INVESTOR RELATIONS
NYSE: IRM 37.71 +0.56 (+1.51%) Volume: 1,512,899 February 21, 2017
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Contact Investor Relations

Iron Mountain
Incorporated
1 Federal Street Boston, MA 02110

Melissa Marsden, SVP
Investor Relations
Phone
617-535-8595
Email

Faten Freiha, Director
Investor Relations
Phone
617-535-8404
Email

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Overview of Scheme Arrangement

What was the Scheme of Arrangement?

Iron Mountain, through a wholly-owned Australian subsidiary, acquired all of the outstanding issued shares of Recall Holdings. All Recall shareholders as of the record date – April 27, 2016 – received the scheme consideration or the cash alternative (as summarized below). In addition, Recall was delisted from the ASX and became a wholly-owned Australian subsidiary of Iron Mountain.

Standard Consideration

US$0.50 cash1

+

0.1722 New Iron Mountain Securities2

Received by all Scheme Shareholders unless you made a Cash Election

Alternatively, you can make a Cash Election to receive the Cash Alternative for each Recall Share you hold on the Record Date.

Cash Alternative

A$8.50 cash

The total Cash Pool available to satisfy Cash Elections is capped at A$225 million.3
If the Cash Pool is not sufficient to satisfy all Cash Elections, the Scale Back Mechanism will apply.

For those Recall Shareholders on the Recall Share Register as at 11 June 2015, preferential access to the Cash Pool is expected for their hrst 5,000 Scheme Shares, provided such shareholders continue to hold those shares until the Record Date.

If you make a Cash Election and are subject to the Scale Back Mechanism,4 you will receive A$8.50 in cash per Scheme Share for that proportion of your Scheme Shares that is able to be satisfied out of the Cash Pool, plus the Standard Consideration for that remaining proportion of your Scheme Shares that is not.2


Notes

  1. Paid in Australian dollars, based on AUD/USD exchange rate on the record date.
  2. Ineligible foreign shareholders were not entitled to receive any new Iron Mountain shares, and instead received cash under the sale facility for any new Iron Mountain shares that they would otherwise have been entitled to receive.
  3. The cash alternative of A$8.50 per scheme share includes the cash supplement amount (US$0.50 in cash paid in Australian dollars, based on the AUD/USD exchange rate on the Record Date), plus the cash base amount. The payment of the cash supplement amount per scheme share is not sourced from the A$225 million cash pool.
  4. The total cash pool of A$225 million represents approximately 9% of the cash which would be required if all Recall shareholders made cash elections. Accordingly, scheme shareholders were subject to material scale back in respect of scheme shares that did not have preferential access to the cash pool.

The above is a summary only. For further information on the Scheme Consideration (including the standard consideration, the cash alternative and the scale back mechanism), see Section 7 of the scheme booklet. For an illustrative example of the operation of the scale back mechanism for different Recall Shareholders, see Section 7.3.3 of the scheme booklet.

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Examples of Stock and Cash Considerations

Scenario 1: Alice, a Scheme Shareholder holding 5,000 Recall Shares who was a Recall Shareholder as at 11 June 2015 and has made a cash election

As Alice was a Recall Shareholder as at 11 June 2015, her 5,000 Recall Shares will all be classified as Preferential Access Shares. Alice will receive the Cash Alternative of A$8.50 per Recall Share in respect of each of her 5,000 Preferential Access Shares, for total cash consideration of A$42,500.


Scenario 2: Bob, a Scheme Shareholder holding 10,000 Recall Shares who was a Recall Shareholder as at 11 June 2015 and has made a cash election

As Bob was a Recall Shareholder as at 11 June 2015, his first 5,000 Recall Shares will be classified as Preferential Access Shares, and his other 5,000 Recall Shares will be classified as Remaining Shares.

