– Updated Expectations Continue to Reflect Meaningful Synergies –
– On Track for Expected Closing on May 2, 2016 –
– Company Reiterates Expectations for Dividend Growth and Deleveraging –
– Company Will Host Conference Call on April 1 at 8:30 am EDT to Provide
Additional Detail and Update 2016 Guidance for Partial Year Contribution
from Recall –
BOSTON--(BUSINESS WIRE)--
Iron
Mountain Incorporated (NYSE: IRM), the storage and information
management services company, today announced outcomes with competition
and antitrust regulators in the United States and Canada related to its
proposed acquisition of Recall Holdings Limited (ASX: REC) by way of a
Scheme of Arrangement (the Scheme) and the associated changes to synergy
and accretion assumptions.
As previously disclosed, the proposed acquisition was reviewed by the
Australian Competition and Consumer Commission (ACCC), the United States
Department of Justice (DOJ), the Canada Competition Bureau (CCB) and the
United Kingdom (UK) Competition and Markets Authority (CMA). To address
competition concerns raised by these regulators, Iron Mountain has
agreed to divest portions of Recall’s business in the United States,
portions of both its and Recall’s businesses in Canada and the majority
of Iron Mountain’s records management business in Australia, and to
place Recall's entire business in the UK in a hold separate arrangement
from the closing until the conclusion of the CMA's review.
Upon closing of the proposed acquisition and after giving effect to
required divestitures, Iron Mountain expects to continue to provide
information management services, data management services and
information destruction services to the respective customers of Iron
Mountain and Recall in each market and country where they collectively
provide service today.
United States Regulatory Approval
The DOJ’s approval of the proposed Recall acquisition is conditioned
upon Iron Mountain’s agreement to divest, to a single buyer pre-approved
by the DOJ, Recall’s records and information management facilities in
the following 13 U.S. cities: Buffalo; Charlotte; Detroit; Durham;
Greenville/Spartanburg; Kansas City; Nashville; Pittsburgh; Raleigh;
Richmond; San Antonio; Tulsa; and San Diego. The DOJ’s approval is also
conditioned on Iron Mountain’s agreement to divest, to a buyer or buyers
subject to the DOJ’s approval, Recall’s records and information
management facility in Seattle and certain of Recall’s records and
information management facilities in Atlanta. Following implementation
of the Scheme and these divestitures, Iron Mountain’s operations in the
United States will include both Recall's and Iron Mountain's existing
operations in all but these 15 U.S. locations.
Iron Mountain has reached an agreement to divest the assets in the 13
initial divestiture cities noted above to Access CIG, LLC, a privately
held provider of information management services throughout the United
States approved by the DOJ as a buyer for these divestitures, for total
consideration of $80 million, subject to adjustments. The transaction is
subject to customary closing conditions and is anticipated to close
shortly after the closing of the proposed Recall acquisition. In
addition, Iron Mountain is in discussions with potential buyers for the
facilities and related assets in Seattle and Atlanta.
Canada Regulatory Approval
The CCB’s approval is based upon Iron Mountain’s agreement to divest
Recall’s records and information management facilities in Edmonton and
Montreal (Laval), and certain of Recall’s records and information
management facilities in Calgary and Toronto. In addition, Iron Mountain
has agreed to divest one of its records and information management
facilities in Vancouver (Burnaby) and two of its records and information
management facilities in Ottawa.
Following implementation of the Scheme and these divestitures, Iron
Mountain's operations in Canada will remain consistent with its
footprint prior to implementation of the Scheme in Edmonton and
Montreal, while in Calgary and Toronto, Iron Mountain’s operations will
remain consistent with its footprint prior to implementation of the
Scheme with the addition of one Recall facility and certain associated
customers in Calgary and three of Recall’s facilities and certain
associated customers in Toronto. In Vancouver and Ottawa, Iron
Mountain’s operations will primarily constitute all of Recall's and Iron
Mountain’s operations as they stood prior to implementation of the
Scheme with the exception of two Iron Mountain facilities in Ottawa and
one Iron Mountain facility in Vancouver, along with certain associated
customers.
