Garmin makes offer for Raymarine
By IBI Magazine
Marine electronics firm Garmin Ltd has made a cash offer to purchase its rival, Raymarine, for 15p per share.
The offer represents a 152 per cent premium to yesterday's closing share price of 5.95p.
Garmin's offer is subject to the satisfaction or waiver, if applicable, of the pre-conditions relating to the obtaining of regulatory clearances and the terms and conditions set out in its announcement.
In June 2009, Raymarine made contact with Garmin to solicit its interest in making a proposal to acquire Raymarine or its business following the press announcement by Raymarine that the company was exploring the possibility of a sale of its business.
Garmin and Raymarine then engaged in discussions relating to a transaction under which Garmin would acquire Raymarine's business but talks were discontinued in December 2009 and Raymarine announced that it was no longer in discussions with Garmin.
Following the announcement on 11 March 2010 by Raymarine of a potential offer at 3.6p per Raymarine share, Garmin wrote to the Board of Raymarine on 1 April 2010 indicating that it was prepared to contemplate making an offer to Raymarine shareholders.
Subsequently Garmin wrote to the Board of Raymarine seeking a recommendation for its proposed offer of 15p per Raymarine share and confirming its expectation that, having undertaken extensive analysis of the potential impact of the acquisition on the markets in which Garmin and Raymarine both participate, it can secure the necessary merger control approvals to allow its offer to proceed.
If the deal is approved, total consideration of approximately £12.5m would be payable by Garmin to Raymarine shareholders, as well as the repayment of Raymarine's last published net debt figure of £91.6m, implying an enterprise value of £104.1m.
Raymarine was floated on the London Stock Exchange in December 2004 at a price of 152p per share. The Raymarine share price peaked in April 2007 at a price of 490p per share.
Following the decline in world financial markets in 2008, demand for marine electronic products of the type manufactured by Raymarine, Garmin and other market participants fell significantly. Raymarine is focused exclusively on this market and entered this downturn with a significant level of debt.
Garmin is a global company whose principal operations are in the US, Europe and Asia (Taiwan). Garmin has in excess of 8,000 employees worldwide.
Garmin's shares are traded on the NASDAQ stock market with a market capitalisation of approximately $7.5bn.
For the 52-week financial period ended 26 December 2009, Garmin reported net sales of $2.95bn, income before taxes of $809m and net income of $704m. As at 26 December 2009, Garmin had stockholders' equity of $2.84bn and cash and marketable securities of $1.86bn.
The Raymarine board had publicly cast doubt on Garmin's ability to secure the necessary anti-trust approvals but Garmin has undertaken an extensive analysis of the potential impact of the acquisition on the markets in which Garmin and Raymarine both participate. Based on this analysis, it is Garmin's opinion that the marine electronics market is highly competitive and Garmin expects to obtain the necessary merger control approvals in relation to the offer in the third quarter of 2010.
More specifically, Garmin believes that competition from the worldwide market leaders (Furuno and Navico) as well as from other established players (such as Johnson Outdoor, JRC, ICOM, Standard, Koden, Cytech, Uniden, Suunto, Sitex, Standard Horizon, Boeing and others) is significant. It estimates the combined worldwide market share of Raymarine and Garmin to be below 30 per cent and therefore below the level at which competition concerns are typically thought to arise.
It is Garmin's opinion that the acquisition of Raymarine will intensify competition in the worldwide marine electronics market and that customers will continue to enjoy, and benefit from, a wide choice of high quality products. Indeed, Garmin believes that the enlarged group will provide a significantly improved offering to customers than is currently the case as a result of efficiencies and because the product portfolios of Garmin and Raymarine are highly complementary.
The Raymarine board, in an announcement following the end of today's trading on the London stock market, stated that it is in advanced discussions with a third party regarding a sale of Raymarine Holdings Limited, representing the entire business operations of Raymarine and its subsidiary undertakings.
In the light of these discussions, the board has urged shareholders not to take any action at this time in relation to the Garmin offer.
(28 April 2010)
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