/NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH US WIRE SERVICES/
CALGARY and TORONTO, Aug. 29 /CNW/ - Added Capital Corp. ("Added")
(TSXV:ACI.P) and Lakeside Steel Corporation ("Lakeside" or the "Company") are
pleased to announce that they have entered into a binding agreement dated
July 24, 2007 (the "Agreement") pursuant to which Added intends to acquire all
of the issued and outstanding shares of Lakeside, a steel pipe and tube
manufacturer based in Welland, Ontario (the "Transaction"). It is anticipated
that the Transaction, which represents Added's Qualifying Transaction, will be
structured as a "three-cornered" amalgamation involving Added, Lakeside and a
wholly-owned subsidiary of Added to be incorporated ("Added Sub"). Lakeside's
two principal shareholders are Northern Financial Corporation ("Northern"), a
Toronto Stock Exchange listed issuer, and Cumberland Lakeside Holdings Inc.
("Cumberland"), which own a total of 96% of the issued shares of Lakeside.
Northern's shareholding in Lakeside is held on behalf of an investor group of
which Northern is a member. Cumberland is an affiliate of Romspen Investment
Corporation ("Romspen"). Concurrently with completion of the Transaction,
Lakeside proposes to complete a financing (the "Financing") of units ("Units")
on a best efforts basis at $0.42 per Unit for gross proceeds of a minimum of
$10 million and a maximum of $50 million through Northern Securities Inc.
("Northern Securities") as lead agent on behalf of a syndicate of agents.
Northern Securities is a wholly owned subsidiary of Northern. Each Lakeside
Unit consists of a common share and one half of one common share purchase
Vic Alboini, Chairman of Lakeside, stated: "All publicly held Canadian
steel companies have been sold to international or North American purchasers,
including the recently announced sale of Stelco to U.S. Steel. The timing is
therefore right for Lakeside to go public and provide investors with an
opportunity to invest in a Canadian steel company which owns the steel pipe
and tube business acquired from Stelco in October 2005. Lakeside's twin
objectives are to grow its organic business profitably and to carry out
mergers and acquisitions of identified companies in steel-related or building
Added currently has 2,000,000 issued common shares, 200,000 issued
options and 100,000 issued broker warrants. Lakeside has 1,044 issued common
shares and, immediately prior to the Financing and prior to completion of the
Transaction, will split its common shares on a 1: 36,398.46743 basis,
increasing the 1,044 issued common shares to 38,000,000 common shares on a
The Agreement provides that Lakeside, which is incorporated under the
Business Corporations Act (Ontario) (the "OBCA") and Added Sub will complete
an amalgamation under the OBCA. Rather than receiving securities of the
amalgamated corporation, the shareholders of Lakeside will each receive common
shares of Added at a deemed price of $0.42 per Added common share. In this
regard, upon the closing of the Transaction, Added intends to issue the
holders of Lakeside common shares one common share of Added for each
outstanding post-split Lakeside common share. Added will also grant 1,000,000
Added options to certain officers, directors, employees and consultants of
Lakeside in exchange for the 1,000,000 options of Lakeside to be granted to
such persons prior to the completion of the Transaction on the same terms as
the Lakeside options. In addition, the warrants and broker warrants of
Lakeside to be issued in connection with the Financing will be cancelled in
exchange for warrants and broker warrants of Added having the same terms.
Lastly, Added will cancel its outstanding 200,000 options and will grant
300,000 options as replacement options upon completion of the Transaction.
Based on their current holdings of Lakeside common shares, Northern and
Cumberland will be issued a total of 36,431,520 common shares of Added on
completion of the Transaction. On a post-Transaction basis, without giving
effect to the Financing, Added will have 40,000,000 common shares outstanding,
1,300,000 options and 100,000 broker warrants which were previously issued by
Added. Lakeside intends to call a shareholder's meeting to be held prior to
completion of the Transaction to approve the stock split and the amalgamation.