The purchaser for the Canadian divestitures is subject to approval by
the Canadian Commissioner of Competition for approval.
Australia Regulatory Approval
As disclosed on March 30, 2016, the ACCC's decision not to oppose the
Scheme is contingent on Iron Mountain’s undertaking to divest Iron
Mountain’s Australian business other than its data management business
throughout Australia and its records and information management and data
management businesses in the Northern Territory of Australia, except in
relation to customers who have holdings in other Australian states or
territories (Retained IRM Australian Business). As a result, Iron
Mountain’s operations in Australia following the implementation of the
Scheme and the divestitures will primarily consist of Recall's
operations as they stood prior to implementation of the Scheme and the
Retained IRM Australian Business.
Once Iron Mountain has selected a preferred purchaser for the Australian
divestitures, it will be presented to the ACCC for approval. The
proposed acquisition remains subject to approval by the Australian
Foreign Investment Review Board, in respect of which a decision is
expected on or before April 15, 2016.
United Kingdom Regulatory Approval
The statutory deadline for completion of CMA’s Phase 2 Review is June
29, 2016, with the provisional findings due in late April 2016, and no
definitive view can be given at this stage as to its outcome or the
scope and timing of any divestitures required. On March 30, 2016, the
CMA granted its conditional consent for the Scheme to be implemented
prior to the issuance of its final decision following its Phase 2
Review. After completion of the CMA’s review, the CMA may order
divestitures of UK assets by the combined business as an appropriate
remedy.
However, Iron Mountain believes that the maximum scope of any
divestitures required in the UK is likely to be less than operations and
assets that generated 1% of the combined companies’ pro forma revenue
for the year ended December 31, 2015. Iron Mountain remains confident
that the CMA Review will result in significantly less divestitures in
the UK than the estimated maximum. As a result, Iron Mountain's
operations in the UK are expected to consist of Iron Mountain's entire
UK operations as they stood prior to implementation of the Scheme and
the majority of Recall's UK business.
Operation of the Businesses subject to
Divestiture Pending Sales
Generally, in connection with the regulatory approvals, Iron Mountain
has agreed to preserve the businesses pending completion of the
divestitures and maintain the economic viability and marketability of
the businesses as independent, and to hold those businesses separate to
its own business pending completion of the divestitures. In addition,
from the implementation of the Scheme until the completion of the
relevant divestiture, Iron Mountain has agreed that certain of the
businesses subject to divestiture will be managed by an independent
manager initially proposed by Iron Mountain and approved by the relevant
regulatory authority, who in Australia and Canada (through a monitor
appointed by the regulator) would report to the respective antitrust
regulators.
Updated Synergy Assumptions Reflect
Divestitures and Other Changes
Iron Mountain’s acquisition of Recall is expected to create meaningful
value for shareholders of both Recall and Iron Mountain through the
realization of material cost savings. Iron Mountain estimates annual net
synergies as a result of the Recall acquisition will be $105 million per
year when fully achieved. When the transaction was originally announced
in June 2015, Iron Mountain estimated annual net synergies of $155
million, which assumed divestitures of businesses with approximately $30
million of annualized OIBDA.
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($ in millions)
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Stabilized
(06/08/15)
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Stabilized
(Current)
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Estimated Total Gross Synergies
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$185
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$185
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Estimated OIBDA lost to Divested Revenue
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(15)
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(35)
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Synergies lost due to Divestiture Location
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(15)
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(40)
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Foreign Currency Impact
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(5)
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Estimated Net Synergies
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$155
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$105
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As noted in the table above, the difference between these estimates is
primarily due to an estimated reduction in the total amount of
annual OIBDA related to anticipated divestitures of $75 million. The $75
million consists of $35 million of divested OIBDA and $40 million
reduction in annualized OIBDA due to a loss in potential synergies
resulting from divestitures in geographies that generally have more
overlap between Iron Mountain’s and Recall’s businesses and would
therefore provide more integration benefits. An additional $5 million
reduction in annual net synergies is related to the continued
appreciation of the US dollar against foreign currencies in the markets
where those synergies were expected to be realized. At the present time,
divestitures in the UK are uncertain, so the amount of divested OIBDA
and related synergies may change, although the impact is not expected to
be significant.
