April 28, 2015

Recall announces agreement in principle to be acquired by Iron Mountain

Sydney: April 29, 2015 - Recall Holdings Limited (ASX:REC) ("Recall") a global leader in document storage, digital information solutions, data protection and secure destruction services, today announced that it has reached an agreement in principle with Iron Mountain Incorporated (NYSE: IRM) ("Iron Mountain") to be acquired by way of a recommended court approved Scheme of Arrangement.

Key points

  • Recall shareholders to receive 0.1722 Iron Mountain shares for each Recall share they hold as of the record date for the proposed transaction
  • A$8.50 per share cash option available to Recall shareholders, subject to a total cash pool of A$225 million
  • The proposed transaction provides significant value for Recall shareholders through a substantial premium to the share price and the potential for further upside from realisation of significant synergies and potential share appreciation of Iron Mountain common stock
  • Iron Mountain and Recall to undertake reciprocal confirmatory due diligence and to seek to finalise a binding scheme implementation agreement reflecting the agreed key commercial terms
  • The Recall Board intends to recommend the proposed transaction to shareholders, subject to no superior proposal being made and an independent expert confirming that the transaction is in the best interests of Recall shareholders

Recall Chairman Ian Blackburne said, "The combination of our two businesses makes strong commercial sense and the transaction terms represent attractive value for Recall shareholders. The terms also recognise the potential synergies that we expect the combined group will be able to achieve. We look forward to working with Iron Mountain to formally bring this transaction to shareholders and to bring about the formation of a leading information management company strongly positioned to better service its customers globally."

Recall President and Chief Executive Officer Doug Pertz said, "We are pleased to have reached agreement with Iron Mountain on the proposed acquisition of Recall and believe the value and commercial terms are highly attractive to our shareholders. The revised offer represents a substantial improvement from the original offer in December 2014 and reflects the significant value that Recall and its employees have created since becoming an independent company. In addition both companies’ shareholders stand to benefit from the expected significant synergies and the potential future share price appreciation.”

“This is a transformational acquisition in terms of the potential value it can create for our customers, our employees and our shareholders,” said William L. Meaney, CEO and president of Iron Mountain. “Recall has a great business that has the potential to provide Iron Mountain with significant synergies. The savings from these synergies will allow us to further our investments in delivering innovative products and services and a superior customer experience within our highly competitive and dynamic marketplace.

Key terms

Under the terms of the proposed transaction, Recall shareholders will receive 0.1722 of an Iron Mountain common share for each Recall share (“Share Consideration”).

In addition, Recall shareholders will be offered the option to elect to receive consideration of A$8.50 per Recall share in cash. The cash option will be structured to provide preferential access to the cash pool for any Recall shareholder’s first 5,000 shares, subject to a total cash pool of A$225 million. Based on Recall's share register as at 27 April 2015, this would enable approximately 98% of Recall's shareholders to receive cash consideration for their entire shareholding.

Iron Mountain will establish a secondary listing on the Australian Securities Exchange to allow Australian Recall Shareholders to trade Iron Mountain shares locally in the form of CHESS Depository Interests ("CDIs").

The terms of the proposed transaction will not be adjusted for any dividends which Recall or Iron Mountain pay in the ordinary course or any dividends which Iron Mountain is required to pay to maintain compliance with its REIT status obligations between now and closing of the proposed transaction. In addition, the exchange ratio for the Share Consideration will be adjusted to protect Recall shareholders from specific dilutive actions before closing.

It is intended that two members of the Recall Board will become Directors of Iron Mountain following completion of the proposed transaction.

Strategic Rationale

Recall considers the proposed transaction to be a compelling proposition that appropriately shares the potential value creation from the combination of the two businesses.

Recall shareholders will own up to approximately 21%[1] of the combined entity and will share in the expected synergies of combining the two companies, including:

  • creation of a leading global information management solutions company with unmatched operational and geographic reach;
  • increased economies of scale, enhanced growth profile and better ability to serve customers and address unmet needs within the industry;
  • greater financial strength and scale from which to pursue growth opportunities;
  • potential to realise substantial synergies; and
  • significant EPS and cash flow per share accretion.

Based on the value of the cash option available to shareholders of A$8.50 per Recall share, the proposed transaction values the fully diluted share capital[2] of Recall at A$2,726 million and an implied enterprise value[3] of A$3,434 million, and represents:

  • a premium of 33% to the closing price of Recall shares of A$6.40 on Friday 12 December 2014, being last day prior to the announcement of Iron Mountain's initial proposal;
  • a premium of 69% to the closing price of Recall shares of A$5.02 on 29 September 2014, being the day before public market speculation about a transaction began;
  • a premium of 103% to the 1 month VWAP of Recall shares of $4.18 from 10 December 2013, being the first month of trading following Recall's demerger from Brambles; and
  • a multiple of 13.0x Recall's 12 month trailing EBITDA to 31 December 2014 of US$207.5 million.

Further Information

The proposed transaction between the companies is contingent on Recall and Iron Mountain conducting confirmatory due diligence and negotiating and executing mutually acceptable transaction documentation. This agreement in principle does not assure that a definitive agreement regarding the proposed transaction will be reached or that any transaction between the companies will actually occur.

Conditions precedent to the closing of the proposed transaction will include, among other things, receipt of antitrust/competition and other requisite regulatory approvals, no material adverse event affecting either party, Recall shareholder approval, Iron Mountain shareholder approval, Australian Court approvals and other customary conditions for a transaction of this nature. The parties are working towards completing their confirmatory due diligence and negotiating and entering into definitive transaction documentation within three to four weeks.

A term sheet setting out the key commercial terms agreed in principle between the parties is included as Appendix A to this announcement.

The Recall Board intends to recommend the proposed transaction to shareholders, subject to no superior proposal being made and an independent expert confirming that the transaction is in the best interests of Recall shareholders.

Recall has appointed BofA Merrill Lynch and UBS AG, Australia Branch as its financial advisers and Allens and Sidley Austin LLP as its lead legal advisers.

Conference call

A conference call to discuss the proposed transaction will be held at 9.30am (Sydney time) on Wednesday, 29 April 2015. Dial in details are included as Appendix B and are also available on Recall's investor relations website at recall.com.

For More Information Please Contact:

Worldwide media enquiries

MSLGROUP

David Sprague or Amanda Fountain

recall@mslgroup.com

+1 781-684-0770

Australian media enquiries

Fleur Jouault

Director, GRACosway

fjouault@gracosway.com.au

+61 405 669 632

 

Investor Relations

Bill Frith

Senior Director, Investor Relations

Bill.Frith@recall.com

+61 2 9582 0244

 

 

[1] Based on fully diluted Iron Mountain shares outstanding of 213.3m. Assumes all shareholders accept Iron Mountain scrip. Recall shareholders will own 19% of the combined entity if shareholders elect to receive cash consideration up to the total A$225m available.

[2] Based on 313.7m ordinary shares outstanding and 7.0m performance share rights.

[3] Based on net debt of US$558 million as at 31 December 2014 and an AUDUSD exchange rate of 0.7879.