SPX to Acquire General Signal for $2.0 Billion
20 July 1998
SPX to Acquire General Signal for $45 Per Share, or $2.0 Billion
Will Create a Strong $2.5 Billion Industrial and Vehicle Solutions Company
Will Apply Proven EVA(R)-Based Program to Create Shareholder Value;
Cash-and-Stock Acquisition Expected to be Accretive to EPS
MUSKEGON, Mich. and STAMFORD, Conn., July 20 -- SPX
Corporation and General Signal Corporation today
jointly announced that their Boards of Directors have approved a definitive
agreement for SPX to acquire General Signal for cash and SPX shares currently
valued at $45 per General Signal share, or a total of approximately
$2.0 billion. SPX will also assume approximately $335 million in General
Signal net debt. The purchase price represents a 20% premium for General
Signal shareholders, based on the closing stock prices of both companies last
Friday.
Under the terms of the cash-election merger, General Signal shareholders
will receive 60% SPX stock and 40% cash in the aggregate, with each
shareholder able to choose among three options -- all cash, all SPX stock or a
60/40 stock/cash combination, subject to proration. The all-stock election
will be based on a fixed exchange ratio of 0.6977 SPX shares per General
Signal share and the 60/40 stock/cash election will be based on a fixed
exchange ratio of 0.4186 SPX shares per GSX share.
A $1.7 billion facility underwritten by Chase Manhattan Bank will be used
to finance the cash portion of the acquisition and to refinance existing debt.
The transaction, which is subject to shareholder approvals, antitrust
clearance and other customary conditions, is expected to close early in the
fourth quarter of 1998. General Signal has agreed not to pay a third quarter
dividend.
SPX expects the acquisition to be accretive to earnings per share in 1999
and to significantly increase cash flow. SPX expects to achieve annual cost
savings of $55-60 million, starting in the first year. SPX plans to continue
to rationalize General Signal's portfolio of 15 businesses and accelerate
implementation of Economic Value Added(R)-based compensation programs.
SPX Chairman, President and CEO John B. Blystone said, "We are very
excited about combining SPX and General Signal to create a strong industrial
and vehicle solutions company which will give us a larger platform to increase
shareholder wealth. SPX's leadership team intends to apply our proven EVA-
based management techniques to create value in General Signal's businesses, as
we've done at SPX. Shareholders of both companies should benefit from this
transaction, which is immediately accretive to EPS and forms a company with
tremendous potential. General Signal shareholders will receive a premium in
cash and SPX's stock and SPX shareholders will own part of a much larger
company with increased value-creation opportunities. In addition, the
combined company will have the financial strength to invest in its current
businesses and pursue strategic acquisitions to fuel further growth."
Michael D. Lockhart, General Signal's Chairman and CEO, stated, "SPX is a
solid company with an impressive management team that has quadrupled SPX's
stock price in just two and a half years. General Signal shareholders will
own 60% of the expanded SPX and benefit from greater critical mass and the
opportunity to share in the upside of the combined entity."
Blystone will continue as Chairman, President and CEO of the combined
company, which will retain the SPX name and headquarters. Two General Signal
directors, Emerson Fullwood, a Corporate Vice President at Xerox Corporation,
and H. Kent Bowen, Professor of Technology and Operations Management at
Harvard University Graduate School of Business Administration, will join the
SPX Board of Directors.
Blystone added, "SPX already manages a range of vehicle solutions
businesses, focusing on those with leading market positions capable of
returning more than the cost of capital. General Signal is comprised of 15
businesses, one in the vehicle components sector and the other 14 in process
equipment, electrical products and network technology. Most of these
industrial solutions businesses are #1 or #2 in their markets or have strong
niche positions that will fit nicely into the SPX model. As we did at SPX, we
will work to eliminate duplicate corporate costs, achieve operating
efficiencies, enhance productivity, extend EVA-based compensation and improve
customer quality and service. We're confident that we can utilize our
leadership experience and management techniques to achieve superior growth and
profitability for the combined company. We will build on Mike Lockhart's
excellent work and look forward to working with the many talented people
throughout the General Signal organization."
The new SPX will have pro forma annual revenues of approximately $2.5
billion balanced between industrial and vehicle solutions businesses, strong
cash flow, and substantial cost-saving opportunities. SPX's plan to improve
performance at General Signal will be patterned after SPX's own turnaround,
where operating margins have nearly doubled and more than 80% of employees
have compensation tied to improvement in EVA.
General Signal will withdraw its previously announced plan to spin off the
GS Networks business to General Signal shareholders. SPX plans to retain and
grow this attractive business.
Joel Stern, Managing Partner of Stern Stewart & Co., stated, "SPX will
have an opportunity to again demonstrate its ability to utilize EVA to drive
cultural change and increase shareholder wealth at General Signal."
SPX received a fairness opinion from Stern Stewart & Co. and was advised
by Chase Securities Inc. General Signal was advised by Lazard Freres & Co.
LLC.
General Signal Corporation is a leading manufacturer of quality products
for the process control, electrical control and industrial technology
industries worldwide. General Signal's Internet address is
http://www.generalsignal.com.
SPX Corporation is a global provider of Vehicle Service Solutions to
franchised dealers and independent service locations, Service Support to
vehicle manufacturers, and Vehicle Components to the worldwide motor vehicle
industry. SPX's Internet address is http://www.spx.com.
Statements in this press release that are not strictly historical are
"forward looking" statements within the meaning of the Safe Harbor provisions
of the federal securities laws. Investors are cautioned that such statements
are solely predictions and speak only as of the date of this release.
Actual results may differ materially due to risks and uncertainties that are
described in the SEC filings of both companies.