COLORADO SPRINGS, Colo. and
MADISON, Miss., March 7, 2022 /PRNewswire/ -- Vectrus, Inc.
(NYSE: VEC) and The Vertex Company ("Vertex") today announced that
they have entered into an all-stock merger to create a leading
global provider of mission-essential solutions.
The combined company will offer significantly expanded
technology and service capabilities, delivering a comprehensive
suite of integrated solutions and critical service offerings to
support national security readiness and modernization initiatives
around the world. As U.S. and allied government clients move toward
a converged environment, the combined company will be well
positioned to meet the mission-essential requirements of its
clients while delivering cost savings, increased security and
resiliency, and more strategic use of resources.
Together, the combined company would have 2021 pro forma revenue
of approximately $3.4 billion and
adjusted EBITDA of approximately $283
million, inclusive of $20
million of estimated cost synergies, resulting in an
adjusted EBITDA margin of more than 8%. With pro forma backlog of
approximately $11.3 billion, the
company has high revenue visibility and will benefit from increased
scale, balance and diversity. With significant cash flow generation
and a strong balance sheet, the combined company will retain
flexibility for continued growth.
"The combination of Vectrus and Vertex will create a stronger,
more diversified company and one of the leading providers of
critical mission solutions and support to defense clients
globally," said Chuck Prow, Chief
Executive Officer of Vectrus. "This highly strategic transaction
builds on both companies' accomplishments over the last several
years and significantly accelerates our ability to deliver
converged solutions while providing enhanced value for our
shareholders and other stakeholders."
Prow continued, "With increased scale and meaningful synergies,
the combined company will be more competitive in the national
security environment while enhancing the delivery of services to
our federal clients. We look forward to combining the strengths of
our businesses and teams to build upon both companies' proud track
records of providing critical mission support for our clients'
toughest operational challenges."
Ed Boyington, President and CEO
of Vertex, said, "Vertex and Vectrus share mission-oriented
foundations and cultural alignment. By joining forces with Vectrus,
we will be better positioned to help the Department of Defense and
government agencies achieve their objectives, and in the process,
create a stronger organization with greater career development and
advancement opportunities for our employees. On behalf of the
Vertex team, we remain dedicated to our clients' missions, and we
are very pleased to enter this new phase of growth as a combined
company."
Creating a Differentiated Industry Leader
- Greater Scale and Improved Competitive
Positioning – The combination
creates a stronger company with greater scale and enhanced ability
to compete for more integrated business opportunities. The company
will benefit from a more diversified revenue base across
geographies, clients, and contract types in supporting missions for
the U.S. Department of Defense and other government agencies. The
combined company's contract portfolio will also be more balanced
across all agencies served.
- Enhanced Portfolio of Technologies and
Solutions – The combined company will be
uniquely positioned to better provide full life-cycle support to
the most critical and enduring missions. The complementary breadth
of capabilities builds on each company's leading position in their
respective markets.
- Attractive Financial Profile and
Efficient Capital Structure –The transaction is expected to
be accretive to Vectrus's adjusted diluted earnings and free cash
flow per share in the first full year following close. The combined
company will have significant revenue visibility and expects to
generate substantial free cash flow and a pro forma adjusted EBITDA
margin profile of more than 8% initially, with plans to improve
margins going forward. The combined company will maintain its low
capital expenditure business model and benefit from significant tax
attributes, allowing for rapid debt reduction. The company will
target long-term net debt to EBITDA of 2.0 to 3.0x.
- Clearly Identified Cost Synergies and Incremental Revenue
Opportunities – The combined company is
expected to achieve approximately $20
million in annualized pre-tax net cost synergies by 2024
through efficiencies in supply chain and contract management,
shared IT infrastructure, business systems right-sizing, and
general corporate costs. The combined capabilities also will create
meaningful incremental revenue growth opportunities across the
company's key addressable markets in operations and logistics,
aerospace, training, and technology.
Transaction Terms
Under the terms of the merger agreement, Vertex shareholders
will own approximately 62% of the combined company on a fully
diluted basis, while Vectrus shareholders will own
approximately 38%. The transaction implies a value for Vertex of
approximately $2.1 billion, or
approximately 9.5x 2021 adjusted EBITDA net of $20 million of cost synergies and the present
value of Vertex's existing tax attributes of approximately
$160 million.
Leadership and Governance
Upon closing of the transaction, Mr. Prow, CEO of Vectrus, will
serve as CEO of the combined company, and Susan Lynch, CFO of Vectrus, will serve as CFO.
The broader leadership team will be comprised of executives from
both companies.
The combined company's Board of Directors will be comprised of
11 members, six directors from the current Vectrus board,
including Mr. Prow, and five directors appointed by Vertex,
including Mr. Boyington, President and CEO of Vertex. An
independent member of the current Vectrus Board of Directors will
serve as Chairman. The combined company plans to announce the
members of the Board of Directors prior to closing.
