Validus seeks to replace IPC directors; Dean to take over Alpro; Holcim makes offer for Cemex

By Stephanie N. Rotondo

Portland, Ore., June 15 - Bermuda-based reinsurer Validus Holdings Ltd. said Monday it would seek to replace IPC Holdings Ltd.'s board if an agreement could not be met in a timely fashion.

Validus has made a hostile takeover bid for IPC, which on Friday rejected a bid from another potential buyer. However, Validus' management remains optimistic regarding the deal's progress.

In other pending transactions, Data Domain Corp.'s board said it was recommending rejecting EMC Corp.'s takeover offer in favor of NetApp Inc.'s proposal. According to one analyst, the news came as no surprise.

Meanwhile, Dean Foods Co. announced that it would take over the Alpro division of Vandermoortele NV. The unit is a leader among soy-based beverages in Europe, adding to Dean's Silk soy-based beverage line in the United States.

Cement producer Cemex SAB de CV received a bid from Swiss cement maker Holcim Ltd. for Cemex's Australian unit. The funds raised through the asset sale would help the Mexico-based company deal with upcoming debt maturities.

Overall, the equity market was weaker. The Dow Jones Industrial Average fell 187.13 points, or 2.13%, to 8,612.13, while the Standard & Poor's 500 index dropped 22.49 points, or 2.38%, to 923.72. The Nasdaq Composite declined 42.42 points, or 2.28%, to 1,816.38.

Validus pushes

Validus' hostile takeover bid for IPC Holdings was progressing aggressively Monday, as Validus said it would seek to replace IPC's board of directors if the deal could not be settled "in a timely fashion."

A company spokesperson declined to specify what "a timely fashion" meant exactly.

The news comes after IPC's shareholders rejected the bid from Max Capital Group Ltd.

"Following the overwhelming rejection of the Max transaction on Friday, we are taking steps to enable IPC's shareholders to receive the superior value offered by Validus," Ed Noonan, Validus' chairman and chief executive officer, said in a statement. "We have previously provided IPC with an executed amalgamation agreement with our offer. While we would like to reach an agreement with IPC's board in view of IPC's statement on Friday indicating its willingness to engage with Validus, our exchange offer and scheme of arrangement provide alternative paths to complete a transaction, if necessary.

"We initiated these steps prior to the termination of the Max amalgamation agreement with IPC and we will proceed with them even as we seek to reach a consensual agreement with IPC's board. In addition, we are also now prepared to seek the removal of IPC's board, if appropriate.

"As 72% of the votes cast at last week's meeting were against the Max amalgamation, we are optimistic that Validus will be able to secure the necessary support of at least 10% of IPC shareholders in order to requisition the special meeting."

Validus has already lined up three candidate for the board: Raymond C. Groth, currently an adjunct professor of business administration at the Fuqua School of Business, Duke University; Paul G. Haggis, chairman of Alberta Enterprise Corp.; and Thomas C. Wajnert, a senior adviser to Irving Place Capital Partners, formerly known as Bear Stearns Merchant Banking LLC.

Under the terms of Validus' offer, IPC shareholders would receive $3.75 in cash along with 1.1234 shares of Validus' voting common shares.

Validus' stock gained 7 cents, or 0.31%, to $22.80. IPC's equity gained 36 cents, or 1.30%, to $28.11.

Data Domain rejects EMC

Data Domain said that its board of directors was recommending rejecting a takeover offer from EMC and instead favored a revised merger agreement with NetApp.

The board said its decision was based in part on the fact that the NetApp agreement was binding. Should Data Domain choose the EMC offer, the company would have to pay a $57 million termination fee and is not guaranteed that EMC would follow through on its offer.

"Our board is committed to enhancing stockholder value and, after careful review with our outside advisers, determined that the $30 per share EMC offer is not in the best interests of our stockholders at this time," Frank Slootman, president and CEO of Data Domain, said in a statement. "We are pleased with the revised terms of NetApp's acquisition offer and feel it will provide great value to our shareholders and customers."

"It's not really a big surprise," said one analyst who asked not to be identified. He said that, culturally, Data Domain's management has wanted to be part of NetApp, not EMC, citing the difference in East Coast - EMC - and West Coast - NetApp - cultures. It also speaks to which company is a better fit, though the analyst said there was "no clear answer," given what both EMC and NetApp plan to do with the company once acquired.

EMC, he said, plans to keep Data Domain as a standalone company, while NetApp wants to cross-train its sales force to sell both Data Domain and NetApp products. However, he added, many of Data's sales staff came from EMC and could choose to go back should the acquisition go through.

