Unsolicited insider bid is timed to take advantage of turbulence in the
capital markets and cyclical trough in pulp prices and deprives
minority shareholders of significant intrinsic value in the NBSK pulp
business, electricity production and profitable long-term agreement in
the RBK segment
MONTREAL, Jan. 3, 2012 /CNW Telbec/ - Fibrek Inc. ("Fibrek" or the
"Company") announced today that its Board of Directors (the "Board")
filed its Directors' Circular on December 30, 2011 recommending that
Fibrek shareholders REJECT the AbitibiBowater Inc. (doing business as Resolute Forest Products)
("Abitibi") unsolicited insider bid (the "Insider Bid') made for all
issued and outstanding common shares of the Company. The Board also
recommended that any shareholders who have tendered their common shares
WITHDRAW them immediately.
The Board has thoroughly reviewed Abitibi's Insider Bid to determine the
course of action that it believes is in the best interests of Fibrek's
shareholders and other stakeholders. Its formal recommendation and the
reasons supporting such recommendation are outlined in its Directors'
Circular filed on December 30, 2011, as contemplated by securities
"Abitibi's insider bid conveniently ignores probable and material new
streams of operating income. It deprives shareholders of significant
intrinsic long-term value associated with our growth prospects," stated
Pierre Gabriel Côté, President and Chief Executive Officer of Fibrek.
"In addition to the 9.5-megawatt increase in capacity already announced,
Management is fully engaged in securing a power purchase agreement
("PPA") under the Government of Québec's new cogeneration program
announced on December 20, 2011 for up to the currently installed
33-megawatt capacity at the St-Félicien Mill. If the application is
successful, the PPA is expected to generate incremental EBITDA of
approximately $16 million in the event that we secure a power purchase
agreement for all the mill's available megawatts. In addition, Fibrek
expects to generate an average of approximately $7 million per year of
additional EBITDA through a new long-term take-or-pay cost-plus
agreement with a major tissue producer for the supply of RBK pulp.
"The insider bid deprives minority shareholders of the opportunity to
participate in the upside of Fibrek's pulp business and other earnings
streams. It is also timed to take advantage of turbulence affecting
the capital markets. The price of our common shares as well as pricing
in the pulp and paper markets were near their lowest level of the year
at the time the intention to make the insider bid was announced by
Abitibi. Therefore, the so-called 39% premium is illusory. Based on the
six-month weighted-average trading price of our common shares, the
premium being offered to shareholders is 0%," concluded Mr. Côté.
"We have a responsibility to our shareholders and that is exactly why we
recommend that they REJECT this insider bid. We are committed to
protecting our shareholders and are doing everything in our power to
ensure that Fibrek shareholders are not pressured into selling their
common shares at a price that is inadequate," stated Hubert T. Lacroix,
Chairman of the Board of Directors of Fibrek.
"We have already received an opinion from our financial advisors, TD
Securities, concluding that the offer is inadequate from a financial
point of view and we have retained the services of Canaccord Genuity
Corp. to prepare a formal valuation of Fibrek's common shares. We are
confident that the results of that valuation will confirm that the
intrinsic value of Fibrek's common shares is not reflected in Abitibi's
opportunistic and inadequate insider bid," concluded Mr. Lacroix.
Reasons for Rejecting the Insider Bid
The Board urges shareholders to REJECT the Insider Bid and NOT TENDER their common shares for a number of reasons detailed in the Directors'
Circular including the following:
The Insider Bid is opportunistic.
The Insider Bid comes at a time which takes advantage of the recent
turbulence observed in capital markets and a cyclical trough in pulp
prices. Abitibi launched its unsolicited Insider Bid when Fibrek's
common shares were trading near a 52-week low at a time of significant
uncertainty, high volatility and general pressure in the stock markets
thereby failing to capture the true value of Fibrek for its
shareholders. In addition, such unfavourable macroeconomic conditions
coincided with a cyclical decline in pulp prices in general, and NBSK
pulp in particular. Third party forecasters and market observers have
forecast that prices will resume their upward trend in the first half
of 2012. The Board believes that Fibrek is uniquely positioned to
capitalize on favourable demand and pricing trends and that the Insider
Bid does not properly reflect the value of this imminent improvement.
