FP Newspapers Income Fund

FP Newspapers Income Fund

April 08, 2010 13:19 ET

FP Newspapers Income Fund Announces Intention to Convert to a Corporation

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 8, 2010) - The Board of Trustees of FP Newspapers Income Fund ( "Fund") (TSX:FP.UN) is pleased to announce that the Fund and its affiliated entities have entered into an agreement for the conversion of the Fund from a trust to a corporate structure pursuant to a plan of arrangement under the Canada Business Corporations Act. The conversion will be presented to unitholders for approval at the Fund's annual and special general meeting on May 5, 2010.

On October 31, 2006, the Canadian Minister of Finance announced the Canadian federal government's plan to change the tax treatment of income trusts like the Fund so that, following a transition period that expires at the end of 2010, they will be taxed on their income at rates of tax comparable to the combined federal and provincial corporate tax rate, and distributions of income to unitholders will be treated as dividends.

The Board of Trustees of the Fund has determined that it would be in the best interests of the Fund and its unitholders to convert the Fund from a trust to a corporation at the end of 2010, when the tax savings from the trust structure will be eliminated. The Board of Trustees believes that the conversion of the Fund to a corporation will:

  • simplify the business structure of the Fund;
  • remove the uncertainty that exists in the income trust marketplace today;
  • permit the Fund's financial performance to be more appropriately compared to that of its corporate peers;
  • attract new investors and provide a more liquid market for its securities than exists for the units;
  • facilitate the Fund's ability to pursue additional financing, if and when required; and
  • permit the Fund to capitalize on future external opportunities that may materialize.

The resolution approving the conversion must be approved by not less than two-thirds of the votes cast by unitholders voting on the matter. The arrangement is also subject to the approval of the Supreme Court of British Columbia and receipt of all necessary regulatory approvals.

If approved, the arrangement transaction will result in the reorganization of the Fund into a new corporation named FP Newspapers Inc. ("FPI") that will own all of the units of the Fund. Immediately following the completion of the Arrangement, the Fund and FPCN Holdings Trust will be wound up into FPI, leaving FPI holding directly the interest in FP Canadian Newspapers Limited Partnership ("FPLP") that is currently owned indirectly by the Fund.

The objective in the arrangement is to convert the Fund to a simplified corporate structure while maintaining as nearly as possible all of the existing rights and relationships among the affected parties. The board of directors of FPI will be composed of the current members of the Board of Trustees of the Fund, and the business will continue to be administered by FPCN General Partner Inc., which is the administrator of the Fund and the managing general partner of FPLP.

Under the arrangement, unitholders will receive, for each unit held, one common share of FPI (an "FPI Share"). Upon completion of the arrangement, the FPI Shares will be listed for trading on the Toronto Stock Exchange, subject to FPI satisfying certain listing conditions of the Exchange. The exchange of units for FPI Shares will be completed on a tax-free "roll-over" basis for Canadian federal income tax purposes.

Although the Fund's intention is to make the conversion effective on or about December 31, 2010, unitholder approval is being sought at the Fund's annual general meeting in May in order to avoid the expense associated with calling and holding a second unitholder meeting later in 2010 to consider the conversion. Full details of the conversion transaction are contained in the information circular dated March 23, 2010 sent to unitholders today in connection with the upcoming meeting, a copy of which is available on SEDAR.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this news release constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. In particular, this news release contains forward-looking information and statements relating to the expectations of the Fund regarding the proposed arrangement including, but not limited to, timing, completion, receipt of necessary approvals and anticipated benefits of the conversion.

These forward-looking information and statements are based on certain assumptions and analysis made by the Fund in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results, performance or achievements will conform to the Fund's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Fund's expectations. Such risks and uncertainties include, but are not limited to the failure to receive approval of the arrangement from the unitholders, the court or other regulatory authorities or to realize the anticipated benefits of the conversion. There can be no assurance that the actual results or developments anticipated by the Fund will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund. Readers are cautioned not to place undue reliance on such forward-looking information and statements. Except as may be required by law, the Fund assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events or otherwise.

About the Fund

FP Canadian Newspapers Limited Partnership owns the Winnipeg Free Press, the Brandon Sun, and their related businesses, as well as the Canstar Community News division, the publisher of eight community and special interest newspapers in the Winnipeg region. The Winnipeg Free Press publishes six days a week for delivery to subscribers and single-copy sales, serving Winnipeg and Manitoba with an average Monday through Saturday circulation of approximately 126,500 copies. On Sundays the Winnipeg Free Press publishes a tabloid-size newspaper sold through single-copy retail outlets and vending boxes. The Brandon Sun publishes seven days a week, serving the region with an average circulation of approximately 15,200 copies. Canstar Community News publishes weekly with an average circulation of approximately 200,000 copies. Based in Winnipeg, the businesses employ approximately 580 people in Winnipeg and Brandon. Further information can be found at www.fpnewspapers.com, and in the disclosure documents filed by FP Newspapers Income Fund with the securities regulatory authorities, which are available at www.sedar.com.

Contact Information

  • FP Newspapers Income Fund
    Daniel Koshowski
    Vice President, Finance and Administration
    (204) 697-7425
    (204) 632-0281 (FAX)