HC2 Holdings, Inc. (“HC2” or the “Company”) (NYSE: HCHC), a
diversified holding company, announced today that a subsidiary of
Global Marine Holdings, LLC, in which HC2 holds an approximate 73%
equity interest, has entered into a definitive agreement to sell
100% of Global Marine Group (“GMG”) to an investment affiliate of
J.F. Lehman & Company, LLC (“JFLCO”). The sale includes
GMG’s operating subsidiary Global Marine Systems Limited, a leading
provider of offshore engineering services to the
telecommunications, renewables, and oil & gas industries, along
with several joint ventures, and excludes the previously announced
sale of GMG’s 49% joint venture with Huawei Marine Networks Co.,
Limited (“HMN”).
Total base consideration for 100% of GMG
(excluding HMN) will be approximately $250 million in cash, subject
to customary closing adjustments, plus a potential future earn-out
should JFLCO and its investment affiliates achieve a specified
multiple of their invested capital. Combined with the
previously announced sale of GMG’s stake in HMN at a valuation of
$140 million (of which approximately $85 million will be paid at
closing, currently scheduled in the first quarter of 2020, with the
remaining interest under a two-year put option), the total
valuation for HC2’s Marine Services Segment (73% owned by HC2) is
$390 million.
The GMG transaction is expected to close by the
end of the first quarter of 2020, subject to customary closing
conditions, with proceeds delivered to HC2 at that time.
After repayment of approximately $97 million of pension and debt
obligations at GMG, as well as other customary closing adjustments,
taxes and transaction fees, HC2 will utilize the net proceeds it
receives from the consummation of both the GMG and HMN sales to
redeem a portion of HC2’s 11.5% Senior Secured Notes (the “11.5%
Notes”) due 2021. The partial redemptions are expected to
occur by the end of the second quarter of 2020.
Post-sale, the remaining 19% interest in HMN
that is under a two-year put option agreement will remain as an
indirect subsidiary of HC2.
“We are energized to start off 2020 with the
completion of the sale process, and there is no question that our
patience and persistence has been rewarded with a very strong
outcome for HC2 stakeholders,” said Philip Falcone, Chairman,
President and Chief Executive Officer of HC2. “Over the last
five years, we have built a tremendous leading company in the
marine services industry, led by Ian Douglas and his GMG team, and
we know they will continue to build on their success while under
the JFLCO umbrella.”
“Importantly, the sale of Global Marine will
enable HC2 to take a significant initial step in our plan to
de-lever,” added Mr. Falcone. “Once the GMG and HMN sales are
completed, we will be able to redeem a significant portion of the
11.5% Notes at the HC2 corporate level. We believe this will
better position our capital structure as we continue to be
opportunistic and look to monetize additional assets at appropriate
valuations, with the explicit goal of further reducing debt.”
“We remain excited about the potential for
producing ongoing strong cash flows, while focusing on our expense
management, and ultimately realizing longer-term growth
opportunities across our overall platform of businesses,” concluded
Mr. Falcone.
Deutsche Bank Securities and ABN AMRO acted as
M&A advisors to Global Marine in connection with the
transaction.
“We’re about to embark on a new chapter for
Global Marine Group, and I want to thank the HC2 team for being
effective owners of our business. The purchase by JFLCO
provides the certainty that we need to continue to build our
business across the telecommunications and utilities markets,
deepening and widening the service we provide to our customers.
We are fortunate to operate in markets that are transforming
the world and we support the rising demand for connectivity of
global communications and offshore renewable energy sources,” said
Ian Douglas, CEO of Global Marine Group.
About HC2
HC2 Holdings, Inc. is a publicly traded (NYSE:
HCHC) diversified holding company, which seeks opportunities to
acquire and grow businesses that can generate long-term sustainable
free cash flow and attractive returns in order to maximize value
for all stakeholders. HC2 has a diverse array of operating
subsidiaries across eight reportable segments, including
Construction, Marine Services, Energy, Telecommunications, Life
Sciences, Broadcasting, Insurance and Other. HC2’s largest
operating subsidiaries include DBM Global Inc., a family of
companies providing fully integrated structural and steel
construction services, and Global Marine Systems Limited, a leading
provider of engineering and underwater services on submarine
cables. Founded in 1994, HC2 is headquartered in New York, New
York. Learn more about HC2 and its portfolio companies at
www.hc2.com.
