ATS Andlauer Income Fund

ATS Andlauer Income Fund

November 28, 2008 09:46 ET

ATS Andlauer Board Recommends Acceptance of Amended Offer

TORONTO, ONTARIO--(Marketwire - Nov. 28, 2008) - ATS Andlauer Income Fund (the "Fund") (TSX:ATS.UN) announced today that its Board of Trustees has issued a Notice of Change to Trustees' Circular in respect of the offer by a subsidiary of Andlauer Management Group Inc. to purchase all of the outstanding units of the Fund.

AMG recently announced that its offer has been extended from November 25, 2008 to December 5, 2008 and the offer price has been reduced from $11.75 per unit to $10.75 per unit. Despite the reduction in the offer price, the Independent Trustees of the Fund are recommending that unitholders tender their units to the amended offer. However, the circumstances are unusual and the Trustees ask that unitholders read carefully the reasons for the recommendation before deciding whether or not they will tender into the amended offer.

The offer from AMG was first publicly announced on August 11, 2008 and then was mailed to the unitholders on October 20, 2008. The Independent Committee retained TD Securities Inc. to prepare a formal valuation and TD Securities' opinion, dated October 9, 2008, was that the value of the units at that date was between $12.50 and $14.50 per unit. The opinion is subject to a number of assumptions and limitations and was sent to unitholders together with the offer (it is also available at

Both TD Securities and Genuity Capital Markets delivered opinions dated October 9, 2008 to the Independent Committee concluding that the original offer price of $11.75 was inadequate from a financial point of view to unitholders other than AMG and its affiliates.

The AMG offer was unsolicited and the Trustees would otherwise not have initiated a sale of the Fund at such time. The Trustees believe the offer was made at a time of depressed equity valuations and the continued volatility of the capital markets may be influencing the desire of some unitholders for liquidity, regardless of the intrinsic value of the Fund.

In response to the insider bid from AMG, the Independent Committee retained Genuity Capital Markets as financial adviser and instructed them to solicit other proposals to maximize unitholder value. This solicitation process was seriously constrained by the fact that AMG and its affiliates, principally Mr. Michael Andlauer, a Trustee of the Fund and a Director and the Chief Executive Officer of ATS Andlauer Transportation Services GP Inc., the administrator of the Fund, refused to support a sale of the Fund to the highest bidder. In the view of the members of the Independent Committee, and its financial adviser, substantially higher values might have been achieved had Mr. Andlauer been prepared to be supportive of the process to secure an alternative transaction.

Notwithstanding these concerns, one third party submitted a non-binding and confidential proposal to the Independent Committee to make an offer at $12.50 per unit, subject to completion of due diligence and to arranging financing. The Independent Committee was advised by its legal counsel that AMG's 25.3% ownership position, together with Lock-up Agreements entered into with certain unitholders, was not sufficient to block a competing transaction based on various structuring alternatives available to the Fund and a competing bidder at a higher price. After considerable work, this third party advised the Independent Committee that it was not prepared to proceed with an offer at $12.50, and it has now also advised the Independent Committee that it is not prepared to propose a transaction that would be financially superior to the amended offer at $10.75. The Independent Committee has been speaking with other third parties, some of whom were constrained by the timing of a Canadian take-over bid. We are not currently aware of anyone proposing to make a superior proposal before the expiry of the amended offer.

The Trustees concluded that the original offer price of $11.75 was not reflective of a fair fundamental value for the units. Despite the continued volatility of the markets, the Trustees believe that the reduced offer price of $10.75 is also not reflective of a fair fundamental value for the units.

However, the Trustees previously advised unitholders that there are a number of reasons why unitholders should consider tendering to the offer. Despite the reduction in the offer price to $10.75, these reasons continue to be applicable to the amended offer.

AMG has entered into Lock-up Agreements with unitholders that own or control 32.6% of the outstanding units. Those agreements permit the locked-up unitholders to withdraw from the agreements and tender into a superior proposal after allowing AMG a five business day right to match the higher offer. Given that the amended offer expires on December 5, 2008, any competing superior transaction would have had to be publicly announced prior to November 27, 2008 for the locked-up unitholders to be able to give notice to AMG and withdraw their units from the Lock-up Agreements if AMG declined to match the superior offer.

With 32.6% of the units subject to Lock-up Agreements, and 25.3% already owned by AMG and its affiliates, AMG is assured of at least 57.9% of the outstanding units. The offer is conditional on sufficient units being tendered such that AMG and its affiliates will own at least 66 2/3% of the outstanding units. The Trustees believe that AMG will likely achieve this minimum tender condition. The AMG offer states that AMG intends to pursue a compulsory acquisition of units not tendered, but the timing of any such transaction will be at AMG's discretion, and unitholders who would prefer to sell their units into the amended offer, and be paid within 10 days of its expiry on December 5, should tender now and not wait to be paid the same amount at a later date in a compulsory acquisition transaction.

The Independent Committee is very aware of the current volatile capital markets and the challenging economic environment generally. If some condition to the AMG offer, such as the minimum tender condition, is not met and the offer is withdrawn, it is reasonable to expect that the trading value of the units on the Toronto Stock Exchange will likely fall to levels below $10.75, and as indicated above AMG has said in a number of press releases that it would not support any alternative transaction. Although the Trustees believe the Fund's business remains fundamentally sound with positive longer-term prospects, there can be no assurances that this will be reflected in the unit price in the near term.

The Trustees remain disappointed that higher values could not be achieved for unitholders. On November 13, 2008 the Fund announced the financial results for a very good third quarter ended September 30, 2008. The Trustees believe the Fund's business is strong and that $10.75 undervalues the units. In the circumstances, however, the Trustees believe that the amended offer will succeed and that it is in the best interests of unitholders to be paid within 10 days of the expiry of the amended offer, rather than some months later pursuant to a compulsory acquisition transaction.

The Fund is an open-ended trust that holds, indirectly, securities of ATS Andlauer Transportation Services Limited Partnership ("ATS Andlauer LP"). ATS Andlauer LP is a leading single source transportation solutions provider in Canada, providing integrated trucking, courier, air freight and value added transportation and distribution services to consumer product companies. It operates facilities in 23 centres across Canada and serves approximately 1,400 diversified customers.

The Fund's units trade on the Toronto Stock Exchange under the symbol ATS.UN.

Additional information relating to the Fund, including all public filings, is available on and on the Fund's website at

Contact Information

  • ATS Andlauer Income Fund
    David I. Matheson
    Chairman of the Board
    (416) 865-7219