Bob will receive:

  • the Cash Alternative of A$8.50 per Recall Share in respect of his 5,000 Preferential Access Shares, for total cash consideration of A$42,500; plus
  • the Cash Alternative of A$8.50 per Recall Share for the percentage of Remaining Shares that can receive the Cash Alternative (20.8% or 1,040), of his 5,000 Remaining Shares, for total cash consideration of A$8,840; plus
  • the Standard Consideration of US$0.501 in cash, plus 0.1722 New Iron Mountain Securities for the balance (79.2% or 3,960) of his 5,000 Remaining Shares, for total consideration of A$2,568 cash and 682 New Iron Mountain Securities.

In total, Bob will receive A$53,908 cash consideration and 682 New Iron Mountain Securities.


Scenario 3: Chris, a Scheme Shareholder holding 10,000 Recall Shares who became a Recall Shareholder after 11 June 2015 and has made a cash election

As Chris was not a Recall Shareholder as at 11 June 2015, all of his 10,000 Recall Shares will be classified as Remaining Shares.

Chris will receive:

  • the Cash Alternative of A$8.50 per Recall Share for the percentage of Remaining Shares that can receive the Cash Alternative (20.8% or 2,080), of his 10,000 Remaining Shares, for total cash consideration of A$17,680; plus
  • the Standard Consideration of US$0.502 in cash, plus 0.1722 New Iron Mountain Securities for the balance (79.2% or 7,920) of his 10,000 Remaining Shares, for total consideration of A$5,136 cash and 1,364 New Iron Mountain Securities.

In total, Chris will receive A$22,816 cash consideration and 1,364 New Iron Mountain Securities.

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1 To be paid in Australian dollars, based on the AUD/USD exchange rate on the Record Date of 0.7710.
2 To be paid in Australian dollars, based on the AUD/USD exchange rate on the Record Date of 0.7710.

Scenario 4: Debbie, a Scheme Shareholder holding 10,000 Recall shares who wants to receive the Standard Consideration

As Debbie wants to receive the Standard Consideration, the Scale Back Mechanism will not apply to her Scheme Consideration. Debbie will receive the Standard Consideration of US$0.503 cash, plus 0.1722 New Iron Mountain Securities in respect of each of her 10,000 Recall Shares.

In total, Debbie will receive A$6,485 cash, plus 1,722 New Iron Mountain Securities.

Recall Shareholders may contact the Recall Shareholder Information Line on 1800 209 118 (within Australia) or +61 1800 209 118 (outside Australia), between 8.30am and 5.30pm (Sydney, Australia time) Monday to Friday if they have any questions in relation to their entitlement to Scheme Consideration.

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3 To be paid in Australian dollars, based on the AUD/USD exchange rate on the Record Date.

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Whom should I contact with questions about the cash I received, or my statement of holdings in Iron Mountain stock and/or CDIs following the transaction?

Contact the Link Market Securities on 1800 209 118 (within Australia), or +61 1800 209 118 (outside Australia), between 8.30am and 5.30pm, Monday to Friday.

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What can I do if I wanted the cash alternative but received Iron Mountain shares or CDIs?

In order to receive the cash alternative, your election was required prior to April 22nd, 2016.

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I wanted to receive Iron Mountain shares rather than CDIs. What should I do?

If you wanted to receive new Iron Mountain shares rather than new Iron Mountain CDIs, or vice versa, please see Section 15.4 of the scheme booklet and contact the Link Market Securities on 1800 209 118 (within Australia), or +61 1800 209 118 (outside Australia), between 8.30am and 5.30pm, Monday to Friday.

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What was the recommendation of the Recall Board?

The Recall Board believed that the combination of Recall and Iron Mountain makes strong commercial sense and represents a compelling opportunity. The Recall Directors unanimously recommended that Recall shareholders vote in favor of the scheme, in the absence of a superior proposal.

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What was the recommendation of the Independent Expert in Australia?

The Independent Expert also reviewed the additional information in this supplementary booklet and confirmed that it did not alter or withdraw its finding that the scheme was in the best interests of Recall shareholders, in the absence of a superior proposal. Appendix 1 of the supplementary scheme booklet includes Independent Expert’s report.