About the Marine Services Segment and
Global Marine GroupThe Marine Services Segment operates
under the platform Global Marine Group (“GMG”), which includes
Global Marine Systems Limited (“GMSL”), an operating subsidiary of
HC2 Holdings Inc. (NYSE: HCHC). GMG is a market leader in offshore
engineering and is recognized as a high quality, independent
strategic partner across multiple sectors. GMG consists of three
business units; Global Marine, providing fibre optic cable
solutions to the telecommunications market, CWind, delivering power
cable and asset management services topside and subsea, to the
offshore renewables and utilities markets, and Global Offshore,
delivering the Company’s trenching and power cable laying
capabilities within the offshore renewable, utility and
oil & gas sectors.
GMG has three successful joint ventures,
including two in China, SBSS and HMN, demonstrating the true global
reach of the Company. Additionally, CWind Taiwan was formed in 2018
addressing the needs of the fast-growing offshore renewable sector
in Asia. The combined experience and knowledge has led to
significant embedded intellectual property and an enviable track
record.
GMG has an outstanding record in health &
safety and proudly hold the RoSPA Order of Distinction, following
19 consecutive years’ of receiving their Gold Standard in
recognition of outstanding occupational health & safety
standards.
GMG is in a unique position, owning and
operating the world’s largest independent marine contracting fleet
including three specialist cable installation and repair vessels,
four maintenance vessels and 19 CTVs. Additionally, the
company has a diverse range of subsea equipment including eight
trenchers and working class ROVs.
GMG boasts a number of industry achievements,
from installing the first subsea cable in 1850, being part of the
consortium that invented the universal joint, and right through to
today, finding solutions for client challenges such as low carbon
crew transfer vessels for offshore wind farms.
GMG aspires to achieve its vision ‘Engineering a
clean and connected future’.
For more information about GMG, GMSL, CWind and
Global Offshore, please visit our websites at
www.globalmarine.group, www.globalmarine.co.uk, www.cwind.global
and www.globaloffshore.co.uk.
Cautionary Statement Regarding
Forward-Looking Statements
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995: This press release
contains, and certain oral statements made by our representatives
from time to time may contain, forward-looking statements.
Generally, forward-looking statements include information
describing actions, events, results, strategies and expectations
and are generally identifiable by use of the words “believes,”
“expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,”
“projects,” “may,” “will,” “could,” “might,” or “continues” or
similar expressions. The forward-looking statements in this press
release include, without limitation, any statements regarding our
expectations regarding building shareholder value, future cash
flow, longer-term growth and invested assets, the timing and
effects of redeeming the 11.5% Notes, reducing HC2's leverage and
interest expense, and the timing or prospects of any refinancing of
HC2's remaining corporate debt. Such statements are based on
the beliefs and assumptions of HC2’s management and the management
of HC2’s subsidiaries and portfolio companies. The Company
believes these judgments are reasonable, but you should understand
that these statements are not guarantees of performance or results,
and the Company’s actual results could differ materially from those
expressed or implied in the forward-looking statements due to a
variety of important factors, both positive and negative, that may
be revised or supplemented in subsequent statements and reports
filed with the Securities and Exchange Commission (“SEC”),
including in our reports on Forms 10-K, 10-Q, and 8-K. Such
important factors include, without limitation, issues related to
the restatement of our financial statements; the fact that we have
historically identified material weaknesses in our internal control
over financial reporting, and any inability to remediate future
material weaknesses; capital market conditions, including the
ability of HC2 and HC2’s subsidiaries to raise capital; the ability
of HC2’s subsidiaries and portfolio companies to generate
sufficient net income and cash flows to make upstream cash
distributions; volatility in the trading price of HC2 common stock;
the ability of HC2 and its subsidiaries and portfolio companies to
identify any suitable future acquisition or disposition
opportunities; our ability to realize efficiencies, cost savings,
income and margin improvements, growth, economies of scale and
other anticipated benefits of strategic transactions; difficulties
related to the integration of financial reporting of acquired or
target businesses; difficulties completing pending and future
acquisitions and dispositions; effects of litigation,
indemnification claims, and other contingent liabilities; changes
in regulations and tax laws; and risks that may affect the
performance of the operating subsidiaries and portfolio companies
of HC2. Although HC2 believes its expectations and
assumptions regarding its future operating performance are
reasonable, there can be no assurance that the expectations
reflected herein will be achieved. There can be no assurance
that the GMG or HMN transactions will be completed as proposed or
at all. These risks and other important factors discussed
under the caption “Risk Factors” in our most recent Annual Report
on Form 10-K filed with the SEC, and our other reports filed with
the SEC could cause actual results to differ materially from those
indicated by the forward-looking statements made in this press
release.
You should not place undue reliance on
forward-looking statements. All forward-looking statements
attributable to HC2 or persons acting on its behalf are expressly
qualified in their entirety by the foregoing cautionary statements.
All such statements speak only as of the date made, and
unless legally required, HC2 undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise.
Contact:Investor Relations
Garrett Edson ir@hc2.com (212) 235-2691
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