Armtec Infrastructure Income Fund
TSX : ARF.UN

Armtec Infrastructure Income Fund

June 25, 2008 16:09 ET

Armtec Announces Strategic Acquisitions, Bought Deal Financing and Proposed Transaction

GUELPH, ONTARIO--(Marketwire - June 25, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Armtec Infrastructure Income Fund (the "Fund") (TSX:ARF.UN) today announced that it has entered into an agreement with Clearford Industries Inc. ("Clearford") to acquire the assets of its Brooklin Concrete division ("Brooklin") and the shares of Boucher Pre-cast Concrete Ltd. ("Boucher"). The aggregate purchase price is approximately $65 million, subject to working capital adjustments. The Fund has also entered into an agreement with Scotia Capital Inc. and TD Securities Inc. for a bought deal private placement offering of Fund units for gross proceeds of approximately $37.5 million. As well, the Fund has entered into a non-binding letter of intent to purchase a Western Canadian based manufacturer of precast concrete products.

Clearford Transaction

For the 12-month period ended March 31, 2008, the Brooklin and Boucher businesses generated, in the aggregate, approximately $43 million of revenue. The purchase price payable for the Brooklin assets is approximately $43 million, of which $3 million will be paid in securities which are exchangeable into units of the Fund. Two-thirds of those securities will be held in escrow for two years to support Clearford's obligations under the purchase agreement. The purchase price payable for the Boucher shares is approximately $22 million, of which $5 million will be paid by way of a promissory note over a five-year period. The transactions are expected to close simultaneously on or about July 31, 2008 and are subject to satisfaction of customary closing conditions, including approval of the transaction by the shareholders and convertible debenture holders of Clearford. The Toronto Stock Exchange ("TSX") must approve the issuance of the Armtec units and Clearford must also obtain approval from the TSX Venture Exchange.

"Our acquisition of Brooklin and Boucher expands the geographic scope of our successful precast business," said Charles M. Phillips, President and Chief Executive Officer. "The transactions build on our acquisitions of Con-Force and A.E. Concrete Precast Products, and increase the range of products and services that we can offer to customers in Ontario and Quebec. Brooklin and Boucher supply both standard precast products and structural components and this will enable us participate in a broad range of projects that cover the breadth of precast solutions from the Pacific Ocean to Western Quebec."

Founded in 1952, Brooklin is the leading manufacturer of septic tanks in Ontario. Brooklin also manufactures precast concrete products, including patio stones, retaining walls, transformer foundations, and switching chambers. Brooklin has four plants in Ontario, located in Brooklin, Newmarket, Huntsville and Haliburton.

Founded in 1954, Boucher specializes in commercial tanks, bridges, box culverts, train boxes, barriers, transformer base and pads, electrical manholes, well tile, parking curbs, pump chambers, concrete panels and segmental rings for tunnelling projects. Boucher's facilities are located in Ottawa, Ontario and primarily service the greater Toronto area, North Bay, Sudbury and the Ottawa region.

Transaction Highlights

- The acquisitions will provide greater cash flow stability through diversification of customers, products and geography and will be immediately accretive to the Fund's cash available for distribution.

- Through its Con-Force division, the Fund is one of the leading manufacturers of precast and pre-stressed concrete structures in Western Canada with high value-added engineered products, a diverse customer base that includes government, commercial and industrial clients. These acquisitions support the Fund's leadership position in this industry as well as its geographic expansion strategy.

- Brooklin's and Boucher's products will be complementary to the Fund's current product offering, through the addition of engineered concrete solutions for a variety of infrastructure applications, including bridges and building applications.

- The acquisitions will provide significant future growth opportunities as:

-- The outlook for general infrastructure growth due to increased government and private sector spending remains positive.

-- Precast and pre-stressed concrete solutions represent a growing product category.

-- Acquisition opportunities exist across Canada based on the fragmented nature of the precast concrete industry.

Scotia Capital Inc. acted as exclusive financial advisor to Armtec and the Fund on the acquisition.

Bought Deal Financing

The Fund also announced today that it had entered into an agreement with Scotia Capital Inc. and TD Securities Inc. for a bought deal private placement offering of Fund units priced at $24.15 per unit for gross proceeds of approximately $37.5 million. The offering is subject to TSX approval and other customary conditions and is scheduled to close on July 10, 2008. The Fund units will be subject to resale restrictions for a four-month period following the closing date under applicable Canadian securities laws.

