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PACR > SEC Filings for PACR > Form 8-K on 18-Mar-2014All Recent SEC Filings

Show all filings for PACER INTERNATIONAL INC

Form 8-K for PACER INTERNATIONAL INC


18-Mar-2014

Other Events


Item 8.01. Other Events

On March 18, 2014, Pacer International, Inc. ("Pacer"), the members of its board of directors (the "Pacer Board"), XPO Logistics, Inc. ("XPO"), and Acquisition Sub, Inc. ("Merger Sub") entered into a memorandum of understanding (the "MOU") with plaintiffs regarding the settlement of certain litigation arising out of the announcement of the Agreement and Plan of Merger, dated as of January 5, 2014, between XPO and Pacer (the "Merger Agreement").

On January 6, 2014, Pacer and XPO announced that they had entered into the Merger Agreement, pursuant to which Pacer will be acquired by XPO through a merger of Merger Sub with and into Pacer with Pacer surviving as a wholly owned subsidiary of XPO (the "Merger"). On January 29, 2014, XPO filed a Registration Statement on Form S-4 with the United States Securities and Exchange Commission (the "SEC"), which was amended on and declared effective by the SEC on February 24, 2014, and which contained the proxy statement/prospectus (the "Proxy Statement/Prospectus"). On February 24, 2014, Pacer filed its definitive proxy statement with the SEC. On or about February 25, 2014, in connection with a special meeting of its stockholders to approve the Merger Agreement, Pacer mailed copies of the Proxy Statement/Prospectus to its stockholders.

As disclosed on page 81 of the Proxy Statement/Prospectus, between January 8 and January 16, 2014, five substantially identical putative class actions were filed in the Tennessee Chancery Court against Pacer, its directors, XPO and Merger Sub challenging the merger. The first of those actions, entitled Iseman v. Pacer International, Inc. et al., was filed in the Chancery Court for Shelby County. The remaining four, entitled Weingarten v. Pacer International, Inc. et al.; Mahmutagic v. Pacer International, Inc. et al.; Frazier v. Pacer International, Inc. et al.; and Blackwell v. Pacer International, Inc. et al., were filed in the Chancery Court for Davidson County (the "Court"). By stipulation and order dated February 18, 2014, the Iseman case was transferred to Davidson County and, by order dated February 20, 2014, the Chancery Court for Davidson County consolidated the five pending cases under the caption In re Pacer International, Inc. Shareholder Litigation, No. 14-39-IV (the "Action"). The operative complaint in the Action alleges, among other things, that the directors of Pacer breached their fiduciary duties to Pacer's shareholders in connection with the proposed acquisition of Pacer by XPO and Merger Sub by agreeing to the proposed merger at an allegedly unfair price pursuant to a purportedly flawed and conflicted sales process, by including certain allegedly preclusive deal-protection measures, and by misrepresenting and/or omitting certain allegedly material information. The complaint alleges that Pacer, XPO, and Merger Sub aided and abetted these breaches of fiduciary duty. The complaint seeks, among other things, injunctive relief preventing the consummation of the merger, as well as attorneys' and experts' fees and certain other damages.

On March 18, 2014, defendants in the Action (the "Defendants") entered into the MOU with plaintiffs in the Action (the "Plaintiffs") pursuant to which Pacer has agreed to make the disclosures concerning the Merger set forth below. The MOU also provides that, solely for purposes of settlement, the Court will certify a class consisting of all persons who were record or beneficial stockholders of Pacer when the Merger was approved by the Pacer Board or any time thereafter (the "Class"). In addition, the MOU provides that, subject to approval by the Court


after notice to the members of the Class (the "Class Members"), the Action will be dismissed with prejudice and all claims that the Class Members may possess with regard to the Merger will be released. In connection with the settlement, the Plaintiffs' counsel have expressed their intention to seek an award by the Court of attorneys' fees and expenses. The amount of the award to the Plaintiffs' counsel will ultimately be determined by the Court. This payment will not affect the amount of merger consideration to be paid by XPO or to be received by any Pacer stockholder in the Merger. There can be no assurance that the parties will ultimately enter into a definitive settlement agreement or that the Court will approve the settlement. In the absence of either event, the proposed settlement as contemplated by the MOU may be terminated.

