/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES/
CALGARY, Oct. 21 /CNW/ - Canyon Services Group Inc. ("Canyon" or the "Company") (TSX: FRC) is pleased to announce that it has received the written consent of a majority of its shareholders (approximately 66% of the Common Shares to date) to approve certain aspects of its previously announced bought deal prospectus financing and concurrent private placement, which are scheduled to close on October 28, 2009 (the "Closing").
Further to its press releases dated October 6, 2009, Canyon confirms that it has received conditional listing approval from the Toronto Stock Exchange (the "TSX") for the listing of an additional 10,000,000 common shares ("Common Shares") to be issued on an underwritten "bought deal" basis (the "Offering"). Additionally, Canyon has received conditional listing approval from the TSX with respect to the issuance of 15,000,000 Common Shares to be issued concurrently with the Offering to the limited partnerships comprising ARC Energy Fund 6 ("ARC Fund") on an underwritten private placement basis (the "Concurrent Private Placement").
The Common Shares to be issued under each of the Offering and the Concurrent Private Placement are being offered at a price of $2.00 per Common Share, which represents a discount of approximately 9.3% to the weighted average trading price of the Common Shares on the TSX for the five trading days immediately preceding the announcement of the Offering and the Concurrent Private Placement and a 14.5% percent discount to the trading price of the Common Shares on the TSX on October 5, 2009, the last trading day prior to announcement of the Offering and the Concurrent Private Placement.
Pursuant to the Offering, the Common Shares have been offered in all provinces of Canada (except Quebec) by way of a short form prospectus and by way of private placement in the United States pursuant to exemptions from the registration requirements pursuant to Rule 144A and/or Regulation D of the United States Securities Act of 1933, as amended. A receipt for the final short form prospectus in respect of the Offering was issued by the Alberta Securities Commission on October 20, 2009.
Proceeds of the Offering and Concurrent Private Placement will be used to fund the Company's capital program, to temporarily reduce bank indebtedness and for general corporate purposes. Canyon's continued expansion into deeper segments of the pressure pumping market with the successful completion of large, horizontal, multi-stage fracturing programs in the Montney area of the Western Canada Sedimentary Basin has resulted in increased demand for Canyon's services and the need to expand its pressure pumping fleet. Canyon's expanded capital program increases the Company's horsepower capabilities from 26,000 hhp to over 70,000 hhp, which management believes positions Canyon as one of the leaders in providing pressure pumping services to Canada's unconventional natural gas resource plays.
Closing of the Offering and the Concurrent Private Placement is expected to occur concurrently on or about October 28, 2009. At Closing, an aggregate of 25,000,000 common shares will be issued for gross proceeds to Canyon of $50.0 million. The syndicate of underwriters, led by Cormark Securities Inc. and including Peters & Co. Limited and Raymond James Ltd. (the "Underwriters"), shall be entitled to terminate the Offering if the Concurrent Private Placement shall not have closed prior to or concurrently with the Offering.
Following the Concurrent Private Placement, ARC Fund will exercise control or direction over 15,000,000 Common Shares representing approximately 32% of the issued and outstanding Common Shares (on a non-diluted basis), thus the Concurrent Private Placement will materially impact control of the Company. ARC Fund will be in a position to vote a significant block of Common Shares at any meeting of shareholders, which could, depending on the number of votes actually cast at such a meeting, result in ARC Fund being in a position to elect a majority of the directors of the Company, block any special resolution requiring 66 2/3% shareholder approval levels, or block other matters proposed for shareholder consideration at such a meeting. Bisset Investment Management, a current 13.3% holder of Common Shares, has indicated an intention to purchase 3,300,000 Common Shares pursuant to the Offering, and following completion of the Offering and the Concurrent Private Placement, will own 6,243,690 Common Shares representing approximately 13.24% of the issued and outstanding Common Shares (on a non-diluted basis).
