Methode’s $420 Million Acquisition of Grakon


Foros acted as financial advisor to Methode. Wachtell, Lipton, Rosen & Katz served as Methode’s outside legal counsel. Baird acted as financial advisor to Grakon. Kirkland & Ellis LLP served as Grakon’s outside legal counsel.

Methode Electronics, Inc. (NYSE: MEI), a global developer of custom engineered and application-specific products and solutions, has entered into a definitive agreement to acquire Grakon Parent, Inc., a global leader in the design, development and manufacture of advanced lighting systems, controls and components for premier OEM manufacturers in the heavy truck, bus, rail, electric vehicle and power sports markets. For the trailing 12 months as of July 31, 2018, Grakon’s revenue was approximately $159 million and EBITDA was approximately $41 million.

Excluding pre-tax costs related to the transaction, Methode expects the acquisition to be accretive to earnings, inclusive of estimated amortization and interest expense of $15 million to $20 million, in its current fiscal year ending April 27, 2019. Methode expects to fund the total consideration of approximately $420 million with a combination of cash on hand and committed debt financing. Methode intends to utilize approximately $140 million of cash on hand and has entered into a debt commitment agreement with certain lenders, pursuant to which the lenders have committed to make available to Methode at closing a $250 million term loan facility and a $200 million revolving credit facility, which will replace Methode’s existing revolving credit facility. The transaction is not subject to a financing condition.

Grakon has provided customized lighting solutions to the transportation industry for over 40 years. The company’s expertise and innovative designs have led to a preferred supplier status among its OEM customers in Asia, Australia, Europe, and the Americas. Grakon delivers interior lighting expertise, as well as exterior lighting systems that enhance vehicle styling, improve safety and eliminate equipment downtime. The company’s top 10 commercial vehicle customers have an average tenure of over 19 years, with its newest customer being Tesla. With three facilities in North America, two in Europe and two in Asia, Grakon has over 1,200 employees, including over 100 engineers.

Methode anticipates pre-tax acquisition and related costs in the range of $23 million to $26 million, which include financing, legal, insurance, due diligence, environmental and financial advisory expenses and the impact of performance-based stock award amortization. Methode expects to update its Fiscal 2019 guidance to include the acquisition of Grakon when the third-party valuation is finalized, a further analysis of projected income is complete and transaction costs are settled.

The acquisition is subject to customary closing conditions, including expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to be completed in September 2018.

The Kirkland team was led by corporate partner Hamed Meshki (Picture) and included associates Michele Cumpston and Elizabeth Roberts; Beijing corporate partner Jing Li; Hong Kong corporate partner David Yun; tax partners Russell Light and Josh McLane and associate Miles H. Johnson; environmental transactions partner Paul Tanaka and associate Jennie Morawetz; employee benefits of counsel Jack Bernstein and associate Chris Chase; technology and intellectual property transactions partner Matthew Lovell and associate Andy Dykstra; labor and employment partners Edward Holzwanger and Bryan O’Keefe; executive compensation partner Michael Krasnovsky and associate Ian Sherwin; debt finance partner Nisha Kanchanapoomi and associate Ruby Yang; international trade partner Mario Mancuso and associate Luci Hague; real estate partner Roberto Miceli and associate Mark Phillip; antitrust partner James Mutchnik and of counsel Mike Robert-Smith; and summer associate Blake Mayes.

Involved fees earner: Hamed Meshki – Kirkland & Ellis; Michele Cumpston – Kirkland & Ellis; Elizabeth Roberts – Kirkland & Ellis; Jing Li – Kirkland & Ellis; David Yun – Kirkland & Ellis; Russell Light – Kirkland & Ellis; Josh McLane – Kirkland & Ellis; Miles Johnson – Kirkland & Ellis; Paul Tanaka – Kirkland & Ellis; Jennie Morawetz – Kirkland & Ellis; Jack Bernstein – Kirkland & Ellis; Chris Chase – Kirkland & Ellis; Edward Holzwanger – Kirkland & Ellis; Bryan O’Keefe – Kirkland & Ellis; Michael Krasnovsky – Kirkland & Ellis; Ian Sherwin – Kirkland & Ellis; Matthew Lovell – Kirkland & Ellis; Andy Dykstra – Kirkland & Ellis; Nisha Kanchanapoomi – Kirkland & Ellis; Ruby Yang – Kirkland & Ellis; Mario Mancuso – Kirkland & Ellis; Lucille Hague – Kirkland & Ellis; Roberto Miceli – Kirkland & Ellis; Mark Andrew Phillip – Kirkland & Ellis; James Mutchnik – Kirkland & Ellis; Mike Robert-Smith – Kirkland & Ellis;

Law Firms: Kirkland & Ellis;

Clients: Grakon LLC;