TORONTO, Jan. 24 /CNW/ - Pareto Corporation (TSX: PTO) ("Pareto" or "the
Company"), a leading Shopper Marketing company, announced today that it
has entered into a definitive agreement pursuant to which a newly
formed subsidiary of The Riverside Company ("Riverside") has agreed,
subject to certain conditions, to acquire all 39,710,271 of the fully
diluted outstanding shares of the Company for cash consideration of
C$2.72 per share. The transaction will proceed by plan of arrangement
and is expected to close by March 31, 2011.
The offer price represents a 51% premium to the 12-month weighted
average price of C$1.80 Based on the recommendation of the special
committee of independent directors, Pareto's board of directors agreed
to enter into this transaction and to recommend that shareholders vote
in favour of the transaction.
Twelve members of Pareto's senior management team, together with all
members of the board of directors and a number of outside shareholders,
in aggregate representing 72% of the outstanding Pareto shares, have
entered into support agreements, under which they have agreed to vote
in favour of the transaction. In addition, these members of Pareto
management have agreed to invest $13.4 million for approximately 20% of
the equity of the purchaser, being the same price as Riverside's
equity. In addition, a syndicate of three major Canadian banks has
committed to provide debt related to this transaction.
In the summer of 2010, the Company engaged Petsky Prunier Securities
LLC, a U.S.-based investment bank with expertise in Pareto's industry,
as financial advisor to assist Pareto's board in a review of strategic
alternatives, including a potential sale transaction. Petsky Prunier
conducted a broad auction process over a number of months, contacting
prospective parties, resulting in expressions of interest, management
meetings with prospects and ultimately a binding deal with Riverside.
In connection with the transaction, Petsky Prunier has also provided a
fairness opinion to Pareto's board of directors.
The definitive agreement contains a non-solicitation covenant on the
part of Pareto, subject to customary "fiduciary out" provisions
entitling Pareto to consider and accept a superior proposal, subject to
a right to match in favour of Riverside, on payment to Riverside of a
break fee of $3.75 million. In addition, Pareto has agreed to reimburse
Riverside for its transaction expenses to a maximum of $2.0 million if
the agreement is terminated in certain circumstances where the break
fee is not payable. Riverside has agreed to pay to Pareto a reverse
break fee of $3.75 million if it fails to close the transaction.
A meeting of Pareto shareholders will be convened to vote on the
transaction, pursuant to a court approval process required for a plan
of arrangement. It is proposed that the transaction must be approved
by (i) 66 2/3% of the holders of common shares voted at the meeting,
(ii) 66 2/3% of the holders of common shares, options and restricted
stock units voting at the meeting, and (iii) a majority of all common
shares voting at the meeting, excluding those members of management who
are acquiring equity in the purchaser. Shareholders holding 52% of
this "majority of minority" have entered into voting support
"After an extensive search by the Special Committee of the Board and our
advisors, we are pleased to announce this proposed transaction which we
believe delivers significant value to our shareholders," stated J. R.
Kingsley Ward, Chairman of the Pareto Board of Directors.
"This is an exciting day for the employees and shareholders of
Pareto," said Kerry Shapansky, Pareto's President and Chief Executive
Officer. "Our entire team will remain in place and continue to be
committed to delivering leading edge Shopper Marketing solutions to our
clients. We have worked diligently to establish Pareto as Canada's
leading Shopper Marketing company and believe that the growth capital
and support to be provided by Riverside will play a key role in
facilitating our future growth initiatives."
"We see tremendous potential in Pareto and are excited to announce this
offer to acquire the company," commented Kristin Newhall, Partner, The
Riverside Company. "Pareto's strategic market position in Shopper
Marketing solutions spans both traditional and innovative platforms. We
expect the proposed acquisition of Pareto by Riverside to be beneficial
to both parties and generate strong results."
Further details of the transaction are expected to be included in a
proxy circular to be mailed to shareholders in due course. The full
acquisition agreement, as well as the lock-up agreements with security
holders will be filed on SEDAR at www.sedar.com.
Ogilvy Renault LLP acted as counsel to Pareto, Fraser Milner Casgrain
LLP acted as counsel to the management shareholders, and Osler Hoskin &
Harcourt LLP acted as counsel to the non-management shareholders who
entered into voting support agreements. Riverside was represented by
Stikeman Elliott LLP and Kirkland & Ellis LLP.
Conference Call Details
A conference call will be held on Tuesday, January 25, 2011 at 8:30am
Toronto time to discuss the transaction. The call will be hosted by
J.R. Kingsley Ward, Chairman of the Pareto Board of Directors and Kerry
Shapansky, CEO of Pareto. To access the call, please dial (647)
427-7450 or (888) 231-8191 ten minutes prior to the scheduled start of
About Pareto Corporation
Pareto Corporation is a Shopper Marketing company that offers marketing
execution solutions to leading companies in a broad range of industry
sectors. Pareto provides measurable, quantifiable services that
complement our clients' marketing and sales departments. For more
information, please visit our website at www.pareto.ca.
About The Riverside Company
The Riverside Company is a global private equity firm focused on
acquiring growing enterprises valued at up to $200 million. The firm
partners with strong management teams and enhances its investments
through acquisitions and organic growth. Since its founding in 1988,
Riverside has invested in more than 245 transactions with a total
enterprise value of more than $5.8 billion. The firm's portfolio in
North America, Europe and the Asia Pacific region includes 74 companies
with roughly 13,000 employees. Riverside completes acquisitions
smoothly thanks to $3.2 billion in assets under management, more than
195 professionals in 19 offices, and longstanding relationships with
partner lenders. For more information, please visit the firm's website
This press release contains forward-looking statements related to
expected future events and financial operating results of Pareto that
involve risks and uncertainties. Actual results may differ materially
from management expectations as projected in such forward-looking
statements for a variety of reasons, including market and general
economic conditions and the risks and uncertainties detailed from time
to time in Pareto's SEDAR filings.
SOURCE Pareto Corporation
For further information:
Kerry Shapansky, President and Chief Executive Officer, Pareto Corporation, (416) 790-2350
Karen Trudell, Chief Financial Officer, Pareto Corporation, (416) 790-2360
Glen Williams, Investor Relations, Equicom Group, (416) 815-0700 ext 272
Graham Hearns, Director of Marketing and Communications, The Riverside Company, (216) 535-2221.