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Cubic Accepts $3 Billion

The acquisition of Cubic Corp. (NYSE: CUB) has turned into a bidding war which at the end of March steadily drove up the price of the San Diego electronics company.

Cubic’s board announced on March 31 that it would accept an increased offer of $75 per share in cash from original bidders Veritas Capital and Evergreen Coast Capital. That would value the deal at approximately $3 billion, including the assumption of debt. Veritas and Evergreen’s original offer was $70 per share.

Singapore Technologies Engineering Ltd. has been making counter offers for Cubic. The San Diego company disclosed on March 22 that Singapore Technologies came forward with a cash offer of $76 per share. That represented more than an 8% premium on Veritas and Evergreen’s original offer of $70 per share — an offer that the Cubic board had already accepted.

The Wall Street Journal reported that Veritas and Evergreen subsequently increased their offer by $2, and Singapore Technologies did the same, offering $78 per share.

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In a statement, Cubic said its board gave due consideration to Singapore Technologies’ bid of $78 per share. “In making its decision, the Board carefully assessed the relative benefits and risks of the proposals from both Veritas and Evergreen and ST Engineering,” the statement said. “The Board determined that, based on the superior certainty and anticipated timing of closing the existing transaction with Veritas and Evergreen, the revised proposal from Veritas and Evergreen was in the best interests of all Cubic’s shareholders.”

The Singapore Technologies bid is not a “superior proposal” and Cubic has stopped discussions with Singapore Technologies, the March 31 statement said.

At midday March 31, shares of Cubic were trading at $74.60.

Transportation, Defense Businesses

Cubic, which had $1.48 billion in revenue during 2020, serves state and local transit agencies, providing fare-collection systems and other technology. Commuters in London, New York, Boston, the San Francisco Bay Area and Los Angeles use Cubic systems to pay their mass transit fares.

In addition, Cubic provides defense electronics to the United States and its allies. Examples include electronics for the advanced F-35 Lightning II fighter, videogame-like systems that train sailors, and highly portable, inflatable satellite dishes from its GATR business.

According to Cubic, Singapore Technologies’ plan for acquiring Cubic was to immediately sell Cubic’s defense businesses to Blackstone Tactical Opportunities, part of The Blackstone Group Inc.

Singapore Technologies has been in discussions with Cubic since at least October, according to a proxy statement filed with the U.S. Securities and Exchange Commission.

Cubic has called a shareholder meeting for April 27. The San Diego company is asking shareholders to vote in favor of the Veritas/Evergreen deal.

Share Price Rose in September

Evergreen Coast Capital Corp. is an affiliate of Elliott Investment Management L.P. It and Veritas publicly announced their plan to buy Cubic on Feb. 8.

Indications of a possible deal went back farther, however. It was revealed on Sept. 21 that Elliott had acquired a 15% stake in Cubic. Shares of the company, which had closed at $44.37 on Sept. 18, gained ground the following Monday, closing at $59.56 on Sept. 21.

The $75 per share deal announced on March 31 represents a premium of approximately 69% to Cubic’s unaffected closing stock price on Sept. 18, the last trading day before the company’s disclosure of third-party interest in potentially acquiring Cubic.

The business was founded by Walter Zable in 1949 and is now based in Kearny Mesa. Evergreen and Veritas have said they plan to keep Cubic in San Diego. Evergreen and Veritas also said they planned to finance the purchase through a combination of equity and debt financing.

J.P. Morgan Securities LLC is acting as lead financial adviser to Cubic and Sidley Austin LLP and Faegre Drinker Biddle & Reath LLP are acting as the company’s legal counsel.

Raymond James & Associates, Inc. provided the Cubic board with an opinion regarding the fairness, from a financial point of view, of the consideration offered to Cubic shareholders.

Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to Veritas.

Gibson, Dunn & Crutcher LLP is acting as legal counsel to Evergreen.

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