Westaim enters into reorganization agreement valuing Westaim at $0.60 per share



    CALGARY, Oct. 3 /CNW/ - The Westaim Corporation announced today it has
entered into a reorganization agreement which values the company at $0.60 per
share. Under the reorganization, Westaim will acquire several closely held and
profitable businesses that provide products and services in the growing
western Canadian construction industry. The businesses to be acquired had
combined revenue of approximately $164 million, pro forma net income of
approximately $10 million, pro forma adjusted net income of approximately
$21 million and pro forma adjusted EBITDA of approximately $30 million for the
year ended December 31, 2007.
    Following the reorganization and a $15 million private placement of
Westaim common shares, the completion of which is a condition of closing the
reorganization, Westaim will have pro forma working capital of approximately
$62 million, total assets of approximately $170 million and liabilities of
approximately $95 million. The combined company will have a healthy balance
sheet and business operations with a history of strong profitability enhanced
by the future utilization of tax pools available in the new company. Pro forma
financial information giving effect to the reorganization is summarized below.
    The reorganization is subject to regulatory approval and approval of the
shareholders of Westaim, which will be sought at a special meeting of
shareholders expected to be held by the end of November. Westaim expects to
mail to its shareholders a notice of meeting, letter of transmittal, form of
proxy and information circular for the special meeting by mid-October.
    The board of directors of Westaim has determined the reorganization is in
the best interests of Westaim and Westaim shareholders and unanimously
recommends that shareholders vote in favour of the reorganization. Each of
Westaim's directors and senior officers has agreed to vote the common shares
he owns in favour of the reorganization.
    "The Westaim board believes that this business combination will result in
a stronger company and provide an opportunity for shareholders to realize new
value," said Drew Fitch, President and CEO of Westaim. "The reorganization
maximizes shareholder value and allows Westaim shareholders to participate in
an industry which has experienced significant growth in recent years and is
expected to continue to grow over the next five years."
    Under the reorganization, Westaim expects to issue approximately
257 million common shares to the vendors of the businesses and 25 million
common shares under the private placement equity financing, assuming an
offering price of $0.60 per share, such that post closing the current
shareholders of Westaim will hold approximately 25.1 percent of the total
number of issued common shares. The percent of the new total common shares
outstanding held by current Westaim shareholders will vary directly with the
offering price of the privately placed equity financing - for example, if the
offering is priced at $0.50 per share, current Westaim shareholders will hold
30.1 percent of the new total common shares outstanding and conversely if the
offering is priced at $0.70 per share, current Westaim shareholders will hold
21.5 percent.
    The equity private placement will be marketed during the two weeks
following mailing of the information circular for the special meeting of
Westaim shareholders. Following this marketing period, Westaim will announce
the price per share paid under the equity financing and the resulting
percentage ownership of existing Westaim shareholders in the restructured
company. The reorganization includes a consolidation of Westaim's outstanding
common shares on a 20 for 1 basis, such that following implementation of the
reorganization, Westaim will have 18.85 million common shares outstanding.
    The reorganization provides Westaim shareholders with the opportunity to
participate in a new company, combining several profitable and established
businesses focused on the strong western Canadian construction industry. Under
the terms of the reorganization, Westaim's board will be altered by the
resignation of all current Directors and the appointment of five new
directors: Marco DeDominicis, Jack Lee, David Hall, Gerald Romanzin and Gerald
Berkhold. Marco DeDominicis will assume the position of President and Chief
Executive Officer. Westaim's name (hereinafter referred to as New Westaim)
