Transaction will create Canada's ultimate authority in sports and
Canada's largest sports retailer with more than 1,000 retail sports
Strong financial and strategic fit to accelerate Canadian Tire's growth
in a core category
Forzani Board of Directors unanimously supports transaction
TORONTO, May 9 /CNW/ - Canadian Tire Corporation, Limited (TSX: CTC)
(TSX: CTC.A) ("Canadian Tire") today announced that it has entered into
a Support Agreement with The Forzani Group Ltd. ("FGL") for Canadian
Tire to acquire all of the outstanding shares of FGL for $26.50 per
share in cash. The transaction will establish Canadian Tire as Canada's
ultimate authority in sports, with more than 1,000 combined retail
sports outlets across the country.
FGL is Canada's leading sporting goods retailer with over 500 retail
outlets, annual revenue of approximately $1.4 billion and some of the
country's most recognized sports brands such as Sport Chek and Sports
Experts. More than 70% of FGL's sales are in athletic apparel and
footwear, with the balance of sales in sporting hard goods that
complement Canadian Tire's assortment with very little overlap.
Canadian Tire will also gain from having access to an expanded customer
base with FGL's retail banners, including mall-based shoppers and the
important 18-35 year old customer segment.
"Canadian Tire is today strengthening its credibility as Canada's
ultimate authority in sports," said Stephen Wetmore, President and CEO
of Canadian Tire. "The acquisition of retail banners like Sport Chek
and Sports Experts is a natural extension of our core sports business.
"Canadian Tire is on offence," continued Wetmore. "This transaction
will bring us to over 1,000 retail sports outlets across Canada,
allowing us to serve nearly every need of every Canadian who plays or
loves sports at every level."
"The businesses of Canadian Tire and Forzani are complementary," said
Bob Sartor, CEO, Forzani Group Ltd. "The transaction has the unanimous
support of the Forzani Board of Directors. It creates significant value
for our shareholders and positions our business for accelerated growth
under a company that shares our culture and values."
The offer to FGL shareholders of $26.50 per share represents a 45%
premium based on a 10-day volume weighted average price as of May 6,
2011. The offer was made pursuant to a Support Agreement signed
between Canadian Tire and FGL and received unanimous support of the FGL
Board of Directors. Terms of the Support Agreement provide for, among
other things, a non-solicitation covenant on the part of FGL (subject
to a "fiduciary out" provision), a right in favour of Canadian Tire to
match any superior proposal and a payment of $15 million to Canadian
Tire if this transaction does not proceed in certain circumstances.
Canadian Tire currently holds approximately 4% of FGL's shares.
The deal is expected to close in Q3, 2011 and is expected to be
accretive to earnings in 2011. In addition, Canadian Tire expects to
realize significant cost synergies by leveraging the strengths of both
organizations, including supply chain, marketing and global sourcing.
Annualized savings are expected to be about $35 million, with
approximately $25 million of annualized savings realized in 2012.
Canadian Tire's financial capacity to undertake this transaction is
strong. The offer is not subject to a financing condition. It is
anticipated the $771 million acquisition (excluding FGL debt and shares
already owned by Canadian Tire) will be financed with $500 million of
cash on hand and the balance with short-term financing. Canadian Tire
expects to return to pre-acquisition leverage levels within 18 to 24
months of closing the transaction.
Canadian Tire intends to operate the FGL retail banners as a separate
business unit, similar to Mark's and Canadian Tire Financial Services.
The offer is conditional upon tendering of shares representing a minimum
of 66 2/3 per cent of the outstanding FGL shares on a fully-diluted
basis. The transaction is also subject to relevant regulatory approval
(including the Competition Bureau), third-party consents and other
customary conditions. A Circular containing the terms of the offer will
be mailed by Canadian Tire to FGL shareholders, together with FGL
Directors' Circular in accordance with applicable law. These documents
will also be available on the SEDAR website at www.sedar.com, www.corp.canadiantire.ca and www.forzanigroup.com.
FGL's Board of Directors, after receiving the recommendation of a
Special Committee of the Board, has unanimously determined that
Canadian Tire's offer is fair to shareholders and that it is in the
best interests of the company to support and facilitate the offer. The
FGL Board of Directors has received a fairness opinion from its
financial advisor stating that the consideration to be received
pursuant to the offer is fair from a financial point of view to the
shareholders of FGL. Accordingly, the Board of Directors of FGL is
recommending to its shareholders to tender their shares to the offer.
In addition, Canadian Tire has entered into lock-up agreements with
each of FGL's directors and senior officers pursuant to which they have
agreed to tender their shares to the offer.