The combined company will introduce a new name post-closing and
will maintain its listing on the NYSE. The company will be
headquartered in Northern
Virginia, with a significant operating presence maintained
in other key locations in the U.S. and around the world.
Shareholder Rights
At closing of the transaction, Vectrus will enter into a
shareholders agreement containing certain rights and other terms
relating to American Industrial Partners Capital Fund VI LP (AIP)
shareholdings following the transaction, including board
designation rights that adjust as AIP and the other Vertex
shareholders reduce their ownership. Other terms include, among
other things, that AIP will be subject to a standstill agreement
for so long as it retains board designation rights and that AIP and
Vertex's other shareholders will be subject to a six-month lockup
agreement and thereafter will have customary registration
rights.
Financing and Approvals
The merger, which was unanimously approved by the
Vectrus Board of Directors, is expected to close in the third
quarter of 2022, subject to satisfaction of customary closing
conditions, including receipt of regulatory and
Vectrus shareholder approvals.
Vertex's capital structure will remain in place and the
companies anticipate refinancing Vectrus's existing debt as part of
an upsized Vertex debt capital structure at close.
Vectrus Fourth Quarter and Full-Year 2021 Results
In a separate press release issued today, Vectrus reported
its fourth quarter and full-year 2021 financial results.
Advisors
Goldman Sachs & Co. LLC is acting as exclusive financial
advisor to Vectrus, and Skadden, Arps, Slate, Meagher & Flom
LLP and Covington & Burling LLP are acting as legal counsel.
Vectrus was also advised by Ernst & Young and Wolf Den
Associates. RBC Capital Markets, LLC and Evercore are acting as
financial advisors to Vertex, and Jones
Day, Baker Botts LLP and Ropes & Gray LLP are acting as
legal counsel. Vertex was also advised by Fairmont Consulting
Group.
Conference Call
Management will conduct a conference call with analysts and
investors at 8:00 a.m. E.T. today,
March 7, 2022. U.S.-based
participants may dial in to the conference call at 877-407-0792,
while international participants may dial 201-689-8263. A live
webcast of the conference call as well as an accompanying slide
presentation will be available on the Vectrus Investor
Relations website at investors.vectrus.com or
https://www.webcaster4.com/Webcast/Page/1431/44827.
A replay of the conference call will be posted on the
Vectrus website shortly after completion of the call and will
be available for one year. A telephonic replay will also be
available at 844-512-2921 (domestic) or 412-317-6671
(international) with passcode 13727760.
About Vectrus
For more than 70 years, Vectrus has provided critical
mission support for our customers' toughest operational challenges.
As a high-performing organization with exceptional talent, deep
domain knowledge, a history of long-term customer relationships,
and groundbreaking technical expertise, we deliver innovative,
mission-matched solutions for our military and government customers
worldwide. Whether it's base operations support, supply chain and
logistics, IT mission support, engineering and digital integration,
security, or maintenance, repair, and overhaul, our customers count
on us for on-target solutions that increase efficiency, reduce
costs, improve readiness, and strengthen national security.
Vectrus is headquartered in Colorado
Springs, Colo., and includes about 8,100 employees spanning
205 locations in 28 countries. In 2021, Vectrus generated
sales of approximately $1.8 billion.
For more information, visit the company's website
at www.vectrus.com or connect with Vectrus on
Facebook, Twitter, and LinkedIn.
About Vertex
The Vertex Company is headquartered in Madison, Mississippi and employs approximately
6,000 employees, over 40 percent of whom are Armed Forces veterans,
operating in over 125 locations worldwide. Vertex delivers
integrated turnkey lifecycle support from concept definition,
to engineering and manufacturing, through end of life support of
complex systems and platforms, Vertex offerings include all levels
of aviation maintenance, worldwide contractor logistics support,
systems engineering and integration, specialized onsite mission
execution, high consequence training programs for defense and
commercial customers, and integrated supply-chain solutions. Over
our 50-year history, we have perfected the balance of cost,
schedule, and performance to offer high-quality solutions that
consistently exceed customer requirements. Information about Vertex
can be found at vtxco.com. Vertex is majority owned by American
Industrial Partners Capital Fund VI LP (AIP), a fund managed by an
operationally oriented private equity firm with $8 billion of assets under management (for more
information on AIP visit americanindustrial.com).
FORWARD-LOOKING STATEMENTS.