will also be changed.
    Following the reorganization, the construction services business segment
of New Westaim will be conducted under five operating divisions: Con-Forte
Contracting Limited Partnership, Asty Concrete Limited Partnership, Four Star
Gravel Contractors Ltd., Sas-Can Masonry Ltd. and Nascor Ltd. These divisions
will jointly provide products and services to the construction industries in
Alberta and parts of British Columbia and Saskatchewan, including concrete
flatwork and formwork, ready-mix concrete and brick and masonry services. The
new business segment will also manufacture and supply engineered and
pre-fabricated wood frame components for the residential and multi-family
construction industries. NUCRYST Pharmaceuticals Corp. will continue as a
74.5 percent owned subsidiary of New Westaim.
    The acquired businesses are well-established in both the commercial and
residential construction industry, despite the competitive environment, and
have a strong reputation in the marketplace for their technical expertise and
extensive experience in successfully completing projects of varying
complexities. The acquired businesses will implement and benefit from
cross-marketing and selling synergies across the markets in which they
operate. The company expects to retain the services of the previous
owner-managers of the acquired businesses. These individuals have successful
track records of managing and growing their businesses. With a combined
workforce of over 800 skilled employees, many of whom are long-term, New
Westaim is well-positioned to be a significant player in the western Canada
construction industry, in particular Alberta.
    Alberta has one of the strongest economies in Canada, with businesses,
workers and their families continuing to migrate into the province, not only
from other regions of Canada, but also from outside Canada. As the province
grows, demand for economic infrastructure needs to be satisfied. In its 2008
budget, the government of Alberta announced $22 billion of infrastructure
spending for the years 2008 to 2011. In addition to growth in commercial
construction, the industry in Alberta has also benefited from a booming
residential housing market in recent years. Although the unprecedented growth
in the residential housing market is not expected to continue at the same
rate, New Westaim will take advantage of its ability to shift resources from
the residential sector to the commercial sector as necessary. New Westaim,
with its vertically integrated construction services segment, expects to
capture market share, expand its product and service lines, broaden its
customer base and capitalize on accretive acquisition opportunities to further
grow the company.
    Under the equity private placement Westaim will issue common shares for
gross proceeds of $15 million to investors who are at arm's length to the
vendors of the businesses. The proceeds of the equity issue will be used for
general working capital purposes and, together with a line of credit, to fund
the acquisitions. A major Canadian bank has provided a commitment letter
whereby it will provide credit facilities comprised of an acquisition term
loan of $30 million with a three-year term and a revolving operating loan with
a $10 million limit. New Westaim will also have access to other existing
operating lines with major financial institutions of approximately
$10 million. Following the reorganization, Nascor will continue to owe
$18.6 million to its former parent.
    Closing of the reorganization is subject to a number of conditions
including no material adverse changes to the underlying businesses and to
Westaim and its subsidiaries, completion of the private placement equity
financing, Westaim shareholder approval and receipt of all necessary
regulatory approvals. The reorganization agreement provides for payment of a
non-completion fee of $2.25 million by Westaim to certain of the vendors of
the businesses if the reorganization is not implemented for various reasons
including the board of directors of Westaim recommending an alternative
transaction to the reorganization. In addition, the reorganization agreement
provides for payment of a non-completion fee of $2.25 million by certain of
the vendors of the businesses to Westaim if the reorganization is not
implemented for various reasons including the vendors being in material breach
of the reorganization agreement.

