CALGARY, AB,(Marketwired) -Canexus Corporation is pleased to announce that it has entered into an arrangement agreement with Superior Plus Corp. ("Superior"), pursuant to which Superior has agreed to acquire all of the issued and outstanding common shares of Canexus ("Canexus Shares") for a value at announcement of approximately $1.70 per Canexus Share (the "Transaction), payable in common shares of Superior ("Superior Shares"). Pursuant to the Arrangement Agreement, Canexus shareholders will receive 0.153 (the "Exchange Ratio") of a Superior Share for each Canexus Share, representing the equivalent of $1.70 per Canexus Share on the 20-day volume weighted-average-price ("VWAP") of Superior Shares. This represents a premium of 36.5% based on the 20-day VWAP of the Superior Shares and the Canexus Shares on The Toronto Stock Exchange ("TSX") as of October 5, 2015 and a premium of 47.6% based on the closing prices of the Superior Shares and the Canexus Shares on the TSX on October 5, 2015.
Canexus has a suite of high quality chemical manufacturing assets. The foundation of the company is its efficient low-cost operations, quality service and a commitment to Responsible Care through safe, sustainable operating practices.
Canexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper, water treatment and oil and gas industries. Our four plants in Canada and two at one site in Brazil are reliable, low-cost, strategically-located facilities that capitalize on competitive electricity costs and transportation infrastructure to minimize production and delivery costs.
In response to inquiries received, Canexus entered into confidential discussions with a number of parties for the sale of the Corporation or certain assets. A Special Committee was created and financial and legal advisors were engaged to evaluate all of Canexus' strategic options. After careful consideration, the Transaction with Superior was determined to be in the best interests of Canexus and the most attractive option for the Corporation and its stakeholders.
Both Canexus and Superior have a solid operational track record and a presence within the North American and South American chemicals market. Together, the combined companies will be more efficient and productive. Both corporations have identified opportunities for the combined business to reduce costs by realizing significant synergies through increased scale, reduced overhead and greater efficiencies. The combined entity will also have greater operational flexibility and a stronger balance sheet to provide improved optionality for future growth through expansion.
"The Board of Directors believes Canexus shareholders are offered the greatest opportunity to recognize the long-term value inherent in Canexus' assets through a better capitalized combined company, with improved economies of scale, cost synergies and stronger balance sheet," stated Hugh Fergusson, Chair of the Board of Directors of Canexus. "By combining the assets and expertise of two well managed organizations, we are creating a strategic entity that will be better positioned to compete, to manage risk and to leverage growth opportunities to create shareholder value."
The Arrangement Agreement
The Arrangement Agreement includes customary provisions relating to non-solicitation, fiduciary-outs for Canexus with respect to financially superior alternate proposals and Superior's right to match such proposals. The Arrangement Agreement provides for the payment by Canexus of a $25 million termination fee if the Arrangement Agreement is terminated in certain specified circumstances and for the payment by Superior of a reverse termination fee of $25 million if the Arrangement Agreement is terminated in certain specified circumstances.
The Transaction is subject to customary conditions for a transaction of this nature, which include court and regulatory approvals, and the approval of 66 2/3 percent of the votes cast by Canexus shareholders represented in person or by proxy at a special meeting of Canexus shareholders to be called to consider the Transaction (the "Meeting").
In accordance with the Arrangement Agreement, Canexus intends to suspend its dividend reinvestment plan (the "DRIP") and will provide the requisite notice to the plan agent and DRIP participants in due course. The final dividend eligible for participation in the DRIP will be the distribution payable October 15, 2015 to holders of record September 30, 2015.
An information circular regarding the Transaction is expected to be mailed to shareholders of Canexus in the coming weeks with the Meeting expected to take place in December 2015. Closing of the Transaction will depend on the timing of regulatory approvals, among other customary items.
A copy of the Arrangement Agreement will be filed on Canexus' SEDAR profile and will be available for viewing at www.sedar.com.
Financial Advisors and Fairness Opinions
CIBC World Markets and The Valence Group are acting as financial advisors to the Board of Directors of Canexus and have each provided a fairness opinion to the board of directors of Canexus that, as of October 5, 2015 and 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.
Recommendation of the Board of Directors
After considering, among other things, the Fairness Opinions, the recommendation of the Special Committee of the Board of Directors of Canexus, the results of the strategic review process conducted by the company and its advisors and other relevant matters, the Board of Directors of Canexus has unanimously determined that the Transaction is in the best interests of Canexus and unanimously recommends that the Canexus shareholders vote in favour of the Transaction.
All directors and officers of Canexus have entered into voting support agreements with Superior pursuant to which they have agreed, among other things, to vote their Canexus Shares in favour of the Transaction, subject to certain permitted exceptions.
North American Sodium Chlorate
Canexus' North American Sodium Chlorate business posted solid operational performance in the Q3/15. We experienced high demand from our pulp customers during the quarter; similar to Q2/15. This business unit continues to benefit from the devaluation of the Canadian dollar relative to the US dollar, with approximately two-thirds of our sales volume exported to the US.
North American Chlor-alkali
NA chlorine demand is up slightly over the prior year year-to-date. PVC production is steady and water treatment demands have yet to encounter any material seasonal downturn. Caustic demand is stable, driven by pulp and paper and exports.
As expected, HCl sales volume and prices showed continued softness through Q3/15. However, we believe the demand for hydrochloric acid appears to have reached floor levels as the decline in price has moderated considerably. We estimate that demand from the oil and gas sector continues to be down approximately 35 percent due to a decrease in global oil prices resulting in reduced drilling activity and, consequently, less demand for acid in fracturing.
During the quarter, a compressor at our North Vancouver plant shut down due to mechanical failure. An investigation is underway to determine the cause of the failure and whether the event constitutes a recoverable event under Canexus' insurance policies. If the event is deemed to be recoverable, which the investigation would suggest to-date, we have the ability to be reimbursed, subject to deductibles, for economic loss and cost of repair. Capacity at the plant will be reduced by 9% while the compressor is shutdown. An update will be provided in our Q3/15 financial and operational results.
Brazil's operations continue to be stable with our primary customer running at high rates resulting in strong demand for our products which are sold under a long-term, cost plus, fixed US dollar margin contract. This business is also experiencing positive uplift from the devaluation of the Canadian dollar, due to our contract being earned in US dollars, and continuing stable merchant chlorine sales.
Canexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries. Our four plants in Canada and two at one site in Brazil are reliable, low-cost, strategically located facilities that capitalize on competitive electricity costs and transportation infrastructure to minimize production and delivery costs. Canexus targets opportunities to maximize shareholder returns and delivers high-quality products to its customers and is committed to Responsible Care® through safe operating practices. Canexus common shares (CUS) and debentures (Series III - CUS.DB.A; Series IV - CUS.DB.B; Series V - CUS.DB.C; Series VI - CUS.DB.D) trade on the Toronto Stock Exchange.