Publicly traded Standard Parking Corp. said that it will buy Central Parking Corp., adding more than 1 million parking spaces to its portfolio. Under the terms of the deal, Standard Parking will issue common stock such that Central Parking’s stockholders will hold 6.16 million shares, or 28%, of the combined company. Standard Parking also will assume approximately $210 million of Central Parking’s debt. Ropes & Gray advised Kohlberg & Co. in the deal. Central Parking Corp. was taken private in 2007 by investors including Kohlberg & Co., Lubert-Adler and Chrysalis Capital Partners in a deal valued at around $726 million.
Standard Parking Corporation (NASDAQ:STAN) today announced that it has signed a definitive Agreement and Plan of Merger with Central Parking Corporation. When completed, the transaction will add more than 2,200 locations and approximately 1 million parking spaces to Standard Parking’s portfolio across the United States. Standard Parking will pay total consideration comprised of cash, Standard Parking stock and the assumption of Central Parking debt.
“This transformational merger with Central Parking will enable us to cross-sell our SP Plus® transportation, maintenance and security service line expertise across an expanded location base to create the preferred provider of outsourced parking facility management, maintenance, transportation and security services,” said James Wilhelm, President and Chief Executive Officer of Standard Parking Corporation. “In addition, Central Parking’s direct-to-consumer marketing programs and advanced technology applications, including Central Parking’s Focus Point remote management division, as well as its USA Parking valet expertise, will enhance our strategy of transforming customer and client service in our industry, adding value to the entire platform.”
James A. Marcum, President and Chief Executive Officer of Central Parking, said, “We are excited to join forces with Standard Parking and combine the best of both companies. Central Parking’s focus on the customer’s parking experience and direct marketing through our fifty consumer-facing websites, plus our iPhone and Android apps, will add value across our combined customer and client base. In addition, Standard Parking’s SP Plus® Gameday division will fit extremely well with our technology offerings and our stadiums, arenas and other venues.”
Mr. Wilhelm added, “Effectively doubling the size of the company will allow us to save costs by eliminating duplicate infrastructure and leveraging the combined company’s purchasing volume. We expect to generate annual run-rate cost synergies of at least $20 million by the end of the second year after closing. We’re confident that we can achieve these cost efficiencies through a variety of measures, which will include a headcount reduction expected to be less than two percent of the combined work force.”
Marc Baumann, Executive Vice President and Chief Financial Officer of Standard Parking, said, “We very much appreciate the support of our business and management team reflected by our banks, BofA Merrill Lynch, Wells Fargo, J. P. Morgan Chase, US Bank, First Hawaiian Bank and GE Antares Capital, in committing to provide a $450 million senior credit facility for this transaction.”
The Boards of Directors of both companies have approved the transaction. Robert S. Roath, Standard Parking’s Chairman, said, “We are very excited about this merger’s upside, and look forward to welcoming all of Central Parking’s professionals when this deal is consummated.” Gordon H. Woodward, Kohlberg & Company’s Chief Investment Officer and a member of Central Parking’s Board of Directors, similarly stated, “We’re anxious to roll up our sleeves and get to work after closing so that we can collectively generate even more long-term value for the stockholders.”
Mr. Wilhelm concluded by noting, “This transaction aligns with Standard Parking’s disciplined merger and acquisition strategy, and will provide tangible, compelling opportunities to create value for stockholders. The combined company’s strong free cash flow should enable us to make substantial additional investments in parking-related technology to accelerate development of new products and services that will improve our customers’ parking experience. Our free cash flow also should enable us to reach a debt coverage ratio of 2.5x within three years, consistent with our long-term objective of achieving debt levels consistent with those of companies having investment grade ratings. At the end of the day, we’re convinced that this merger bodes very well for our stockholders, our clients, our parking customers and our employees as our company grows in the years ahead.”
The stockholders of Central Parking have voted to approve the transaction. The transaction remains subject to Standard Parking stockholder approval, antitrust and other regulatory review, consummation of financing and other customary closing conditions. Until the closing of the transaction, Standard Parking and Central Parking will continue to operate as independent companies, and will remain committed to providing superior service to create value for their clients and customers.
With an expected transaction close in the third quarter of 2012, it is anticipated that the transaction will be accretive to earnings per share within three years.
Details of the Transaction
At closing, Standard Parking will issue additional shares of common stock such that Central Parking’s stockholders will hold 6.16 million shares, or 28%, of the combined company on a diluted basis (subject to reduction under certain circumstances as provided in the merger agreement). Additionally, Central Parking’s stockholders will be entitled to receive a total of $27 million of cash consideration (subject to adjustment as provided in the merger agreement) to be paid in three years to the extent it is not used to satisfy indemnity obligations that may arise under the agreement.
In conjunction with the transaction, Standard Parking also will assume approximately $210 million of Central Parking’s debt net of cash acquired, which will be refinanced at closing using the proceeds of the combined company’s new $450 million senior credit facility. Standard Parking has received commitment letters for this facility from BofA Merrill Lynch, Wells Fargo, J. P. Morgan Chase, US Bank, First Hawaiian Bank and GE Antares Capital.
Upon closing, Standard Parking’s Board of Directors will expand from five to eight members, with the three new Board members being representatives of Central Parking’s stockholders.
About the Combined Company
The combined company’s leadership will represent the best of both organizations, including individuals who are best qualified to integrate and lead the company. James Wilhelm and Marc Baumann, Standard Parking’s current CEO and CFO, respectively, will continue in the same capacities at the combined company. James Marcum, Central Parking’s current CEO, will become the combined company’s COO. Tom Hagerman, Standard Parking’s current COO, will assume a new role with chief responsibility for all of the combined company’s business development efforts throughout North America.
The combined company’s headquarters will be in Chicago, where Standard Parking first established its business in 1929. The Company also will maintain a major support office in Nashville. Further details regarding the structure, leadership and integration plans will be forthcoming as appropriate.
After the closing, the combined company will continue to conduct operations using the existing Standard Parking and Central Parking brands while a thorough evaluation of the go-forward brand strategy is conducted.
BofA Merrill Lynch is acting as financial advisor, and Katten Muchin Rosenman LLP is acting as legal counsel, to Standard Parking. Ernst & Young LLP is providing transaction advisory and due diligence services. Booz & Company is acting as integration advisors, and FTI Consulting serves as communications advisors.
Ropes & Gray LLP and Wilmer Cutler Pickering Hale and Dorr LLP are acting as legal counsel to Central Parking. PriceWaterhouseCoopers LLP is providing transaction advisory and due diligence services. Klehr Harrison Harvey Branzburg LLP is acting as legal counsel to Lubert-Adler Partners, L.P. Sullivan & Cromwell LLP is acting as legal counsel to Versa Capital Management, LLP.