The number of Common Shares to be issued pursuant to the Concurrent Private Placement will be in excess of 67% of the Common Shares currently issued and outstanding (on a non-diluted basis) prior to the closing of the Offering and the Concurrent Private Placement. The number of Common Shares to be issued pursuant to the Concurrent Private Placement and the Offering will be approximately 113% of the Common Shares currently issued and outstanding (on a non-diluted basis) prior to the date of Closing. Details of the same are set forth below:
Current issued and outstanding Common Shares: 22,151,033
Common Shares Issuable Pursuant to the Offering 10,000,000
Common Shares Issuable Pursuant to the Concurrent
Private Placement 15,000,000
Percentage of Current Issued and Outstanding (both
Offering and Concurrent Private Placement) 113%
Percentage of Current Issued and Outstanding (Concurrent
Private Placement Only) 67.72%
In accordance with the policies of the TSX: (A) as the Concurrent Private Placement will result in the issuance of a number of Common Shares greater than 25% of the issued and outstanding Common Shares (on a non-diluted basis) and the Common Shares are being issued at a discount to market price; and (B) the issuance of the Common Shares in connection with the Concurrent Private Placement will have a material impact on control of the Company, written consent to the Concurrent Private Placement by holders of more than 50% of the Common Shares is required. To date, Canyon has received the written consent of holders of approximately 66% of the Common Shares.
In connection with the Concurrent Private Placement, Canyon and ARC Fund will enter into an investment rights agreement (the "Investment Rights Agreement") granting ARC Fund certain rights with respect to its share ownership of Canyon.
In accordance with the Investment Rights Agreement, and based on an expected board of directors of seven members, for so long as ARC Fund and certain designated affiliates and related funds (collectively "ARC") own or exercise control or direction over 10% or more of the outstanding Common Shares, ARC will have the right to nominate one representative as a director of Canyon and for so long as ARC owns or exercises control or direction over 15% or more of the outstanding Common Shares, ARC will have the right to nominate one additional director of Canyon, to be acceptable to the President of Canyon and approved by the board of directors of Canyon, and such additional director shall not be a director, officer or employee of ARC unless otherwise agreed by the board of directors of Canyon. At least one of such representatives will also be entitled to be on committees of the board of directors of Canyon. As ARC will be in a position to nominate two directors to the Board, ARC will have significant influence over the business and direction of the Company.
Further, pursuant to the Investor Rights Agreement, ARC will be granted certain rights that other shareholders may not have, including: (A) registration rights to cause the Company to file a prospectus to qualify the sale of the Common Shares held by ARC, (B) piggyback rights whereby ARC would be entitled to cause the Company to qualify the sale of the Common Shares held by ARC in connection with a prospectus offering being undertaken by the Company; and (C) pre-emptive rights whereby ARC will have a right to purchase additional Common Shares in connection with any offering in order to maintain its percentage share ownership of the Company.
Advisory: The Offering is only made by prospectus. The prospectus contains important detailed information about the securities being offered. Copies of the prospectus may be obtained on request without charge from the General Counsel of Canyon Services Group Inc. at 1600, 510 - 5th Street S.W. Calgary, AB T2P 3S2 (telephone: (403) 355-2300 or by faxing a written request to (403) 355-2211), and are also available electronically at www.sedar.com. Investors should read the prospectus before making an investment decision.
This news release contains forward looking statements. More particularly, this news release contains statements concerning the anticipated closing date of the Offering and Concurrent Private Placement, the effects of the Offering and the Concurrent Private Placement, the expected use of the proceeds of the Offering and Concurrent Private Placement and the terms of the Investment Rights Agreement. Although Canyon believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Canyon can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. The closing of the Offering or Concurrent Private Placement could be delayed if Canyon is not able to obtain the necessary regulatory and stock exchange approvals on the timelines it has planned. The Offering and Concurrent Private Placement will not be completed at all if these approvals are not obtained or some other condition to the closing is not satisfied. In addition, the Offering could be terminated by the Underwriters if the Concurrent Private Placement shall not have closed prior to or concurrently with the Offering. Accordingly, there is a risk that the Offering and Concurrent Private Placement will not be completed within the anticipated time or at all. Further, the intended use of the net proceeds of the Offering and Concurrent Private Placement might change if the board of directors of Canyon determines that it would be in the best interests of Canyon to deploy the proceeds for some other purpose.
The forward looking statements contained in this document are made as of the date hereof and Canyon undertakes no obligations to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company within the United States. The securities of Canyon have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act") or any state securities laws. Accordingly, the Common Shares may not be offered or sold in the United States or to U.S. persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws or an exemption from such registration is available.
SOURCE Canyon Services Group Inc.
For further information: For further information: Brad Fedora, President, Phone: (403) 290-2491; Barry O'Brien, Vice President, Finance and CFO, Phone: (403) 290-2478