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Significant synergies and efficiencies to enhance container supply and customer service platform
Highly accretive transaction – Expected to be accretive to net income per share by ~30% when savings fully realized
Hamilton, Bermuda - November 09, 2015
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Under the terms of the transaction agreement, Triton and TAL International will combine under a newly-formed holding company, Triton International Limited (“Triton International”), which will be domiciled in Bermuda and is expected to be listed on the New York Stock Exchange. Triton shareholders will own 55% of the equity of the combined company and TAL International shareholders will own 45%. TAL International shareholders will receive one common share of Triton International for each share of TAL International stock owned. TAL International shareholders will also receive a special dividend of $0.54 per share upon closing of the transaction.
Company Backgrounds
Triton was founded in 1980 and is currently owned by Warburg Pincus LLC and Vestar Capital Partners, along with other private investors, including members of Triton management. Triton operates a container fleet of 2.4 million TEU, services its customers through 19 subsidiary offices in 13 countries and is domiciled in Bermuda.
TAL International was founded in 1963 and has been publicly listed since 2005. TAL International operates a container fleet of 2.4 million TEU, services its customers through 17 offices in 11 countries and is domiciled in Delaware.
Transaction Highlights
• A merger of Triton and TAL International will create the world’s largest and most efficient intermodal container leasing company with a container fleet of 4.8 million TEU, resulting in industry cost leadership and an enhanced container supply capability.
• The combined company expects to realize $40 million per year in annual SG&A synergies, by aligning infrastructure and creating a best-in-class systems environment. The cost savings are expected to be fully implemented by the end of 2016.
• The transaction is expected to be approximately 30% accretive to net income per share for TAL International’s existing shareholders when cost savings are fully realized.
• The regional and product line strengths of Triton and TAL International are highly complementary. The combined company will offer its customer base a broad range of container types and will maintain close customer relationships across all major geographic locations.
• Consummation of the transaction will not require any incremental leverage and existing debt facilities at Triton and TAL International will largely remain in place.
• The new company expects to implement an annual dividend of $1.80 per share and intends to adopt a share repurchase plan of up to $250 million following the close of the transaction. The planned share repurchase program will be completed using the company’s existing liquidity, and will supplant TAL International’s recently announced $150 million buyback program.
Ed Schneider, Co-Founder and Chairman of the Board, Triton, stated, “This transaction will create a company with deep industry knowledge, enhanced operating and systems capabilities and expanded fleet size. Both Triton and TAL International have well-earned reputations for competence and reliability with our customers, suppliers and capital providers. We are proud of what Triton has accomplished over the last 35 years and we believe that joining forces with TAL International is a next logical step in our evolution. We look forward to bringing together our similar cultures of dependability, high quality customer service and teamwork.”
Brian Sondey, President and Chief Executive Officer, TAL International, stated, “This is a transformational transaction. The new company’s enhanced capabilities, larger scale and improved cost competitiveness will better position it in the current soft operating environment and provide valuable operating leverage when the market recovers. In addition, our customers will benefit from significantly expanded supply capabilities, the industry’s best container build quality and top-tier customer service. Both Triton and TAL International have delivered industry-leading returns over the last ten years, and we are very excited to work together to continue this tradition of success as a larger, stronger, more profitable company.”
Simon Vernon, President and Chief Executive Officer, Triton, stated, “Bringing together our two highly compatible companies is a powerful combination that will deliver a number of compelling strategic and financial benefits to the stakeholders of both companies. The product line and customer strengths of Triton and TAL International are highly complementary, which will allow us to preserve the core strengths of each company. We also share a strong commitment to container quality, investment discipline and operational excellence. Both organizations are focused on making the integration as seamless as possible for our respective customers and suppliers. TAL International will be an excellent partner for us and we are looking forward to bringing these two outstanding companies together.”
Financial Highlights
The following table summarizes the historical financial highlights for Triton and TAL International as of and for the twelve months ended September 30, 2015 (dollars in millions).
1. Subject to completion of quarterly reviews by Triton’s external auditors.
2. Combined financial data as of September 30, 2015, before consideration
of transaction costs, synergies, and purchase accounting adjustments.
The combined company expects to achieve $40 million in annual SG&A synergies upon full integration by the end of 2016, to be realized through aligning infrastructure and creating a best-in-class systems environment. No additional leverage is required to consummate the transaction and existing Triton and TAL International debt facilities will largely remain in place. Both companies have significant undrawn financing availability for liquidity and capital expenditures under their existing credit facilities.
