TRADING SYMBOL: Toronto Stock Exchange - HWD.UN
This news release contains "forward looking information and statements"
within the meaning of applicable securities laws. A summary of the
forward looking information and statements are set out later in this
LANGLEY, BC, April 5 /CNW/ - Hardwoods Distribution Income Fund (the
"Fund") announced today that it will be asking its unitholders to
approve the conversion of the Fund to a corporation at its annual
general and special meeting of unitholders to be held on May 19, 2011
The conversion is to take place as a "plan of arrangement" and is
expected to be effective July 1, 2011. Under the arrangement,
unitholders of the Fund are to receive common shares of a newly formed
corporation, "Hardwoods Distribution Inc.", on a one-for-one basis.
Unitholders resident in Canada will generally receive their shares of
Hardwoods Distribution Inc. on a tax deferred basis. Non-resident
unitholders should consult their own tax advisors.
The Fund holds, indirectly, securities which represent a 80% ownership
interest in Hardwoods Specialty Products LP and Hardwoods Specialty
Products US LP (collectively, "Hardwoods"), the Fund's operating
subsidiaries. The Sauder Group has retained a 20% interest in Hardwoods
in the form of holding special voting units of the Fund and Class B
limited partner units of Hardwoods (the "Retained Interest"), which are
exchangeable into units of the Fund in certain circumstances.
Under the existing terms of the exchange agreement, the proposed
conversion of the Fund to a corporation is a transaction that would
entitle the Sauder Group to exchange its 20% Retained Interest for
units of the Fund on a one-for-one basis. However, the Retained
Interest's entitlement to cash flows of Hardwoods is presently subject
to certain subordination arrangements which are to remain in place
until certain financial tests have been achieved. As a result the
value per unit of the Retained Interest is not considered to be equal
on a one-for-one basis with that of a unit of the Fund. Accordingly,
the Sauder Group has agreed to amend the exchange ratio attaching to
their Retained Interest from one unit of the Fund to 0.3793 units of
the Fund (the "Amended Exchange Ratio"). The Sauder Group has also
agreed to exchange its Retained Interest for common shares at the
Amended Exchange Ratio in connection with the conversion. The amendment
to the exchange ratio and exchange of Retained Interest for common
shares of Hardwoods Distribution Inc. are conditional upon all
necessary approvals for the conversion having been obtained on or
before June 30, 2011 and the arrangement becoming effective. The Fund
and the Sauder Group are negotiating the terms of the definitive
agreements for the transaction.
When the conversion is effective, the Sauder Group will hold 8.6%, and
the existing unitholders will hold 91.4%, of the issued and outstanding
common shares of Hardwoods Distribution Inc. The business of Hardwoods
Distribution Inc. will continue to be conducted by Hardwoods, which
will then be wholly-owned.
The Trustees expect that Hardwoods Distribution Inc. will become a
dividend paying corporation when its business and financial
requirements permit the payment of dividends. The actual amounts and
timing of any future dividends by Hardwoods Distribution Inc. will vary
depending on, among other things, Hardwoods Distribution Inc.'s
earnings, financing requirements, the satisfaction of tests imposed by
its governing statute for the declaration of dividends and other
It is expected that the current directors of Hardwoods Specialty
Products GP Inc., being the Trustees of the Fund and Messrs. Lawrence
Sauder and William Sauder, will become the directors of Hardwoods
Distribution Inc., and the current officers and management of Hardwoods
will become officers and management of Hardwoods Distribution Inc.
The conversion to a corporation is a result of the changes to the
taxation of income funds which became effective January 1, 2011, and
which makes the income fund form of business enterprise less
Terry Holland, Chair of the Board of Trustees of the Fund said: "We feel
that this is an appropriate time to simplify our structure by
converting to a corporation and exchanging the Retained Interests of
the Sauder Group to the same class of securities held by the public."
The conversion will require the approval of at least 2/3rds of the votes
cast by the holders of units of the Fund and special voting units of
the Fund, owned by the Sauder Group, in person or by proxy at the
Meeting. Court and regulatory approval will also be required. Further
details on the proposed conversion will be set out in an information
circular of the Fund, expected to be sent to unitholders of the Fund in
mid April, 2011. The Trustees today fixed the close of business on
April 8, 2011 as the record date for the determination of holders of
units and special voting units of the Fund entitled to notice of, and
to vote at, the Meeting.
The trustees of the Fund have retained Capital West Partners as
financial advisor in connection with the determination as to the
fairness to holders of units of the Fund, from a financial point of
view, of the Amended Exchange Ratio. Farris, Vaughan, Wills & Murphy
LLP is acting as legal counsel.
About the Fund
Hardwoods Distribution Income Fund is an unincorporated, open-ended,
limited purpose trust established to hold, indirectly, securities which
represent an 80% ownership interest in Hardwoods.
Hardwoods is one of North America's largest distributors of high-grade
hardwood lumber and sheet goods to the cabinet, moulding, millwork,
furniture and specialty wood products industries. The company currently
operates a network of 26 distribution centers in the U.S. and Canada.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This news release includes forward-looking statements. These involve
known and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements or industry results to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
These forward-looking statements are identified by the use of terms and
phrases such as "anticipate", "believe", "estimate", "expect", "may",
"plan", "will", and similar terms and phrases, including references to
assumptions. Such statements may involve, but are not limited to,
comments with respect to the completion of the conversion of the Fund
from an income trust structure to a publicly traded corporation.
These forward looking statements reflect current expectations of the
Fund's management regarding future events and operating performance as
of the date of this news release. Forward-looking statements involve
significant risks and uncertainties, should not be read as guarantees
of future performance or results, and will not necessarily be accurate
indications of whether or not such results will be achieved. A number
of factors could cause actual results to differ materially from the
results discussed in the forward-looking statements, including, but not
limited to: national and local business conditions; political or
economic instability in local markets; competition; consumer
preferences; spending patterns and demographic trends; legislation or
Although the forward-looking statements contained in this news release
are based upon what management believes to be reasonable assumptions,
the Fund cannot assure investors that actual results will be consistent
with these forward-looking statements. The forward-looking statements
reflect management's current beliefs and are based on information
currently available to the Fund.
All forward-looking information in this news release is qualified in its
entirety by this cautionary statement and, except as may be required by
law, the Fund undertakes no obligation to revise or update any forward
looking information as a result of new information, future events or
otherwise after the date hereof.
SOURCE Hardwoods Distribution Income Fund
For further information:
Chief Financial Officer
Phone: (604) 881-1990
Fax: (604) 881-1995