The Defendants believe that the Action is without merit, have vigorously denied, and continue to vigorously deny, all of the allegations of wrongful or actionable conduct asserted in the Action, and the Pacer Board vigorously maintains that it diligently and scrupulously complied with its fiduciary duties, that the Proxy Statement/Prospectus is complete and accurate in all material respects, and that no further disclosure is required under applicable law. The Defendants are entering into the MOU and the contemplated settlement solely to eliminate the costs, burden, distraction and expense of having to defend this litigation further, and to put the claims that were or could have been asserted to rest. Nothing in the MOU, any settlement agreement or any public filing, including this Current Report on Form 8-K ("Current Report"), is or shall be deemed to be an admission of the legal necessity of filing or the materiality under applicable laws of any of the additional information contained herein or in any public filing associated with the proposed settlement of the Action.

SUPPLEMENTAL DISCLOSURES

Solely in connection with the contemplated settlement, Pacer and XPO have agreed to make these supplemental disclosures to the Proxy Statement/Prospectus. The following information should be read in conjunction with the Proxy Statement/Prospectus, which should be read in its entirety. All page references in the information below are to pages in the Proxy Statement/Prospectus, and capitalized terms used in this Current Report have the meanings set forth in the Proxy Statement/Prospectus, unless otherwise defined herein.

The following disclosure supplements the disclosure on page 30 of the Proxy Statement/Prospectus by deleting the fourth paragraph thereof in its entirety and replacing it with the following:

On November 7, 2013, Pacer and Morgan Stanley executed an engagement letter that specifically addressed the sale process and set forth the transaction fee that would be payable to Morgan Stanley, which was payable only upon consummation of a sale of Pacer as a whole.

The following disclosures supplement the information contained in the Proxy Statement/Prospectus under "Opinion of Morgan Stanley & Co. LLC-Pacer Analysis-Comparable Company Trading Multiples," which begins on page 47 of the Proxy Statement/Prospectus, by:



(1) Adding the following sentence and table in a new paragraph immediately following the second paragraph thereof:

The multiples observed in this analysis are set forth below.

                                       Aggregate Value to             Price to
  Intermodal Company                  Estimated 2014 EBITDA      Estimated 2014 EPS
  Hub Group, Inc.                                      10.5x                   18.8x
  JB Hunt Transport Services, Inc.                     10.7x                   22.8x

(2) Deleting the second paragraph and all of the lists that follow on page 48 in their entirety and replacing them with the following:

To provide additional context for the global logistics industry, including XPO, Morgan Stanley also reviewed and compared, using publicly available information, certain current and historical financial information, ratios and public market multiples for the asset-light freight forwarder companies, contract logistics companies, and integrator companies. Those multiples are set forth in the table below. For each company listed below, Morgan Stanley also analyzed for comparative purposes the ratio of aggregate value to estimated 2014 EBITDA and stock price to estimated 2014 EPS. The companies reviewed and the aggregate value to estimated 2014 EBITDA and stock price to estimated 2014 EPS multiples observed for each transaction were as follows:

                                                  Aggregate Value to                      Price to
Asset-Light/Freight Forwarder Company            Estimated 2014 EBITDA               Estimated 2014 EPS
C.H. Robinson Worldwide, Inc.                                     11.8x                            19.0x
DSV A/S                                                           11.8x                            16.7x
Echo Global Logistics, Inc.                                        9.8x                            23.2x
Expeditors International of
Washington, Inc.                                                  10.9x                            21.9x
Forward Air Corporation                                            9.6x                            20.7x
Hub Group, Inc.                                                   10.5x                            18.8x
Kuehne + Nagel International AG                                   12.4x                            20.8x
Landstar System, Inc.                                             11.3x                            20.2x
Panalpina World Transport Holding
Ltd.*                                                             15.2x                               NM *
Roadrunner Transportation Systems,
Inc.                                                               9.4x                            16.2x
Toll Holdings Limited                                              7.2x                            13.6x
UTi Worldwide Inc.*                                               10.8x                               NM *
XPO Logistics, Inc.                                                  NM *                             NM *

Contract Logistics Company
Agility Public Warehousing Company
K.S.C.                                                             5.5x                             9.9x
Con-way Inc.                                                       4.8x                            15.3x
Norbert Dentressangle S.A.                                         5.4x                            11.8x
Ryder System, Inc.                                                 5.1x                            13.3x
Wincanton Plc                                                      3.9x                             8.8x

Integrator Company
Deutsche Post AG                                                   7.7x                            15.7x
FedEx Corporation                                                  6.6x                            17.3x
United Parcel Service, Inc.                                       10.4x                            18.8x

* Multiple not meaningful and excluded from high, low and median multiples summarized in the Precedent Transactions Multiples table.