Finally, the Insider Bid was made during the holiday season to hinder
Fibrek in its response.
The Insider Bid fails to compensate Fibrek shareholders for the value of
Fibrek's attractive asset base and growth prospects.
The Insider Bid does not provide adequate consideration for the unique
value of our NBSK pulp and the strategic importance of the
Saint-Félicien Mill. In addition to the production of NBSK pulp, the
Saint-Félicien Mill has the ability to produce quantities of renewable
electricity at low cost. Fibrek will also sell 9.5 megawatts (MW) per
year of electrical power co-generated by burning biomass to
Hydro-Québec, starting in December 2012, pursuant to a power supply
agreement signed on February 12, 2010. Management believes that the
Saint-Félicien Mill also qualifies as a renewable energy producer under
the Government of Québec's new program to purchase electric power
produced by cogeneration announced in October 2011. As a result, the
Saint-Félicien Mill, whose existing green energy installed capacity
currently stands at approximately 33 MW, could generate an incremental
EBITDA of approximately $16 million in the event Fibrek were to secure
a power purchase agreement for all of the mill's available megawatts,
without any additional capital expenditure required.
The Insider Bid also significantly undervalues Fibrek's RBK segment. In
accordance with its strategic plan, Fibrek has signed a new long-term
agreement on April 11, 2011 with a major tissue producer to supply, on
an exclusive basis, 90,000 tonnes per year of RBK pulp under a
cost-plus agreement, allowing both RBK pulp mills to base-load their
business and eliminate low margin export sales. Deliveries in
connection with this contract are scheduled to start in the fourth
quarter of 2012. This take-or-pay contract will also (i) give the
opportunity to reduce freight costs, (ii) improve wastepaper mix usage,
and (iii) reduce exposure to wastepaper price volatility. Based on a
study completed by an external consulting firm, Management believes
that the additional EBITDA generated by this contract will be, on
average, approximately $7 million per year.
The Insider Bid comes at a turning point in the execution of Fibrek's
strategic plan. The Board and Management are confident that, given the
strategic and operational actions it has already undertaken Fibrek can
continue to realize upon the opportunities available to it and deliver
more value to Shareholders than that proposed by the Insider Bid.
The value of the Insider Bid is uncertain and does not compensate Fibrek
shareholders adequately for the risks and uncertainties relating to
Abitibi's business, as shares of Abitibi constitute a substantial part
of the consideration offered pursuant to the Insider Bid.
Shareholders are reminded that demand for Abitibi's core newsprint
(representing 38% of Abitibi's revenue for the last twelve months) and
coated and uncoated commercial printing papers (also representing 38%
of Abitibi's revenue for the last twelve months) has weakened
significantly over the last decade. Abitibi states in its Insider Bid
Circular that third-party forecasters indicate that these declines may
continue in the future. You should carefully review the section
entitled "Risk Factors - Risk Factors relating to Resolute's Business"
of the Insider Bid Circular before taking any action in respect of your
common shares. In comparison, global demand for pulp and, in
particular, demand for the high-quality softwood kraft pulp produced at
the Saint-Félicien Mill, is expected to continue to grow. The Board
believes that Fibrek's common shares are comparatively more attractive
as a long-term investment than Abitibi's shares.
In addition, all of Fibrek's directors and officers have rejected the
Insider Bid and will not tender their shares to the Insider Bid.
Shareholders are also reminded that the Board has undertaken a rigorous
process in order to ensure that all shareholders are treated fairly by
Abitibi's unsolicited Insider Bid. As part of such process and for the
reasons disclosed in a press release dated December 19, 2011 your Board
has appointed an independent committee which has retained Canaccord
Genuity Corp. as independent valuator to prepare a formal valuation of
the Fibrek common shares.
Fibrek was at a turning point in the implementation of its strategic
plan when the Insider Bid was announced. A third party valuation will
attribute a fair value to Fibrek's growth prospects, including expected
new streams of operating income from the sale of electricity at the
Saint-Félicien Mill and the cost-plus agreement in the RBK segment.