Iron Mountain estimates that approximately 90% of these expected
synergies will be achieved in the first three years following
implementation of the Scheme, with approximately $80 million realized in
calendar year 2017 and $100 million realized in calendar year 2018. Iron
Mountain continues to estimate 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.
Updated Accretion Assuming Iron Mountain’s
Growth Plan and Transformation Benefits
Iron Mountain has previously communicated its intent to pursue
additional value creating initiatives such as its transformation plan
and expanded multi-year plans for developed markets, emerging markets,
and adjacent businesses and real estate portfolio expansion. Iron
Mountain estimates these initiatives will create approximately $60
million of additional earnings by 2018 with a proportional increase in
Normalized FFO and AFFO. Therefore, when Iron Mountain’s forecast is
updated with these initiatives, the estimated realized accretion from
the proposed Recall acquisition will, on a percentage basis, be lower
than accretion estimates that do not include these initiatives in the
base assumptions. As a result, Iron Mountain expects Adjusted EPS
accretion in 2018 when giving effect to these initiatives to be 10%, as
compared with 15% accretion on the same basis as the original
transaction announcement in June 2015.
Additional information related to accretion on the original basis can be
found in Iron Mountain’s Current Report on Form 8-K which will be filed
with the Securities and Exchange Commission tomorrow morning, and
details related to accretion, including Iron Mountain’s expanded growth
plan, as well as updates to Iron Mountain’s 2016 guidance can be found
in the investor presentation available HERE.
Expected Divestiture Proceeds
Iron Mountain estimates it will receive approximately $220 million in
proceeds from the divestitures resulting from the Scheme. However, there
can be no assurance that this amount of proceeds will be received, and
the proceeds may be materially different from this amount. Iron Mountain
anticipates that for every $25 million change in proceeds, Adjusted EPS
accretion will shift approximately 0.3% in the same direction. Upon
successful completion of these divestitures, Iron Mountain anticipates
using the net proceeds to repay its long term debt obligations and/or
outstanding borrowings under its Revolving Credit Facility and
ultimately reinvest those proceeds in the business.
Regular Quarterly Dividends for Second Quarter
to Include New Recall Shares
Consistent with past practice and subject to approval by its Board of
Directors, Iron Mountain intends to declare and pay its regular second
quarterly dividend in the latter portion of the second quarter,
including on shares of common stock issued to Recall shareholders in the
Recall transaction, assuming the Recall transaction closes on or prior
to the record date for such dividend.
In addition, the company is reiterating its expectations for dividend
growth and deleveraging consistent with the 2020 targets originally
presented during the company’s October 14, 2016 Investor Day, available HERE.
Webcast and Conference Call Details
Iron Mountain will host a conference call and webcast to provide
additional details and discuss the transaction on:
Date: Friday April 1, 2016 at 8:30 am EDT
U.S. Dial in: 1-877-730-0431 or 973-453-3063
AUS Dial in: +61 2 8223 9773 or 1-800-005-989
Participant Code: 80085295
About Iron Mountain
Iron Mountain Incorporated (NYSE:
IRM) is a leading provider of storage and information management
services. The company’s real estate network of more than 69 million
square feet across more than 1,100 facilities in 37 countries allows it
to serve customers around the world. And its solutions for records
management, data
management, document
management, and secure
shredding help organizations to lower storage costs, comply with
regulations, recover from disaster, and better use their information.
Founded in 1951, Iron Mountain stores and protects billions of
information assets, including business documents, backup tapes,
electronic files and medical data. Visit www.ironmountain.com
for more information.
