ST. LOUIS--(BUSINESS WIRE)--Belden Inc. (NYSE: BDC) announced today that it has submitted a proposal to the Board of Directors of Digi International Inc. (NASDAQ: DGII) to acquire Digi in an all-cash transaction valued at approximately $380 million.
Under the terms of the proposal, Digi shareholders would receive $13.82 in cash for each Digi share, representing a 35% premium over Digi’s trailing one month volume-weighted average price (“VWAP”), a 37% premium over Digi’s trailing thirty-six month VWAP and a 25% premium over Digi’s share price of $11.05 on Thursday, November 10, 2016. The offer represents an implied enterprise value of $242 million, representing a premium of 54% to Digi’s enterprise value of approximately $158 million on Thursday, November 10, 2016 and a 10x EBITDA multiple based on the high end of guidance provided by Digi to its shareholders on October 27, 2016. The acquisition would be fully funded with existing cash reserves and therefore is not subject to any financing contingency.
This proposal, which was initially formalized on November 4, 2016, was reiterated in a letter sent today to Digi’s Chairman, William Priesmeyer, and President and Chief Executive Officer, Ronald Konezny, after Belden received a letter from Digi on November 8, 2016 expressing unwillingness to engage in discussions. Belden is disclosing the contents of its letter in order to inform Digi’s shareholders of the opportunity to realize a significant premium and the compelling strategic fit inherent in a combination of the two companies.
The addition of Digi to Belden’s Industrial IT platform would create a unique and broad portfolio of wireless and embedded solutions for customers across a number of vertical markets. Further, Digi would benefit from Belden’s proven business system which would provide access to new growth markets. Belden and Digi have a history of commercial and technical collaboration, which provides Belden confidence of the strong strategic fit with Digi.
Belden has a strong track record of successfully acquiring and integrating a diverse range of businesses. Since 2007, Belden has deployed over $2.8 billion toward M&A to accelerate its strategic transformation.
Belden is prepared to engage in discussions immediately to work toward a successful completion of the proposed transaction, and Belden looks forward to working with Digi’s management team and Board of Directors to maximize value for all stakeholders. Although there can be no assurances a definitive agreement will be reached between the companies, Belden is committed to pursuing this transaction and will continue to update shareholders on our progress as appropriate.
The full text of the letter is included below.
A discussion of the offer and strategic rationale is available on our Investor Relations website now. The link to the webcast replay as well as the presentation slides are available via the Internet at http://investor.belden.com. A replay of this webcast will remain accessible in the investor relations section of the Company’s Web site for a limited time.
November 11, 2016
Board of Directors
Digi International Inc.
11001 Bren Road East
Minnetonka, MN 55343
Attention: Mr. William N. Priesmeyer, Chairman of the Board
Attention: Mr. Ron Konezny, President & Chief Executive Officer
Dear Members of the Board:
We are disappointed that the Digi Board is unwilling to engage in discussions regarding an all-cash acquisition of Digi by Belden, as expressed in your letter of November 8, 2016, sent in response to our letter of November 4, 2016, and in subsequent email and telephone interactions. Based on the commercial and technical collaboration between our companies to date, we strongly believe that the strategic fit between Digi and Belden’s Industrial IT business is excellent. Digi’s capabilities in wireless and embedded networking would complement Belden’s capabilities to create uniquely complete solutions for customers in machine-to-machine applications. We remain convinced that the combination presents a compelling opportunity for your shareholders to receive an immediate and substantial premium to the value that would be achievable as a standalone company and would create enhanced opportunities for both companies’ employees.
While we remain hopeful that the two companies can engage in productive discussions relating to the proposal, we are making the contents of this letter public to ensure that the Digi shareholders are aware of the value inherent in our proposal.
As previously communicated to you, Belden proposes to acquire 100% of the fully-diluted outstanding Digi common shares for a price of $13.82 per share in cash at closing. This price represents a 35% premium over Digi’s trailing one month volume-weighted average price (“VWAP”), a 37% premium over Digi’s trailing thirty-six month VWAP and a 25% premium over Digi’s share price of $11.05 on Thursday, November 10, 2016. The offer represents an implied enterprise value of $242 million, representing a premium of 54% to Digi’s enterprise value of approximately $158 million on Thursday, November 10, 2016 and a 10x EBITDA multiple based on EBITDA of $24 million implied by the high end of guidance provided by Digi to its shareholders on October 27, 2016. We believe the proposal recognizes the significant strategic value of a combination of Digi with Belden and reflects a significant premium to the value that Digi could achieve on a standalone basis.
The acquisition would be fully funded with existing cash reserves. Therefore, the transaction would not be subject to any financing contingencies.
Given our knowledge of Digi and our historical collaboration, we are prepared to swiftly complete confirmatory due diligence and negotiate a mutually acceptable definitive agreement in parallel with due diligence. Closing the proposed transaction would be subject to the receipt of standard regulatory approvals, such as Hart-Scott-Rodino anti-trust filing requirements, and any required shareholder approvals. We have engaged Guggenheim Securities as our financial advisor and Lewis Rice as our legal advisor to assist us in this transaction.
