transaction, KPS brought in Steve Andrews as a new CEO, replacing longtime Briggs executive Todd Teske. The new Briggs & Stratton has since touted its local hiring efforts and extended its contract as a Summerfest sponsor.
Other area bankruptcy-related deals included Jason Industries, Arandell Corp. and Techniplas. New Berlin-based Cascio Interstate Music also went through the receivership process in state court and was bought by Geneva Supply, which closed the New Berlin store and said it planned to open an event venue in Menomonee Falls and expand the company’s online presence.
Milwaukee-based Jason acquired Chicago-based Matchless Metal Polish in a $5 million cash deal just months before filing for bankruptcy. The company emerged from Chapter 11 in August as a private company with ownership drawn from its senior creditors, including Monomoy Capital Partners and Credit Suisse Asset Management.
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Briggs & Stratton[/caption]
As Jason was getting ready to exit bankruptcy, Menomonee Falls-based printer Arandell Holdings Inc. was preparing to file for Chapter 11 protection. The third largest catalog printer in the U.S. was challenged by store closings and the popularity of e-commerce, trends exacerbated by the COVID-19 pandemic.
Arandell had to close its Kentucky plant, which was part of a 2018 expansion, but it was able to continue operations in Menomonee Falls after it was bought by a group led by Saothair Capital Partners, a Pennsylvania private equity firm.
An early example of the challenges brought on by COVID-19 came from Nashotah-based manufacturer Techniplas LLC, which was forced into bankruptcy after a restructuring plan was derailed by the pandemic. The company had been exploring strategic alternatives since 2017 and had an agreement in principle by mid-February 2020. When sales slowed because of COVID, the deal fell apart and Techniplas was in bankruptcy court by May.
Techniplas did emerge from bankruptcy by the end of June with a new ownership group that included Bayside Capital, Amzak Capital Management and The Jordan Company. Jordan was also part of the deal that fell apart when COVID hit.
Other deals were impacted by COVID too. Green Bay-based Nicolet Bank planned to acquire West Bend-based Commerce State Bank in what was a nearly $130 million deal when it was announced in February 2020. The deal called for Nicolet’s stock to remain above at least $62 per share to move forward. When the pandemic hit, the bank’s stock plummeted from more than $70 per share to a low of around $47 per share amid market uncertainty and economic shutdowns. The two sides called off the deal in May, citing the unlikelihood of the share price returning to the required range.
It ultimately took until October for Nicolet’s stock to top the $62 threshold and only returned to pre-pandemic levels in January and February.