GAAP purchase accounting adjustments at Triton International will result in a reduction to the carrying value of certain revenue earning assets. In addition, a lease intangible asset will be created to reflect the value of above market lease rates on certain existing leases. These accounting changes will not impact the borrowing base availability under the debt facilities of either Triton or TAL International. These purchase accounting adjustments, which are non-cash, will likely decrease net income in 2016, be approximately net income neutral in 2017 and positively impact net income thereafter.
Management and Board of Directors
Following the completion of the transaction, TAL International’s President and Chief Executive Officer Brian Sondey will serve as Chief Executive Officer, Triton’s President and Chief Executive Officer Simon Vernon will serve as President, and TAL International’s Chief Financial Officer John Burns will serve as Chief Financial Officer of the combined company. Triton’s Chairman Ed Schneider will see the transaction through to close and has announced that he will then retire.
The newly-formed company will be domiciled in Bermuda and will continue to have significant operating subsidiaries worldwide.
The Board of Directors of the newly-formed company will initially be comprised of nine directors. It is expected that three directors will come from Triton’s existing Board of Directors with one additional director to be identified by Triton, four will come from TAL International’s existing Board of Directors, and one new independent director will be identified by TAL International's Nominating and Governance Committee after conducting an external search process. From and after the closing, Warburg Pincus LLC and Vestar Capital Partners will have the right to designate three of the nine directors, subject to step down as their ownership decreases after the closing.
Following the close of the transaction, Warburg Pincus and Vestar will own approximately 27% and 15%, respectively, of Triton International. A majority of the Board of Directors will be independent under New York Stock Exchange standards.
Approvals and Time to Close
The transaction is subject to Triton and TAL International shareholder approval, regulatory clearances and other customary closing conditions. Triton shareholders holding Triton common shares sufficient to approve the transaction on behalf of the Triton shareholders have agreed to vote in favor of the transaction. The companies expect to complete the transaction during the first half of 2016.
Advisors
Wells Fargo Securities is serving as financial advisor to Triton, and Cleary Gottlieb Steen & Hamilton LLP is serving as its legal advisor. BofA Merrill Lynch is serving as financial advisor to TAL International and Skadden, Arps, Slate, Meagher & Flom LLP and Shearman & Sterling LLP are serving as its legal advisors.
Investor Conference Call and Webcast
Triton and TAL International will host a joint investor conference call to discuss the proposed merger tomorrow, November 10, 2015, at 8:00 AM U.S. Eastern Time. To access the call, please use one of the following dial-in numbers: (866) 547-1509 (toll-free U.S. and Canada), and (920) 663-6208 (International), and enter the Conference ID number 75434916. A telephone replay of the call will be available for 60 days and can be accessed by dialing (800) 585-8367 ((404) 537-3406 international callers). The access code for the replay is 75434916. An investor presentation will be made available on Triton’s and TAL International’s websites.
About Triton Container International Limited
Triton is one of the world’s largest lessors of intermodal cargo containers. Domiciled in Bermuda and with 19 subsidiary offices in 13 countries, Triton has focused on providing exceptional customer service, designing and maintaining a superior quality fleet and operating a world-wide, customer-centric infrastructure. Through its world-wide network of Triton regional service subsidiaries, agents and depots, and a dedicated, experienced staff, Triton meets its customers' needs by providing equipment in demand locations at flexible and competitive lease terms.
About TAL International Group, Inc.
TAL International is one of the world's largest lessors of intermodal freight containers and chassis with 17 offices in 11 countries and approximately 230 third-party container depot facilities in 40 countries. TAL International's global operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis. TAL International is among the world's largest independent lessors of intermodal containers and chassis as measured by fleet size.
About Warburg Pincus LLC
Warburg Pincus LLC is a leading global private equity firm focused on growth investing. The firm has more than $37 billion in assets under management. The firm’s active portfolio of more than 120 companies is highly diversified by stage, sector and geography. Warburg Pincus is an experienced partner to management teams seeking to build durable companies with sustainable value. Founded in 1966, Warburg Pincus has raised 14 private equity funds, which have invested more than $50 billion in over 720 companies in more than 35 countries. The firm is headquartered in New York with offices in Amsterdam, Beijing, Frankfurt, Hong Kong, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo and Shanghai. For more information please visit www.warburgpincus.com.
About Vestar Capital Partners
Vestar Capital Partners is a leading U.S. middle-market private equity firm currently managing approximately $5 billion in capital. Specializing in management buyouts and growth capital investments, Vestar invests and collaborates with incumbent management teams and private owners in a creative, flexible and entrepreneurial way to build long-term enterprise value. Vestar has extensive experience investing across a wide variety of industries including Consumer, Healthcare, Diversified Industries, and Financial Services. Since Vestar’s founding in 1988, Vestar funds have completed 75 investments in companies with a total value of more than $40 billion. For more information, please visit www.vestarcapital.com.
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TAL International - press release