(3) Deleting the first sentence in the first full paragraph on page 49.

The following disclosures supplement the information contained in the Proxy Statement/Prospectus under "Opinion of Morgan Stanley & Co. LLC-Pacer Analysis-Precedent Transactions Analysis," which begins on page 50 of the Proxy Statement/Prospectus, by:

(1) Adding the following new sentence immediately following the second sentence thereof:

For each transaction listed below, Morgan Stanley noted the ratio of aggregate value of the transaction to the target company's last twelve months ("LTM") EBITDA.

(2) Deleting the third sentence and the table on page 50 in their entirety and replacing them with the following:

The transactions reviewed, the month and year each transaction was announced and the aggregate value to LTM EBITDA multiples observed for each transaction were as follows:

                 Selected Global Logistics Company Transactions



                                                                      Aggregate Value/
   Date Announced              Target               Acquirer             LTM EBITDA
    December 2013         Newgistics, Inc.      Littlejohn & Co.,
                                                     L.L.C.                 8.0x
   September 2013         syncreon Holdings       Centerbridge
                               Limited           Partners, L.P.             8.3x
      July 2013                Marisol             Roadrunner
                          International LLC      Transportation
                                                  Systems, Inc.             NA*
      July 2013               3PD, Inc.          XPO Logistics,
                                                      Inc.                 10.1x
      May 2013               Transplace         Greenbriar Equity
                                                    Group LLC               NA*
    November 2012          Total Quality,          Forward Air
                                Inc.               Corporation              8.8x
    November 2012            GEFCO S.A.            JSC Russian
                                                 Railways (RZD)             NA*
    October 2012             Star Track          Australia Post
                           Express Pty Ltd         Corporation              NA*
   September 2012              Phoenix            C.H. Robinson
                           International,        Worldwide, Inc.
                                Inc.                                       12.4x
      July 2012            LINC Logistics           Universal
                               Company              Truckload
                                                 Services, Inc.             6.8x
      June 2012           Panther Expedited       Arkansas Best
                           Services, Inc.          Corporation              7.7x
      May 2012               Caterpillar        Platinum Equity,
                              Logistics                LLC
                            Services LLC                                    5.1x
     March 2012             World Courier       AmerisourceBergen
                             Group, Inc.           Corporation              NA*
    January 2012            UFC Aerospace         BE Aerospace,
                                Corp.                 Inc.                  9.5x
      June 2011             Korea Express        CJ Corporation
                              Co., Ltd.                                    22.4x
    November 2010              TDG Plc               Norbert
                                                  Dentressangle
                                                      S.A.                  NA*
      July 2010            ATC Technology             GENCO
                             Corporation          Distribution
                                                  System, Inc.              5.8x
    October 2009             Livingston          Canada Pension
                            International        Plan Investment
                             Income Fund            Board and
                                                Sterling Partners           9.4x
     March 2009           De Post-La Poste         CVC Capital
                                                    Partners
                                                 SICAV-FIS S.A.             1.9x
    November 2008             Logwin AG             DELTON AG               8.1x
      July 2008               Compagnie           Arcapita Bank
                             Européen de
                             Prestations
                             Logistiques
                               (CEPL)                                       NA*
      June 2008             ABX Logistics            DSV A/S
                           Worldwide SA/NV
                                Group                                      13.9x
     April 2008               GEODIS SA         Société Nationale
                                                de Chemins de fer
                                                    Francais                8.3x
    February 2008              TDG Plc           Laxey Partners
                                                       Ltd                  6.0x


