The strong opposition from the board of Recall Holdings (REC) has upset Iron Mountain chief executive William Meaney who says he may take its ‘indicative, non-binding’ $7 a share bid for Recall and go home.
He said in a statement issued in New York overnight Monday that he sees little point in pursuing a takeover of Recall after the rejection.
Recall directors rejected the highly conditional $7-a-share cash and scrip offer on Monday and, in an unusual move, revealed detailed estimates of the synergies Iron Mountain could extract from the combination and the implications for the $7 offer price It is too cheap, according to Recall.
In the statement to the New York Stock Exchange, Mr Meaney (an unfortunate name for a takeover price thought by the target to be too cheap) stood by the original offer price.
“We believe our proposal accurately reflected the value creation potential of the combined businesses – and an appropriate allocation of the potential synergies between shareholders of both companies,” he said.
Recall said on Monday that the bid – comprising $404 million in cash and $1.82 billion of scrip – would create $US3.9 billion additional value and Recall shareholders would get less than 5% of that extra value at $7-a-share.
Recall directors reckoned in their statement they estimated Iron Mountain could extract $US250 million in annual synergies from the takeover and rationalising assets and staff.
REC YTD – Iron Mountain rebuffs Recall
Mr Meaney said his company is “very surprised” by the big estimate. “Iron Mountain’s estimate of net synergies is substantially lower than Recall’s estimate, which additionally, does not include the substantial time and transaction costs required to realise those synergies.”
“We see little point in having further discussions with Recall regarding a purchase of the company given their estimates values,” he said. So it seems Iron Mountain will take its bid off the table and go home.
Recall shares fell 5.1% to $7 after jumping more than 15% to $7.38 on Monday. The hedge funds seem to be getting worried.
But let’s wait and see what develops. Takeover battles are always about price in the end. If Iron Mountain wants Recall badly, it will lift its offer and do a deal.
But I reckon iron Mountain has been preparing a while for this bid. Last month it reshuffled some of its global assets to concentrate on North America, where Recall has much of its business.
In fact it cleared the decks for it last month by selling off a collection os assets in several countries, including Australia, according to a statement on its website.
“Iron Mountain Incorporated, the storage and information management firm, today announced it has signed a definitive agreement to divest its international shredding operations located in the United Kingdom, Ireland and Australia to Shred-it International ULC (“Shred-it”) for approximately US$29.8M.
"Additionally, Iron Mountain has agreed to acquire Canadian-based Securit Records Management Inc., an affiliate of Shred-it International ULC, for approximately US$29M. The deals are subject to customary closing conditions and price adjustments, and are expected to close by the end of the year.
"Iron Mountain’s international shredding operations include eight shredding plants and approximately 90 mobile shredding units across the UK, Ireland, and Australia. Going forward, Iron Mountain and Shred-it will work together to provide seamless support for shared customers in these regions.
“We chose to divest our UK, Irish and Australian shredding businesses because collectively they are much smaller than our North American operations, and we did not benefit from the same scale,” said the president and CEO of Iron Mountain.
“After an extensive review of our international product portfolio, we concluded that collaborating with Shred-it was a better option in these countries, allowing us to support our customers’ document destruction needs and freeing-up resources for making future investments in our growing records management and data management businesses.”
"Additionally, the acquisition of Securit Records Management aligns with Iron Mountain’s vision to expand its capacity to provide records management services and to grow its brand as a leading information management solution provider. Securit Records Management in Canada consists of nine facilities and 3 million cubic feet of records.
"Two of the largest facilities are located in Ottawa and Toronto, where Iron Mountain sought additional space to support new and existing customers.
“Iron Mountain will continue to operate its substantial shredding business throughout North America, which includes 21 plants, 290 mobile shredding units and serves more than 43,000 customers,” the company said.
And now to add Recall.
