- 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 (TSX: CHE.UN)
("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 (TSX: CUS) ("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.
Advisors
BMO Capital Markets is acting as Chemtrade's exclusive financial advisor. Osler, Hoskin &
Harcourt LLP is acting as Chemtrade's legal counsel. Bayfield Strategy, Inc. is acting as Chemtrade's strategic communications
advisor.
About Chemtrade
Chemtrade operates a diversified business providing industrial chemicals and services to customers in North America and around the world. Chemtrade is one of North America's
largest suppliers of sulphuric acid, spent acid processing services, inorganic coagulants for water treatment, sodium nitrite,
sodium hydrosulphite and phosphorus pentasulphide. Chemtrade is a leading regional supplier of sulphur, sodium chlorate, liquid
sulphur dioxide, potassium chloride, and zinc oxide. Additionally, Chemtrade provides industrial services such as processing
by-products and waste streams.
Important Notice
This news release does not constitute an offer to buy or the solicitation of an offer to sell any of the securities of Chemtrade
or Canexus.
Non-IFRS and Non-U.S. GAAP Measures
This news release makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS,
do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by
other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further
understanding of operations from management's perspective. Accordingly, non-IFRS measures should never be considered in isolation
nor as a substitute for analysis of financial information reported under IFRS. Specifically, this press release discloses Adjusted
Cash Operating Profit, which is a non-IFRS measure used by Canexus. Adjusted Cash Operating Profit is a non-IFRS measure used by
Canexus and adjusts Cash Operating Profit for certain items which have not been disclosed. Canexus defines Cash Operating Profit as
Operating Profit before depreciation and amortization (which is included in cost of sales and general and administrative expense)
and non–cash share–based compensation expense (which is included in cost of sales, distribution, selling and marketing expense, and
general and administrative expense). Cash Operating Profit represents the cash contribution of product sales and service revenues
after taking into consideration direct costs to produce products and deliver services, distribution, selling and marketing expense
and general and administrative expense.
Caution Regarding Forward-Looking Statements
Certain statements contained in this news release constitute forward-looking information within the meaning of certain
securities laws, including the Securities Act (Ontario). Forward-looking information can be
generally identified by the use of words such as "anticipate", "continue", "estimate", "expect", "expected", "intend", "may",
"will", "project", "plan", "should", "believe" and similar expressions. Specifically, forward-looking information in this news
release includes statements respecting the expected liquidity and certainty of value for Canexus shareholders and the timing and
expected completion date of the Arrangement. Forward-looking statements in this news release describe the expectations of the Fund
and its subsidiaries as of the date hereof. These statements are based on assumptions and involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such
forward-looking statements for a variety of reasons, including without limitation that the conditions of the Arrangement, such as
receipt of shareholder and regulatory approvals, may not be satisfied or, where applicable, waived by Chemtrade, potential adverse
reactions or changes to business relationships resulting from the announcement, pendency or completion of the Arrangement,
competitive responses to the announcement or completion of the Arrangement, costs and difficulties related to the integration of
Canexus' businesses and operations with Chemtrade's businesses and operations if the Arrangement is completed, the inability to
obtain, or delays in obtaining, cost savings and synergies from the Arrangement, uncertainties as to the impact of the completion
of the Arrangement on Chemtrade's earnings or cash flows, unexpected costs, liabilities, charges or expenses resulting from the
Arrangement, litigation relating to the Arrangement, the inability to retain key personnel, any changes in general economic and/or
industry-specific conditions, as well as the risks and uncertainties detailed under the "Risk Factors" section of the Fund's latest
Annual Information Form and the "Risks and Uncertainties" section of the Fund's most recent Management's Discussion &
Analysis.
Although the Fund believes the expectations reflected in these forward-looking statements and the assumptions upon which they
are based are reasonable, no assurance can be given that actual results will be consistent with such forward-looking statements,
and they should not be unduly relied upon.
The Fund disclaims any intention or obligation to update any forward-looking information even if new information becomes
available, as a result of future events or for any other reason, except as required by law. The forward-looking information
contained herein are expressly qualified in their entirety by this cautionary statement.
Further information can be found in the disclosure documents filed by Chemtrade Logistics Income Fund with the securities
regulatory authorities, available at www.sedar.com.
SOURCE Chemtrade Logistics Income Fund