Forward Looking Statements
Certain statements contained in this communication may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 and other securities laws and
be subject to the safe-harbor created by such Act. Forward-looking
statements include, but are not limited to, the expected timing of the
closing of Iron Mountain’s proposed acquisition of Recall, the outcome
of the regulatory review of the transaction, the scope and timing of
required divestitures, Iron Mountain’s financial performance outlook and
shareholder returns, including after giving effect to Iron Mountain’s
proposed acquisition of Recall, and statements regarding Iron Mountain’s
goals, beliefs, plans and current expectations. These forward-looking
statements are subject to various known and unknown risks, uncertainties
and other factors. When Iron Mountain uses words such as "believes,"
"expects," "anticipates," "estimates" or similar expressions, it is
making forward-looking statements. You should not rely upon
forward-looking statements except as statements of Iron Mountain’s
present intentions and of Iron Mountain’s present expectations, which
may or may not occur. Although Iron Mountain believes that its
forward-looking statements are based on reasonable assumptions, Iron
Mountain’s expected results may not be achieved, and actual results may
differ materially from its expectations. Important factors that could
cause actual results to differ from Iron Mountain’s expectations
include, among others: (i) Iron Mountain’s ability to remain qualified
for taxation as a real estate investment trust for U.S. Federal income
tax purposes; (ii) the adoption of alternative technologies and shifts
by Iron Mountain’s customers to storage of data through non-paper based
technologies; (iii) changes in customer preferences and demand for Iron
Mountain’s storage and information management services; (iv) the cost to
comply with current and future laws, regulations and customer demands
relating to privacy issues; (v) the impact of litigation or disputes
that may arise in connection with incidents in which we fail to protect
Iron Mountain’s customers' information; (vi) changes in the price for
Iron Mountain’s storage and information management services relative to
the cost of providing such storage and information management services;
(vii) changes in the political and economic environments in the
countries in which Iron Mountain’s international subsidiaries operate;
(viii) Iron Mountain’s ability or inability to complete acquisitions on
satisfactory terms and to integrate acquired companies efficiently; (ix)
changes in the amount of Iron Mountain’s capital expenditures; (x)
changes in the cost of Iron Mountain’s debt; (xi) the impact of
alternative, more attractive investments on dividends; (xii) the cost or
potential liabilities associated with real estate necessary for Iron
Mountain’s business; (xiii) the performance of business partners upon
whom we depend for technical assistance or management expertise outside
the United States; and (xiv) other trends in competitive or economic
conditions affecting Iron Mountain’s financial condition or results of
operations not presently contemplated. In addition, with respect to the
potential Recall transaction, Iron Mountain’s ability to close the
proposed transaction in accordance with its terms and within the
anticipated time period, or at all, is dependent on Iron Mountain’s and
Recall's ability to satisfy the closing conditions for the transaction,
including the receipt of Recall shareholder approval, and the benefits
of the potential Recall transaction, including potential cost synergies,
accretion and other synergies (including tax synergies), may not be
fully realized or may take longer to realize than expected. Further,
with respect to the sale of the assets in the 13 initial U.S.
divestiture cities noted above, Iron Mountain’s ability to close the
proposed transaction in accordance with its terms and within the
anticipated time period is dependent on the ability to satisfy the
closing conditions for the transaction. Additional risks that may affect
results are set forth in Iron Mountain’s filings with the Securities and
Exchange Commission, including Iron Mountain’s Annual Report on Form
10-K for the fiscal year ended December 31, 2015, and in Recall’s
filings with the Australian Stock Exchange, including Recall’s Annual
Report for the fiscal year ended June 30, 2015 and Recall’s interim
financial statements for the 6-month period ended December 31, 2015. Any
forward-looking statements contained herein are based on assumptions
that Iron Mountain believes to be reasonable as of the date hereof and
Iron Mountain undertakes no obligation, except as required by law, to
update these statements as a result of new information or future events.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160331006542/en/
Source: Iron Mountain