Certain material presented
in this press release includes forward-looking statements
intended to qualify for the safe harbor from liability established
by the Act. These forward-looking statements include, but are not
limited to, Vectrus may be unable to obtain shareholder approval as
required for the Transaction; conditions to the closing of the
Transaction may not be satisfied; the possibility that anticipated
benefits of the Transaction may not be realized or may take longer
to realize than expected; the possibility that costs related to
Vectrus's integration of Vertex's operations may be greater than
expected and/or that revenues following the Transaction may be
lower than expected; Vectrus's business may suffer as a result of
uncertainty surrounding the Transaction and disruption of
management's attention due to the Transaction; the outcome of any
legal proceedings that arise that are related to the Transaction;
Vectrus may be adversely affected by other economic, business,
and/or competitive factors; the risk that Vectrus may be unable to
obtain governmental and regulatory approvals required for the
Transaction, or that required governmental and regulatory approvals
may delay the Transaction or result in the imposition of conditions
that could reduce the anticipated benefits from the Transaction or
cause the parties to abandon the Transaction; the impact of
legislative, regulatory, competitive and technological changes; the
occurrence of any event, change or other circumstances that could
give rise to the termination of the merger agreement; the effect of
the Transaction on the ability of Vectrus to retain and maintain
relationships with both Vectrus's and Vertex's customers, including
the U.S. Government; other risks to the consummation of the merger,
including the risk that the merger will not be consummated within
the expected time period or at all; responses from customers and
competitors to the Transaction; the risk that the integration of
Vertex may distract management from other important matters;
results from the Transaction may be different than those
anticipated; statements about Vectrus's 2022 performance
outlook, five-year growth plan, revenue, DSO, contract
opportunities, the impacts of COVID-19, and any discussion of
future operating or financial performance.
Whenever used, words such as "may," "are considering," "will,"
"likely," "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe," "target," "could," "potential," "continue,"
"goal" or similar terminology are forward-looking statements. These
statements are based on the beliefs and assumptions of our
management based on information currently available to
management.
These forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside our management's control, that
could cause actual results to differ materially from the results
discussed in the forward-looking statements. For a
discussion of some of the risks and important factors that
could cause actual results to differ from such forward-looking
statements, see the risks and other factors detailed from time to
time in our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, and other filings with the U.S. Securities and Exchange
Commission.
We undertake no obligation to update any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
Additional Information and Where to Find It
In
connection with the Transaction, Vectrus plans to file with the SEC
and mail or otherwise provide to its shareholders a proxy
statement/prospectus regarding the Transaction. BEFORE MAKING ANY
VOTING DECISION, VECTRUS'S SHAREHOLDERS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND
ANY OTHER DOCUMENTS FILED BY VECTRUS WITH THE SEC IN CONNECTION
WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE THEREIN
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION AND THE PARTIES TO THE PROPOSED TRANSACTION. Investors
and shareholders will be able to obtain a free copy of the proxy
and other documents containing important information about Vectrus
and Vertex, once such documents are filed with the SEC, through the
website maintained by the SEC at www.sec.gov. Vectrus makes
available free of charge at www.vectrus.com (in the "Investors"
section), copies of materials it files with, or furnishes to, the
SEC.
Participants in Solicitation
Vectrus, its directors
and certain of its respective executive officers may be considered
participants in the solicitation of proxies in connection with the
Transaction. Information about the directors and executive officers
of Vectrus is set forth in Vectrus's Annual Report on Form 10-K for
the fiscal year ended December 31,
2020, which was filed with the SEC on March 2, 2021, and its definitive proxy statement
for the 2021 annual meeting of shareholders, which was filed with
the SEC on March 23, 2021, certain of
its Quarterly Reports on Form 10-Q and certain of its Current
Reports filed on Form 8-K. To the extent the holdings of securities
of Vectrus by Vectrus's directors and executive officers have
changed since the amounts set forth in Vectrus's proxy statement
for its 2021 annual meeting of shareholders, such changes have been
or will be reflected on Statements of Change in Ownership on Form 4
filed with the SEC. Additional information regarding the interests
of such individuals in the Transaction will be included in the
proxy statement/prospectus relating to the Transaction when it is
filed with the SEC. These documents can be obtained free of charge
from the sources indicated above. Additional information regarding
the participants in the proxy solicitations and a description of
their direct and indirect interests, by security holdings or
otherwise, may be obtained by reading the definitive proxy
statement regarding the acquisition described above.
Non-GAAP Measures
This press release includes certain
non-GAAP financial measures, including EBITDA and Pro forma
Adjusted EBITDA. These financial measures are not prepared in
accordance with accounting principles generally accepted in
the United States and may be
different from non-GAAP financial measures used by other companies.
Vertex and the Company believe that the use of these non-GAAP
financial measures provides an additional tool for investors to use
in evaluating ongoing operating results and trends. These non-GAAP
measures with comparable names should not be considered in
isolation from, or as an alternative to, financial measures
determined in accordance with GAAP.
Contact Information
Vectrus
Mike Smith,
CFA
michael.smith@vectrus.com
(719) 637-5773
Or
Jim Golden / Scott Bisang / Tim
Ragones
Joele Frank, Wilkinson Brimmer
Katcher
212-355-4449
The Vertex Company
Rick
Mendoza
Richard.mendoza@vtxco.com
(601) 607-6022
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SOURCE Vectrus, Inc.