official New Flyer Industries acquires NABI for $80 Million

[Cait Sith]

 

New Flyer Industries Inc. acquired North American Bus Industries Inc. (NABI) from an affiliate of Cerberus Capital Management LP for approximately $80 million.

 

The acquisition excludes discontinued operations in Hungary and substantially all related assets and liabilities.

 

The completion of the acquisition and related financing transactions is subject only to confirmation of the required wire transfers of funds which is expected later today.

 

“NABI represents a compelling growth platform for us,” said New Flyer's President/CEO Paul Soubry. “The addition of NABI to the New Flyer family provides New Flyer with a highly complementary product line, access to new customers, a cost efficient manufacturing platform based in Alabama, and it creates a significant player in aftermarket parts. The company plans to operate the NABI bus and NABI parts operations under the names NABI Bus LLC and NABI Parts LLC, respectively, within the New Flyer group of companies.”

 

The manufacturer also operates one of the transit industry’s aftermarket parts organizations, sourcing parts from more than 200 different suppliers and providing support for transit buses throughout North America. For the last 12 months, ending March 31, NABI delivered 582 bus equivalent units (EUs) with bus revenue of approximately $268 million, aftermarket parts revenue of approximately $60 million, and a combined adjusted earnings  before interest taxes depreciation amortization of approximately $20 million.

NABI currently has a total backlog of 1,579 EUs of which 593 are firm and 986 are options.

 

“New Flyer is a world-class company and this acquisition will provide NABI with synergistic opportunities to achieve an even higher level of performance and success,” said NABI’s President/CEO Jim Marcotuli. “The combined entity will be positioned to provide customers with an enhanced product offering and superior customer service.”

 

The transaction presents a number of opportunities for New Flyer, including:

 

•  An enhanced transit bus product offering. The addition of NABI’s Low Floor (LFW) and Bus Rapid Transit (BRT) product platforms complements New Flyer’s Xcelsior and MiDi product platforms enhancing the manufacturer’s ability to provide customers with the best bus for their application or environment. In addition, NABI offers buses incorporating stainless steel frames for customers who have a specific requirement for this feature. There is little overlap in customers for whom the two companies are currently building buses.

 

•  Expanded parts business with improved offering and customer support. The addition of NABI’s aftermarket parts segment represents a significant step for New Flyer’s aftermarket parts business. New Flyer intends to synchronize the parts databases and cross-reference lists of New Flyer, Orion and NABI, which management anticipates will permit the manufacturer to source parts more efficiently and offer expanded supply chain solutions to customers.

 

• Synergy Opportunities. New Flyer has identified opportunities for cost synergies such as in the areas of purchasing and strategic sourcing, plus general and administrative expenses that are expected to improve competiveness.

 

• Collaboration and sharing of technology and best practices. The combined entity will employ more than 3,000 people who share a commitment to excellence in heavy duty transit buses and product support with over 40,000 buses currently in operation in Canada and the U.S.

 

 

http://www.metro-magazine.com/news/story/2013/06/breaking-new-flyer-acquires-nabi-for-80m.aspx

[GojiMet86]

Boy, is NF the big guy it what?

[Nabinut]

This is mind blowing. When I saw the news 10 minutes ago, I had to do a double take. Man, this is almost a bombshell as Orion closing.

[Orion VII 4 Life]

WOW!!!!!!!! This is shocking!

 

Anyway, I can definitely see them discontinuing the LFW (which I always thought looked a little too much like the Xcelsior anyway) and closing the Anniston plant. I also see no mention of the 416, all I can say is good f**king riddance to those. The BRT is actually a decent bus, and I hope NFI keeps it in production.

[Cait Sith]

WOW!!!!!!!! This is shocking!

 

Anyway, I can definitely see them discontinuing the LFW (which I always thought looked a little too much like the Xcelsior anyway) and closing the Anniston plant. I also see no mention of the 416, all I can say is good f**king riddance to those. The BRT is actually a decent bus, and I hope NFI keeps it in production.

 

What you see is full of crap, its been stated that they are going to keep the LFW model. What this means is that this might finally be the end of the LFRs(no, they have not completely disappeared yet).

[SevenEleven]

Let's all take the time to read and comprehend the press release before jumping to conclusions...

