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Transaction
Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study 61

SOKOLOFF & COMPANY CASE STUDY
RuggedCom Inc. to be acquired by
Siemens Canada Limited, a subsidiary of Siemens AG (NYSE:SI)

DATE ANNOUNCED: January 30, 2012
BUYER:  Siemens Canada Limited a subsidiary of Siemens AG (NYSE:SI)
SELLER:  RuggedCom Inc.   (TSX.RCM)
RuggedCom Inc. designs and manufactures rugged communications networking solutions for mission-critical applications in harsh environments in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.
PURCHASE PRICE: USD$443 M(C$440 M)
FORM OF PURCHASE PRICE: USD$33.16 per share (C$33 per share)

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year FY 2010  (3/31) FY 2011 (3/31) Trailing Twelve Months
through
September 30, 2011

Revenue

$72.74M

$93.97M

$107.47M

EBITDA

$9.47M

        $15.75M

$18.42M

Cash

 

 

$39.04M

Debt

 

 

$7K

Purchase Price

 

 

$443M

Enterprise Value

 

 

$404M

Multiple of Revenue

 

 

3.76

Multiple of EBITDA

 

 

21.93

TRANSACTION DRIVERS
On December 19, 2012 Belden, Inc. (NYSE:BDC) made an unsolicited offer to acquire RuggedCom for $22 per common share.  RCM’s board unanimously rejected the offer.  When Siemens stepped in a little over a month later, the board approved the takeover because it represented a premium of 142% to the closing price of their shares on the TSX as of December 16, 2011 as well as a 50% premium relative to Belden’s bid.  Anton Huber, Chief Executive of Siemens Industry Automation division, said the acquisition of RuggedCom would improve Siemens' router and switch products.

SOKOLOFF COMMENTARY:
Oh, the pitfalls of attempting a hostile takeover!  The good old days of “Barbarians at the Gates” are in the past as Belden, Inc. has painfully learned.  We can only guess that Belden approached RCM’s board in a friendly fashion at first – and then getting no traction with what they perceived as a nice offer – after all it was a 62% premium over the previous trading day’s closing price – went away plotting revenge in the form of a hostile offer.

Now, RuggedCom’s board showed they are thoroughly modern Millys and promptly adopted a poison pill – the long upheld method developed decades ago to fend off hostile takeovers – and the reason why most folks won’t waste corporate resources attempting a hostile tender offer strategy today.
But – and here we give much credit to RCM’s board – they twisted the blade in Belden’s back to score a greatly improved deal with behemoth Siemens, moving the price to $33 per share, a 50% blow out premium over the Belden offer.

So, congratulations to the RCM board, execs and bankers.  They delivered a terrific payday to their shareholders.  Shareholders on December 16th would have seen their stock appreciate 142% in a mere 45 days. 

One last note - While Siemens may be perceived as overpaying, the RCM deal is a tiny blip on the screen of a $100 billion company who, if they did nothing else, could make the deal worthwhile by buying an RCM product for each of its 363,000 employees!

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