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Scheme Timing and Logistics

When was the Scheme Consideration issued or Cash Alternative paid?

The scheme consideration was issued or paid (as applicable) to scheme shareholders (other than ineligible foreign shareholders) on the implementation date, May 2, 2016.

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How were cash payments sent?

Cash payments were made either by sending you a check or by electronic funds transfer into your nominated bank account used for dividend payments.

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Who is classified as an ineligible foreign shareholder?

A scheme shareholder was an ineligible foreign shareholder for the purposes of the scheme if their address as shown in the Recall share register at 5:00pm on the record date was a place that Iron Mountain reasonably determined was unlawful or unduly onerous to issue that scheme shareholder with new Iron Mountain shares when the scheme became effective. This did not apply to a scheme shareholder with an address as shown in the Recall share register at 5:00pm on the record date within Australia and its external territories, New Zealand, the United Kingdom (provided that scheme shareholder certifies to the reasonable satisfaction of Iron Mountain that it is a UK qualified investor), Hong Kong, Singapore, Canada or the US.

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What happens if I owned fractional shares?

If the number of Recall shares held at the Record Date (April 27, 2016) was such that the aggregate entitlement to the scheme consideration included a fractional entitlement to a new Iron Mountain share or new Iron Mountain CDI, then the entitlement of that shareholder was rounded up or down, with any such fractional entitlement of:

  • less than 0.5 being rounded down to the nearest whole number of new Iron Mountain securities; and
  • 0.5 or more being rounded up to the nearest whole number of new Iron Mountain securities.

Where the calculation of the aggregate cash consideration payable to a particular Scheme Shareholder resulted in the payment of a fraction of a cent, the amount was rounded:

  • if the fractional entitlement is less than 0.5 – down to the nearest cent; and
  • otherwise – up to the nearest cent.

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When did Recall Shares cease trading on ASX?

Recall shares were suspended from trading on ASX from the close of trading on the effective date (which was April 21, 2016).

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What are the New Iron Mountain Securities?

If you were a Recall shareholder as of April 27, 2016 and your address on the Recall shareholder registry was:

  • in Australia, you received new Iron Mountain securities issued as part of the scheme in the form of Iron Mountain CDIs; and
  • outside Australia, new Iron Mountain securities were issued as part of the scheme in the form of new Iron Mountain shares.

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What are CDIs or CHESS depository interests?

CDIs, or CHESS depositary interests, are instruments through which Iron Mountain shares can be traded on ASX. Each new Iron Mountain CDI represents a beneficial interest in one Iron Mountain share. New Iron Mountain CDIs can be converted into Iron Mountain shares at any time and vice versa.

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What’s the difference between Iron Mountain Shares and CDIs?

New Iron Mountain shares are common shares in the share capital of Iron Mountain (common shares are the equivalent of ‘ordinary shares’ in Australian companies), ranking equally in all respects with all other Iron Mountain shares issued. New Iron Mountain shares will be listed and traded on NYSE. They will not be quoted or traded on ASX. Accordingly, investors who wish to trade Iron Mountain shares on the open market must do so on NYSE. Such trades must be undertaken through a broker entitled to trade on NYSE. Not all Australian brokers are able to trade securities on NYSE. As trading in new Iron Mountain shares on NYSE will be in US dollars, the Australian dollar value of the new Iron Mountain shares will depend on the AUD/USD exchange rate.

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Will I have to pay brokerage or stamp duty on the transfer of my Recall Shares?

You will not be required to pay any brokerage or stamp duty in relation to your participation in the Scheme.

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Do I have to sign anything to transfer my Recall Shares?

No. After the scheme is approved, Recall automatically signed a transfer on your behalf, and then the Scheme consideration was paid to you. However, you should be aware that under the scheme, you are deemed to have warranted to Recall that (except as otherwise set out in the scheme):

  • all of your Recall shares are fully paid and not encumbered; and
  • you have full power and capacity to sell and transfer your Recall shares.

