 |
MISSISSAUGA, ONTARIO (February 23, 2005): CFM Corporation announced today that it has signed a definitive transaction agreement for the acquisition of all of the common shares of the Company by Teachers’ Private Capital, the private equity arm of Ontario Teachers’ Pension Plan.
Under the terms of the agreement, which has been unanimously approved by the CFM board of directors, shareholders will receive Cdn.$1.50 in cash for each CFM common share held at the time of the acquisition of the Company by Teachers’ Private Capital. Completion of the acquisition is subject to the satisfaction of certain conditions set out in the transaction agreement, including the approval of 66 2/3% of all votes cast at a shareholders’ meeting expected to be held in early April.
The agreement and board approval are the result of an extensive review of the Company’s strategic options and an analysis of the Company’s weakened financial position and future prospects. In the absence of this transaction, CFM projects that the Company’s currently available cash resources will not be sufficient to fund its operations beyond mid-March.
As part of the transaction, Teachers’ Private Capital has agreed to provide the Company with a U.S.$25 million interim financing facility to assist the Company in meeting its working capital needs until the closing of the transaction. CFM’s shareholders will be entitled to receive an additional Cdn.$0.10 per share in cash on closing if the Company does not utilize more than U.S.$10 million of the facility or if it does so while continuing to meet a specified current asset coverage threshold. The Company must determine whether it can comply with either of these restrictions not later than 10 days before the shareholders’ meeting and will issue a press release on such date in the event of the Cdn$0.10 price increase.
The Ontario Teachers’ Pension Plan is a major Canadian investor and an independent corporation responsible for investing in excess of Cdn.$80 billion in assets and administering the pensions of more than 250,000 current and retired teachers in Ontario.
Following a recommendation by a committee of its independent directors, CFM’s board of directors unanimously recommends that shareholders vote in favour of the acquisition transaction and waive the CFM shareholder rights plan with respect to the acquisition transaction. BMO Nesbitt Burns Inc., financial advisor to the committee of independent directors, has provided a written opinion that the consideration to be offered to the holders of CFM common shares is fair, from a financial point of view, based upon the specific factors set out in its opinion.
The committee of independent directors was created in October 2004 to oversee a review of long-term financing alternatives and other strategic options available to the Company. This review followed breaches by the Company of covenants under its debt facilities for the last two quarters of the Company’s 2004 fiscal year.
During the review process, the committee of independent directors, with the assistance of its financial and legal advisors, completed an extensive process to assess the potential for entering into one or more strategic and/or recapitalization transactions. The committee of independent directors held numerous discussions with a number of interested financial and strategic parties relating to potential financing or sale transactions prior to recommending this transaction with Teachers’ Private Capital to the Company’s board of directors for approval.
It became apparent during the period of the review that ongoing operational inefficiencies resulting from the implementation of restructuring initiatives, as well as rapidly rising material costs and a stronger Canadian dollar were adversely affecting the Company’s performance and that a significant infusion of cash was required to stabilize its operations.
“This transaction is clearly in the best interests of all CFM stakeholders, in light of the alternatives that emerged during the strategic review and the Company’s deteriorating financial condition”, said Colin Adamson, Chairman and Chief Executive Officer of CFM Corporation. “It provides an all-cash payment to our shareholders and the assurance of greater stability to our suppliers, customers and employees.”
Jim Leech, Senior Vice-President, Ontario Teachers’ commented, “We have been working with CFM’s committee of independent directors for several months to evaluate the prospects of the Company. This effort has been complicated by CFM’s difficult financial position and lack of audited financial statements for 2004. Our strong financial backing and subsequent privatization will give CFM the time and resources to restructure its operations in a measured and appropriate manner.”
Upon receiving the required shareholder approval, the parties intend to give effect to the acquisition transaction shortly after the shareholders’ meeting. In addition, completion of the acquisition transaction is conditional upon receiving the necessary regulatory approvals and completion of certain other customary closing conditions including that the Company is not subject to any event, occurrence or change having a material adverse effect on the Company prior to closing.
Under the terms of the transaction agreement, Ontario Teachers’ Pension Plan may terminate the agreement if, among other things, the Company has not publicly disclosed its audited consolidated financial statements for the fiscal year ended October 2, 2004, together with an unqualified audit report by the Company’s auditors prior to the date on which the Company mails its meeting materials to shareholders. No assurances can be given that all conditions to the closing under the transaction agreement will be met or that the acquisition will become effective.
At the request of Teachers’ Private Capital, the Company has designated Larry Robinette to become Chief Executive Officer of the Company, concurrent with the closing of the transaction. Mr. Robinette has served as Chief Executive Officer of Morgan Products, a building materials distributor, and Collision Team of America, a collision repair facilities operator. He has significant experience in leading change for organizations challenged with underperforming acquisitions, turnarounds, and industry consolidations.
Ontario Teachers’ Pension Plan is entitled to a termination fee of Cdn.$1.6 million on the occurrence of customary termination fee events, including if the CFM shareholders do not approve the acquisition transaction and an acquisition proposal (as defined in the transaction agreement) is announced prior to the shareholders' meeting and is subsequently completed, or an acquisition proposal is announced within three months following the shareholders' meeting and is subsequently completed within 12 months, and if CFM enters into a superior proposal (as defined in the transaction agreement) with a third party that is not matched by Ontario Teachers' Pension Plan. The Company has also agreed to pay all third party expenses incurred by Ontario Teachers’ Pension Plan in connection with the transaction up to a maximum of Cdn.$1.25 million.
