Toshiba to Acquire “Aussie” Landis and Gyr for $US 2.3bn

19th May 2011. After a tightly fought contest, Swiss-based “Australian” Landis+Gyr today announced that Toshiba Corporation (TOKYO:6502) has entered into a definitive sale agreement under which Toshiba, one of the world’s leaders in electronics and power systems, will acquire Landis+Gyr, the global leader in energy management solutions for utilities, for US$2.3 billion in cash, to build the world’s Smart Grid leader.

Toshiba emerged as the sole potential buyer for Landis & Gyr after a competitive bidding process run by advisers Credit Suisse and Lazard. Swiss media outlets reported that strategic buyers such as Siemens, ABB and General Electric had expressed interest, and Bloomberg News reported that the private equity firms TPG Capital and EQT of Sweden had made offers. Press reports also indicated the owner of Landis+Gyr, the Australian investment group Bayard Capital, had been looking to receive $2bn from the sale.

Bayard / Landis and Gyr was built by Irish/Australian Cameron O’Reilly, with significant “angel investment” from Australia.

  • In May 2003, Cameron O’Reilly launched investment house Bayard Capital, with $100m from various shareholders, including companies associated with John B Fairfax, Douglas Myers, Sir Anthony O’Reilly, Kerry Stokes, and Temasek Holdings, the investment arm of the Singapore Government.
  •  In August 2003 Bayard bought Ampy Email Metering, the market leader in electricity and gas meters in Australia and electricity meters in the United Kingdom, from Smorgon Steel and OneSteel.
  • Bayard bought Landis+Gyr in 2004 from Demag Holding, a company owned 81 per cent by Kohlberg Kravis Roberts and 19 per cent by Siemens.He sold shares in early 2004 to invest in Bayard, which spent over US$200 million on acquisitions in its first year, finishing that year with 3500 employees in 27 countries and annual sales of over US$600 million.
  • O’Reilly developed Bayard with a focus on investments that leveraged growing shortages of energy and water, including metering technology, and by 2008, the Bayard group of companies employed over 5000 people across 30 countries, with a turnover of in excess of US$1.2 billion and EBITDA earnings in excess of US$200 million.
  • The Landis+Gyr name was extended to the whole group in May 2008.
  • In 2010, and aiming fr a US IPO, the company secured up to $250m funding lead by  DLJ Merchant Banking, a division of Credit Suisse’s Asset Management division.
  • The original Landis+Gyr was established in Switzerland in 1896, and provided a wide range of metering products, systems and solutions for electricity, heat and gas to energy utilities all over the world, being the largest player in that global industry.

The acquisition by Toshiba is designed to create a new growth platform within Toshiba specifically targeting the global Smart Grid opportunity, bringing benefits to both utility customers and consumers. The combination will extend Toshiba’s tradition of first-class innovation, product portfolio and commitment to research and development along side Landis+Gyr’s iconic brand and reputation for excellence in smart metering solutions.

With over 8,000 utility customers globally, Landis+Gyr has been a pioneer in creating leading-edge smart metering, networking and service products to meet the needs of the utility industry for more than 100 years. Toshiba is acquiring this capability and know-how, and intends to build the business as a stand-alone platform to offer utilities the most comprehensive product and solution set in the industry.

“We welcome Landis+Gyr, the world leader in smart metering products and services, to the Toshiba family” said Hideo Kitamura, Toshiba’s Corporate Executive Vice President . “Our intent is to become a global leader in the Smart Community business by 2020. Together with Landis+Gyr, we will accelerate the development of our combined product and service portfolio to empower utilities and their end customers and to provide sophisticated Smart Community solutions in the global market.”

Toshiba will retain and enhance the globally respected Landis+Gyr brand, and continue to meet and exceed customer requirements worldwide. There are no plans for job reduction or restructuring as a result of this transaction. As of today, Andreas Umbach has assumed the title of Landis+Gyr’s Chief Executive Officer and Cameron O’Reilly will become the Executive Deputy Chairman until the closing of the transaction, after which he looks forward to assisting Toshiba in further growing its smart grid business as well as pursuing other private interests.

“Over the past 10 years we have built the world leader in smart metering,” said Landis+Gyr CEO Andreas Umbach. “As a growth platform for Toshiba, Landis+Gyr will have the resources and power to complement, and indeed accelerate, our product offering to utilities. With this transaction, Toshiba will now share our vision of helping the world manage energy better”.

The benefits of the acquisition will touch the stakeholders of both companies. Utility customers will have seamless continuity of operations as well as a broadened product offering to choose from, while Landis+Gyr will gain additional capital strength from being an integral part of the US$77 billion revenue Toshiba Corporation.

‘The shareholders and I are very proud to have come this far in creating a global leader in an essential industry undergoing transformational growth,” said Cameron O’Reilly, the founder of the investment group that has supported the building of Landis+Gyr over the past 9 years. “We are delighted that Toshiba fully shares our vision, and intends to take Landis+Gyr to the next stage in its exciting development”.

Major shareholders of the selling Landis+Gyr investor group include interests associated with Allianz Capital Partners, Australian Capital Equity, DLJ Merchant Banking Partners, Dubai International Capital, Marinya Holdings, Sir Douglas Myers, Sir Anthony O’Reilly, Propel Investments, and Sofina SA.

Credit Suisse and Lazard led the sale process of Landis+Gyr to Toshiba. Deutsche Bank and Goldman Sachs co-advised Landis+Gyr shareholders on various liquidity alternatives.

The acquisition remains subject to regulatory approvals and other customary closing conditions and is expected to close in the third calendar quarter of this year.

Credit Suisse Group AG and Lazard Ltd. (LAZ) advised closely held Landis+Gyr, while Deutsche Bank AG and Goldman Sachs Group Inc. (GS) advised the Swiss company’s shareholders, including Allianz Capital Partners and Australian Capital Equity, according to the statement. JPMorgan Chase & Co. is advising Toshiba.

Middletons acted as lawyears for Landis+Gyr AG, with KPMG who provided complex modelling services and tax advice, Middletons partner Adam Levine said, “Landis+Gyr AG had one of the most complex equity structures I have seen in all my years of practice. The major challenge was sorting through a structure comprising convertible notes, warranty management shares and several classes of shares with deferred rights. All of this had to be completed in a tight timeframe. The added factor of working with several jurisdictions added to the complexity of the transaction.”

About Landis+Gyr
Landis+Gyr is the leading global provider of integrated energy management products tailored to energy company needs and unique in its ability to deliver true end-to-end advanced metering solutions. Today, the Company offers the broadest portfolio of products and services in the electricity metering industry, and is paving the way for the next generation of smart grid. Landis+Gyr operates in 30 countries across five continents, and employs 5,000 people with the sole mission of helping the world manage energy better. The company’s LTM revenue and adjusted EBITDA through March 2011 were US$1.59 billion and US$215 million respectively.

About Toshiba
Toshiba is a world leader and innovator in pioneering high technology, a diversified manufacturer and marketer of advanced electronic and electrical products spanning digital consumer products; electronic devices and components; power systems, including nuclear energy; industrial and social infrastructure systems; and home appliances. Toshiba was founded in 1875, and today operates a global network of more than 490 companies, with 203,000 employees worldwide and annual sales surpassing 6.3 trillion yen (US$77 billion).

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