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Shareholder Tax Implications

What are the taxation implications of the scheme for me?

A general summary of the main Australian, US and United Kingdom taxation implications of the scheme for certain Recall shareholders is set out in Section 13 of the scheme booklet. You should seek your own independent professional taxation advice in respect of your individual circumstances, particularly if you are not covered by the general summary set out in Section 13.

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Did the Australian Taxation Office issue a ruling on taxation of the scrip-for-scrip acquisition of Recall by Iron Mountain?

Yes, the Australian Taxation Office issued a ruling, available [HERE].

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What are the tax implications on CDIs and Iron Mountain shares?

To the extent that dividends paid by Iron Mountain are subject to US dividend withholding tax then the gross amount of those dividends (i.e. before the deduction of dividend withholding tax) will be included in your assessable income. However, you may be able to reduce the amount of Australian tax payable by you in respect of that assessable income by claiming a foreign income tax offset for some or all of the US dividend withholding tax that was deducted. You should consult your own independent professional taxation advice in relation to the amount of the foreign income tax offset that you can claim in these circumstances. As a shareholder in Iron Mountain, you may be required to complete and submit certain US tax declarations to Iron Mountain (or its agent) so that it can determine its tax withholding obligations in respect of payments it makes to you. These are discussed further under Section 13.2.4 in the scheme booklet.

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Do Iron Mountain Dividends qualify for Franking Credits?

Dividends paid by Iron Mountain to holders of new Iron Mountain securities will be included in the assessable income of Australian resident shareholders. However, no franking credits will be attached to such dividends because Iron Mountain is not an Australian company.

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Transaction Costs, Divestitures and Synergies

What are Iron Mountain’s costs associated with the Scheme?

Iron Mountain estimates total costs of approximately $300 million in one-time costs to integrate the businesses, achieve the expected synergies and complete the required divestitures, with approximately $220 million expected to be treated as operating expenses and $80 million expected to be treated as capital expenditures. In addition, Iron Mountain anticipates $80 million of deal transaction related costs, primarily consisting of banker and legal fees.

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What are Recall's transaction costs associated with the Scheme?

Recall is expected to have incurred one-off transaction costs of approximately US$38 million, including adviser, legal, accounting and expert fees, employee payments and various other costs.

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What is the expected impact of the Divestitures on the Combined Group?

The expected annual net impact of the divestitures is estimated by Iron Mountain to be a US$120 million reduction of the revenue and an associated US$35 million reduction of OIBDA for the Combined Group (or approximately 3% of the combined group’s pro forma revenue and OIBDA for the year ended 31 December 2015). In addition to the direct loss of revenue and OIBDA the divestitures are expected to result in an additional US$40 million annual reduction in OIBDA for the combined group, due to a loss in potential synergies.

Iron Mountain’s estimate (which incorporates current market conditions) of the proceeds the combined group will receive in relation to the divestitures is approximately US$220 million. However, there can be no assurance that the combined group will receive this amount of proceeds from the sales of the divestitures and the proceeds may be materially different from this amount. Upon the successful completion of the divestitures, Iron Mountain anticipates using the net proceeds to repay outstanding borrowings under its Revolving Credit Facility and ultimately to reinvest those proceeds in the combined group’s business.

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What is the impact of the Divestitures on the expected synergies and accretion?

The updated information in relation to the combined group includes updated estimates of the levels of synergies and accretion that Iron Mountain expects will result from the proposed transaction. These amounts of synergies and accretion are less than what was originally expected by Iron Mountain at the time of the scheme booklet.

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Contact Information

Who can I contact if I have further questions in relation to the Scheme?

If you have any further questions, you should seek advice from independent and appropriately licensed financial, legal and taxation advisers. You may also call the Recall Shareholder Information Line on 1800 209 118 (within Australia), or +61 1800 209 118 (outside Australia), between 8.30am and 5.30pm, Monday to Friday.

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