The net proceeds from the offering will be used by the Fund to finance potential acquisitions, including the acquisition of the assets of Brooklin and the acquisition of the shares of Boucher if, as and when completed, general business purposes and/or the repayment of outstanding indebtedness of the Fund and its subsidiaries. Closing of the offering is not conditional on the completion of the Brooklin and Boucher acquisitions.

The securities to be offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

Proposed Transaction

Armtec has also entered into a non-binding letter of intent to purchase a Western Canadian based manufacturer of precast concrete products for approximately $50 million. Completion of the transaction will depend upon a number of conditions including, without limitation, satisfactory results of a due diligence review being undertaken by the Fund and the negotiation of a definitive purchase agreement. There can be no assurance that a definitive agreement will be entered into.

About Armtec

The Fund is a leading manufacturer and marketer of a broad range of infrastructure products and engineered bridging solutions for application in a diverse cross-section of industries. These include the public infrastructure market and private sector markets such as natural resources, commercial building, residential construction and agricultural drainage in Canada. The Fund's Armtec division is Canada's only national multi-material manufacturer specializing in corrugated high density polyethylene pipe, and corrugated steel pipe for drainage applications and highly engineered solutions including bridging products and water management systems. The Con-Force division designs and manufactures a wide range of bridging and construction products including the advanced "NU" bridge girder system that allows for some of the longest spans available in precast concrete technology. The Durisol division designs and manufactures highway noise barriers and related infrastructure products, such as retaining walls and acoustic enclosures, and is recognized as the only fully qualified supplier for absorptive material in Ontario. For further information, please visit Armtec's website at www.armtecincomefund.com. Armtec Infrastructure Income Fund is listed on the Toronto Stock Exchange, under the trading symbol ARF.UN

Forward-Looking Statements

This news release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). All statements other than statements of historical fact contained herein are forward-looking statements, including, without limitation, statements regarding the future financial position, cash distributions, business strategy, proposed acquisitions (including the Brooklin and Boucher acquisitions and their impact on the Fund's financial performance), budgets, litigation, projected costs and plans and objectives of or involving the Fund or the businesses in which it has invested. Prospective investors can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require assumptions and are subject to inherent risks and uncertainties, including those discussed herein. There is significant risk that forward-looking statements will not prove to be accurate. You are cautioned not to place undue reliance on forward-looking statements made herein because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: industry cyclicality; competition; reduction in demand for products; collection from customers; relationships with suppliers; lack of long-term agreements; expiration of rights under licence and distribution arrangements; raw material price volatility; product liability; intellectual property; reliance on key personnel; environmental; collective bargaining; interest rates; uninsured and underinsured losses; operating hazards; risks of future legal proceedings; dependence on other Armtec entities; income tax matters; leverage and restrictive covenants; credit facilities; nature of units; distribution of securities on redemption or termination of Fund; restrictions on potential growth; effect of market interest rates on price of Units; undiversified and illiquid holdings in Armtec Operating Trust; potential dilution; and various risks relating to the Brooklin and Boucher acquisitions and other proposed acquisitions, including risks relating to integration and realization of expected synergies, Brooklin and Boucher's reliance on key personnel, potential undisclosed liabilities associated with the Brooklin and Boucher acquisitions and other proposed acquisitions, and Armtec's limited recourse against the vendors of Brooklin and Boucher. You are cautioned that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to the Fund, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The Fund undertakes no obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities law.

Risks related to the Fund have been summarized in the Fund's latest Annual Information Form, Management's Discussion and Analysis included in the Annual Report and quarterly financial reports available on www.sedar.com or the Fund's web site at www.armtecincomefund.com.

Contact Information

  • Armtec Limited Partnership
    Charles M. Phillips
    President & Chief Executive Officer
    (519) 822-0210
    (519) 822-8894 (FAX)
    or
    Armtec Limited Partnership
    James R. Newell
    Chief Financial Officer
    (519) 822-0210
    (519) 822-8894 (FAX)
    or
    Armtec Limited Partnership
    Carrie Boutcher
    Vice President, Finance
    (519) 822-0210
    (519) 822-8894 (FAX)
    Website: www.armtecincomefund.com