Tobacco Dealers Merge in $670M Deal

Source from:  The Deal by Brenon Daly 11/09/2004

Dimon Inc. said Monday, Nov. 8, that it will acquire Standard Commercial Corp., an acquisition valued at $670 million that nearly doubles the size of the tobacco leaf dealer. Danville, Va.-based Dimon will exchange three of its shares for each share of Standard Commercial, of Wilson, N.C. In addition to the $255 million in equity, Dimon will also assume Standard Commercial's debt, bringing the total value of the transaction, net of cash, to $670 million. Based on Standard Commercial's previous closing price, the acquisition represents a 14% premium. On Monday afternoon trading, Dimon shares ticked up 3.5% to $6.44 while Standard Commercial stock, reflecting the bid, gained 14% to $18.70. The combination of the No. 2 and No. 3 tobacco dealers is expected to close in the first half of 2005. On a conference call, executives said they don't anticipate any problems with a Hart-Scott-Rodino review, adding they won't be filing for an EU review of the proposed transaction. If the deal closes, Dimon will own 52% of the combined entity, with Standard Commercial owning the remaining 48%. On a stand-alone basis, Dimon recorded $1.1 billion in sales in the previous 12 months, while Standard Commercial recorded $792 million in the same period. The deal is expected to boost net income at the company in the first full year of operations. Within two years of the combination, the companies project cost savings will reach $40 million annually. Executives on the conference call declined to be specific about the cost savings, as well as future plans for the headquarters of the combined company. Similarly, executives refused to answer questions about the background on the transaction. Enditem