--------------------------------------------------------------------------------
     December 2007            BALtrans Holdings       Toll Holdings Limited
                                   Limited                                      17.9x
      October 2007          Christian Salvesen Plc    Norbert Dentrassangle
                                                               S.A.              7.4x
        May 2007             Jacobson Companies,         Oak Hill Capital
                                     Inc.                    Partners            NA*
        May 2007                  EGL, Inc.               CEVA Logistics        15.0x
     December 2006            Greatwide Logistic            Investcorp
                                   Services                                      NA*
     November 2006          TNT Freight Management          GEODIS SA            NA*
      October 2006          Arnold Logistics, LLC        Oak Hill Capital
                                                             Partners            NA*
      August 2006               TNT Logistics         Apollo Management L.P.     NA*
       March 2006             SembCorp Logistics      Toll Holdings Limited     11.4x
      January 2006          Koninklijke Frans Maas           DSV A/S
                                  Groep N.V.                                     7.2x
     December 2005           Hoau Logistics Group            TNT N.V.            NA*
      October 2005              ACR Logistics             Kuehne + Nagel
                                                         International AG        NA*
       June 2005                ABX Logistics              3i Group plc
                            Worldwide SA/NV Group                                NA*
        May 2001             USCO Logistics Inc.          Kuehne + Nagel
                                                         International AG        NA*

* Multiple not available and excluded from high, low, mean and median multiples summarized in the Precedent Transactions Multiples table.

(3) Deleting the first sentence in the first full paragraph on page 51.

The following disclosures supplement the information contained in the Proxy Statement/Prospectus under "Opinion of Morgan Stanley & Co. LLC-Pacer Analysis-Discounted Cash Flow Analysis," which begins on page 52 of the Proxy Statement/Prospectus, by:

(1) Adding the following new sentence immediately following the third sentence thereof:

Pacer's unlevered free cash flows were calculated as Pacer's EBITDA minus depreciation and amortization, minus tax expense based on the applicable tax rate, plus depreciation and amortization and other non-cash expenses, and minus capital expenditures, changes in net working capital and changes in deferred tax and other assets.

(2) Adding the following new sentence immediately following the sixth sentence thereof:

The range of perpetuity growth rates and discount rates described above implied a range of multiples of Pacer's aggregate value to estimated 2014 EBITDA and 2015 EBITDA of 6.4x to 9.0x and 4.8x to 6.9x, respectively.

The following disclosure supplements the information contained in the Proxy Statement/Prospectus under "Opinion of Morgan Stanley & Co. LLC-XPO Analysis-Discounted Cash Flow Analysis," which begins on page 54 of the Proxy Statement/Prospectus, by adding the following new sentence immediately following the second sentence thereof:

XPO's unlevered free cash flows were calculated as XPO's EBITDA minus depreciation and amortization, minus tax expense based on the applicable tax rate, plus depreciation and amortization, and minus capital expenditures and changes in net working capital.


The following disclosure supplements the information contained in the Proxy Statement/Prospectus under "Opinion of Houlihan Lokey Financial Advisors, Inc.," which begins on page 56 of the Proxy Statement/Prospectus, by adding the following bullet point immediately following the third bullet point on page 60:

• Unlevered, after tax free cash flow, calculated as EBITDA less taxes and capital expenditures, adjusted for changes in working capital.

The following disclosure supplements the information contained in the Proxy Statement/Prospectus under "Opinion of Houlihan Lokey Financial Advisors, Inc.-Pacer Financial Analyses-Selected Companies Analysis," which begins on page 61 of the Proxy Statement/Prospectus, by deleting the third sentence thereof and all of the tables that follow on pages 61 and 62 in their entirety and replacing them with the following:

The list of selected companies, their respective enterprise values to Adjusted EBITDA multiples and the related mean and median multiples for such selected companies, together with the corresponding Pacer multiples as of October 23, 2013 and January 3, 2014, were as follows:

Larger Cap Asset-Light Transportation and Logistics
Companies
                                                          Enterprise Value to Adjusted EBITDA
                                                          LTM               NFY            NFY+1
CH Robinson Worldwide Inc.                                  12.3x             12.4x          11.6x
Expeditors International of Washington Inc.                 12.7x             12.2x          10.9x
Forward Air Corp.                                           11.6x             11.0x           9.4x
Hub Group Inc.                                              10.3x             11.5x          10.4x
Kuehne + Nagel International AG                             13.7x             13.4x          12.4x
Landstar System Inc.                                        12.0x             11.8x          10.8x
Panalpina World Transport Holding Ltd.(1)                   20.7x             19.7x          15.2x
UTi Worldwide Inc.(2)                                       21.8x             16.6x          10.2x
XPO(3)                                                        NMF               NMF            NMF

Mean                                                        12.1x             12.7x          11.4x
Median                                                      12.2x             12.2x          10.9x

(1) LTM and NFY excluded from high, low, mean and median data

(2) LTM excluded from high, low, mean and median data

(3) LTM, NFY and NFY+1 excluded from high, low, mean and median data

Smaller Cap Asset-Light Transportation and Logistics
Companies
                                                           Enterprise Value to Adjusted EBITDA
                                                           LTM                NFY            NFY+1
Echo Global Logistics, Inc.                                   12.4x              12.0x         9.5x
Roadrunner Transportation Systems, Inc.                       12.1x              11.9x         9.6x
Universal Truckload Services Inc.                              9.5x               9.4x         8.6x
Wincanton plc                                                  4.0x               4.0x         3.9x

Mean                                                           9.5x               9.3x         7.9x
Median                                                        10.8x              10.6x         9.1x


--------------------------------------------------------------------------------
All Selected Asset-Light Transportation and Logistics
Companies
                                                                Enterprise Value to Adjusted EBITDA
                                                               LTM                NFY             NFY+1
Mean                                                             11.1x              11.5x           10.2x
Median                                                           12.1x              11.9x           10.3x

Pacer as of October 23, 2013 (the date prior to the
beginning of a significant Pacer common stock price
appreciation)                                                     8.0x               7.4x            5.7x

Pacer as of January 3, 2014                                      10.9x              10.5x            8.3x

The following disclosure supplements the information contained in the Proxy Statement/Prospectus under "Opinion of Houlihan Lokey Financial Advisors, Inc.-Pacer Financial Analyses-Selected Transactions Analysis," which begins on page 63 of the Proxy Statement/Prospectus, by deleting the first paragraph, first table, second paragraph, and second table thereof in their entirety and replacing them with the following:

Houlihan Lokey selected the following publicly announced asset-light transportation and logistics transactions and calculated implied enterprise value to EBITDA multiples based on the estimated announced purchase prices. The calculated multiples included implied enterprise value of the target company as a multiple of LTM EBITDA for which information had been made public as of the announcement date of the relevant transaction. The list of selected transactions, their respective announcement dates, their respective implied enterprise value to EBITDA multiples and the related mean and median multiples for such selected transactions, as compared to the multiple implied by the merger, were as follows:

                                                                            Enterprise
                                                                              Value/
Announcement Date                Target                 Acquiror              EBITDA
December 11, 2013          Landstar Supply         XPO
                           Chain Solutions,
                           Inc.                                                   11.9x
July 15, 2013              3PD, Inc.               XPO                            10.1x
February 12, 2013          Vitran Corp. Supply     Legacy Supply
                           Chain Operation         Chain, Inc.
                           Division                                                9.8x
September 25, 2012         Phoenix                 CH Robinson
                           International           Worldwide Inc.
                           Freight Services
                           Ltd.                                                   12.5x
July 26, 2012              Linc Logistics          Universal Truckload
                           Company                 Services Inc.                   5.2x
June 14, 2012              Panther Expedited       Arkansas Best
                           Services, Inc.          Corporation                     7.5x
December 15, 2011          Vantec Corporation      Hitachi Transport
                                                   System Ltd.                     7.7x

Mean                                                                               9.2x
Median                                                                             9.8x

Pacer (at implied merger consideration value) 12.4x


The following disclosure supplements the information contained in the Proxy Statement/Prospectus under "Opinion of Houlihan Lokey Financial Advisors, Inc.-Pacer Financial Analyses-Discounted Cash Flow Analysis," which appears on page 64 of the Proxy Statement/Prospectus, by adding the following new sentence immediately following the first sentence thereof:

Houlihan Lokey made no additional adjustments to such EBITDA estimates in . . .

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