CanWel Building Materials Group Ltd., a Vancouver based company, has announced purchasing Jemi Fibre Corp., acquiring approximately 136,000 acres of private timberlands, harvesting operations, several post peeling facilities, two specialty wood treatment plants and one specialty saw mill. The purchase creates Canada’s only vertically-integrated building materials distribution company. A majority of these timberlands are located in the Elk Valley surrounding Fernie.
CanWel Building Materials Group Ltd. and Jemi Fibre Corp. are pleased to announce that they have entered into a definitive agreement whereby CanWel will acquire all of the issued and outstanding common shares of Jemi Fibre. Pursuant to the Transaction, all of Jemi Fibre’s issued and outstanding common shares will be exchanged for CanWel shares on the basis of 31.13 Jemi Fibre shares for one CanWel share and approximately 2.53 million common shares of CanWel will be issued to shareholders of Jemi Fibre.
The Exchange Ratio implies consideration of $0.136 per Jemi Fibre common share, based on the closing price of CanWel’s common shares on the Toronto Stock Exchange on March 8, 2016, representing a 29% premium to the closing price of Jemi Fibre on March 8, 2016. The implied equity value of Jemi Fibre is approximately $11 million. CanWel also expects to assume total indebtedness of approximately $25 million and refinance approximately $50 million of Jemi Fibre’s senior loans through the Offering (as described below) and new senior term loans committed by CanWel’s existing lenders.
Jemi Fibre is a vertically-integrated forest products company that operates primarily in SouthBritish Columbia and Saskatchewan. Jemi Fibre owns approximately 136,000 acres of private timberlands, strategic crown licenses and tenures, log harvesting and trucking operations, several post and pole peeling facilities, two pressure-treated specialty wood production plants, and one specialty saw mill. The Transaction will result in Jemi Fibre becoming a wholly-owned subsidiary of CanWel and will combine Jemi Fibre’s operations with CanWel’s well-established Canadian platform.
Amar Doman, Chairman and CEO of CanWel, commented “The Transaction further solidifies our position in Canada as a leading manufacturer and distributor of building material and related products. The acquisition of vast timberland holdings and experienced operators strengthens our supply chain, guaranteeing access to raw material supply for our company. We also forge stronger relationships with our existing suppliers, who are customers of Jemi Fibre. We are very pleased to deepen our presence in Western Canada, and look forward to welcoming our new colleagues to the CanWel family and accelerating our offerings, presence and overall growth together”. Mr. Doman added “We are also very pleased to announce that The Futura Corporation will be participating on the Offering in the amount of $6 million, alongside other insiders.”
Mike Jenks added “We are extremely pleased to be joining the CanWel organization to establish a more stable operating platform. Joining CanWel allows us to be part of a larger entity with deep and effective sales and distribution channels, operating expertise and a strong balance sheet. We have worked hard building a highly strategic, valuable and integrated collection of assets, and look forward to continuing our company’s vision as part of CanWel.”
The proposed Transaction will be effected by way of a court-approved plan of arrangement completed under the Business Corporations Act (British Columbia). The Transaction will require approval by 66 2/3 percent of the votes cast by the shareholders of Jemi Fibre present in person or represented by proxy at a special meeting of shareholders expected to take place in May of 2016. The Transaction does not require the approval of CanWel’s shareholders.
Officers and directors of Jemi Fibre have entered into voting support agreements in favour of the Transaction, representing approximately 52% of the outstanding common shares, pursuant to which they will vote their common shares held in favor of the Transaction. The voting support agreements may not be terminated by the officers and directors, except in very limited circumstances, even if Jemi Fibre validly exercises its right to terminate the Arrangement Agreement to pursue a superior proposal. The voting support agreements also provide that the officers and directors of Jemi Fibre will not sell or dispose of any CanWel shares they receive pursuant to the proposed Transaction for at least 12 months from the completion of the proposed Transaction.
In addition to shareholder and court approvals, the Transaction is subject to completion of the Offering and repayment of Jemi Fibre’s senior loans, and the satisfaction of certain other closing conditions.
The Arrangement Agreement includes customary provisions including non-solicitation provisions, a right to match any superior proposal and a $2.5 million termination fee payable to CanWel under certain circumstances. Further information regarding the Transaction and the Arrangement Agreement will be included in an information circular that is expected to be filed and mailed to Jemi Fibre shareholders in April 2016. Copies of the Arrangement Agreement and the information circular will be available online under CanWel’s and/or Jemi Fibre’s SEDAR profile at www.sedar.com