[Orion VII 4 Life]

What you see is full of crap, its been stated that they are going to keep the LFW model. What this means is that this might finally be the end of the LFRs(no, they have not completely disappeared yet).

TRUE, I forgot those were still in production. That's a damn good possibility.

 

Issue with using the LFWs over the LFRs is the fact that it's been proven the LFW artics are sh*t, they won't be able to offer an artic version as they can with the LFR.

[DJ MC]

Things are looking good for New Flyer. With NABI joining them will makes things interesting. 

[Turbo19]

Below is a direct press release from New Flyer.

 

Winnipeg, Manitoba, Canada – June 21, 2013: (TSX:NFI; TSX:NFI.DB.U) New Flyer Industries Inc. (“New Flyer” or the “Company”) today announced the acquisition of North American Bus Industries, Inc. (“NABI”) from an affiliate of Cerberus Capital Management, L.P. for cash consideration of approximately $80 million, virtually all for the satisfaction of affiliate debt. The acquisition excludes discontinued operations in Hungary and substantially all related assets and liabilities. NABI was founded in 1992, and was known prior to October 1996 as American Ikarus. The completion of the acquisition and related financing transactions is subject only to confirmation of the required wire transfers of funds which is expected later today.

With bus manufacturing operations in Anniston, AL, a parts distribution center in Delaware, OH, and a service center in Jurupa Valley, CA, NABI is an innovative manufacturer of urban transit buses for U.S. customers. NABI also operates one of the transit industry’s most sophisticated aftermarket parts organizations, sourcing parts from over 200 different suppliers and providing support for transit buses throughout North America. For the last twelve months ended March 31, 2013 NABI delivered 582 bus equivalent units (“EUs”) with bus revenue of approximately $268 million, aftermarket parts revenue of approximately $60 million, and a combined Adjusted EBITDA of approximately $20 million.   NABI currently has a total backlog of 1,579 EUs of which 593 are firm and 986 are options.

New Flyer’s Chairman of the Board, the Honourable Brian Tobin, P.C. O.C. commented, “The acquisition of NABI marks an important milestone for New Flyer and is consistent with the Company’s strategic plan to ensure market and technology leadership, while providing public transit operators with long-term stability and excellence in product support. We have been able to proceed with this transaction while maintaining a flexible and conservative approach to our balance sheet.”
 
New Flyer’s President and Chief Executive Officer, Paul Soubry explained further, “NABI represents a compelling growth platform for us.  The addition of NABI to the New Flyer family provides New Flyer with a highly complementary product line, access to new customers, a cost efficient manufacturing platform based in Alabama, and it creates a significant player in aftermarket parts.  The Company plans to operate the NABI bus and NABI parts operations under the names NABI Bus, LLC and NABI Parts, LLC, respectively, within the New Flyer group of companies.”

Jim Marcotuli, NABI’s President and Chief Executive Officer, added “New Flyer is a world-class company and this acquisition will provide NABI with synergistic opportunities to achieve an even higher level of performance and success. The combined entity will be positioned to provide customers with an enhanced product offering and superior customer service.”

“This transaction is mutually beneficial for both New Flyer’s and NABI’s customers and will provide both companies with access to new resources and customers that will serve as catalysts for future growth,” said Dev Kapadia, a Cerberus Managing Director. “We are proud of the operational turnaround that occurred since we acquired NABI in 2006 under the leadership of President and CEO Jim Marcotuli, and with capital resources and extensive operating expertise from Cerberus.”

The transaction presents a number of attractive opportunities for New Flyer, including:
 

1. Enhanced Transit Bus Product Offering: The addition of NABI’s low floor (LFW) and bus rapid transit (BRT) product platforms complements New Flyer’s XcelsiorTM and MiDiTM product platforms enhancing the Company’s ability to provide customers with the best bus for their application or environment. In addition, NABI offers buses incorporating stainless steel frames for customers who have a specific requirement for this feature. There is little overlap in customers for whom the two companies are currently building buses.
    
2. Expanded Parts Business with Improved Offering and Customer Support: The addition of NABI’s aftermarket parts segment represents a significant step for New Flyer’s aftermarket parts business. New Flyer intends to synchronize the parts databases and cross-reference lists of New Flyer, Orion and NABI, which management anticipates will permit the Company to source parts more efficiently and offer expanded supply chain solutions to customers.
    
