MONTREAL, April 11, 2012 /CNW Telbec/ - Fibrek Inc. ("Fibrek" or the "Company") announced today that Mercer International Inc. ("Mercer") has increased the consideration offered to Fibrek shareholders under its offer to purchase all of the issued and outstanding common shares of Fibrek from $1.30 to $1.40 (the "Increased Mercer Offer"). As a consequence, the support agreement between the two companies, dated February 9, 2012, has been amended. The increased consideration represents a 40% premium over the unsolicited insider bid made by AbitibiBowater Inc. (doing business as Resolute Forest Products) ("Abitibi"). Fibrek also announced today that its Board of Directors has adopted a shareholder rights plan (the "Rights Plan"), to automatically terminate at the close of business on May 11, 2012, in order to enable shareholders to benefit from the Increased Mercer Offer.
"Mercer has once again brought a superior offer to the table - one which recognizes the intrinsic value of Fibrek shares, as confirmed by the independent valuation presented to the Board in February, and one the Board strongly recommends to shareholders," stated Hubert T. Lacroix, Chairman of the Board of Directors of Fibrek. "Note that the full amount of the increased portion of Mercer's improved offer at $1.40 is payable in additional cash.
"Our Board remains committed to its fiduciary duty to maximize value for our shareholders. Faced with Abitibi's continued oppressive conduct, which has effectively prevented an unrestricted auction for the common shares of Fibrek, we are taking measures to promote shareholder democracy in the face of a highly coercive unsolicited bid by Abitibi. The adoption of the shareholder rights plan is a genuine attempt by the Board to provide our shareholders with the ability to choose Mercer's vastly superior offer.
"The rights plan, which will expire on May 11, will provide shareholders with sufficient time to compare Mercer's new, improved offer to Abitibi's inferior bid and will eliminate the threat of Abitibi's coercive offer against our minority shareholders who may feel forced into tendering their shares in fear of being left out in a controlled public company, without any hope of getting a control premium for their shares. In addition, the rights plan will give enough time to the minority shareholders to wait for the Supreme Court decision. We have fought vigorously to protect the rights of our shareholders since day one and we will continue to do so," continued Mr. Lacroix.
Fibrek would like its shareholders to consider the following developments since the Mercer offer was originally announced on February 10, 2012:
- the troubling behaviour of Abitibi and its insiders Fairfax Financial Holdings Limited ("Fairfax") and Steelhead Partners, LLC ("Steelhead"), including the significant and improper acquisitions of Fibrek shares made by Steelhead after the announcement of the Abitibi offer;
- the reduction by Abitibi of its minimum tender condition to the number of shares covered by lock-up agreements in its favour, which could allow Abitibi to become, practically speaking, the controlling shareholder of Fibrek as soon as its offer expires at 11:59 p.m. today, without having paid a fair value to our shareholders;
- Abitibi has no obligation to extend its offer following April 11 and therefore no obligation to acquire more common shares or to privatize the Company after having taken up only 59,502,822 of the 130,075,556 Fibrek shares currently outstanding;
- Abitibi's opportunistic strategy to acquire Fibrek shares at a discount while proceedings seeking a cease trade order in respect of its offer are still pending takes advantage of the uncertainty existing in the market; and
- Abitibi's coercive attempt to place Fibrek shareholders in front of a fait accompli and force them to accept its inadequate offer and leave $0.40 per share on the table.
Pierre Gabriel Côté, President and Chief Executive Officer of Fibrek, added: "In adopting the new shareholder rights plan, the Board is ensuring that shareholders can choose an increased offer from Mercer. We are very pleased that the new offer now recognizes further value in Fibrek to the benefit of our shareholders, including our potential 33 megawatt power purchase agreement which could generate an incremental EBITDA of up to $16 million."
Details of the Increased Mercer Offer
Pursuant to the amendment, the consideration to be offered for each common share of Fibrek under the Increased Mercer Offer will be, at each shareholder's option, (i) $1.40 in cash; (ii) 0.1659 of a share of Mercer common stock ("Mercer Shares"); or (iii) $0.64 in cash plus 0.0903 of a Mercer Share, subject to proration on the basis of a maximum of $83,007,556 in cash and approximately 11.7 million Mercer Shares. Mercer has increased the cash component of its offer by $13,007,556 compared to its previous offer and it is $11,466,000 superior to the cash component of Abitibi's inferior insider bid. In addition, the consideration represents a premium of approximately 84% over the volume weighted average price of the common shares of Fibrek on the Toronto Stock Exchange ("TSX") for the 20 trading days ending on November 28, 2011, and a premium of 94% over the closing price the day before the announcement of the unsolicited bid of Abitibi.