    The Westaim Corporation's investments include iFire Technology Ltd., and
a 74.5 percent interest in NUCRYST Pharmaceuticals Corp. (NASDAQ:   NCST; TSX:
NCS). Westaim's common shares are listed on The Toronto Stock Exchange under
the trading symbol WED.

    Forward-Looking Statements

    Certain information regarding Westaim, the acquired businesses and New
Westaim in this news release including, without limitation, management's
assessment of future plans and operations, the effect of the reorganization on
Westaim, timing of matters related to the approval of the reorganization and
implementation thereof, completion and pricing of the private placement,
shareholdings of existing shareholders of Westaim in New Westaim, growth
prospects for New Westaim and implementation of New Westaim's business plan
may constitute forward-looking statements under applicable securities laws.
Such forward-looking statements or information are based on a number of
assumptions which may prove to be incorrect. The forward-looking statements
are based on Westaim's current expectations, estimates and projections, and
are subject to a number of significant risks including, without limitation,
risks associated with a failure on the part of any party to meet the
conditions to completion of the reorganization, New Westaim's ability to be
retained for existing and new project work by existing and new customers, New
Westaim's ability to retain and hire the qualified personnel required, the
delay or cancellation of projects and general economic, business and market
conditions. As a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Furthermore, the forward-looking
statements contained in this news release are made as at the date of this news
release and Westaim does not undertake any obligation to update publicly or to
revise any of the included forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be required by
applicable securities laws. Completion of the reorganization is subject to a
number of conditions, including but not limited to regulatory and shareholder
approval. There can be no assurance that the reorganization will be completed
as proposed or at all.

    
    Pro Forma Financial Information Giving Effect To The Reorganization

                       Pro Forma Six Months Ended    Pro Forma Year Ended
                              June 30, 2008            December 31, 2007
                    -------------------------------  ------------------------
                     Construction                Construction
                      Services(1) Other(2) Total  Services(1) Other(2) Total
                      ----------- -------- -----  ----------- -------- -----
                                (unaudited)                (unaudited)

                           ($000's except share       ($000's except share
                            and per share data)        and per share data)

    Revenues             62,500    9,962   72,462  163,904   31,830  195,734

    Net income             (363)   1,340      977    9,789   (2,831)   6,958
    Adjustments(3)        6,501    2,441    8,942   11,129   10,856   21,985
                    -------------------------------  ------------------------
    Adjusted
     Net Income(3)        6,138    3,781    9,919   20,918    8,025   28,943
                    -------------------------------  ------------------------

    Adjusted
     EBITDA(4)            9,470   (2,198)   7,272   29,832   (1,137)  28,695

    Weighted Average
     Number of New
     Westaim Shares
     Outstanding                       18,850,000                 18,850,000
    Adjusted Net Income
     per New Westaim
     Share                                   0.53                       1.54

                              As at
                    June 30, 2008(5)
                    ----------------
                      (unaudited)

                        ($000's)

    Total Assets        169,871
    Working Capital      62,455
    Net Debt(6)          27,684


    Notes:

    (1) Construction Services represents the pro forma financial results of
        Plumb-Line Income Trust, F&D Management Services Ltd., Four Star
        Gravel Contractors Ltd., Asty Concrete & Construction Ltd., and
        Nascor Ltd.
    (2) Other represents the pro forma financial results of The Westaim
        Corporation which is primarily the results of its 74.5% owned
        subsidiary, Nucryst Pharmaceuticals Corp., and excludes the
        discontinued operations of iFire Technology Ltd., the assets of which
        are expected to be sold in the fourth quarter of 2008. (Note 5)
    (3) Pro forma adjusted net income represents pro forma net income
        adjusted to reflect a reduction of owner-manager salaries and
        bonuses, additional facility lease costs and future public company
        costs.
    (4) EBITDA represents net income before net interest expense, income
        taxes, depreciation and amortization and non-recurring items, and is
        a non-GAAP measure used by management to assess operational
        performance. Non-recurring items are generally the results of one-
        time events that distort the financial results that are used by
        management to measure financial performance. Pro forma adjusted
        EBITDA represents EBITDA adjusted to reflect a reduction of
        owner-manager salaries and bonuses, additional facility lease costs
        and future public company costs.
    (5) These pro forma balance sheet items have been adjusted to reflect an
        expected sale of the assets of iFire Technology Ltd. in the fourth
        quarter of 2008.
    (6) Pro forma net debt includes bank indebtedness, debt, capital lease
        obligations and due to related parties (including current and
        long-term amounts), net of cash and cash equivalents. Cash and cash
        equivalents excludes the cash and cash equivalents of Nucryst
        Pharmaceuticals Corp. of $27.5 million which is not accessible to
        fund New Westaim's operations.
    

    %SEDAR: 00002793E




For further information:

For further information: David Wills, Investor Relations, (416)
504-8464, info@westaim.com, www.westaim.com


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