"So that's kind of a wrinkle," he said.

Also, the amount of risk in accepting EMC's offer outweighs the positives, the analyst said. EMC is not bound to buy the company, and the government could deem the deal null under antitrust laws.

"That speaks to the risk they think EMC is just trying to drive the [share] price up so NetApp will have to pay a higher price, which would hurt them competitively," the analyst explained.

"Until the regulatory hurdles are cleared, we won't likely see a higher bid," he continued, though he noted that it was leaked that EMC was considering a bid of $34.00 to $35.00 per share.

"The shareholders are ultimately going to make the decision," he said. "And while they want the best fit, they also want the most money.

Data Domain's stock fell 65 cents, or 1.94%, to $32.85. The Santa Clara, Calif.-based company provides deduplication storage appliances for disk-based backup, archiving and network-based disaster recovery.

Hopkinton, Mass.-based EMC's stock fell by 28 cents, or 2.11%, to $12.98. It develops information infrastructure technology and solutions.

NetApp, a Sunnyvale, Calif.-based data storage company, saw its stock fall by 32 cents, or 1.59%, to $19.82.

Dean takes over Alpro

Dean Foods, a Dallas-based food and beverage company, has agreed to acquire the Alpro division of Belgium-based Vandermoortele for €325 million.

The Alpro unit will add to Dean's soy beverage product lines with its Alpro soya and Provamel brands. Alpro had about €260 million in sales in 2008.

"We think this is a great deal that establishes Dean Foods as a clear global leader in the attractive soy beverages and related products category, with over $1 billion in combined annual retail sales," said Gregg Engles, Dean Foods' chairman and CEO, in a press release. "This is one of the most strategic assets we could have acquired. We see significant opportunities to leverage the collective strengths of both businesses across a global soy platform to accelerate growth."

"We are confident that this is a winning acquisition," commented Joe Scalzo, president and CEO of Dean's WhiteWave-Morningstar division. "We fundamentally believe that the soy market is an emerging category."

Additionally, during an investor call to discuss the merger, Engles noted that Dean had been following Alpro since 2002.

"We frankly did not believe it would ever become available," he said of what he later called a "fortuitous opportunity." Due to the credit crunch, however, the division did become available, and Dean reacted in kind.

"I could not be more pleased about this transaction," Engles said. "We believe this transaction creates value that is larger than the sum of its parts."

It is expected that Dean will finance the deal through the use of existing revolving credit facility funds. The acquisition is hoped to be "modestly accretive" to 2009 earnings.

Furthermore, Dean does not plan to raise additional equity to fund the transaction.

"Dean Foods remains committed to deleveraging its balance sheet to below 3.5x funded debt to EBITDA, as defined by its bank agreement," the company said in its statement. "Inclusive of the EBITDA and debt impacts of this transaction, the company continues to expect to achieve that goal and will not raise additional equity as a result of this transaction."

Dean's equity slipped 54 cents, or 2.91%, to $18.02. Vandermoortele is a privately held company.

Holcim to buy Cemex

Switzerland-based cement maker Holcim announced that it would buy the Australian unit of its Mexico-based rival Cemex for A$2.02 billion, or $1.6 billion.

Holcim, the world's largest cement producer, also said it will fund the acquisition through a CHF 2 billion rights issue. The company will ask for shareholder approval next month.

"This was an opportunistic buy," Holcim CEO Markus Akermann said during an investor call. "Cemex has done the job right. This is a profitable, performing company."

For Cemex, the deal is expected to help the debt-burdened company to generate funds as it tries to refinance $14.5 billion in debt maturing through 2011, including $4.1 billion that comes due this year.

"The assets to be divested consist of 249 ready-mix concrete plants, 83 aggregates quarries and 16 concrete pipe and products plants - a total of 348 facilities located throughout Australia," Cemex said in a press release. "These operations generated revenues and EBITDA in 2008 of approximately A$1.86 billion and A$313 million, respectively."

The sale also includes Cemex's 25% stake in Cement Australia.

Holcim's American Depositary Receipts fell 15 cents, or 1.31%, to $11.30, while Cemex's shares dipped $1.09, or 9.61%, to $10.25.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

Data Domain Inc. Nasdaq: DDUP

Dean Foods Co. NYSE:DF

EMC Corp. NYSE: EMC

Holcim Ltd Pink Sheets: HCMLY

IPC Holdings Ltd. Nasdaq: IPCR

Max Capital Group Ltd. Nasdaq: MXGL

NetApp, Inc. Nasdaq: NTAP

Validus Holdings Ltd. NYSE: VR

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