As previously announced, the Company has been operating under a forbearance agreement against action related to continuing covenant violations provided for in the agreements governing its bank credit facility and its senior notes. That forbearance was scheduled to expire on March 4, 2005. In connection with the forbearance arrangements, the Company’s bank operating facility was reduced from Cdn.$105 million to U.S.$30 million. The Company’s current cash flow projections indicate that it would not be able to meet its cash requirements to fund the business beyond mid-March without the increased access to borrowings provided by Ontario Teachers' Pension Plan. The holders of the Company’s senior notes, a significant majority of which are held by Ontario Teachers’ Pension Plan, and its credit facility lender have agreed to continue to forbear against action related to financial and reporting covenant violations until the earlier of May 13, 2005 (subject to extension to June 12 in limited circumstances), 20 days following the termination of the transaction agreement, and 30 days following the completion of the acquisition transaction. The terms of the extended forbearance require the Company to deliver its unaudited interim consolidated financial statements for the first quarter of 2005 prior to March 31, 2005, its audited consolidated financial statements for the year ended October 2, 2004 prior to April 15, 2005 and all future financial statements and cash flow statements and projections in accordance with the requirements of the Company's senior notes.
The Company anticipates that it will disclose its annual audited consolidated financial statements for the year ended October 2, 2004 during the week of February 28, 2005. In connection with the completion of its fiscal 2004 audit, the Company has determined that there has been a permanent impairment to the value of its goodwill and, as a result, a significant writedown of its goodwill will be taken, although the specific amount of the goodwill writedown has yet to be determined. The Company expects that the notes to its annual audited financial statements will include disclosure about the Company’s ability to continue as a going concern.
Although the interim financial results for the first quarter of fiscal 2005 have not been finalized, based upon its review of the preliminary results compiled to date, CFM currently estimates that it generated sales revenues of between U.S.$133 million and U.S.$135 million for the quarter and incurred an operating loss before interest, taxes, depreciation and amortization of between U.S.$6 million and U.S.$11 million for the quarter. The Company has incurred significant costs during the review of its financing and strategic alternatives, which, including the costs of completing the acquisition transaction, will exceed U.S.$9.5 million. The Company anticipates that it will disclose its unaudited interim financial statements for the first quarter of fiscal 2005 by March 31, 2005.
Investors and shareholders are urged to read the management information circular for the shareholders’ meeting when it becomes available, since it will contain important information about the financial condition of the Company as well as the transaction. The circular will be mailed to CFM shareholders prior to the shareholders’ meeting and will be made available through SEDAR at www.sedar.com.
Investor Conference Call
CFM will hold a conference call for investors to discuss this transaction on Wednesday, February 23, 2005 at 9:00 a.m. To participate in the conference call please dial 416-620-2414. Business media are invited to participate in listen-only mode and to contact the Company for further information at the number listed above.
The conference call will also be broadcast live on CFM’s website. To listen to the conference call live via the webcast, enter CFM’s website at www.cfmcorp.com and click on the conference call webcast.
The conference call can also be listened to after the conference call’s completion by telephone or via the webcast. The telephone number to listen to the call after it is completed (Postview Replay) is 416-626-4100, passcode: 21232951. The Postview Replay will be available until midnight on March 2, 2005.
This press release contains forward looking statements that involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, without limitation, general economic conditions, consumer confidence, the level of housing starts and demographics, CFM’s ability to develop new products, patent protection, weather and related customer buying patterns and manufacturing issues, industry capacity, product liability, availability of gas and gas prices, mass merchant consolidation, credit and collections, supply and cost of raw materials, steel availability and pricing, purchased parts and personnel, costs of certain employee benefits, the inability to increase selling prices as costs increase, competition, foreign currency fluctuations and government regulation. These factors and other risks and uncertainties are discussed in detail in CFM's Annual Information Form dated February 9, 2004 and in the reports and disclosure documents filed by CFM with Canadian and U.S. securities regulatory authorities and commissions. Statements made in this press release are made as of February 23, 2005 and CFM disclaims any intention or obligation to update or revise any statements made herein, whether as a result of new information, future events or otherwise.
CFM Corporation is a leading integrated manufacturer of home products and related accessories in North America and the United Kingdom. CFM designs, develops, manufactures and distributes a line of hearth and space heating products, barbecue and outdoor products and water and air purification products. CFM maintains an ongoing program of research and development aimed at continually improving the quality, design, features and efficiency of its products.
Teachers’ Private Capital is the private equity arm of the C$80 billion Ontario Teachers’ Pension Plan, which invests on behalf of 250,000 active and retired teachers in Ontario, Canada. With assets of more than Cdn.$7 billion, Teachers’ Private Capital is one of Canada’s largest private investors and is currently working with more than 100 companies and funds around the world to create value by providing long-term flexible capital. It specializes in providing private equity and mezzanine debt capital for large and mid-cap companies, venture capital for developing industries, and financing for a growing portfolio of infrastructure and timberland assets.
For more information:
CFM Corporation |  | |
| Investors: | | Media: |
Colin M. Adamson
Chairman and Chief Executive Officer
(905) 670-7777 ext. 2243
J. David Wood
Vice President and Chief Financial Officer
(905) 670-7777 ext. 2243
| | John Lute
Lute & Company
(416) 929-5883 |
Ontario Teachers' Pension Plan
Lee Fullerton
Director, Communications and Media Relations
(416) 730-5347
lee_fullerton@otpp.com
|
| | |
|
|
