Zacks_Analysts' Blog : ATC to be Bought by GENCO - Analyst Blog

ATC Technology Corporation (ATAC) has entered an all-cash merger agreement with GENCO Distribution System, Inc. (“GENCO"), under which it will be acquired by the latter for $512.6 million.



GENCO is a privately held third-party provider of logistics services for retailers, manufacturers and U.S. government agencies. It will acquire ATC for $25 per share in cash, reflecting a 43% premium over the company’s closing share price as on July 16, 2010. The deal is expected to be closed during the fourth quarter of the year.



GENCO plans to finance the transaction partly through the proceeds from the sale of about $125 million of its shares to affiliates of Greenbriar Equity Group LLC, a private equity investment firm specializing in leveraged buyouts, recapitalizations, growth capital investments, corporate joint ventures and privatization.



GENCO will fund the rest of the transaction using the borrowings under a $450 million line of credit extended by PNC Bank, National Association and Wells Fargo Bank, N.A. as well as through cash on hand.



Following the completion of the deal, ATC will turn into a wholly owned subsidiary of GENCO and will no longer be traded publicly.



The deal closely follows ATC’s woes in the recent quarter. The company’s profits declined to 35 cents per share in the first quarter of 2010 from 47 cents per share in the year-ago quarter. Its revenues declined 7.9% to $104.5 million.



ATC’s Logistics segment has been hurt by the weak business with its prominent customer, AT&T, Inc. (T). Meanwhile, its Drivetrain segment was adversely affected by the loss of transmission remanufacturing program with Honda Motor Co. (HMC).



Revenues in the Logistics segment slid 2.8% to $75.1 million, while revenues in the Drivetrain segment dipped 18.8% to $29.4 million during the quarter. These led ATC to lower its full-year 2010 guidance.



The company lowered its revenues and segment profit outlook for the Logistics segment to $355 million–$375 million and $55 million–$61 million, respectively, from the earlier guidance of revenues of $400 million–$430 million and a segment profit of $67 million–$74 million. Further, earnings per share guidance has been downgraded to $1.75–$1.95 from the earlier projection of $2.13–$2.45.
Read the full analyst report on "ATAC"
Read the full analyst report on "HMC"
Read the full analyst report on "T"
Zacks Investment Research