There is no relationship between any of the officers, directors or principal
shareholders of Added and any of the officers, directors or principal
shareholders of Lakeside. The Transaction is therefore an arm's length
transaction that is expected to constitute Added's Qualifying Transaction as
defined in Policy 2.4 of the TSX Venture Exchange.
The proposed acquisition of the assets of Packard Gas Company described
in a letter of intent dated December 6, 2006 and in Added's press release of
December 7, 2006 and which was proposed as a Qualifying Transaction, was not
completed by, and is no longer binding on, Added.
Following completion of the Transaction, Added will hold a shareholder's
meeting to approve a change of name from Added Capital Corp. to Lakeside Steel
It is proposed that Lakeside will raise a minimum of $10 million and a
maximum of $50 million in the Unit Financing. Each Unit will consist of one
post-split common share and one half of one common share purchase warrant with
each full warrant exercisable into one post-split Lakeside common share for a
period of 24 months.
Lakeside has engaged Northern Securities to lead a syndicate of agents in
the Financing. The agents will be entitled to a cash commission of 8% of the
gross proceeds of the Financing and that number of broker warrants equal to
10% of the number of Units sold in the Financing with each broker warrant
exercisable into one post-split Lakeside common share. The broker warrants
will be exercisable for a period of 24 months. Lakeside is a related and
connected issuer with respect to Northern Securities. If the maximum of
$50 million is raised, Northern Securities has the option, subject to
regulatory approval, to raise up to an additional $50 million of Units of
Added on the same terms, for a period of 30 days following the closing of the
The net proceeds of the Financing (assuming completion of the maximum
offering) will be used to retire up to $13 million in Lakeside's subordinated
debt, including accrued interest, held by an affiliate of Romspen, up to
$5 million will be used for capital expenditures and up to $28 million will be
used to fund potential acquisitions of private or public companies in business
segments connected to the steel and building products sectors and for general
working capital purposes. The proposed acquisition program planned by Lakeside
is focused on the acquisition of steel-related companies or building product
companies that provide a strategic fit and achieve cost and production
efficiency. Lakeside has identified certain companies for acquisition and
intends to move forward with its acquisition program immediately following
closing of the Transaction.
In addition to raising up to $50 million, Lakeside also has a $35 million
line of credit with a working capital lender in which Lakeside has borrowed
less than $200,000 as of August 28, 2007.
All securities issued by Lakeside in the Financing including the
post-split common shares and warrants comprising the Units and the broker
warrants will be replaced by securities of Added with the same terms upon the
completion of the Transaction.
The Transaction is conditional upon, among other matters, completion of
the Financing, completion of satisfactory due diligence, the entering into of
definitive agreements, approval by the Board of Directors of Lakeside and
receipt of all regulatory approvals. There is no assurance that the
Transaction will be completed.
Added has agreed to deal exclusively with Lakeside in the completion of
the Transaction until November 17, 2007. The Agreement is binding upon Added
and may not be terminated by Added unless the Transaction is not approved by
the TSX Venture Exchange or is not completed by October 31, 2007. Lakeside may
terminate the Transaction for any reason including the entering into of any
other transaction with any other third party, and in the case of any such
termination Lakeside will reimburse the out-of-pocket expenses of Added to a
maximum of $25,000.
Management and Directors
On completion of the Transaction, it is anticipated that the Board of
Directors of Added will consist of Vic Alboini of Toronto, Ontario, Wes
Roitman of Toronto, Ontario, William Grant of Toronto, Ontario and Thomas G.
Milne of Calgary, Alberta.
Mr. Alboini is Chairman of Lakeside and Chairman and Chief Executive
Officer of Northern, which owns Northern Securities, a national brokerage firm
and investment bank with 120 employees in 8 Canadian cities. Mr. Alboini is
also Chairman and Chief Executive Officer of Jaguar Financial Inc., a Toronto
Stock Exchange listed merchant bank with $26.7 million in cash and investments
reported in its financial statements dated June 30, 2007. Mr. Alboini is
experienced in mergers and acquisitions and will lead the M&A team at Northern
Securities to implement Lakeside's acquisition program to acquire synergistic
companies in steel-related or building product sectors.
