MONTREAL, Oct. 28 /CNW Telbec/ - Cosmos Capital Inc. ("Cosmos") announced today that it will make a binding, fully financed, all-cash take-over bid (the "Offer") to acquire all of the issued and outstanding subordinate voting shares of Cossette, Inc. ("Cossette" or the "Company"), at a price of CDN $5.25 per share.
The all-cash offer of CDN $5.25 per share represents a premium of approximately 61.5% over the $3.25 closing share price on July 17, 2009, the last trading day prior to Cosmos' announcement of its proposal to make an offer, and a premium of approximately 54.5% over the average trading price of the shares on the TSX for the 30 trading days preceding the announcement date in July.
The Offer is not subject to any financing conditions, as Cosmos has obtained all the necessary financing commitments to fund the consideration payable for the shares and any incremental funds needed to successfully execute the Offer. The Offer is not subject to a due diligence condition.
Two of Cossette's largest institutional shareholders, Burgundy Asset Management Ltd. and Beutel, Goodman & Company, who together hold or exercise control over 3,113,791 subordinate voting shares or approximately 18.6% of Cossette's outstanding shares on a fully diluted basis, have agreed to tender their shares into the Offer as part of 'lock-up agreements' with Cosmos. These agreements include provisions giving Cosmos the ability to match any higher bid, which may be made for the Company. These provisions also allow the shareholders to accept a superior offer if it is not matched by Cosmos.
Cosmos, it affiliates, associates and joint actors, own or control, as of the date hereof, 3,120,313 Shares representing approximately 18.7% of Cossette's outstanding shares, which when taken together with the shares subject to the lock-up agreements, represent 37.3% of all issued and outstanding subordinate voting shares of Cossette.
In making the announcement, François Duffar, Chairman and CEO of Cosmos, stated that "The Cosmos offer is a compelling one and represents a full and fair price for Cossette shares, given the Company's financial performance and current business risks. For shareholders, it has the benefit of providing them with the certainty of an immediate cash payment for their shares". Duffar further added: "The fact that two of Cossette's largest institutional shareholders have agreed to tender their shares in support of the Cosmos offer validates this view."
Cosmos also announced that it is deeply concerned about actions the Board of Directors and Chief Executive Officer of Cossette have taken in the preceding months. Cosmos stated that it believes that the actions of the Board of Directors have had the effect of preventing shareholders from having the opportunity to respond to the Cosmos proposal. For example, on August 7, 2009, only three days after it enacted a shareholder rights plan, the Board of Directors granted 200,000 options to Claude Lessard, the CEO, amounting to 1.2% of the total outstanding shares of the Company. Despite the significance of such a grant in the context of a sale process, the Company made no announcement or provided any public explanation of the purpose of such a grant. Consequently, the grant brought the existing senior management of Cossette closer to a blocking position on any sale of the Company.
The option grant is difficult to justify in light of the recent performance of the Company. During its last fiscal quarter, the Company generated losses of $18.4 million, representing its worst financial performance ever. Revenue fell 23%, poor in both absolute terms and relative to industry averages of under 10%. The Company has lost long standing significant clients, has seen its quarterly earnings decline 53% in the first quarter of this fiscal year before making losses in both of the last two quarters, and has seen its share price decline 78% over the past two years to a low of $2.70.
For these reasons, Cosmos has chosen to present its offer directly to the Company's shareholders so they may fully and independently consider the merits of it.
Further details about the Cosmos Offer will be provided in the Offer Circular, which will be publicly filed as soon as practicable, and mailed to Cossette shareholders following receipt by Cosmos of a complete and up-to-date shareholder list from Cossette. Cosmos intends to formally commence the Offer on or before October 30th, 2009 by way of published advertisement as permitted under the applicable securities laws.
The Offer will be subject to customary conditions, including but not solely: there being tendered to the Offer a number of shares that, together with the shares then beneficially owned by the Offeror, its affiliates and associates and persons acting jointly or in concert with the Offeror, represents 66 2/3% of the total number of outstanding subordinate voting shares of Cossette Inc. on a fully diluted basis; the waiver, redemption or granting of a cease trade order in respect of the shareholder rights plan put in place by Cossette on August 4th 2009; and the receipt of government and regulatory approvals.
Genuity Capital Markets is acting as the exclusive financial advisor to Cosmos Capital. McCarthy Tétrault S.E.N.C.R.L., s.r.l. and Torys LLP are acting as legal advisors to Cosmos.
About Cosmos Capital Inc.
Cosmos Capital is a company incorporated in Québec. Its investors include two of Cossette's founding partners - François Duffar, former Vice-Chair and President of Cossette and Georges Morin, former Senior Vice President of Cossette - Jean Monty, President of Libermont Inc., Daniel Bernard, President of Provestis and Chairman of Kingfisher plc and H.I.G. Capital, LLC, a leading global private equity investment firm.
The offer is being made for the securities of a Canadian issuer. The offer is subject to disclosure requirements of Canada. Shareholders should be aware that these requirements are different from those of the United States. Financial information included herein, if any, has been prepared in accordance with Canadian generally accepted accounting principles and thus may not be comparable to financial information reported by United States companies.
This announcement is for informational purposes only and does not constitute an offer to purchase or a solicitation of an offer to sell Subordinate Voting Shares of Cossette. The offer is being made pursuant to an Offer to Purchase and Circular and other related offer materials to be filed by Cosmos with the Canadian Securities Administrators on or about October 30th 2009. These materials, as they may be amended from time to time, contain important information, including the terms and conditions of the offer, that should be read carefully before any decision is made with respect to the offer. Investors and holders of Subordinate Voting Shares will be able to obtain a free copy of these materials and other documents filed by Cosmos with the Canadian Securities Administrators at www.sedar.com.
The enforcement by Shareholders of civil liabilities under United States federal securities laws may be affected adversely by the fact that Cosmos is incorporated under the laws of the Province of Quebec and that some or all of their officers and directors are residents of Canada and that all or a substantial portion of the assets of Cossette and of the above-mentioned persons may be located outside the United States.
No assurance can be given that the proposed transaction described herein will be consummated by Cosmos or that it will be completed on the terms proposed or within any particular schedule. Any information regarding Cossette contained herein has been taken from, or is based upon, publicly available information. Although Cosmos does not have any information that would indicate that any information contained herein is inaccurate or incomplete, Cosmos does not undertake any responsibility for the accuracy or completeness of such information. Cosmos does not undertake, and specifically disclaims, any obligation or responsibility to update or amend any of the information above except as otherwise required by law.
Certain statements made in this press release are forward-looking statements that involve risks and uncertainties. Often, but not always, forward-looking statements can be identified by the use of words such as "plans," "expects," "expected," "scheduled," "estimates," "intends," "anticipates," or "believes," or variations of such words and phrases, or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved. These forward-looking statements reflect Cosmos' best judgment based on current information, factors and assumptions, and although it bases these statements on circumstances that it believes to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance or actions, and actual performance and actions may vary materially from the actions and expectations discussed in this documentation. Cosmos disclaims any intention or obligation to update or revise any forward looking information whether as a result of new information, future events or otherwise, except as required by applicable law.
SOURCE COSMOS CAPITAL INC.
For further information: For further information: Shareholders and investors: Jean-François Desjardins, Genuity Capital Markets, (514) 281-3245; Media: Sylvia Morin, Cosmos Group, (514) 240-3841