The Increased Mercer Offer will be open for acceptance for a period of no less than 10 days from the date of the notice of change, variation and extension to be filed by Mercer, or as otherwise required by applicable securities laws. The Increased Mercer Offer remains subject to the same conditions as the original Mercer offer dated February 29, 2012 and mailed to Fibrek shareholders. Pursuant to the amendment, the amount of the expense reimbursement payable by Fibrek to Mercer in certain conditions has been increased from $2,000,000 to $2,400,000.
The Rights Plan
The Rights Plan, which will automatically terminate at the close of business on May 11, 2012, has been adopted in order to:
- ensure that all shareholders of Fibrek are treated fairly in connection with any attempt by Abitibi to acquire effective control of Fibrek through coercive and opportunistic acquisition tactics;
- considering that the Supreme Court of Canada has granted Fibrek's request to expedite the application for permission to appeal the Québec Court of Appeal's decision, allow the Fibrek shareholders to wait for the Supreme Court of Canada's decision in respect of the proposed private placement to Mercer of 32,320,000 special warrants to purchase common shares of Fibrek, which would re-establish a level playing field between Abitibi and Mercer;
- maximize the return to all shareholders of Fibrek and give them the right to benefit from the higher bid from Mercer at $1.40 and to protect such higher offer on behalf of the shareholders;
- protect the minority shareholders from the oppressive conduct of Abitibi; and
- allow sufficient time for Management to complete the negotiations with Hydro-Québec in connection with the conclusion of a power purchase agreement, which as previously announced, according to Management's estimates, could generate an incremental EBITDA of up to $16 million at the Saint-Félicien Mill in the event the Corporation were to secure a power purchase agreement for all the mill's available 33 megawatts.
Based on advice from its advisors, Fibrek's Board of Directors unanimously recommends that shareholders ACCEPT and TENDER their common shares to the Increased Mercer Offer.
The Board also recommends that shareholders REJECT and NOT TENDER their common shares to Abitibi's $1.00 unsolicited insider bid. If shareholders have tendered their shares to the Abitibi insider bid, the Board recommends that they WITHDRAW them immediately.
Full details of the Increased Mercer Offer will be included in a notice of variation to be mailed promptly by Mercer to Fibrek shareholders. A full description of the reasons for the recommendation of Fibrek's Board of Directors to accept the Increased Mercer Offer will be provided in a notice of change to the directors' circular dated February 29, 2012, which will also be mailed to Fibrek shareholders as soon as practicable.
Pursuant to the Rights Plan, the Board has authorized the issuance of one right in respect of each common share of Fibrek outstanding as of the close of business on April 11, 2012 and each share issued thereafter. The rights will become exercisable and a Flip-in Event (as defined in the Rights Plan) will occur if a person, together with its affiliates, associates and joint actors, acquires beneficial ownership of common shares which, when aggregated with its current holdings, total 20% or more of the outstanding common shares (determined in the manner set out in the Rights Plan).
To the knowledge of Fibrek, Abitibi is deemed to be the beneficial owner of 45.74% of the issued and outstanding common shares (given that Fairfax, Pabrai Investment Funds and Oakmont Capital Inc. have signed hard lock-up agreements in its favour) and Fairfax beneficially owns 25.85% of the issued and outstanding common shares of Fibrek. Abitibi and Fairfax are grandfathered under the Rights Plan and their respective beneficial ownership of more than 20% of the outstanding common shares as of today's date will not trigger a Flip-in Event. However, if subsequent to today, Abitibi and/or Fairfax become the owner of any common shares not beneficially owned by them as of the close of business on April 11, 2012 or if Abitibi enters into additional lock-up agreements with other shareholders, then a Flip-in Event will occur. As such, the Rights Plan will be triggered and a Flip-in Event will occur upon Abitibi taking-up any common shares at the expiry of its offer or upon Abitibi entering into additional lock-up agreements with other shareholders. Upon the occurrence of a Flip-In Event, Abitibi and all the shareholders having signed lock-up agreements in its favour would suffer substantial dilution.
Upon the occurrence of a Flip-in Event, each right held by a person other than the acquiring person and its affiliates, associates and joint actors would, upon exercise, entitle the holder to purchase additional common shares at a substantial discount to the market price thereof at that time.
The Board has the discretion to defer the time at which the rights become exercisable and to waive the application of the Rights Plan and/or redeem the rights if the Board determines it is in the best interest of Fibrek to do so.
Although Abitibi's first announcement of its intention to commence its unsolicited insider bid would have given effect to the "separation time" under the Rights Plan, the Board has delayed the "separation time" to a later date to be determined by the Board.
Under the support agreement with Mercer, Fibrek has agreed to irrevocably waive, suspend the operation of, or otherwise render the Rights Plan inoperative against the Increased Mercer Offer.
The Rights Plan permits the acquisition of control of Fibrek through a "permitted bid" under the terms of the Rights Plan, a competing permitted bid or negotiated transactions. A "permitted bid" is a bid that, among other things, is made to all holders of common shares, and is accepted by a majority of Fibrek's independent shareholders. Abitibi's Insider Bid is not a "permitted bid" under the Rights Plan.