3. Synergy Opportunities: New Flyer has identified opportunities for cost synergies such as in the areas of purchasing and strategic sourcing, plus general and administrative expenses that are expected to improve competiveness.
    
4. Collaboration and Sharing of Technology and Best Practices: The combined entity will employ over 3,000 people who share a like-minded commitment to excellence in heavy-duty transit buses and product support with over 40,000 buses currently in operation in Canada and the US.

The transaction, including related expenses, is being funded using approximately C$65 million in proceeds from the issuance of the second and final tranche of the previously announced strategic equity investment in New Flyer by Marcopolo S.A.  An additional $20 million is being drawn from the Company’s renewed senior secured credit facility. On a pro forma basis, New Flyer’s Total Leverage Ratio (total indebtedness to Adjusted EBITDA, as defined in the credit agreement) would decrease to approximately 2.2x as at March 31, 2013. Furthermore, the transaction is expected to be immediately accretive to New Flyer’s earnings per share and cash flow per share.

In April of 2013, NABI entered into a settlement agreement with a customer which provides for an aggregate payment obligation of $9.25 million over three years, of which $6.25 million remains to be paid by NABI.  In addition, NABI is required to contribute an additional aggregate amount of at least $5 million over the next five years in the form of parts and services rebates (or cash in lieu thereof).  NABI’s obligations under the settlement agreement will remain in place following the acquisition.

As noted above, the second and final tranche of Marcopolo S.A.’s strategic equity investment in New Flyer is being completed concurrently with the acquisition. New Flyer is issuing an additional 6,162,304 common shares to Marcopolo S.A. at a price of C$10.50 per share for gross proceeds of approximately C$65 million. Marcopolo S.A. will hold approximately 19.99% of the Company’s issued and outstanding common shares.

Also concurrent with the acquisition of NABI, the Company completed the amendment and extension of its senior secured credit facility to April 24, 2017 while increasing the total amount of the facilities to $257 million, an increase of $45 million. The borrowing limit of the revolving facility has been increased to $115 million from $90 million to support working capital fluctuations. The borrowing limit of the term facility has been increased to $142 million from $122 million. In addition, certain financial covenants and definitions have been adjusted to reflect the acquisition of NABI. The credit agreement also maintains an accordion feature of $75 million for future investment or acquisition opportunities.

BMO Capital Markets is acting as exclusive financial advisor to New Flyer in connection with the acquisition of NABI. Torys LLP is acting as primary legal counsel to New Flyer in connection with the transaction. The Bank of Nova Scotia and Bank of Montreal acted as co-lead arrangers and joint-bookrunners on the senior credit facility extension.

Senior management of New Flyer will host a conference call at 9:00 AM (ET) on Monday, June 24, 2013. The call-in number for listeners is 888-231-8191 or 647-427-7450. A live audio feed of the call will also be available at http://www.newswire.ca/en/webcast/detail/1182391/1295533.  During the call, senior management will be referring to a presentation which will be posted on the New Flyer website later this morning at www.newflyer.com in the Investor Relations section of the Events and Presentations page.

A replay of the call will be available from 12:00 p.m. (ET) on June 24, 2013 until 11:59 p.m. (ET) on July 1, 2013.  To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 95678601. The replay will also be available on New Flyer’s web site at www.newflyer.com.
 

Read More: NFI

[Cait Sith]

TRUE, I forgot those were still in production. That's a damn good possibility.

 

Issue with using the LFWs over the LFRs is the fact that it's been proven the LFW artics are sh*t, they won't be able to offer an artic version as they can with the LFR.

 

Proven how? The only major screwup was the CTA order, which was built to their specs, which in turn, did not work because they wanted something completely identical to the D40LF.

[DJ MC]

With New Flyer owning NABI, is it possible we may see the LFWs and BRTs being ordered by Canadian transit systems in the near future?

[Turbo19]

Personally I feel that the two entities should have remained separate.

 

A few concerns of mine in order of priority are displacement of NABI's current workforce, the sale of NABI's current properties for NFI's financial gain, and deterioration of product quality should NFI decide to produce NABI products.

