Menu Foods Income Fund

TSX : MEW.UN


Menu Foods Income Fund
Simmons Pet Food, Inc.



August 09, 2010 02:15 ET

Menu Foods Limited to Be Acquired by Simmons Pet Food, Inc.

Menu Unitholders to Receive $4.80 per Unit in Cash

TORONTO, ONTARIO--(Marketwire - Aug. 9, 2010) - Menu Foods Income Fund (the "Fund") (TSX:MEW.UN) and Simmons Pet Food, Inc. ("Simmons Pet Food"), an affiliate of Simmons Foods, Inc., announced today that the Fund has entered into a definitive agreement with Simmons Pet Food providing for the acquisition by Simmons Pet Food of Menu Foods Limited, the Fund's operating subsidiary. Under the agreement, Simmons Pet Food will acquire Menu Foods Limited for approximately $239 million, including assumption of existing debt. Immediately after the disposition of the Fund's assets, the units of the Fund will be redeemed for $4.80 per unit in cash. That value represents a 65.5% premium to the March 15, 2010 closing price of $2.90, the last trading day prior to the Fund's announcement that it would undertake a strategic review process, and a 46.8% premium to the closing price of $3.27 on August 6, 2010.

The transaction is subject to the approval of the Fund's unitholders by two-thirds of the votes cast at a special meeting, the receipt of regulatory approvals, and other customary closing conditions. The special meeting is expected to be held in September, 2010, with closing expected to occur early in the fourth quarter of 2010. The Fund will set a record date for a special meeting of unitholders to approve the terms of the transaction and will mail a circular describing the proposed transaction to Fund unitholders.

The proposed sale of Menu Foods Limited is the outcome of a previously announced strategic review process by the Fund's board of trustees (the "Board") under the supervision of Menu Food GenPar Limited's Strategic Alternatives Committee. BMO Capital Markets has provided an opinion to the Board that the consideration payable under the transaction is fair from a financial point of view to the Fund's unitholders. The Board has unanimously determined that the acquisition agreement and the proposed transaction are fair to the Fund's unitholders and in the best interests of the Fund and the Fund's unitholders. Accordingly, the Board has unanimously recommended that unitholders vote in favour of the special resolution to approve the proposed transaction.

"We have conducted an extensive review of the strategic alternatives available to the Fund and believe this transaction provides our unitholders with an attractive price for the business and a material premium to the recent trading levels of the units," said C. Ian Ross, Chairman of the Board. 

Under the acquisition agreement, the Fund is subject to a non-solicitation covenant, subject to customary "fiduciary out" provisions, which entitle the Fund to consider and accept a superior proposal, subject to the right of Simmons Pet Food to match the superior proposal and the payment to Simmons Pet Food of a break-up fee of $5 million for the Fund to accept a superior proposal. The transaction is not conditional on financing. Simmons Pet Food has represented to the Fund that it has obtained financing commitments which will be sufficient to pay the total consideration and related fees and expenses. A reverse termination fee of $5 million will become payable to the Fund by Simmons Pet Food in certain circumstances. A material change report, which provides more details on the transaction, will be filed with the Canadian securities commissions and will be available at www.sedar.com.

Each of the trustees of the Fund, the officers and directors of Menu Foods GenPar Limited, the Fund's administrator, and Deans Knight Capital Management Ltd. (collectively, the "Locked-up Parties") has agreed to vote his, her or its units in favour of the transaction pursuant to voting and support agreements with Simmons Pet Food. The Locked-Up Parties own or control 13,137,507 units (or approximately 45% of the units assuming the exercise of exchangeable units).

"With this transaction, we are adding one of North America's leading private label pet food manufacturers to our portfolio and further strengthening our company. Menu is a great company with an excellent management team and employees that are among the best in our industry, and we look forward to welcoming them into the Simmons family," said Mark Simmons, Chairman of Simmons Foods, Inc. and affiliates.

"Our businesses share a similar commitment to operational excellence, quality, customer service and innovation and through this transaction we expect to offer our customers an even stronger platform dedicated to helping them grow their businesses," said Todd Simmons, Simmons Pet Food's Chief Operating Officer.

BMO Capital Markets is acting as exclusive financial advisor to the Fund in connection with the transaction. Goodmans LLP and Fredrikson & Byron P.A. are legal advisors to the Fund. TD Securities Inc. is acting as exclusive financial advisor to Simmons Pet Food in connection with the transaction and its legal advisors are Stikeman Elliott LLP, Bingham McCutchen LLP, Wachtell, Lipton, Rosen & Katz, and Conner & Winters LLP.

About Menu Foods Income Fund

The Fund is the indirect owner of Menu Foods Limited, a leading North American private-label/contract-manufacturer of wet pet food products.

About Simmons

Based in Arkansas, the Simmons family of companies represents a highly diversified agricultural-based organization with annual sales of over US$1 billion. Simmons' businesses include Simmons Pet Food, a manufacturer of wet and dry pet food serving customers across the United States. Simmons' businesses also include a vertically integrated chicken business that focuses on national restaurants and retail mass merchandisers as well as Simmons Feed Ingredients, a quality leader in dry feed ingredients for dairy, cattle, aquaculture and pet food manufacturers.

Caution Regarding Forward Looking Statements

Certain statements contained in this news release, including statements relating to the completion of the proposed transaction, are "forward-looking statements" and are prospective. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "targets", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are based on estimates and assumptions made by management of the Fund and Menu Foods Limited in light of their experience and their perception of historical trends, current conditions and expected future developments, as well as other factors that they believe are appropriate in the circumstances, including their expectations of the timing and the terms and benefits of the proposed transaction. The completion of the proposed transaction is subject to a number of terms and conditions, including the expiration of any applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvement Act, required Fund unitholder approval, and certain termination rights available to the parties under the acquisition agreement. Many factors could cause the actual events to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the possibility that certain conditions of the proposed transaction may not be satisfied and legislative and/or regulatory changes. These factors should be considered carefully, and readers should not place undue reliance on the forward-looking statements. The Fund and Menu Foods Limited disclaim any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or other circumstances, except to the extent required by applicable law.

Contact Information

  • Menu Foods GenPar Limited,
    C. Ian Ross
    Chairman of the Board
    (905) 826-3870 Ext 211
    or
    Simmons Pet Food, Inc.
    Kimmie Provost
    (479) 215-2507