QUÉBEC CITY, Nov. 10 /CNW Telbec/ - As a result of an extensive strategic review process initiated at the end of July 2009, Cossette Inc. ("Cossette" or the "Company") today announced that it has entered into a definitive agreement (the "Agreement") to be acquired and taken private by Mill Road Capital, L.P. ("Mill Road"), a Greenwich, Connecticut-based private investment firm (the "Transaction").
Under the terms of the Agreement, Mill Road will acquire all of the issued and outstanding subordinate voting shares of the Company (the "Shares") for a consideration of $7.87 per share in cash, other than the shares of Senior Management Shareholders (as defined below). The transaction is not conditional on financing or due diligence.
The all-cash consideration of $7.87 per Share represents a premium of approximately 40% to the volume-weighted average trading price of the Shares for the past 20 trading days, 50% over Cosmos Capital Inc.'s ("Cosmos") offer price of $5.25 per Share of October 30, 2009 and 142% over the unaffected share price of $3.25 on July 17, 2009, the last trading day prior to Cosmos announcing its unsolicited and non-binding proposal to acquire all outstanding Shares at a price of $4.95 per Share on July 20, 2009.
"We are very pleased with this transaction for many reasons: it better reflects Cossette's true value and exemplifies our commitment to maximize value for all our shareholders," commented Claude Lessard, Cossette's Chairman of the Board, Chief Executive Officer and President. "Furthermore, it is occurring with a strategic partner that has already proven its respect for our organization, our brand and our people, and it ensures total continuity with our trusted clients who have supported us throughout this process. This transaction is fully supported by the senior management team."
Thomas Lynch, Senior Managing Director of Mill Road added, "Cossette is an outstanding brand in the communications sector and a great company. We are very pleased to partner with the management team who has our full support in deploying their strategic plan."
As a private company, Cossette will continue to be led by Claude Lessard and his current senior management team, and maintain its focus on providing best-in-class marketing and communications services to its global roster of clients.
Senior Management Shareholders (as defined below) and other officers of Cossette, representing approximately 30% of the Shares, have each entered into a support and voting agreement pursuant to which they have agreed, subject to certain conditions, to vote their Shares in favour of the Transaction (collectively, the "Support and Voting Agreements").
The key senior management shareholders of Cossette (the "Senior Management Shareholders"), including Messrs. Claude Lessard, Chief Executive Officer, President and founding partner of Cossette, and Pierre Delagrave, President, Cossette Media and Fjord Interactive Marketing and Technology and founding partner of Cossette, Gregor Angus, Chief Operating Officer of the U.K. operations, Marcel Barthe, Vice-President, Corporate Strategy, Martin Faucher, Vice-President & Chief Financial Officer, Richard Hadden, President and Executive Creative Director, Cossette West, Dominique Lebel, Executive Vice-President, Montreal and Quebec City, Brett Marchand, Executive Vice-President and Managing Director, Toronto, Kimberley Okell, Vice-President, Legal Affairs and Corporate Secretary and Colin Schleining, Executive Vice-President Cossette West and Chief Operating Officer of the U.S. operations and others, will exchange, immediately prior to the Transaction, part of their Shares for shares of a wholly-owned subsidiary of Mill Road.
The Transaction will be effected by way of a statutory amalgamation of Cossette with a wholly-owned subsidiary of Mill Road under Part 1A of the Companies Act (Québec), requiring the approval of (i) two-thirds of the votes cast by holders of Shares and (ii) a simple majority of the votes cast by shareholders other than the Senior Management Shareholders (the "Public Shareholders"). A special meeting of shareholders will be held to consider the Transaction on or about December 18, 2009. The Transaction will also be subject to customary conditions precedent, including obtaining regulatory approvals, if any.
Subject to receiving the required Cossette shareholder and regulatory approvals, if any, and the satisfaction of the other customary conditions, it is anticipated that this transaction would close before the end of 2009.
Other Transaction Terms
Cossette has agreed not to solicit competing acquisition proposals for the Company but has retained the ability to consider a competing acquisition proposal not solicited by it which the Board believes, in the exercise of its fiduciary duties, represents a superior proposal and to terminate the Agreement in the event of such superior proposal, subject to Mill Road's right to match or being paid a termination fee of $3.25 million. In addition, the Support and Voting Agreements will terminate in the event of the termination of the Agreement.
Board Approves Unanimously
Cossette's strategic review process was led by the special committee (the "Special Committee") of the Board of Directors (the "Board") of the Company comprised of four independent directors, namely: Messrs. Jean Lavigueur (Chairman), Robert Beauregard and Raymond Boucher, and Ms. Paule Gauthier. The proposed Transaction has been approved unanimously by the Board (with interested directors abstaining) following the report and favourable unanimous recommendation of the Special Committee. In doing so, the Board determined that the Transaction is fair to the Public Shareholders and in the best interests of Cossette and its shareholders and authorized the submission of the Transaction to shareholders of the Company for their approval at a special meeting of shareholders. The Board has also determined unanimously (with interested directors abstaining) to recommend to the shareholders of Cossette that they vote in favour of the Transaction.