Mr. Roitman is a principal and Chief Financial Officer of Romspen.
Romspen is a Toronto-based independent commercial mortgage lender and real
estate financier, specializing in commercial first and second mortgages as
well as mezzanine, participation and construction loans. Mr. Roitman is
formerly the Vice President of Business Systems for Sinclair Technologies Inc.
and formerly the Executive Vice President and Chief Operating Officer of
Mr. Grant is an insurance broker and consultant. Mr. Grant was formerly
President and a director of Loyalist Insurance Company, a Toronto Stock
Exchange listed issuer, formerly a director of Commonwealth Insurance Company
and Federated Insurance Company, and formerly President of Markel Insurance
Mr. Milne is a self-employed financial consultant and is a current
director of Added. From 2000 to 2005, Mr. Milne was the Chief Financial
Officer of Big Sky Energy, an energy and exploration development company. From
2002 to 2004, Mr. Milne was a partner with Meyers Norris Penny, a chartered
The management team of Lakeside following completion of the Transaction
will consist of the current management team at Lakeside:
Vic Alboini, Toronto, Ontario Chairman
Sam Di Michele, Toronto, Ontario President and Chief Executive Officer
Ken Hunter, Welland, Ontario Chief Financial Officer
Olga Budimirovic, Toronto, Ontario Senior Vice President, Corporate
Robert O'Brien, Welland, Ontario Vice President, Human Resources
Frank Marotta, Welland, Ontario Vice President and Controller
Mr. Di Michele was hired as President and Chief Restructuring Officer on
March 5, 2007, for a period of one year, and on July 20, 2007 was appointed
President and Chief Executive Officer. Mr. Di Michele's business partner Olga
Budimirovic was hired as Senior Vice President, Corporate Planning. Mr. Di
Michele and Ms. Budimirovic have led the financial and operational
restructuring of Lakeside, which Lakeside anticipates will be substantially
completed by March 31, 2008.
Mr. Di Michele has significant experience in restructurings. Mr. Di
Michele led Cineplex Odeon Corporation through its restructuring and
subsequent sale and public offering. Mr. Di Michele is a self-employed
restructuring consultant offering such services through his consulting firm.
Mr. Di Michele has a Masters of Business Administration from Queen's
University and is a Certified Management Accountant.
Mr. Hunter was most recently Director of Finance and Information
Technology at Eurocopter Canada Limited, a wholly owned subsidiary of
Eurocopter, one of the world's largest manufacturers of civilian helicopters.
Previously, Mr. Hunter was a client service manager at Cincom Systems of
Canada Ltd. and finance & IT strategy manager for Ferranti-Packard
Transformers Ltd., a division of Rolls Royce. Mr. Hunter is a Certified
Olga Budimirovic is a restructuring consultant and business partner of
Mr. Di Michele. Previously Ms. Budimirovic was senior vice-president at Loews
Cineplex Entertainment and Cineplex Odeon Corporation; systems specialist at
Delcan-Hatch, management consultant to the Toronto Transit Commission; and IT
Mr. O'Brien is a seasoned human resources professional with more than 15
years experience. Mr. O'Brien has experience in senior positions with national
and international companies in the retail and entertainment sectors including
Marks and Spencer Canada and Loews Cineplex Entertainment.
Mr. Marotta has over 20 years of experience as a finance professional at
Lakeside and its predecessor owner, including his current position of Vice
President and Controller.
Lakeside was formed by Romspen to acquire certain assets and liabilities
of Stelpipe Ltd. ("Stelpipe"), a wholly-owned subsidiary of Stelco Inc.