As we have continually communicated, we stand ready to work with you to bring this value-enhancing transaction to fruition. Our senior management team and advisors are prepared to meet with you and your representatives at any time to discuss the proposal in more detail.
We look forward to your prompt and favorable reply.
President and Chief Executive Officer
This Proposal is neither a legally enforceable contract nor a binding offer to enter into a contract. It does not contain all matters upon which agreement must be reached for any proposed transaction and does not constitute an offer or commitment on our part to submit a definitive proposal at a future time. A binding agreement will result only from the execution of a definitive written agreement not yet negotiated or executed by the parties.
This release contains, and statements made by us concerning the release may contain, forward-looking statements, including our expectations for our business following a potential combination with Digi International Inc. (“Digi”). Forward-looking statements also include statements regarding future financial performance (including revenues, expenses, earnings, margins, cash flows, dividends, capital expenditures and financial condition), plans and objectives, and related assumptions. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “forecast,” “guide,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions. Forward-looking statements reflect management’s current beliefs and expectations and are not guarantees of future performance. Actual results may differ materially from those suggested by any forward-looking statements for a number of reasons, including, without limitation: the impact of a challenging global economy or a downturn in served markets; the cost and availability of raw materials including copper, plastic compounds, electronic components, and other materials; the competitiveness of the global broadcast, enterprise, and industrial markets; disruption of, or changes in, the Company’s key distribution channels; volatility in credit and foreign exchange markets; the inability to execute and realize the expected benefits from strategic initiatives (including revenue growth, cost control, and productivity improvement programs); the inability to successfully complete and integrate acquisitions in furtherance of the Company’s strategic plan; the inability of the Company to develop and introduce new products and competitive responses to our products; assertions that the Company violates the intellectual property of others and the ownership of intellectual property by competitors and others that prevents the use of that intellectual property by the Company; risks related to the use of open source software; the inability to retain senior management and key employees; disruptions in the Company’s information systems including due to cyber-attacks; variability in the Company’s quarterly and annual effective tax rates; perceived or actual product failures; political and economic uncertainties in the countries where the Company conducts business, including emerging markets; the impairment of goodwill and other intangible assets and the resulting impact on financial performance; the impact of regulatory requirements and other legal compliance issues; disruptions and increased costs attendant to collective bargaining groups and other labor matters; and other factors.
For a more complete discussion of risk factors, please see our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 25, 2016. Although the content of this release represents our best judgment as of the date of this report based on information currently available and reasonable assumptions, we give no assurances that the expectations will prove to be accurate. Deviations from the expectations may be material. For these reasons, Belden cautions readers to not place undue reliance on these forward-looking statements, which speak only as of the date made. Belden disclaims any duty to update any forward looking statements as a result of new information, future developments, or otherwise, except as required by law.
This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. This communication relates to a proposal that Belden Inc. has made for a business combination with Digi. No tender offer for the shares of Digi has commenced at this time. In connection with the proposed transaction and subject to future developments, Belden (and Digi if a negotiated transaction is agreed to) may file one or more proxy statements, tender offer documents or other documents with the U.S. Securities and Exchange Commission. This communication is not a substitute for any proxy statement, tender offer document or other document that Belden and/or Digi may file with the SEC in connection with the proposed transaction. Any definitive proxy statement (if and when available), definitive tender offer documents or other documents will be mailed to stockholders of Digi. INVESTORS AND SECURITY HOLDERS OF DIGI ARE URGED TO READ THESE AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents filed with the SEC by Belden through the web site maintained by the SEC at http://www.sec.gov.
This communication does not constitute a solicitation of a proxy from any stockholder. However, Belden and/or Digi and their respective directors, executive officers and other employees may be deemed to be participants in any solicitation of proxies in respect of the proposed transaction. You can find information about Belden’s directors and executive officers in Belden’s definitive proxy statement for its 2016 annual meeting of stockholders, which was filed with the SEC on April 6, 2016, and Belden’s annual report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the SEC on February 25, 2016. You can find information about Digi’s directors and executive officers in Digi’s definitive proxy statement for its 2016 annual meeting of stockholders, which was filed with the SEC on December 11, 2015, and Digi’s annual report on Form 10-K for the fiscal year ended September 30, 2015, which was filed with the SEC on November 30, 2015. Additional information regarding the interests of such potential participants will be included in one or more proxy statements or other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents using the sources indicated above.
Belden Inc., a global leader in high-quality, end-to-end signal transmission solutions, delivers a comprehensive product portfolio designed to meet the mission-critical network infrastructure needs of industrial, enterprise and broadcast markets. With innovative solutions targeted at reliable and secure transmission of rapidly growing amounts of data, audio and video needed for today’s applications, Belden is at the center of the global transformation to a connected world. Founded in 1902, the company is headquartered in St. Louis and has manufacturing capabilities in North and South America, Europe and Asia. For more information, visit us at www.belden.com; follow us on Twitter @BeldenInc.