Chemtrade enters into agreement to acquire Canexus for $1.65 cash per share in a board-supported plan of arrangement
- Chemtrade and Canexus reach agreement on an arrangement transaction with unanimous board support.
- Canexus shareholders to receive increased consideration of $1.65 in cash per Common Share, representing a 33% premium over the closing price of $1.24 on September 13, 2016 .
- Shareholders accounting for approximately 20% of Canexus' outstanding shares, including all Canexus directors and officers and its largest shareholder Stirling Global Value Fund Inc., have entered into binding agreements to vote their shares in favour of the arrangement agreement.
TORONTO , Dec. 15, 2016 /CNW/ - Chemtrade Logistics Income Fund (CHE-UN.TO) ("Chemtrade" or the "Fund") is pleased to announce that an indirect wholly-owned subsidiary of the Fund has entered into an arrangement agreement (the "Arrangement Agreement") to acquire all of the issued and outstanding common shares (the "Common Shares") of Canexus Corporation (CUS.TO) ("Canexus") for consideration of $1.65 in cash per share, pursuant to a court-approved plan of arrangement (the "Arrangement"). Canexus' board of directors (the "Canexus Board") unanimously recommends that Canexus shareholders vote in favour of the Arrangement.
"We are very pleased to have reached an agreement with Canexus resulting in a mutually beneficial outcome for Canexus shareholders and Chemtrade unitholders. The successful completion of the Arrangement will strengthen and expand Chemtrade's existing platform while further diversifying our North American operations and allowing us to enter attractive South American markets," said Mark Davis , Chief Executive Officer of Chemtrade.
The Arrangement
Pursuant to the Arrangement, Canexus shareholders will receive $1.65 in cash per Common Share. This represents a 33% premium to the closing price of the Common Shares on the TSX on September 13, 2016 (the last trading day prior to the public announcement by Chemtrade of its initial proposal to the Canexus Board) and an increase of 10% relative to Chemtrade's offer of $1.50 in cash per Common Share announced on October 3, 2016 . The Arrangement values Canexus at an enterprise value of approximately $900 million , which implies a multiple of Canexus' 2016 Adjusted Cash Operating Profit (ACOP) of 8.6x based on the mid-point of Canexus' 2016 ACOP guidance range of $100 - $110 million .
The Arrangement provides Canexus shareholders with immediate liquidity, certainty of value and is not subject to a financing condition. Chemtrade has sufficient capital to fund the full consideration payable under the Arrangement from available cash resources and from firm committed financing.
Chemtrade intends to terminate its previously commenced offer to acquire Canexus' Common Shares prior to its expiry on January 18, 2017 in favour of pursuing the Arrangement. Any Common Shares tendered under Chemtrade's offer will be returned to the holder upon termination.
Canexus Support of the Arrangement
The Canexus Board, after consultation with its financial and legal advisors, has unanimously determined that the Arrangement is fair to Canexus shareholders and is in the best interests of Canexus. The Canexus Board unanimously recommends that Canexus shareholders vote in favour of the Arrangement. Each of CIBC Capital Markets and The Valence Group have provided a fairness opinion to the board of directors of Canexus that, subject to the assumptions, limitations and qualifications set out in such fairness opinion, the consideration to be received by Canexus shareholders in connection with the Arrangement is fair, from a financial point of view, to such Canexus shareholders.
All of the directors and officers of Canexus and certain other Canexus shareholders, including its largest shareholder Stirling Global Value Fund Inc., have entered into agreements with Chemtrade pursuant to which, among other things, they have agreed to vote all of the Common Shares owned or controlled by them in favour of the Arrangement. Those shares represent approximately 20% of the Common Shares.
Key Details of the Arrangement Agreement
The Arrangement will be considered by Canexus shareholders at a special meeting expected to be held in early February 2017 , and will require the approval of at least 66 2/3% of the votes cast by Canexus shareholders at the meeting. It is expected that Canexus will prepare and mail a management information circular to shareholders in early January.
The Arrangement Agreement provides for, among other things, customary non-solicitation covenants on the part of Canexus and a right in favour of Chemtrade to match any unsolicited superior proposal. If Chemtrade does not exercise its right to match, Chemtrade would receive a termination fee of $25 million from Canexus in the event the Arrangement Agreement is terminated as a result of a superior proposal. Canexus could receive an expense reimbursement of $8 million from Chemtrade if the Arrangement is not completed solely due to the failure to obtain regulatory approvals.
The Arrangement will also be subject to a number of other customary conditions, including court and regulatory approvals, as set forth in the Arrangement Agreement.
Subject to the receipt of all required regulatory approvals, Chemtrade expects the transaction to close, in the first quarter of 2017. Shareholders are encouraged to review the detailed information to be contained in the Canexus management information circular. The management information circular, a copy of the Arrangement Agreement, the plan of arrangement, and related documents will be filed with Canadian securities regulators and will be available at www.sedar.com.