QUÉBEC CITY, Nov. 20 /CNW Telbec/ - Cossette Inc. ("Cossette") provided today an update on its strategic review process following the announcement by Cosmos Capital Inc. ("Cosmos"), on November 17, 2009, that it would amend its offer launched on October 30, 2009 with several parties, including members of the H.I.G. Capital, LLC group, a US-based equity investment firm, to increase its price to $7.87 per share and add a due diligence condition to its offer whereby Cosmos shall have been granted access to all non-public information relating to Cossette or any of its entities as well as to management of Cossette and shall be satisfied in its sole discretion with the results of its review of that information. The revised price under Cosmos' amended offer matches the all-cash consideration of $7.87 per share to be received by shareholders under the transaction with Mill Road Capital, L.P. ("Mill Road") which is not subject to due diligence and is supported by Cossette.
While Cosmos' amended offer of $7.87 was announced publicly on November 17, the Chairman of the Special Committee of the Board of Cossette simultaneously received a letter from Cosmos informing the Special Committee that Cosmos was prepared to further increase the offer price to $8.10, subject to the same due diligence condition described above, all of which was not disclosed publicly by Cosmos.
Under the merger agreement with Mill Road, Cossette may only engage in negotiations with, or provide information to, a person making a bona fide written "acquisition proposal" if the Board has determined that it constitutes, or could reasonably be expected to lead to, a "superior proposal" within the meaning of the merger agreement, and that the failure to take such action would be inconsistent with its fiduciary duties.
In order to allow the Board to make such an assessment, the legal advisor to the Special Committee sent a letter yesterday to Cosmos' legal advisors requesting that Cosmos provide Cossette with the following:
- The rationale as to why Cosmos believes it can increase its offer price
- Executed documentation evidencing equity and debt financing sufficient
to finance a purchase price of $8.10 including a detailed sources and
uses of cash schedule;
- A specific list of key due diligence items Cosmos requires in order to
determine whether it will increase its offer to $8.10;
- Details as to Cosmos' intentions with respect to the conditionality of
its offer as outlined in Cosmos' take-over bid circular dated October
30, 2009, other than due diligence; and
- Confirmation as to whether Cosmos requires a support agreement and if
so, its key terms and conditions.
Responses to these questions were received after the close of business yesterday but were found to be incomplete by the Special Committee. Further information is required in order for the Board to determine whether Cosmos' proposal at $8.10 per share could reasonably lead to a superior proposal.
Cosmos Activities - Setting the Facts Straight
Cosmos was previously offered access to Cossette's virtual data room which access was declined.
Specifically, contrary to what is alleged in Cosmos' Notice of Variation dated November 18, 2009 and as already stated in Cossette's Directors Circular dated November 13, 2009:
- On September 22, 2009, Cossette's financial advisor indicated to Cosmos
that as a pre-condition to gaining access to Cossette's virtual
dataroom, Cosmos would first need to enter into a standard
confidentiality and standstill agreement as executed by all other
participants in Cossette's strategic review process and indicate a
willingness to consider increasing its then proposed offer price of
- On October 8, 2009, BMO Capital Markets and Genuity Capital Markets
participated in a telephone call, at Genuity Capital Markets' request,
to discuss the confidentiality and standstill agreement. Genuity
Capital Markets stated that absent the removal of the standstill
provisions, Cosmos was not willing to execute such an agreement, even
though the form of confidentiality and standstill agreement sent to
Cosmos' financial advisor provided for the automatic termination of the
standstill provisions contained therein in the event of a supported
change of control transaction for Cossette or a formal takeover bid for
the Shares by any third party.
- Cosmos ultimately decided to proceed with its offer without obtaining
access to Cossette's non-public information.
- On November 6, 2009, Cossette entered into an exclusivity agreement
with Mill Road for a period beginning immediately and ending at 11:59
p.m. on Tuesday, November 10, 2009, based on Mill Road's fully financed
offer to acquire all Shares at a price of $7.87 per Share.
- On the same day, several weeks after their refusal to execute
Cossette's standard form of confidentiality and standstill agreement,
Cosmos sent a letter to the Chairman of the Special Committee
requesting access to the confidential information that Cossette had
made available to other potential acquirers. Cosmos also stated that it
was prepared to increase the price it had offered to Shareholders upon
satisfactory review of the materials made available to other potential
Shareholders will be promptly notified of any determination by the Board in respect of Cosmos' amended offer through a press release and notice of change to the directors' circular in accordance with applicable securities laws. Cossette recommends that its shareholders defer making any decision until its Board of Directors has had an opportunity to fully review Cosmos' amended offer.
The management information circular in connection with the special general meeting of shareholders to be held on December 18, 2009 to consider the Mill Road Transaction will be filed with the Canadian provincial securities regulatory authorities and will be mailed to shareholders shortly. The circular contains a determination that the Mill Road Transaction is fair to Cossette's shareholders other than key senior management shareholders (the "Senior Executives") exchanging part of their Cossette shares for shares of a wholly-owned subsidiary of Mill Road (the "Public Shareholders") and in the best interests of Cossette and the Public Shareholders. The circular also contains a recommendation to the shareholders of Cossette that they vote in favour of the Mill Road Transaction.
Cossette Inc. offers a full range of leading-edge communication services to clients of all sizes, including some of the most prestigious brands in the world. A customer-driven organization built around highly specialized business units, Cossette also offers Convergent Communications(TM), a unique working method that brings added value to the client by integrating various services offered by the Group, including strategic planning and research, advertising, media buying and channel planning, sales promotion, direct response, database and direct marketing, customer relationship management, interactive marketing and technology solutions, public relations, organizational communication and change management, sponsorship and alliance marketing, branding and design, ethnic marketing, business-to-business communications (B2B practices) and print and video production. Cossette has approximately 1,437 employees and offices in Quebec City, Montreal, Toronto, Vancouver, Halifax, New York, Irvine, Los Angeles, London and Shanghai.
SOURCE COSSETTE INC.
For further information: For further information: Financial Analysts only: Martin Faucher, Vice-President and Chief Financial Officer, (418) 521-3784; Investors: Francis Trudeau, Director, Acquisitions and Investor Relations, (514) 282-4633; Medias: Sylvie Isabelle, Optimum Public Relations, (418) 521-3184; Source: Cossette Inc., www.cossette.com