BMO Capital Markets acted as exclusive financial advisor to Cossette through the Company's strategic review process. In reviewing the Transaction, the Special Committee received an opinion from RBC Capital Markets and the Special Committee and the Board received an opinion from BMO Capital Markets that the consideration to be received pursuant to the Transaction is fair from a financial point of view to the Public Shareholders. A copy of the fairness opinions, factors considered by the Special Committee and the Board and other relevant background information will be included in the management information circular that will be sent to Cossette shareholders in connection with the special meeting to consider the Transaction.
Speaking on behalf of the Special Committee, Jean Lavigueur said: "In the past three months, Cossette, through its financial advisor, has sought interest from a wide variety of parties with respect to a potential sale of the Company. Through an extensive sale process, the Company contacted approximately 125 potential strategic and financial buyers from across Canada, the United States, Europe and Asia. The transaction with Mill Road is the culmination of this thorough and extensive process."
A copy of the Agreement, the Support and Voting Agreements, the fairness opinions and certain related documents will be filed with Canadian securities regulators and will be available at the Canadian SEDAR website at www.sedar.com in due course. The management information circular in connection with the special meeting of shareholders to consider the Transaction is expected to be mailed to shareholders over the coming weeks.
Cossette's Recommendation to Reject the Cosmos Offer
Cossette further announced today that its Board unanimously approved, following the report and unanimous recommendation of the Special Committee, to recommend to shareholders that they reject the unsolicited offer by Cosmos to acquire all of the Shares for $5.25 per Share (the "Cosmos Offer"). The Board determined that the Cosmos Offer significantly undervalues Cossette and overall is not in the best interests of Cossette and its shareholders. As indicated above, the all-cash consideration of $7.87 per Share offered by Mill Road represents a premium of approximately 50% to the value of the Cosmos Offer of $5.25 per Share. Accordingly, the Board recommends that the shareholders not tender any of their Shares to Cosmos and instead to vote in favour of the Transaction with Mill Road.
Cossette Updates on its Shareholder Rights Plan
Cossette also announced that its Board has resolved, in accordance with Cossette's shareholder rights plan dated August 4, 2009 (the "Rights Plan"), to waive the application of the Rights Plan with respect to the acquisition of Shares by Cosmos under the terms and conditions set forth in the Cosmos Offer. The Board also decided to defer the "Separation Time" under the Rights Plan in connection with the Cosmos Offer until further determination is made in order to avoid the separation of the rights from the subordinate voting shares that would otherwise occur as a result of the announcement of the Cosmos Offer. In light of the foregoing, the Cosmos Offer will be permitted to proceed in accordance with its terms, provided however that under the terms of the Rights Plan, Cosmos and members of its group (like any other person or group of persons that are considered as "grandfathered" persons under the terms of the Rights Plan or are otherwise subject to the Rights Plan) will continue to be prohibited from acquiring subordinate voting shares of Cossette in any other manner, including by making purchases through the facilities of the Toronto Stock Exchange.
The Rights Plan was adopted on August 4, 2009 to prevent a creeping takeover of the Company and preserve its ability to seek to obtain the best value for all shareholders. The Rights Plan also ensures the stability of the Company's share ownership so that all shareholders may have the opportunity to participate in any future transaction involving the Company. The Board is of the view that a creeping takeover would be detrimental to the best interests of the shareholders and not in the best interest of the Company, and that the Rights Plan gives the Board an effective tool in responding to an attempt to acquire control through a progressive increase in ownership without an offer to all shareholders. The Rights Plan will not prevent an offer made to all shareholders for all of their shares.
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 1,485 employees and offices in Quebec City, Montreal, Toronto, Vancouver, Halifax, New York, Irvine, Los Angeles, London and Shanghai.
About Mill Road Capital
Mill Road Capital is a Greenwich, Connecticut-based investment firm formed by a core group of former professionals from The Blackstone Group. Mill Road focuses exclusively on investing in outstanding small publicly-traded companies. It invests on behalf of a prominent international group of limited partners including public pension funds, foundations, endowments and insurance companies. Mill Road has flexible capital with the ability to purchase shares in the open market, buy large block positions from existing shareholders, provide capital for growth or acquisition opportunities, or partner with management and sponsor going-private transactions.
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: Sylvie Isabelle, Optimum Public Relations, (418) 521-3184; Source: Cossette Inc., www.cossette.com