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Lakeside Steel suitor JMC to acquire 100% of shares
2012-01-25 12:21 ET - News Release
Mr. Joel Kazman reports
LAKESIDE STEEL INC. AND JMC STEEL GROUP, INC. ANNOUNCE EXECUTION OF ARRANGEMENT AGREEMENT
Lakeside Steel Inc. and JMC Steel Group Inc. have entered into a definitive agreement pursuant to which JMC Steel Group, through a wholly owned subsidiary, has agreed to acquire all of the issued and outstanding common shares of Lakeside at a price of 29.83 cents per share in cash, which represents a premium of approximately 326 per cent over the closing price of Lakeside's shares of seven cents on Dec. 15, 2011, being the last trading day prior to the date on which Lakeside first announced that it was in exclusive negotiations with a potential purchaser, and a premium of approximately 130 per cent over the volume-weighted average price of Lakeside's shares of 13 cents for the 30 trading days prior to and including Dec. 15, 2011. The transaction is proposed to be implemented pursuant to a court-approved statutory plan of arrangement governed by the Business Corporations Act (Ontario). The transaction is subject to the satisfaction or waiver of certain customary closing conditions, and is currently expected to be completed in or prior to the early second quarter of 2012.
Unless otherwise indicated, all dollar amounts in this press release are in Canadian dollars.
Under the arrangement agreement, JMC Steel has also agreed to provide Lakeside with a secured loan in the total principal amount of up to $50-million (U.S.), such financing to be provided on, and subject to, the terms and conditions of a loan agreement between JMC Steel and Lakeside. Financing under the loan agreement is subject to the satisfaction of certain conditions precedent, including execution of an intercreditor agreement with Lakeside's existing senior lender. If the arrangement agreement is terminated in certain circumstances, including if the board changes its recommendation or Lakeside terminates the arrangement agreement to enter into a superior acquisition proposal, then Lakeside will be required to immediately repay the principal amount outstanding under the loan, together with all accrued and unpaid interest to the date of such repayment, and certain other fees and costs of JMC Steel. The loan would otherwise mature on June 29, 2012.
One of Lakeside's principal shareholders, Jaguar Financial Corp., as well as all of the directors and executive officers of Lakeside, have entered into voting support agreements with JMC Steel pursuant to which the supporting shareholders have irrevocably agreed, subject to the terms thereof, to vote their shares in favour of the arrangement. The supporting shareholders beneficially own or exercise control or direction over, collectively, approximately 14.5 per cent of the outstanding common shares of Lakeside.
The board of directors of Lakeside has unanimously approved (with two directors having abstained from voting) the entering into of the arrangement agreement and has determined that the arrangement is in the best interests of Lakeside and its shareholders and unanimously recommends that shareholders vote in favour of the arrangement. The approval by the board followed the unanimous recommendation of a special committee of independent directors which was formed, among other things, to review the terms and conditions of the arrangement. In connection with its work, the special committee engaged Blair Franklin Capital Partners as its independent financial adviser. The recommendation of the special committee followed an extensive review and analysis of the proposed transaction. In addition, the board has received a fairness opinion from Blair Franklin Capital Partners to the effect that, as of the date hereof, the consideration payable under the arrangement is fair, from a financial point of view, to the holders of Lakeside common shares.
The completion of the proposed arrangement is subject to a number of customary conditions, including the approval of the Ontario Superior Court of Justice and the approval of two-thirds of the votes cast by Lakeside's shareholders and a simple majority of Lakeside's disinterested shareholders, in each case, present in person or represented by proxy at a special meeting to be convened for such purpose. It is currently anticipated that the meeting will be held in March, 2012, and that proxy materials providing details of the arrangement, including Lakeside's management proxy circular, will be mailed to shareholders in February, 2012. Details concerning the record date for the meeting, the mailing date and meeting date will be announced in the coming days.
Pursuant to the arrangement agreement, Lakeside is subject to customary non-solicitation covenants. In addition, JMC Steel has the right to match any unsolicited superior acquisition proposal. In certain circumstances where the arrangement agreement is terminated, including if the board changes its recommendation or Lakeside terminates the arrangement agreement to enter into a superior acquisition proposal, Lakeside has agreed to pay JMC Steel a termination fee.
A copy of the arrangement agreement and the plan of arrangement relating thereto, the management proxy circular of Lakeside, the fairness opinion and other related documents will be filed with the Canadian securities regulatory authorities and will be available for viewing on the System for Electronic Document Analysis and Retrieval (SEDAR) website.
"This strategic acquisition will dramatically increase our capabilities and presence in the energy pipe market," said Barry Zekelman, executive chairman of JMC Steel Group. "The energy pipe market is a very large market and has significant growth potential. Lakeside Steel is a solid platform for JMC Steel Group Inc. to grow and expand in this area."
"Lakeside's manufacturing capabilities including the new heat treat and finishing operations in Alabama are a great complement to our existing pipe business," said Frank Riddick, chief executive officer of JMC Steel Group. "We are excited about the synergies generated by this acquisition and look forward to leveraging our combined strengths in the market."
About JMC Steel Group
JMC Steel Group is the largest independent steel tubular manufacturer in North America, producing more than two million tons of pipe and tubular products a year and employing more than 1,800 people. It operates 12 manufacturing facilities in the United States and Canada and is a market leader in steel hollow structural sections (HSS), standard pipe and electrical conduit. Its companies have been recognized for their short production cycle times, in-house coating capabilities and proprietary products. The JMC Steel Group is headquartered in Chicago, Ill., and its two largest companies, Atlas Tube and Wheatland Tube, market products under their brand names.
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