QUÉBEC CITY, Nov. 25 /CNW Telbec/ - Cossette Inc. ("Cossette") announced today that its Board of Directors unanimously determined (with the interested directors, being Claude Lessard and Pierre Delagrave, abstaining) that the amended offer announced by Cosmos Capital Inc. ("Cosmos") on November 17, 2009 to purchase all of the outstanding shares of Cossette (the "Shares") not already owned by Cosmos, its joint actors and its affiliates and associates at a price of $7.87 per share (the "Amended Cosmos Offer") is not in the best interests of Cossette and its shareholders, and unanimously recommends that shareholders reject the Amended Cosmos Offer and not tender their shares to the Amended Cosmos Offer.
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
- 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
- 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 November 17, 2009 stating that Cosmos was prepared to further increase the price offered under the Amended Cosmos Offer to $8.10, exchange of correspondence between the Special Committee and Cosmos for clarification and assessment purposes is continuing.
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: Maxime Couture, Optimum Public Relations, (418) 521-3770; Source: Cossette Inc.; www.cossette.com