Neo Material Technologies to Oppose Pala's Application to the OSC



    TORONTO, April 17 /CNW/ - Neo Material Technologies Inc. ("Neo" or the
"Company") (TSX: NEM) announced today that it intends to oppose Pala
Investments Holdings Limited's ("Pala") application to the Ontario Securities
Commission ("OSC") for a cease trade order against Neo's existing shareholder
rights plan (the "Rights Plan") and the new shareholder rights plan (the "New
Rights Plan").
    Pala's unsolicited partial offer (the "Pala Partial Offer'), which seeks
to increase Pala's share ownership in Neo to approximately 41%, would, if
successful, provide Pala with effective control over Neo without paying an
appropriate premium for that control. The Pala Partial Offer price of
Cdn.$1.40 per share, among other things, fails to take into account the value
of Neo's recent strategic initiatives and Neo's future growth and acquisition
opportunities. The closing price of Neo's shares on the Toronto Stock Exchange
on April 16, 2009 was Cdn.$1.44, and the current trading price is over
Cdn.$1.50.
    Neo's Special Committee considers Pala's recent public announcements,
which attempt to discredit Neo's management and the Company's business
strategy, to be misleading, self-serving and in contradiction to prior
statements of praise for Neo's management and its performance. In Pala's offer
circular, it praised Neo's management for doing "an excellent job in creating
a company with the potential for growth over the long term". Similarly, Pala
has indicated several times that its goal is to be a long-term investor in
Neo. In Pala's recent application to the OSC, it has criticized the board of
directors for not seeking a bona fide bidder for the Company, which makes it
clear that their objectives are short term in nature and that they have no
real interest in the success of the Company.
    In evaluating the Pala Partial Offer as well as the New Rights Plan,
shareholders should consider Pala's track record of investing in Canadian
public companies. Pala, a company indirectly owned by Vladimir Iorich, has
increasingly taken on an activist role in its equity investments. Coalcorp
Mining Inc. ("Coalcorp") and Rockwell Diamonds Inc. ("Rockwell Diamonds") are
two recent Pala investments where Pala has failed to support management or the
respective companies or add any strategic value.
    Based on publicly available information, as of the date hereof, the share
prices of Coalcorp and Rockwell Diamonds have declined by approximately 88%
and 82%, respectively, since Pala announced its increased shareholdings above
40% (in the case of Coalcorp), and launched an offer to shareholders (in the
case of Rockwell Diamonds). Moreover, since increasing its ownership in
Coalcorp, 13 directors have resigned from Coalcorp's board and a number of
senior executives have resigned or have had their employment terminated.
    Neo's ability to maintain strategic relationships in its principal
manufacturing and marketing regions, namely China, Thailand, Japan and most
recently, Brazil, and to realize its business plan are dependent on the
management team. A repeat of Pala's "Coalcorp experience" could have
devastating effects on Neo's business and shareholder value.
    The Special Committee, and its financial and legal advisors, have
reviewed Pala's application to the OSC, as well as other information recently
published by Pala, and have found it to contain many inaccuracies,
inconsistencies and omissions. For example, the existence of change of control
provisions in the employment agreements of Neo's executive officers was known
to Pala prior to the launch of its partial offer and these provisions were in
existence well before Pala first became an investor in Neo. Also, Pala's
assertion that management has not taken any steps to increase shareholder
value is entirely inaccurate. For example, Neo recently signed an exclusive
development agreement with Mineraco Taboca S.A. with respect to rare earth
deposits in the State of Amazonas, Brazil. The joint development agreement and
the patent compliance program between Neo's Magnequench division and NIDEC
Corporation, the largest Japanese micro-motor manufacturer, are other recent
examples of Neo management increasing shareholder value through strategic
initiatives.
    The Pala Partial Offer, by its very nature, affects all shareholders,
regardless of whether or not they tender their shares. If the Pala Partial
Offer is successful, shareholders will, in all circumstances, retain
less-liquid, minority-discounted shares in a company effectively controlled by
Pala.
    Pala made its initial investment in Neo in July 2007 with full knowledge
of the Rights Plan, which was approved by shareholders in 2004, and later
ratified by approximately 90% of the votes cast by shareholders at the annual
meeting in April 2007. The Pala Partial Offer has been structured to comply
with the "Permitted Bid" provisions of the Rights Plan. The Special Committee
believes that Pala's application to the OSC to cease trade the Rights Plan is
inappropriate in light of such circumstances.
    The New Rights Plan is being submitted to shareholders for approval at
the Company's upcoming annual and special meeting on April 24, 2009. In the
context of Pala's conduct and the coercive nature of the Pala Partial Offer,
the Special Committee believes that the New Rights Plan is important to
protect shareholders from bids such as Pala's and its adoption is at the
discretion of shareholders. Neo shareholders have the opportunity to consider
whether or not to ratify the New Rights Plan and tender to the Pala Partial
Offer. In the circumstances, the basis for Pala's application to the OSC is
unclear and the application will be opposed by Neo.

    Directors' Circular

    Neo's board of directors' recommendation to reject the Pala Partial
Offer, as well as a detailed discussion of its reasons for rejection, are
contained in a circular prepared by the board dated March 9, 2009 (the
"Directors' Circular") filed with Canadian securities regulatory authorities.
The Directors' Circular is available on the Company's website at
www.neomaterials.com or on SEDAR at www.sedar.com. It was mailed to Neo's
shareholders on March 10, 2009 and shareholders are urged to read the
Directors' Circular in its entirety.

    About Neo Material Technologies

    Neo Material Technologies is a producer, processor and developer of
neodymium-iron-boron magnetic powders ("Neo Powders"), rare earths and
zirconium based engineered materials and applications through its Magnequench
and AMR Performance Materials business divisions. These innovative products
are essential in many of today's high technology products. Magnequench's Neo
Powders are used in the production of bonded magnets for micro motors,
precision motors, sensors and other applications requiring high levels of
magnetic strength, flexibility, small size and reduced weight. Rare earth and
zirconium applications include catalytic converters, computers, television
display panels, optical lenses, mobile phones and electronic chips. The
Company is headquartered in Toronto, Canada and has approximately 1,300
employees in 15 locations, across 10 countries.

    %SEDAR: 00002061E




For further information:

For further information: Questions may be directed to Neo's information
agent, Laurel Hill Advisory Group, toll-free at 1-888-812-9183.

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