("Stelco"). The Stelpipe business, which is the manufacture of steel pipe and
tubing for use in the oil and gas, mining, automotive and distribution
industries, had been carried on by Stelco and prior owners for over 100 years.
The Stelpipe business was sold by Stelco to Lakeside on October 31, 2005,
when Stelco was subject to the provisions of the Companies Creditors
Arrangement Act. Lakeside paid approximately $67 million for the Stelpipe
business, which was satisfied largely by the assumption of liabilities by
Lakeside. On the closing date, Cumberland, an affiliate of Romspen, acquired
47% of the issued common shares of Lakeside and a third party company also
acquired 47% of Lakeside and advanced $10 million in subordinated debt to
Lakeside. As a result of the third party's exercise of a shotgun buy-sell
mechanism in its shareholders agreement with Cumberland, on April 13, 2006 the
third party sold its 47% interest in Lakeside to Northern for $3 million and
transferred its $10 million in subordinated debt to an affiliate of Romspen.
The combined shareholdings of Northern and Romspen were increased subsequently
to 96% as a result of the purchase by Lakeside for cancellation of
approximately 2% of the issued Lakeside shares.
Current Financial Results and Financial Position
The selected financial information of Lakeside set out below is based on
audited financial statements for the year ended March 31, 2007 prepared in
accordance with Canadian GAAP.
For the fiscal year ended March 31, 2007, Lakeside generated
approximately $178 million in revenue and had net income of $3.1 million,
which takes into account a revaluation of certain liabilities and deferred
costs resulting in adjustments totaling $11.5 million. Lakeside's book value
at March 31, 2007 was $17 million.
For the five month period from November 1, 2005 (following the date of
acquisition of the business from Stelco) to March 31, 2006, Lakeside generated
approximately $88 million in revenue and net income of $14 million, which
reflects an extraordinary gain of $12.7 million from the acquisition of the
Based on Lakeside's unaudited financial statements as at June 30, 2007,
Lakeside has total assets of over $90 million, little or no bank debt and
subordinated debt of $13 million. Lakeside has substantially reduced the
interest rate on its subordinated debt effective April 1, 2007, conditional on
the closing of the Transaction. As of June 30, 2007, Lakeside had working
capital of approximately $25 million.
Lakeside's land, machinery and equipment have an independently appraised
value of $28.5 million, $2.8 million of which is reflected on the Lakeside
balance sheet. Therefore, the adjusted book value of Lakeside as at March 31,
2007 is estimated to be approximately $43 million.
Lakeside has a pension plan for its salaried employees and a pension plan
for its employees with Local Union 523 CAW-TCA Canada. The pension plans are
currently substantially funded with assets of approximately $57 million.
Financial and Operational Restructuring
Since the acquisition of the Lakeside business from Stelco in October
2005, Lakeside has carried out a financial and operational restructuring which
is substantially advanced. The restructuring streamlined the operations of
Lakeside, sold excess inventory, implemented an aggressive cost reduction
program aimed at eliminating inefficiencies and unnecessary expenses, and
Lakeside has focused on the achievement of better pricing for volume
steel purchases, the negotiation of discounts with suppliers and the reduction
of outsourced services.
As Lakeside completes its restructuring, the Company's objective is to
reach breakeven profitability over the next 12 month period.
Lakeside Steel Corporation, located in Welland, Ontario, is one of
Canada's most diversified steel pipe and tubing manufacturers. Lakeside's list
of customers includes some of the largest oil and gas, mining, automotive and
distribution companies in the world. In addition to supplying its products in
these industries, Lakeside manufactures pipe and mechanical tubing for the
resale market which is sold to distributors in Eastern Canada and the
Northeastern United States. Lakeside manufactures a variety of products for
these industries including oil well tubing and casing, mechanical tubing,
pressure tubing, automotive tubing, hollows for redraw, line pipe, heating and
plumbing pipe, galvanized pipe, drill rod and specialty tubing. Lakeside
serves customers worldwide supplying products in Canada, China, Australia and
the United States.
