Cossette Recommends that Shareholders Reject the Amended Cosmos Offer of
$7.87 per Share
KOS (TSX)
QUÉBEC CITY,
This recommendation is based on the following reasons, all contained in the notice of change to the directors' circular of Cossette in relation to the Amended Cosmos Offer, filed today with the Canadian provincial securities regulatory authorities and that will be mailed to shareholders shortly:
- The Mill Road Transaction is for $7.87 per Share and is not subject to due diligence, contrary to the Amended Cosmos Offer. On November 10, 2009, as a result of the extensive strategic review process initiated by the Board on July 20, 2009, Cossette announced that it had entered into a merger agreement to be acquired and taken private by Mill Road Capital, L.P. ("Mill Road"). Under the terms of the merger agreement, Mill Road will acquire the shares of Cossette for a consideration of $7.87 in cash per share, subject to a limited number of conditions, including approval of the shareholders (the "Mill Road Transaction"). The Mill Road Transaction is not conditional on due diligence or financing. - The Amended Cosmos Offer is subject to a Due Diligence Condition that cannot be satisfied. The Amended Cosmos Offer is subject to a due diligence condition 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. This due diligence condition cannot be satisfied unless Cossette breaches its contractual obligations under the merger agreement with Mill Road. Under this agreement, Cossette may only provide information to a person making an unsolicited bona fide written "acquisition proposal" if the Board has determined, after consultation with its outside legal and financial advisors, that (i) such acquisition proposal constitutes, or could reasonably be expected to lead to, a "superior proposal" within the meaning of the merger agreement (i.e. more favourable to shareholders from a financial point of view than the Mill Road Transaction taking into account other terms thereof and likelihood of completion), and (ii) the failure to take such action would be inconsistent with its fiduciary duties. Since the Amended Cosmos Offer does not provide greater value to shareholders than the Mill Road transaction (both are at the same price of $7.87 per share), the Board cannot determine in good faith, after consultation with its outside legal and financial advisors, that the Amended Cosmos Offer constitutes, or could reasonably be expected to lead to, a "superior proposal" within the meaning of the merger agreement, and, therefore, cannot give Cosmos access to its virtual data room and provide non-public information to Cosmos. In the event of a breach by Cossette of its contractual obligations under the merger agreement, Mill Road would be entitled to terminate the merger agreement and receive from Cossette a termination fee of $3,250,000, in addition to all other remedies available at law, including an award of damages. - Recommendation of the Special Committee. The Special Committee of independent directors determined that the Amended Cosmos Offer is not in the best interests of Cossette and its shareholders, and determined that the Board should recommend that shareholders reject the Amended Cosmos Offer and not tender their shares to the Amended Cosmos Offer. - Rejection of Amended Cosmos Offer by Cossette's directors and officers. The directors and officers of Cossette have indicated to Cossette that they do not intend to tender any of their shares to the Amended Cosmos Offer. Furthermore, each of Claude Lessard, Pierre Delagrave, Brett Marchand, Gregor Angus, Colin Schleining, Dominique Lebel, Martin Faucher, Kimberley Okell, Marcel Barthe and Richard Hadden has agreed, pursuant to support and voting agreements, that he or she will vote his or her shares, representing in the aggregate approximately 30% of the outstanding shares of Cossette, in favour of the Mill Road Transaction, subject to certain conditions. Such agreements may only be terminated under limited circumstances, including in case of termination of the merger agreement. - Amended Cosmos Offer is subject to several other conditions. The Amended Cosmos Offer is subject to the satisfaction or waiver by Cosmos of 15 conditions, in addition to the due diligence condition described above, several of which include numerous sub-conditions. Certain of the conditions and sub-conditions provide a broad discretion in favour of Cosmos and are not subject to any materiality thresholds or other objective criteria, and include language such as "in its sole discretion" and similar phrases. Taken together, this list of conditions provides Cosmos with a broad range of grounds upon which it may decline to proceed with the Amended Cosmos Offer. The conditions of the Amended Cosmos Offer also lead to significant uncertainties as to the timing and the ultimate outcome of the Amended Cosmos Offer, imposing significant value risk on shareholders for which they are not adequately compensated under the terms of the Amended Cosmos Offer. The Mill Road agreement does not contain such a comprehensive and complex list of conditions, thus greatly reducing the uncertainties for shareholders and potentially providing more immediate results.
Update - Cosmos' proposal to increase its offer price
With respect to Cosmos' letter of
About Cossette
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
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: Maxime Couture, Optimum Public Relations, (418) 521-3770; Source: Cossette Inc.; www.cossette.com
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