Clarivate to merge with CPA Global in $6.8bn all-stock deal

Clarivate, a Philadelphia-based information services and analytics company, has agreed to combine with CPA Global, a Jersey, Channel Islands-based intellectual property services provider. The all-stock deal has an implied enterprise value of about $6.8 billion and is expected to close in the fourth quarter of this year. Clarivate, which went public last year, is a portfolio company of Onex Corp, while CPA Global is majority owned by Leonard Green & Partners.

PRESS RELEASE

London, UK, July 29, 2020 – Clarivate Plc (NYSE:CCC), a global leader in providing trusted information and insights to accelerate the pace of innovation, today announced that it has signed a definitive agreement to combine with CPA Global, a global leader in intellectual property (“IP”) software and tech-enabled services. In the all-stock transaction, CPA Global shareholders will receive approximately 218 million Clarivate ordinary shares, representing 35% pro forma fully diluted ownership of Clarivate. Based on the 30-day volume weighted average share price of Clarivate, the implied enterprise value is approximately $6.8 billion, which includes approximately $900 million of the present value of tax assets. The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to close fourth quarter of 2020.

CPA Global provides IP management and technology solutions to more than 12,000 law firm and corporate customers, providing IP professionals with the information, insights and technology they need to manage the world’s intellectual property. Together, CPA Global and Clarivate will form a true end-to-end solution that covers the entire innovation and IP lifecycle – from scientific and academic research to IP portfolio management and protection. The proposed combination of market-leading intellectual property software, data, technology and services will provide customers with seamless access to richer content and broader capabilities as they execute on their innovation and IP strategies.

Jerre Stead, Executive Chairman and CEO, Clarivate, said: “This is a transformative combination with a strong strategic fit between the two companies. It will create a full-service IP organization which will provide customers with a wide range of products and services to help them make faster and smarter critical decisions. The many strategic and financial benefits are expected to enhance our growth and drive value for shareholders. The two companies share similar core values, along with deep industry, subject matter and technical expertise, that when combined, will strengthen our ability to accelerate the pace of innovation.”

Simon Webster, CEO, CPA Global, said: “Combining CPA Global and Clarivate is a natural next step for both businesses. The fit between our respective product offerings across the innovation and IP lifecycle, the commonality of our vision for the future of the industry, and the alignment of both companies’ cultures and values makes for an extremely exciting future for our customers, employees and shareholders alike.”

Compelling strategic benefits to drive future growth
Complementary strategic fit to meet the needs of a growing market: The proposed combination will build on complementary product and innovation strengths currently held by the two companies: Geographically, given the strength of CPA Global in Europe and Clarivate in North America and Asia; and in product offerings, resulting from CPA Global strengths in IP software and technology-enabled services and Clarivate strengths in content, trademarks and domains.

Connects the entire innovation management lifecycle: The intellectual expertise of Clarivate and CPA Global, combined with their leading data and advanced technologies, will enable smarter decision-making and free up critical resources across the innovation lifecycle.

Opportunities to accelerate revenue growth: The combination of Clarivate and CPA Global will create multiple opportunities for accelerated growth focusing on deeper market penetration. The combined company will be able to provide current and future customers with access to a more comprehensive suite of products and allow it to invest in the customer experience through product development and integration in order to create best-of-breed solutions across the expanded software, data and tech-enabled solution suite.

Financially compelling transaction
Accretive to Clarivate earnings per share: The transaction is expected to be accretive to Clarivate earnings, with approximately 12% accretion in 2021 and approximately 15% accretion in 2022.

Attractive CPA Global business model featuring growth and profitability: For the full year 2019, CPA Global generated $564 million of pro forma revenue, with 4% organic growth, 46% pro forma adjusted EBITDA margin[1] and $262 million of pro forma adjusted EBITDA1 before the impact of acquisition cost synergies. CPA Global generated strong pro forma free cash flow[2] of $208 million in 2019, a conversion of almost 79% of its Adjusted EBITDA1.

Significant cost and tax savings opportunities: Clarivate expects to achieve cost synergies of approximately $75 million within the first 18 months after the transaction closes, which in addition to anticipated cross selling, is expected to drive Clarivate Adjusted EBITDA growth and expand its Adjusted EBITDA margin into the upper 40% range1. The combined company currently expects to benefit from approximately $90 million in annual cash tax savings from the transaction structure.

Strong free cash flow generation: The significant cash flow generated will enable Clarivate to quickly reduce its debt, while also continuing to invest in product development and M&A opportunities.

Financing
In connection with the transaction, Clarivate intends to refinance CPA Global’s debt and has secured a $1.5 billion fully committed incremental term loan facility led by Citi and Bank of America. Clarivate expects to obtain long-term financing with a new debt issuance before the closing of the transaction.

Governance
CPA Global’s majority owner, Leonard Green & Partners (“LGP”), will have the right to appoint two directors to the Clarivate board, which is expected to increase the Clarivate board from 11 to 13 members. Certain CPA Global shareholders, including funds advised by majority owner LGP along with funds advised by Castik Capital and Partners Group, will be locked-up from selling their Clarivate shares until October 1, 2021.

Clarivate reaffirming standalone 2020 outlook
For the year ending December 31, 2020, excluding the combination with CPA Global, Clarivate continues to expect:
Adjusted Revenues in a range of $1.13 billion to $1.16 billion1
Adjusted EBITDA in a range of $395 million to $420 million1
Adjusted EBITDA margins in a range of 35% to 36%1
Adjusted Free Cash Flow in a range of $220 million to $240 million1

Clarivate will issue its second quarter 2020 financial results on July 30, 2020.

Advisors
Evercore is serving as lead financial advisor and Davis Polk & Wardwell LLP is serving as legal advisor to Clarivate. Goldman Sachs is serving as lead financial advisor and Latham & Watkins LLP is serving as legal advisor to CPA Global.

Conference call and webcast
Clarivate will host a conference call and webcast to discuss the strategic and operating aspects of the CPA Global combination on Wednesday, July 29th at 8:00 a.m. Eastern Time. The conference call will be simultaneously webcast on the Investor Relations section of the company’s website.
Interested parties may access the live audio broadcast by dialing 1-888-317-6003 in the United States, 1-412-317-6061 for international, and 1-866-284-3684 in Canada. The conference ID number is 8098149. An audio replay will be available approximately two hours after the completion of the call at 1-877-344-7529 in the United States, 1-412-317-0088 for international, and 1-855-669-9658 in Canada. The Replay Conference ID number is 10146921. The recording will be available for replay through August 12, 2020.

The webcast can be accessed at https://services.choruscall.com/links/ccc200729.html and will be available for replay.

About Clarivate Plc
Clarivate™ is a global leader in providing trusted information and insights to accelerate the pace of innovation. We offer subscription and technology-based solutions coupled with deep domain expertise that cover the entire lifecycle of innovation – from foundational research and ideas to protection and commercialization. Today, we’re setting a trail-blazing course to help customers turn bold ideas into life-changing inventions. Our portfolio consists of some of the world’s most trusted information brands, including the Web of Science™, Cortellis™, Derwent™, CompuMark™, MarkMonitor™ and Techstreet™.

About CPA Global
CPA Global makes it possible for IP to move at the speed of ideas. We’re the global leader in Intellectual Property software and tech-enabled services, serving over 12,000 law firm and corporate customers every day. Our commitment is to give IP professionals the information, expertise and technology they need to manage the world’s ideas.