For fiscal 2007, approximately 50% of Lakeside's revenues were derived
from the oil and gas sector. Revenues from the mining and automotive sectors
comprised 19% and 16.3% respectively, for fiscal 2007. For fiscal 2008,
Lakeside's focus is to increase substantially its business in the mining
sector. Approximately 60% of Lakeside's raw steel supply is purchased from
Lakeside's facilities consist of approximately 90 acres of land and
industrial buildings containing an area of approximately one million square
feet. Lakeside owns and operates three mills that manufacture high quality
pipe and tube products ranging from 3/4" to 8 5/8" outside diameter. The three
mills consist of a state-of-the-art electric resistance weld stretch reduction
mill ("SRM"), a cold drawn tubing mill ("Cold Draw") capable of producing 1/4"
to 4 1/2" tubing products and an electric resistance weld mill ("ERW") capable
of producing 1/4" to 4 1/2" pipe products.
The SRM mill produces products that are used by customers in the
petroleum industry such as oil well casings, carbon steel pipes, drill pipes
and oil well tubing. The Cold Draw mill manufactures high-strength, mechanical
tubing which is utilized in the manufacture of drill rod for mining
exploration and automotive parts. The ERW pipe mill manufactures standard
pipes which are utilized in industrial applications, plumbing and heating,
water supply systems and refrigeration. Lakeside's operations have a number of
certifications including: ISO 9001-2000, API Specification Q1, Spec 5L and
The combined facilities have a manufacturing capacity of approximately
200,000 tons per year. For fiscal 2007, Lakeside sold 131,000 tons of product.
To capitalize on new market opportunities, Lakeside has plans to acquire a
pipe upsetting, pipe-threading and additional pressure-testing equipment to
add finishing services to its manufactured products.
Added's shares were listed on the TSXV and immediately halted pending the
Company's announcement of the previously announced Qualifying Transaction.
Trading in shares will resume subject to the receipt of appropriate filing
documentation and upon the engagement of a sponsor or sponsorship exemption.
Completion of the Transaction is subject to a number of conditions
including, but not limited to, TSX Venture Exchange acceptance and, if
applicable, pursuant to TSX Venture Exchange requirements, majority of the
minority shareholder approval. Where applicable, the Transaction cannot close
until the required shareholder approval is obtained. There can be no assurance
that the Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Filing Statement
to be prepared in connection with the Transaction, any information released or
received with respect to the Transaction may not be accurate or complete and
should not be relied upon. Trading in securities of a capital pool company
should be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the
proposed Transaction and has neither approved nor disapproved the contents of
this press release.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
Forward Looking Information
This press release contains certain forward looking information within
the meaning of applicable Canadian securities legislation. Forward-looking
information includes, but is not limited to, information with respect to
current expectations and projections about future results. In certain cases,
forward-looking information can be identified by the use of words such as
"plans", "expects" or "does not anticipate", or "believes", or variations of
such words and phrases or information that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking information involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements expressed or implied by the forward-looking information to be
materially different from those expressed or implied by such forward-looking
information, including risks associated with: Volatility of Metal Prices and
Cyclical Nature of Business, Oil and Gas Sector Volatility, Increased Imports,
Production Cost Increases, General Economic Slowdown and Limited History of
Operations. Although Added and the Company have attempted to identify
important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking information, there may be
other factors that cause actions, events or results to differ from those
anticipated, estimated or intended. There can be no assurance that
forward-looking information will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such
information. Accordingly, readers should not place undue reliance on
forward-looking information. Added and the Company do not undertake to update
any forward-looking information except in accordance with applicable
For further information:
For further information: Tom Milne, Director, Added Capital Corp.,
Telephone: (403) 606-8574, Email: email@example.com; Vic Alboini,
Chairman, Lakeside Steel Corporation, Telephone: (416) 644-8110, Email: