MacDonald, Dettwiler and Associates Ltd. (TSX: MDA) in British Columbia announced a major expansion of its information products business in the U.S. The company has entered into an agreement to acquire privately held Marshall & Swift / Boeckh (MS/B). MS/B is a supplier of property information and valuation data to the U.S. property insurance sector.
The purchase price for MS/B is $250 million cash, plus an additional future cash payment of up to $90 million based on MS/B’s 2005 performance. The transaction includes a cash tax benefit to MDA of approximately $150 million. This cash benefit will be received by MDA in more or less equal annual portions over the next 15 years. Key management shareholders of MS/B are investing a substantial portion of their proceeds in MDA shares, which will be restricted for three years.
The transaction is expected to provide material accretion to MDA’s earnings beginning in 2004.
“This event represents a significant move forward in realizing MDA’s vision to become a leading force in the U.S. property information market,” stated Daniel Friedmann, president and CEO of MDA. “It will significantly improve our position as one of the leading suppliers in the expanding market for automated property valuations in the U.S., a key step in our strategy. MDA is delighted to welcome MS/B, a brand name market leader with proven management and a solid track record of performance.”
MS/B was formed in 2001 as a merger of Marshall & Swift, and E.H. Boeckh, both 70 year-old companies, extensive data content, and proprietary technology. With about 350 employees, MS/B currently generates approximately $70M in annualized revenues. Over the past three years MS/B has demonstrated a compounded average growth rate in revenues and earnings in excess of 15 percent. The company is headquartered in Los Angeles, with significant operations in Milwaukee, Wisconsin and Princeton, New Jersey.
“The MS/B team is pleased to be joining MDA and is committed to becoming a pivotal part of MDA’s Information Products group,” affirmed Robert Dowdell, who will continue as president and CEO of MS/B. “Both companies share a common vision of supplying essential information, and complement each other strategically.”
Through this acquisition, MDA’s Information Products Group will:
• More than double its U.S. property information and valuation business revenue to over $120 million per year. This will significantly enhance the company’s critical mass in the U.S. property information market;
• Expand the extensive public record and appraisal data warehouse at its disposal with a proprietary database containing many years of accumulated property information collected for insurance purposes;
• Be enabled to offer a complete suite of property valuation solutions to both the mortgage services sector and the residential and commercial property insurance sector in the U.S.;
• Significantly expand its offerings, geographic presence, and customer base in the U.S.; and;
* Diversify into the insurance sector, a sector with business cycles complementary to MDA’s other businesses.
The transaction will be financed predominately with debt. Concurrent with this transaction MDA has significantly increased its senior credit facility. As a result, MDA’s available credit reserve for further strategic investments after the closing of this transaction will now exceed the pre-transaction level.
The final closing of the transaction is subject to customary terms and conditions remaining at this stage, including regulatory approval. It is anticipated that the acquisition will be completed before June 30, 2004.
MacDonald, Dettwiler and Associates Ltd. (MDA) operates through two groups, Information Products and Information Systems. MDA generates annual revenues in excess of CDN$600 million and has over 2,200 employees.
Prior to the transaction, MS/B’s major shareholder was Boston Ventures, a private equity firm.
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