Investment Community Conference Call Details
Canadian Tire will conduct a conference call to discuss information
included in this news release and related matters at 8:30am EDT on
Monday, May 9, 2011. The dial-in number is 1-888-231-8191 for U.S. or
Canada or 647-427-7450 for outside North America, conference ID #
64437816. The conference call will be available simultaneously and in
its entirety to all interested investors and the news media through a
webcast at http://corp.canadiantire.ca/EN/investors, and will be available through replay at this website for 12 months.
BMO Capital Markets acted as financial advisor to Canadian Tire. Legal
counsel was provided to Canadian Tire by Goodmans LLP and Stikeman
This document contains forward-looking information that reflects
management's current expectations related to matters related to the
proposed acquisition. Forward-looking statements are provided for the
purposes of providing information about management's current
expectations and plans and allowing investors and others to get a
better understanding of our financial position, results of operation
and operating environment. Readers are cautioned that such information
may not be appropriate for other circumstances.
All statements other than statements of historical facts included in
this document may constitute forward-looking information, including but
not limited to, statements concerning the expected benefits of the
proposed acquisition, such as efficiencies, cost savings, enhanced
revenue and cash flows, growth potential, market profile and financial
strength; the competitive ability and position of Canadian Tire
following the acquisition; the expected timing of completion of the
acquisition; and management's expectations relating to possible or
assumed future prospects and results, our strategic goals and
priorities, our actions and the results of those actions and the
economic and business outlook for us. Often but not always,
forward-looking information can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "believe",
"estimate", "plan", "could", "should", "would", "outlook", "forecast",
"anticipate", "foresee", "continue" or the negative of these terms or
variations of them or similar terminology. The forward-looking
information contained herein is based on the reasonable assumptions,
estimates, analysis and opinions of management made in light of its
experience and perception of trends, current conditions and expected
developments, as well as other factors that management believes to be
relevant and reasonable at the date that such statements are made.
By its very nature, forward-looking information requires us to make
assumptions and is subject to inherent risks and uncertainties, which
give rise to the possibility that Canadian Tire's assumptions may not
be correct and that Canadian Tire's expectations and plans will not be
achieved. Although Canadian Tire believes that the forward-looking
information in this document is based on information and assumptions
that are current, reasonable and complete, this information is
necessarily subject to a number of factors that could cause actual
results to differ materially from management's expectations and plans
as set forth in such forward-looking information for a variety of
reasons. Some of the factors - many of which are beyond our control and
the effects of which can be difficult to predict - include (a) the
failure to obtain, on a timely basis or otherwise, required approvals
of regulatory agencies (including the terms of such approvals); (b) the
risk that a condition to completion of the acquisition may not be
satisfied; (c) the possibility that the anticipated benefits and
synergies from the proposed acquisition cannot be realized or may take
longer to realize than expected; (d) the ability of Canadian Tire and
FGL to retain and attract key personnel (including franchisees) and
maintain relationships with customers, suppliers and other business
partners, as well as our financial arrangements with such parties; (e)
the risk that credit ratings of Canadian Tire may be different than
expected; (f) credit, market, currency, operational, liquidity and
funding risks generally, including changes in economic conditions,
interest rates or tax rates; and (g) risks and uncertainties relating
to information management, technology, supply chain, product safety,
changes in law, competition, seasonality, commodity price and business.
We caution that the foregoing list of important factors and assumptions
is not exhaustive and other factors could also adversely affect our
results. Investors and other readers are urged to consider the
foregoing risks, uncertainties, factors and assumptions carefully in
evaluating the forward-looking information and are cautioned not to
place undue reliance on such forward-looking information.
For more information on the risks, uncertainties and assumptions that
could cause Canadian Tire's actual results to differ from current
expectations, please refer to the "Risk Factors" section of our Annual
Information Form for fiscal 2010 and our 2010 Management's Discussion
and Analysis, as well as Canadian Tire's other public filings,
available at www.sedar.com and at www.corp.canadiantire.ca.
The forward-looking statements and information contained herein are
based on certain factors and assumptions as of the date hereof.
Canadian Tire does not undertake to update any forward-looking
information, whether written or oral, that may be made from time to
time by it or on its behalf, to reflect new information, future events
or otherwise, unless required by applicable securities laws.
ABOUT CANADIAN TIRE CORP.
Canadian Tire Corporation, Limited (TSX:CTC.a) (TSX:CTC) is one of
Canada's most-shopped general retailers, offering everyday products and
services to Canadians through more than 1,200 retail and gasoline
outlets from coast-to-coast. Our primary retail business categories -
Automotive, Living, Fixing, Playing and Apparel - are supported and
strengthened by our Financial Services division, which offers such
products and services as credit cards, in-store financing, product
warranties, and insurance. Nearly 57,000 people are employed across the
Canadian Tire enterprise, which was founded in 1922 and remains one of
Canada's most recognized and trusted brands.
SOURCE Canadian Tire Corporation, Limited
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