SourceHOV, Novitex Holdings and Quinpario Acquisition will combine to create an industry-solutions provider for financial technology and business services. The new company will be called Excela Technologies. The parties have entered into a definitive business combination agreement for the proposed transaction, which is expected to close during Q2/17.
The transaction is valued at approximately $2.8 billion, representing a 7.3x multiple of the projected 2017 pro forma EBITDA for the combined company of $385 million. The purchase price will be funded through a combination of $1.35 billion in new debt financing, cash from Quinpario, rollover equity and cash on hand at closing, including from equity financing. Shareholders of SourceHOV and Novitex are rolling 100% of the current equity and will be the majority shareholders of the combined company. All proceeds from the Quinpario equity capital contribution will be used for deleveraging, to pay fees and expenses for the transaction and for general corporate purposes.
The combined company is expected to have approximately $1.5 billion in revenue in 2017, adding substantial scale and offering a complementary set of platforms and services to enhance customer offerings.
According to a related 8-K filing, Royal Bank of Canada and Credit Suisse will provide the debt financing to support the merger.
Novitex, a North American provider of technology-driven managed services, is owned by certain funds managed by affiliates of Apollo Global Management. SourceHOV is majority owned by HandsOn Global Management and affiliates and provides transaction processing solutions and enterprise information management solutions.
Ron Cogburn, CEO of SourceHOV, commented, “We are excited about the possibilities the transaction will bring to the business services sector, as it positions us well for growth in our key markets. Our journey from people-intensive to technology-enabled services and our combination with Novitex fundamentally increases our scale, making us a more strategic partner to customers in their quest for digital transformation.”
John Visentin, executive chairman and CEO of Novitex, added, “The combination of Novitex and SourceHOV supports our strategy of serving as an end-to-end provider of innovative cloud-enabled solutions in the document outsourcing industry. This combination allows us to further enhance our strategic focus in providing leading-edge, integrated enterprise information management services.”
The combined company will have a board of directors consisting of eight members, including three directors to be nominated by HGM, two directors to be nominated by Apollo and three independent directors.
Credit Suisse and RBC Capital Markets are acting as financial advisors to Novitex. Rothschild and Morgan Stanley are acting as financial advisors to SourceHOV. Moelis & Company is acting as financial advisor to Quinpario, while Deutsche Bank Securities and Cantor Fitzgerald are acting as capital markets advisors. Willkie Farr & Gallagher acted as legal advisor to SourceHOV, Akin Gump Strauss Hauer & Feld and Paul, Weiss, Rifkind, Wharton & Garrison acted as legal advisors to Novitex, and Kirkland & Ellis and Graubard Miller acted as legal advisors to Quinpario.
Apollo is a global alternative investment manager.
Quinpario is a special purpose acquisition company that completed its initial public offering in January 2015.