 

And I've said it before and I'll say it again, New Flyer is getting too big for its own damn good. I wouldn't be shocked if there were any repercussions down the line because of all these acquisitions. 

[RPTA]

I wonder if we will see a Volvo/Prevost buyout of Gillig in order for them to better compete against NFI. That would create a virtual duopoly between New Flyer/NABI and Nova Bus/Gillig, unless ElDorado gets huge orders for the Axess.

[DJ MC]

Personally I feel that the two entities should have remained separate.

 

A few concerns of mine in order of priority are displacement of NABI's current workforce, the sale of NABI's current properties for NFI's financial gain, and deterioration of product quality should NFI decide to produce NABI products.

 

And I've said it before and I'll say it again, New Flyer is getting too big for its own damn good. I wouldn't be shocked if there were any repercussions down the line because of all these acquisitions. 

 

As long as New Flyer doesn't make any significant mistakes, New Flyer won't have much to worry about. 

[Turbo19]

As long as New Flyer doesn't make any significant mistakes, New Flyer won't have much to worry about. 

With no disrespect intended towards you, I could care less about the monopoly that is the current New Flyer. I'm more worried about NABI getting the short end of the deal.

 

But at this point I suppose it doesn't matter much anymore. No use trying to reverse things. I'll just see how this plays out.

 

I wonder if we will see a Volvo/Prevost buyout of Gillig in order for them to better compete against NFI. That would create a virtual duopoly between New Flyer/NABI and Nova Bus/Gillig, unless ElDorado gets huge orders for the Axess.

I don't see that happening, as Volvo operates entirely different from Gillig in many ways. I would say the two are more different from each other, moreso than NFI and NABI.

[DJ MC]

With no disrespect intended towards you, I could care less about the monopoly that is the current New Flyer. I'm more worried about NABI getting the short end of the deal.

 

But at this point I suppose it doesn't matter much anymore. No use trying to reverse things. I'll just see how this plays out.

 

 

I don't see that happening, as Volvo operates entirely different from Gillig in many ways. I would say the two are more different from each other, moreso than NFI and NABI.

 

I get what your saying. As for Gillig they are already owned by a company called Henry Crown. They are doing fine on their own. 

[Turbo19]

I get what your saying. As for Gillig they are already owned by a company called Henry Crown. They are doing fine on their own. 

With all of that said, I'm sure New Flyer shareholders are cracking open the Champagne tonight.

[Burrstone]

Personally I feel that the two entities should have remained separate.

 

A few concerns of mine in order of priority are displacement of NABI's current workforce, the sale of NABI's current properties for NFI's financial gain, and deterioration of product quality should NFI decide to produce NABI products.

 

And I've said it before and I'll say it again, New Flyer is getting too big for its own damn good. I wouldn't be shocked if there were any repercussions down the line because of all these acquisitions. 

 

Where exactly in the press release did it say NFI will divest NABI, shutting down the Anniston plant or selling off their assets?  I think a lot of times people feel a competitor buying out a competitor means the company that was bought will be stripped down and the useful parts merged while other parts are just thrown away.  (like plants and workforce).

 

Many times both companies can be successfully run both targeting a niche in the industry.

 

Let's just sit back and see what happens before we jump to conclusions about what is going to happen.  Even if any of your "fears" come true, this is not going to happen over night.

[Turbo19]

Where exactly in the press release did it say NFI will divest NABI, shutting down the Anniston plant or selling off their assets?  I think a lot of times people feel a competitor buying out a competitor means the company that was bought will be stripped down and the useful parts merged while other parts are just thrown away.  (like plants and workforce).

 

Many times both companies can be successfully run both targeting a niche in the industry.

 

Let's just sit back and see what happens before we jump to conclusions about what is going to happen.  Even if any of your "fears" come true, this is not going to happen over night.

Which is true. At the end all that can be done at this point is watch this play out.

[RPTA]

I wonder though, will NABI switch to MAN axles instead of Meritor for parts commonality with New Flyer's lineup?

 

Also, I wonder if the model numbers will change. Perhaps the model numbers will indicate the fuel type, i.e. D40LFW, C40LFW, DE40LFW, and so on.

[SevenEleven]

I wonder though, will NABI switch to MAN axles instead of Meritor for parts commonality with New Flyer's lineup?