Although the Rights Plan is effective immediately, it remains subject to acceptance by the Toronto Stock Exchange. A copy of the Rights Plan will be available at www.sedar.com.
Important Shareholder Information
The next annual meeting of Fibrek shareholders will be held on June 21, 2012. Record date to receive notice of the meeting and to vote at such meeting has been fixed to May 14, 2012.
A notice of change, variation and extension setting forth details of the Increased Mercer Offer will be mailed to shareholders and will be available on SEDAR at www.sedar.com in due course. The Support Agreement, the Special Warrant Agreement and the Directors' Circular in respect of the Mercer offer, February 9, 2012, is available at www.sedar.com under the company's profile.
Further to the announcement by Abitibi that it has reduced to 59,502,822 shares its minimum tender condition and extended its unsolicited insider bid to 11:59 p.m. on April 11, 2012, the Board of Directors of Fibrek is continuing to vigorously defend the rights of its minority shareholders to benefit from the superior $1.40 offer from Mercer. The Board of Directors continues to unanimously recommend that shareholders ACCEPT and TENDER their common shares to Mercer's $1.40 offer. The Increased Mercer Offer represents a 40% premium over Abitibi's unsolicited insider bid.
As previously announced, Mercer has filed an application before the Bureau de décision et de révision (Quebec) for a cease trade order and/or other appropriate relief with respect to the unsolicited insider bid made by Abitibi for the shares of Fibrek. This application is currently pending.
Fibrek reminds shareholders that 45.7% of Fibrek shares are subject to lock-up agreements, which expire on April 13, 2012, in favour of Abitibi and that as of March 30, 2012, only 46.4% of the outstanding Fibrek shares had been deposited to the Abitibi unsolicited insider bid.
For more information on how to tender Fibrek common shares, for any other inquiries regarding the Mercer offer or on how to withdraw shares tendered to the Abitibi bid, please contact Fibrek's information agent, Phoenix Advisory Partners, at 1-800-398-1129 (North American Toll Free) or via email at [email protected].
Fibrek (TSX: FBK) is a leading producer and marketer of high-quality virgin and recycled kraft pulp. The company operates three mills located in Saint-Félicien, Québec, Fairmont, West Virginia, and in Menominee, Michigan with a combined annual production capacity of 760,000 tonnes. Fibrek has approximately 500 employees. The Saint-Félicien mill provides northern bleached softwood kraft pulp (product known as NBSK pulp) to various sectors of the paper industry mainly in Canada, the United States and Europe, for use in the production of specialized products. The Fairmont and Menominee mills manufacture air-dried recycled bleached kraft pulp (product known as RBK pulp) and primarily supply manufacturers of fine uncoated paper, tissue paper for commercial and industrial uses, and coated paper in the United States.
This press release contains "forward-looking statements" within the meaning of applicable securities laws. These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical facts and include statements concerning Fibrek's future outlook, business strategy, plans, expectations, results or actions, or the assumptions underlying any of the foregoing. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. These statements are based on information currently available to Fibrek's management and on the current assumptions, intentions, plans, expectations and estimates of Management regarding Fibrek's future growth, results of operations, performance, business prospects and opportunities and ability to attract and retain customers as well as the economic environment in which it operates. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which could cause actual results of Fibrek to differ materially from the conclusion, forecast or projection stated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: actions taken by Abitibi or Mercer, actions taken by shareholders of Fibrek in respect of Abitibi's unsolicited offer and the Mercer Offer, the possible effect of Abitibi's unsolicited offer and the Mercer Offer on Fibrek's business, the award of a power purchase agreement to Fibrek under the new Québec Government cogeneration program, general economic conditions, pulp prices and sales volume, exchange rate fluctuations, cost and supply of wood fibre, wastepaper and other raw materials, pension contributions, competitive markets, dependence upon key customers, increased production capacity, equipment failure, disruptions of production, capital requirements and other factors referenced in Fibrek's continuous disclosure filings which are available on SEDAR at www.sedar.com. The completion of the Mercer Offer is subject to a number of terms and conditions. The conditions to the Mercer Offer may not be satisfied in accordance with their terms, and/or Mercer may exercise its termination rights under the support agreement, in which case the Mercer Offer could be terminated. Failure to complete the Mercer Offer could have a material adverse impact on the market price of Fibrek's shares. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, except as required by applicable securities laws, Fibrek assumes no obligation to update or revise them to reflect new events or circumstances.
For further information:
Patsie Ducharme 514 871-0550
Vice President and Chief Financial Officer
Lyla Radmanovich 514 843-2336
NATIONAL Public Relations
Dany Paradis 514 871-0550
Vice President, Change Management and Supply Chain