Shareholders are advised that the information to be contained in the
formal valuation could materially affect their decision to accept or
reject the Insider Bid and as such, the Board urges Fibrek's
shareholders not to take any action before the formal valuation has
been completed and publicly disclosed.
Important Shareholder Information
The Board's recommendation to Fibrek shareholders that they REJECT the Insider Bid and DO NOT TENDER their common shares, as well as a more detailed discussion of the
reasons for rejecting the Insider Bid and the inadequacy opinion
provided by Fibrek's financial advisor, are contained in the Directors'
The Directors' Circular is available on SEDAR at www.sedar.com and has been mailed to shareholders on December 30, 2011. It is also
available at www.fibrek.com. Shareholders are advised and encouraged to read the Directors'
Circular in its entirety, as it contains important information
regarding the Board's recommendation to REJECT Abitibi's Insider Bid.
Questions and requests for assistance or any other inquiries regarding
the Insider Bid may be directed to Fibrek's information agent, Phoenix
Advisory Partners, at 1-800-398-1129 (North American Toll Free) or via
e-mail at firstname.lastname@example.org.
Fibrek (TSX: FBK) is a leading producer and marketer of high-quality virgin and recycled
kraft pulp. The company operates three mills located in Saint-Félicien,
Québec, Fairmont, West Virginia, and in Menominee, Michigan with a combined annual production capacity of 760,000
tonnes. Fibrek has approximately 500 employees. The Saint-Félicien mill
provides northern bleached softwood kraft pulp (product known as NBSK
pulp) to various sectors of the paper industry mainly in Canada, the
United States and Europe, for use in the production of specialized
products. The Fairmont and Menominee mills manufacture air-dried
recycled bleached kraft pulp (product known as RBK pulp) and primarily
supply manufacturers of fine uncoated paper, tissue paper for
commercial and industrial uses, and coated paper in the United States.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This press release contains "forward-looking statements" within the meaning of applicable securities laws. These statements can be
identified by expressions of belief, expectation or intention, as well
as those statements that are not historical facts and include
statements concerning Fibrek's future outlook, business strategy,
plans, expectations, results or actions, or the assumptions underlying
any of the foregoing. Forward-looking statements can generally be
identified by words such as "may", "should", "would", "could", "will",
"intend", "plan", "anticipate", "believe", "estimate", "expect",
"outlook" and similar expressions. These statements are based on
information currently available to Fibrek's management and on the
current assumptions, intentions, plans, expectations and estimates of
Management regarding Fibrek's future growth, results of operations,
performance, business prospects and opportunities and ability to
attract and retain customers as well as the economic environment in
which it operates. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors which could cause actual
results of Fibrek to differ materially from the conclusion, forecast or
projection stated in such forward-looking statements. These risks,
uncertainties and other factors include, but are not limited to:
actions taken by Abitibi, actions taken by shareholders of Fibrek in
respect of the Insider Bid, the possible effect of the Insider Bid on
Fibrek's business, the qualification of Fibrek under the new Québec
government cogeneration program, general economic conditions, pulp
prices and sales volume, exchange rate fluctuations, cost and supply of
wood fibre, wastepaper and other raw materials, pension contributions,
competitive markets, dependence upon key customers, increased
production capacity, equipment failure, disruptions of production,
capital requirements and other factors referenced in Fibrek's
continuous disclosure filings which are available on SEDAR at www.sedar.com. Readers should not place undue reliance on these forward-looking
statements. These forward-looking statements are made as of the date of
this press release and, except as required by applicable securities
laws, Fibrek assumes no obligation to update or revise them to reflect
new events or circumstances.
SOURCE FIBREK INC.
For further information:
| Investor Relations: || Patsie Ducharme || 514 871-0550 |
| || Vice President and Chief Financial Officer |
| || || |
| Media Relations: || Roch Landriault || 514 843-2345 |
| || NATIONAL Public Relations |
| || || |
| || Dany Paradis || 514 871-0550 |
| || Vice President, Change Management and Supply Chain |