 

Also, I wonder if the model numbers will change. Perhaps the model numbers will indicate the fuel type, i.e. D40LFW, C40LFW, DE40LFW, and so on.

Accidentally downvoted you.. Whoops

 

The product lines will remain separate. Xcelsior and MiDi under New Flyer, the LFW and BRT under NABI.

[Orion VII 4 Life]

Proven how? The only major screwup was the CTA order, which was built to their specs, which in turn, did not work because they wanted something completely identical to the D40LF.

The 60LFW has been discontinued... explain that one.

 

Anyway I'm sorry if I sounded like I didn't read that shit at first, I did understand that for now the LFW is to be kept in the product line but I personally don't see it lasting much longer into the future. The BRT on the other hand, that's most likely gonna stick around for a while.

 

Where exactly in the press release did it say NFI will divest NABI, shutting down the Anniston plant or selling off their assets?  I think a lot of times people feel a competitor buying out a competitor means the company that was bought will be stripped down and the useful parts merged while other parts are just thrown away.  (like plants and workforce).

 

Many times both companies can be successfully run both targeting a niche in the industry.

 

Let's just sit back and see what happens before we jump to conclusions about what is going to happen.  Even if any of your "fears" come true, this is not going to happen over night.

Doesn't say it in the press release, but it could definitely happen. Or we could see NFI products being produced in Anniston, who knows. It might be a good idea for them to use the new steel frame production in Anniston for American orders instead of the Canadian plants used now.

[RPTA]

Accidentally downvoted you.. Whoops

 

The product lines will remain separate. Xcelsior and MiDi under New Flyer, the LFW and BRT under NABI.

The lines will remain separate, however, this doesn't preclude New Flyer from making a few changes in NABI's products for commonality with other New Flyer products. New Flyer has a strong relationship with MAN and it would make financial sense to stick with a single axle supplier across the board instead of using two different suppliers for New Flyer and NABI.

 

As for model numbers, even though NABI will be a separate division, I just think it makes sense to indicate the fuel type in the model number as New Flyer has always done.

[RailBus63]

Here's how I see it playing out:

 

Customers who want a small, medium-duty bus - MidiBus

Customers who want a basic, lower-cost transit bus - LFW

Customers who want a premium transit bus for true heavy-duty use - Xcelsior

Customers who want a Bus Rapid Transit product - Xcelsior or BRT

 

The Anniston plant is likely a key part of the acquisition.  NABI has spent quite a bit of money on the plant in recent years, and I believe the Anniston plant is non-union.  I could actually see New Flyer potentially closing one or both of its Minnesota plants and moving work down to Alabama.  I think the workers there will be fine.

[Burrstone]

If anyone wants to listen to the conference call for investors on Monday, I posted this article because it contains a link to the audio of the investor call:

 

http://www.newswire.ca/en/story/1188519/new-flyer-confirms-the-successful-closing-of-north-american-bus-industries-inc-acquisition-and-related-financing-transactions

WINNIPEG, June 21, 2013 /CNW/ - (TSX:NFI; TSX:NFI.DB.U) New Flyer Industries Inc. ("New Flyer" or the "Company") announced  earlier today the acquisition of North American Bus Industries, Inc. ("NABI") from an affiliate of Cerberus Capital Management L.P. for cash consideration of approximately $80 million, virtually all for the satisfaction of affiliate debt.

The Company has now received confirmation of the wire transfers of funds and confirms the completion of the acquisition and related financing transactions involving Marcopolo S.A. and the Company's amended and restated senior credit facility.

As a reminder to the previous news release, senior management of New Flyer will host a conference call at 9:00 AM (ET) on Monday, June 24, 2013. The call-in number for listeners is 888-231-8191 or 647-427-7450. A live audio feed of the call will also be available at http://www.newswire.ca/en/webcast/detail/1182391/1295533. During the call, senior management will be referring to a presentation which is posted on the New Flyer website at www.newflyer.com. The presentation can be found in the Investor Relations section of the New Flyer website on the Events and Presentations page.

A replay of the call will be available from 12:00 p.m. (ET) on June 24, 2013 until 11:59 p.m. (ET) on July 1, 2013.  To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 95678601. The replay will also be available on New Flyer's web site at www.newflyer.com.